<PAGE>
As filed with the Securities and Exchange Commission on April 7, 1997.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------
LOOMIS, FARGO & CO.
(and its Subsidiaries identified in Footnote (1) Below)
(Exact Name of Co-Registrants as Specified in their Charters)
DELAWARE 4214 76-0521092
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Code Number)
Organization)
16225 PARK TEN PLACE, SUITE 600 JAMES B. MATTLY
HOUSTON, TEXAS 77084 16225 PARK TEN PLACE, SUITE 600
(281) 647-6700 HOUSTON, TEXAS 77084
(Address, including Zip Code, and (281) 647-6700
Telephone Number, including Area Code (Name, Address, including Zip Code,
of Co-Registrants' Principal Executive and Telephone Number, including Area
Offices) Code, of Agent for Service)
COPY TO:
MARY R. KORBY
WEIL, GOTSHAL & MANGES LLP
100 CRESCENT COURT
SUITE 1300
DALLAS, TEXAS 75201
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING
BOX AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [_] ____________
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [_] ____________
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [_]
--------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS TO BE PRICE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
10% Senior Subordinated Notes due
2004................................. $85,000,000 100% $85,000,000 $25,757.58
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Senior Subordinated Guarantees(3)..... -- -- -- --
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</TABLE>
(1) LFC Holding Corporation, a Delaware corporation (I.R.S. Employer
Identification No. 75-2371825), Loomis, Fargo & Co., a Texas corporation
(I.R.S. Employer Identification No. 75-0117200), LFC Armored of Texas Inc.,
a Texas corporation (I.R.S. Employer Identification No. 58-1884701) and
Loomis, Fargo & Co. of Puerto Rico, a Tennessee corporation (I.R.S.
Employer Identification No. 66-0215016), each a direct or indirect
subsidiary of Loomis, Fargo & Co., a Delaware corporation.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act of 1933.
(3) The 10% Senior Subordinated Notes due 2004 are guaranteed by the Co-
Registrants on a senior subordinated basis. No separate consideration will
be paid in respect of the guarantees.
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
LOOMIS, FARGO & CO.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING THE LOCATION IN
THE PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-1
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......... Cover Page of
Registration Statement;
Outside Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front and Outside
Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges...................... Prospectus Summary; Risk
Factors; Business;
Selected Historical
Financial Information;
Pro Forma Combined
Financial Information
4. Use of Proceeds................................. Use of Proceeds
5. Determination of Offering Price................. Not Applicable
6. Dilution........................................ Not Applicable
7. Selling Security Holders........................ Not Applicable
8. Plan of Distribution............................ Front Cover Page of
Prospectus; The Exchange
Offer; Plan of
Distribution
9. Description of Securities to be Registered...... Description of New Notes
10. Interests of Named Experts and Counsel.......... Not Applicable
11. Information with Respect to the Registrant...... Cover Page of
Registration Statement;
Prospectus Summary; Risk
Factors; Business; The
Transactions; Selected
Historical Financial
Information; Pro Forma
Combined Financial
Information; Management's
Discussion and Analysis
of Financial Condition
and Results of
Operations; Management;
Security Ownership of
Certain Beneficial Owners
and Management; Certain
Relationships and Related
Transactions; Description
of New Credit Facility;
Legal Matters
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 7, 1997
PROSPECTUS
OFFER FOR ALL OUTSTANDING
10% SENIOR SUBORDINATED NOTES DUE 2004
IN EXCHANGE FOR
10% SENIOR SUBORDINATED NOTES DUE 2004
OF
LOOMIS, FARGO & CO.
Loomis, Fargo & Co., a Delaware Corporation (the "Company"), and the
Guarantors (as hereinafter defined) hereby offer, upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal (which together constitute the "Exchange Offer"), to exchange
$1,000 principal amount of registered 10% Senior Subordinated Notes Due 2004
(the "New Notes") issued by the Company, for each $1,000 principal amount of
unregistered 10% Senior Subordinated Notes Due 2004 (the "Old Notes") issued by
the Company, of which an aggregate principal amount of $85,000,000 is
outstanding. The form and terms of the New Notes are identical to the form and
terms of the Old Notes except that (i) interest on the New Notes shall accrue
from the date of issuance of the Old Notes, and (ii) the New Notes are being
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and will not bear any legends restricting their transfer. The New Notes will
evidence the same debt as the Old Notes and will be issued pursuant to, and
entitled to the benefits of, the indenture governing the Old Notes. The
Exchange Offer is being made in order to satisfy certain contractual
obligations of the Company. See "The Exchange Offer" and "Description of New
Notes." The New Notes and the Old Notes are sometimes collectively referred to
herein as the "Notes."
Interest on the New Notes will be payable semi-annually on January 15 and
July 15 of each year, commencing July 15, 1997. The Company will not be
required to make any sinking fund payment with respect to the New Notes. The
New Notes will be redeemable at the option of the Company, in whole or in part,
at any time on or after January 15, 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest and Liquidated Damages (as defined),
if any, to the date of redemption. In addition, prior to January 15, 2000, the
Company may on any one or more occasions redeem up to $25.0 million in
principal amount of the Notes at a redemption price equal to 110% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of redemption, with the net proceeds of
one or more public offerings of common stock, par value $.01 per share ("Common
Stock"), of the Company; provided that at least $60.0 million in aggregate
principal amount of the Notes remains outstanding immediately after the
occurrence of such redemption. See "Description of New Notes--Optional
Redemption."
The net proceeds from the sale of the Old Notes (the "Original Offering")
were used to effect the business combination of Loomis Armored Inc. ("Loomis
Armored"), a wholly-owned subsidiary of Loomis Holding Corporation ("Loomis"),
and Wells Fargo Armored Service Corporation ("Wells Fargo Armored"), a wholly-
owned subsidiary of Borg-Warner Security Corporation ("Borg-Warner"), and
related transactions (together, the "Transactions"). Following the consummation
of the Transactions, the Company is owned 51% by a Delaware business trust, the
beneficiaries of which are the former stockholders of Loomis (the "Business
Trust"), and 49% by Borg-Warner, through its wholly-owned subsidiary Wells
Fargo Armored. See "The Transactions."
In the event of a Change of Control (as defined), holders of the New Notes
will have the right to require the Company to purchase their New Notes, in
whole or in part, at a price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase.
The New Notes will be general unsecured obligations of the Company
subordinate in right of payment to all existing and future Senior Debt (as
defined) of the Company. The Company conducts its operations solely through its
subsidiaries. Certain of the Company's subsidiaries (the "Guarantors") will
guarantee the New Notes (collectively, the "Subsidiary Guarantees") that will
be subordinated in right of payment to all existing and future senior debt of
such Guarantors. As of December 31, 1996, after giving pro forma effect to the
Original Offering, the Transactions, borrowings under the New Credit Facility
and the application of the proceeds therefrom, there would have been
approximately $163.3 million of total debt of the Company and its subsidiaries,
$70.8 million of which would have been Senior Debt; in addition, there would
have been approximately $31.9 million available to be drawn by the Company
under the New Credit Facility.
----------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
NEW NOTES.
----------------------------------
The Company and the Guarantors will accept for exchange any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
, 1997, unless extended (as so extended, the "Expiration Date"). Tenders of
Old Notes may be withdrawn at any time prior to the Expiration Date. The
Exchange Offer is subject to certain customary conditions. See "The Exchange
Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of those New Notes. The letter of transmittal
accompanying this Prospectus (the "Letter of Transmittal"), states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed, for a period of one year after the date of
this Prospectus, to make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
No public market has existed for the Old Notes before the Exchange Offer. The
Company and the Guarantors currently do not intend to list the New Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system, and no active public market for the New Notes is currently
anticipated. The Company and the Guarantors will pay all the expenses incident
to the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange pursuant to the Exchange Offer.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
<PAGE>
AVAILABLE INFORMATION
As a result of the filing of its Registration Statement with the Securities
and Exchange Commission (the "Commission"), the Company and the Guarantors
will become subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, will be required to file reports and other information
with the Commission. Such reports and other information can be inspected and
copied at the principal office of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the following Regional Offices of
the Commission: Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60611 and New York Regional
Office, 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material may also be obtained at prescribed rates from the Public
Reference Section of the Commission at its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission at http://www.sec.gov.
The Company and the Guarantors have filed with the Commission a Registration
Statement (which term shall encompass any amendments thereto) on Form S-1
under the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement and the exhibits thereto, to which reference is hereby made.
Statements made in this Prospectus as to the contents of any contract,
agreement, or other document are not necessarily complete. With respect to
each such contract, agreement, or other document filed as an exhibit to the
Registration Statement, reference is hereby made to such exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
The Company will furnish holders of the securities offered hereby with
annual reports containing, among other information, audited financial
statements certified by an independent public accounting firm and quarterly
reports containing unaudited financial information for the first three
quarters of each fiscal year. The Company will also furnish such other reports
as it may determine or as may be required by law or by the Indenture.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN OF THE MATTERS DISCUSSED UNDER THE CAPTIONS "PROSPECTUS SUMMARY,"
"RISK FACTORS," "PRO FORMA COMBINED FINANCIAL INFORMATION," "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,"
"BUSINESS" AND ELSEWHERE IN THIS PROSPECTUS MAY CONSTITUTE FORWARD-LOOKING
STATEMENTS FOR PURPOSES OF THE SECURITIES ACT AND THE EXCHANGE ACT 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. IMPORTANT FACTORS
THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE
COMPANY TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ARE DISCLOSED IN
THIS PROSPECTUS ("CAUTIONARY STATEMENTS"), INCLUDING, WITHOUT LIMITATION,
THOSE STATEMENTS MADE IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS
INCLUDED UNDER "RISK FACTORS" AND OTHERWISE HEREIN. ALL WRITTEN OR ORAL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY ARE EXPRESSLY QUALIFIED
IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements, and
the related notes thereto, included elsewhere in this Prospectus. As used in
this Prospectus, unless the context otherwise requires, (i) references to
"Loomis" herein mean Loomis Holding Corporation prior to the consummation of
the Transactions, (ii) references to "Loomis Armored" herein mean Loomis
Armored Inc. prior to the consummation of the Transactions, (iii) references to
"Wells Fargo Armored" herein mean Wells Fargo Armored Service Corporation prior
to the consummation of the Transactions, and (iv) references to "Loomis, Fargo
& Co." or the "Company" herein mean the combined entity, including Loomis,
Loomis Armored and the assets transferred to the Company by Wells Fargo Armored
pursuant to the Transactions. Unless otherwise specified, all financial,
statistical and other data regarding the Company contained herein is presented
on a pro forma basis after giving effect to the Original Offering, the
Transactions, borrowings under the New Credit Facility and the application of
the proceeds therefrom.
THE COMPANY
Loomis, Fargo & Co., created through the combination of Loomis Armored and
Wells Fargo Armored, is one of the largest armored transport companies in the
United States. Loomis, Fargo & Co. operates over 150 branches, employs
approximately 8,700 persons, and utilizes a fleet of approximately 2,700
armored vehicles nationwide to provide armored ground transport services,
automated teller machine ("ATM") services, and cash vault and related services
to financial institutions and commercial customers. Serving all 50 states and
Puerto Rico, the Company is one of only two armored transport companies in the
United States that provides these services on a national basis. Management
believes that the combination of Loomis Armored and Wells Fargo Armored into a
national service provider favorably positions the Company for additional
revenue opportunities as large financial and retail institutions are
increasingly seeking vendors capable of providing an array of services on a
national basis. In addition, management believes the proliferation of ATMs and
the trend of banks and other financial and retail institutions towards
outsourcing cash vault and related services will contribute to the Company's
growth prospects. For the twelve months ended December 31, 1996, the Company
would have had pro forma revenues of $373.7 million and earnings before
interest, taxes, depreciation and amortization ("EBITDA") of $35.2 million.
The Company is implementing the management principles and decentralized
structure utilized by the Loomis Armored management team, which have proven to
be highly effective in reducing employee turnover, increasing customer
satisfaction and decreasing "cost of risk," which consists of the cost of cargo
and casualty losses, related insurance costs and claims administration
expenses. Since implementing this strategy at Loomis Armored in 1991, Loomis
Armored's total cost of risk decreased from 10.9% of revenues for the year
ended June 30, 1992 to 7.4% of revenues for the twelve months ended December
31, 1996, and EBITDA as a percent of revenues increased from 2.4% to 9.4% over
the same period. Management believes that by combining the business strategy
and risk management skills of Loomis Armored with the larger customer base and
leading ATM Services (as defined) position of Wells Fargo Armored, the Company
will be well-positioned to capitalize on the numerous opportunities developing
in the armored transport industry.
The Company provides a wide range of services within the following
categories:
Traditional Armored Transport. The Company's armored fleet transports
currency and other valuables in sealed packages between commercial
enterprises and banks, between banks, and from the Federal Reserve Banks to
commercial banks. The Company provides traditional armored transport
services to numerous banks including Bank of America and Wells Fargo Bank
as well as national and regional
1
<PAGE>
businesses such as Wal-Mart Stores, Inc., Kmart Corporation and Kroger.
Traditional armored transport represented approximately 62.9% of the
Company's revenues for the twelve months ended December 31, 1996, making it
the largest component of the Company's business.
ATM Services. The Company provides cash replenishment, deposit pick-up,
and first-line maintenance services (collectively, "ATM Services") to over
28,000 ATM locations nationwide, making it the leading provider of ATM
Services in the United States. The total number of ATM locations in the
United States is expected to increase significantly over the next five
years. Additionally, many ATM owners have begun outsourcing the servicing
and maintenance of ATM locations formerly serviced and maintained
internally. Management believes these trends provide the Company with
further opportunities to build upon its leading position in the ATM
Services industry by offering broad geographic coverage as well as a high
level of service. The Company's ATM customers include NationsBank, NCR
Corporation and Electronic Data Systems Corporation. ATM Services
represented approximately 29.9% of the Company's revenues for the twelve
months ended December 31, 1996 and have increased at a compounded annual
growth rate of approximately 12.3% over the three year period ended
December 31, 1996.
Cash Vault and Related Services. The Company provides a wide array of
cash vault and related services ranging from passive, secured storage of
valuables such as currency, securities and computer chips to active
services such as deposit processing and consolidation, change order
preparation, coin wrapping and storage and food stamp processing. In
addition, the Company's cash vault capacity is a key element in supporting
services to larger customers and ATM networks. Cash vault and related
services represented approximately 7.2% of the Company's revenues for the
twelve months ended December 31, 1996.
The Company's principal executive offices are located at 16225 Park Ten
Place, Suite 600, Houston, Texas 77084, and its telephone number at such
address is (281) 647-6700.
INDUSTRY OVERVIEW
Management estimates that the ten largest armored transport companies in the
United States have aggregate annual revenues of approximately $1.0 billion. The
ground transportation portion of the armored transport industry, currently the
single largest sector, has historically maintained moderate growth. ATM
services represent the most dynamic growth sector of the armored transport
industry, with the total number of ATM locations served by the armored
transport industry expected to increase significantly over the next five years.
This expected growth results from a fundamental change in the retail delivery
channel strategy of banks in the United States as traditional, full service
bank branches are being replaced by ATMs, drive-through service centers and
banks located in supermarkets and other nontraditional locations. In addition,
while cash vault and related services currently represent a relatively small
portion of the armored transport industry's revenues, this market is also
expected to expand over the next several years as banks and other financial
institutions continue the trend toward outsourcing such services.
POST-COMBINATION STRATEGY
Management believes that Loomis, Fargo & Co. has several distinct competitive
strengths within the armored transport industry, including a strong national
presence, the leading ATM Services operation, and a management team experienced
in maximizing service value, reducing cost of risk and improving cash flow and
profitability. The Company's business strategy is to capitalize on its
competitive strengths by implementing the following initiatives:
Promote the National Presence of Loomis, Fargo & Co. The Company provides
its services to a much larger geographic area than either Loomis Armored or
Wells Fargo Armored serviced on a stand-alone
2
<PAGE>
basis. With services in all 50 states and Puerto Rico, the Company is able
to expand its business with national financial institutions and retail
customers which require armored ground transport, ATM Services and/or cash
vault and related services in numerous locations across the country.
Management believes that the ability to provide nationwide service is
becoming more important in the armored transport industry as banks are
expanding geographically through the continuing consolidation of the
banking industry and as other institutions are shifting toward centralized
purchasing of goods and services. As one of only two armored transport
providers in the United States with nationwide service, the Company is
well-positioned to augment its base of customers requiring broad geographic
coverage. The Company has dedicated a segment of its sales force to manage
national account relationships.
Focus on Growing ATM Services Market. The Company provides ATM Services
to over 27,000 ATM locations nationwide, making it the leading provider of
ATM Services in the United States. Both the number of ATM locations and the
types of items being dispensed through ATMs, such as travelers checks,
lottery tickets, coupons, postage stamps and other valuables, continue to
grow. Additionally, many ATM owners have begun outsourcing the servicing
and maintenance of ATM locations formerly serviced and maintained
internally. The Company uses its proprietary automated national dispatching
system to coordinate customer requests, provide service data to customers
and dispatch service technicians nationwide. To complement the national
dispatching system, the Company has developed an automated network cash
management system that optimizes ATM cash loads and provides ATM balance
reporting. With its broad range of services and automated systems, the
Company intends to build upon its leading position in the ATM Services
market.
Reduce Cost of Risk and Emphasize Risk Management Partnership with
Customers. Management intends to improve cash flow and profitability not
only by reducing the Company's overall cost of risk but also by using a
risk management partnership approach with its customers as a means of
differentiating the Company from its competitors. A comprehensive risk
management program which emphasizes incident avoidance and loss
minimization is being implemented throughout the Company's operations. The
program focuses on (i) employee culture and attitude, (ii) selectivity in
hiring, (iii) operating procedures designed to recognize and avoid
potential danger or accidents, (iv) safety and security procedures,
including training in the proper use of firearms and the operation of the
Company's vehicles, (v) limits on the amounts of cash or other valuables
contained in a branch or vehicle or under the control of an employee, (vi)
utilization of three-person crews and surveillance or chase cars in high-
risk areas, and (vii) an extensive security oversight program, including
surveillance and evaluation by AMSEC, an independent, international
security firm. This risk management program produced significant cost
savings with respect to cargo loss and casualty liability claims for Loomis
Armored over the five years prior to the consummation of the Transactions.
To provide the quality of service necessary to enhance customer loyalty in
support of this business strategy, the Company emphasizes an operating
philosophy dedicated to:
Attracting and Retaining Quality, Loyal Employees. Management believes
that a loyal employee base directly contributes to reducing cost of risk
and improving customer service and that the combination of selectivity in
hiring, a commitment to employee training, responsibility and safety, and
competitive wage and benefit packages will enable the Company to attract
and retain quality, loyal employees. As a result of Loomis Armored's
commitment to these principles, its employee turnover rate decreased from
41% for the twelve months ended December 31, 1992 to 29% for the twelve
months ended December 31, 1996.
Encouraging Employee Initiative. The Company operates so that many of the
daily operational decisions such as local sales, routing, hiring, and fleet
maintenance are made at the branch level while the Company's corporate and
five regional management teams support the branches, particularly with
respect to pricing and risk management. This delegation of responsibility
is expected to improve efficiency and responsiveness to customer needs,
while maintaining Company-wide security, safety and quality of revenue
standards. Management believes that this structure, together with an
incentive program that links a branch
3
<PAGE>
manager's compensation to branch profitability, gives branch managers and
other employees a sense of empowerment and accountability. This structure
was successfully implemented at Loomis Armored's operations and is
currently being implemented at all of the Company's locations.
CONSOLIDATION SAVINGS
The Company has developed an integration plan focused on reducing corporate
overhead and consolidating branches in overlapping service areas. The Company
expects to achieve cost savings in consolidation through (i) adopting the most
effective business practices of Loomis Armored and Wells Fargo Armored, (ii)
consolidating corporate, regional and branch offices, and (iii) achieving
routing and servicing efficiencies as well as reducing occupancy costs by
combining operations in the areas where both Loomis Armored and Wells Fargo
Armored previously operated.
Management estimates that, upon successful completion of its consolidation
plan over the 12-month period following the consummation of the Transactions,
the Company will realize $7.5 million in cost savings on an annualized basis
(approximately $3.4 million of which is related to headcount reduction and $3.7
of which is related to the elimination of management fees) compared to the cost
of operating Loomis Armored and Wells Fargo Armored as separate entities, which
savings have been included in the pro forma financial data set forth in this
Prospectus. There can be no assurance, however, that all of such savings will
occur as planned. The Company's actual consolidation savings could differ
materially from management's estimate. Factors that could cause or contribute
to such differences include those discussed elsewhere in this Prospectus,
including, but not limited to, risks and uncertainties relating to leverage,
risks inherent in the armored transport industry, issues concerning integration
of operations and the ability of the Company to attract and retain qualified
employees. See "Risk Factors--Implementation of Post-Combination Strategy," "--
Employees" and "Pro Forma Combined Financial Information."
4
<PAGE>
THE TRANSACTIONS
The Business Combination. On November 28, 1996, Borg-Warner, Wells Fargo
Armored, the Company, Loomis, Loomis Armored and the Business Trust entered
into the Contribution Agreement (as defined), pursuant to which, on January 24,
1997, the Business Trust contributed all of the issued and outstanding common
stock of Loomis and Wells Fargo Armored contributed substantially all of its
assets and certain liabilities to the Company in exchange for 51% and 49%,
respectively, of the Common Stock and certain other consideration. See "The
Transactions--The Business Combination."
The Financing. The Transactions were financed through the establishment of
the New Credit Facility and the issuance of the Old Notes. The following table
illustrates the sources and uses of cash in connection with the Transactions.
See "The Transactions--The Business Combination" and "Pro Forma Combined
Financial Information." The Transactions were consummated on January 24, 1997.
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
SOURCES OF CASH
New Credit Facility (1)...................................... $ 73.3
10% Senior Subordinated Notes................................ 85.0
------
Total sources of cash..................................... $158.3
======
USES OF CASH
Retirement of Loomis and Loomis Armored obligations:
Existing indebtedness (2) (3).............................. $ 29.6
Accrued management fees (4)................................ 1.6
Casualty and employee claims (5)........................... 8.5
Payments to the Loomis Indemnity Trust....................... 4.7
Payments to Wells Fargo Armored and related entities (6)(7).. 106.6
Fees and expenses............................................ 5.3
Payment escrowed to retire Wells Fargo Armored IRB and
accrued interest............................................ 1.1
Contribution to the Operating Subsidiary for working capital
purposes.................................................... 0.9
------
Total uses of cash........................................ $158.3
======
</TABLE>
- --------
(1) The New Credit Facility provides initially for aggregate borrowings of
$115.0 million and matures in January 2002. As of January 24, 1997,
approximately $12.3 million in letters of credit were outstanding under the
New Credit Facility, leaving approximately $29.4 million in available
borrowing capacity under the New Credit Facility.
(2) Includes (i) $10.3 million of 14% senior subordinated notes that were
scheduled to mature on September 30, 1999, including accrued interest, (ii)
$9.2 million of a 9% junior subordinated note that was scheduled to mature
on September 30, 1999, including accrued interest (iii) $3.3 million of a
term loan that was scheduled to mature on September 30, 1999, including
accrued interest, and (iv) $6.8 million in borrowings under Loomis
Armored's credit facility.
(3) $3.5 million of the borrowings by Loomis Armored under its credit facility
were used to redeem the Loomis Preferred Stock (as defined) immediately
prior to the Closing (as defined). See "The Transactions--The Business
Combination."
(4) Accrued management fees were paid at Closing to an affiliate of Loomis
pursuant to a Financial Advisory Agreement (as defined). See "Certain
Relationships and Related Transactions--Financial Advisory Agreement."
(5) Represents a lump sum payment on behalf of the Business Trust to CIGNA
Insurance Company and related entities pursuant to an Early Program Close-
Out Agreement dated January 24, 1997, related to insuring and managing
casualty and employee claims of Loomis incurred prior to the Closing (the
"Early Program Close-Out Agreement"). See "The Transactions--The Business
Combination" and "Pro Forma Combined Financial Information."
(6) Includes approximately $1.4 million of reimbursement for fees and expenses
related to the Transactions.
(7) A portion of such consideration was paid at Closing by the Company to Borg-
Warner and/or one or more of its wholly-owned subsidiaries to satisfy
certain intercompany indebtedness of Wells Fargo Armored assumed by the
Company.
5
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer applies to $85.0 million aggregate principal amount of the
Old Notes. The form and terms of the New Notes are the same as the form and
terms of the Old Notes except that (i) interest on the New Notes shall accrue
from the date of issuance of the Old Notes, and (ii) the New Notes are being
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer. The New Notes will evidence the same debt as the
Old Notes and will be entitled to the benefits of the Indenture pursuant to
which the Old Notes were issued. The Old Notes and the New Notes are sometimes
referred to collectively herein as the "Notes." See "Description of New Notes."
The Exchange Offer........ $1,000 principal amount of New Notes in exchange
for each $1,000 principal amount of Old Notes. As
of the date hereof, Old Notes representing $85.0
million aggregate principal amount are outstanding.
The terms of the New Notes and the Old Notes are
substantially identical.
Based on an interpretation by the Commission's
staff set forth in no-action letters issued to
third parties unrelated to the Company and the
Guarantors, the Company and the Guarantors believe
that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any
person receiving the New Notes, whether or not that
person is the holder (other than any such holder or
such other person that is an "affiliate" of the
Company or any Guarantors within the meaning of
Rule 405 under the Securities Act), without
compliance with the registration and prospectus
delivery provisions of the Securities Act, provided
that (i) the New Notes are acquired in the ordinary
course of business of that holder or such other
person, (ii) neither the holder nor such other
person is engaging in or intends to engage in a
distribution of the New Notes, and (iii) neither
the holder nor such other person has an arrangement
or understanding with any person to participate in
the distribution of the New Notes. See "The
Exchange Offer--Purpose and Effect." Each broker-
dealer that receives New Notes for its own account
in exchange for Old Notes, where those Old Notes
were acquired by the broker-dealer as a result of
its market-making activities or other trading
activities, must acknowledge that it will deliver a
prospectus in connection with any resale of these
New Notes. See "Plan of Distribution."
Registration Rights
Agreement................ The Old Notes were sold by the Company on January
24, 1997, in a private placement. In connection
with the sale, the Company entered into a
Registration Rights Agreement with the purchasers
(the "Registration Rights Agreement") providing for
the Exchange Offer. See "The Exchange Offer--
Purpose and Effects."
Expiration Date........... The Exchange Offer will expire at 5:00 p.m., New
York City time, , 1997, or such later date and
time to which it is extended.
Withdrawal................ The tender of Old Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date.
Any Old Notes not accepted for exchange for any
reason will be returned without expense to the
tendering holder thereof as promptly as practicable
after the expiration or termination of the Exchange
Offer.
6
<PAGE>
Interest on the New Notes
and Old Notes............ Interest on each New Note will accrue from the date
of issuance of the Old Note for which the New Note
is exchanged.
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain customary
conditions, certain of which may be waived by the
Company. See "The Exchange Offer--Certain
Conditions to Exchange Offer."
Procedures for Tendering
Old Notes................ Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a copy thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver the
Letter of Transmittal, or the copy, together with
the Old Notes and any other required documentation,
to the Exchange Agent at the address set forth in
the Letter of Transmittal. Persons holding Old
Notes through the Depository Trust Company ("DTC")
and wishing to accept the Exchange Offer must do so
pursuant to the DTC's Automated Tender Offer
Program, by which each tendering Participant will
agree to be bound by the Letter of Transmittal. By
executing or agreeing to be bound by the Letter of
Transmittal, each holder will represent to the
Company that, among other things, (i) the New Notes
acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the
person receiving such New Notes, whether or not
such person is the holder of the Old Notes, (ii)
neither the holder nor any such other person is
engaging in or intends to engage in a distribution
of such New Notes, (iii) neither the holder nor any
such other person has an arrangement or
understanding with any person to participate in the
distribution of such New Notes, and (iv) neither
the holder nor any such other person is an
"affiliate," as defined under Rule 405 promulgated
under the Securities Act, of the Company. Pursuant
to the Registration Rights Agreement, the Company
and each of the Guarantors are required to use
their reasonable best efforts to file a "shelf"
registration statement for a continuous offering
pursuant to Rule 415 under the Securities Act in
respect of the Old Notes (and cause such shelf
registration statement to be declared effective by
the Commission and keep it continuously effective,
supplemented and amended for prescribed periods) if
(i) the Company is not required to file an Exchange
Offer Registration Statement (as defined in the
Registration Rights Agreement) or to consummate the
Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy,
or (ii) any holder of Old Notes is prohibited from
participating in the Exchange Offer by applicable
law or Commission policy, or such holder would be
required to deliver a prospectus in connection with
any resale of New Notes acquired in the Exchange
Offer and the prospectus contained in the Exchange
Offer Registration Statement would not be
appropriate or available for such resales, or such
holder is a broker-dealer that holds Old Notes
acquired directly from the Company or its
affiliates.
7
<PAGE>
Acceptance of Old Notes
and Delivery of New
Notes.................... The Company will accept for exchange any and all
Old Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The New Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
Exchange Agent............ Marine Midland Bank is serving as Exchange Agent in
connection with the Exchange Offer.
Federal Income Tax
Considerations........... The exchange pursuant to the Exchange Offer should
not be a taxable event for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
Effect of Not Tendering... Old Notes that are not tendered or that are
tendered but not accepted will, following the
completion of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer
thereof. The Company will have no further
obligation to provide for the registration under
the Securities Act of such Old Notes.
8
<PAGE>
TERMS OF NEW NOTES
Securities Offered........ $85.0 million aggregate principal amount of 10%
Senior Subordinated Notes due 2004.
Issuer.................... Loomis, Fargo & Co.
Interest Payment Dates.... January 15 and July 15, commencing July 15, 1997.
Maturity.................. January 15, 2004.
Sinking Fund Provisions... None.
Optional Redemption....... The New Notes will be redeemable at the option of
the Company, in whole or in part, at any time on or
after January 15, 2001 at the Redemption Prices (as
defined) set forth herein, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to
the date of redemption. In addition, prior to
January 15, 2000, the Company may on any one or
more occasions redeem up to $25.0 million aggregate
principal amount of the New Notes at a Redemption
Price equal to 110% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of
redemption, with the net proceeds of one or more
public offerings of Common Stock; provided that at
least $60.0 million principal amount of the Notes
remains outstanding immediately after the
occurrence of such redemption. See "Description of
New Notes--Optional Redemption."
Change of Control......... In the event of a Change of Control (as defined),
the holders of the New Notes will have the right to
require the Company to purchase their New Notes at
a price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of
purchase.
Ranking................... The New Notes will be general unsecured obligations
of the Company, subordinate in right of payment to
all existing and future Senior Debt of the Company,
which will include all indebtedness incurred under
the New Credit Facility. As of December 31, 1996,
after giving pro forma effect to the Original
Offering, the Transactions, borrowings under the
New Credit Facility and application of the proceeds
therefrom, there would have been approximately
$163.3 million of total debt of the Company and its
subsidiaries, $70.8 million of which would have
been Senior Debt; in addition, there would have
been approximately $31.9 million available to be
drawn by the Company as secured Senior Debt under
the New Credit Facility. See "Risk Factors--
Subordination," "Capitalization" and "Description
of New Notes."
Subsidiary Guarantees..... The Company's payment obligations under the New
Notes will be jointly and severally guaranteed by
the Guarantors. The Subsidiary Guarantees will be
subordinated in right of payment to all existing
and future
9
<PAGE>
senior debt of each Guarantor, which will include
guarantees of all indebtedness incurred under the
New Credit Facility. See "Description of New
Notes--Subsidiary Guarantees."
Certain Covenants......... The indenture pursuant to which the New Notes will
be issued (the "Indenture") will contain covenants
that, among other things, limit the ability of the
Company and its subsidiaries to: (i) incur
additional indebtedness; (ii) pay dividends or make
certain other restricted payments; (iii) enter into
transactions with affiliates; (iv) create certain
liens; (v) engage in certain sale and leaseback
transactions; (vi) make certain asset dispositions;
and (vii) merge or consolidate with, or transfer
substantially all of their assets to, another
person. See "Description of New Notes--Certain
Covenants."
Use of Proceeds........... There will be no cash proceeds to the Company from
the exchange of New Notes for Old Notes pursuant to
the Exchange Offer. The net proceeds from the
Original Offering were used, together with
borrowings under the New Credit Facility, to effect
the Transactions.
For a discussion of certain factors that should be considered in connection
with an investment in the New Notes, see "Risk Factors" beginning on page 17.
10
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited Summary Pro Forma Combined Financial Information set forth
below should be read in conjunction with the unaudited Pro Forma Combined
Financial Information included elsewhere herein, and is based on the historical
financial statements of Loomis and Wells Fargo Armored and gives effect to (i)
the acquisition of substantially all of the assets and certain liabilities of
Wells Fargo Armored and other adjustments relating to the Transactions, (ii)
the sale of the Old Notes and borrowings under the New Credit Facility, and the
application of the net proceeds therefrom to repay certain indebtedness of
Loomis Armored, repay accrued management fees of Loomis and Loomis Armored,
fund a distribution to the Loomis Indemnity Trust, make a lump sum payment to
CIGNA Insurance Company and related entities pursuant to the Early Program
Close-Out Agreement on behalf of the Business Trust, and fund the purchase of
substantially all of the assets and certain liabilities of Wells Fargo Armored
pursuant to the Contribution Agreement, all as described in the Notes to Pro
Forma Combined Financial Information, and (iii) the redemption by Loomis of the
Loomis Preferred Stock. See "The Transactions--The Business Combination." The
unaudited Summary Pro Forma Combined Financial Information is intended for
informational purposes only and is not necessarily indicative of the future
financial position or results of operations of the Company had the transactions
described above occurred on the indicated dates or been in effect for the
period presented. The unaudited Summary Pro Forma Combined Financial
Information should be read in conjunction with, and is qualified in its
entirety by, the historical consolidated financial statements of Loomis and
Wells Fargo Armored, including the related notes thereto, included elsewhere
herein.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
INCOME STATEMENT DATA:
Revenues................................................ $373,742
Cost of operations:
Payroll and related expenses........................... 216,210
Vehicle expense........................................ 50,034
Facilities expense..................................... 16,650
Other operating expenses............................... 68,003
Gains associated with benefit plans.................... (954)
--------
Operating income........................................ 23,799
Interest expense, net.................................. 15,847
--------
Income before income taxes.............................. 7,952
Income taxes............................................ 207
--------
Net income.............................................. $ 7,745
========
Ratio of earnings to fixed charges (1).................. 1.4x
BALANCE SHEET DATA (AT PERIOD END):
Total assets............................................ $200,575
Total debt and capital leases........................... 163,274
Common stockholders' equity............................. 1,760
OTHER DATA:
EBITDA (2).............................................. $ 35,153
EBITDA as a % of revenues............................... 9.4%
Depreciation and amortization........................... $ 12,308
Capital expenditures.................................... 11,811
SELECTED FINANCIAL RATIOS:
Ratio of EBITDA to cash interest expense (3)............ 2.4x
Ratio of total debt to EBITDA........................... 4.6x
</TABLE>
- --------
(1) For the purpose of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense on all indebtedness plus the
interest portion of rental expense on noncancelable leases, and
amortization of debt issuance costs and debt discount.
11
<PAGE>
(2) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and excludes certain gains related to benefit plans of $954 in
1996. EBITDA is presented because it is commonly used by certain investors
and analysts to analyze and compare companies on the basis of operating
performance and to determine a company's ability to service and incur debt.
EBITDA should not be considered in isolation from or as a substitute for
net income, cash flows from operating activities or other consolidated
income or cash flow statement data prepared in accordance with generally
accepted accounting principles or as a measure of profitability or
liquidity.
(3) Cash interest expense represents total interest expense less (i) $949 of
amortization of financing fees and (ii) $484 of accretion of discount on
non-interest bearing NOL Note.
12
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION--LOOMIS HOLDING CORPORATION
The summary historical financial data of Loomis set forth below for each of
the three fiscal years in the period ended June 30, 1996 and the six months
ended December 31, 1996 has been derived from the consolidated financial
statements of Loomis which have been audited by Ernst & Young LLP, independent
auditors. The summary financial information for the six months ended December
31, 1995 is unaudited and in the opinion of Loomis management reflects all
adjustments, consisting only of normal recurring accruals, considered necessary
for a fair presentation of such data. The results of operations for any interim
period are not necessarily indicative of results of operations for the fiscal
year and should be read in conjunction with, and are qualified in their
entirety by, "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Loomis" and the financial statements of Loomis included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
---------------------------- ----------------
1994 1995 1996 1995 1996
-------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............... $106,447 $115,136 $119,455 $57,806 $65,765
Cost of operations:
Payroll and related
expenses.............. 72,447 77,270 79,974 38,029 43,031
Vehicle expense........ 13,583 13,815 14,035 7,010 7,637
Facilities expense..... 5,395 4,991 5,094 2,531 2,661
Other operating
expenses.............. 14,679 15,936 17,120 8,381 8,745
Gains associated with
benefit plans......... (1,677) -- (954) -- --
-------- -------- -------- ------- -------
Operating income....... 2,020 3,124 4,186 1,855 3,691
Interest expense, net.. 3,053 3,158 2,981 1,528 1,445
-------- -------- -------- ------- -------
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principle............. (1,033) (34) 1,205 327 2,246
Income taxes........... -- -- 78 25 50
Cumulative effect of
change in accounting
principle............. (453) -- -- -- --
-------- -------- -------- ------- -------
Net income (loss)...... $ (1,486) $ (34) $ 1,127 $ 302 $ 2,196
======== ======== ======== ======= =======
Ratio of earnings to
fixed charges (1)..... -- 1.0x 1.3x 1.2x 2.1x
BALANCE SHEET DATA (AT
PERIOD END):
Total assets........... $ 39,935 $ 38,879 $ 39,755 $36,449 $43,046
Total debt (2)......... 26,985 26,791 27,392 27,253 27,767
Common stockholders'
deficit............... (11,316) (11,350) (10,550) (11,048) (8,354)
OTHER DATA:
EBITDA (3)............. $ 7,423 $ 8,344 $ 8,118 $ 4,323 $ 5,752
EBITDA as a % of
revenues.............. 7.0% 7.2% 6.8% 7.5% 8.7%
Depreciation and
amortization.......... $ 7,080 $ 5,220 $ 4,886 $ 2,468 $ 2,061
Capital expenditures... 419 809 2,231 1,056 2,571
Cost of risk (4)....... 10,578 10,134 10,210 5,007 3,974
Cost of risk as a % of
revenues.............. 9.9% 8.8% 8.5% 8.7% 6.0%
Monthly fixed billing
revenue per location
served (dollars not in
thousands) (5)........ $ 280 $ 329 $ 368 $ 345 $ 345
Number of ATMs serviced
(6)................... 906 1,172 3,181 2,400 3,925
</TABLE>
13
<PAGE>
- --------
(1) For the purposes of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense on all indebtedness plus the
interest portion of rental expense on noncancelable leases, and
amortization of debt issuance costs and debt discount. For the year ended
June 30, 1994, earnings were insufficient to cover fixed charges by
approximately $1,000.
(2) Total debt includes long-term capital lease obligations, redeemable
preferred stock and redeemable common stock warrants.
(3) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and excludes certain gains related to benefit plans of $1,677
in 1994 and $954 in 1996 and the cumulative effect of the change in
accounting principle of $(453) in 1994. EBITDA is presented because it is
commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance and to determine a
company's ability to service and incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operating activities or other consolidated income or cash flow
statement data prepared in accordance with generally accepted accounting
principles or as a measure of profitability or liquidity.
(4) Cost of risk is defined as the total cost of cash-in-transit insurance
coverage (cargo), casualty and other insurance (worker's compensation,
automobile liability, general liability and other coverage), and surety and
includes premiums, broker's fees, administration charges, payments under
deductibles provisions, collateral fees and insurance related incentive
programs.
(5) Monthly fixed billing revenue per location served is defined as the total
fixed fee monthly contract revenue for all types and frequency of service
divided by the number of customer service locations billed in such manner
at the end of each period. Monthly fixed billing revenue constitutes
approximately 70% of Loomis' total revenue in all years.
(6) Number of ATMs serviced is defined as the number of ATM machines under
contract at the end of each period whether on a fixed fee monthly contract
or on a variable fee for service basis. Figures prior to 1995 are
management estimates.
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION--WELLS FARGO ARMORED
The summary historical financial data of Wells Fargo Armored set forth below
for each of the three years in the period ended December 31, 1996 has been
derived from the financial statements of Wells Fargo Armored which have been
audited by Deloitte & Touche LLP, independent auditors.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net service revenues............ $211,204 $230,999 $246,328
Cost of services................ 177,093 188,639 204,543
-------- -------- --------
Gross profit.................... 34,111 42,360 41,785
Selling, general, and
administrative expenses........ 21,406 18,705 20,309
Depreciation.................... 7,096 7,150 6,997
Management fees to Borg-Warner.. 3,004 3,185 3,353
Amortization of excess purchase
price.......................... 1,325 1,474 1,466
-------- -------- --------
Earnings from operations........ 1,280 11,846 9,660
Interest expense and finance
charges........................ 6,567 7,135 7,683
-------- -------- --------
Earnings (loss) before income
taxes.......................... (5,287) 4,711 1,977
Provision (benefit) for income
taxes.......................... (1,798) 1,866 860
-------- -------- --------
Net earnings (loss)............. $ (3,489) $ 2,845 $ 1,117
======== ======== ========
Ratio of earnings to fixed
charges (1).................... -- 1.5x 1.2x
BALANCE SHEET DATA (AT PERIOD
END):
Total assets.................... $124,812 $128,192 $136,204
Total debt...................... 58,477 54,114 53,102
Stockholder's equity............ 35,341 43,705 50,285
OTHER DATA:
EBITDA (2)...................... $ 9,701 $ 20,470 $ 18,123
EBITDA as a % of net service
revenues....................... 4.6% 8.9% 7.4%
Depreciation and amortization... $ 8,421 $ 8,624 8,463
Capital expenditures............ 6,231 3,695 8,065
Cost of risk (3)................ 29,734 30,086 28,262
Cost of risk as a % of net
service revenues............... 14.1% 13.0% 11.5%
Number of ATMs serviced (4)..... 18,185 23,980 24,062
</TABLE>
15
<PAGE>
- --------
(1) For the purposes of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense on all indebtedness plus the
interest portion of rental expense on noncancelable leases. For the year
ended December 31, 1994, earnings were insufficient to cover fixed charges
by $5,287.
(2) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA is presented because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability
or liquidity.
(3) Cost of risk is defined as the total cost of cash-in-transit insurance
coverage (cargo), casualty and other insurance (worker's compensation,
automobile liability, general liability and other coverage), and surety and
includes premiums, broker's fees, administration charges, payments under
deductibles provisions, collateral fees and insurance related incentive
programs.
(4) Number of ATMs serviced is defined as the number of ATM machines under
contract at the end of each period whether on a fixed fee monthly contract
or on a variable fee for service basis.
16
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully in evaluating an investment
in the New Notes offered hereby. This Prospectus contains forward-looking
statements. These statements are subject to a number of risks and
uncertainties, including the factors set forth below, many of which are beyond
the Company's control.
LEVERAGE AND DEBT SERVICE
The Company has a significant amount of indebtedness following the
consummation of the Transactions. As of December 31, 1996, as adjusted for the
Exchange Offer, the Offering, the Transactions, borrowings under the New
Credit Facility and the application of proceeds therefrom, the Company's
consolidated pro forma total indebtedness and stockholders' equity would have
been $163.3 million and $1.8 million, respectively.
The degree to which the Company is leveraged could have important
consequences to holders of the New Notes, including, without limitation, the
following: (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, potential acquisition
opportunities, general corporate purposes or other purposes may be impaired;
(ii) a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness; and
(iii) the Company may be more vulnerable to economic downturns, may be limited
in its ability to withstand competitive pressures, and may have reduced
flexibility in responding to changing business and economic conditions. The
Company's ability to service its indebtedness will be dependent on its future
performance, which, in turn, will be affected by prevailing economic
conditions and financial, business and other factors, many of which are beyond
the Company's control.
The Company believes that, based upon current levels of operations, it will
be able to meet its debt service obligations, including principal and interest
payments on the Notes, when due. However, if the Company cannot generate
sufficient cash flow from operations to meet its debt service obligations,
defaults may occur thereunder and the Company might be required to refinance
its indebtedness. There is no assurance that refinancings could be effected on
satisfactory terms or would be permitted by the terms of the New Credit
Facility. See "Description of New Credit Facility" and "Description of New
Notes."
A substantial portion of the indebtedness incurred by the Company to finance
the Transactions bears interest at variable rates. Any increase in the
interest rates on the Company's indebtedness will reduce funds available to
the Company for its operations and future business opportunities and will
exacerbate the consequences of the Company's leveraged capital structure.
SUBORDINATION
The indebtedness evidenced by the New Notes and the Subsidiary Guarantees
(including principal, Redemption Price and Purchase Price (as defined) of,
interest and Liquidated Damages, if any, on the New Notes) will be
subordinated in right of payment to present and future Senior Debt of the
Company and senior debt of each Guarantor. In the event of the dissolution or
liquidation of the Company, or in the case of certain events of default with
respect to the New Notes or such Senior Debt, certain creditors of the Company
holding Senior Debt will be entitled to be paid in full before any payment is
made to holders of the New Notes. Senior Debt would currently include, among
other things, the debt incurred under the New Credit Facility and the
Company's current and future obligations under capitalized leases. As of
December 31, 1996, after giving pro forma effect to the Offering, the
Transactions and borrowings under the New Credit Facility and the application
of the proceeds therefrom as if all such transactions had occurred on December
31, 1996, there would have been approximately $163.3 million of total debt of
the Company and its subsidiaries, $70.8 million of which would have been
Senior Debt; in addition, there would have been approximately $31.9 million
available to be drawn by the Company as secured Senior Debt under the New
Credit Facility. The Indenture does not prohibit or limit the designation of
indebtedness otherwise permitted to be incurred as Senior Debt. See "Pro Forma
Combined Financial Information" and "Description of New Notes--Subordination."
17
<PAGE>
HOLDING COMPANY STRUCTURE
The Company is a holding company, the sole asset of which is all of the
issued and outstanding capital stock of its subsidiaries. The Company has no
independent means of generating revenues. As a holding company, the Company
will depend on dividends and other permitted payments from its subsidiaries to
meet cash needs, including payment of dividends on the Common Stock and
principal, Redemption Price and Purchase Price of, interest and Liquidated
Damages, if any, on the New Notes. The Company will be the sole obligor on the
New Notes, which will be initially guaranteed by all of the Company's
subsidiaries. The New Notes will not be secured by any of the assets of the
Company or its subsidiaries. In addition, the obligations of the Company and
its subsidiaries under the New Credit Facility will be secured by pledges of
substantially all of such entities' assets. The right of the Company to
participate in any distribution of earnings or assets of its subsidiaries will
be subject to the prior claims of the creditors of such subsidiaries. See "The
Transactions," "Description of New Credit Facility" and "Description of New
Notes."
RISKS INHERENT IN THE ARMORED TRANSPORT INDUSTRY
The nature of the services provided by the Company potentially exposes the
Company to greater risks than are experienced in many businesses. The
potential for substantial cargo losses, as well as claims for personal injury,
wrongful death, worker's compensation, punitive damages and general liability,
despite risk management efforts, is inherent in the armored transport
business. While the Company seeks to maintain appropriate levels of insurance,
there can be no assurance that the Company will avoid significant future
catastrophic claims or adverse publicity related thereto. Furthermore, there
can be no assurance that the Company's insurance will be adequate to cover the
Company's liabilities or that such insurance coverage will remain available at
acceptable costs. The availability of quality and reliable insurance coverage
is an important factor in the Company's ability to obtain and retain
customers. A successful claim brought against the Company for which coverage
is denied or which is in excess of its insurance coverage could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--The Industry."
Pursuant to the terms of the Company's insurance policies, the Company is
required to maintain standby letters of credit with its insurance providers to
satisfy any deductible requirements in the event of an insurable loss. Such
standby letters of credit are counted against the amount available to be
borrowed by the Company under the New Credit Facility and therefore constrain
the Company's financial flexibility. The exercise of all or a significant
portion of the Company's outstanding standby letters of credit to satisfy
deductible claims would have a material adverse effect on the Company's
business, financial condition and results of operations. As of January 24,
1997, the Company had outstanding approximately $12.3 million in standby
letters of credit, which amounts are expected to substantially increase over
time as the Company's reserve for casualty losses increases. Because the
casualty and employee claims incurred by Wells Fargo Armored prior to the
consummation of the Transactions are liabilities of Wells Fargo Armored and
those incurred by Loomis Armored prior to the consummation of the Transactions
are liabilities of the Business Trust and are subject to the Early Program
Close-Out Agreement, the Company did not have any reserve for casualty losses
immediately following the consummation of the Transactions. See "The
Transactions--The Business Combination."
On March 29, 1997, the Company experienced a material cargo loss, which is
currently under investigation. The Company believes that the cargo loss will
not have a material adverse effect on the Company's liquidity or earnings in
1997, but that such loss could have negative consequences on the Company's
insurance coverage and/or costs at some future time.
IMPLEMENTATION OF POST-COMBINATION STRATEGY
The Company's future operations and earnings will be largely dependent upon
the Company's ability to integrate the businesses separately conducted by
Loomis Armored and Wells Fargo Armored. In addition, management will be
required to apply its business strategy to an entity which is significantly
larger than the entity it previously managed. The Company must, among other
things, consolidate certain regional and branch offices, integrate management
and employee personnel, combine customer bases and relocate certain billing,
security,
18
<PAGE>
and other database systems. There can be no assurance that the Company will
successfully integrate the separate businesses of Loomis Armored and Wells
Fargo Armored, and the failure to do so would have a material adverse effect on
the Company's results of operations and financial condition. Additionally, the
need to focus management's attention on integration of the businesses and
implementation of the Company's post-combination strategy may limit the
Company's ability to successfully pursue other opportunities related to its
business for the foreseeable future.
As presented under "Prospectus Summary--Consolidation Savings" and "Pro Forma
Combined Financial Information," management anticipates that the Company will
realize approximately $7.5 million in annualized cost savings as a result of a
successful integration of the businesses of Wells Fargo Armored and Loomis
Armored. The achievement of these savings is significantly dependent on such
successful integration. There can be no assurance that all such savings will be
achieved or sustained and the failure to achieve or sustain such savings could
result in a material adverse effect on the Company's business, financial
condition and results of operations.
The Company has not yet received all necessary third party and state and
local governmental consents, approvals and waivers in connection with the
Transactions. While the Company believes that all material consents, approvals
and waivers ultimately will be received, the failure to obtain certain of such
consents, approvals and waivers, in the aggregate, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION
The armored transport industry is highly competitive. Some of the Company's
competitors have a greater presence in certain markets in which the Company
competes and may have greater financial and other resources available to them.
There can be no assurance that the Company can compete with such other
companies in any given market or that the Company will continue to be
competitive in the markets it presently serves. See "Business--Competition."
CONTROL BY THE BUSINESS TRUST AND BORG-WARNER
The Business Trust owns 51%, and Borg-Warner, through its wholly-owned
subsidiary Wells Fargo Armored, owns 49%, of the outstanding shares of Common
Stock. Frederick B. Hegi, Jr., an indirect general partner of Wingate Partners,
L.P. ("Wingate Partners"), a Delaware limited partnership and private
investment firm located in Dallas, Texas, serves as Manager of the Business
Trust. Acting together, the Business Trust and Borg-Warner have the power to
elect all of the directors of the Company and to approve any action requiring
stockholder approval. See "Security Ownership of Certain Beneficial Owners and
Management."
FRAUDULENT CONVEYANCE; ENFORCEABILITY OF SUBSIDIARY GUARANTEES
The Company's obligations under the Notes may be subject to review under
federal or state fraudulent transfer law if the Company becomes a debtor in a
subsequent bankruptcy case or otherwise has financial difficulties after
consummation of the Original Offering. In that event, if a court in a lawsuit
by an unpaid creditor or by a representative of creditors (such as a trustee in
a bankruptcy or a debtor-in-possession) were to find that the Company received
less than fair consideration or reasonably equivalent value for incurring the
indebtedness represented by the Notes and (i) was insolvent, (ii) was rendered
insolvent by reason of such transaction, (iii) was engaged in a business or
transaction, or was about to be engaged in a business or transaction, for which
its remaining assets constituted unreasonably small capital or (iv) intended to
incur, or believed or reasonably should have believed that it would incur,
debts beyond its ability to pay such debts as they matured, such court could
void the Company's obligations under the Notes and direct the return of any
amounts paid thereunder to the Company or to a fund for the benefit of its
creditors. The measure of insolvency for purposes of the foregoing will vary
depending upon the law of the jurisdiction being applied. Management believes
that at the time the Old Notes were issued, the Company received fair
consideration and reasonably equivalent value in exchange for its
19
<PAGE>
obligations thereunder, was, is and will be solvent, will have sufficient
capital for the business in which it is engaged and will not incur debts beyond
its ability to pay such debts as they mature. There can be no assurance,
however, as to what standard a court would apply in making such determinations
or whether a court would agree with such assessments. See "--Leverage and Debt
Service" above.
The Guarantors will guarantee the Company's obligations under the New Notes.
See "Description of New Notes--Subsidiary Guarantees." Under applicable
provisions of the federal bankruptcy law or comparable provisions of state law,
if any Guarantor is insolvent at the time it incurs its Subsidiary Guarantee,
such Guarantee could be voided, or claims in respect of such Subsidiary
Guarantees could be subordinated to all other debts of such Guarantor. The
measures of insolvency will vary depending upon the law applied in any such
proceeding. See "Description of New Notes--Subordination."
ENVIRONMENTAL MATTERS
The Company is subject to numerous and increasingly stringent federal, state
and local laws and regulations relating to the protection of the environment as
well as the storage, handling, use, emission, discharge, release or disposal of
hazardous materials and solid wastes into the environment and the investigation
and remediation of contamination associated with such materials. These laws
include, but are not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act, the Water Pollution Control Act, the Clean Air
Act and the Resource Conservation and Recovery Act, as those laws have been
amended and supplemented, the regulations promulgated thereunder, and any
applicable state analogs. The Company's operations also are governed by laws
and regulations relating to employee health and safety. The Company believes
that it is in material compliance with such applicable laws and regulations and
that its existing environmental controls are adequate to address existing
regulatory requirements.
As is the case with other companies engaged in similar businesses, the
Company could incur costs relating to environmental compliance, including
remediation costs related to historical hazardous materials handling and
disposal practices, principally petroleum products related to the Company's
fleet, at certain facilities. The Company has undertaken remedial activities in
the past to address on-site soil contamination caused by historic operations.
None of these cleanups has resulted in any material liability. Currently, the
Company is involved in remedial/closure activities at various locations, none
of which, individually or in the aggregate, is expected to have a material
adverse effect on the Company's operations, financial condition or competitive
position. As mentioned above, however, the risk of environmental liability and
remediation costs is present in the Company's business and, therefore, there
can be no assurance that material environmental costs, including remediation
costs, will not arise in the future. Moreover, it is possible that future
developments (e.g., new regulations or stricter regulatory requirements) could
result in the Company incurring material costs to comply with applicable
environmental laws and regulations. In addition, the Company has not undertaken
an independent investigation of each facility; accordingly, there can be no
assurance that in the future additional conditions requiring remediation will
not be identified.
The Company has identified 41 underground fuel storage tanks on the
properties owned or operated by it. Federal governmental regulations require
that by the end of 1998 all underground storage tanks located within the United
States must satisfy stricter safety standards or be removed. If the Company
fails to comply with these regulations, it could be subject to fines, penalties
or other governmental actions, the imposition of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Pursuant to the Contribution Agreement, the Company will be indemnified by
Borg-Warner and the Business Trust for environmental liabilities associated
with underground storage tanks and other known and identified environmental
liabilities existing as of the Closing Date. The indemnification obligations
will survive until the earlier of December 31, 1998 or the first anniversary of
an initial public offering of Common Stock. To the extent that there are
remedial activities in process as of the date of termination of such
indemnification obligations, the Company will provide Borg-Warner and the
Business Trust, as applicable, with a written estimate describing in reasonable
detail the remaining costs and expenses expected to be incurred by the
20
<PAGE>
Company which would otherwise have been covered by such indemnification. Such
estimated costs and expenses may be satisfied in cash (subject to a present
value discount rate) or pursuant to an irrevocable letter of credit issued in
the full amount of such estimated costs and expenses.
RESTRICTIONS IMPOSED BY THE INDENTURE AND THE NEW CREDIT FACILITY
The Indenture contains covenants which restrict, among other things, the
ability of the Company to incur additional indebtedness, pay dividends or make
certain other Restricted Payments (as defined), enter into transactions with
affiliates, create certain liens, engage in certain sale and leaseback
transactions, make certain asset dispositions and merge or consolidate with, or
transfer substantially all of its assets to, another person. In addition, the
New Credit Facility contains other and more restrictive covenants and prohibits
the Company from prepaying certain of its indebtedness, including the Notes.
Under the New Credit Facility, the Company is also required to maintain
specified financial ratios and comply with certain financial tests. The failure
by the Company to maintain such financial ratios or to comply with the
restrictions contained in the New Credit Facility or the Indenture could result
in a default thereunder, which in turn could cause such indebtedness (and by
reason of cross-default provisions, other indebtedness) to become immediately
due and payable. No assurance can be given that the Company's future operating
results will be sufficient to enable compliance with such covenants, or in the
event of default, to remedy such default. See "Description of New Credit
Facility" and "Description of New Notes."
EMPLOYEES
The Company's business is labor intensive and, as a result, is affected by
the availability of qualified personnel and the cost of labor, including the
cost of insurance and other employee benefits provided to the Company's
employees. The Company's ability to pass along any increases in labor costs may
be limited by contract or by price competition within the industry. In
addition, the Company's operations could be adversely affected if the Company
is unable to hire suitable personnel in certain markets due to a lack of
qualified candidates in those markets.
REGULATION AND LEGAL PROCEEDINGS
The Company is subject to and complies with a large number of state and
federal occupational licensing and firearm laws that apply to its employees. In
addition, many states have laws requiring training and registration of certain
of the Company's employees and imposing minimum bond surety or insurance
standards. The Company, either directly or through industry trade associations,
generally supports the creation of minimum standards for the industry. Due to
its high qualification and training standards, the Company does not expect any
future establishment of minimum federal standards or new state standards to
have a material adverse effect on the Company's business. However, there can be
no assurance that future regulatory actions will not have a material adverse
effect on the Company's operations, financial condition or competitive
position.
ABSENCE OF PUBLIC MARKET
The New Notes are being offered to the holders of Old Notes, and the Company
does not intend to apply to have the New Notes listed on any securities
exchange. The initial purchasers of the Old Notes (the "Initial Purchasers")
have advised the Company that they currently intend to make a market in the New
Notes after the consummation of the Exchange Offer, as permitted by applicable
laws and regulations; however, the Initial Purchasers are not obligated to do
so, and may discontinue any such market-making activity at any time without
notice. Therefore, there can be no assurance that an active market for the New
Notes will develop. If a trading market for the New Notes does develop, the New
Notes may trade at a discount from their face value depending upon prevailing
interest rates, the market for similar securities, the performance of the
Company and other factors.
21
<PAGE>
THE TRANSACTIONS
THE BUSINESS COMBINATION
Contribution Agreement. On November 28, 1996, Borg-Warner, Wells Fargo
Armored, the Company, Loomis, Loomis Armored, and the Business Trust entered
into a Contribution Agreement (the "Contribution Agreement"), pursuant to
which, at the closing of the Transactions (the "Closing" and the date on which
such Closing occurred, the "Closing Date"), (a) the Business Trust contributed
all of the issued and outstanding shares of common stock of Loomis to the
Company in exchange for (i) 5,100,000 shares of Common Stock issued to the
Business Trust, (ii) a cash payment of $8.5 million was delivered to CIGNA
Insurance Company and related entities on behalf of the Business Trust for the
purpose of administering casualty and employee claims of Loomis incurred prior
to the Closing, (iii) a cash payment of approximately $4.7 million was made on
behalf of the Business Trust to an indemnity trust established to satisfy
indemnity claims of the Company (the "Loomis Indemnity Trust"), and (iv) a
promissory note issued to the Business Trust in the original principal amount
of $6.0 million (the "NOL Note"), and (b) Wells Fargo Armored contributed
substantially all of its assets, including all of the capital stock of two
wholly-owned subsidiaries of Wells Fargo Armored (collectively, the
"Transferred Assets"), and assigned certain liabilities (including
intercompany indebtedness) (the "Assumed Liabilities") to the Company in
exchange for (i) 4,900,000 shares of Common Stock to be issued to Wells Fargo
Armored and (ii) a cash payment made to Wells Fargo Armored and related
entities equal to approximately $106.6 million (as adjusted based upon a
formula set forth in the Contribution Agreement). In addition, at the Closing,
the Company, the Business Trust and Wells Fargo Armored entered into the
Stockholders Agreement (as defined). See "Certain Relationships and Related
Transactions." The Contribution Agreement also provides that, after the
Closing, certain post-closing cash adjustments will be made among the parties
based upon specified minimum working capital requirements. The capitalization
of the Company and the combination of Loomis and Wells Fargo Armored has been
accounted for as a recapitalization of Loomis and the purchase of
substantially all the assets and certain liabilities of Wells Fargo Armored by
Loomis.
Immediately following the consummation of the transactions contemplated by
the Contribution Agreement, the Company: (i) filed a certificate of amendment
to the certificate of incorporation of Loomis changing its name to LFC Holding
Corporation (the "Intermediate Holding Company"); (ii) filed articles of
amendment to the articles of incorporation of Loomis Armored changing its name
to Loomis, Fargo & Co. (the "Operating Subsidiary"); and (iii) contributed all
of the assets acquired from Wells Fargo Armored to the Operating Subsidiary.
The Company and the Operating Subsidiary have the same name, except that the
Company is incorporated under the laws of Delaware and the Operating
Subsidiary is incorporated under the laws of Texas.
Loomis Preferred Stock. Pursuant to the Contribution Agreement, at the
Closing, Loomis redeemed $3.5 million aggregate liquidation preference of
Series I Preferred Stock, par value $.01 per share, of Loomis (the "Loomis
Preferred Stock"), representing all issued and outstanding shares of Loomis
Preferred Stock, out of proceeds of the former credit facility of Loomis
Armored. All of such shares of Loomis Preferred Stock were owned of record and
beneficially by Wingate Partners or its affiliates. See "Certain Relationships
and Related Transactions."
Historical Casualty and Employee Claims. At the Closing, the Company
delivered $8.5 million to CIGNA Insurance Company and related entities on
behalf of the Business Trust pursuant to the Early Program Close-Out
Agreement, related to casualty and employee claims of Loomis incurred prior to
Closing. In addition, pursuant to an Excess Claims Assumption Agreement dated
January 24, 1997, among the Company, the Intermediate Holding Company, the
Operating Subsidiary and the Business Trust, the Business Trust is liable for
all casualty and employee claims of Loomis incurred prior to Closing not
covered by CIGNA pursuant to the Early Program Close-Out Agreement. Casualty
and employee claims of Wells Fargo Armored incurred prior to Closing were not
assumed by the Company and remain liabilities of Wells Fargo Armored. As of
December 31, 1996, the estimated aggregate insurance liability for casualty
and employee claims of Wells Fargo Armored was $16.0 million.
NOL Note. At the Closing, the NOL Note, which does not accrue interest, was
issued by the Company to the Business Trust and is carried at a discount of
$565,000 from its original principal amount to approximate its
22
<PAGE>
fair value. The NOL Note 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 available as
of the Closing Date.
Environmental Indemnification. Pursuant to the Contribution Agreement, the
Company will be indemnified by Borg-Warner and the Business Trust for
environmental liabilities associated with existing underground storage tanks
and other known and identified environmental liabilities. The indemnification
obligations will survive until the earlier of December 31, 1998 or the first
anniversary of an initial public offering of Common Stock. To the extent that
there are remedial activities in process as of the date of termination of such
indemnification obligations, the Company will provide Borg-Warner and the
Business Trust, as applicable, with a written estimate describing in reasonable
detail the remaining costs and expenses expected to be incurred by the Company
which would otherwise have been covered by such indemnification. Such estimated
costs and expenses may be satisfied in cash (subject to a present value
discount rate) or pursuant to an irrevocable letter of credit issued in the
full amount of such estimated costs and expenses.
USE OF PROCEEDS
The Company will not receive any proceeds for the exchange of New Notes for
Old Notes pursuant to the Exchange Offer.
The net proceeds from the sale of the Old Notes of approximately $81.8
million, together with borrowings under the New Credit Facility, were used to
consummate the Transactions and meet ongoing working capital needs. See "The
Transactions."
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
SOURCES OF CASH
New Credit Facility (1)...................................... $ 73.3
10% Senior Subordinated Notes................................ 85.0
------
Total sources of cash..................................... $158.3
======
USES OF CASH
Retirement of Loomis and Loomis Armored obligations:
Existing indebtedness (2)(3)............................... $ 29.6
Accrued management fees (4)................................ 1.6
Casualty and employee claims (5)........................... 8.5
Payment to the Loomis Indemnity Trust........................ 4.7
Payments to Wells Fargo Armored and related entities (6)(7).. 106.6
Fees and expenses............................................ 5.3
Payment escrowed to retire Wells Fargo Armored IRB and
accrued interest............................................ 1.1
Contribution to the Operating Subsidiary for working capital
purposes.................................................... 0.9
------
Total uses of cash........................................ $158.3
======
</TABLE>
- --------
(1) The New Credit Facility provides initially for aggregate borrowings of
$115.0 million and matures in January 2002. As of January 24, 1997,
approximately $12.3 million in letters of credit were outstanding under the
New Credit Facility, leaving approximately $29.4 million in available
borrowing capacity under the New Credit Facility.
(2) Includes (i) $10.3 million of 14% senior subordinated notes that were
scheduled to mature on September 30, 1999, including accrued interest, (ii)
$9.2 million of a 9% junior subordinated note that was scheduled to mature
on September 30, 1999, including accrued interest (iii) $3.3 million of a
term loan that was scheduled to mature on September 30, 1999, including
accrued interest, and (iv) $6.8 million in borrowings under Loomis
Armored's credit facility.
(3) $3.5 million of the borrowings by Loomis Armored under its credit facility
were used to redeem the Loomis Preferred Stock immediately prior to the
Closing. See "The Transactions--The Business Combination."
(4) Accrued management fees were paid at Closing to an affiliate of Loomis
pursuant to a Financial Advisory Agreement. See "Certain Relationships and
Related Transactions--Financial Advisory Agreement."
(5) Represents a lump sum payment on behalf of the Business Trust to CIGNA
Insurance Company and related entities pursuant to the Early Program Close-
Out Agreement related to insuring and managing casualty and employee claims
of Loomis incurred prior to the Closing. See "The Transactions--The
Business Combination" and "Pro Forma Combined Financial Information."
(6) Includes approximately $1.4 million of reimbursement for fees and expenses
related to the Transactions.
(7) A portion of such consideration was paid at Closing by the Company to Borg-
Warner and/or one or more of its wholly-owned subsidiaries to satisfy
certain intercompany indebtedness of Wells Fargo Armored assumed by the
Company.
23
<PAGE>
CAPITALIZATION
The following table sets forth the Company's capitalization as adjusted to
give effect to the Original Offering, the Transactions and borrowings under
the New Credit Facility. The table should be read in conjunction with the
unaudited Pro Forma Combined Financial Information and audited financial
statements appearing elsewhere herein. For additional information with respect
to the New Credit Facility, see "Description of New Credit Facility."
<TABLE>
<CAPTION>
AS IF THE
TRANSACTIONS OCCURRED
ON DECEMBER 31, 1996
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Total Debt:
New Credit Facility (1)................................. $ 70,793
10% Senior Subordinated Notes........................... 85,000
Non-interest bearing NOL Note (2)....................... 5,435
Other debt.............................................. 2,046
--------
Total debt............................................. 163,274
Total stockholders' equity............................... 1,760
--------
Total capitalization................................... $165,034
========
</TABLE>
- --------
(1) The New Credit Facility provides initially for an aggregate principal
amount of $115.0 million in borrowings and matures in January 2002. As of
December 31, 1996, approximately $12.3 million in letters of credit would
have been outstanding under the New Credit Facility, leaving approximately
$31.9 million in available borrowing capacity under the New Credit
Facility.
(2) The $6.0 million 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 available as of the Closing Date. The
NOL Note is being carried on the Company's balance sheet at a discount of
$565,000 from its original principal amount to approximate its fair value.
24
<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION
The accompanying unaudited Pro Forma Combined Financial Information is based
on the historical financial statements of Loomis and Wells Fargo Armored and
gives effect to (i) the acquisition of substantially all of the assets and
certain liabilities of Wells Fargo Armored and other adjustments related to
the Transactions, (ii) the issuance and sale of the Old Notes, together with
borrowings under the New Credit Facility, and the application of the net
proceeds therefrom to repay all indebtedness of Loomis Armored, repay certain
accrued management fees of Loomis and Loomis Armored, fund a distribution to
the Loomis Indemnity Trust on behalf of the Business Trust, make a lump sum
payment on behalf of the Business Trust to CIGNA Insurance Company and related
entities pursuant to the Early Program Close-Out Agreement, related to
casualty and employee claims of Loomis and Loomis Armored prior to the Closing
Date, and fund the purchase of substantially all of the assets and certain
liabilities of Wells Fargo Armored pursuant to the Contribution Agreement, all
as described in the Notes to Pro Forma Combined Financial Information, and
(iii) the redemption by Loomis of the Loomis Preferred Stock. See "The
Transactions--The Business Combination." The accompanying unaudited Pro Forma
Combined Balance Sheet at December 31, 1996 is presented giving effect to the
transactions described above as if all such transactions had been consummated
as of that date. The unaudited Pro Forma Combined Income Statements for the
twelve months ended December 31, 1996 give effect to the transactions
described above as if they had been consummated on January 1, 1996. The Pro
Forma Combined Financial Information has been prepared on the basis of a
December 31 fiscal year end as the Company reports on a calendar year basis.
The historical Wells Fargo Armored financial statements have been conformed to
the Loomis financial statement presentation format in the accompanying Pro
Forma Combined Financial Information.
The unaudited Pro Forma Combined Financial Information is intended for
informational purposes only and is not necessarily indicative of the future
financial position or results of operation of the Company had the transactions
described in the preceding paragraph occurred on the indicated dates or been
in effect for the periods presented.
The unaudited Pro Forma Combined Financial Information and the accompanying
notes should be read in conjunction with, and are qualified in their entirety
by, the historical consolidated financial statements of Loomis and Wells Fargo
Armored, including the related notes thereto, included elsewhere herein.
25
<PAGE>
LOOMIS, FARGO & CO.
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
WELLS FARGO
LOOMIS HOLDING ARMORED SERVICE PRO FORMA PRO FORMA
CORPORATION CORPORATION ADJUSTMENTS COMBINED
-------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 2,469 $ 4,601 $ (3,448)(a) 3,622
Accounts receivable... 10,939 14,618 11,542 (b) 37,099
Amounts receivable
from Borg-Warner..... -- 39,857 (39,857)(c) --
Deferred tax asset.... -- 2,017 (2,017)(c) --
Prepaid expenses and
other assets......... 2,253 6,051 (3,490)(d) 4,814
-------- -------- -------- --------
Total current assets.... 15,661 67,144 (37,270) 45,535
Property and equipment.. 16,816 35,889 (3,020)(e) 49,685
Deferred tax asset...... -- 5,198 (5,198)(c) --
Goodwill................ 7,851 27,416 64,288 (f) 99,555
Other assets............ 2,718 557 2,525 (g) 5,800
-------- -------- -------- --------
Total assets............ $ 43,046 $136,204 $ 21,325 $200,575
======== ======== ======== ========
LIABILITIES AND COMMON
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable...... $ 5,439 $ 8,253 $ -- 13,692
Accrued expenses and
other current
liabilities.......... 16,619 9,822 (4,592)(h) 21,849
Current portion, long-
term debt............ 1,500 -- (1,500)(i) --
Current portion,
capital lease
obligations.......... 496 574 -- 1,070
-------- -------- -------- --------
Total current
liabilities............ 24,054 18,649 (6,092) 36,611
Long-term liabilities:
New Credit Facility... -- -- 70,793 (i) 70,793
Notes................. -- -- 85,000 (i) 85,000
Non-interest bearing
NOL Note............. -- -- 5,435 (i) 5,435
Long-term debt--
affiliates........... 7,569 51,518 (59,087)(i) --
Long-term debt--
other................ 13,381 1,000 (14,381)(i) --
Capital lease
obligations.......... 966 10 -- 976
Accrual for casualty
insurance............ -- 14,742 (14,742)(c) --
Other long-term
liabilities.......... 1,575 -- (1,575)(i) --
-------- -------- -------- --------
Total long-term
liabilities............ 23,491 67,270 71,443 162,204
Redeemable preferred
stock.................. 3,500 -- (3,500)(i) --
Redeemable common stock
warrants............... 355 -- (355)(j) --
Common stockholders'
equity (deficit):
Common stock.......... 15 1 84 (j) 100
Common stock
warrants............. 304 -- (304)(j) --
Additional paid-in
capital.............. 1,485 36,903 (12,960)(j) 25,428
Accumulated earnings
(deficit)............ (10,158) 13,424 (27,034)(k) (23,768)
Translation
adjustment........... (43) 43 (j) --
-------- -------- -------- --------
Total common
stockholders' equity
(deficit).............. (8,354) 50,285 (40,171) 1,760
-------- -------- -------- --------
Total liabilities and
common stockholders'
equity................. $ 43,046 $136,204 $ 21,325 $200,575
======== ======== ======== ========
</TABLE>
See accompanying notes to Pro Forma Combined Balance Sheet.
26
<PAGE>
LOOMIS, FARGO & CO.
NOTES TO PRO FORMA COMBINED BALANCE SHEET
(UNAUDITED)
The Pro Forma Combined Balance Sheet has been prepared giving effect to the
following (dollars in thousands):
The total purchase price for substantially all of the assets and certain
liabilities of Wells Fargo Armored was estimated to be approximately $132,575.
The purchase price has been preliminarily allocated to the net assets and
liabilities of Wells Fargo Armored based on estimated fair values at the date
of acquisition, with the excess of cost over fair value of net assets
allocated to goodwill. The purchase price allocation to property and equipment
is amortized over the estimated useful lives ranging from 3 to 20 years.
Goodwill is amortized over 40 years.
The total purchase price of Wells Fargo Armored by Loomis and its allocation
to assets and liabilities acquired on a preliminary basis is as follows:
<TABLE>
<S> <C>
Purchase price:
Payment to Wells Fargo Armored and related entities.............. $106,600
Common Stock issued to Wells Fargo Armored....................... 23,369
Transaction costs................................................ 2,606
--------
Total purchase price........................................... $132,575
========
Allocation of purchase price on a preliminary basis:
Current assets................................................... $ 29,521
Property and equipment........................................... 32,869
Goodwill......................................................... 91,704
Liabilities assumed.............................................. (21,519)
--------
$132,575
========
</TABLE>
Pro Forma adjustments reflect estimates which will be refined as additional
information is obtained, particularly in the areas of fair value of property
and equipment and liabilities for facilities to be closed.
Pro Forma adjustments have been made to the Pro Forma Combined Balances
Sheet to reflect the following:
(a) For a description of the sources and uses of funds for the
Transactions, see "Use of Proceeds." The Company repaid substantially
all existing indebtedness (other than capital leases) of Loomis at
Closing. The Pro Forma Combined Balance Sheet reflects the receipt of
$70,793 from the New Credit Facility and $85,000 from the Notes at
Closing. The amounts presented below differ from those reflected in
"Use of Proceeds" because of changes in balances between December 31,
1996 and January 24, 1997.
<TABLE>
<S> <C>
New Credit Facility proceeds.................................. $ 70,793
Notes......................................................... 85,000
Costs related to financing.................................... (5,800)
Costs paid after December 31, 1996 related to the
Transactions................................................. (41)
Debt and other liabilities retired:
Current portion Loomis long-term debt....................... (1,500)
Loomis long-term debt--affiliates........................... (7,569)
Loomis long-term debt--other................................ (13,381)
Loomis accrued management fees.............................. (1,575)
Loomis redeemable preferred stock--affiliates............... (3,500)
Loomis revolving credit facility............................ (1,022)
Loomis accrued interest..................................... (122)
Wells Fargo Armored IRB loan, accrued interest and related
costs...................................................... (1,130)
Payment to CIGNA Insurance Co. and related entities......... (8,500)
Excess distribution to Loomis Indemnity Trust................. (4,700)
Payment to Wells Fargo Armored and related entities........... (106,600)
Cash excluded from assets purchased from Wells Fargo Armored.. (3,801)
---------
Adjustments to cash........................................... $ (3,448)
=========
</TABLE>
27
<PAGE>
LOOMIS, FARGO & CO.
NOTES TO PRO FORMA COMBINED BALANCE SHEET--(CONTINUED)
(UNAUDITED)
(b) To record accounts receivable of Wells Fargo Armored, previously sold
to a special purpose entity, that were repurchased and delivered to the
Company pursuant to the terms of the Transactions. Includes gross
accounts receivable of $13,042 and an allowance of $1,500 to adjust the
receivables to fair market value.
(c) To exclude assets and liabilities of Wells Fargo Armored not acquired
by the Company.
(d) To conform accounting policies with respect to the cost of tires and
other truck accessories capitalized by Wells Fargo Armored that are
expensed as incurred by the Company (Prepaid--$1,498) (see note (g) for
other non-current assets of $557), and to write-off certain current
assets of $1,992 (e.g. uniforms, training videos, and other supplies
with the Wells Fargo Armored logo) which have no future benefit to the
Company.
(e) To adjust acquired property and equipment to estimated fair market
values which includes the write-off of $2,320 in capitalized costs
relating to certain software that will not be used by the Company, the
write-off of the capitalized cost of weapons of $1,700 which are
expensed by the Company when purchased, and the write-up of $1,000 of
other property and equipment.
(f) To eliminate Wells Fargo Armored's historical goodwill, and record the
goodwill originating from the Company's acquisition of Wells Fargo
Armored.
<TABLE>
<S> <C>
Wells Fargo Armored's historical goodwill...................... $(27,416)
Goodwill originating from the Company's acquisition of Wells
Fargo Armored................................................. 91,704
--------
$ 64,288
========
</TABLE>
(g) To (i) write-off the non-current costs of uniforms which have no future
benefit to the Company (see note (d)), (ii) record the estimated
offering costs relating to the Notes and the New Credit Facility, which
will be amortized over the life of the debt, (iii) reclassify costs
incurred at December 31, 1996 related to the purchase of assets of
Wells Fargo Armored that were allocated to the acquired assets, and
(iv) write-off the unamortized portion of deferred financing costs
relating to debt that was retired upon closing of the Transactions,
which will be reflected as an extraordinary loss in the Company's
financial statements.
<TABLE>
<S> <C>
Write-off non-current deferred cost of uniforms................ $ (557)
Offering costs related to Notes and New Credit Facility........ 5,800
Deferred transaction costs incurred by Loomis that are included
in the purchase price of the assets of Wells Fargo Armored.... (2,606)
Write-off (extraordinary loss) of unamortized financing costs
relating to debt retired...................................... (112)
-------
$ 2,525
=======
</TABLE>
(h) To adjust for (i) Loomis casualty and employee liabilities assumed by
the Business Trust, (ii) Wells Fargo Armored casualty and employee
liabilities not assumed by the Company, (iii) interest accrued on
Loomis and Wells Fargo Armored debt paid at Closing, (iv) an allowance
established for vacation costs associated with conforming the vacation
policy of Wells Fargo Armored to that of the Company giving
consideration to prior service of former Wells Fargo Armored employees
who will be employed by the Company, and (v) an allowance established
for costs associated with consolidating headquarters and branch
facilities and related relocation costs and severance payments.
28
<PAGE>
LOOMIS, FARGO & CO.
NOTES TO PRO FORMA COMBINED BALANCE SHEET--(CONTINUED)
(UNAUDITED)
<TABLE>
<S> <C>
Loomis' liabilities assumed by the Business Trust............... $(5,178)
Loomis' revolving credit facility............................... (1,022)
Wells Fargo Armored's liabilities not assumed by the Company.... (1,258)
Accrued interest paid at Closing................................ (169)
Accrual for vacation liability to former Wells Fargo Armored em-
ployees........................................................ 425
Accrual to consolidate headquarters facilities.................. 850
Accrual to relocate certain employees........................... 500
Accrual for abandoned leaseholds................................ 360
Accrual for severance payments.................................. 900
-------
$(4,592)
=======
</TABLE>
(i) To record the (i) retirement of Loomis' debt, (ii) issuance of new debt
in connection with the Transactions, including the $6,000 principal
amount non-interest bearing NOL note less $565 discount for imputed
interest, (iii) retirement of Wells Fargo Armored intercompany debt,
(iv) payment of Loomis' accrued management fees and (v) redemption of
the Loomis Preferred Stock.
(j) To record the (i) elimination of Wells Fargo Armored common stock not
acquired in connection with the purchase of assets from Wells Fargo
Armored, (ii) issuance of the Common Stock to Wells Fargo Armored
recorded at fair value of the Common Stock, (iii) exercise of warrants
for Loomis common stock, and (iv) exchange of all outstanding Loomis
common stock for shares of Common Stock recorded at book value of
Loomis common stock.
<TABLE>
<S> <C>
Elimination of Wells Fargo Armored common stock................ $ (1)
Elimination of Loomis common stock............................. (15)
Issuance of Common Stock to Wells Fargo Armored................ 49
Issuance of Common Stock to the Business Trust................. 51
--------
Adjustment to Common Stock................................... $ 84
========
Elimination of Wells Fargo Armored additional paid-in capital.. $(36,903)
Elimination of Loomis additional paid-in capital............... (1,485)
Additional paid-in capital for shares issued to Wells Fargo Ar-
mored......................................................... 23,320
Additional paid-in capital for shares issued to the Business
Trust......................................................... 2,108
--------
Adjustment to additional paid-in capital..................... $(12,960)
========
</TABLE>
(k) To record the (i) elimination of Wells Fargo Armored's retained
earnings, (ii) expense relating to the write-off of financing costs for
Loomis' debt which was retired, and (iii) net distribution to Loomis
Indemnity Trust.
<TABLE>
<S> <C> <C>
Elimination of Wells Fargo Armored's retained
earnings............................................. $(13,424)
Write-off (extraordinary loss) of unamortized
financing costs relating to debt to be retired....... (112)
Distribution to Loomis Indemnity Trust:
Cash (less liabilities assumed)...................... $(8,063)
NOL non-interest bearing note, net of discount....... (5,435)
-------
(13,498)
--------
$(27,034)
========
</TABLE>
29
<PAGE>
LOOMIS, FARGO & CO.
PRO FORMA COMBINED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
WELLS FARGO PROJECTED
LOOMIS HOLDING ARMORED SERVICE PRO FORMA COST PRO FORMA
CORPORATION CORPORATION ADJUSTMENTS SAVINGS COMBINED
-------------- --------------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues................ $ 127,414 $246,328 $ -- $ -- $ 373,742
Cost of operations:
Payroll and related
expense............... 84,976 134,585 -- (3,351) (c) 216,210
Vehicle expense........ 14,663 35,371 -- -- 50,034
Facilities expense..... 5,224 11,442 87 (a) (103) (c) 16,650
Other operating
expenses.............. 17,484 55,270 (719)(b) (4,032) (c) 68,003
Gains associated with
benefit plans......... (954) -- -- -- (954)
--------- -------- ------- ------ ----------
121,393 236,668 (632) (7,486) 349,943
--------- -------- ------- ------ ----------
Operating income........ 6,021 9,660 632 7,486 23,799
Interest expense--
affiliates............. 1,097 7,683 (8,780)(d) -- --
Interest expense--
other.................. 1,799 -- 14,048 (d) -- 15,847
--------- -------- ------- ------ ----------
Total interest
expense............... 2,896 7,683 5,268 -- 15,847
--------- -------- ------- ------ ----------
Income before income
taxes.................. 3,125 1,977 (4,636) 7,486 7,952
Income taxes............ 103 860 -- (756)(e) 207
--------- -------- ------- ------ ----------
Net income.............. 3,022 1,117 (4,636) 8,242 7,745
Increase in value of
redeemable warrants.... 327 -- (327)(f) -- --
--------- -------- ------- ------ ----------
Net income available to
common stockholders.... $ 2,695 $ 1,117 $(4,309) $8,242 $ 7,745
========= ======== ======= ====== ==========
Net income per common
and common equivalent
share.................. $ 1.02 $ 0.77
========= ==========
Weighted average common
and common equivalent
shares................. 2,648,633 10,000,000
========= ==========
OPERATING AND OTHER
DATA:
EBITDA (1)............. $ 9,544 $ 18,123 $ 35,153
EBITDA as a % of
revenues.............. 7.5% 7.4% 9.4%
Depreciation and
amortization.......... $ 4,477 $ 8,463 $ 12,308
Capital expenditures... 3,746 8,065 11,811
Ratio of EBITDA to
total cash interest
expense (2)........... 2.4x
Ratio of earnings to
fixed charges (3)..... 1.4x
</TABLE>
- --------
(1) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and excludes certain gains related to benefit plans of $954.
EBITDA is presented because it is commonly used by certain investors and
analysts to analyze and compare companies on the basis of operating
performance and to determine a company's ability to service and incur
debt. EBITDA should not be considered in isolation from or as a substitute
for net income, cash flows from operating activities or other consolidated
income or cash flow statement data prepared in accordance with generally
accepted accounting principles or as a measure of profitability or
liquidity.
(2) Cash interest expense represents total interest expense less (i)
amortization of financing fees and (ii) accretion of discount on non-
interest bearing NOL note. See Note (d) to the Pro Forma Combined Income
Statement.
(3) For the purpose of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense on all indebtedness plus the
interest portion of rental expense on non-cancelable leases, and
amortization of debt issuance costs and debt discount.
See accompanying notes to Pro Forma Combined Income Statement.
30
<PAGE>
LOOMIS, FARGO & CO.
NOTES TO PRO FORMA COMBINED INCOME STATEMENT
(UNAUDITED)
Pro Forma adjustments have been made to the unaudited Pro Forma Combined
Income Statement to reflect the following (in thousands):
(a) To adjust depreciation expense resulting from the adjustment in basis
of Wells Fargo Armored property and equipment to fair market value.
(b) Represents (i) the adjustment of depreciation expense resulting from
the adjustment in basis of Wells Fargo Armored property and equipment
to fair market value (ii) the amortization over 40 years of goodwill
arising from the Transactions (see note (f) to the Pro Forma Combined
Balance Sheet) and (iii) the elimination of Wells Fargo Armored
historical goodwill amortization.
<TABLE>
<S> <C>
Depreciation and amortization.................................... $(1,546)
Record revised goodwill amortization............................. 2,293
Reverse historical Wells Fargo Armored goodwill amortization..... (1,466)
-------
$ (719)
=======
</TABLE>
(c) Management estimates that, upon successful completion of its
consolidation plan over the 12-month period following the consummation
of the Transactions, the Company will realize $7.5 million in savings
on an annualized basis (approximately $3.4 million of which is related
to headcount reduction and $3.7 million of which is related to
elimination of management fees) compared to the cost of operating
Loomis and Wells Fargo Armored as separate entities. The costs
associated with implementing this plan have been recognized as
liabilities assumed in the business combination and included in the
allocation of purchase price in accordance with EITF Issue No. 95-3,
"Recognition of Liabilities in Connection with a Purchase Business
Combination." See Note (h) to the Pro Forma Combined Balance Sheet. The
following table itemizes these consolidation and related cost savings
on an annualized basis:
<TABLE>
<CAPTION>
PAYROLL AND OTHER TOTAL
RELATED FACILITIES OPERATING COST
EXPENSES EXPENSE EXPENSES SAVINGS
----------- ---------- --------- -------
<S> <C> <C> <C> <C>
Headquarters office headcount
reduction...................... $2,376 $ -- $ -- $2,376
Information systems
duplication.................... -- -- 319 319
Branch headcount and facilities
duplication.................... 739 103 -- 842
ATM dispatch center
duplication.................... 236 -- 10 246
Elimination of management fees
to Borg-Warner................. -- -- 3,353 3,353
Elimination of management fees
to Wingate Partners............ -- -- 350 350
------ ----- ------ ------
$3,351 $ 103 $4,032 $7,486
====== ===== ====== ======
</TABLE>
Management fees for both Loomis and Wells Fargo Armored will no longer
be charged to the Company. There are no direct services associated with
the Wingate Partners management fees. Any services previously
associated with the management fees paid to Borg-Warner are duplicative
of activities already performed by Loomis.
31
<PAGE>
LOOMIS, FARGO & CO.
NOTES TO PRO FORMA COMBINED INCOME STATEMENT--(CONTINUED)
(UNAUDITED)
(d) Reflects the net change in interest expense based on the financing of
the Transactions:
<TABLE>
<S> <C>
Elimination of historical interest expense....................... $(10,579)
Interest on New Credit Facility.................................. 5,770
Interest on Notes................................................ 8,500
Interest on other existing debt.................................. 144
Amortization of financing fees................................... 949
Accretion of discount on non-interest bearing NOL note........... 484
--------
$ 5,268
========
</TABLE>
The interest rates on the New Credit Facility are variable rates based
on LIBOR and are assumed to be 7.75%. For each 1/8% change in the
assumed average rate on the New Credit Facility, interest expense would
change by approximately $92 for the twelve months ended December 31,
1996. The non-interest bearing NOL note has been discounted at a rate
of 10.0%.
(e) Reflects the income tax effect of the pro forma adjustments based on
the availability of net operating loss carryforwards and the
requirements of the alternative minimum tax.
(f) Eliminates the accretion in carrying value of redeemable warrants that
were exercised prior to the closing of the Transactions.
32
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
LOOMIS
The selected consolidated financial data of Loomis set forth below for each
of the three fiscal years in the period ended June 30, 1996 and the six months
ended December 31, 1996 has been derived from the financial statements of
Loomis which have been audited by Ernst & Young LLP, independent auditors. The
selected financial information for the two years in the period ended June 30,
1993 and the six months ended December 31, 1995 is unaudited and in the
opinion of Loomis management reflects all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair presentation of
such data. The results of operations for any interim period are not
necessarily indicative of results of operations for the fiscal year and should
be read in conjunction with, and are qualified in their entirety by,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Loomis" and the financial statements of Loomis included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------------------ ----------------
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS, UNLESS OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............... $105,590 $107,249 $106,447 $115,136 $119,455 $57,806 $65,765
Cost of operations:
Payroll and related
expenses.............. 75,312 75,128 72,447 77,270 79,974 38,029 43,031
Vehicle expense........ 14,650 14,883 13,583 13,815 14,035 7,010 7,637
Facilities expense..... 5,404 5,184 5,395 4,991 5,094 2,531 2,661
Other operating
expenses.............. 13,793 12,857 14,679 15,936 17,120 8,381 8,745
Gains associated with
benefit plans......... -- -- (1,677) -- (954) -- --
-------- -------- -------- -------- -------- ------- -------
Operating income
(loss)................ (3,569) (803) 2,020 3,124 4,186 1,855 3,691
Interest expense, net.. 3,179 3,369 3,053 3,158 2,981 1,528 1,445
-------- -------- -------- -------- -------- ------- -------
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principle............. (6,748) (4,172) (1,033) (34) 1,205 327 2,246
Income taxes........... -- -- -- -- 78 25 50
Cumulative effect of
change in accounting
principle............. -- -- (453) -- -- -- --
-------- -------- -------- -------- -------- ------- -------
Net income (loss)...... $ (6,748) $ (4,172) $ (1,486) $ (34) $ 1,127 $ 302 $ 2,196
======== ======== ======== ======== ======== ======= =======
Earnings (loss) per
share (dollars not in
thousands)............ (4.50) (2.78) (0.99) (0.02) 0.30 0.21 0.83
Ratio of earnings to
fixed charges (1)..... -- -- -- 1.0x 1.3x 1.2x 2.1x
BALANCE SHEET DATA (AT
PERIOD END):
Total assets........... $ 55,011 $ 46,244 $ 39,935 $ 38,879 $ 39,755 $36,449 $43,046
Total debt (2)......... 29,444 28,429 26,985 26,791 27,392 27,253 27,767
Common stockholders'
deficit............... (5,658) (9,830) (11,316) (11,350) (10,550) (11,048) (8,354)
OTHER DATA:
EBITDA (3)............. $ 2,529 $ 5,389 $ 7,423 $ 8,344 $ 8,118 $ 4,323 $ 5,752
EBITDA as a % of
revenues.............. 2.4% 5.0% 7.0% 7.2% 6.8% 7.5% 8.7%
Depreciation and
amortization.......... $ 6,098 $ 6,192 $ 7,080 $ 5,220 $ 4,886 $ 2,468 $ 2,061
Capital expenditures... 3,957 569 419 809 2,231 1,056 2,571
Cost of risk (4)....... 11,527 12,232 10,578 10,134 10,210 5,007 3,974
Cost of risk as a % of
revenues.............. 10.9% 11.4% 9.9% 8.8% 8.5% 8.7% 6.0%
Monthly fixed billing
revenue per location
served (dollars not in
thousands) (5)........ n/a $ 274 $ 280 $ 329 $ 368 $ 345 $ 345
Number of ATMs serviced
(6)................... 722 734 906 1,172 3,181 2,400 3,925
</TABLE>
33
<PAGE>
- --------
(1) For the purposes of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense on all indebtedness plus the
interest portion of rental expense on noncancelable leases, and
amortization of debt issuance costs and debt discount. For the years ended
June 30, 1992, 1993 and 1994, earnings were insufficient to cover fixed
charges by approximately $6,700, $4,200, and $1,000, respectively.
(2) Total debt is defined as long-term debt, long-term capital lease
obligations, redeemable preferred stock and redeemable common stock
warrants.
(3) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and excludes certain gains related to benefit plans of $1,677
in 1994 and $954 in 1996 and the cumulative effect of the change in
accounting principle of $(453) in 1994. EBITDA is presented because it is
commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance and to determine a
company's ability to service and incur debt. EBITDA should not be
considered in isolation from or as a substitute for net income, cash flows
from operating activities or other consolidated income or cash flow
statement data prepared in accordance with generally accepted accounting
principles or as a measure of profitability or liquidity.
(4) Cost of risk is defined as the total cost of cash-in-transit insurance
coverage (cargo), casualty and other insurance (worker's compensation,
automobile liability, general liability and other coverage), and surety
and includes premiums, broker's fees, administration charges, payments
under deductibles provisions, collateral fees and insurance related
incentive programs.
(5) Monthly fixed billing revenue per location served is defined as the total
fixed fee monthly contract revenue for all types and frequency of service
divided by the number of customer service locations billed in such manner
at the end of each period. Monthly fixed billing revenue constitutes
approximately 70% of Loomis' total revenue in all years. Information for
1992 is not available.
(6) Number of ATMs serviced is defined as the number of ATM machines under
contract at the end of each period whether on a fixed fee monthly contract
or on a variable fee for service basis. Figures prior to 1995 are
management estimates.
34
<PAGE>
WELLS FARGO ARMORED
The selected consolidated financial data of Wells Fargo Armored set forth
below for each of the three years in the period ended December 31, 1996 has
been derived from the financial statements of Wells Fargo Armored which have
been audited by Deloitte & Touche LLP, independent auditors. The selected
financial information for the two years in the period ended December 31, 1993
is unaudited and in the opinion of Wells Fargo Armored management reflects all
adjustments, consisting only of normal recurring accruals, considered
necessary for a fair presentation of such data.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net service revenues........ $156,388 $182,124 $211,204 $230,999 $246,328
Cost of services............ 120,916 142,210 177,093 188,639 204,543
-------- -------- -------- -------- --------
Gross profit................ 35,472 39,914 34,111 42,360 41,785
Selling, general, and
administrative expenses.... 17,973 17,306 21,406 18,705 20,309
Depreciation................ 5,953 6,753 7,096 7,150 6,997
Management fees to Borg-
Warner..................... 3,160 2,577 3,004 3,185 3,353
Amortization of excess
purchase price............. 959 1,332 1,325 1,474 1,466
-------- -------- -------- -------- --------
Earnings from operations.... 7,427 11,946 1,280 11,846 9,660
Interest expense and finance
charges.................... 4,738 5,363 6,567 7,135 7,683
-------- -------- -------- -------- --------
Earnings (loss) before
income taxes............... 2,689 6,583 (5,287) 4,711 1,977
Provision (benefit) for
income taxes............... 1,796 1,922 (1,798) 1,866 860
-------- -------- -------- -------- --------
Net earnings (loss) before
cumulative effect of
accounting change.......... 893 4,661 (3,489) 2,845 1,117
Cumulative effect of
accounting change.......... -- (2,000) -- -- --
-------- -------- -------- -------- --------
Net earnings (loss)......... $ 893 $ 2,661 $ (3,489) $ 2,845 $ 1,117
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges (1)................ 1.5x 2.0x -- 1.5x 1.2x
BALANCE SHEET DATA (AT PERIOD
END):
Total assets................ $113,344 $118,129 $124,812 $128,192 $136,204
Total debt.................. 59,741 58,110 58,477 54,114 53,102
Stockholder's equity........ 28,702 34,453 35,341 43,705 50,285
OTHER DATA:
EBITDA (2).................. $ 14,339 $ 20,031 $ 9,701 $ 20,470 $ 18,123
EBITDA as a % of net service
revenues................... 9.2% 11.0% 4.6% 8.9% 7.4%
Depreciation and
amortization............... $ 6,912 $ 8,085 $ 8,421 $ 8,624 $ 8,463
Capital expenditures........ 12,064 5,740 6,231 3,695 8,065
Cost of risk (3)............ 16,060 18,211 29,734 30,086 28,262
Cost of risk as a % of net
service revenues........... 10.3% l0.0% 14.1% 13.0% 11.5%
Number of ATMs serviced
(4)........................ 13,618 15,405 18,185 23,980 24,062
</TABLE>
35
<PAGE>
- --------
(1) For the purposes of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense on all indebtedness plus the
interest portion of rental expense on non-cancelable leases. For the year
ended December 31, 1994 earnings were insufficient to cover fixed charges
by $5,287.
(2) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and excludes the cumulative effect of a change in accounting
principle of ($2,000) in 1993. EBITDA is presented because it is commonly
used by certain investors and analysts to analyze and compare companies on
the basis of operating performance and to determine a company's ability to
service and incur debt. EBITDA should not be considered in isolation from
or as a substitute for net income, cash flows from operating activities or
other consolidated income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a measure
of profitability or liquidity.
(3) Cost of risk is defined as the total cost of cash-in-transit insurance
coverage (cargo), casualty and other insurance (worker's compensation,
automobile liability, general liability and other coverage), and surety
and includes premiums, broker's fees, administration charges, payments
under deductibles provisions, collateral fees and insurance related
incentive programs.
(4) Number of ATMs serviced is defined as the number of ATM machines under
contract at the end of each period whether on a fixed fee monthly contract
or on a variable fee for service basis.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Except as otherwise indicated, the following discussion and analysis of
results of operations and financial condition of Loomis and Wells Fargo
Armored covers periods before the consummation of the Transactions.
Accordingly, the discussion and analysis of such periods does not reflect the
significant impact that the Transactions, the Original Offering and the New
Credit Facility have had on the Company. See "Pro Forma Combined Financial
Information" and "Prospectus Summary--Consolidation Savings." In addition, the
following discussion and analysis is based upon and should be read in
conjunction with "Selected Historical Financial Information" and the
consolidated financial statements of each of Loomis and Wells Fargo Armored,
including the notes thereto, included elsewhere in this Prospectus.
LOOMIS
OVERVIEW
Loomis was incorporated and has operated under the name Loomis Holding
Corporation since 1991. On May 5, 1991, Loomis acquired Loomis Armored for
$27.8 million. Loomis Armored was incorporated in 1928.
Upon consummation of the acquisition, Loomis' management implemented a three
part turnaround strategy to improve Loomis' profitability. The strategy
focused on improving the quality of revenue while keeping costs constant and
managing the cost of risk. Management did not employ a typical cost cutting
strategy; but rather encouraged investment in expenditures related to employee
compensation, training, security, vehicles and facilities. This focus on
establishing core values with employees through fair compensation and an
improved work environment has lead to reduced employee turnover from an
estimated 41% annually as of December 1992 to 29% as of December 1996.
Central to the success of Loomis is its comprehensive approach to risk
management. Loomis views itself as a risk management partner rather than a
transportation company. Loomis' risk management approach permeates all facets
of its operations including: employee selection and screening; anti-robbery,
weapons safety, driving safety, and injury prevention training programs;
operational security procedures; claims management and administration; and
customer-specific assessment of risk factors. As a result of this
comprehensive risk management approach, total cost of risk decreased from
10.9% of revenues for the year ended June 30, 1992 to 7.4% of revenues for the
twelve months ended December 31, 1996.
Insurance coverage underlies Loomis' comprehensive risk management program.
Loomis has an A-rated primary cash-in-transit insurance policy which provides
Loomis with coverage up to $200 million per occurrence. Casualty claims are
managed through a cooperative arrangement developed over six years with CIGNA,
Loomis' primary insurance carrier. The insurance program allows Loomis to
participate in potential savings by actively managing claims with reduced
fixed premiums and collateral costs, but affords Loomis protection for
catastrophic claims.
By focusing on the quality of revenue, management believes Loomis has
developed a customer base which recognizes the importance and value of risk
management. Specific risks factors are considered in pricing decisions and
customers are asked to pay appropriate prices to support security costs
necessary to safely provide services. Those customers with lines of business
representing unacceptable risk profiles have been eliminated.
As a result of the three part turnaround strategy, Loomis' revenue increased
from $105.6 million for the fiscal year ended June 30, 1992 to $127.4 million
for the twelve months ended December 31, 1996, a $21.8 million increase.
Operating income increased from an operating loss of $3.6 million for the
fiscal year ended June 30, 1992 to operating income of $6.0 million for the
twelve months ended December 31, 1996, an increase of $9.6 million. Cost of
risk has decreased from $11.5 million for the fiscal year ended June 30, 1992
to $9.4 million for the twelve months ended December 31, 1996. In addition,
over this period the armored car industry has been
37
<PAGE>
experiencing expanded market opportunities. As their industry continues to
consolidate, banks have been reassessing their retail distribution strategies
and are expanding their points of access, principally through ATMs. Loomis'
ATM Services revenue has grown from $4.1 million for the year ended June 30,
1992 to $19.4 million for the twelve months ended December 31, 1996, or a
compound annual growth rate of 36.4%. Management expects this line of business
to have continued opportunity for growth into the future.
RESULTS OF OPERATIONS
The following table sets forth Loomis' results of operations expressed as a
percentage of revenue.
<TABLE>
<CAPTION>
SIX
YEARS ENDED MONTHS ENDED
JUNE 30, DECEMBER 31,
-------------------- --------------
1994 1995 1996 1995 1996
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of operations:
Payroll and related expense......... 68.0 67.1 67.0 65.8 65.5
Vehicle expense..................... 12.8 12.0 11.7 12.1 11.6
Facilities expense.................. 5.1 4.3 4.3 4.4 4.0
Other operating expenses............ 13.8 13.9 14.3 14.5 13.3
Gains associated with benefit
plans.............................. (1.6) 0.0 (0.8) 0.0 0.0
----- ----- ----- ------ ------
Operating income...................... 1.9 2.7 3.5 3.2 5.6
Interest expenses, net................ 2.9 2.7 2.5 2.6 2.2
Income (loss) before income taxes and
cumulative effect of change in
accounting principle................. (1.0) 0.0 1.0 0.6 3.4
Income taxes.......................... 0.0 0.0 0.1 0.1 0.1
Cumulative effect of change in
accounting principle................. 0.4 0.0 0.0 0.0 0.0
----- ----- ----- ------ ------
Net income (loss)..................... (1.4%) 0.0% 0.9% 0.5% 3.3%
===== ===== ===== ====== ======
</TABLE>
Six months ended December 30, 1995 compared with six months ended December
30, 1996
Revenues. Revenues increased from $57.8 million for the six months ended
December 31, 1995 to $65.8 million for the six months ended December 31, 1996,
an increase of $8.0 million or 13.8%. The following table analyzes revenues by
type of service.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
DECEMBER 31,
---------------
1995 1996 CHANGE PERCENT
------- ------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Traditional armored transport services..... $ 48.2 $ 49.1 $0.9 1.9%
ATM services............................... 4.5 10.9 6.4 142.2
Cash vault and related services............ 5.1 5.8 0.7 13.7
------- ------- -----
Total revenue............................ $ 57.8 $65.8 $ 8.0 13.8
======= ======= =====
</TABLE>
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 significant improvement in ATM services
revenue has resulted from Loomis' strategic decision to increase its efforts
in developing this market segment.
38
<PAGE>
Payroll and related expense. Payroll and related expense increased from
$38.0 million for the six months ended December 31, 1995 to $43.0 million for
the six months ended December 31, 1996, an increase of $5.0 million or 13.2%.
Payroll and related expense as a percent of revenue decreased slightly from
65.8% for the six months ended December 31, 1995 to 65.5% for the six months
ended December 31, 1996. The increase in payroll and related expenses is
primarily attributable to additional personnel required to support the growing
market for ATM services.
Vehicle expense. Vehicle expense increased from $7.0 million for the six
months ended December 31, 1995 to $7.6 million for the six months ended
December 31, 1996, an increase of $0.6 million or 8.6%. Vehicle expense as a
percent of revenue decreased from 12.1% for the six months ended December 31,
1995 to 11.6% for the six months ended December 31, 1996. The primary reason
for the $0.6 million increase in vehicle expense was related to an increase in
the price of gasoline and diesel fuel. The reduction in vehicle expense as a
percent of revenue primarily resulted from reduced vehicle repair expense as
new armored vehicles have replaced older vehicles that had previously been
utilized at near full capacity. The reduction in vehicle repairs has more than
offset the increase in armored vehicle depreciation.
Facilities expense. Facilities expense increased from $2.5 million for the
six months ended December 31, 1995 to $2.7 million for the six months ended
December 31, 1996. Facilities expense as a percent of revenue decreased from
4.4% for the six months ended December 31, 1995 to 4.0% for the six months
ended December 31, 1996. No new facilities have been opened since December 31,
1995.
Other operating expenses. Other operating expenses increased from $8.4
million for the six months ended December 31, 1995 to $8.7 million for the six
months ended December 31, 1996. Other operating expenses as a percent of
revenue decreased from 14.5% for the six months ended December 31, 1995 to
13.3% for the six months ended December 31, 1996. Other operating expenses
include such expenses as cargo insurance premiums and losses; subcontracting
costs; and testing, recruiting, uniforming, and training of employees.
Included in other operating expenses is the amortization of a covenant not to
compete and the cost of purchased contracts which became fully amortized
during fiscal year ended June 30, 1996. Consequently, amortization of these
intangible assets decreased by $0.5 million for the six months ended December
31, 1996.
Operating income. Operating income increased from $1.9 million for the six
months ended December 31, 1995 to $3.7 million for the six months ended
December 31, 1996, an increase of $1.8 million or 94.7%, for the reasons
stated above.
Net income. Net income increased from $0.3 million for the six months ended
December 31, 1995 to $2.2 million for the six months ended December 31, 1996,
an increase of $1.9 million or 633.3%, for the reasons stated above.
Fiscal year ended June 30, 1995 compared with fiscal year ended June 30, 1996
Revenues. Revenues increased from $115.1 million in fiscal 1995 to $119.5
million in fiscal 1996, an increase of $4.4 million or 3.8%. The following
table analyzes revenues by type of service.
<TABLE>
<CAPTION>
YEARS ENDED
JUNE 30,
---------------
1995 1996 CHANGE PERCENT
------- ------- -------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Traditional armored transport services.... $ 98.5 $ 96.2 $ (2.3) (2.3)%
ATM services.............................. 7.2 13.1 5.9 80.6
Cash vault and related services........... 9.4 10.2 0.8 8.5
------- ------- ------
Total revenue........................... $ 115.1 $ 119.5 $ 4.4 3.8
======= ======= ======
</TABLE>
39
<PAGE>
In fiscal 1995, Loomis developed an improved revenue management system which
effectively identified those contracts which were inappropriately priced
relative to cost of service. As a result of this review, traditional armored
transport and cash vault and related services revenues in fiscal 1996
initially declined with the loss of certain high risk and low profitability
customers. By mid-1996 Loomis returned to building the customer base with a
higher quality of revenue and finished the fiscal year with significantly
improved revenue per fixed billing location served. Fixed billing revenue per
location served increased from $329 monthly at June 30, 1995 to $368 monthly
at June 30, 1996, an 11.8% increase. ATM services revenues were responsible
for most of the revenue growth during fiscal 1996, with an 81% increase over
fiscal 1995, which more than offset a decrease in traditional armored
transport services.
Payroll and related expense. Payroll and related expense increased from
$77.3 million in fiscal 1995 to $80.0 million in fiscal 1996, an increase of
$2.7 million or 3.5%. Payroll and related expense as a percent of revenue
decreased slightly from 67.1% in fiscal 1995 to 66.9% in fiscal 1996, which in
part reflects improvement in the customer mix. With the growth in ATM
services, Loomis' wage structure has increased to support three-person crews
which are used on most ATM routes as well as service locations with higher
risk profiles. The effect of the increased wages has been more than offset
during this period due to a change to subcontracting work related to some of
Loomis' coin operations that previously were performed in-house. These
subcontracting expenses, which increased by $0.8 million in fiscal 1996, are
included in other operating expenses. Loomis established a $0.3 million
reserve for discretionary bonuses in fiscal 1996 that were unrelated to branch
performance. An additional expense of $0.2 million was incurred in fiscal 1996
to harmonize branch specific vacation policies to a region standard vacation
entitlement program.
Vehicle expense. Vehicle expense increased from $13.8 million in fiscal 1995
to $14.0 million in fiscal 1996, an increase of $0.2 million or 1.6%. Vehicle
expense as a percent of revenue decreased slightly from 12.0% in fiscal 1995
to 11.7% in fiscal 1996. The decrease as a percent of revenue primarily
related to a reduction of over $0.4 million related to auto and general
liability insurance losses. Additionally, armored truck depreciation continued
to decline, by $0.2 million, between fiscal 1995 and fiscal 1996 as a portion
of Loomis' vehicles became fully depreciated.
Facilities expense. Facilities expense increased from $5.0 million in fiscal
1995 to $5.1 million in fiscal 1996, an increase of $0.1 million or 2.0%.
Facilities expense as a percent of revenue remained constant for both fiscal
1995 and 1996 at 4.3%.
Other operating expenses. Other operating expenses increased from $15.9
million in fiscal 1995 to $17.1 million in fiscal 1996, an increase of $1.2
million or 7.4%. Other operating expenses as a percent of revenue increased
from 13.8% in fiscal 1995 to 14.3% in fiscal 1996. As noted above, the Company
shifted certain coin operation work previously performed in-house to
subcontractors. The shift resulted in an increase in subcontracting expense of
$0.8 million from fiscal 1995 to 1996. Excluding this shift in operational
strategy, other operating expense as a percent of revenue would have decreased
to 13.7%. Loomis established in fiscal 1996 a reserve of $0.3 million for a
potential settlement of a customer dispute and a reserve of $0.3 million for a
wrongful termination suit for an employee terminated in June 1994.
Gains associated with benefit plans. The $1.0 million gain associated with
benefit plans in fiscal 1996 related to the termination of Loomis'
postretirement benefit plan. See footnote 7 to the audited financial
statements of Loomis for further discussion.
Operating income. Operating income increased from $3.1 million in fiscal
1995 to $4.2 million in fiscal 1996, an increase of $1.1 million or 34.0%, for
the reasons stated above.
Net income. Net income increased from a slight loss in fiscal 1995 to $1.1
million net income in fiscal 1996, an increase of $1.2 million, for the
reasons stated above.
40
<PAGE>
Fiscal year ended June 30, 1994 compared with fiscal year ended June 30, 1995
Revenues. Revenues increased from $106.4 million in fiscal 1994 to $115.1
million in fiscal 1995, an increase of $8.7 million or 8.2%. The following
table analyzes revenues by type of service.
<TABLE>
<CAPTION>
YEARS ENDED
JUNE 30,
---------------
1994 1995 CHANGE PERCENT
------- ------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Traditional armored transport services......... $ 93.4 $ 98.5 $ 5.1 5.5%
ATM services................................... 5.0 7.2 2.2 44.0
Cash vault and related services................ 8.0 9.4 1.4 17.5
------- ------- -----
Total revenue................................ $ 106.4 $ 115.1 $ 8.7 8.2
======= ======= =====
</TABLE>
The increase in traditional armored transport services and cash vault and
related services revenues resulted in part from corrective price increases
associated with the development of the new revenue management system. In
addition, Loomis provided more cash vault and related services to an
increasing number of ATM customers.
Payroll and related expense. Payroll and related expense increased from
$72.4 million in fiscal 1994 to $77.3 million in fiscal 1995, an increase of
$4.9 million or 6.7%. Payroll and related expense as a percent of revenue
decreased from 68.1% in fiscal 1994 to 67.1% in fiscal 1995. Payroll and
related expense declined as a percentage of revenue due to higher revenue from
the improved price structure associated with the quality of revenue program
and a $0.4 million decrease in workers' compensation cost resulting from
improved loss history.
Vehicle expense. Vehicle expense increased from $13.6 million in fiscal 1994
to $13.8 million in fiscal 1995, an increase of $0.2 million or 1.7%. Vehicle
expense as a percent of revenue decreased from 12.8% in fiscal 1994 to 12.0%
in fiscal 1995. Fixed vehicle expense declined by $0.4 million as a portion of
Loomis' vehicles became fully depreciated.
Facilities expense. Facilities expense decreased from $5.4 million in fiscal
1994 to $5.0 million in fiscal 1995, a decrease of $0.4 million or 7.5%.
Facilities expense as a percent of revenue decreased from 5.1% in fiscal 1994
to 4.3% in fiscal 1995 due primarily to the 8.2% increase in revenues from
fiscal 1994 to fiscal 1995.
Other operating expenses. Other operating expenses increased from $14.7
million in fiscal 1994 to $15.9 million in fiscal 1995, an increase of $1.2
million or 8.6%. Other operating expenses as a percent of revenue remained
constant at 13.8%.
Gains associated with benefit plans. The gain associated with benefit plans
in fiscal 1994 related to the curtailment of future benefits under Loomis'
defined benefit plan. See footnote 7 to the audited financial statements for
further discussion.
Operating income. Operating income increased from $2.0 million in fiscal
1994 to $3.1 million in fiscal 1995, an increase of $1.1 million or 54.7%, for
the reasons stated above.
Cumulative effect of change in accounting principle. The cumulative effect
of change in accounting principle totaling $0.5 million expense in fiscal 1994
resulted from the adoption of Statement of Financial Accounting Standards No.
106, Employer's Accounting for Postretirement Benefits Other Than Pensions.
See footnote 7 to the audited financial statements for further discussion.
Net income (loss). Net income increased from a net loss of $1.4 million in
fiscal 1994 to a slight loss in fiscal 1995, an increase of $1.4 million, for
the reasons stated above.
HISTORICAL LIQUIDITY AND CAPITAL RESOURCES
Total cash and cash equivalents at June 30, 1995, June 30, 1996 and December
31, 1996 were $1.9 million, $3.4 million and $2.5 million, respectively.
Included in these amounts for each period were $1.5 million in
41
<PAGE>
restricted cash and cash equivalents. Changes in cash and cash equivalents and
other working capital items are described in Loomis' consolidated statements
of cash flows, which are summarized below.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED ENDED
JUNE 30, DECEMBER 31,
------------ ------------
1995 1996 1996
----- ----- ------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net cash provided by operating activities....... $ 0.7 $ 3.8 $1.2
Net cash used in investing activities........... (0.4) (1.8) (1.3)
Net cash provided by (used in) financing
activities..................................... -- (0.6) (0.8)
</TABLE>
Net cash provided by operating activities increased $3.2 million from fiscal
1995 to fiscal 1996. Loomis experienced improved net income over prior years
of $1.5 million in fiscal 1995 and $1.2 million in fiscal 1996. Despite the
improvement in net income during fiscal 1995, operating cash flows for the
period declined compared to fiscal 1994 due in part to a change in Loomis'
major medical plan. Also, operating cash flow was reduced in fiscal 1995 due
to the payment of $0.9 million in interest during fiscal 1995 that had been
recognized as expense in fiscal 1994. Finally, a change in Loomis' cash-in-
transit insurance program resulted in the use of $1.5 million in operating
cash flow during fiscal 1995 to fund a restricted cash requirement. Net cash
provided by operations was $1.2 million in the six months ended December 31,
1996. Loomis' net income of $2.2 million in the six months ended December 31,
1996 is consistent with the improving trend in net income. On an annualized
basis, the net income of the six month period would indicate an improvement of
$3.3 million over the fiscal year ended June 30, 1996.
Net cash used in investing activities in fiscal 1995 was $0.4 million,
reflecting capital expenditures necessary to maintain existing assets. Net
cash used in investing activities in fiscal 1996 was $1.8 million of which
$1.1 million was used for vehicle refurbishment and new vehicles to meet the
new equipment requirements of business growth. An additional $0.7 million was
used for support equipment, computer and software needs, and capital
expenditures necessary to maintain existing assets. The cash used in investing
activities in the six months ended December 31, 1996 was $1.3 million, of
which $0.9 million was used for computers and software purchased in
anticipation of the acquisition of Wells Fargo Armored.
Net cash used in financing activities in fiscal 1994 was $2.5 million, of
which $1.5 million was used to repay principal of a long-term note with a
commercial finance company and the remainder was used to pay down on Loomis'
revolver. The remaining $0.4 million of the long-term note with the commercial
finance company was repaid in fiscal 1995. In fiscal 1996, Loomis borrowed a
$4.0 million term loan from a commercial finance company under its credit
facility for the purpose of repaying $4.0 million to certain senior and junior
subordinated debt holders and negotiated a deferral of the remaining principal
to September 30, 1999. Net cash of $0.8 million used in financing activities
in the six months ended December 31, 1996 was primarily payment of costs
related to the acquisition of Wells Fargo Armored, and the related refinancing
of debt.
Loomis' credit agreement in effect prior to consummation of the Transactions
consisted of a $29.5 million facility with $21.5 million in aggregate maximum
borrowings for the term loan and guarantees of letters of credit. The total
credit facility and the total maximum borrowings for the term loan of $4.0
million and for the guarantees of letters of credits are reduced by an amount
equal to the aggregate amount of all payments made on the term loan. Loomis
maintains letters of credit principally as collateral for the insurance
companies participating in the casualty and cargo risk programs. Loomis can
borrow up to $8.0 million on the credit facility revolver to the extent of a
fixed percentage of qualified trade receivables. The credit agreement expires
as of September 30, 1999. As of December 31, 1996, borrowings outstanding
under the term loan and guarantees of letters of credit were $3.3 million and
$15.9 million, respectively. As of December 31, 1996, $1.0 million was
outstanding under Loomis' revolver. Availability under the revolver was
limited to $4.8 million based on the balance of outstanding trade receivables
at that date.
The credit facilities and senior and junior subordinated notes were
refinanced as part of the Transactions. See "--Loomis, Fargo & Co.--Liquidity
and Capital Resources."
42
<PAGE>
While Loomis' balance sheet reflects a significant working capital deficit
($8.4 million at December 31, 1996), approximately $6.0 million in current
liabilities consist of net insurance reserves, much of which will be paid over
periods in excess of one year. Loomis also is highly leveraged, with long-term
liabilities comprising 55% of total liabilities and common stockholders'
deficit.
TAX LOSS CARRYFORWARD
Loomis had a net operating loss carryforward at December 31, 1996 of $15.1
million and therefore has generally not been subject to federal and state
income taxes due to the availability of this net operating loss carryforward
resulting in a net deferred tax asset. The realization of this deferred tax
asset is dependent primarily on Loomis' ability to generate future taxable
earnings. Because Loomis' operating history does not provide sufficient
evidence to conclude that it is more likely than not that it will generate
sufficient future taxable earnings to realize this asset, a valuation
allowance for the full amount of the net deferred tax asset has been recorded.
Changes in this valuation allowance result primarily from utilization of net
operating loss carryforwards. See footnote 6 to the audited financial
statements for further discussion.
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"),
provides that upon the occurrence of a more than 50% change in the ownership
of a corporation having a net operating loss carryforward, the annual
utilization of such net operating loss carryforward will be limited to an
amount generally determined by multiplying the value of the stock of the loss
corporation immediately before the ownership change times an applicable
federal rate (currently 5.64%) (an "Annual Limitation"). The Company currently
intends to take the position that the Transactions do not result in an
ownership change of Loomis for purposes of Section 382 of the Code. However,
there can be no assurance that the Internal Revenue Service will not disagree
with such position. Further, because small changes in the direct or indirect
ownership of the Company during the three year period following the Closing
Date may result in an ownership change with respect to Loomis for purposes of
Section 382 of the Code, there can be no assurance that an Annual Limitation
will not become applicable to the Loomis net operating loss carryforward
following the Closing of the Transactions.
SEASONALITY
Although Loomis' sales are generally level throughout the year, Loomis'
sales vary to the extent demand for money increases during major holiday
seasons. Additional charges apply to most deliveries made on bank holidays.
Extra charges are incurred by customers during the increased demand during the
pre-Christmas shopping season relating to increased item count, liability
limits, and special runs. Payroll related costs generally follow the same
seasonal pattern with paid holidays and overtime for work done on bank
holidays.
WELLS FARGO ARMORED
OVERVIEW
Wells Fargo Armored is a security-related cash services business that
provides traditional armored transport services, ATM services and cash vault
and related services in the United States and Puerto Rico. The traditional
armored transport services business, consisting of the transportation by
heavily armored vehicles of currency, securities and other valuables for the
banking industry, is a mature business that experiences modest growth. In
reaction to consolidation in the banking industry, Wells Fargo Armored has
expanded into additional areas of service, including ATM services and cash
vault and related services. It has also expanded the markets served by the
traditional armored transport business by providing service in small to mid-
size markets for retail clients that have not traditionally used armored
transport services. Consolidated net service revenues have increased from
$211.2 million in 1994 to $246.3 million in 1996, an annual compound increase
of 8.0%, and ATM services revenues have increased from $73.0 million in 1994
to $92.4 million in 1996, an annual compound increase of 12.6%.
43
<PAGE>
During 1994 increased cargo losses relative to historic levels resulted in
increased security costs and insurance premiums. Wells Fargo Armored responded
with a pricing effort in 1995 and 1996 to better align prices with the cost of
risk of providing armored transport services. In addition, Wells Fargo Armored
expanded its programs to reduce cargo losses, the benefits of which began to
be seen in 1995 and continued into 1996. Such programs include lowering the
profile of its vehicles, increasing security training, improving security
measures through technology and route structure and eliminating certain
higher-risk services.
RESULTS OF OPERATIONS
The following table sets forth the Wells Fargo Armored's results of
operations expressed as a percentage of revenue.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net service revenues.... 100.0% 100.0% 100.0%
Gross profit............ 16.2 18.3 17.0
Selling, general and
administrative
expenses............... 10.1 8.1 8.2
Depreciation............ 3.4 3.1 2.8
Earnings from
operations............. 0.6 5.1 3.9
Net earnings (loss)..... (1.7) 1.2 0.5
</TABLE>
Fiscal year ended December 31, 1995 compared with fiscal year ended December
31, 1996.
The following table sets forth information concerning the revenue
contributed by each sector of Wells Fargo Armored:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------
1995 1996 CHANGE PERCENT
------ ------ ------ -------
<S> <C> <C> <C> <C>
Traditional armored transport.................. $133.5 $137.9 $ 4.4 3.3%
ATM services................................... 81.2 92.4 11.2 13.8
Cash vault and related services................ 16.3 16.0 (0.3) (0.2)
------ ------ -----
Total........................................ $231.0 $246.3 $15.3 6.6%
====== ====== =====
</TABLE>
Consolidated net service revenue increased 6.6% in 1996 compared with 1995.
Higher volume in ATM services, both for new and existing customers, and
selected price increases contributed to the revenue increase.
Gross profit margins declined to 17.0% in 1996 from 18.3% in 1995 due to
higher labor, vehicle and insurance costs, as well as higher cargo losses.
Beginning in 1995, Wells Fargo Armored increased its use of operating leases
relative to capital leases and purchases for capital investments, principally
vehicles. As a result, costs of services have increased while depreciation
expense has decreased as a percentage of revenues. Selling, general and
administrative expenses have stabilized as a percentage of revenues as Wells
Fargo Armored received the full impact of certain cost reduction programs
implemented in late 1994. Such programs included consolidation of certain
regions, administrative consolidation of certain traditional armored transport
and ATM Services offices and consolidation of certain back office functions at
the corporate and branch office levels.
Interest expense is based on financing decisions and allocations made by
Borg-Warner. Wells Fargo Armored participates in the receivables financing
facility that Borg-Warner established in November 1995 and the level of its
participation affects Borg-Warner's net investment in Wells Fargo Armored.
Because interest expense includes both the balance of receivables sold by
Wells Fargo Armored and certain debt allocations made by Borg-Warner,
management does not believe that the reported amount of interest expense is
material to an analysis of Wells Fargo Armored's results.
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Wells Fargo Armored is included in Borg-Warner's consolidated United States
income tax return. The provision for income taxes is determined on a separate
return basis. Effective tax rates have varied from the federal tax rate
primarily due to nondeductible amortization of excess purchase price over net
assets acquired. Such excess purchase price results from the increase in
carrying values of Wells Fargo Armored's assets in connection with the 1987
acquisition of Borg-Warner and its subsidiaries (including Wells Fargo
Armored).
Fiscal year ended December 31, 1994 compared with fiscal year ended December
31, 1995
The following table sets forth information concerning the revenue
contributed by each sector of Wells Fargo Armored:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------
1994 1995 CHANGE PERCENT
------ ------ ------ -------
<S> <C> <C> <C> <C>
Traditional armored transport.................. $121.5 $133.5 $12.0 9.9%
ATM services................................... 73.0 81.2 8.2 11.2
Cash vault and related services................ 16.7 16.3 (0.4) (2.4)
------ ------ -----
Total........................................ $211.2 $231.0 $19.8 9.4%
====== ====== =====
</TABLE>
Consolidated net service revenue increased 9.4% in 1995 compared with 1994.
Wells Fargo Armored instituted a pricing effort to better align prices with
the increasing cost of risk of providing armored transport services. In
addition, Wells Fargo Armored increased its volume of armored transport and
ATM Services business in 1995. Wells Fargo Armored's traditional armored
transport unit has expanded its operations to provide deposit pick up services
in small to medium-sized markets for retailers that have not traditionally
used armored transport services.
Gross profit margins improved to 18.3% in 1995 compared to 16.2% in 1994
primarily due to improved pricing and programs to improve profitability and
control losses. During 1994 an increased amount of cargo losses relative to
historic levels resulted in increased security costs and insurance premiums.
Pricing efforts in 1995 focused on recovering these cost increases. Cost
reduction programs implemented in late 1994 were effective in reducing general
and administrative expenses. Such programs included consolidation of certain
regions, administrative consolidation of certain traditional armored transport
and ATM Services offices and consolidation of certain back office functions at
the corporate and branch office levels. As a result, earnings from operations
increased from 0.6% of revenues in 1994 to 5.1% of revenues in 1995.
Beginning in 1995, Wells Fargo Armored increased its use of operating leases
relative to capital leases for capital investments. As a result, cost of
services will increase while depreciation expense will decrease as a
percentage of revenues.
HISTORICAL FINANCIAL CONDITION AND LIQUIDITY
Wells Fargo Armored's operations overall generate sufficient cash flow to
meet its operating capital needs. Wells Fargo Armored is part of Borg-Warner's
central cash management system, wherein excess cash is transferred to Borg-
Warner and short-term working capital needs are funded by Borg-Warner.
Financing decisions and allocations made by Borg-Warner affect Borg-Warner's
net investment in Wells Fargo Armored.
Wells Fargo Armored is involved in several legal actions arising in the
ordinary course of business. Wells Fargo Armored believes that the various
asserted claims and litigation in which it is involved will not materially
affect its financial position or future operating results, although no
assurance can be given with respect to the ultimate outcome of any such claim
or litigation.
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<PAGE>
LOOMIS, FARGO & CO.
PRO FORMA LIQUIDITY AND CAPITAL RESOURCES
Upon consummation of the Transactions, the Original Offering and the closing
of the New Credit Facility, interest payments on the Notes and principal and
interest payments under the New Credit Facility represent significant
liquidity requirements for the Company. The Notes require semiannual interest
payments of $4.25 million on each January 15 and July 15 commencing July 15,
1997. Borrowings under the New Credit Facility bear interest at floating rates
and require interest payments on varying dates depending on the interest rate
option selected by the Company. See "Description of New Credit Facility."
In addition to its debt service obligations, the Company's remaining
liquidity demands are for capital expenditures and working capital needs. The
Company expects to spend approximately $18.5 million on capital projects in
1997, with approximately $8.7 million of that amount representing maintenance-
related capital expenditures. The New Credit Facility imposes annual limits on
the Company's capital expenditures and investments.
The Company's primary sources of liquidity are cash flows from operations
and borrowings under the New Credit Facility. See "Description of New Credit
Facility." As of December 31, 1996, approximately $31.9 million would have
been available to be drawn by the Company under the New Credit Facility. In
addition, as of December 31, 1996, the Company would have had outstanding
approximately $12.3 million in standby letters of credit, relating primarily
to the Company's insurance program. The Company's standby letters of credit
reduce amounts available to be borrowed under the New Credit Facility. Over
time, the Company's standby letters of credit are expected to substantially
increase as the Company's reserve for casualty losses increases. Because the
casualty and employee claims incurred by Loomis and Wells Fargo Armored prior
to the consummation of the Transactions are liabilities assumed by the
Business Trust (and covered under the Early Program Close-Out Agreement) and
of Wells Fargo Armored, respectively, the Company did not have any reserve for
casualty losses as of the Closing of the Transactions. See "The Transactions--
The Business Combination."
The Company anticipates that its working capital, capital expenditures and
scheduled interest payments for the 1997 fiscal year will be satisfied through
a combination of funds generated from operations together with funds available
under the New Credit Facility.
46
<PAGE>
BUSINESS
GENERAL
Loomis, Fargo & Co., created through the combination of Loomis Armored and
Wells Fargo Armored, is one of the largest armored transport companies in the
United States. Loomis, Fargo & Co. operates over 150 branches, employs
approximately 8,700 persons, and utilizes a fleet of approximately 2,700
armored vehicles nationwide to provide armored ground transport services,
automated teller machine ("ATM") services, and cash vault and related services
to financial institutions and other commercial customers. Serving all 50
states and Puerto Rico, the Company is one of only two armored transport
companies in the United States which provides these services on a national
basis. Management believes that large financial and retail institutions are
increasingly seeking vendors capable of providing an array of services on a
national basis and that the combination of Loomis Armored and Wells Fargo
Armored favorably positions the Company for additional revenue opportunities.
In addition, management believes the proliferation of ATMs and the trend of
banks and other financial and retail institutions towards outsourcing cash
vault and related services should contribute to the Company's growth
prospects. For the twelve months ended December 31, 1996, the Company would
have had revenues of $373.7 million and earnings before interest, taxes,
depreciation and amortization ("EBITDA") of $35.2 million.
The Company is implementing the management principles and decentralized
structure utilized by the Loomis Armored management team, which have proven to
be highly effective in reducing employee turnover, increasing customer
satisfaction and decreasing "cost of risk," which consists of the cost of
cargo and casualty losses, related insurance costs and claims administration
expenses. Since implementing this strategy at Loomis Armored in 1991, Loomis
Armored's total cost of risk decreased from 10.9% of revenues for the year
ended June 30, 1992 to 7.4% of revenues for the twelve months ended December
31, 1996, and EBITDA as a percent of revenues increased from 2.4% to 9.4% over
the same period. Management believes that by combining the management strategy
and risk management skills of Loomis Armored with the larger customer base and
leading ATM services position of Wells Fargo Armored, the Company is well-
positioned to capitalize on the numerous opportunities developing in the
armored transport industry.
THE INDUSTRY
The U.S. armored transport industry consists of two national companies and
over 100 regional and local companies. Management estimates that the ten
largest of these companies have aggregate annual revenues of approximately
$1.0 billion. The industry provides a variety of services which can be
categorized as (i) traditional armored ground transportation of cash and other
valuables, (ii) ATM services and (iii) cash vault and related services.
Traditional Armored Ground Transportation. Traditional armored ground
transportation is the largest sector of the armored transport industry and
represents the core service provided by the industry. Armored vehicles
transport currency and other valuables between commercial enterprises and
banks, between banks, and from the Federal Reserve Banks to commercial banks.
Approximately one-half of ground transportation revenues in the industry were
generated from financial institutions. Other customers of ground
transportation services include a wide range of commercial establishments as
well as governmental entities.
Typically, ground transportation services have been provided by a two-person
crew, comprised of a driver and a guard, operating in an armored vehicle. At
each stop, the guard exits the vehicle to pick up or deliver cargo, usually
currency and/or coin, while the driver normally remains inside the vehicle.
The cargo typically is received by the guard in a sealed bag bearing a tag
indicating the amount of cash the bag is said to contain. The sealed bag is
ultimately delivered to its destination without being opened while in the
custody of the armored carrier.
In effect, the armored transport industry provides customers a logistical
service in transporting valuables as well as a form of insurance by accepting
the risk of cargo losses. Until recently, cash-in-transit insurance for
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<PAGE>
armored transport service providers was relatively easy to obtain, in part
because armored carriers were not frequently targeted by criminals, and
carriers were able to pass most of the risk to insurance companies.
Accordingly, the economics of the industry were based largely on routing
efficiency or density and effective cost control. Quality of service was
measured primarily by timeliness of pick-up and delivery. Generally, risk
management, while important, was not a crucial service differentiator as long
as the carrier maintained adequate insurance. By the early 1990s, however,
armored vehicles had increasingly become targets of armed robbery,
particularly on the east and west coasts. As a result, cargo loss insurers
suffered substantial losses and the cost of cash-in-transit insurance
increased significantly for large carriers, forcing them to retain greater
risk and pay higher premiums.
Due to these changes, quality risk management has become increasingly
important from both a cost and marketing perspective. While the cost reduction
benefits of an effective risk management program are clear for the armored
carrier, they are even more significant to the customer, particularly banking
customers. In the event of an armed robbery at the customer's place of
business, the customer will suffer a business disruption and may be liable
should one of its employees or customers or a bystander become injured. An
armored carrier that can prevent or avoid an incident saves its customer from
the prospect of a multi-million dollar liability. Consequently, the strategy
of establishing a risk management partnership between the armored service
provider and the customer becomes more appealing to the customer once the
customer recognizes the benefits of a comprehensive risk management program.
ATM Services. ATM services represent the most dynamic growth sector of the
armored transport industry and are expected by the Company to grow
significantly over the next five years. This expected growth results from a
fundamental change in the retail delivery channel strategy of banks in the
United States as traditional, full service bank branches are being replaced by
ATMs, drive-through service centers and banks located in supermarkets and
other non-traditional locations. Each individual point of distribution
represents a potential service location and new revenue opportunity to the
armored transport industry. Additionally, many ATM owners have begun
outsourcing the servicing and maintenance of ATM locations formerly serviced
and maintained internally, resulting in further growth prospects for this
portion of the armored transport industry.
ATM services consist of cash replenishment, deposit pick-up and first-line
and second-line maintenance services. Cash replenishment and deposit pick-up
at ATM locations is substantially similar to normal ground transportation
services with respect to the transport of cash. However, the servicing of ATM
locations involves a greater degree of mechanical proficiency in that guards
are required to disarm and reset alarms, change bill cassettes and perform
various other administrative and mechanical tasks. First-line maintenance
services involve correction of simple non-technical problems such as
dislodging jammed bills and cards and refilling receipt paper and are
frequently provided by armored transport carriers. Second-line maintenance
services consist of more complex technical ATM repairs and often require
specialized training, diagnostic equipment and an inventory of parts.
Cash Vault and Related Services. Cash vault and related services cover a
wide array of activities from passive, secured storage of valuables such as
currency, securities and computer chips to active services such as deposit
processing and consolidation, change order preparation, coin wrapping and
storage and food stamp processing. While cash vault and related services
currently represent only a small portion of the total industry's revenues,
this market is expected to expand over the next several years as banks and
other financial institutions continue the trend toward outsourcing such
services.
BUSINESS STRATEGY
Management believes that Loomis, Fargo & Co. has several distinct
competitive strengths within the armored transport industry, including a
strong national presence, the leading ATM Services operation, and a management
team experienced in reducing cost of risk and improving cash flow and
profitability. The Company's business strategy is to capitalize on its
competitive strengths by implementing the following initiatives:
48
<PAGE>
Promote the National Presence of Loomis, Fargo & Co. The Company provides
its services to a much larger geographic area than either Loomis Armored or
Wells Fargo Armored serviced on a stand-alone basis. With services in all
50 states and Puerto Rico, the Company will be able to expand its business
with national financial institutions and retail customers which require
armored ground transport, ATM Services and/or cash vault and related
services in numerous locations across the country. Management believes that
the ability to provide nationwide service is becoming more important in the
armored transport industry as banks are expanding geographically through
the continuing consolidation of the banking industry and as many other
institutions are shifting toward centralized purchasing of goods and
services. As one of only two armored transport providers in the United
States with nationwide service, the Company is well-positioned to augment
its base of customers requiring broad geographic coverage. The Company
intends to dedicate a segment of its sales force to exclusively manage
national account relationships.
Focus on Growing ATM Services Market. The Company provides ATM Services
to over 28,000 ATM locations nationwide, making it the leading provider of
ATM Services in the United States. Both the number of ATM locations and the
types of items being dispensed through ATMs, including travelers checks,
lottery tickets, coupons, postage stamps and other valuables, continue to
grow. Additionally, many ATM owners have begun outsourcing the servicing
and maintenance of ATM locations formerly serviced and maintained
internally. The Company uses its proprietary automated national dispatching
system to coordinate customer requests, provide service data to customers
and dispatch service technicians nationwide. To complement the national
dispatching system, the Company has developed an automated network cash
management system that optimizes ATM cash loads and provides ATM balance
reporting. With its broad range of services and automated systems, the
Company intends to build upon its leading position in the ATM services
market.
Reduce Cost of Risk and Emphasize Risk Management Partnership with
Customers. Management intends to increase profitability not only by
reducing the Company's overall cost of risk but also by using a risk
management partnership approach with its customers as a means of
differentiating the Company from its competitors. A comprehensive risk
management program which emphasizes incident avoidance and loss
minimization per incident is being implemented throughout all of the
Company's operations. The program focuses on (i) employee culture and
attitude, (ii) selectivity in hiring, (iii) operating procedures designed
to recognize and avoid potential danger or accidents, (iv) safety and
security procedures, including training in the proper use of firearms and
the operation of the Company's vehicles, (v) limits on the amounts of cash
or other valuables contained in a branch or vehicle or under the control of
an employee, (vi) utilization of three-person crews and surveillance or
chase cars in high-risk areas, and (vii) an extensive security oversight
program, including surveillance and evaluation by AMSEC, an independent,
international security firm. This risk management program produced
significant cost savings with respect to cargo loss and casualty liability
claims for Loomis Armored over the five years prior to the consummation of
the Transactions.
To provide the quality of service necessary to enhance customer loyalty in
support of this business strategy, the Company emphasizes an operating
philosophy dedicated to:
Attracting and Retaining Quality, Loyal Employees. Management believes
that a loyal employee base directly contributes to reducing cost of risk
and improving customer service and that the combination of selectivity in
hiring, a commitment to employee training, responsibility and safety, and
competitive wage and benefit packages will enable the Company to attract
and retain quality, loyal employees. As a result of Loomis Armored's
commitment to these principles, employee turnover at Loomis Armored
decreased from 41% for the twelve months ended December 31, 1992 to 29% for
the twelve months ended December 31, 1996. Wells Fargo Armored has also
embraced many of these same principles; its employee turnover rate for the
fiscal year ended December 31, 1996 was approximately 62%.
Encouraging Employee Initiative through Decentralized Management
Structure. The Company operates on a decentralized basis so that many of
the daily operational decisions such as local sales, routing, hiring, and
fleet maintenance are made at the branch level while the Company's
corporate and five regional management teams support the branches,
particularly with respect to pricing and risk management. This
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<PAGE>
delegation of responsibility is expected to improve efficiency and
responsiveness to customer needs, while maintaining strict compliance with
Company-wide security and safety standards. Management believes that this
decentralized structure, together with an incentive program that links a
branch manager's compensation to branch profitability, gives branch
managers and other employees a sense of empowerment and accountability.
This decentralized structure was successfully implemented at Loomis
Armored's operations and is currently being implemented at all of the
Company's locations.
SERVICES
The Company provides services in three business areas: traditional armored
transport; ATM Services; and cash vault and related services.
Traditional Armored Transport. Traditional armored transport constitutes the
largest part of the Company's business and the overall armored transport
industry, representing approximately 62.9% of the Company's gross revenues for
the twelve months ended December 31, 1996. The Company's ground transportation
services primarily involve the secured transport of currency, securities and
other items of value between commercial enterprises and banks, between banks,
and from the Federal Reserve Banks to commercial banks.
The Company provides traditional armored transport services seven days per
week, 365 days per year. Most of the Company's armored vehicles use two-person
crews, with the driver remaining in the vehicle and the guard making the pick-
up or delivery. In higher risk areas, the Company utilizes several additional
security measures, including three-person or four-person crews and
surveillance vehicles. In addition, the Company strives to work closely with
its customers to develop safe procedures for transferring and transporting
cargo. Typically, armored vehicle routes are scheduled to provide for pick-up
and delivery within prescribed time periods which are most convenient for the
customer, usually during normal business hours. The Company schedules routes
for each armored vehicle to maximize efficiency, with armored vehicles
generally leaving the branch in the morning and not returning until the
evening, making approximately 40 to 50 service stops on average per day.
ATM Services. The ATM Services business represents the Company's second
largest revenue generating division and is the most rapidly growing area of
the armored transport industry. As ATMs and other remote banking services
expand, the Company is positioned to capitalize on business opportunities in
this field. As the leading provider of ATM Services in the United States, the
Company believes that its experience, customer relationships, infrastructure,
and dominant position in this market will enable the Company to increase its
revenues.
The Company offers a wide range of ATM Services to customers including cash
replenishment, deposit pick-up, and first-line maintenance. The Company
utilizes a proprietary centralized automated dispatch system to coordinate ATM
servicing nationwide. The dispatch center coordinates customer requests and
directs field technicians throughout the country. The automated system
provides detailed service confirmation data both internally and directly to
the customer. In addition, the automated system controls the ATM security
access codes and provides such codes to technicians upon receipt of proper
identification.
The frequency of cash replenishment of ATMs varies depending upon consumer
use of an ATM location. High traffic ATM locations may require cash
replenishment on a daily basis whereas low traffic locations may require
service once or twice per month. Deposit pick-ups at ATM locations that
process banking deposits are typically executed on a daily basis. First-line
maintenance calls are less predictable than cash replenishment and deposit
pick-ups, but require the same level of prompt attention as scheduled ATM
services.
Cash Vault and Related Services. Cash vault and related services cover a
wide array of activities from passive, secured storage of valuables such as
currency, securities and computer chips to active services such as deposit
processing and consolidation, change order preparation, coin wrapping and
storage and food stamp
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<PAGE>
processing. While cash vault and related services represent a relatively small
portion of the Company's revenues and the armored transport industry's
revenues, this market is expected to expand over the next several years as
banks and other financial institutions continue the trend toward outsourcing
such services. The Company also provides contract security officers to patrol
and control access to customer facilities in Puerto Rico.
RISK MANAGEMENT
Management views the Company as a risk management partner rather than a
transportation company. Cost of risk, in the form of armed robberies, other
cargo losses, vehicular accidents or worker's compensation claims, represents
a key component of the Company's overall cost structure. The Company attempts
to control its cost of risk by integrating risk management into all phases of
its operations: corporate culture; hiring and training; customer and revenue
management; operating procedures; and insurance, administration and claims
management. This risk management program is an extension of the program
utilized by Loomis Armored over the five years prior to the consummation of
the Transactions in reducing Loomis Armored's cost of risk from 10.9% of
revenues for the year ended June 30, 1992 to 7.4% of revenues for the twelve
months ended December 31, 1996.
Corporate Culture. Management believes that the most important factor to
effective risk management for an armored transport company is that its
employees understand their safety is the primary concern of the Company. This
belief has been encouraged and consistently reinforced through all programs
and procedures of the Company and will be a fundamental building block of the
Company going forward.
Hiring and Training. The Company maintains an employee selection and
screening program which includes a series of tests and a detailed background
check. The Company emphasizes training and development at all levels. All
safety training stresses the importance of risk avoidance rather than
confrontation. The Company has implemented specialized training programs in
employee orientation, weapons safety, driving safety, back injury prevention
and virtually all other elements of operations. All training is reinforced
through a coordinated communications effort featuring posters, videotape
presentations, weekly security updates, payroll stuffers and other news
bulletins. The programs are further supported through incentive and other
employee recognition programs.
Customer and Revenue Management. Management believes that it can charge a
premium for the quality of service provided by Loomis, Fargo & Co. The Company
emphasizes its role as a risk management partner with its customers and works
closely with them to develop safe procedures for transferring and transporting
cargo. Customers in higher risk locations or those that ship higher valued
cargo pay premium prices to support additional security costs necessary to
safely provide the service and minimize risk of loss. If the Company
determines that the risk of providing armored transport services in a given
situation is too great, the Company will decline the business.
Operating Procedures. The Company's operating procedures are designed to
avoid robberies or, in the event of a robbery, to minimize cargo losses and
worker's compensation claims. The Company has instituted many safety and
security procedures such as (i) use of three-person crews at locations
considered high risk, (ii) utilization of chase cars and roving guards to
scout high risk locations in advance of servicing and to provide unmarked
surveillance, and (iii) adoption of "over the pavement" limits representing
the maximum cargo a guard may carry while out of the armored vehicle,
effectively limiting the amount of cargo which could be lost in the event of
robbery.
To ensure compliance with its operating procedures, the Company utilizes
AMSEC, an international security consulting firm, to evaluate the operating
security of branches. The AMSEC team will review or audit the operations of
each branch at least once per year. AMSEC reports each month to a committee of
the Company comprised of executive officers and senior level operations
personnel, providing an effective third party quality control function.
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<PAGE>
Insurance, Administration and Claims Management. The two primary risks for
which the Company carries insurance are cargo loss and casualty claims.
Insurance coverage underlies the Company's comprehensive risk management
program. The Company has an A-rated primary cash-in-transit insurance policy
which provides the Company with coverage up to $200 million per occurrence.
The insurance program allows the Company to participate in potential savings
by actively managing claims with reduced fixed premiums and collateral costs,
but affords the Company protection for catastrophic claims.
On March 29, 1997, the Company experienced a material cargo loss, which is
currently under investigation. The Company believes that the cargo loss will
not have a material adverse effect on the Company's liquidity or earnings in
1997, but that such loss could have negative consequences on the Company's
insurance coverage and/or costs at some future time.
SALES AND MARKETING
The Company markets its services to a broad cross section of customer types
which can be classified as either depository or commercial institutions. The
Company further classifies these two categories into national and local
subgroups. Typically, national customers make decisions on the use of armored
transport carriers at the corporate office level. Conversely, local customers
function at an individual market level or within a fairly limited geographic
area. To optimize penetration of these customer groups, the Company has
organized its marketing effort and sales force around these general customer
profiles.
National Accounts. To promote revenue growth from and maintain strong
customer relationships with national customers, the Company has a dedicated
staff of senior-level salespersons, each of whom individually manages a very
limited number of customers and prospects in this group. These sales personnel
promote a full range of ATM Services, traditional armored transport services
and cash vault and related services. They work with senior-level officers of
the customers to ensure that the Company is maximizing revenue opportunities
with these customers by cross-selling the Company's many services, maintaining
the quality of customer service, and identifying changes in customer needs,
priorities and business strategies.
The Company markets itself to financial institutions as the premier service
provider in the armored transport industry capable of providing a wide array
of services on a national basis. The rapid expansion of ATMs across the nation
as well as bank consolidation has compelled armored transport companies to be
increasingly flexible, dependable and consistent in the delivery of services.
Management believes that customers are placing greater emphasis on quality of
service when making their purchase decisions than they have in the past. The
Company views this development as a significant opportunity to expand and
enhance the Company's business relationships with financial institutions.
Local Customers. The local customer subgroups include community and regional
depository institutions as well as regional and local retail stores, hotels
and restaurants. The sale of the Company's services at the local market level
is primarily linked to the relationship established between the Company's
salesperson and the customer's local decision maker. The field sales force
includes sales representatives located in all of the Company's major markets
who are responsible for an integral part of the Company's growth plan. Such
sales representatives are accountable for meeting specific new revenue
objectives, as established by individual markets, as well as building
relationships with key customers in the marketplace to maintain a high degree
of customer retention.
The Company's sales representatives receive extensive training both in basic
selling skills and product knowledge of all of the Company's services. The
Company's sales force positions the Company not only as an armored car service
provider, but more broadly as a provider of risk management services. Trust,
dependability and expertise are the main components in securing the customer
relationship. Senior management of the Company provides overall guidelines for
pricing, prioritizing sales calls and growth targets for the field sales
force; however, specific strategic plans are developed by the branch managers.
COMPETITION
The armored transport industry in the United States consists of two national
companies (Loomis, Fargo & Co. and Pittston Brink's) and numerous regional and
local companies. The Company competes with all of the above types of companies
in the markets it serves. However, because of the national presence and
substantial
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resources of Pittston Brink's, the Company believes that Pittston Brink's is
the Company's primary competitor for many national accounts. While the Company
believes its pricing of services is generally competitive, certain of its
competitors offer lower prices in certain markets primarily as a result of
lower employee wages and benefits and/or more limited services. See "Risk
Factors--Competition."
GOVERNMENT REGULATION
Federal legislation became effective in 1995 that abolished all interstate
regulatory control over prices, routes and service to which the Company's
business had been previously subject. The Company's operations continue to be
subject to regulation by federal and state agencies with respect to safety of
employees, operations and equipment, vehicle emissions, and underground fuel
storage tanks. See "Risk Factors--Regulation and Legal Proceedings."
ENVIRONMENTAL MATTERS
The Company is subject to numerous and increasingly stringent federal, state
and local laws and regulations relating to the protection of the environment
as well as the storage, handling, use, emission, discharge, release or
disposal of hazardous materials and solid wastes into the environment and the
investigation and remediation of contamination associated with such materials.
These laws include, but are not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act, the Water Pollution Control Act, the
Clean Air Act and the Resource Conservation and Recovery Act, as those laws
have been amended and supplemented, the regulations promulgated thereunder,
and any applicable state analogs. The Company's operations also are governed
by laws and regulations relating to employee health and safety. The Company
believes that it is in material compliance with such applicable laws and
regulations and that its current environmental controls are adequate to
address existing regulatory requirements.
As is the case with other companies engaged in similar businesses, the
Company could incur costs relating to environmental compliance, including
remediation costs related to historical hazardous materials handling and
disposal practices at certain facilities. In the past the Company has
undertaken remedial activities to address on-site soil contamination caused by
historic operations. None of these cleanups has resulted in any material
liability. Currently, the Company is involved with remedial/closure activities
at various locations, none of which is expected to have a material adverse
effect on the Company's operations, financial condition or competitive
position. As mentioned above, however, the risk of environmental liability and
remediation costs is present in the Company's business and, therefore, there
can be no assurance that material environmental costs, including remediation
costs, will not arise in the future. In addition, it is possible that future
developments (e.g., new regulations or stricter regulatory requirements) could
result in the Company incurring material costs to comply with applicable
environmental laws and regulations. In addition, the Company has not
undertaken an independent investigation of each facility; accordingly, there
can be no assurance that in the future additional conditions requiring
remediation will not be identified. See "Risk Factors--Environmental Matters."
The Company has identified 41 underground fuel storage tanks on the
properties owned or operated by it. Federal governmental regulations require
that by the end of 1998 all underground storage tanks located within the
United States must satisfy stricter safety standards or be removed. If the
Company fails to comply with these regulations, it could be subject to fines,
penalties or other governmental actions, the imposition of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors--Environmental Matters."
Pursuant to the Contribution Agreement, the Company will be indemnified by
Borg-Warner and the Business Trust for environmental liabilities associated
with existing underground storage tanks and other known and identified
environmental liabilities. The indemnification obligations will survive until
the earlier of December 31, 1998 or the first anniversary of an initial public
offering of Common Stock. To the extent that there are remedial activities in
process as of the date of termination of such indemnification obligations, the
Company will provide Borg-Warner and the Business Trust, as applicable, with a
written estimate describing in
53
<PAGE>
reasonable detail the remaining costs and expenses expected to be incurred by
the Company which would otherwise have been covered by such indemnification.
Such estimated costs and expenses may be satisfied in cash (subject to a
present value discount rate) or pursuant to an irrevocable letter of credit
issued in the full amount of such estimated costs and expenses.
EMPLOYEES
As of April 4, 1997, the Company employed approximately 8,700 full-time and
part-time employees, most of whom are drivers and/or guards. Of these
employees, approximately 2,800 are represented by labor unions. The contracts
covering the Company's unionized work force will expire at varying times over
the next three years. The Company believes that its relations with its
employees are good.
PROPERTIES
The Company's corporate headquarters, which consist of approximately 15,000
square feet of leased office space, are located in Houston, Texas. The Company
recently completed negotiating an agreement to lease a new corporate
headquarters consisting of approximately 29,000 square feet of office space in
Houston, Texas and anticipates that it will begin to move into such new office
space in May 1997. The Company's fleet of approximately 2,700 armored vehicles
operates out of 150 branches which provide service to all 50 states and Puerto
Rico. Of these branch locations, 123 are leased and 27 are owned. Management
expects to close six of the branches within the next 12 months in connection
with the consolidation. All of the Company's owned properties have been
pledged to secure the Company's indebtedness under the New Credit Facility.
The Company believes that its properties are suitable and adequate for their
intended uses.
LEGAL PROCEEDINGS
The Company is a party to various legal proceedings and administrative
actions, all of which are of an ordinary or routine nature incidental to the
operations of the Company. In the opinion of the Company's management, such
proceedings and actions should not, individually or in the aggregate, have a
material adverse effect on the Company's results of operations or financial
condition.
54
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the Stockholders' Agreement, seven directors serve on the
Company's board: three nominees designated by the Business Trust, three
nominees designated by Borg-Warner, and the Chief Executive Officer of the
Company. See "Certain Relationships and Related Transactions--Stockholders
Agreement."
Set forth below is certain information with respect to those individuals who
serve as members of the Board of Directors and as executive officers of the
Company. Each of the persons named below holds the positions set forth
opposite his name with each of the Co-Registrants, except that Messrs.
Adorjan, Mattly and Hegi are the only directors constituting the boards of
directors of LFC Armored of Texas Inc. and Loomis, Fargo & Co. of Puerto Rico.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
J. Joe Adorjan.......... 58 Chairman of the Board of Directors
James B. Mattly......... 55 Director, President and Chief Executive Officer
James T. Callier, Jr.... 61 Director
Frederick B. Hegi, Jr... 53 Director
John D. O'Brien......... 54 Director
Jay I. Applebaum........ 34 Director
Timothy M. Wood......... 49 Director
James K. Jennings, Jr... 54 Executive Vice President, Chief Financial
Officer and Secretary
Edward H. Hamlett....... 46 Executive Vice President--Sales and Marketing
</TABLE>
There is no family relationship between any director or executive officer of
the Company. Officers of the Company are elected by the Board of Directors and
hold office until their respective successors are duly elected and qualified.
J. Joe Adorjan has served as a director of Borg-Warner since 1993, Chairman
of the Board of Borg-Warner since January 1996, Chief Executive Officer of
Borg-Warner since October 1995, and President of Borg-Warner since April 1995,
and was elected to the Board of Directors of the Company as of the Closing.
Mr. Adorjan was President of Emerson Electric Co. from 1992 to 1995 and
Chairman and Chief Executive Officer of ESCO Electronics Corporation from 1990
to 1992. Mr. Adorjan also currently serves as a director of California
Microwave, Inc., The Earthgrains Company, ESCO Electronics Corporation and
Goss Graphic Systems, Inc.
James B. Mattly served as a director and as President and Chief Executive
Officer of Loomis Armored from November 1991 to January 1997 and as a director
of Loomis from May 1991 to January 1997, and was elected to the Board of
Directors of the Company in January 1997. From 1979 to 1990, Mr. Mattly served
as Regional Vice President of Browning-Ferris Industries ("BFI") and as Chief
Operating Officer of its southwest region. Mr. Mattly has also served as Vice
President--Operations for Butler Aviation (1977-79) and Regional Vice
President of Wells Fargo Armored (1973-77).
James T. Callier, Jr. served as a director of Loomis and Loomis Armored from
May 1991 to January 1997, and was elected to the Board of Directors of the
Company as of the Closing. Mr. Callier is an indirect general partner of
Wingate Partners and a general partner of Wingate Affiliates, L.P., and has
served as President of Callier Consulting, Inc. (an operating management firm)
since 1985. From January 1992 through March 1995, Mr. Callier served as a
director of Associated Stationers, Inc. (an office products wholesaler) and
has served as a director of United Stationers Inc., the successor to
Associated Stationers, Inc., since March 1995. Mr. Callier also currently
serves as Chairman of the Board of Century Products Company (a manufacturer of
baby seats and other juvenile products), and as a director of RBPI Holding
Corporation ("RBPI") (a manufacturer and distributor of aluminum and vinyl
windows).
55
<PAGE>
Frederick B. Hegi, Jr. served as Chairman of the Board of Loomis and Loomis
Armored from May 1991 to January 1997, and was elected to the Board of
Directors of the Company in August 1996. Mr. Hegi is an indirect general
partner of Wingate Partners and a general partner of Wingate Affiliates, L.P.
Since May 1982, Mr. Hegi has served as President of Valley View Capital
Corporation (a private investment firm). Mr. Hegi served as a director of
Associated Holdings, Inc. from January 1992 through March 1995, a director of
United Stationers Inc. since March 1995 and Chairman of the Board, President
and Chief Executive Officer of United Stationers Inc. since November 1996. Mr.
Hegi also currently serves as Chairman of the Board of ITCO Holding Company,
Inc. (the parent corporation of ITCO Tire Company), Tahoka First Bancorp, Inc.
(a bank holding company), and Cedar Creek Bancshares, Inc. (a bank holding
company), and as a director of RBPI, Century Products Company, Lone Star
Technologies, Inc. (a diversified company engaged in the manufacturing of
steel pipe), Cattle Resources, Inc. (a manufacturer of animal feeds and
operator of commercial cattle feedlots), and various funds managed by
InterWest Partners.
John D. O'Brien has served as Senior Vice President of Borg-Warner since
1993 and was Vice President of Borg-Warner from 1987 to 1993, and was elected
to the Board of Directors of the Company as of the Closing.
Timothy M. Wood has served as Vice President, Finance of Borg-Warner since
1994 and was Vice President and Controller of Borg-Warner from 1987 to 1994,
and was elected to the Board of Directors of the Company in January 1997.
Jay I. Applebaum was elected to the board of directors of the Company in
February 1997. Mr. Applebaum served as Secretary for Loomis and Loomis Armored
from May 1991 to January 1997. Since June 1989, Mr. Applebaum has been
associated with Wingate Partners.
James K. Jennings, Jr. served as Chief Financial Officer of Loomis from
March 1994 to January 1997, and was elected to the offices of Executive Vice
President, Chief Financial Officer and Secretary of the Company in January
1997. Prior to joining Loomis, Mr. Jennings held various management positions
at HWC Distribution Corporation (a distributor of electrical and electronic
wire and cable), including as President and as a director from February 1990
to September 1993 and as Executive Vice President and Chief Financial Officer
from 1980 to February 1990.
Edward H. Hamlett served as a director of Loomis from February 1992 to
January 1997 and as Vice President of Sales and Marketing from February 1996
to January 1997, and was elected to the office of Executive Vice President of
the Company in January 1997. From May 1979 to May 1995, Mr. Hamlett served as
Vice President, Sales and Marketing of BFI. Prior to joining BFI, Mr. Hamlett
held regional sales and branch management positions with Wells Fargo Armored
from 1973 to 1977.
COMPENSATION OF DIRECTORS
Directors who are officers, employees or otherwise an affiliate of the
Company do not presently receive compensation for their services as directors.
Directors of the Company are entitled to reimbursement of their reasonable
out-of-pocket expenses in connection with their travel to and attendance at
meetings of the board of directors or committees thereof. No determination has
yet been made whether annual fees or board attendance fees, if any, will be
paid to future directors who are not also officers, employees, or otherwise an
affiliate of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There is currently no compensation committee of the Board of Directors of
the Company. Compensation decisions in 1996 were made by (i) the entire board
of directors of Loomis, the members of which were Messrs. Hegi, Callier,
Mattly, Hamlett, Thomas W. Sturgess and David S. Teed, in the case of Loomis
Armored, and (ii) the compensation committee of the board of directors of
Borg-Warner, in the case of Wells Fargo Armored.
56
<PAGE>
EXECUTIVE COMPENSATION
The executive officers of the Company did not receive any compensation from
the Company during the period prior to the consummation of the Transactions.
The compensation to be paid to the executive officers of the Company will be
determined by the Board of Directors of the Company or any compensation
committee thereof and, for Mr. Mattly, subject to the terms of his existing
employment agreement with Loomis.
BENEFIT PLANS
Stock Option Plan. It is anticipated that the Company will adopt a stock
option plan for the Company's management and employees and grant options to
purchase shares of Common Stock pursuant to such plan. Such option plan may
provide for approximately 5% to 10% of the fully diluted Common Stock of the
Company to be reserved for issuance under such plan.
Management Equity Growth and Appreciation Plan. Effective as of May 1, 1991,
Loomis and Loomis Armored established a Management Equity Growth and
Appreciation Plan (the "Old MEGA Plan") to reward certain of the key employees
of Loomis and Loomis Armored. As of the Closing Date, Loomis and Loomis
Armored had issued or had contractual obligations which may have required the
issuance of an aggregate of 349,827 participation units ("Units") pursuant to
the Old MEGA Plan. Each Unit issued pursuant to the Old MEGA Plan was subject
to a five-year vesting schedule and represented an unfunded, unsecured,
potential right to receive deferred compensation.
Upon consummation of the Transactions, the Old MEGA Plan was terminated and
each Unit was cancelled. Holders of Units received options ("Options") to
purchase a number of shares of Common Stock of the Company that were
substantially equivalent in value pursuant to a New MEGA Units Holder Option
Plan (the "New MEGA Plan") established by the Company. The Options are subject
to the same vesting schedule and other limitations on exercise and transfer as
existed under the Old MEGA Plan, including without limitation, the requirement
that a Triggering Event (as defined) occur before the Options become
exercisable.
Upon exercising any Options, pursuant to a stock contribution agreement, the
Business Trust will be required to contribute to the Company that number of
shares of Common Stock which is delivered to such Option holder, and the
Company will be required to deliver to the Business Trust the exercise price
paid by the Option holder in connection with the exercise of such Options.
A Triggering Event under the New MEGA Plan means the first to occur of (i)
any sale, disposition, exchange, consolidation, merger or other transaction,
as a result of which Wingate Partners, either directly or indirectly through
its ownership interest through the Business Trust or otherwise, sells,
transfers or otherwise disposes of for value, in the aggregate through one or
more transactions, more than 1,250,000 shares of Common Stock to any other
person or entity that is not an affiliate of the Company, a successor entity
or Wingate Partners, (ii) any sale, exchange or other disposition either
directly or indirectly, of all or substantially all of the assets of the
Company or a successor entity (in a single transaction or a series of related
transactions) to a person or entity which is not an affiliate of the Company,
a successor entity or Wingate Partners, (iii) a merger or consolidation of the
Company or a successor entity with or into another entity which is not an
affiliate of the Company, a successor entity or Wingate Partners (whether or
not the Company or such successor entity is the survivor) with respect of
which more than 50% of the fully diluted Common Stock or common stock of such
successor entity, as the case may be, is converted into cash or other
property, or (iv) the consummation of an underwritten public offering or
series of offerings of Common Stock by the Company or a successor entity
pursuant to a registration statement filed under the Securities Act producing
aggregate gross proceeds to the Company or any successor entity and any
selling stockholders of at least $100 million; provided, however, that
notwithstanding the occurrence of one of the events described in (i) through
(iv) of this paragraph, a Triggering Event may be deferred in certain
circumstances by the board of directors of the Company for a period of up to
two years.
Compensation Paid by Loomis Armored. The following table sets forth for the
last fiscal year the compensation awarded to or earned by the Chief Executive
Officer of the Company and the other most highly
57
<PAGE>
compensated executive officers (the "Named Executive Officers") of the
Company, which compensation was paid to such Named Executive Officers by or on
behalf of Loomis Armored.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS
------------------- ----------------------
NAME AND PRINCIPAL ALL OTHER SECURITIES UNDERLYING
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) UNITS (#) (3)
------------------ ---- --------- -------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
James B. Mattly......... 1996(1) 362,500 138 -- 29,476(4)
Director, President and
Chief Executive
Officer
James K. Jennings, Jr... 1996(1) 150,000 2,938 6,864(5) --
Executive Vice
President,
Chief Financial Officer
and Secretary
Edward H. Hamlett....... 1996(1)(2) 66,667 -- 2,860(5) 10,000
Executive Vice
President-- Sales and
Marketing
</TABLE>
- --------
(1) Reflects compensation paid by Loomis Armored for the fiscal year ended
June 30, 1996.
(2) Represents compensation for the period of February 2, 1996, when Mr.
Hamlett became employed by the Company, to June 30, 1996.
(3) Reflects Units granted under the Old MEGA Plan. The number of securities
underlying Units is shown based on the shares of Loomis common stock
outstanding on June 30, 1996, and does not give effect to the
Transactions.
(4) Units shown were issuable to Mr. Mattly only upon the occurrence of
certain contingencies on or prior to June 30, 1998.
(5) Reflects automobile allowance paid to Messrs. Jennings and Hamlett in the
fiscal year ended June 30, 1996.
Mattly Employment Agreement. Mr. Mattly is a party to an employment
agreement with the Company pursuant to which he serves as President and Chief
Executive Officer. Mr. Mattly's employment agreement is subject to automatic
successive one-year renewal terms. Mr. Mattly's current base salary is
$350,000, subject to increase from time to time at the sole discretion of the
board of directors of Loomis. In addition, Mr. Mattly may receive a bonus
generally recognizable following the end of the Company's fiscal year in an
amount up to 100% of his then current base salary at the sole discretion of
the board of directors of the Company. The employment agreement also provides
for participation by Mr. Mattly in the Company's general life, health and
disability plans generally applicable to senior executives of the Company, as
well as reimbursement of reasonable business expenses. Mr. Mattly's employment
agreement includes certain noncompetition and confidentiality provisions.
In May 1996 and January 1997, the provisions of Mr. Mattly's employment
agreement were amended to provide for the issuance of 166,543 Options under
the New MEGA Plan upon the occurrence of certain contingencies on or prior to
December 31, 1999.
58
<PAGE>
Old MEGA Plan Units. The following table shows individual grants of Units
issued pursuant to the Old MEGA Plan to the Chief Executive Officer of the
Company and the Named Executive Officers for the fiscal year ended June 30,
1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
POTENTIAL VALUE
AT ASSUMED
NUMBER OF ANNUAL RATE
SECURITIES PERCENT OF OF STOCK PRICE
UNDERLYING TOTAL UNITS APPRECIATION
UNITS GRANTED TO EXERCISE OR FOR UNIT TERM (6)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ------------------
NAME (#) (1) FISCAL YEAR (%) ($/SH) DATE 5% ($) 10% ($)
---- ---------- --------------- ----------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
James B. Mattly......... 29,476(2)(3) 74.7 $3.33(4) (5) 242,293 338,384
Edward H. Hamlett....... 10,000(2) 25.3 $3.33(4) (5) 82,200 114,800
</TABLE>
- --------
(1) The number of securities underlying Units is shown based on the shares of
Loomis common stock outstanding on June 30, 1996, and does not give effect
to the Transactions.
(2) All Units reflected vest in five equal annual installments commencing on
the Award Date (as defined). The Units vest immediately for employees of
Loomis or Loomis Armored on a Payment Event (as defined).
(3) Pursuant to Mr. Mattly's employment agreement, as amended, 29,476 Units
would have been issuable if certain contingent events occur on or prior to
June 30, 1998.
(4) Reflects the base price per share of the common stock of Loomis used to
calculate the value per Unit.
(5) The Units issued under the Old MEGA Plan had no established expiration
date. The Old MEGA Plan and all Units thereunder terminated upon certain
conditions specified in the Old MEGA Plan.
(6) Assumes a Payment Event (as defined in the Old MEGA Plan) occurs five
years from June 30, 1996.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AND UNITS AT OPTIONS AND UNITS
FISCAL YEAR-END(#)(1) AT FISCAL YEAR-END($)(2)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
<S> <C> <C>
James B. Mattly............ 6,265/127,730(2) 35,523/724,229
Edward H. Hamlett.......... 6,265/10,000 35,523/56,700
</TABLE>
- --------
(1) The number of securities underlying options and Units is shown based on
the shares of Loomis common stock outstanding on June 30, 1996, and does
not give effect to the Transactions.
(2) Assumes a fair market value of Loomis common stock as of June 30, 1996 of
$9.00 per share.
(3) Includes 29,476 Units that would have been issuable to Mr. Mattly pursuant
to an employment agreement if certain contingencies occurred on or prior
to June 30, 1998.
59
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock as
of the Date of this Prospectus by (i) each person known to the Company to
beneficially own more than 5% of the Common Stock, (ii) each of the directors
of the Company, (iii) each of the Named Executive Officers, and (iv) all
directors and Named Executive Officers of the Company as a group.
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
NAME AND ADDRESS NUMBER PERCENT OF
OF BENEFICIAL OWNER OF SHARES CLASS
------------------- --------- ----------
<S> <C> <C>
Loomis Stockholders Trust................................ 5,100,000 51.0%
c/o Wingate Partners, L.P.
750 N. St. Paul Street
Suite 1200
Dallas, Texas 75201
Wingate Partners, L.P.(1)(2)............................. 4,120,208 41.2%
750 N. St. Paul Street, Suite 1200
Dallas, Texas 75201
Key Capital Corporation(1)............................... 516,774 5.2%
127 Public Square, Fourth Floor
Cleveland, Ohio 44114
Wells Fargo Armored Service Corporation.................. 4,900,000 49.0%
200 South Michigan Avenue
Chicago, Illinois 60604
Borg-Warner Security Corporation(3)...................... 4,900,000 49.0%
200 South Michigan Avenue
Chicago, Illinois 60604
J. Joe Adorjan(4)........................................ -- *
James B. Mattly(1)....................................... 88,370 *
James T. Callier, Jr.(5)................................. -- *
Frederick B. Hegi, Jr.(5)(6)............................. -- *
John D. O'Brien(4)....................................... -- *
Jay I. Applebaum(1)...................................... 10,703 *
Timothy M. Wood(4)....................................... -- *
James K. Jennings, Jr.................................... -- *
Edward H. Hamlett(7)..................................... 10,978 *
All directors and executive officers as a group (9 *
persons)(8)............................................. 99,159
</TABLE>
- --------
* Represents less than 1%.
(1) Reflects such holder's beneficial ownership of Common Stock in accordance
with its percentage interest of trust units in the Business Trust. All of
such shares of Common Stock are held of record by the Business Trust
pursuant to the Business Trust Agreement and, therefore, the number of
shares and percentage of beneficial ownership of the Company attributable
to such holder is subject to change upon the acquisition or disposition of
shares of Common Stock held of record by the Business Trust.
(2) Includes the beneficial ownership of 4,051,150 shares by Wingate Partners
and 69,058 shares by Wingate Affiliates, L.P.
(3) Borg-Warner is the sole stockholder of Wells Fargo Armored and, therefore,
may be deemed to beneficially own all shares of Common Stock owned of
record by Wells Fargo Armored.
60
<PAGE>
(4) Does not include 4,900,000 shares of Common Stock held of record by Wells
Fargo Armored, a wholly-owned subsidiary of Borg-Warner. Mr. Adorjan is a
director and each of Messrs. Adorjan, O'Brien and Wood are executive
officers of Borg-Warner and, therefore, may be deemed to be a beneficial
owner of some or all of such shares. Each of Messrs. Adorjan, O'Brien and
Wood disclaims beneficial ownership of all shares of Common Stock not held
of record by him.
(5) Does not include an aggregate of 4,120,208 shares of Common Stock
beneficially owned by Wingate Partners and Wingate Affiliates, L.P. Each
of Messrs. Callier and Hegi are indirect general partners of Wingate
Partners and general partners of Wingate Affiliates, L.P. and, therefore,
may be deemed to beneficially own some or all of the shares of Common
Stock owned by such entities. Each of Messrs. Callier and Hegi disclaims
beneficial ownership of all shares of Common Stock not held of record by
him.
(6) Does not include 5,100,000 shares of Common Stock held by the Business
Trust. Mr. Hegi is the manager of the Business Trust and, therefore, may
be deemed to beneficially own the shares of Common Stock held by the
Business Trust. Mr. Hegi disclaims beneficial ownership of all shares of
Common Stock not held of record by him.
(7) Includes options exercisable within 60 days of the date of this Prospectus
to purchase up to 10,978 shares of Common Stock.
(8) Includes (i) 10,978 shares of Common Stock issuable to Mr. Hamlett
pursuant to an option exercisable within 60 days of the date of this
Prospectus and (ii) 88,181 shares of Common Stock beneficially owned by
Mr. Mattly through the Business Trust following the delivery to the
Company of 10,978 shares of Common Stock by the Business Trust pursuant to
a stock contribution agreement upon the exercise of Mr. Hamlett's stock
option.
61
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCKHOLDERS AGREEMENT
At the Closing, the Company, Wells Fargo Armored, the Business Trust and
Wingate Partners entered into a stockholders agreement (the "Stockholders
Agreement"). The Stockholders Agreement provides that the Board of Directors
initially will consist of seven directors: the Chief Executive Officer of the
Company, three directors nominated by the Business Trust, and three directors
nominated by Wells Fargo Armored. The right to designate directors pursuant to
the Stockholders Agreement shall be adjusted as to Wells Fargo Armored or the
Business Trust (each a "Designating Party"), as the case may be, as follows:
(i) if a Designating Party shall own beneficially less than 35% but at least
15% of the fully diluted Common Stock, such Designating Party shall be
entitled to designate only two directors pursuant to the Stockholders
Agreement, (ii) if such Designating Party shall own beneficially less than 15%
but at least 10% of the fully diluted Common Stock, such Designating Party
shall be entitled to designate only one director and (iii) if such Designating
Party shall cease to own beneficially at least 10% of the fully diluted Common
Stock, the right of such Designating Party to designate directors pursuant to
the Stockholders Agreement shall terminate. The Board of Directors shall be
empowered to create an Executive Committee to act on behalf of the Board of
Directors, subject to any limitations under applicable law. The Executive
Committee shall consist of three directors, such committee to be comprised of
the Chief Executive Officer of the Company, one director designated by Wells
Fargo Armored and one director designated by the Business Trust. Pursuant to
the Stockholders Agreement, the affirmative vote of at least five of the seven
directors, or the unanimous consent of the Executive Committee, is required
for the Company to engage in certain specified activities.
The Stockholders Agreement prohibits the sale, transfer or disposition of
any shares of Common Stock by Wells Fargo Armored or the Business Trust for a
period of three years following the Closing Date without the prior written
consent of the other. After such three year period, shares of Common Stock may
be sold, transferred or disposed of only in accordance with the provisions of
the Stockholders Agreement, which include rights of first refusal and co-sale
rights. The issuance by the Company of Common Stock or securities exchangeable
or convertible into Common Stock will also be subject to certain preemptive
rights of the stockholders.
Each time the Company proposes to register any Common Stock pursuant to the
Securities Act, the stockholders shall be entitled to include their shares of
Common Stock in such registered offering; provided, however, that the Company
may at any time withdraw or cease proceeding with such registration if it
shall at the same time withdraw or cease proceeding with the registration of
all other shares of Common Stock originally proposed to be registered;
provided, further, that if the managing underwriter in any such proposed
offering advises the Company in writing that the number of shares of Common
Stock requested to be included in the registration by all persons (including
the Company) exceeds the number of shares of Common Stock which can be sold in
such offering without having an adverse effect on such offering, including
without limitation, the price at which such shares can be sold (the "Maximum
Offering Size"), the Company will be obligated to include in such registration
only (i) first, any and all shares of Common Stock for sale by the Company,
(ii) second, to the extent the Maximum Offering Size exceeds the number of
shares to be offered by the Company, each of the Business Trust, on the one
hand, and Wells Fargo Armored, on the other hand, shall be entitled to include
one-half of such available shares in the registration and (iii) third, to the
extent any remaining shares which may be sold in such offering, pro rata among
any other shares of Common Stock requested to be included pursuant to any
other registration rights that may have been, or may hereafter be, granted by
the Company (on the basis of the total number of shares of Common Stock that
each holder has requested to be registered). Pursuant to the terms of the
Stockholders Agreement, the Company has agreed to indemnify participating
stockholders against certain liabilities arising from a registration statement
filed in connection with such offering.
The Stockholders Agreement (except for certain limited provisions including
the registration rights described above, which survive indefinitely) shall
terminate upon the earliest to occur of (i) the consummation of an
underwritten public offering or series of offerings pursuant to an effective
registration statement under the Securities Act for cash of Common Stock
producing aggregate gross proceeds to the Company and any holders
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selling shares of Common Stock thereunder of at least $100.0 million, (ii) the
sale of all or substantially all of the assets of the Company, or the merger
or consolidation of the Company with any person as a result of which the
holders hold less than 35% of the Common Stock, (iii) the date one year after
the date of a Change of Control (as defined in the Stockholders Agreement) of
Borg-Warner, (iv) the foreclosure on or forced sale of at least 50% of the
Common Stock held by Wells Fargo Armored on the Closing Date by any lender of
Borg-Warner or Wells Fargo Armored, and (v) the date any holder and its
affiliates become the beneficial owners of all of the outstanding Common
Stock.
PAYMENTS TO AFFILIATES
At the Closing, the Company made certain payments to the Business Trust and
related entities and to Wells Fargo Armored and related entities pursuant to
the terms of the Contribution Agreement. See "The Transactions--The Business
Combination." In addition, at the Closing Loomis redeemed $3.5 million
aggregate principal amount of Loomis Preferred Stock. All issued and
outstanding shares of Loomis Preferred Stock were owned of record and
beneficially by Wingate Partners and its affiliates. Additionally, at the
Closing Loomis Armored repaid all of its outstanding 14% senior subordinated
notes due September 30, 1999, of which approximately $7.5 million was paid to
Wingate Partners and its affiliates, approximately $2.7 million was paid to
Key Capital Corporation and approximately $175,000 was paid to James B.
Mattly, President and Chief Executive Officer of the Company.
In the ordinary course of business, Wells Fargo Armored purchases security
services from various other subsidiaries of Borg-Warner. During 1995, Wells
Fargo Armored paid approximately $1.65 million for such services, including
electronic security installation, maintenance and monitoring, physical
security, investigative services and courier services.
FINANCIAL ADVISORY AGREEMENT
Pursuant to a Financial Advisory Agreement (the "Financial Advisory
Agreement") dated as of May 6, 1991 among Loomis, Loomis Armored and Wingate
Partners, Wingate Partners (i) provided certain financial advisory services to
Loomis and Loomis Armored in connection with the merger (the "Merger") of
Loomis Acquisition Corporation, a wholly-owned subsidiary of Loomis, with and
into Loomis Armored, in exchange for a one-time fee of $750,000 (which was
paid in May 1991 upon consummation of the Merger), and (ii) agreed to provide
additional financial advisory services to Loomis and Loomis Armored in
exchange for a fee of $350,000 per year. Loomis Armored is also obligated to
reimburse Wingate Partners for its out-of-pocket expenses and indemnify
Wingate Partners and its affiliates from losses incurred in connection with
the provision of these services. The Financial Advisory Agreement was
scheduled to expire on May 6, 2001 (the "Primary Term"), provided that it
would have continued in effect on a year to year basis thereafter unless
terminated in writing by one of the parties on or before the thirtieth day
prior to the expiration of the Primary Term or prior to the expiration of any
subsequent annual term. At the Closing, all accrued management fees and
expenses pursuant to the Financial Advisory Agreement were paid to Wingate
Partners for the period up to and including the Closing Date and the Financial
Advisory Agreement terminated. See "The Transactions--The Business
Combination" and "Use of Proceeds."
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DESCRIPTION OF NEW CREDIT FACILITY
At the Closing, the Company, Lehman Commercial Paper Inc. ("LCPI") and
NationsBank of Texas, N.A. ("NationsBank" and, together with LCPI, and the
other lenders parties thereto the "Lenders") entered into a credit agreement
(the "Credit Agreement") to provide the Company's new credit facility (the
"Credit Facility"), which provides initial aggregate borrowings of up to
$115.0 million.
Term. The New Credit Facility is a five-year step-down revolving facility
providing for initial aggregate borrowings of up to $115.0 million. The
commitment (the "Commitment") under the New Credit Facility will be reduced
beginning in January 1999 to $105.0 million, reduces further in January 2000
to $90.0 million, in January 2001 to $72.5 million, and matures in January
2002. In addition, the Company is obligated to make mandatory prepayments on
the New Credit Facility under certain circumstances with the proceeds of
certain asset sales and incurrence of indebtedness and from excess cash flow.
Letters of Credit. A portion of the New Credit Facility, not to exceed $40.0
million in the first year following the Closing Date, $45.0 million in the
second year following the Closing Date and $50.0 million thereafter, is
available for the issuance of letters of credit ("Letters of Credit").
Interest Rate. Amounts outstanding under the New Credit Facility bear
interest at a rate equal to, at the Company's option, (i) the Base Rate (as
defined) plus the Base Rate Applicable Margin (as defined) ("Base Rate Loans")
or (ii) the Eurodollar Rate (as defined) plus the Eurodollar Applicable Margin
(as defined) ("Eurodollar Rate Loans"). "Base Rate" means the highest of (i)
the rate of interest publicly announced by the administration agent for the
New Credit Facility as its prime rate in effect at its principal office and
(ii) the federal funds effective rate from time to time plus 0.5%, and "Base
Rate Applicable Margin" means an amount per annum ranging from 0.125% to 1.25%
based upon the Company's ratio of total debt to EBITDA. "Eurodollar Rate"
means the average of the rates (adjusted for statutory reserve requirements
for eurocurrency liabilities) at which eurodollar deposits for one, two, three
or six months (as selected by the Company) are offered to reference Lenders to
be selected in the interbank eurodollar market, and "Eurodollar Applicable
Margin" means an amount per annum ranging from 1.125% to 2.25% based upon the
Company's ratio of total debt to EBITDA. Interest on Base Rate Loans are
payable quarterly in arrears. Interest on Eurodollar Loans are payable on the
last day of each relevant interest period and, in the case of any interest
period longer than three months, on each successive date three months after
the first day of such interest period.
Security and Guarantees. The New Credit Facility is secured by a perfected
first priority security interest in substantially all of the Company's and its
direct and indirect subsidiaries' tangible and intangible assets, including
without limitation, intellectual property, fee owned real property and all of
the capital stock of the Company's direct and indirect subsidiaries. The New
Credit Facility is also guaranteed by each of the Company's subsidiaries.
Fees. The Company is required to pay a commitment fee, calculated at a rate
per annum ranging from 0.375% to 0.5% based upon the Company's ratio of total
debt to EBITDA, on the average daily unused portion of the New Credit
Facility, payable quarterly in arrears. Fees to be paid on outstanding Letters
of Credit are at a per annum rate equal to the Eurodollar Applicable Margin.
In addition, a fronting fee on the face amount of each Letter of Credit is
payable by the Company quarterly in arrears to the issuing Lender in an amount
per annum of 0.125% or 0.1875% based upon whether the Company's ratio of total
debt to EBITDA exceeds certain thresholds.
Covenants. The Credit Agreement contains customary affirmative and negative
covenants which, among other things and with certain exceptions, require the
Company and its subsidiaries to: (i) periodically deliver certain financial
and other information; (ii) not merge or consolidate with another entity;
(iii) not incur indebtedness or guarantees of indebtedness; (iv) not incur
liens on property; (v) not engage in certain sales or other dispositions or
sale-leaseback transactions; (vi) not engage in certain acquisitions or other
investments; (vii) not pay dividends, repurchase stock or make certain other
restricted payments; and (viii) not engage in
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transactions with affiliates. Under the Credit Agreement, the Company is
required to satisfy certain financial covenants, which require the Company to
maintain specified financial ratios and comply with certain financial tests.
Events of Default. The Credit Agreement contains certain customary events of
default, including without limitation, a change of control (to be defined in
the Credit Agreement) of the Company.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company on January 24, 1997, in a private
placement. In connection with that placement, the Company entered into the
Registration Rights Agreement, which requires that the Company file a
registration statement under the Securities Act with respect to the New Notes
and, upon the effectiveness of that registration statement, offer to the
holders of the Old Notes the opportunity to exchange their Old Notes for a
like principal amount of New Notes, which will be issued without a restrictive
legend and may be reoffered and resold by the holder without registration
under the Securities Act. The Registration Rights Agreement further provides
that the Company must use its best efforts to cause the Registration Statement
with respect to the Exchange Offer to be declared effective on or before
, 1997. Except as provided below, upon the completion of the Exchange
Offer, the Company's obligations with respect to the registration of the Old
Notes and the New Notes will terminate. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part and the summary herein of certain provisions thereof
does not purport to be complete and is subject to, and is qualified in its
entirety by reference thereto. As a result of the filing and the effectiveness
of the Registration Statement, certain liquidated damages ("Liquidated
Damages") provided for in the Registration Rights Agreement will not become
payable by the Company. Following the completion of the Exchange Offer (except
as set forth in the paragraph immediately below), holders of Old Notes not
tendered will not have any further registration rights and those Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for the Old Notes could be adversely affected upon
completion of the Exchange Offer.
In order to participate in the Exchange Offer, a holder must represent to
the Company, among other things, that (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of
the person receiving the New Notes, whether or not such person is the holder
of the Old Notes, (ii) neither the holder nor any such other person is
engaging in or intends to engage in a distribution of the New Notes, (iii)
neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of the New
Notes, and (iv) neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 promulgated under the Securities Act,
of the Company. In the event that (i) the Company is not required to file an
Exchange Offer Registration Statement (as defined in the Registration Rights
Agreement) because the Exchange Offer is not permitted by applicable law of
Commission policy, or (ii) any holder of Old Notes is prohibited from
participating in the Exchange Offer by applicable law or Commission policy, or
such holder would be required to deliver a prospectus in connection with any
resale of New Notes acquired in the Exchange Offer and the prospectus
contained in the Exchange Offer Registration Statement would not be
appropriate or available for such resales, or such holder is a broker-dealer
that holds Old Notes acquired directly from the Company or its affiliates.
Such holders can elect, by so indicating on the Letter of Transmittal and
providing certain additional necessary information, to have such holder's Old
Notes registered in a "shelf" registration statement on an appropriate form
pursuant to Rule 415 under the Securities Act. In the event that the Company
is obligated to file a "shelf" registration statement, it may be required to
keep such "shelf" registration statement effective for at least three years.
Other than as set forth in this paragraph, no holder will have the right to
participate in the "shelf" registration statement nor otherwise to require
that the Company register such holder's Old Notes under the Securities Act.
See"--Procedures for Tendering."
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third-parties unrelated to the Company, the Company believes
that, with the exceptions set forth below, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving such New Notes, whether or not
such person is the holder (other than any such holder or such other person
which is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that the New Notes are
acquired in the ordinary course of business of the holder or such other person
and neither the holder nor such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes. Any holder who tenders in the Exchange Offer for the purpose
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of participating in a distribution of the New Notes cannot rely on this
interpretation by the Commission's staff and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
a secondary resale transaction. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where the Old Notes were acquired
by that broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer (except as set forth in the
second paragraph under "--Purpose and Effect" above), holders of Old Notes not
tendered will not have any further registration rights and those Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for a holder's Old Notes could be adversely
affected upon completion of the Exchange Offer if the holder does not
participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of New Notes in exchange for each $1,000 principal amount of outstanding Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered
only in integral multiples of $1,000 in principal amount.
The form and terms of the New Notes are substantially the same as the form,
and terms of the Old Notes except that (i) interest on the New Notes shall
accrue from the date of issuance of the Old Notes and (ii) the New Notes have
been registered under the Securities Act and will not bear legends restricting
their transfer. The New Notes will evidence the same debt as the Old Notes and
will be issued pursuant to, and entitled to the benefits of, the Indenture
pursuant to which the Old Notes were issued.
As of April 4, 1997, Old Notes representing $85,000,000 aggregate principal
amount were outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to such registered Holder and to others believed to
have beneficial interests in the Old Notes. Holders of Old Notes do not have
any appraisal or dissenters' rights under the General Corporation Law of the
State of Delaware or the indenture in connection with the Exchange Offer. The
Company intends to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of
the Commission promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to the
Exchange Agent. the Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the New Notes from the Company. If any tendered
Old Notes are not accepted for exchange because of an invalid tender, the
occurrence of certain other events set forth herein or otherwise, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes, in connection with the Exchange
Offer. See "The Exchange Offer--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
1997, unless the Company, in its sole discretion, extends the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended. In order to extend the Exchange
Offer,
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the Company will notify the Exchange Agent and each registered holder of any
extension by oral or written notice prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date. The
Company reserves the right, in its sole discretion, (i) to delay accepting any
Old Notes, to extend the Exchange Offer or, if any of the conditions set forth
under "The Exchange Offer--Certain Conditions to Exchange Offer" shall not
have been satisfied, to terminate the Exchange Offer, by giving oral or
written notice of such delay, extension or termination to the Exchange Agent,
or (ii) to amend the terms of the Exchange Offer in any manner.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender the Old Notes in the Exchange Offer.
Except as set forth under "The Exchange Offer--Book Entry Transfer," to tender
in the Exchange Offer a holder must complete, sign, and date the Letter of
Transmittal, or a copy thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the
Letter of Transmittal or copy to the Exchange Agent prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Old Notes, if that procedure is available, into the Exchange Agent's account
at DTC (the "Book-Entry Transfer Facility") pursuant to the procedure for
book-entry transfer described below, must be received by the Exchange Agent
prior to the Expiration Date, or (iii) the Holder must comply with the
guaranteed delivery procedures described below. To be tendered effectively,
the Letter of Transmittal and other required documents must be received by the
Exchange Agent at the address set forth under "The Exchange Offer--Exchange
Agent" prior to the Expiration Date.
The tender by a holder that is not withdrawn before the Expiration Date will
constitute an agreement between that holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES, OR NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company, or other nominee and who wishes to
tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the
beneficial owner wishes to tender on the owner's own behalf, the owner must,
prior to completing and executing the Letter of Transmittal and delivering the
owner's Old Notes, either make appropriate arrangements to register ownership
of the Old Notes in the beneficial owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership
may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless Old Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of transmittal
or (ii) for the account of an Eligible Institution. If signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, the guarantee must be by any eligible guarantor institution
that is a member of or participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program, the Stock
Exchange Medallion Program, or an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
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If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, the Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by the registered
holder as that registered holder's name appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so at must be submitted with the Letter of
Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Notes not properly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the right to waive any defects, irregularities, or conditions of
tender as to particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Company, the Exchange Agent, nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly as to which the defects or irregularities
have not been cured or waived will be returned by the Exchange Agent to the
tendering holders, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer--Conditions," to
terminate the Exchange Offer and, to the extent permitted by applicable law,
purchase Old Notes in the open market, in privately negotiated transactions,
or otherwise. The terms of any such purchases or offers could differ from the
terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, ( ii ) neither the holder nor
any such other person is engaging in or intends to engage in a distribution of
such New Notes, (iii) neither the holder nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Notes, and (iv) neither the holder nor any such other
person is an "affiliate" as defined under Rule 405 of the Securities Act, of
the Company or any ~Guarantor.
In the event that (i) the Company is not required to file an Exchange Offer
Registration Statement because the Exchange Offer is not permitted by
applicable law or Commission policy, or (ii) any holder of Old Notes is
prohibited from participating in the Exchange Offer by applicable law or
Commission policy, or such holder would be required to deliver a prospectus in
connection with any resale of New Notes acquired in the Exchange Offer and the
prospectus contained in the Exchange Offer Registration Statement would not be
appropriate or available for such resales, or such holder is a broker-dealer
that holds Old Notes acquired directly from the Company or its affiliates.
Such holders can elect, by so indicating on the Letter of Transmittal and
providing certain additional necessary Information, to have such holder's Old
Notes registered in a "shelf" registration statement on an appropriate form
pursuant to Rule 415 under the Securities Act Such election must be made by
the Expiration Date in order for such holder to participate in the "shelf"
registration.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely
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Book-Entry Confirmation of such Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal (or, with respect to the DTC and its participants,
electronic instructions in which the tendering holder acknowledges its receipt
of and agreement to be bound by the Letter of Transmittal) and all other
required documents. If any tendered Old Notes are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Old Notes
are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering Holder thereof (or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer. However,
although delivery of Old Notes may be effected through book-entry transfer at
the Book-Entry Transfer Facility, the Letter of Transmittal or copy thereof,
with any required signature guarantees and any other required documents, must,
in any case other than as set forth in the following paragraph, be transmitted
to and received by the Exchange Agent at the address set forth under "The
Exchange Offer-Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through
DTC's communication system in place of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is
made through an Eligible Institution, (ii) prior to the Expiration Date, the
Exchange Agent received from such Eligible Institution a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of
Guaranteed Delivery, substantially in the form provided by the Company (by
telegram, telex, facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Notes and the amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent, and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal, are
received by the Exchange Agent within three NYSE trading days after the date
of execution of the Notice of Delivery.
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WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or (for
DTC participants) electronic ATOP transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth in this Prospectus
prior to 5:00 p.m., New York City time, on the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Old Notes to be withdrawn (the ~'Depositor"), (ii) identify the Old Notes
to be withdrawn (including the certificate number or numbers and principal
amount of such Old Notes),
(iii) be signed by the holder in the same manner as the original signature
on the Letter of Transmittal by which such Old Notes were tendered (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee register the transfer of such Old Notes into
the name of the person withdrawing the tender, and (iv) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form, and eligibility (including
time of receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender, or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures under "The Exchange Offer-Procedures for Tendering" at any time on
or prior to the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the
New Notes for such Old Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental age~ncy or court of competent
jurisdiction.
The foregoing conditions ~or the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any
such condition or may be waived by the Company and the Guarantors in whole or
in part at any time and from time to time in its sole discretion. The failure
by the Company at any time to exercise any of the foregoing rights shall not
be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes,
if at such time any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or
the qualification of the indenture under the Trust Indenture Act of 1939, as
amended (the "TIA" ). In any such event the Company is required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
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EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. Marine Midland Bank has been appointed as Exchange Agent for the
Exchange Offer. Questions, requests for assistance and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed
to the Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
For information or
Confirmation by Telephone:
By Mail: By Facsimile Transmission By Hand or Overnight Delivery:
(for Eligible Institutions only):
</TABLE>
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be $ ,
which includes fees and expenses of the Trustee, accounting, legal, printing,
and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection except that holders who instruct the Company
to register New Notes in the name of, or request that Old Notes not tendered
or not accepted in the Exchange Offer be returned to, a person other than the
registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does
not purport to be a complete analysis of all potential tax effects. The
discussion is based upon the Internal Revenue Code of 1986, as amended,
Treasury regulations, Internal Revenue Service rulings and pronouncements, and
judicial decisions now in effect, all of which are subject to change at any
time by legislative, judicial or administrative action. Any such changes may
be applied retroactively in a manner that could adversely affect a holder of
the New Notes. The description does not consider the effect of any applicable
foreign, state, local or other tax laws or estate or gift tax considerations.
EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a material modification of the terms of the Old Notes
and, therefore, such exchange should not constitute an exchange for federal
income tax purposes. Accordingly, such exchange should have no federal income
tax consequences to holders of Old Notes.
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<PAGE>
DESCRIPTION OF NEW NOTES
GENERAL
The New Notes will be issued pursuant to an Indenture (the "Indenture"),
dated as of January 24, 1997, among the Company, the Guarantors and Marine
Midland Bank, as trustee (the "Trustee"). Upon the issuance of the New Notes,
the Indenture will be subject to and governed by the Trust Indenture Act of
1939 (the "Trust Indenture Act"). The New Notes are subject to all such terms,
and Holders of New Notes are referred to the Indenture and the Trust Indenture
Act for a statement thereof. The following summary of certain provisions of
the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to all the provisions of the New Notes,
the Indenture including the definitions therein of certain terms used below. A
copy of the Indenture is available as set forth under "Additional
Information." The definitions of certain terms used in the following summary
are set forth below under "Certain Definitions."
The New Notes will rank junior in right of payment to all Senior Debt,
including borrowings under the New Credit Facility. The New Notes will rank
pari passu in right of payment with the Old Notes, if any, and all senior
subordinated Indebtedness of the Company issued in the future, if any, and
senior in right of payment to all other subordinated Indebtedness of the
Company issued in the future, if any. As of December 31, 1996, the total
amount of Senior Debt outstanding after giving pro forma effect to the
Original Offering, Transactions and the initial borrowings under the New
Credit Facility would have been approximately $70.8 million.
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Company is dependent upon the cash flow of its Subsidiaries to
meet its obligations, including its obligations under the Notes. Except to the
extent of the Subsidiary Guarantees, the Notes will be effectively
subordinated to all Indebtedness and other liabilities and commitments
(including trade payables and lease obligations) of the Company's
Subsidiaries. Any right of the Company to receive assets of any of its
Subsidiaries upon the latter's liquidation or reorganization (and the
consequent right of the Holders of the Notes to participate in those assets)
will be effectively subordinated to the claims of that Subsidiary's creditors,
except to the extent that the Company is itself recognized as a creditor of
such Subsidiary, in which case the claims of the Company would still be
subordinate to any security in the assets of such Subsidiary and any
Indebtedness of such Subsidiary senior to that held by the Company. See "--
Subsidiary Guarantees" and "--Subordination."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $85.0 million and
will mature on January 15, 2004. Interest on the Notes will accrue at the rate
of 10% per annum and will be payable semi-annually in arrears on January 15
and July 15, commencing on July 15, 1997, to Holders of record at the close of
business on the January 1 and July 1 immediately preceding such interest
payment date. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, Redemption Price and Purchase
Price of, and interest and Liquidated Damages, if any, on the Notes will be
payable at the office or agency of the Company maintained for such purpose
within the City and State of New York or, at the option of the Company,
payment of interest and Liquidated Damages, if any, may be made by check
mailed to the Holders of the Notes at their respective addresses set forth in
the register of Holders of Notes; provided that all payments with respect to
Global Notes or Notes where the Holders thereof have given wire transfer
instructions to the Trustee or the Paying Agent will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Trustee maintained for
such purpose. The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the Company's option prior to January
15, 2001. Thereafter, the Notes will be subject to redemption at the option of
the Company, in whole or in part, upon not less than 30 nor more
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<PAGE>
than 60 days' notice, at the Redemption Prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on January 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2001.................................................... 105.000%
2002.................................................... 102.500%
2003 and thereafter..................................... 100.000%
</TABLE>
Notwithstanding the foregoing, prior to January 15, 2000, the Company may in
its discretion redeem up to an aggregate of $25.0 million in principal amount
of Notes at a redemption price of 110% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date, with the net proceeds of one or more public offerings of
common stock of the Company; provided that at least $60.0 million in aggregate
principal amount of Notes remain outstanding immediately after the occurrence
of such redemption; and provided, further, that such redemption shall occur
within 90 days after the date of the closing of such public offering of common
stock of the Company.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee by lot, pro rata or by such
other method as the Trustee shall deem fair and appropriate; provided that no
Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall
be mailed by first class mail at least 30 but not more than 60 days before the
redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
ceases to accrue on the Notes or portions of them called for redemption.
SUBSIDIARY GUARANTEES
The Company's obligations under the Notes will be jointly and severally
Guaranteed (the "Subsidiary Guarantees") by the Guarantors. The Subsidiary
Guarantees of the Guarantors will be unsecured and subordinated to the prior
payment in full of all senior debt of the Guarantors (including such
Guarantor's Guarantee of the New Credit Facility), approximately $2.0 million
of other Indebtedness of the Guarantors and the amounts for which the
Guarantors will be liable under Guarantees issued from time to time with
respect to Senior Debt of the Company, which would include approximately $70.8
million of Senior Debt outstanding as of December 31, 1996, after giving pro
forma effect to the Original Offering, the Transactions and the initial
borrowings under the New Credit Facility. The subordination of the Subsidiary
Guarantees will be substantially similar to the subordination provided for in
the Indenture with respect to the Notes. See "Subordination." The obligations
of each Guarantor under its Subsidiary Guarantee will be limited so as not to
constitute a fraudulent conveyance under applicable law. See, however, "Risk
Factors--Fraudulent Conveyance."
The Indenture provides that, subject to the provisions of the following
paragraph, no Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person), another corporation, Person or
entity (except the Company or another Guarantor) whether or not affiliated
with such Guarantor, unless (i) the Person formed by or surviving any such
consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor under its Subsidiary Guarantee in form and
substance reasonably satisfactory to the Trustee; (ii) immediately after
giving effect to such transaction, no Default or Event of Default exists; and
(iii) immediately after giving pro forma effect to such transaction, the
Company would be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant
described below under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
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The Indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of any Guarantor, by way of merger,
consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Guarantor, then such Guarantor (in the event of a sale or
other disposition, by way of such a merger, consolidation or otherwise, of all
of the Capital Stock of such Guarantor to any Person other than the Company or
a Wholly Owned Subsidiary thereof) will be released and relieved of any
obligations under its Subsidiary Guarantee; provided that the Net Proceeds of
such sale or other disposition are applied in accordance with the applicable
provisions of the Indenture. See "Repurchase at the Option of Holders."
"Guarantors" means each of (i) the Operating Subsidiary, (ii) the
Intermediate Holding Company, (iii) LFC Armored of Texas Inc., a Texas
corporation ("LFC of Texas"), (iv) Loomis, Fargo & Co. of Puerto Rico, a
Tennessee corporation ("LFC of Puerto Rico") and (v) any other Subsidiary that
(a) Guarantees any Senior Debt of the Company or any Indebtedness of the
Company that is pari passu in right of payment with the Notes or (b) is or
becomes a Significant Subsidiary (whether as a result of creation,
acquisition, additional investment, internal growth, or otherwise), and their
respective successors and assigns.
The Intermediate Holding Company is a holding company whose only significant
asset is all of the capital stock of the Operating Subsidiary. All of the
Company's business is conducted through the Operating Subsidiary and its two
wholly-owned subsidiaries, LFC of Texas and LFC of Puerto Rico. Separate
financial statements of the Guarantors are not included herein because the
Guarantors are jointly and severally liable with respect to the Company's
obligations pursuant to the New Notes, the Subsidiary Guarantees are full and
unconditional, and the Guarantors have no operations independent of the
Company.
SUBORDINATION
The payment of principal, Redemption Price and Purchase Price of, and
interest and Liquidated Damages, if any, on the Notes will be expressly
subordinate and subject in right of payment, as set forth in the Indenture, to
the prior payment in full of all Senior Debt, whether outstanding on the date
of the Indenture or thereafter incurred.
The Notes will rank junior in right of payment to all Senior Debt, including
borrowings under the New Credit Facility. Borrowings under the New Credit
Facility will be secured by substantially all the Company's assets, including
the capital stock of the Company's existing and future Subsidiaries, and will
be guaranteed by all such Subsidiaries, which guarantees will be secured by
substantially all of such Subsidiaries' assets. The Notes will rank pari passu
in right of payment with all senior subordinated Indebtedness of the Company
issued in the future, if any, and senior in right of payment to all other
subordinated Indebtedness of the Company issued in the future, if any.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt whether or not such interest
constitutes an allowable claim in such proceeding) before the Holders of Notes
will be entitled to receive any payment with respect to the Notes, and until
all Obligations with respect to Senior Debt are paid in full, any distribution
to which the Holders of Notes would be entitled shall be made to the holders
of Senior Debt (except that Holders of Notes may receive securities that are
subordinated at least to the same extent as the Notes to Senior Debt and any
securities issued in exchange for Senior Debt and payments made from the trust
described under "Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in such subordinated securities or from the trust described under
"Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of
the principal of, premium, if any, or interest on Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any
default occurs (other than a payment default) and is continuing
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<PAGE>
with respect to Designated Senior Debt that permits holders of the Designated
Senior Debt as to which such default relates to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice")
from the Company or the representative of the Designated Senior Debt. Payments
on the Notes may and shall be resumed (a) in the case of a payment default,
upon the date on which such default is cured or waived and (b) in case of a
nonpayment default, the earlier of (i) the date on which such nonpayment
default is cured or waived, (ii) 179 days after the date on which the
applicable Payment Blockage Notice is received unless the maturity of any
Designated Senior Debt has been accelerated and (iii) the date on which such
payment blockage period shall have been terminated by written notice to the
Company and the Trustee from the representative of the Designated Senior Debt
who shall have previously delivered the Payment Blockage Notice. No new period
of payment blockage may be commenced unless and until (i) 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, Redemption Price and
Purchase Price of, and interest and Liquidated Damages, if any, on the Notes
that have become due have been paid in full in cash or Cash Equivalents. No
nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice. The Company shall deliver a notice to
the Trustee promptly after the date on which any nonpayment default is cured
or waived or ceases to exist or on which the Designated Senior Debt related
thereto is discharged or paid in full.
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the Holders of Notes to
accelerate the maturity thereof in accordance with the Indenture. See "--
Events of Default." The Indenture will further require that the Company
promptly notify the holders of Senior Debt if payment of the Notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. On a pro forma basis,
after giving effect to the Transactions and the initial borrowings under the
New Credit Facility, the pro forma principal amount of Senior Debt outstanding
at September 30, 1996 would have been approximately $69.6 million. Although
the Indenture will limit, subject to certain financial tests, the amount of
additional Indebtedness, including Senior Debt, that the Company and its
Subsidiaries can incur, under certain circumstances, the amount of such
Indebtedness could be substantial and, in any case, said Indebtedness may be
Senior Debt. See " Certain Covenants--Incurrence of Indebtedness and Issuance
of Preferred Stock."
"Designated Senior Debt" means (i) Indebtedness of the Company under the New
Credit Facility and (ii) any other Senior Debt permitted under the Indenture,
which, at the date of creation thereof or determination, has an aggregate
principal amount outstanding of, or under which at the date of creation
thereof or determination, the holders thereof are committed to lend, at least
$20.0 million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Debt as "Designated Senior Debt" for
purposes of the Indenture.
"Senior Debt" means Indebtedness of the Company, whether outstanding on the
date of the Indenture or thereafter created, incurred or assumed, unless the
instrument under which such Indebtedness is incurred expressly provides that
such Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, Senior Debt will not include (i) Indebtedness
evidenced by the Notes, (ii) Indebtedness that is by its terms subordinate or
junior in right of payment to any other Indebtedness of the Company, (iii) any
liability for federal, state, local or other taxes owed or owing by the
Company, (iv) Indebtedness of the Company to any of its Subsidiaries, (v)
Indebtedness for the purchase of goods or materials in the ordinary course of
business except purchase money Indebtedness secured by a security interest in
or a Lien upon the goods or materials purchased, (vi) that portion of any
Indebtedness that is incurred in violation of the Indenture, (vii)
Indebtedness which is represented by Disqualified Stock, (viii) Indebtedness
of or amounts owing by the Company for compensation to employees, (ix) amounts
owing under leases (other than Capital Lease Obligations), and (x) the NOL
Note.
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MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control. Upon the occurrence of a Change of Control, each Holder
of Notes will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at a
Purchase Price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to
the Purchase Date). Within 30 days following any Change of Control, the
Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes pursuant to the procedures required by the Indenture and described in
such notice. The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to
the extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the related Purchase Date, which is at least 30 but no more than 60 days
from the date on which the Company mails notice of the Change of Control, the
Company will, to the extent permitted under applicable law, (1) accept for
payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer, (2) deposit with the Paying Agent an amount equal to the
Purchase Price, together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Purchase Date in respect of all Notes or
portions thereof so tendered and accepted for repurchase and (3) deliver or
cause to be delivered to the Trustee the Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of Notes or
portions thereof being purchased by the Company. The Paying Agent will
promptly mail to each Holder of Notes so repurchased the amount due in
connection with such Notes, and the Company will promptly issue a new Note,
and the Trustee, upon written request from the Company will authenticate and
mail or deliver (or cause to be transferred by book entry) to each relevant
Holder a new Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Purchase Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all
or substantially all of the assets of the Company and its Subsidiaries taken
as a whole to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act) other than the Principals or their Related Parties (as defined
below), (ii) the approval by the requisite vote of the stockholders of the
Company of a plan of liquidation or dissolution of the Company, (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Wingate Principals, Borg-Warner Principals, and their Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of more than
40% of the voting stock of the Company and at such time neither the Wingate
Principals and their Related Parties nor the Borg-Warner Principals and their
Related Parties beneficially own, directly or indirectly (including through
the
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Business Trust), more voting stock of the Company than such "person", (iv) the
first day on which a majority of the members of the Board of Directors of the
Company are not Continuing Directors or (v) the first day on which the Company
ceases for any reason to own, beneficially and legally, 100% of the
outstanding Capital Stock of the Operating Subsidiary.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under
applicable law. Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"Borg-Warner Principals" means Borg-Warner Security Corporation and the
Management Group.
"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) (x) was a member of such Board
of Directors on the date of the Indenture or (y) was identified to become a
Director on Exhibit B to the Contribution Agreement or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Management Group" means the individuals listed as such in the Indenture.
"Principals" means either the Borg-Warner Principals or the Wingate
Principals, as the case may be.
"Related Party" with respect to either the Wingate Principals or the Borg-
Warner Principals means (A) any controlling stockholder, 80% (or more) owned
Subsidiary, or spouse or immediate family member (in the case of an
individual) of such Principals or (B) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of
the Borg-Warner Principals, the Wingate Principals and/or such other Persons
referred to in the immediately preceding clause (A).
"Wingate Principals" means Wingate Partners, L.P., Wingate Affiliates, L.P.
and the Management Group.
Asset Sales. The Indenture provides that the Company will not, and will not
permit any of its Subsidiaries to, engage in an Asset Sale unless (i) the
Company (or the Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by
a resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Subsidiary is in the form of cash or Cash
Equivalents; provided that the amount of (x) any liabilities (as shown on the
Company's or such Subsidiary's most recent balance sheet) of the Company or
any of its Subsidiaries (other than contingent liabilities and liabilities
that are by their terms subordinated to the Notes or any guarantee thereof)
that are assumed by the transferee of any such assets pursuant to an agreement
that releases the Company or such Subsidiary from further liability and (y)
any securities received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary
into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents
received), shall be deemed to be cash or Cash Equivalents for purposes of this
provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Subsidiary may apply such Net Proceeds, at its
option, (a) to permanently reduce Senior Debt, including without limitation
Indebtedness under the New Credit Facility (and to correspondingly reduce
commitments with respect thereto) or (b) to the acquisition of a controlling
interest in another business, the making of a capital expenditure or the
acquisition of other long-term assets, in each case, in the same or a similar
line of business as the Company
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was engaged in on the date of the Asset Sale. Pending the final application of
any such Net Proceeds, the Company or the applicable Subsidiary may
temporarily reduce Senior Debt, including without limitation Indebtedness
under the New Credit Facility or otherwise invest such Net Proceeds in any
manner that is not prohibited by the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of
this paragraph will be deemed to constitute "Excess Proceeds." Within 30 days
after the aggregate amount of Excess Proceeds exceeds $5.0 million, the
Company will be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase an aggregate principal amount of Notes equal to such
Excess Proceeds (the "Offer Amount"), at a Purchase Price in cash in an amount
equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the Purchase Date, in
accordance with the procedures set forth in the Indenture and described in
such notice.
The Company will comply with the requirements of Rule 14(e)-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of an Asset Sale.
On the related Purchase Date, which is at least 30 but no more than 60 days
from the date on which the Company mails notice of an Asset Sale Offer, the
Company will, to the extent permitted under applicable law, (i) accept for
payment all Notes or portions thereof properly tendered pursuant to the Asset
Sale Offer in an aggregate principal amount not in excess of the Offer Amount,
(ii) deposit with the Paying Agent an amount equal to the Purchase Price,
together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Purchase Date, in respect of all Notes or portions thereof so
tendered and accepted for repurchase and (iii) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions
thereof being repurchased by the Company. The Paying Agent will promptly mail
to each Holder of Notes so tendered the amount due in connection with such
Notes, and the Company will promptly issue a new Note, and the Trustee, upon
written request from the Company will authenticate and mail or deliver (or
cause to be transferred by book entry) to each relevant Holder a new Note,
equal in principal amount to any unpurchased portion of the Notes surrendered,
if any; provided, that each such new Note will be in a principal amount of
$1,000 or an integral multiple thereof. The Company will publicly announce the
results of the Asset Sale Offer on or as soon as practicable after the
Purchase Date.
To the extent that the aggregate amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company or the
applicable Subsidiary may use any remaining Excess Proceeds for any purpose
not prohibited by the Indenture. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the Offer Amount, the Trustee shall
select the Notes to be purchased on a pro rata basis. Upon completion of an
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Restrictions under Senior Debt. The Indenture provides that prior to
complying with the provisions of the covenants described above relating to a
Change of Control Offer or an Asset Sale Offer, but in any event within 90
days following a Change of Control or the accumulation of Excess Proceeds in
excess of $5.0 million, the Company shall (i) repay, or otherwise make
arrangements satisfactory to the holders of all Senior Debt for the repayment
of, all Senior Debt in full or offer to repay all such Senior Debt in full and
have repaid, or otherwise made arrangements satisfactory to the holders of all
Senior Debt for the repayment of, all Senior Debt in full of any lender who
accepts such offer; and/or (ii) obtain the requisite consents under the New
Credit Facility or under agreements relating to other Senior Debt to purchase
Notes as required by the Indenture.
The New Credit Facility prohibits the Company from purchasing any Notes and
also will provide that certain change of control events with respect to the
Company and asset sales would constitute a default thereunder. Any future
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event the Company becomes
obligated pursuant to the Indenture to purchase Notes at a time when the
Company is contractually prohibited by the New Credit Facility or any other
such agreement from purchasing Notes, the Company could seek the consent of
its lenders to the purchase of Notes or could attempt to refinance the
borrowings under the agreements that contain such prohibition. If the Company
does not obtain such a consent or repay such borrowings, the Company would
remain contractually prohibited from purchasing Notes. In such case, the
Company's failure to make the required Change or Control
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Offer or Asset Sale Offer or to purchase tendered Notes would constitute an
Event of Default under the Indenture which would, in turn, constitute a
default under the New Credit Facility and any other Senior Debt which contains
terms which would result in an event of default upon the occurrence of an
Event of Default under the Notes. In such circumstances, the Company's ability
to make payments to the Holders of Notes would be subject to the subordination
provisions of the Indenture.
CERTAIN COVENANTS
Restricted Payments. The Indenture provides that the Company will not, and
will not permit any of its Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any other payment or distribution in
respect of the Company's Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company)
or to the direct or indirect holders of the Company's Equity Interests in
their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends
or distributions payable to the Company or any Wholly Owned Subsidiary of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any direct or indirect parent of the
Company or other Affiliate of the Company (other than a Wholly Owned
Subsidiary of the Company); (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value, prior to any
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Indebtedness that is subordinated to the Notes; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i)
through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
of the Indenture (excluding Restricted Payments permitted by clauses (w)
and (x) of the next succeeding paragraph), is less than the sum of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Company from
the issue or sale since the date of the Indenture of Equity Interests of
the Company or of debt securities of the Company that have been converted
into or exchanged for such Equity Interests (other than Equity Interests
(or convertible debt securities) sold to a Subsidiary of the Company and
other than Disqualified Stock or debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash
or otherwise liquidated or repaid for cash, the lesser of (A) the cash
return of capital with respect to such Restricted Investment (less the cost
of disposition, if any) and (B) the initial amount of such Restricted
Investment plus (iv) $500,000.
The foregoing provisions will not prohibit (v) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (w) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Subsidiary of the
Company) of other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph; (x) the
defeasance, redemption,
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repurchase or payment of principal of Indebtedness that is subordinated to the
Notes with the net cash proceeds from an incurrence of Permitted Refinancing
Debt or the substantially concurrent sale (other than to a Subsidiary of the
Company) of Equity Interests of the Company (other than Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (c)(ii) of the preceding paragraph; (y) (A) the
acquisition or assumption of the indebtedness evidenced by the Bond Agreement
by and among New Jersey Economic Development Authority, Wells Fargo Armored,
the purchasers thereunder, and Mellon Bank, N.A., as trustee, dated June 1,
1984, in the original principal amount of $1.0 million (the "IRB"), (B) the
payment of principal, interest, or premiums, if any, in connection with the
redemption, repurchase or maturity of the IRB, (C) the payment or
reimbursement of costs, expenses and taxes as may be incurred by Wells Fargo
Armored after the Closing Date with respect to maintaining the property to
which the IRB relates, (D) the payment to the original holders under the IRB
or their assignees of any amount required to cancel or retire the IRB and the
indebtedness evidenced thereby and (E) the reimbursement of costs and expenses
incurred by Wells Fargo Armored in redeeming or repurchasing the IRB at the
request or direction of the Company; and (z) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the
Company or any Subsidiary of the Company held by any member of the Company's
(or any of its Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the date of
the Indenture; provided that (i) the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$250,000 in any twelve-month period plus the aggregate cash proceeds received
by the Company during such twelve-month period from any reissuance of Equity
Interests by the Company to members of management of the Company and its
Subsidiaries; (ii) the cash proceeds from any such reissuance shall be
excluded from clause (c)(ii) of the preceding paragraph; and (iii) no Default
or Event of Default shall have occurred and be continuing immediately after
such transaction.
Notwithstanding anything contained in the Indenture to the contrary, the
events described in clause (y) of the preceding paragraph (each, an "IRB
Payment Event") shall be excluded from the definition of Restricted Payments.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company
or such Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
Incurrence of Indebtedness and Issuance of Preferred Stock. The Indenture
provides that the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guaranty or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of Disqualified
Stock or preferred stock (other than to the Company or a Wholly Owned
Subsidiary of the Company); provided, however, that the Company and its
Subsidiaries may incur Indebtedness (including Acquired Debt) and the Company
(but not any of its Subsidiaries) may issue shares of Disqualified Stock, if
the Fixed Charge Coverage Ratio for the Company's most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at least 2.0 to
1.0, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred,
or the Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period.
The foregoing provisions will not apply to:
(i) the incurrence by the Company of Senior Debt under the New Credit
Facility and letters of credit thereunder in an aggregate principal amount
at any time outstanding (with letters of credit (other than
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Insurance Letters of Credit) being deemed to have a principal amount equal
to the maximum potential liability of the Company and its Subsidiaries
thereunder) not to exceed an amount equal to $100.0 million under the New
Credit Facility less the aggregate amount of all Net Proceeds of Asset
Sales applied to permanently reduce the commitments with respect to such
Indebtedness pursuant to the covenant described above under the caption
"Repurchase at the Option of Holders--Asset Sales";
(ii) the incurrence by the Company and its Subsidiaries of Existing
Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness represented by Capital Lease Obligations, mortgage
financings, purchase money obligations or Acquired Debt, in each case
incurred for the purpose of financing or refinancing all or any part of the
purchase price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $5.0 million at any time
outstanding;
(v) the incurrence in the ordinary course of business by the Company or
any of its Subsidiaries of Indebtedness in respect of Insurance Letters of
Credit;
(vi) the incurrence by any Subsidiary of the Company of Indebtedness
under a Guarantee of any Indebtedness permitted under the Indenture to be
incurred by the Company; provided that (a) in the case such Guarantee is of
Indebtedness that is pari passu in right of payment with the Notes, all
obligations with respect to the Notes are Guaranteed on an equal and
ratable basis with the Indebtedness so Guaranteed, and (b) in the case such
Guarantee is of Indebtedness that is subordinated in right of payment to
the Notes, all obligations with respect to the Notes are Guaranteed on a
senior basis reflecting the subordination of the Indebtedness so Guaranteed
on terms substantially similar to, or more favorable to senior creditors
than, those contained in the Indenture;
(vii) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Indenture to be incurred;
(viii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries; provided, however, that (i) if the Company is
the obligor of such Indebtedness, such Indebtedness is evidenced by a note
and expressly subordinate to the payment in full of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance, transfer or other
disposition of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Wholly Owned Subsidiary and
(B) any sale, transfer or other disposition of any such Indebtedness to a
Person that is not either the Company or a Wholly Owned Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of its Subsidiaries of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risk with respect to any floating rate Indebtedness that is permitted
by the terms of this Indenture to be outstanding;
(x) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of bid, performance or advance payment bonds, and
appeal and surety bonds;
(xi) the incurrence by the Company of Indebtedness represented by the
IRB;
(xii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $10.0 million; and
(xiii) the incurrence by the Company or any of its Subsidiaries of
interest, fees or other expenses on Indebtedness otherwise permitted under
this covenant, provided that such interest, fees or other expenses are
payable on a current basis no less frequently than semi-annually and are
paid when due or within any applicable customary grace period thereafter,
not to exceed thirty days.
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For purposes of determining compliance with this covenant, (i) in the event
that an item of Indebtedness meets the criteria of more than one of the types
of Indebtedness permitted by this covenant, the Company in its sole discretion
will classify such item of Indebtedness and will only be required to include
the amount and type of each class of Indebtedness in the test specified in the
first paragraph of this covenant or in one of the clauses of the second
paragraph of this covenant; (ii) the amount of Indebtedness issued at a price
which is less than the principal amount thereof shall be equal to the amount
of liability in respect thereof determined in accordance with GAAP unless the
Company shall elect upon written notice to the Trustee at the time of issuance
of such Indebtedness to qualify the extended principal amounts or final
accreted value thereof as permitted under the terms of the Indenture; and
(iii) the amount of Indebtedness represented by a Guarantee of a primary
obligation of another Person shall be deemed to be the lower of (x) an amount
equal to the maximum amount of the primary obligation (including without
limitation all principal, premiums, if any, interest, fees and all other
amounts in respect thereof) in respect of which such Guarantee is made and (y)
the maximum amount for which such guaranteeing Person may be liable pursuant
to the terms of the applicable Guarantee, which, in any case in which such
Guarantee consists solely of the granting of a Lien on any asset of such
guaranteeing Person, shall be limited to the fair market value of such asset.
Liens. The Indenture provides that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries. The
Indenture provides that the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any encumbrance or restriction on the ability of
any Subsidiary to (i)(a) pay dividends or make any other distributions to the
Company or any of its Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Subsidiaries, (ii) make loans or advances to the Company or any of its
Subsidiaries or (iii) transfer any of its properties or assets to the Company
or any of its Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (a) Existing Indebtedness as in effect on the
date of the Indenture; (b) the New Credit Facility as in effect as of the date
of the Indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings are no more
restrictive with respect to such dividend and other payment restrictions than
those contained in the New Credit Facility as in effect on the date of the
Indenture, (c) the Indenture and the Notes, (d) applicable law, (e) any
instrument or agreement governing Acquired Debt of the Company or any of its
Subsidiaries or Capital Stock of a Person acquired by the Company or any of
its Subsidiaries as in effect at the time of such acquisition (except to the
extent such Acquired Debt was incurred or Capital Stock was issued in
connection with or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets of the Person, so
acquired, provided that in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred and provided, further,
that the Consolidated Cash Flow of such Person is not taken into account in
determining whether such Indebtedness is permitted, (f) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations
for property acquired in the ordinary course of business that impose
restrictions of the nature described in clause (iii) above on the property so
acquired, or (h) Permitted Refinancing Debt, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Debt are no
more restrictive than those contained in the agreements governing the
Indebtedness being refinanced.
Merger, Consolidation, or Sale of Assets. The Indenture provides that the
Company may not consolidate or merge with or into (whether or not the Company
is the surviving corporation), or permit any other Person to consolidate or
merge with or into the Company, nor will the Company sell, assign, transfer,
lease, convey or
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otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to another corporation, Person or entity
unless (i) the Company shall be the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made (the "Surviving Entity"), is a
corporation organized and existing under the laws of the United States, any
state thereof, or the District of Columbia; (ii) the Surviving Entity assumes
by supplemental indenture in a form reasonably satisfactory to the Trustee all
of the obligations of the Company under the Notes and this Indenture; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iv) immediately after giving
effect to such transaction, the Consolidated Net Worth of the Company or the
Surviving Entity, as the case may be, would be at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction;
and (v) immediately after giving effect to such transaction and after giving
pro forma effect thereto as if such transaction had occurred at the beginning
of the applicable four quarter period, the Company or the Surviving Entity, as
the case may be, would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates. The Indenture provides that the Company will
not, and will not permit any of its Subsidiaries to, make any payment to, or
sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend
any contract, agreement, understanding, loan, advance or guarantee with, or
for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Subsidiary than those that could
have been reasonably obtained in a comparable transaction by the Company or
such Subsidiary with an unrelated Person and (ii) the Company delivers to the
Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause
(i) above and that such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors and (b) with respect to
any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $5.0 million, an opinion as to
the fairness to the Company of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking firm of
national standing; provided that (u) the Contribution Agreement and the
transactions contemplated thereunder, including without limitation the
issuance of the NOL Note, (v) the stockholders agreement, entered into on the
Issue Date, among the Company and Wells Fargo Armored Service Corporation, the
Business Trust and Wingate Partners, L.P., (w) the indemnification of officers
and directors of the Company or its Subsidiaries in accordance with the
charters and by-laws of the Company and its Subsidiaries or pursuant to
director indemnification agreements, (x) any employment agreement entered into
by the Company or any of its Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Subsidiary, (y)
transactions between or among the Company and/or its Wholly Owned Subsidiaries
and (z) Restricted Payments, Permitted Investments and IRB Payment Events that
are permitted by the provisions of the Indenture described above under the
caption "Certain Covenants--Restricted Payments," in each case, shall not be
deemed Affiliate Transactions.
Notwithstanding the foregoing, clause (ii) in the preceding paragraph shall
not apply to any agreement for the provision of security services and related
goods in connection therewith between the Company or any of its Subsidiaries
and an Affiliate that (x) provides for rates that are at least as favorable as
standard published rates then offered by the Affiliate in question or (y) is
entered into pursuant to a commercially bid arrangement in which at least two
Persons that are not Affiliates have been asked to participate.
Sale and Leaseback Transactions. The Indenture provides that the Company
will not, and will not permit any of its Subsidiaries to, enter into any sale
and leaseback transaction; provided that the Company may enter into a sale and
leaseback transaction if (i) the Company could have (a) incurred Indebtedness
in an amount equal to the Attributable Debt relating to such sale and
leaseback transaction pursuant to the Fixed Charge Coverage
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Ratio test set forth in the first paragraph of the covenant described above
under the caption "Certain Covenants--Incurrence of Additional Indebtedness
and Issuance of Preferred Stock" and (b) incurred a Lien to secure such
Indebtedness pursuant to the covenant described above under the caption
"Certain Covenants--Liens," (ii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the fair market value (as
determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Company
applies the proceeds of such transaction in compliance with, the covenant
described above under the caption "Certain Covenants--Asset Sales."
No Intervening Subordinate Debt. The Indenture provides that (i) the Company
will not incur, create, issue, assume, Guarantee or otherwise become liable
for any Indebtedness that is subordinate or junior in right of payment to any
Senior Debt and senior in right of payment to the Notes, and (ii) no Guarantor
will incur, create, issue, assume, Guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of payment to its
senior debt and senior in any respect in right of payment to the Subsidiary
Guarantees.
Payments for Consent. The Indenture provides that neither the Company nor
any of its Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any Notes for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Reports. The Indenture provides that, whether or not required by the rules
and regulations of the Securities and Exchange Commission (the "Commission"),
so long as any Notes are outstanding, the Company will, and if the Company is
required to file financial statements for any Guarantor, shall cause such
Guarantor to, furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company and/or any Guarantor were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by the certified independent
accountants of the Company and/or any Gurantor and (ii) all information that
would be required to be filed with the Commission on Form 8-K if the Company
and/or any Gurantor were required to file such reports. In addition, whether
or not required by the rules and regulations of the Commission, the Company
and/or any Guarantor will file a copy of all such information and reports with
the Commission for public availability (unless the Commission will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company has agreed that,
for so long as any Notes remain outstanding, it will, and will cause any
Guarantor to, furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes (whether or not
prohibited by the subordination provisions of the Indenture); (ii) default in
payment when due of the principal, Redemption Price or Purchase Price of the
Notes (whether or not prohibited by the subordination provisions of the
Indenture); (iii) failure by the Company to comply with the provisions
described under the captions "Repurchase at the Option of Holders"; (iv)
failure by the Company for 30 days after notice from the Trustee or Holders of
not less than 25% of the aggregate principal amount of the Notes outstanding
to comply with the provisions described under the captions "Certain
Covenants--Restricted Payments" or "Incurrence of Indebtedness and Issuance of
Preferred Stock"; (v) failure by the Company for 60 days after notice from the
Trustee or Holders of not less than 25% of the aggregate principal amount of
the Notes outstanding to comply with any of its other agreements in the
Indenture or the Notes; (vi) default under any mortgage, indenture or
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instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Subsidiaries (or the payment of which is Guaranteed by the Company or any of
its Subsidiaries) whether such Indebtedness or Guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$7.5 million or more; (vii) failure by the Company or any of its Subsidiaries
to pay final judgments aggregating in excess of $7.5 million (excluding
judgments to the extent covered by insurance in respect of which coverage has
not been disclaimed or denied), which judgments are not paid, discharged or
stayed for a period of 60 days; (viii) a Subsidiary Guarantee is held in any
judicial proceeding to be unenforceable or invalid, or with respect to any
Guarantor that is a Significant Subsidiary, the Subsidiary Guarantee of such
Guarantor ceases to be in full force and effect; and (ix) certain events of
bankruptcy or insolvency with respect to the Company, any Guarantor or any
Subsidiary that is obligated under the Indenture to execute and deliver a
Subsidiary Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Upon such acceleration, the
entire principal amount of, and accrued and unpaid interest and Liquidated
Damages, if any, on the Notes shall become immediately due and payable, unless
all Events of Default specified in such acceleration notice (other than any
Event of Default in respect of non-payment of principal, premium or interest,
if any, which has become due solely by reason of such declaration of
acceleration) shall have been cured. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Guarantor or any Subsidiary that
is obligated under the Indenture to execute and deliver a Subsidiary
Guarantee, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal, Redemption Price, Purchase Price, interest or Liquidated Damages,
if any) if it determines in good faith that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to the
first date on which the Company may redeem Notes at its option as described in
the first paragraph under "Optional Redemption" by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding the prohibition on redemption of the Notes prior to
such first date, then the premium specified in the Indenture for an optional
redemption on such first date shall also become immediately due and payable to
the extent permitted by law upon the acceleration of the Notes.
The Holders of the required percentage of the aggregate principal amount of
the Notes then outstanding as described under "Amendment, Supplement and
Waiver," by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and, in certain
circumstances MAY RESCIND ANY ACCELERATION WITH RESPECT TO THE NOTES AND ITS
CONSEQUENCES.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or of any Guarantor, as such, shall have any liability for any obligations of
the Company under the Notes or the Indenture or of a Guarantor under the
Subsidiary Guarantee, or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver of liabilities under the federal
securities laws is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of the
Obligations of the Company and the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of
outstanding Notes to receive payments in respect of the principal or
Redemption Price of, and interest and Liquidated Damages, if any, on such
Notes when such payments are due from the trust referred to below, (ii) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and
the maintenance of an office or agency for payment and money for security
payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have the
Obligations of the Company released with respect to certain covenants
(including those described under "Repurchase at the Option of Holders") that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable government
securities, or a combination thereof, in such amounts as will be sufficient
(without reinvestment), in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal or Redemption Price of,
and interest and Liquidated Damages, if any, on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of the Indenture, there has
been a change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that, the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred; (iv) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit (other than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit) or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit (it being understood that
such condition shall not be deemed to be satisfied until such 91st day); (v)
such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or
instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the
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Company or any of its Subsidiaries is bound; (vi) the Company must have
delivered to the Trustee an opinion of counsel to the effect that, after the
91st day after the deposits, the trust funds will not be subject to the effect
of an avoidance or other order under any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii)
the Company must deliver to the Trustee an Officers' Certificate stating that
the deposit was not made by the Company with the intent of preferring the
Holders of Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or
others; and (viii) the Company must deliver to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance, as the case may be, have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed. The registered Holder of a Note will be treated as the owner of it
for all purposes.
The Notes will be subject to certain transfer restrictions as described
below under "Notice to Investors" and certificates evidencing the Notes will
bear a legend to such effect. No service charge will be made for any
registration of transfer, exchange or redemption of Notes, except in certain
circumstances for any tax or other governmental charge that may be imposed in
connection therewith.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided below, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of, tender offer or exchange
offer for, Notes), and any existing default or compliance with any provision
of the Indenture or the Notes may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal, Redemption Price or Purchase
Price of or change the fixed maturity of any Note or alter the provisions with
respect to the redemption of the Notes (other than a payment required by one
of the covenants described above under the caption "Repurchase at the Option
of Holders"), (iii) reduce the rate of or change the time for payment of
interest or Liquidated Damages, if any, on or with respect to any Note, (iv)
waive a Default or Event of Default in the payment of principal, Redemption
Price or Purchase Price of, or interest or Liquidated Damages, if any, on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of
the payment default that resulted from such acceleration), (v) make any Note
payable in money other than that stated in the Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of Notes to receive payments of principal, Redemption Price
or Purchase Price of, or interest or Liquidated Damages, if any, on the Notes,
(vii) waive a redemption or repurchase payment with respect to any Note (other
than a payment required by one of the covenants described above under the
caption "Repurchase at the Option of Holders"), or (viii) make any change in
the foregoing amendment and waiver provisions.
Old Notes that remain outstanding after the consummation of the Exchange
Offer, if any, and New Notes issued in connection with the Exchange Offer will
be entitled to vote or consent on all matters as a single class of securities
under the Indenture.
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Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to the Trustee
against any loss, liability or expense.
BOOK-ENTRY, DELIVERY AND FORM
The New Notes will be issued in fully registered form, without coupons, in
denominations of $1,000 principal amount and integral multiples thereof.
Global Notes; Book-Entry Form. New Notes will be evidenced by one or more
global notes (collectively, the "Global Note") which will be deposited with
the Trustee as custodian for The Depository Trust Company, New York, New York
("DTC") and registered in the name of Cede & Co. ("Cede") as DTC's nominee.
Except as set forth below, record ownership of the Global Notes may be
transferred, in whole or in part, only to another nominee of DTC or to a
successor of DTC or its nominee.
An investor may hold its interests in the Global Note directly through DTC
if such investor is a participant in DTC, or indirectly through organizations
which are participants in DTC (the "Participants"). Transfers between
Participants will be effected in the ordinary way in accordance with DTC rules
and will be settled in same-day funds. The laws of some states require that
certain persons take physical delivery of securities in definitive form.
Consequently, the ability to transfer a beneficial interest in the Global Note
to such person may be limited.
Investors who are not Participants may beneficially own interests in the
Global Notes held by DTC only through Participants, or certain banks, brokers,
dealers, trust companies and other parties that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants"). So long as Cede, as nominee of DTC, is the
registered owner of the Global Notes, Cede for all purposes will be considered
the sole Holder of the Global Notes. Except as provided below, owners of
beneficial interests in the Global Notes will not be entitled to have
certificates registered in their names, will not receive or be entitled to
receive physical delivery of certificates in definitive form, and will not be
considered Holders thereof.
Payment of principal, Redemption Price and Purchase Price of, and interest
and Liquidated Damages, if any, on the Global Notes will be made to Cede, the
nominee for DTC, as the registered owner of the Global
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Notes by wire transfer of immediately available funds. None of the Company,
the Trustee or any paying agent will have any responsibility or liability for
any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in the Global Notes or for maintaining,
supervising, or reviewing any records relating to such beneficial ownership
interests.
The Company has been informed by DTC that, with respect to any payment of
principal, Redemption Price and Purchase Price of, and interest and Liquidated
Damages, if any, on the Global Notes, DTC's practice is to credit
Participants' accounts on the payment date therefor with payments in amounts
proportionate to their respective beneficial interests in the Notes
represented by the Global Notes, as shown on the records of DTC, unless DTC
has reason to believe that it will not receive payment on such payment date.
Payments by Participants to owners of beneficial interests in Notes
represented by the Global Notes held through such Participants will be the
responsibility of such Participants, as is now the case with securities held
for the accounts of customers registered in "street name."
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a person
having a beneficial interest in Notes represented by the Global Notes to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interest, may be affected
by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Trustee (or any registrar or paying agent under
the Indenture) will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under
the rules and procedures governing their operations. DTC has advised the
Company that it will take any action permitted to be taken by a Holder of New
Notes only at the direction of one or more Participants to whose account with
DTC interests in the Global Notes are credited and only in respect of the
principal amount of the Notes represented by the Global Notes as to which such
Participant or Participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to the accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the Initial Purchasers. Certain of such
Participants (or their representatives), together with other entities, own
DTC. Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Participant, either directly or indirectly.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the
Company will cause New Notes to be issued in definitive form in exchange for
the Global Notes. None of the Company, the Trustee or any of their respective
agents will have any responsibility for the performance by DTC, their
Participants or Indirect Participants of their respective obligations under
the rules and procedures governing their operations, including maintaining,
supervising or reviewing the records relating to, or payments made on account
of, beneficial ownership interests in Global Notes.
An investor may request that their New Note be issued in certificated form,
and may request at any time that their interest in a Global Note be exchanged
for a New Note in certificated form. Finally, certificated New Notes may be
issued in exchange for New Notes represented by the Global Notes if no
successor depositary is appointed by the Company or in certain other
circumstances set forth in the Indenture.
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Same-Day Settlement and Payment. The Indenture requires that payments in
respect of the Notes represented by the Global Notes (including principal,
Redemption Price, Purchase Price, interest and Liquidated Damages, if any) be
made by wire transfer of immediately available funds to the accounts specified
by Cede, the nominee for DTC. With respect to certificated securities, the
Company will make all payments of principal, Redemption Price, Purchase Price,
interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no
such account is specified, by mailing a check to each such Holder's registered
address. Secondary trading in long-term notes and debentures of corporate
issuers not held in DTC is generally settled in clearing-house or next-day
funds. In contrast, the New Notes represented by the Global Notes are expected
to trade in the Depositary's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in such New Notes will, therefore,
be required by the Depositary to be settled in immediately available funds.
The Company expects that secondary trading in the certificated securities will
also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person or
assumed in connection with the acquisition of assets from such other Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person or such acquisition of assets, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the voting securities of
a Person shall be presumed to be control, which presumption may be rebutted by
evidence to the contrary.
"Asset Sale" means (A) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback)
other than in the ordinary course of business consistent with past practices
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole will be governed by the provisions of the Indenture described above
under the caption "Repurchase at the Option of Holders--Change of Control"
and/or the provisions described above under the caption "Merger, Consolidation
or Sale of Assets" and not by the provisions of the "Asset Sale" covenant), or
(B) the issue or sale by the Company or any of its Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either clause
(A) or (B), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $500,000 or (b)
for net proceeds in excess of $500,000. Notwithstanding the foregoing: (i) a
transfer of assets by the Company to a Wholly Owned Subsidiary of the Company
or by a Subsidiary of the Company to the Company or to a Wholly Owned
Subsidiary of the Company, (ii) an issuance or sale of Equity Interests by a
Subsidiary of the Company to the Company or to a Wholly Owned Subsidiary of
the Company, (iii) a Restricted Payment that is permitted by the covenant
described above under the caption "Certain Covenants--Restricted Payments",
(iv) a disposition of inventory in the ordinary course of business, and (v) a
sale or other disposition of damaged, worn out or obsolete property that is no
longer useful in the conduct of the business of the Company and its
Subsidiaries in the ordinary course of business will not be deemed to be Asset
Sales.
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"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended).
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or other business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) in the equity of such association or entity, (iii) in the case of
a partnership, partnership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive
a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (ii) demand and time deposits, certificates of deposit
and eurodollar time deposits with maturities of six months or less from the
date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any lender party to the
New Credit Facility or with any domestic commercial bank having capital and
surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or
better, (iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (i) and (ii) above
entered into with any financial institution meeting the qualifications
specified in clause (ii) above and (iv) commercial paper rated at least P-1 by
Moody's Investors Service, Inc. or at least A-1 by Standard & Poor's Rating
Group and in each case maturing within six months after the date of
acquisition.
"Consolidated Cash Flow" means, without duplication, with respect to any
Person for any period, the Consolidated Net Income of such Person for such
period plus, to the extent deducted in computing Consolidated Net Income: (i)
an amount equal to any net loss realized in connection with an Asset Sale,
plus (ii) provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, plus (iii) consolidated interest expense of
such Person and its Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization of
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred
in respect of letter of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations, but excluding fees and
expenses related to Insurance Letters of Credit), plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) and other non-cash charges (excluding any such non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Subsidiaries for such period, in each
case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or
profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in same
proportion) that the net income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination to be paid as a dividend to
the Company by such Subsidiary without prior governmental approval (that has
not been obtained), and without direct or indirect restriction pursuant to,
the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
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"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the net income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom, without duplication: (i) all items
classified as extraordinary, unusual or nonrecurring gains or losses; (ii) any
net loss or net income of any other Person (other than a Subsidiary of such
Person), except to the extent of the amount of dividends or other
distributions actually paid to such Person or its Subsidiaries by such other
Person during such period; (iii) the net income of any Person acquired by such
Person or a Subsidiary thereof in a pooling-of-interests transaction for any
period prior to the date of such acquisition; (iv) gains (but not losses) in
respect of Asset Sales by such Person or its Subsidiaries; (v) the net income
(but not net loss) of any Subsidiary of such Person to the extent that the
declaration or payment of dividends or distributions to such Person is
restricted by the terms of its constituent documents or any agreement,
instrument, contract, judgment, order, decree, statute, rule, governmental
regulation or otherwise, except for any dividends or distributions actually
paid by such Subsidiary to such Person or another Subsidiary of such Person;
(vi) with regard to a Subsidiary of such Person (other than a Wholly Owned
Subsidiary of such Person), any aggregate net income (or loss) in excess of
such Person's pro rata share of such Subsidiary's net income (or loss); and
(vii) the cumulative effect of any change in accounting principles.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the consolidated stockholders' equity of such Person and its consolidated
Subsidiaries, as determined in accordance with GAAP, less, to the extent
included therein, all amounts, if any, attributable to Disqualified Stock.
"Contribution Agreement" means that certain Contribution Agreement, dated as
of November 28, 1996, by and among Borg-Warner Security Corporation, Wells
Fargo Armored Service Corporation, the Company, Loomis Holding Corporation,
Loomis Armored Inc. and Business Trust.
"Default" means any event, occurrence or condition that is or with the
passage of time or the giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock of any Person which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event or with the
passage of time, matures or is redeemable, pursuant to a sinking fund
obligation or otherwise (excluding any redemption at the option of the issuer
of such Capital Stock on a date that is at least 91 days after the date on
which the Notes mature), or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means all Indebtedness of the Company and its
Subsidiaries (other than under the New Credit Facility) in existence on the
Issue Date, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person
and its Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations, but excluding fees and expenses related to Insurance Letters of
Credit) plus (ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period plus (iii) any interest
expense on Indebtedness of another Person that is Guaranteed by such Person or
one of its Subsidiaries or secured by a Lien on assets of such Person or one
of its Subsidiaries (whether or not such Guarantee or Lien is called upon)
plus (iv) the product of (a) all cash dividend payments (and non-cash dividend
payments in the case of a Person that is a Subsidiary) on any series of
preferred stock of such Person, times (b) a fraction, the numerator of which
is one and the denominator of which is one minus the then current combined
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federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than repayments of revolving credit borrowings) or issues
or redeems preferred stock subsequent to the commencement of the period for
which the Fixed Charge Coverage Ratio is being calculated but prior to the
date on which the event for which the calculation of the Fixed Charge Coverage
Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio
shall be calculated giving pro forma effect to such incurrence, assumption,
Guarantee or redemption of Indebtedness, or such issuance or redemption of
preferred stock, and the use of the proceeds therefrom, as if the same had
occurred at the beginning of the applicable four-quarter reference period. In
addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related
financing transactions, during the four-quarter reference period or subsequent
to such reference period and on or prior to the Calculation Date shall be
deemed to have occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with
GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded, and (iii) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession of the United States, as in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any liability of such Person (a) for borrowed money, or under any
reimbursement obligation relating to a letter of credit, bankers' acceptance
or note purchase facility; (b) evidenced by a bond, note, debenture or similar
instrument; (c) for the balance deferred and unpaid of the purchase price for
any property or service or any obligation upon which interest charges are
customarily paid (except for accrued expenses or trade payables arising in the
ordinary course of business); (d) for the payment of money relating to a lease
that is required to be classified as a Capitalized Lease Obligation in
accordance with GAAP; or (e) for the maximum fixed repurchase price of any
Disqualified Stock of such Person plus accrued and unpaid dividends thereon;
(ii) any obligation of others secured by a Lien on any asset of such Person,
whether or not any obligation secured thereby has been assumed, by such
Person; (iii) any obligations of such Person under any Hedging Obligation; and
(iv) any Guarantee of such Person or any obligation of such Person which in
economic effect is a guarantee with respect to any Indebtedness of another
Person.
For purposes of this definition, "maximum fixed repurchase price" of any
Disqualified Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Stock as
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if such Disqualified Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the fair market value of such
Disqualified Stock, such fair market value shall be determined in good faith
by the board of directors of the Person issuing such Disqualified Stock.
"Insurance Letters of Credit" means letters of credit issued for the account
of the Company or any Wholly Owned Subsidiary of the Company for purposes of
(i) securing certain deductible amounts payable by the Company or a Wholly
Owned Subsidiary of the Company under cargo, automobile or general liability
insurance policies or (ii) complying with workers' compensation requirements
under applicable law.
"Investment" by any Person means any direct or indirect loan, advance (or
other extension of credit) or capital contribution (by means of any transfer
of cash or other property) to another Person or any other payments for
property or services for the account or use of another Person, including
without limitation the following: (i) the purchase or acquisition of any
Capital Stock or other evidence of beneficial ownership in another Person;
(ii) the purchase, acquisition or Guarantee of the Indebtedness of another
Person or the issuance of a "keep well" with respect thereto; and (iii) the
purchase or acquisition of the business or assets of another Person; but shall
exclude: (a) accounts receivable and other extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices;
(b) the acquisition of property and assets from equipment suppliers and other
vendors in the ordinary course of business, provided that such property and
assets do not represent all or substantially all of the production capacity of
the supplier or other vendor; and (c) the acquisition of assets, Capital Stock
or other securities by the Company for consideration consisting solely of the
Capital Stock of the Company other than Disqualified Stock. If the Company or
any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Subsidiary not sold or disposed
of.
"Issue Date" means the date on which the Notes are first authenticated and
delivered under the Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"NOL Note" means the note having a principal amount of $6.0 million issued
by the Company to the Business Trust pursuant to the terms of the Contribution
Agreement.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received in connection with the sale or other disposition
of any non-cash consideration received in any Asset Sale), net of (i) the
direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, (ii) taxes paid or payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), (iii) amounts required to be
applied to the repayment of Indebtedness that is (a) secured by a Lien on the
asset or assets that were the subject of such Asset Sale or (b) Senior Debt,
the repayment of which is required either pursuant to the terms thereof, by
applicable law, or in order to obtain a necessary consent to such transaction,
and (iv) any reserves established in accordance with GAAP for adjustment in
respect of the sale price of such asset or assets or for any liabilities
associated with such Asset Sale; provided that any reversal of any such
reserve shall be added back in the determination of Net Proceeds.
"New Credit Facility" means that certain credit facility, dated as of the
Issue Date, by and among the Company and the banks party thereto, providing
for up to $115.0 million of revolving credit borrowings and
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letters of credit, including any related notes, Guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Paying Agent" means Marine Midland Bank or any other office or agency where
Notes may be presented for payment, as designated by the Company.
"Permitted Investments" means (a) any Investment in the Company or in a
Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment (i) such Person becomes
a Subsidiary of the Company and a Guarantor or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Subsidiary of the Company that is a Guarantor; (d) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described above under the
caption "Repurchase at the Option of Holders--Asset Sales"; (e) any
obligations or shares of Capital Stock received in connection with or as a
result of a bankruptcy, workout or reorganization of the issuer of such
obligations or shares of Capital Stock; (f) any Investment received
involuntarily; (g) any Investment existing on the date of the Indenture; and
(h) Investments having an aggregate fair market value (together with all other
Investments made pursuant to this clause (h) and outstanding) at any time
outstanding not to exceed $1.0 million.
"Permitted Liens" means (i) Liens on assets of the Company securing the New
Credit Facility and other Senior Debt that was permitted by the terms of the
Indenture to be incurred; (ii) Liens on assets of Subsidiaries securing Senior
Guarantees; (iii) Liens in favor of the Company; (iv) Liens on property of a
Person existing at the time such Person is merged into or consolidated with
the Company or any Subsidiary of the Company; provided that such Liens were in
existence prior to such merger or consolidation and were not incurred in
contemplation thereof and do not extend to any assets other than those of the
Person merged into or consolidated with the Company or any Subsidiary of the
Company; (v) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to such acquisition and were not incurred in contemplation
thereof and do not extend to any assets other than those so acquired by the
Company or any Subsidiary of the Company; (vi) Liens to secure the performance
of statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business (or
to secure reimbursement obligations in respect of letters of credit issued in
connection with any of the foregoing obligations); (vii) Liens existing on the
date of the Indenture; (viii) Liens to secure Indebtedness (including Capital
Lease Obligations) permitted by clause (iv) of the second paragraph of the
covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock"
covering only the assets acquired with such Indebtedness; (ix) Liens for
taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (x) covenants, easements, rights-of-way,
restrictions, encroachments or other similar encumbrances not materially
impairing the marketability of the property encumbered thereby and not
interfering in any material respect with the use of such property or with the
ordinary conduct of the business of the Company or any Subsidiary; (xi) Liens
to secure any Indebtedness which is pari passu with or subordinate in right of
payment to the Notes, where (a) in the case of any Lien securing Indebtedness
that is pari passu in right of payment with the Notes, all obligations with
respect to the Notes are secured on an equal and ratable basis with the
Indebtedness so secured and (b) in the case of any Lien securing Indebtedness
that is subordinated in right of payment to the Notes, all obligations with
respect to the Notes are secured on a senior basis reflecting the
subordination of the Indebtedness so secured on terms substantially similar
to, or more favorable to senior creditors than, those contained in the
Indenture, in each case, until such time as such pari passu or subordinated
Indebtedness is no longer secured by such Lien, at which time such Lien
securing the
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Notes shall be automatically released; (xii) Liens to secure obligations of
the Company or its Subsidiaries under Insurance Letters of Credit; (xiii)
Liens with respect to judgments which have been stayed or for which a bond
having a value equal to the judgment amount has been posted, but only for so
long as such judgment has been stayed or such bond remains posted and
outstanding; (xiv) Liens securing the IRB or the property which is subject to
the IRB; (xv) Liens incurred in the ordinary course of business of the Company
or any Subsidiary of the Company with respect to obligations that do not
exceed $1.0 million at any one time outstanding and that (a) are not incurred
in connection with the borrowing of money or the obtaining of advances or
credit (other than trade credit in the ordinary course of business) and (b) do
not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company
or such Subsidiary.
"Permitted Refinancing Debt" means any Indebtedness of the Company or any of
its Subsidiaries issued in exchange for, or the net proceeds of which are used
to extend, refinance, renew, replace, defease or refund other Indebtedness of
the Company any of its Subsidiaries; provided that (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Debt does not
exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded
(plus the amount of reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Debt has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to
or greater than the Weighted Average Life to Maturity of, the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Debt has a final maturity date later than the final maturity date
of, and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Purchase Date" means each date on which the Company is obligated to
repurchase Notes pursuant to the terms of the Indenture.
"Purchase Price" means the amount payable for the repurchase of any Note on
a Purchase Date, exclusive of accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Purchase Date, unless otherwise specifically
provided.
"Redemption Price" means the amount payable for the redemption of any Note,
exclusive of accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption, unless otherwise specifically provided.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Senior Guarantees" means Guarantees by a Guarantor with respect to Senior
Debt of the Company.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date of the
Indenture.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or in a combination thereof) and (ii) any partnership or limited
liability company (a) the sole general partner or member or the managing
general partner or member of which is such Person or a Subsidiary of such
Person or
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(b) the only general partners or members of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Transactions" means the formation of the Company and related transactions
contemplated by the Contribution Agreement.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by (i)
such Person or (ii) such Person and one or more Wholly Owned Subsidiaries of
such Person.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of one year
after the date of this Prospectus, they will make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until , 1997 all dealers effecting transactions in
the New Notes may be required to deliver a Prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market. In negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer or the purchasers of any such New Notes. Any broker-
dealer that resells New Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of one year after the date of this Prospectus, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such
documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Notes) other than commissions or concessions of any
brokers or dealers and will indemnify holders of the Old Notes (including any
broker-dealers) against certain liabilities, including certain liabilities
under the Securities Act.
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LEGAL MATTERS
Certain legal matters with respect to the New Notes offered hereby will be
passed upon for the Company by Weil, Gotshal & Manges LLP, Dallas, Texas and
New York, New York.
EXPERTS
The consolidated financial statements of Loomis included in this Prospectus
have been audited by Ernst & Young LLP, independent auditors, as stated in
their report with respect thereto included herein, and are included in
reliance on such report given upon the authority of such firm as experts in
accounting and auditing. The consolidated financial statements of Wells Fargo
Armored (a wholly-owned subsidiary of Borg-Warner Security Corporation)
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report with respect thereto included
herein, and are included in reliance on such report given upon the authority
of such firm as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
LOOMIS, FARGO & CO.
Separate historical financial information for the Company is not included in
this Prospectus because the Company was not capitalized prior to January 24,
1997, the date of the consummation of the Transactions, and accordingly, had no
assets, liabilities or operations prior to that date.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LOOMIS HOLDING CORPORATION
Report of Independent Auditors............................................ F-2
Audited Consolidated Financial Statements:
Consolidated Balance Sheets as of June 30, 1995, June 30, 1996 and De-
cember 31, 1996........................................................ F-3
Consolidated Statements of Operations for the fiscal years ended June
30, 1994, June 30, 1995 and June 30, 1996 and the six months ended De-
cember 31, 1996........................................................ F-4
Consolidated Statements of Cash Flows for the fiscal years ended June
30, 1994, June 30, 1995 and June 30, 1996 and the six months ended De-
cember 31, 1996........................................................ F-5
Notes to Consolidated Financial Statements.............................. F-6
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
Independent Auditors' Report.............................................. F-17
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1995 and December 31,
1996................................................................... F-18
Consolidated Statements of Operations for the fiscal years ended Decem-
ber 31, 1994, December 31, 1995 and December 31, 1996.................. F-19
Consolidated Statements of Stockholder's Equity for the fiscal years
ended December 31, 1994, December 31, 1995 and December 31, 1996....... F-20
Consolidated Statements of Cash Flows for the fiscal years ended Decem-
ber 31, 1994, December 31, 1995 and December 31, 1996.................. F-21
Notes to Consolidated Financial Statements.............................. F-22
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Loomis Holding Corporation
We have audited the accompanying consolidated balance sheets of Loomis
Holding Corporation as of June 30, 1995 and 1996 and December 31, 1996, and
the related consolidated statements of operations and cash flows for each of
the three years in the period ended June 30, 1996 and the six months ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Loomis
Holding Corporation at June 30, 1995 and 1996 and December 31, 1996, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended June 30, 1996 and the six months ended
December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 7 to the financial statements, during the year ended
June 30, 1994, the Company changed its method of accounting for postretirement
benefits other than pensions.
/s/ Ernst & Young LLP
Houston, Texas
March 14, 1997
F-2
<PAGE>
LOOMIS HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
JUNE 30 1996
------------------ DECEMBER 31 (PRO FORMA)
1995 1996 1996 (Note 11)
-------- -------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents,
including restricted cash and
cash equivalents of $1,500,
$1,505 and $1,536, respectively
(Note 2)........................ $ 1,902 $ 3,376 $ 2,469 $ 2,469
Trade accounts receivable, net
(Note 3)........................ 6,394 8,515 10,235 10,235
Other receivables................ 338 577 704 704
Parts and supplies............... 619 322 267 267
Prepaid expenses................. 2,915 2,724 1,986 1,986
-------- -------- -------- --------
Total current assets............ 12,168 15,514 15,661 15,661
Property and equipment:
Land............................. 1,899 1,865 1,865 1,865
Buildings........................ 4,472 4,215 4,216 4,216
Armored vehicles................. 22,861 24,194 24,506 24,506
Other equipment.................. 4,837 5,662 7,626 7,626
Leasehold improvements........... 2,792 2,641 2,655 2,655
-------- -------- -------- --------
36,861 38,577 40,868 40,868
Less accumulated depreciation and
amortization.................... 19,156 22,381 24,052 24,052
-------- -------- -------- --------
Property and equipment, net........ 17,705 16,196 16,816 16,816
Other assets, net (Note 3)......... 9,006 8,045 10,569 10,569
-------- -------- -------- --------
Total assets.................... $ 38,879 $ 39,755 $ 43,046 $ 43,046
======== ======== ======== ========
LIABILITIES AND COMMON
SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable................. $ 6,797 $ 7,530 $ 5,439 $ 5,439
Accrued expenses (Note 3)........ 13,691 13,896 15,597 15,597
Short-term debt (Note 4)......... 445 -- 1,022 1,022
Distribution payable to
shareholders.................... -- -- -- 13,498
Current portion, long-term debt
(Note 4)........................ -- 1,500 1,500 1,500
Current portion, capital lease
obligations (Note 5)............ 43 110 496 496
-------- -------- -------- --------
Total current liabilities....... 20,976 23,036 24,054 37,552
Long-term liabilities:
Long-term debt--affiliates (Note
4).............................. 7,539 7,561 7,569 7,569
Long-term debt--other (Note 4)... 15,597 14,123 13,381 13,381
Capital lease obligations (Note
5).............................. 84 243 966 966
Accrued management fees (Note
8).............................. 1,312 1,487 1,575 1,575
Postretirement benefits other
than pensions (Note 7).......... 1,193 -- -- --
-------- -------- -------- --------
Total long-term liabilities..... 25,725 23,414 23,491 23,491
Redeemable preferred stock, par
value $.01 per share (Note 10):
Authorized shares--4,000,000
Issued and outstanding shares--
3,500,000....................... 3,500 3,500 3,500 3,500
Redeemable common stock warrants
(Note 10)......................... 28 355 355 355
Common shareholders' deficit (Note
10):
Class A common stock, par value
$.01 per share: Authorized
shares--10,000,000 Issued and
outstanding shares--1,500,000... 15 15 15 15
Class B common stock, par value
$.01 per share: Authorized
shares--2,000,000 Issued and
outstanding shares--none........ -- -- -- --
Common stock warrants............ 304 304 304 304
Additional paid-in capital....... 1,485 1,485 1,485 1,485
Accumulated deficit.............. (13,154) (12,354) (10,158) (23,656)
-------- -------- -------- --------
Total common shareholders'
deficit........................ (11,350) (10,550) (8,354) (21,852)
-------- -------- -------- --------
Total liabilities and common
shareholders' deficit.......... $ 38,879 $ 39,755 $ 43,046 $ 43,046
======== ======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
LOOMIS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JUNE 30 ENDED
------------------------------- DECEMBER 31
1994 1995 1996 1996
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues.......................... $ 106,447 $ 115,136 $ 119,455 $ 65,765
Cost of operations:
Payroll and related expense..... 72,447 77,270 79,974 43,031
Vehicle expense................. 13,583 13,815 14,035 7,637
Facilities expense.............. 5,395 4,991 5,094 2,661
Other operating expenses........ 14,679 15,936 17,120 8,745
Gains associated with benefit
plans.......................... (1,677) -- (954) --
--------- --------- --------- ---------
104,427 112,012 115,269 62,074
--------- --------- --------- ---------
Operating income.................. 2,020 3,124 4,186 3,691
Interest expense--affiliates (Note
8)............................... 1,099 1,099 1,099 550
Interest expense--other........... 1,954 2,059 1,882 895
--------- --------- --------- ---------
3,053 3,158 2,981 1,445
--------- --------- --------- ---------
Income (loss) before income taxes
and cumulative effect of change
in accounting principle.......... (1,033) (34) 1,205 2,246
Income taxes (Note 6)............. -- -- 78 50
--------- --------- --------- ---------
Income (loss) before cumulative
effect of change in accounting
principle........................ (1,033) (34) 1,127 2,196
Cumulative effect of change in
accounting principle............. (453) -- -- --
--------- --------- --------- ---------
Net income (loss)................. (1,486) (34) 1,127 2,196
Increase in value of redeemable
warrants......................... -- -- 327 --
--------- --------- --------- ---------
Net income (loss) available to
common shareholders.............. (1,486) (34) 800 2,196
Accumulated deficit at beginning
of period........................ (11,634) (13,120) (13,154) (12,354)
--------- --------- --------- ---------
Accumulated deficit at end of
period........................... $ (13,120) $ (13,154) $ (12,354) $ (10,158)
========= ========= ========= =========
Net income (loss) per share before
cumulative effect of change in
accounting principle............. $ (0.69) $ (0.02) $ 0.30 $ 0.83
Cumulative effect of change in
accounting principle............. (0.30) -- -- --
--------- --------- --------- ---------
Net income (loss) per share....... $ (0.99) $ (0.02) $ 0.30 $ 0.83
========= ========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
LOOMIS HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED JUNE 30 ENDED
------------------------------- DECEMBER 31
1994 1995 1996 1996
--------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................ $ (1,486) $ (34) $ 1,127 $ 2,196
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Cumulative effect of change in
accounting principle.......... 453 -- -- --
Depreciation and amortization
expense....................... 7,080 5,220 4,886 2,061
(Gain) loss on disposal of
property and equipment........ 44 (265) 92 3
Provision for allowance for
doubtful accounts............. (181) (12) 27 60
Accrued management fees........ 350 262 175 88
Postretirement benefits other
than pensions................. -- 340 (954) --
Change in restricted cash...... -- (1,500) (5) (31)
Changes in current assets and
liabilities:
Trade accounts receivable.... 826 (806) (2,148) (1,780)
Other receivables............ (7) (155) (239) (127)
Parts and supplies........... 38 (133) (62) 55
Prepaid expenses............. (1,084) (461) 191 738
Accounts payable............. (1,539) 3,182 733 (2,091)
Accrued expenses............. (2,612) (4,073) (34) 17
Deferred interest and
accretion of discounts...... 1,001 (890) 48 16
--------- --------- --------- --------
Net cash provided by operating
activities...................... 2,883 675 3,837 1,205
INVESTING ACTIVITIES
Acquisition of property and
equipment....................... (419) (688) (1,930) (1,355)
Proceeds from sale of property
and equipment................... 33 295 162 1
--------- --------- --------- --------
Net cash used in investing
activities...................... (386) (393) (1,768) (1,354)
FINANCING ACTIVITIES
Borrowings of debt............... 117,937 123,528 130,485 66,600
Repayments of debt and capital
leases.......................... (120,413) (123,492) (131,005) (66,435)
Other............................ -- -- (80) (954)
--------- --------- --------- --------
Net cash provided by (used in)
financing activities............ (2,476) 36 (600) (789)
--------- --------- --------- --------
Net increase (decrease) in cash
and cash equivalents............ 21 318 1,469 (938)
Cash and cash equivalents at
beginning of period*............ 63 84 402 1,871
--------- --------- --------- --------
Cash and cash equivalents at end
of period*...................... $ 84 $ 402 $ 1,871 $ 933
========= ========= ========= ========
</TABLE>
- --------
* Excludes restricted cash and cash equivalents of $1,500, $1,505 and $1,536 at
June 30, 1995 and 1996 and December 31, 1996, respectively.
See accompanying notes.
F-5
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. BACKGROUND
Loomis Holding Corporation (the "Company"), through its wholly owned
subsidiary, Loomis Armored Inc. (the "Subsidiary"), provides armored car
transport services to a variety of financial, commercial, industrial and
retail establishments within the United States. It offers secure, expedited
transportation and protection for a variety of valuable commodities such as
coin and currency, negotiable and nonnegotiable securities, precious metals,
bullion, food coupons, gems and works of art. The Company also offers several
ancillary services including storage and issuance of U.S. government food
stamps, coin wrapping, vault storage and other related services. In addition,
Loomis provides an extensive automatic teller machine supply and repair
service.
On May 5, 1991, the Company acquired the Subsidiary for cash and debt of
$27,787,000 and assumed liabilities of $8,052,000. Acquisition-related costs
to purchase the Subsidiary were $5,705,000 which included arbitration costs
incurred prior to finalizing the purchase price. As part of the final
settlement agreement of the purchase price, the seller ("Seller") agreed to
assume all preacquisition contingencies relating to outstanding or pending
litigation, workers' compensation claims and state income taxes and a portion
of preacquisition contingencies relating to environmental liabilities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. Intercompany accounts and transactions have
been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity date of three months or less to be cash equivalents. Approximately
$1,500,000, $1,505,000 and $1,536,000 of cash and cash equivalents at June 30,
1995 and 1996 and December 31, 1996, respectively, were held under restricted
arrangements as required by insurance agreements.
Revenue Recognition
Revenue on service contracts is recognized as services are provided.
Unearned revenues represent billings for recurring services to be performed in
the month subsequent to year-end.
Property and Equipment
Property and equipment, which includes assets resulting from capital leases,
are recorded at cost and are depreciated on a straight-line basis over the
estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings.................................................... 20--40 years
Trucks and other vehicles.................................... 3--12 years
Other equipment.............................................. 2--8 years
</TABLE>
Leasehold improvements are amortized over the term of the related leases or
the useful lives of the improvements, whichever is less. Repairs and
maintenance costs are charged to expense as incurred.
The Company acquired $121,000, $301,000 and $1,216,000 of assets under
capital lease agreements in the years ended June 30, 1995 and 1996 and the six
months ended December 31, 1996, respectively, which represent both non-cash
investing and non-cash financing activities.
F-6
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1994, the Company changed its estimates for depreciable lives of
certain assets. The effect of this change was to increase depreciation expense
for 1994 by approximately $1,000,000.
Other Assets
Goodwill resulting from the purchase acquisition is being amortized on a
straight-line basis over 40 years. A related covenant not to compete entered
into with the Seller and certain service contracts acquired by the Company in
the state of Alaska subsequent to May 5, 1991 were amortized on a straight-
line basis over a five-year period and were fully amortized at June 30, 1996.
Amortization expense on other assets was $1,194,000 for each of the years
ended June 30, 1994 and 1995, $1,041,000 for the year ended June 30, 1996 and
$114,000 for the six months ended December 31, 1996.
Long-Lived Assets
Under Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of (Statement 121), impairment losses are required to be recorded on long-
lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amounts. Statement 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The Company's
adoption of Statement 121 in fiscal 1996 did not impact the Company's results
of operations or financial position.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock-Based Compensation
The Company grants stock options to employees for a fixed number of shares
with an exercise price no less than the fair value of the shares at the date
of grant. The Company accounts for stock option grants in accordance with
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and, accordingly, recognizes no compensation expense for the
stock option grants.
Net Income (Loss) Per Share
Net income (loss) per share amounts are computed by dividing net income
(loss) available to common shareholders by the weighted-average number of
common shares and common stock equivalents outstanding during the year. Common
stock equivalents include stock options and warrants and are computed under
the treasury stock method. Because the Company's common stock is not publicly
traded, the computation of common stock equivalents is based on the fair value
of the Company's common stock, rather than the market price of the stock. The
fair value of the Company's common stock has been estimated by a third party
in connection with the transaction described in Note 11. The number of shares
used in the computation of net income (loss) per share for the years ended
June 30, 1994, 1995 and 1996 and the six months ended December 31, 1996 was
1,500,000, 1,500,000, 2,648,633 and 2,648,633, respectively.
Reclassifications
Certain reclassifications have been made in the prior years' financial
statements to conform to the current year presentation.
F-7
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fiscal Year
Effective July 1, 1996, the Company changed its fiscal year end from June 30
to December 31. Accordingly, the financial statements include a presentation
as of and for the six months ended December 31, 1996. Certain unaudited
comparative information for the six months ended December 31, 1995 are
presented below (in thousands, except per share information):
<TABLE>
<S> <C>
Revenues.......................................................... $57,806
Operating income.................................................. $ 1,855
Net income........................................................ $ 302
Net income per share.............................................. $ 0.20
</TABLE>
3. BALANCE SHEET DATA
Detailed balance sheet data are as follows:
<TABLE>
<CAPTION>
JUNE 30
---------------- DECEMBER 31
1995 1996 1996
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Trade accounts receivable:
Gross trade accounts
receivable............... $13,099 $15,871 $17,937
Unearned revenues......... (6,484) (7,109) (7,394)
Allowance for doubtful
accounts receivable...... (221) (247) (308)
------- ------- --------
Net trade accounts
receivable................. $ 6,394 $ 8,515 $ 10,235
======= ======= ========
Other assets:
Goodwill.................. $ 9,153 $ 9,153 $ 9,153
Covenant not to compete... 4,500 -- --
Purchased contracts....... 385 -- --
------- ------- --------
14,038 9,153 9,153
Less accumulated
amortization............. (5,032) (1,188) (1,302)
Deferred financing and
acquisition costs........ -- 80 2,718
------- ------- --------
Total other assets,
net.................... $ 9,006 $ 8,045 $ 10,569
------- ------- --------
Accrued expenses:
Payroll and related
expenses................. $ 5,698 $ 5,917 $ 6,450
Insurance................. 6,043 6,488 6,095
Other..................... 1,950 1,491 3,052
------- ------- --------
Total accrued expenses.. $13,691 $13,896 $ 15,597
======= ======= ========
</TABLE>
4. DEBT
Long-term debt consists of the following at:
<TABLE>
<CAPTION>
JUNE 30
--------------- DECEMBER 31
1995 1996 1996
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
14% senior subordinated notes due September
30, 1999..................................... $12,211 $10,211 $10,211
9% junior subordinated note due September 30,
1999......................................... 11,015 9,015 9,015
Term loan with commercial finance company..... -- 4,000 3,250
------- ------- -------
23,226 23,226 22,476
Less discount................................. 90 42 26
Less current portion.......................... -- 1,500 1,500
------- ------- -------
$23,136 $21,684 $20,950
======= ======= =======
</TABLE>
F-8
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The senior subordinated notes include $7,580,000 owed to affiliates. The
junior subordinated debt is held by the Seller as a result of the purchase of
the Subsidiary by the Company.
Effective June 25, 1996, the Company renegotiated its senior subordinated
and junior subordinated debt agreements and, as a result, deferred all
principal payments to September 30, 1999.
During 1994, the Company entered into an agreement to repay the $991,000
interest due on the junior subordinated note for the period May 7, 1993
through May 6, 1994, of which $46,000 was repaid in fiscal 1994 and $945,000
in fiscal 1995.
The Company has a $29,500,000 credit facility consisting of a term loan and
a line of credit with a commercial finance company which expires on September
30, 1999. The facility is structured such that the total maximum borrowings
for the term loan and for guarantees for letters of credit cannot exceed
$21,500,000. The total credit facility and the total maximum borrowings for
the term loan and for the guarantees for letters of credits are reduced by an
amount equal to the aggregate amount of all payments made on the term loan. At
December 31, 1996, the total credit facility and maximum borrowings were
reduced by term loan payments of $750,000 to $28,750,000 and $20,750,000,
respectively. Borrowings under the term loan are repayable in monthly
installments through February 1999. At December 31, 1996, the Company had
approximately $15,900,000 in letters of credit outstanding which were
guaranteed under this agreement and approximately $1,600,000 available for
additional guarantees of letters of credit. Fees charged for the letter of
credit guarantee range from 2.00% to 2.25% of the face amount of the letter of
credit. The maximum amount allowed under the resulting line of credit is the
lesser of (a) 85% of outstanding eligible accounts receivable or (b)
$8,000,000. The balances under the line of credit are classified as short-term
debt under the terms of the agreement. Available borrowings were approximately
$4,800,000 at December 31, 1996. Interest is determined using the bank
reference rate plus 1.75% on the term loan and the bank reference rate plus
1.5% on the line of credit. The interest rates for the term loan and line of
credit were 10% and 9.75% at June 30, 1996 and December 31, 1996. The interest
rate on the line of credit was 10.5% at June 30, 1995.
Collateral pledged under the credit facility includes virtually all the
assets of the Company. The agreement contains restrictive covenants regarding
the level of net worth and working capital, the creation of loans, the
compensation of officers, limitations on capital expenditures, the entering
into of capital leases and maintenance of certain financial ratios.
Additionally, the agreement generally prohibits the payment of dividends to
the Company by the Subsidiary. The Company is in compliance with the terms of
the credit agreement.
The Company's long-term debt maturities for years following December 31,
1996 are $1,500,000 in 1997; $1,500,000 in 1998; $19,476,000 in 1999 and none
thereafter.
Interest of $2,100,000, $4,000,000, $3,100,000 and $1,300,000 was paid
during the years ended June 30, 1994, 1995 and 1996 and the six months ended
December 31, 1996, respectively.
The carrying amount of the Company's long-term debt approximates its fair
value.
On January 24, 1997, the Company issued $85,000,000 in notes due 2004, the
proceeds of which were used to repay all outstanding long-term debt, and
replaced its credit facility with a new $115,000,000 facility (see Note 11).
F-9
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. LEASES
At December 31, 1996, the scheduled future minimum lease payments under
capital leases are as follows (in thousands):
<TABLE>
<S> <C>
1997................................................................. $ 594
1998................................................................. 566
1999................................................................. 407
2000................................................................. 53
2001................................................................. 23
------
Total minimum lease payments......................................... 1,643
Less amount representing interest.................................... 181
------
Present value of capital lease obligations........................... 1,462
Less current portion of capital lease obligations.................... 496
------
Long-term capital lease obligations.................................. $ 966
======
</TABLE>
The Company leases various office space and equipment under noncancelable
operating leases expiring on various dates through 2004. The Company also
subleases certain office space under noncancelable operating leases expiring
on various dates through 1997.
The following is a schedule of future minimum lease payments and future
minimum sublease income under noncancelable operating leases having remaining
terms in excess of one year as of December 31, 1996:
<TABLE>
<CAPTION>
LEASE SUBLEASE NET
PAYMENTS INCOME OBLIGATION
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1997............................................ $ 2,893 $ 11 $ 2,882
1998............................................ 2,476 -- 2,476
1999............................................ 1,763 -- 1,763
2000............................................ 1,131 -- 1,131
2001............................................ 635 -- 635
Thereafter...................................... 1,407 -- 1,407
------- ---- -------
$10,305 $ 11 $10,294
======= ==== =======
</TABLE>
Rent expense for the years ended June 30, 1994, 1995 and 1996 and the six
months ended December 31, 1996 was $2,907,000, $2,993,000, $3,093,000 and
$1,765,000, respectively.
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 options to renew.
6. INCOME TAXES
The Company accounts for income taxes using the liability method required by
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.
Taxes on income from operations for the year ended June 30, 1996 and the six
months ended December 31, 1996 consisted of current federal tax expense.
F-10
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The reconciliation of income tax attributable to operations before the
cumulative effect of a change in accounting principle computed at the federal
statutory tax rates to income tax expense is:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30 ENDED
----------------------- DECEMBER 31
1994 1995 1996 1996
------- ------ ------ -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax (benefit) at statutory rate....... $ (351) $ (12) $ 410 $ 764
Change in valuation allowance......... 503 228 (418) (977)
Nondeductible goodwill amortization
and other............................ (152) (216) 86 263
------- ------ ------ -----
Income tax expense.................... $ -- $ -- $ 78 $ 50
======= ====== ====== =====
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
as of June 30, 1995 and 1996 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
JUNE 30
---------------- DECEMBER 31
1995 1996 1996
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforward............. $ 8,360 $ 6,646 $ 5,574
Minimum tax credit carryforward............. -- 67 119
Accrued vacation and bonuses................ 1,082 1,141 1,038
Self-insurance reserve...................... 574 1,663 2,271
Postretirement plan obligation.............. 480 -- --
Deferred management fees.................... 245 455 630
Other reserves not currently deductible..... 210 8 --
Other, net.................................. 204 276 140
------- ------- -------
Total deferred tax assets................. 11,155 10,256 9,772
Valuation allowance for deferred tax assets... (8,362) (7,944) (6,967)
------- ------- -------
Net deferred tax assets....................... 2,793 2,312 2,805
Deferred tax liabilities:
Tax over book depreciation.................. 2,401 1,908 2,138
Prepaid pension cost........................ 392 404 404
Other....................................... -- -- 263
------- ------- -------
Total deferred tax liabilities............ 2,793 2,312 2,805
------- ------- -------
Net deferred tax assets................... $ -- $ -- $ --
======= ======= =======
</TABLE>
The Company has a federal net operating loss carryover of $22,594,000,
$17,885,000 and $15,065,000 at June 30, 1995 and 1996 and December 31, 1996,
respectively. The net operating loss carryover expires in years 2007 through
2009.
During the years ended June 30, 1995 and 1996 and the six months ended
December 31, 1996, the Company paid taxes of $-0-, $84,000 and $50,000,
respectively.
A valuation allowance of $3,892,000 was recognized as of the acquisition
date. Any subsequent reduction in this valuation allowance will result in a
reduction of goodwill. The change in the valuation allowance results primarily
from the recognition of tax benefits attributable to the net operating loss
carryforward which is recognized as the loss is utilized.
F-11
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. BENEFIT PLANS
Pension Plan
Employees of the Company participate in a qualified, defined-benefit pension
plan (the "Plan") sponsored by the Company, covering substantially all
employees who meet the eligibility requirements regarding age and length of
service and who are not participants in another plan to which the Company may
contribute. Plan assets are comprised primarily of investments in equity
securities.
During 1994, the Company froze future benefits under the Plan effective June
30, 1994. Due to the curtailment, the funding requirements under the Employee
Retirement Income Security Act of 1974, as amended, were changed from the
projected unit credit actuarial cost method to the accrued benefit cost
method. This change in funding methods resulted in an increase in the total
actuarial present value of accumulated benefit obligations of $983,000 to
$14,050,000 and an increase in the actuarial present value of projected
benefit obligations of $1,099,000 to $15,586,000 as of July 1, 1994.
The effect of the curtailment resulted in a $1,698,000 decrease to the
projected benefit obligation and a $21,000 decrease to the unrecognized net
gain which affected the $480,000 net pension liability at June 30, 1994,
resulting in prepaid pension cost after curtailment of $1,197,000.
The following table sets forth the funded status of the Plan:
<TABLE>
<CAPTION>
JUNE 30
--------------- DECEMBER 31
1995 1996 1996
------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested...................................... $14,358 $14,109 $16,051
Nonvested................................... 369 458 78
------- ------- -------
Total..................................... 14,727 14,567 16,129
------- ------- -------
Plan assets at fair value..................... 14,955 15,380 16,373
------- ------- -------
Funded status................................. 228 813 244
Unrecognized net loss......................... 752 196 798
------- ------- -------
Prepaid pension cost.......................... $ 980 $ 1,009 $ 1,042
======= ======= =======
</TABLE>
A summary of the components of the net periodic pension cost is as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED JUNE 30 ENDED
------------------------ DECEMBER 31
1994 1995 1996 1996
------ ------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost......................... $ 459 $ -- $ -- $ --
Interest cost........................ 1,207 1,195 1,120 563
Actual return on plan assets......... (627) (1,826) (1,511) (1,444)
Deferred gain (loss) on plan assets.. (490) 849 362 848
------ ------- ------- -------
Net periodic pension cost
(income)........................ $ 549 $ 218 $ (29) $ (33)
====== ======= ======= =======
Assumptions:
Discount rate...................... 8.0% 8.5% 8.0% 7.5%
Expected long-term rate of return
on assets......................... 8.0% 8.0% 8.0% 8.0%
</TABLE>
F-12
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company contributes to certain multiemployer, defined-benefit plans
covering certain employees under collective bargaining agreements. Total
expenses of these plans were $703,000, $789,000, $1,029,000 and $593,000 for
the years ended June 30, 1994, 1995 and 1996 and the six months ended December
31, 1996, respectively.
The Company also contributes to a 401(k) defined-contribution plan covering
substantially all employees. Contributions and cost are determined as 25% of
employees' contributions up to a maximum of $188 per employee. Total expenses
of this Plan were $-0-, $108,000, $109,000 and $89,000 for the years ended
June 30, 1994, 1995 and 1996 and the six months ended December 31, 1996,
respectively. The Company did not begin contributions to the Plan until August
1, 1994.
In addition to providing pension benefits, the Company had a defined-benefit
postretirement plan that provided medical care to its employees. The
postretirement plan was contributory and contained other cost- sharing
features such as deductibles and Medicare coordination. The funding policy was
to pay for these benefits as incurred.
During the year ended June 30, 1996, the Company terminated the
postretirement benefit plan. As a result of the termination, the Company made
lump-sum payments totaling approximately $89,000 to current retirees and
certain employees. The Company also incurred costs of approximately $150,000
associated with the plan termination and recognized a gain of $954,000.
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, Employer's Accounting for Postretirement
Benefits Other Than Pensions. The effect of adopting the new rules increased
net periodic postretirement benefit expense by approximately $453,000 for the
year ended June 30, 1994.
A summary of the components of the net periodic postretirement benefit
expense was as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Service cost............................................. $ 64 $ 57
Interest cost............................................ 66 93
--------- ---------
$ 130 $ 150
========= =========
</TABLE>
Actuarial Assumptions
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Discount rate.................................................... 8.0% 8.0%
Health care cost trend rate--current year........................ 9.5% 9.5%
Health care cost trend rate--next year........................... 9.5% 9.5%
Ultimate health care cost trend rate............................. 4.5% 4.5%
</TABLE>
The following sets forth the funded status of the plans as of June 30, 1995
(in thousands):
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees.......................................................... $ 683
Fully eligible active plan participants........................... 80
Other active plan participants.................................... 430
-------
1,193
Plan assets at fair value........................................... --
-------
Accrued postretirement benefit liability............................ $ 1,193
=======
</TABLE>
F-13
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. TRANSACTIONS WITH AFFILIATES
The Company's statements of operations include management fees charged by
affiliates of $350,000 for the years ended June 30, 1994, 1995 and 1996 and
$175,000 for the six months ended December 31, 1996. Cumulative management
fees of $1,312,000, $1,487,000 and $1,575,000 have not been paid and are
included in long-term liabilities at June 30, 1995 and 1996 and December 31,
1996, respectively. In addition, the Company paid interest of $1,061,000,
$1,076,000, $1,076,000 and $542,000 to affiliates in the years ended June 30,
1994, 1995 and 1996 and the six months ended December 31, 1996, respectively.
9. EMPLOYEE COMPENSATION PLANS
On January 1, 1993, the Board of Directors adopted the Loomis Holding
Corporation Management Stock Option Plan (the "Stock Option Plan"). Under the
Stock Option Plan, officers and key employees of the Company and its
subsidiary may be selected by the Compensation Committee of the Board of
Directors (the "Committee") to receive incentive or nonqualified stock options
to purchase the Company's Class A common stock at an exercise price not less
than the fair market value of the Class A shares at the grant date. The Stock
Option Plan also provides that outside directors of the Company may be
selected by the Compensation Committee to receive nonqualified stock options.
Subject to adjustment, the number of options that may be issued under the
Stock Option Plan will not in the aggregate exceed 50,000. No options were
granted under the plan during the three and one-half years in the period ended
December 31, 1996. Options to acquire 12,530 shares of Class A common stock at
a price of $3.33 per share were issued in previous periods and currently are
fully vested and exercisable.
On February 24, 1995, the Company adopted the Loomis Holding Corporation
Management Equity Growth and Appreciation Plan (the "Old MEGA Plan"),
effective May 5, 1991, pursuant to which the Company may award a maximum of
350,000 units to certain directors and key employees of the Company and its
subsidiary. Units do not represent securities, but merely serve as a basis to
compute compensation. Cash compensation is payable based on the value of a
unit under this plan only in the event of a change in control of the Company.
In the event of a public offering of the Company's common stock, units under
the plan will be exchanged for stock options with a fair value equal to the
value of the units. The value of a unit is based on (i) the value received
from a sale of over 50% of the Company's stock or substantially all the assets
of the Company (on a per share basis), less (ii) amounts received upon
issuance of the Company's equity securities (net of capital distributions),
currently equal to $3.33 per share. There are 284,351 units that vest ratably
over a five-year period. However, upon a change in control of the Company, the
units attributable to current employees vest immediately. In the event of a
public offering of the Company's common stock, units in the plan will be
converted to common stock options with a value equivalent to the units then
outstanding. At December 31, 1996, 320,351 units under the Old MEGA Plan were
outstanding, of which 217,560 were vested.
An additional 29,476 units will be issued in the event that, on or before
June 30, 1998, the Company's principal shareholder receives, in cash or fair
market value of equity securities of a class that is publicly traded, a return
on its investment equal to a compound rate of return of 45%.
In connection with the transactions described in Note 11, the Old MEGA Plan
was terminated and each Unit was cancelled. Holders of Units received options
("Options") to purchase a number of shares of Common Stock of the Company that
were substantially equivalent in value pursuant to the New MEGA Unitholder
Option Plan (the "New MEGA Plan") established by the Company. The Options are
subject to substantially the same vesting schedule and other limitations on
exercise and transfer as existed under the Old MEGA Plan, including without
limitation, the requirement that a Triggering Event (as defined) occur before
the Options become exercisable.
F-14
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. REDEEMABLE PREFERRED AND COMMON STOCK
Redeemable Preferred Stock
The Company's articles of incorporation authorize the issuance of 4,000,000
shares of $.01 par value Series I Preferred Stock, of which 3,500,000 shares
were issued in May 1991 and remain outstanding. There are no dividend
requirements associated with the preferred stock, except that the preferred
stock is entitled to share equally and ratably in dividends with holders of
common stock as if all such shares were a single class. In the event of a
change in control (as defined), the holders of not less than 66 2/3% of
outstanding preferred shares have the right to require that the Company
purchase all outstanding shares of preferred stock for cash at a price of $1
per share. Also, the Company has the right to redeem the preferred stock at
any time, in whole or in part, at a price of $1 per share. The holders of the
preferred stock are entitled to one vote for each share of preferred stock and
vote together with the holders of common stock as a single class. On January
24, 1997, the Company redeemed all its outstanding redeemable preferred stock
(see Note 11).
Common Stock
The Company's articles of incorporation authorize the issuance of 10,000,000
shares of $.01 par value Class A Common Stock and 2,000,000 shares of $.01 par
value Class B Common Stock, of which 1,500,000 and -0- shares, respectively,
are outstanding. The holders of Class A and Class B shares have identical
rights and privileges, except that holders of Class B common stock cannot vote
on matters submitted to shareholders, with the exception of certain
reorganizations or transactions that would result in a change in control of
the Company, in which case Class A and Class B shareholders vote as a single
class and are entitled to one vote per share. Class A shares may be converted
into Class B shares at any time. Class B shares may be converted into Class A
shares upon a change in control or a public offering of securities of the
Company. On January 24, 1997, the Company's shareholders exchanged all their
common stock in the Company for shares of Loomis, Fargo & Co. that
concurrently were transferred to a Business Trust owned by the shareholders of
the Company (see Note 11).
Warrants
In 1991, the Company issued to a lender warrants to purchase 39,301 shares
of the Company's Class A Common Stock at a price of $0.0654 per share, subject
to adjustment for the issuance of certain additional common equity securities.
The warrants expire on May 6, 2001. The warrant holders may require the
Company to repurchase their warrants and/or common equity securities resulting
from the exercise of a portion of their warrants anytime after May 6, 1996,
but before a public offering of the Company's common stock. The repurchase
price is equal to an amount determined by multiplying (a) the higher of (i)
the market value of the Company as of the exercise date or (ii) an amount
equal to (A) six times "put earnings before interest and taxes" (as defined)
for the four fiscal quarters immediately preceding the exercise date, plus (B)
the Company's cash equivalents as of the fiscal quarter immediately preceding
the exercise date, minus (C) outstanding debt and certain other liabilities as
of the fiscal quarter immediately preceding the exercise date, by (b) an
amount equal to the number of warrants or common securities being repurchased
divided by the total number shares of common stock and other dilutive
securities outstanding. Additionally, the Company may repurchase the warrants
and/or common equity securities resulting from the exercise of a portion of
the warrants for the purchase price defined above anytime after May 6, 1995,
but before a public offering of the Company's securities. The warrants are
carried at the greater of their initial book value or their redemption value,
which resulted in a $327,000 charge to retained earnings in the year ended
June 30, 1996.
In 1991, the Company also issued to another lender warrants to purchase
268,794 shares of the Company's Class B Common Stock and issued warrants to
certain shareholders to purchase 838,345 shares of the Company's Class A
Common Stock. All of these warrants are exercisable at a price of $0.0654 per
share. The number of shares that may be purchased under the warrants, as well
as the purchase price, are subject to adjustment for the issuance of certain
additional common equity securities. The warrants expire on May 22, 2002.
F-15
<PAGE>
LOOMIS HOLDING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On January 23, 1997, all warrant holders exercised their warrants and on
January 24, 1997 exchanged the resulting common shares for shares of Loomis,
Fargo & Co., which concurrently were transferred to a Business Trust owned by
the shareholders of the Company (see Note 11).
11. SUBSEQUENT EVENTS
On January 24, 1997 (the "transaction date"), the Company completed its
reorganization into Loomis, Fargo & Co. and the acquisition of certain assets
of Wells Fargo Armored Service Corporation ("Wells Fargo"), a wholly owned
subsidiary of Borg Warner Security Corporation. The reorganization involved
the exchange of all outstanding common stock of the Company for 5,100,000
shares of the common stock of Loomis, Fargo & Co. which concurrently were
transferred to a Business Trust owned by the shareholders of the Company, the
distribution of a total of $13,498,000 to the shareholders of the Company (or
to a trust established for the benefit of the shareholders) and the assumption
by the shareholders of the Company of certain of the Company's employee and
other liabilities. The distribution to the shareholders of the Company is
reflected in the pro forma balance sheet.
The aggregate purchase price for the assets acquired and the assumption of
certain liabilities of Wells Fargo was approximately $132,575,000, which
includes cash payments of $106,600,000 and the issuance of 4,900,000 shares of
the common stock of Loomis, Fargo & Co. The acquisition has been accounted for
by the purchase method. The excess of the purchase price over net assets
acquired, which is expected to exceed $90,000,000, will be amortized to
expense over 40 years.
Concurrent with the acquisition, the Company issued $85,000,000 of 10%
unsecured notes due 2004 in a private placement and repaid all of its
outstanding long-term debt and redeemable preferred stock and replaced its
existing lines of credit with an $115,000,000 revolving credit agreement.
F-16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder
Wells Fargo Armored Service Corporation:
We have audited the consolidated balance sheets of Wells Fargo Armored
Service Corporation (a wholly owned subsidiary of Borg-Warner Security
Corporation ("Borg-Warner")) and subsidiaries (the "Company") as of December
31, 1995 and 1996, and the related consolidated statements of operations,
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Wells Fargo
Armored Service Corporation and subsidiaries at December 31, 1995 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.
As discussed in Note 10, in January 1997 the Company declared a dividend
payable to Borg-Warner and contributed substantially all of its assets and
assigned certain of its liabilities to Loomis, Fargo & Co.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 14, 1997
F-17
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
<TABLE>
<CAPTION>
1996
PRO FORMA
(UNAUDITED)
ASSETS 1995 1996 (NOTE 1)
------ -------- -------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................... $ 4,330 $ 4,601 $ 4,601
Receivables--net............................ 14,197 14,618 14,618
Inventories................................. 1,987 1,809 1,809
Amounts receivable from Borg-Warner......... 33,256 39,857 39,857
Deferred tax asset.......................... 2,626 2,017 2,017
Other current assets........................ 4,575 5,566 5,566
-------- -------- --------
Total current assets...................... 60,971 68,468 68,468
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings.......................... 21,768 20,709 20,709
Machinery and equipment..................... 49,935 47,800 47,800
Capital leases.............................. 9,041 7,943 7,943
-------- -------- --------
80,744 76,452 76,452
Less accumulated depreciation............... 49,687 45,587 45,587
-------- -------- --------
Property, plant and equipment--net........ 31,057 30,865 30,865
NET EXCESS PURCHASE PRICE OVER NET ASSETS
ACQUIRED..................................... 28,887 27,416 27,416
DEFERRED TAX ASSET............................ 3,822 5,198 5,198
OTHER LONG-TERM ASSETS........................ 3,455 4,257 4,257
-------- -------- --------
Total other assets........................ 36,164 36,871 36,871
-------- -------- --------
TOTAL ASSETS.................................. $128,192 $136,204 $136,204
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable and capital lease
obligations................................ $ 532 $ 574 $ 574
Accounts payable and accrued expenses....... 16,791 18,075 18,075
-------- -------- --------
Total current liabilities................. 17,323 18,649 18,649
LONG-TERM LIABILITIES:
Note payable and capital lease obligations.. 2,064 1,010 1,010
Note payable to Borg-Warner................. 51,518 51,518 68,518
Accrual for casualty insurance.............. 13,582 14,742 14,742
-------- -------- --------
Total long-term liabilities............... 67,164 67,270 84,270
-------- -------- --------
Total liabilities......................... 84,487 85,919 102,919
STOCKHOLDER'S EQUITY:
Capital stock............................... 1 1 1
Capital in excess of par value.............. 31,437 36,903 36,903
Dividends declared.......................... (17,000)
Retained earnings........................... 12,307 13,424 13,424
Cumulative translation adjustment........... (40) (43) (43)
-------- -------- --------
Total stockholder's equity................ 43,705 50,285 33,285
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.... $128,192 $136,204 $136,204
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
NET SERVICE REVENUES.............................. $211,204 $230,999 $246,328
COST OF SERVICES.................................. 177,093 188,639 204,543
-------- -------- --------
GROSS PROFIT...................................... 34,111 42,360 41,785
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES...... 21,406 18,705 20,309
DEPRECIATION...................................... 7,096 7,150 6,997
MANAGEMENT FEES TO BORG-WARNER.................... 3,004 3,185 3,353
AMORTIZATION OF EXCESS PURCHASE PRICE OVER NET
ASSETS ACQUIRED.................................. 1,325 1,474 1,466
-------- -------- --------
EARNINGS FROM OPERATIONS.......................... 1,280 11,846 9,660
INTEREST EXPENSE AND FINANCE CHARGES.............. 6,567 7,135 7,683
-------- -------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES............... (5,287) 4,711 1,977
PROVISION (BENEFIT) FOR INCOME TAXES.............. (1,798) 1,866 860
-------- -------- --------
NET EARNINGS (LOSS)............................... $ (3,489) $ 2,845 $ 1,117
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1996
PRO FORMA
(UNAUDITED)
1994 1995 1996 (NOTE 1)
------- ------- ------- -----------
(DOLLAR AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
COMMON STOCK (100 shares issued and
outstanding).......................... $ 1 $ 1 $ 1 $ 1
CAPITAL IN EXCESS OF PAR VALUE:
Beginning balance.................... 21,544 25,920 31,437 31,437
Capital contributions................ 4,376 5,517 5,466 5,466
------- ------- ------- -------
Balance at December 31............... 25,920 31,437 36,903 36,903
DIVIDENDS DECLARED..................... (17,000)
RETAINED EARNINGS:
Beginning balance.................... 12,951 9,462 12,307 12,307
Net earnings (loss).................. (3,489) 2,845 1,117 1,117
------- ------- ------- -------
Balance at December 31............... 9,462 12,307 13,424 13,424
CUMULATIVE TRANSLATION ADJUSTMENT:
Beginning balance.................... (43) (42) (40) (40)
Current year adjustment.............. 1 2 (3) (3)
------- ------- ------- -------
Balance at December 31............... (42) (40) (43) (43)
------- ------- ------- -------
TOTAL STOCKHOLDER'S EQUITY............. $35,341 $43,705 $50,285 $33,285
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-20
<PAGE>
WELLS FARGO ARMORED SERVICES CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings (loss).................................... $(3,489) $ 2,845 $ 1,117
Adjustments to reconcile earnings (loss) to net
cash flows provided
by operating activities:
Depreciation and amortization..................... 8,421 8,624 8,463
Provision for losses on receivables............... 945 983 1,853
Change in deferred income taxes................... (2,610) (1,522) (767)
Changes in assets and liabilities:
Increase in receivables.......................... (7,462) (2,777) (2,122)
(Increase) decrease in other assets and
liabilities..................................... 7,119 (5,285) (7,311)
Increase (decrease) in accounts payable and
accrued expenses................................ 4,845 (1,630) 1,284
------- ------- -------
Net cash provided by operating activities...... 7,769 1,238 2,517
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................... (6,231) (3,695) (8,065)
Proceeds from sales of fixed assets................ 2,029 430 1,520
Payments related to businesses acquired............ (5,623) (311)
------- ------- -------
Net cash used in investing activities.......... (9,825) (3,576) (6,545)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuances of debt.................................. 3,500 756 32
Redemption of debt................................. (3,133) (5,119) (1,044)
Contributions from parent.......................... 4,376 5,517 5,466
Other.............................................. (15) (155)
------- ------- -------
Net cash provided by financing activities...... 4,728 1,154 4,299
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................................ 2,672 (1,184) 271
CASH AND CASH EQUIVALENTS--Beginning of year........ 2,842 5,514 4,330
------- ------- -------
CASH AND CASH EQUIVALENTS--End of year.............. $ 5,514 $ 4,330 $ 4,601
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid...................................... $ 5,051 $ 5,918 $ 5,759
Income taxes paid.................................. 56 108 352
</TABLE>
See notes to consolidated financial statements.
F-21
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS OF DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Wells Fargo
Armored Service Corporation and subsidiaries (the "Company"), a wholly owned
subsidiary of Borg-Warner Security Corporation ("Borg- Warner").
Nature of Operations--The Company transports currency, securities and other
valuables, and provides full-service automated teller machine operations and
cash management services such as deposit verification and currency processing.
The principal markets for the Company's services are the United States and
Puerto Rico.
Use of Estimates--The preparation of the consolidated financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect reported amounts and
related disclosures. Actual results may differ from the estimates.
Cash and Cash Equivalents--Cash and cash equivalents consists primarily of
cash and certificates of deposit with original maturities of three months or
less.
Inventories--Inventories are valued at the lower of cost or market. Cost of
substantially all inventories is determined by the first-in, first-out method.
Property, Plant and Equipment and Depreciation--Property, plant and
equipment is carried at cost less accumulated depreciation. Expenditures for
maintenance, repairs and renewals of relatively minor items are generally
charged to expense as incurred. Renewals of significant items are capitalized.
Depreciation is computed generally on the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements.................................. 15 to 20 years
Machinery and equipment..................................... 3 to 12 years
Property under capital leases............................... 3 to 7 years
</TABLE>
Income Taxes--The Company is included in Borg-Warner's consolidated United
States ("U.S.") income tax return. The Company's provision for income taxes is
determined on a separate return basis.
Income taxes are determined using the liability method under which deferred
tax assets and liabilities are based on the differences between the financial
accounting and tax bases of assets and liabilities. Deferred tax assets or
liabilities at the end of each period are determined using the currently
enacted tax rate expected to apply to taxable income in the periods in which
the deferred tax asset or liability is expected to be settled or realized.
Retirement Benefit Plans--A number of eligible salaried and hourly employees
participate in contributory or noncontributory defined benefit or defined
contribution plans sponsored by Borg-Warner. Borg-Warner's funding policy is
based upon independent actuarial valuations and is within the limits required
by the Employment Retirement Income Security Act of 1974 ("ERISA") for U.S.
defined benefit plans.
The benefits provided to certain salaried employees covered under the
various defined benefit plans are based on years of service and final average
pay and utilize the projected unit credit method for cost allocation. The
benefits provided to certain hourly employees under the various defined
benefit plans are based on years of service and utilize the unit credit method
for cost allocation.
F-22
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Under the defined contribution plan, contributions are based on the
employees' salaries and are charged to earnings as they become payable to the
plan.
Casualty Insurance Liabilities--The Company has accrued a discounted
liability for the retained portion of insurance costs related to its various
deductible policies. This insurance liability is determined by Borg-Warner and
allocated to the Company based on claims filed and an estimate of claims
incurred but not yet reported. The discount rate used to value the future
obligation at December 31, 1995 and 1996 was 5.5%.
Amortization of Excess of Purchase Price Over Net Assets Acquired--Excess of
purchase price over net assets acquired is being amortized on a straight-line
basis over 5 to 40 years, with the majority being amortized over 40 years. The
Company periodically reviews its operations to determine whether there has
been a diminution in value of its excess purchase price over net assets
acquired. If the review indicates a decline in the carrying value, the Company
adjusts the amortization accordingly.
Revenue Recognition--Revenue is recognized at the time services are
provided. In certain circumstances, this can result in revenue recognition
prior to customer billing and revenue deferral from advance billings.
Pro Forma Information (Unaudited)--The pro forma information presented in
the accompanying consolidated balance sheet as of December 31, 1996 and the
accompanying consolidated statement of stockholder's equity for the year ended
December 31, 1996 includes the effects of a dividend payable declared on
January 17, 1997 (described in Note 10) recorded as a portion of long-term
debt in the pro forma balance sheet.
2. BALANCE SHEET INFORMATION
Detailed balance sheet data are as follows:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Receivables:
Customers............................................... $14,418 $14,010
Other................................................... 763 2,456
------- -------
15,181 16,466
Less allowance for losses............................... 984 1,848
------- -------
Net receivables........................................... $14,197 $14,618
======= =======
Accounts payable and accrued expenses:
Trade payables.......................................... $ 8,589 $ 8,253
Payroll and related..................................... 3,042 5,615
Casualty insurance (short-term)......................... 1,418 1,258
Cargo insurance......................................... 2,867 1,812
Other................................................... 875 1,137
------- -------
Total accounts payable and accrued expenses........... $16,791 $18,075
======= =======
</TABLE>
The Company participates in Borg-Warner's agreement to sell a $120,000
undivided interest in a revolving pool of customer receivables. The Company's
portion of this sold interest is $13,194 and $13,042 at December 31, 1995 and
1996, respectively, and is reflected as a reduction of "Receivables-net" in
the accompanying Consolidated Balance Sheets. The full amount of the allowance
for losses has been retained because the Company has retained substantially
the same risk of credit loss as if the receivables had not been sold. The
F-23
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
discount related to the sale of receivables is included with "Interest expense
and finance charges" in the Consolidated Statements of Operations.
Selling, general and administrative expenses include provisions for losses
on receivables of approximately $945, $983 and $1,853 in 1994, 1995 and 1996,
respectively. The allowance for doubtful accounts includes deductions of
$1,191 and $989 in 1995 and 1996, respectively.
Accumulated depreciation related to capital leases amounted to approximately
$5,790 and $5,603 at December 31, 1995 and 1996, respectively. Accumulated
amortization related to excess purchase price over net assets acquired
amounted to $10,063 and $9,581 at December 31, 1995 and 1996, respectively.
Trade payables include checks outstanding in excess of bank deposits in
Borg-Warner's central disbursement accounts, since arrangements with the banks
do not call for reimbursement until checks are presented for payment. Such
amounts were $5,483 and $4,085 at December 31, 1995 and 1996, respectively.
The long-term portion of the casualty insurance accrual was $13,582 and
$14,742 at December 31, 1995 and 1996, respectively. The estimated aggregate
undiscounted insurance liability was $17,226 and $17,086 at December 31, 1995
and 1996, respectively.
3. COMMITMENTS
Rental commitments on non-cancelable operating leases with terms exceeding
one year are summarized at December 31, 1996 as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1997............................................................... $ 8,027
1998............................................................... 6,970
1999............................................................... 4,504
2000............................................................... 3,276
2001............................................................... 2,652
2002 and after..................................................... 2,317
-------
Total............................................................ $27,746
=======
</TABLE>
Total rental expense amounted to $5,799, $9,303 and $10,321 in 1994, 1995
and 1996, respectively.
F-24
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
The following is a summary of all borrowings of the Company:
<TABLE>
<CAPTION>
1995 1996
----------------- -----------------
CURRENT LONG-TERM CURRENT LONG-TERM
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Note payable to Borg-Warner (at an
average rate of 10.5% in 1995 and
10.3% in 1996)........................ $51,518 $51,518
Capital lease liabilities (at an
average rate of 9.3% in 1995 and 9.0%
in 1996).............................. $532 1,064 $574 10
Industrial revenue bond (at an average
rate of 11.2%)........................ 1,000 1,000
---- ------- ---- -------
Total notes payable and long-term
debt................................ $532 $53,582 $574 $52,528
==== ======= ==== =======
</TABLE>
Maturities of long-term debt and capital lease obligations are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1997............................................................... $ 574
1998............................................................... 10
1999............................................................... --
2000............................................................... 200
2001............................................................... 200
2002 and after..................................................... 52,118
-------
Total............................................................ $53,102
=======
</TABLE>
5. CONTINGENT LIABILITIES
The Company is involved in a number of legal actions arising in the ordinary
course of business. The Company believes that the various asserted claims and
litigation in which it is involved will not materially affect its financial
position or future operating results, although no assurance can be given with
respect to the ultimate outcome of any such claim or litigation.
6. TRANSACTIONS WITH AFFILIATES
Pursuant to an agreement, the Company paid management fees to Borg-Warner of
$3,004, $3,185 and $3,353 in 1994, 1995 and 1996, respectively. The fees
include charges for administrative services provided by Borg-Warner during the
ordinary course of business.
The Company maintained a note payable to a subsidiary of Borg-Warner of
$51,518 at December 31, 1995 and 1996. The note bears interest at the prime
rate plus 2.0% and its stated maturity is January 1, 2003. Related interest
expense was $4,606, $5,648 and $5,401 in 1994, 1995 and 1996, respectively.
Amounts receivable from Borg-Warner primarily represent advances to Borg-
Warner offset by certain tax and other liabilities owed to Borg-Warner.
F-25
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. PENSION AND OTHER RETIREMENT BENEFITS
The Company participates in various defined benefit plans and a defined
contribution plan (the "Plans") sponsored by Borg-Warner, which cover eligible
employees. The Plans are funded according to ERISA and income tax regulations
as applicable. The expense allocated to the Company by Borg-Warner under
defined benefit plans amounted to $784, $486 and $625 in 1994, 1995 and 1996,
respectively. The expense allocated to the Company by Borg-Warner under the
defined contribution plan was $153, $159 and $157 in 1994, 1995 and 1996
respectively.
8. INCOME TAXES
Provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- ------
<S> <C> <C> <C>
Current:
Federal........................................ $ 332 $ 3,178 $1,176
State.......................................... 480 210 451
Deferred......................................... (2,610) (1,522) (767)
------- ------- ------
Provision (benefit) for income taxes............. $(1,798) $ 1,866 $ 860
======= ======= ======
</TABLE>
The analysis of the variance of income taxes as reported from income taxes
computed at the U.S. statutory federal income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------ -----
<S> <C> <C> <C>
Income taxes at U.S. statutory rate of 35%......... $(1,850) $1,649 $ 692
Increases (decreases) resulting from:
State income taxes............................... 312 137 293
Non-temporary differences........................ 61 (47) 157
Other--net....................................... (321) 127 (277)
------- ------ -----
Income taxes reported.............................. $(1,798) $1,866 $ 860
======= ====== =====
</TABLE>
F-26
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the deferred tax asset at December 31, 1995 and 1996 were
as follows:
<TABLE>
<CAPTION>
1995 1996
-------------- --------------
LONG- LONG-
CURRENT TERM CURRENT TERM
------- ------ ------- ------
<S> <C> <C> <C> <C>
Deferred tax assets:
Accruals for casualty insurance............ $5,884 $6,415
Allowance for bad debts.................... $1,363 $ 739
Miscellaneous accruals..................... 1,060 2,156
Other--net................................. 287 8
------ ------ ------ ------
Total deferred tax assets.................... 2,710 5,884 2,903 6,415
Deferred tax liabilities:
Net excess purchase price over net assets
acquired.................................. 160 222
Fixed assets............................... 1,902 995
Prepaid assets............................. 84 886
------ ------ ------ ------
Total deferred tax liabilities............... 84 2,062 886 1,217
------ ------ ------ ------
Net deferred tax assets...................... $2,626 $3,822 $2,017 $5,198
====== ====== ====== ======
</TABLE>
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, receivables, notes
payable and accounts payable approximate fair value because of the short
maturity of these instruments and because interest rates are based on floating
rates identified by market rates.
10. SUBSEQUENT EVENTS
On January 17, 1997, the Company declared a dividend of $17,000 to Borg-
Warner payable in the form of a promissory note at a rate of prime plus 2.0%
due and payable on January 1, 2003.
On January 24, 1997, the Company contributed substantially all of its assets
and assigned certain of its liabilities to Loomis, Fargo & Co. ("Loomis
Fargo") in exchange for (i) 4,900,000 shares of Loomis Fargo common stock and
(ii) a cash payment of approximately $105 million which includes amounts paid
to satisfy intercompany indebtedness assumed by Loomis Fargo, including all
intercompany payables to Borg-Warner. Borg-Warner and the former stockholders
of Loomis Holding Corporation own 49% and 51%, respectively, of Loomis Fargo.
F-27
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION
(A WHOLLY OWNED SUBSIDIARY OF BORG-WARNER SECURITY CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. INTERIM FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------
1995 1996
------------------------------------------ -------------------------------------------
MAR. 31 JUN. 30 SEPT. 30 DEC. 31 YEAR 1995 MAR. 31 JUN. 30 SEPT. 30 DEC. 31 YEAR 1996
------- ------- -------- ------- --------- ------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net service revenues.... $56,684 $56,750 $58,092 $59,473 $230,999 $59,004 $60,733 $62,545 $64,046 $246,328
Cost of services........ 45,739 47,581 48,441 46,878 188,639 49,559 51,211 52,599 51,174 204,543
------- ------- ------- ------- -------- ------- ------- ------- ------- --------
Gross profit............ 10,945 9,169 9,651 12,595 42,360 9,445 9,522 9,946 12,872 41,785
Selling, general and
administrative
expenses............... 4,928 3,894 4,740 5,143 18,705 4,358 3,925 5,539 6,487 20,309
Depreciation............ 1,716 1,785 1,738 1,911 7,150 1,690 1,718 1,786 1,803 6,997
Management fees to Borg-
Warner................. 799 776 801 809 3,185 830 825 848 850 3,353
Amortization of excess
purchase price over net
assets acquired........ 370 358 368 378 1,474 368 365 367 366 1,466
------- ------- ------- ------- -------- ------- ------- ------- ------- --------
Earnings from
operations............. 3,132 2,356 2,004 4,354 11,846 2,199 2,689 1,406 3,366 9,660
Interest expense and
finance charges........ 1,701 1,763 1,762 1,909 7,135 1,820 1,802 2,020 2,041 7,683
------- ------- ------- ------- -------- ------- ------- ------- ------- --------
Earnings (loss) before
income taxes........... 1,431 593 242 2,445 4,711 379 887 (614) 1,325 1,977
Provision (benefit) for
income taxes........... 539 213 87 1,027 1,866 199 566 (344) 439 860
------- ------- ------- ------- -------- ------- ------- ------- ------- --------
Net earnings (loss)..... $ 892 $ 380 $ 155 $ 1,418 $ 2,845 $ 180 $ 321 $ (270) $ 886 $ 1,117
======= ======= ======= ======= ======== ======= ======= ======= ======= ========
</TABLE>
F-28
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH IN-
FORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE NEW NOTES OFFERED
HEREBY NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE NEW NOTES TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 17
The Transactions......................................................... 22
Use of Proceeds.......................................................... 23
Capitalization........................................................... 24
Pro Forma Combined Financial Information................................. 25
Selected Historical Financial Information................................ 33
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 37
Business................................................................. 47
Management............................................................... 55
Security Ownership of Certain Beneficial Owners and Management........... 60
Certain Relationships and Related Transactions........................... 62
Description of New Credit Facility....................................... 64
The Exchange Offer....................................................... 66
Certain Federal Income Tax Considerations................................ 72
Description of New Notes................................................. 73
Plan of Distribution..................................................... 98
Legal Matters............................................................ 99
Experts.................................................................. 99
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OFFER FOR ALL
OUTSTANDING 10% SENIOR
SUBORDINATED NOTES DUE 2004
IN EXCHANGE FOR
10% SENIOR SUBORDINATED NOTES
DUE 2004
OF
LOOMIS, FARGO & CO.
------------------
PROSPECTUS
------------------
1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table set forth the expenses payable in connection with the
offering of the securities to be registered and offered hereby. All of such
expenses are estimates, other than the registration fee payable to the
Securities and Exchange Commission.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............... $25,757.58
Printing and Engraving Expenses................................... *
----------
Legal Fees and Expenses .......................................... *
----------
Accounting Fees and Expenses...................................... *
----------
Miscellaneous..................................................... *
----------
Total......................................................... $ *
==========
</TABLE>
- --------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Delaware law authorizes corporations to limit or to eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of directors' fiduciary duty of care. The Certificate of
Incorporation of Loomis, Fargo & Co. (the "Company"), as amended (the
"Charter"), limits the liability of the Company's directors to the Company or
its stockholders to the fullest extent permitted by the Delaware statute as in
effect from time to time. Specifically, directors of the Company will not be
personally liable for monetary damages for breach of a director's fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, (iii) for unlawful payments of dividends or unlawful stock repurchases
or redemptions as provided in the Delaware law, or (iv) for any transaction
from which the director derived an improper personal benefit.
The Charter of the Company provides that Company shall indemnify its
officers and directors and former officers and directors to the fullest extent
permitted by the General Corporation Law of the State of Delaware. Pursuant to
the provisions of Section 145 of the General Corporation Law of the State of
Delaware, the Company has the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding (other than an action by or in the right
of the Company) by reason of the fact that he is or was a director, officer,
employee, or agent of the Company, against any and all expenses, judgments,
fines, and amounts paid in actually and reasonably incurred m connection with
such action, suit, or proceeding. The power to indemnify applies only if such
person acted in good faith and in a manner he reasonably believed to be in the
best interest or not opposed to the best interest, of the Company and with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of the
Company as well, but only to the extent of defense and settlement expenses and
not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemnification shall be
made in the event of any adjudication of negligence or misconduct unless the
court, in its discretion, believes that in light of all the circumstances
indemnification should apply.
The statute further specifically provides that the indemnification
authorized thereby shall not be deemed exclusive of any other rights to which
any such officer or director may be entitled under any bylaws, agreements,
vote of stockholders or disinterested directors, or otherwise.
II-1
<PAGE>
Insofar as indemnifications for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a director,
officer or controlling person thereof in the successful defense of any action,
suit or proceeding) is asserted by a director, officer or controlling person
in connection with the securities being registered, the Company will, unless
in the opinion of its counsel the matter has been settled by controlled
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On January 24, 1997, the Company sold $85,000,000 aggregate principal amount
of 10% Senior Subordinated Notes due 2004 (the "Old Notes") in a private
placement in reliance on Section 4(2) under the Securities Act, at a price
equal to 100% of the stated principal amount of such Old Notes. The Old Notes
were immediately resold by the initial purchasers thereof in reliance on Rule
144A under the Securities Act.
On January 24, 1997, the Company issued 10,000,000 shares of its common
stock, $0.01 par value, to two purchasers in a transaction exempt from the
registration requirements of the Securities Act in reliance on Section 4(2)
thereof. Such shares of common stock were issued in exchange for securities
and assets in connection with the initial capitalization of the Company.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
2.1 -- Contribution Agreement, dated as of November 28, 1996, among the
Company, LFC Holding Corporation (formerly known as Loomis Holding
Corporation) ("LFC Holding") Loomis Fargo & Co (Texas) (formerly
known as Loomis Armored Inc.) ("Loomis, Fargo Texas"), Borg-Warner
Security Corporation, Wells Fargo Armored Service Corporation, and
the Loomis Stockholders Trust.*
2.2 -- Business Trust Agreement, dated as of November 27, 1996, among
Wingate Partners, L.P. and Wingate Affiliates, L.P., as initial
grantors, Wilmington Trust Company, as trustee, Frederick B. Hegi,
Jr., as manager, and the Unitholders parties thereto.*
2.3 -- Trust Unit Exchange Agreement, dated as of January 24, 1997, among
the Loomis Stockholders Trust and the Exchanging Shareholders
parties thereto.*
3.1 -- Certificate of Incorporation of Loomis, Fargo & Co. (Delaware), as
amended.+
3.2 -- Bylaws of Loomis, Fargo & Co. (Delaware).+
3.3 -- Certificate of Incorporation of LFC Holding, as amended.+
3.4 -- Bylaws of LFC Holding, as amended.+
3.5 -- Articles of Incorporation of Loomis, Fargo Texas, as amended.+
3.6 -- Bylaws of Loomis, Fargo Texas, as amended.+
3.7 -- Articles of Incorporation of LFC Armored of Texas Inc., as
amended.+
3.8 -- Bylaws of LFC Armored of Texas, Inc.+
3.9 -- Amended and Restated of Incorporation of Loomis, Fargo & Co. of
Puerto Rico, as amended.+
3.10 -- Bylaws of Loomis, Fargo & Co. of Puerto Rico.+
4.1 -- Indenture, dated as of January 24, 1997, among the Company, as
Issuer, LFC Holding, Loomis, Fargo Texas, LFC Armored of Texas Inc.
(formerly known as Wells Fargo Armored Service Corporation of
Texas) ("LFC of Texas"), and Loomis, Fargo & Co of Puerto Rico
(formerly known as Wells Fargo Armored Service Corporation of
Puerto Rico) ("LFC of Puerto Rico"), as Guarantors, and Marine
Midland Bank, as trustee.*
4.2 -- Form of Old Note (included in Exhibit 4.1, Exhibit A-1).
4.3 -- Form of New Note (included in Exhibit 4.1, Exhibit A-3).
4.4 -- Registration Rights Agreement, dated as of January 24, 1997, among
Loomis, the Company, LFC Holding, Loomis, Fargo Texas, LFC of
Texas, LFC of Puerto Rico and Lehmen Brothers Inc. and NationsBanc
Capital Markets, Inc.*
4.5 -- Purchase Agreement, dated as of January 17, 1997, among the
Company, LFC Holding, Loomis, Fargo Texas and Lehman Brothers Inc.
and NationsBanc Capital Markets, Inc., as initial purchasers.*
5.1 -- Opinion of Weil, Gotshal & Manges LLP as to the securities
registered hereby.+
II-3
<PAGE>
10.1 -- Credit Agreement, dated as of January 24, 1997, among the
Company, as borrower, the several lenders parties thereto,
Lehman Commercial Paper Inc. ("LCPI") and NationsBank of Texas,
N.A. ("NationsBank"), as arrangers, LCPI and NationsBanc Capital
Markets, Inc., as syndication agents, LCPI as documentation
agent, and NationsBank as administrative agent.+
10.2 -- Guarantee and Collateral Agreement made by the Company, LFC
Holding, Loomis, Fargo Texas, LFC of Texas and LFC of Puerto
Rico, in favor of NationsBank of Texas, N.A.+
10.3 -- Stockholders Agreement dated as of January 24, 1997 among the
Company, Wells Fargo Armored Service Corporation, the Loomis
Stockholders Trust and Wingate Partners, L.P.*
10.4 -- Loomis Indemnity Trust Agreement, dated as of January 24,
1997, among the Company, the Loomis Stockholders Trust, and
Frederick B. Hegi, Jr., as trustee.*
10.5 -- Excess Claims Assumption Agreement, dated as of January 24,
1997, among the Company, LFC Holding, Loomis, Fargo Texas, and
the Loomis Stockholders Trust.*
10.6 -- Unitholders Option Plan and Agreement, dated as of January 24,
1997, among the Company and the Unitholders signatories
thereto.*
10.7 -- Stock Contribution Agreement, dated as of January 24, 1997,
between the Company and the Loomis Stockholders Trust.*
10.8 -- NOL Promissory Note, dated as of January 24, 1997, of the
Company in the principal amount of $6,000,000, payable to the
Loomis Stockholders Trust.*
10.9 -- Fleet Lease Agreement, dated as of December 2, 1996, between
Associates Leasing, Inc. and Wells Fargo Armored Service
Corporation.*
10.10 -- Transfer and Assumption Agreement, dated as of January 2,
1997, among Wells Fargo Armored Service Corporation, Borg-Warner
Security Corporation, the Company and Associates Leasing, Inc.*
10.11 -- Transition Services Agreement, dated as of January 24, 1997,
between the Company and Pony Express Courier Corp.*
12.1 -- Statement Re: Computation of Ratio of Earnings to Fixed
Charges of Loomis Holding Corporation.*
12.2 -- Statement Re: Computation of Pro Forma Ratio of Earnings to
Fixed Charges of Loomis, Fargo & Co.*
21.1 -- Subsidiaries of the Company.*
23.1 -- Consent of Weil, Gotshal & Manges LLP (included in the opinion
filed as Exhibit 5.1 to this Registration Statement).
23.2 -- Consent of Ernst & Young LLP, independent auditors.*
23.3 -- Consent of Deloitte & Touche LLP, independent auditors.*
24.1 -- Powers of Attorney (see pages II-6, II-7, II-8, II-9, and II-
10 of this Registration Statement).
25.1 -- Form T-1 of Marine Midland Bank, as Trustee under the
Indenture filed as Exhibit 4.1.+
99.1 -- Form of Letter of Transmittal.+
99.2 -- Form of Notice of Guaranteed Delivery.+
- --------
* Filed herewith.
+ To be filed by amendment.
II-4
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted since the required information is either not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Co-Registrants hereby undertaken:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) See Item 14.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 4th day of April, 1997.
LOOMIS, FARGO & CO., a Delaware
corporation
BY: /s/ James K. Jennings, Jr.
-----------------------------------
James K. Jennings, Jr.
Executive Vice President and
Chief Financial Officer
Each person whose signature to this Registration Statement appears below
hereby appoints Frederick B. Hegi, Jr., James B. Mattly and James K. Jennings,
Jr., and each individually, either of whom may act without the joinder of the
other, as his agent and attorney-in-fact to sign on his behalf individually
and in the capacity stated below and to file all pre- and post-effective
amendments to this Registration Statement (and, in addition, any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, for the offering to which this Registration Statement relates), which
may make such changes and additions to this Registration Statement as such
agent and attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. Joe Adorjan Chairman of the Board, and Director of the April 4, 1997
- ---------------------------- Co-Registrant listed above
J. Joe Adorjan
/s/ James B. Mattly President, Chief Executive Officer and April 4, 1997
- ---------------------------- Director of the Co-Registrant listed
James B. Mattly above (Principal Executive Officer)
/s/ James K. Jennings, Jr. Executive Vice President and chief April 4, 1997
- ---------------------------- Financial Officer of the Co-Registrant
James K. Jennings, Jr. listed above (Principal Financial and
Accounting Officer)
/s/ Frederick B. Hegi, Jr. Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Frederick B. Hegi, Jr.
/s/ Timothy M. Wood Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Timothy M. Wood
/s/ Jay I. Applebaum Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Jay I. Applebaum
/s/ John D. O'Brien Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
John D. O'Brien
/s/ James T. Callier, Jr. Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
James T. Callier, Jr.
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 4th day of April, 1997.
LFC HOLDING CORPORATION
BY: /s/ James K. Jennings, Jr.
-----------------------------------
James K. Jennings, Jr.
Executive Vice President and
Chief Financial Officer
Each person whose signature to this Registration Statement appears below
hereby appoints Frederick B. Hegi, Jr., James B. Mattly and James K. Jennings,
Jr., and each individually, either of whom may act without the joinder of the
other, as his agent and attorney-in-fact to sign on his behalf individually
and in the capacity stated below and to file all pre- and post-effective
amendments to this Registration Statement (and, in addition, any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, for the offering to which this Registration Statement relates), which
may make such changes and additions to this Registration Statement as such
agent and attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. Joe Adorjan Chairman of the Board, and Director of the April 4, 1997
- ---------------------------- Co-Registrant listed above
J. Joe Adorjan
/s/ James B. Mattly President, Chief Executive Officer and April 4, 1997
- ---------------------------- Director of the Co-Registrant listed
James B. Mattly above (Principal Executive Officer)
/s/ James K. Jennings, Jr. Executive Vice President and chief April 4, 1997
- ---------------------------- Financial Officer of the Co-Registrant
James K. Jennings, Jr. listed above (Principal Financial and
Accounting Officer)
/s/ Frederick B. Hegi, Jr. Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Frederick B. Hegi, Jr.
/s/ Timothy M. Wood Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Timothy M. Wood
/s/ Jay I. Applebaum Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Jay I. Applebaum
/s/ John D. O'Brien Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
John D. O'Brien
/s/ James T. Callier, Jr. Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
James T. Callier, Jr.
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 4th day of April, 1997.
LOOMIS, FARGO & CO., a Texas
corporation
BY: /s/ James K. Jennings, Jr.
-----------------------------------
James K. Jennings, Jr.
Executive Vice President and
Chief Financial Officer
Each person whose signature to this Registration Statement appears below
hereby appoints Frederick B. Hegi, Jr., James B. Mattly and James K. Jennings,
Jr., and each individually, either of whom may act without the joinder of the
other, as his agent and attorney-in-fact to sign on his behalf individually
and in the capacity stated below and to file all pre- and post-effective
amendments to this Registration Statement (and, in addition, any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, for the offering to which this Registration Statement relates), which
may make such changes and additions to this Registration Statement as such
agent and attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. Joe Adorjan Chairman of the Board, and Director of the April 4, 1997
- ---------------------------- Co-Registrant listed above
J. Joe Adorjan
/s/ James B. Mattly President, Chief Executive Officer and April 4, 1997
- ---------------------------- Director of the Co-Registrant listed
James B. Mattly above (Principal Executive Officer)
/s/ James K. Jennings, Jr. Executive Vice President and chief April 4, 1997
- ---------------------------- Financial Officer of the Co-Registrant
James K. Jennings, Jr. listed above (Principal Financial and
Accounting Officer)
/s/ Frederick B. Hegi, Jr. Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Frederick B. Hegi, Jr.
/s/ Timothy M. Wood Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Timothy M. Wood
/s/ Jay I. Applebaum Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Jay I. Applebaum
/s/ John D. O'Brien Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
John D. O'Brien
/s/ James T. Callier, Jr. Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
James T. Callier, Jr.
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 4th day of April, 1997.
LFC ARMORED OF TEXAS INC.
BY: /s/ James K. Jennings, Jr.
-----------------------------------
James K. Jennings, Jr.
Executive Vice President and
Chief Financial Officer
Each person whose signature to this Registration Statement appears below
hereby appoints Frederick B. Hegi, Jr., James B. Mattly and James K. Jennings,
Jr., and each individually, either of whom may act without the joinder of the
other, as his agent and attorney-in-fact to sign on his behalf individually
and in the capacity stated below and to file all pre- and post-effective
amendments to this Registration Statement (and, in addition, any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, for the offering to which this Registration Statement relates), which
may make such changes and additions to this Registration Statement as such
agent and attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. Joe Adorjan Chairman of the Board, and Director of the April 4, 1997
- ---------------------------- Co-Registrant listed above
J. Joe Adorjan
/s/ James B. Mattly President, Chief Executive Officer and April 4, 1997
- ---------------------------- Director of the Co-Registrant listed
James B. Mattly above (Principal Executive Officer)
/s/ James K. Jennings, Jr. Executive Vice President and chief April 4, 1997
- ---------------------------- Financial Officer of the Co-Registrant
James K. Jennings, Jr. listed above (Principal Financial and
Accounting Officer)
/s/ Frederick B. Hegi, Jr. Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Frederick B. Hegi, Jr.
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston,
State of Texas, on the 4th day of April, 1997.
LOOMIS, FARGO & CO. OF PUERTO RICO
BY: /s/ James K. Jennings, Jr.
-----------------------------------
James K. Jennings, Jr.
Executive Vice President and
Chief Financial Officer
Each person whose signature to this Registration Statement appears below
hereby appoints Frederick B. Hegi, Jr., James B. Mattly and James K. Jennings,
Jr., and each individually, either of whom may act without the joinder of the
other, as his agent and attorney-in-fact to sign on his behalf individually
and in the capacity stated below and to file all pre- and post-effective
amendments to this Registration Statement (and, in addition, any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, for the offering to which this Registration Statement relates), which
may make such changes and additions to this Registration Statement as such
agent and attorney-in-fact may deem necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. Joe Adorjan Chairman of the Board, and Director of the April 4, 1997
- ---------------------------- Co-Registrant listed above
J. Joe Adorjan
/s/ James B. Mattly President, Chief Executive Officer and April 4, 1997
- ---------------------------- Director of the Co-Registrant listed
James B. Mattly above (Principal Executive Officer)
/s/ James K. Jennings, Jr. Executive Vice President and chief April 4, 1997
- ---------------------------- Financial Officer of the Co-Registrant
James K. Jennings, Jr. listed above (Principal Financial and
Accounting Officer)
/s/ Frederick B. Hegi, Jr. Director of the Co-Registrant listed April 4, 1997
- ---------------------------- above
Frederick B. Hegi, Jr.
</TABLE>
II-10
<PAGE>
EXHIBIT 2.1
CONTRIBUTION AGREEMENT
AMONG
BORG-WARNER SECURITY CORPORATION
WELLS FARGO ARMORED SERVICE CORPORATION
LOOMIS-WELLS CORPORATION
LOOMIS HOLDING CORPORATION
LOOMIS ARMORED INC.
AND
LOOMIS STOCKHOLDERS TRUST
DATED AS OF NOVEMBER 28, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
TRANSFER AND REDEMPTION OF LOOMIS STOCK.................... 2
SECTION 1.1. Transfer of Loomis Stock to Loomis
Stockholders Trust......................................... 2
SECTION 1.2. Transfer of Loomis Common Stock to Newco......... 2
SECTION 1.3. Issuance of NOL Note............................. 4
SECTION 1.4. Redemption of Preferred Stock and Payment of
Loomis Closing Liabilities................................. 5
ARTICLE II
SALE AND TRANSFER OF WELLS FARGO ASSETS AND LIABILITIES.... 5
SECTION 2.1. Transfer of Assets and Assumption of
Liabilities................................................ 5
SECTION 2.2. Assignment of Contracts and Rights; Associates
Lease...................................................... 7
SECTION 2.3. Consideration for Transferred Assets............. 8
ARTICLE III
POST-CLOSING ADJUSTMENTS........................... 8
SECTION 3.1. Minimum Adjusted Working Capital................. 8
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF BORG-WARNER AND WELLS FARGO................... 10
SECTION 4.1. Organization and Qualification................... 10
SECTION 4.2. Authorization.................................... 10
SECTION 4.3. No Violation..................................... 11
SECTION 4.4. Subsidiaries and Equity Investments.............. 12
SECTION 4.5. Consents and Approvals........................... 12
SECTION 4.6. Financial Statements............................. 13
SECTION 4.7. Absence of Undisclosed Liabilities............... 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 4.8. Absence of Certain Changes................... 13
SECTION 4.9. Litigation................................... 15
SECTION 4.10. Liens and Encumbrances....................... 15
SECTION 4.11. Certain Agreements........................... 16
SECTION 4.12. Employee Benefit Plans....................... 17
SECTION 4.13. Taxes........................................ 18
SECTION 4.14. Compliance with Applicable Law............... 19
SECTION 4.15. Brokers' Fees and Commissions................ 19
SECTION 4.16. Proprietary Rights........................... 19
SECTION 4.17. Labor Relations.............................. 20
SECTION 4.18. Real Estate.................................. 21
SECTION 4.19. Personal Property............................ 21
SECTION 4.20. Environmental Matters........................ 21
SECTION 4.21. Certain Business Practices and Regulations... 24
SECTION 4.22. Related Party Transactions................... 24
SECTION 4.23. Investment Intent............................ 24
SECTION 4.24. Continued Stock Ownership.................... 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF LOOMIS AND LOOMIS ARMORED................... 25
SECTION 5.1. Organization and Qualification............... 25
SECTION 5.2. Authorization................................ 25
SECTION 5.3. No Violation................................. 26
SECTION 5.4. Capitalization of Loomis and Loomis Armored.. 26
SECTION 5.5. Subsidiaries and Equity Investments.......... 28
SECTION 5.6. Consents and Approvals....................... 28
SECTION 5.7. Financial Statements......................... 29
SECTION 5.8. Absence of Undisclosed Liabilities........... 29
SECTION 5.9. Absence of Certain Changes................... 30
SECTION 5.10. Litigation................................... 31
SECTION 5.11. Liens and Encumbrances....................... 31
SECTION 5.12. Certain Agreements........................... 32
SECTION 5.13. Employee Benefit Plans....................... 33
SECTION 5.14. Taxes........................................ 34
SECTION 5.15. Compliance with Applicable Law............... 35
SECTION 5.16. Brokers' Fees and Commissions................ 35
SECTION 5.17. Proprietary Rights........................... 35
SECTION 5.18. Labor Relations.............................. 36
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5.19. Insurance........................................ 37
SECTION 5.20. Real Estate...................................... 37
SECTION 5.21. Personal Property................................ 38
SECTION 5.22. Environmental Matters............................ 38
SECTION 5.23. Certain Business Practices and Regulations....... 40
SECTION 5.24. Related Party Transactions....................... 40
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF LOOMIS STOCKHOLDERS TRUST....................... 41
SECTION 6.1. Ownership of Shares............................... 41
SECTION 6.2. Authority......................................... 41
SECTION 6.3. No Conflicts...................................... 42
SECTION 6.4. Investment Intent................................. 42
SECTION 6.5. Continued Stock Ownership......................... 42
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF NEWCO....................... 42
SECTION 7.1. Organization and Qualification.................... 42
SECTION 7.2. Authorization..................................... 43
SECTION 7.3. Capitalization of Newco........................... 43
SECTION 7.4. Consents and Approvals............................ 44
SECTION 7.5. No Operations..................................... 44
SECTION 7.6. Disposition of Property........................... 44
SECTION 7.7. No Redemption of Stock............................ 44
SECTION 7.8. Loomis Common Stock............................... 44
ARTICLE VIII
COVENANTS................................ 44
SECTION 8.1. Conduct of Business of Each of Loomis and
Wells Fargo Prior to the Closing Date....................... 44
SECTION 8.2. Access to Information............................. 47
SECTION 8.3. All Reasonable Efforts............................ 48
SECTION 8.4. Consents and Approvals............................ 48
SECTION 8.5. Public Announcements.............................. 49
SECTION 8.6. Notice of Certain Events.......................... 49
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8.7. No Other Bids; Liquidated Damages; Failure to
Obtain Director Consents................................. 49
SECTION 8.8. Stockholders Agreement......................... 50
SECTION 8.9. Election of Officers or Directors.............. 50
SECTION 8.10. The Financing................................. 50
SECTION 8.11. Wells Fargo Corporate Existence............... 50
SECTION 8.12. Cancellation of MEGA Units.................... 51
SECTION 8.13. Tax Reporting................................. 51
SECTION 8.14. Insurance Coverage............................ 53
SECTION 8.15. Title Policies................................ 53
SECTION 8.16. Information Supplied.......................... 53
SECTION 8.17. Transition Services........................... 54
SECTION 8.18. Accounts Receivable........................... 55
SECTION 8.19. Wells Fargo Armored Service Corporation of
Puerto Rico.............................................. 55
SECTION 8.20. Loomis Casualty Insurance Deposits............ 55
SECTION 8.21. Employees and Employee Benefits............... 55
SECTION 8.22. Termination of Management Agreements.......... 58
SECTION 8.23. Use of Name................................... 58
SECTION 8.24. Consents of Equity Holders.................... 58
SECTION 8.25. Contribution to Reserve....................... 59
SECTION 8.26. Support Payment............................... 59
ARTICLE IX
CLOSING CONDITIONS........................ 59
SECTION 9.1. Conditions to Each Party's Obligations under
this Agreement........................................... 59
SECTION 9.2. Conditions to the Obligations of the Loomis
Stockholders Trust, Loomis and Loomis Armored under
this Agreement........................................... 60
SECTION 9.3. Conditions to the Obligations of Borg-Warner
and Wells Fargo under this Agreement.................... 60
ARTICLE X
CLOSING............................. 61
SECTION 10.1. Closing....................................... 61
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XI
TERMINATION AND ABANDONMENT................. 63
SECTION 11.1. Termination.......................... 63
SECTION 11.2. Procedure and Effect of Termination.. 64
ARTICLE XII
INDEMNIFICATION................ 64
SECTION 12.1. Environmental Indemnification........ 64
SECTION 12.2. Accounts Receivable Indemnification.. 67
SECTION 12.3. General Indemnification.............. 68
SECTION 12.4. Tax Indemnification.................. 69
SECTION 12.5. Defense and Payment of Claims........ 70
SECTION 12.6. Limitation of Liability.............. 71
ARTICLE XIII
MISCELLANEOUS PROVISIONS................. 72
SECTION 13.1. Amendment and Modification........... 72
SECTION 13.2. Waiver of Compliance; Consents....... 72
SECTION 13.3. Validity............................. 72
SECTION 13.4. Expenses and Obligations............. 72
SECTION 13.5. Parties in Interest.................. 72
SECTION 13.6. Notices.............................. 72
SECTION 13.7. Governing Law........................ 74
SECTION 13.8. Counterparts......................... 74
SECTION 13.9. Headings............................. 74
SECTION 13.10. Entire Agreement.................... 74
SECTION 13.11. Assignment.......................... 75
SECTION 13.12. Termination of Representations and
Warranties...................................... 75
SECTION 13.13. Bulk Sales.......................... 75
SECTION 13.14. Exclusive Remedy.................... 75
SECTION 13.15. Jurisdiction and Venue.............. 76
</TABLE>
(v)
<PAGE>
Exhibit List
Exhibit A -- Form of Stockholders Agreement
Exhibit B -- Officers and Directors of Newco
Exhibit C -- Officers and Directors of Loomis
Exhibit D -- Form of Contingent Exercise Agreements
Exhibit E -- Form of Opinion of Davis Polk & Wardwell
Exhibit F -- Form of Opinion of General Counsel of Borg-Warner
Exhibit G -- Form of Opinion of Weil, Gotshal & Manges LLP
Exhibit H -- Form of Opinion of Prickett, Jones, Elliott, Kristol & Schnee
(vi)
<PAGE>
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT (this "Agreement"), dated as of November 28, 1996,
---------
by and among Borg-Warner Security Corporation, a Delaware corporation ("Borg-
----
Warner"), Wells Fargo Armored Service Corporation, a Delaware corporation and
- ------
wholly-owned subsidiary of Borg-Warner ("Wells Fargo"), Loomis-Wells
-----------
Corporation, a Delaware corporation ("Newco"), Loomis Holding Corporation, a
-----
Delaware corporation ("Loomis"), Loomis Armored Inc., a Texas corporation and
------
wholly-owned subsidiary of Loomis ("Loomis Armored"), and the Loomis
--------------
Stockholders Trust, a Delaware business trust (the "Loomis Stockholders Trust").
-------------------------
A list of defined terms used in this Agreement is attached hereto as Appendix A.
----------
RECITALS:
--------
WHEREAS, each of Loomis Armored and Wells Fargo is engaged in providing
armored transport services and certain other security-related services to
financial institutions and other commercial customers;
WHEREAS, the parties hereto desire to contribute the capital stock of
Loomis and substantially all of the assets and certain liabilities of Wells
Fargo in order to combine the armored transport businesses of Loomis Armored and
Wells Fargo in a transaction intended to satisfy the requirements of Section 351
of the Code;
WHEREAS, at or prior to the combination of the businesses of Loomis Armored
and Wells Fargo, (i) the stockholders of Loomis (the "Stockholders"), as of the
------------
date hereof, shall contribute all of the issued and outstanding shares of the
Class A Common Stock, $0.01 par value, of Loomis (the "Loomis Common Stock") to
-------------------
the Loomis Stockholders Trust organized under the Delaware Business Trust Act
(12 Del.C. (S)(S) 3801-3820) and pursuant to that certain Business Trust
------
Agreement, dated as of November 27, 1996 (the "Business Trust Agreement"), among
------------------------
each of the Stockholders and other Persons who may hereafter become parties
thereto, Wilmington Trust Company, a Delaware banking corporation, as trustee,
and Frederick B. Hegi, Jr., as manager, and (ii) all of the holders (the "Loomis
------
Other Equity Holders") of options, warrants, calls, subscriptions, conversions
- --------------------
or other rights, agreements or commitments (collectively, "Loomis Other Equity
-------------------
Interests") obligating Loomis to issue any additional shares of its capital
- ---------
stock or Loomis Voting Securities or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock or Loomis Voting Securities or to participate in the equity of
Loomis (other than participants in the Loomis Management Equity Growth and
Appreciation Plan) shall have exercised, converted or exchanged such Loomis
Other Equity Interests for shares of Loomis Common Stock and contributed such
shares to the Loomis Stockholders Trust; and
<PAGE>
WHEREAS, to effect the combination, the Loomis Stockholders Trust intends
to contribute all of the issued and outstanding shares of Loomis Common Stock to
Newco and Wells Fargo intends to contribute substantially all of the assets and
certain liabilities of Wells Fargo to Newco, in exchange for 51% and 49% of the
newly-issued Newco Common Stock, respectively, and certain other consideration
as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
TRANSFER AND REDEMPTION OF LOOMIS STOCK
---------------------------------------
SECTION 1.1. Transfer of Loomis Stock to Loomis Stockholders Trust. Upon
-----------------------------------------------------
the terms and subject to the conditions hereof, at or prior to the Closing Date
without duplication, (i) the Stockholders shall contribute all of the issued and
outstanding shares of Loomis Common Stock to the Loomis Stockholders Trust and
(ii) the Loomis Other Equity Holders shall have exercised, converted or
exchanged all of the outstanding Loomis Other Equity Interests for (x) shares of
Loomis Common Stock and contributed such shares to the Loomis Stockholders Trust
or (y) options in the New MEGA Plan. In exchange for such contributions of
Loomis Common Stock to the Loomis Stockholders Trust, the Stockholders shall
receive beneficial interests in the Loomis Stockholders Trust representing the
right to receive a pro rata allocation of the assets of the Loomis Stockholders
Trust in accordance with the terms and subject to the conditions set forth in
the Business Trust Agreement.
SECTION 1.2. Transfer of Loomis Common Stock to Newco.
----------------------------------------
(a) Upon the terms and subject to the conditions hereof, at the Closing,
the Loomis Stockholders Trust shall deliver to Newco (i) all of the issued and
outstanding shares of Loomis Common Stock, duly endorsed for transfer by the
Loomis Stockholders Trust, and (ii) the Loomis Excess Claims Assumption
Agreement.
(b) Upon the terms and subject to the conditions hereof, at the Closing, in
exchange for the consideration set forth in Section 1.2(a), Newco shall (i)
issue and deliver to the Loomis Stockholders Trust 5,100,000 shares of common
stock, $0.01 par value, of Newco (the "Newco Common Stock"), (ii) deliver to a
------------------
trust (the "Loomis Indemnity Trust") to be established prior to Closing pursuant
----------------------
to a trust agreement in form and substance reasonably acceptable to Borg-Warner
and the Loomis Stockholders Trust, cash in the
2
<PAGE>
amount equal to the Loomis Excess Payment by wire transfer of immediately
available funds to an account designated in writing by the Loomis Indemnity
Trust to Newco prior to the Closing Date; provided, that if the Loomis Excess
--------
Payment exceeds $5,400,000, any excess amount will be delivered to the Loomis
Casualty and Employee Claims Trust and/or the Loomis Stockholders Trust in such
proportion as directed by Loomis pursuant to a written notice to be delivered by
Loomis to Newco prior to Closing and transferred by wire transfer of immediately
available funds to an account designated to Newco in writing by the Loomis
Casualty and Employee Claims Trust or the Manager of the Loomis Stockholders
Trust, as the case may be, prior to the Closing Date, (iii) deliver to a trust
(the "Loomis Casualty and Employee Claims Trust") to be established prior to
-----------------------------------------
Closing pursuant to a trust agreement in form and substance reasonably
acceptable to Borg-Warner and the Loomis Stockholders Trust, cash in the amount
of $7,200,000 by wire transfer of immediately available funds to an account
designated in writing by the Loomis Casualty and Employee Claims Trust to Newco
prior to the Closing Date, and (iv) contribute the Class I beneficial interests
in the Loomis Indemnity Trust and the Loomis Casualty and Employee Claims Trust
to the capital of Loomis and assign the Class II beneficial interests in the
Loomis Indemnity Trust and the Loomis Casualty and Employee Claims Trust to the
Loomis Stockholders Trust.
(c) As used in this Agreement:
(i) "Loomis Excess Payment" shall mean an amount equal to
---------------------
$30,100,000 plus cash and cash equivalents held by Loomis (on a consolidated
----
basis) immediately prior to Closing (including, without limitation, an amount
equal to amounts held in lock-box accounts for the benefit of Loomis Armored)
plus Transaction Costs actually paid by Loomis or its Subsidiaries on or prior
- ----
to Closing minus the sum of (x) the amount (including principal, accrued and
-----
unpaid interest, premium, penalties and breakage fees, if any) required to pay,
satisfy or discharge as of the Closing Date all indebtedness for borrowed money
(including any intercompany debt) of Loomis and its Subsidiaries, including
without limitation all indebtedness under Loomis Armored's 14% Senior
Subordinated Notes due September 30, 1999, 9% Junior Subordinated Note due
September 30, 1999 and the Amendment and New Term Loan Agreement dated as of
June 25, 1996 among Loomis, Loomis Armored and the CIT Group/Business Credit,
Inc., but excluding any indebtedness incurred by Loomis or Loomis Armored in
connection with the redemption of the Series I Preferred Stock as contemplated
by Section 1.4, (y) all capitalized leases of Loomis and its Subsidiaries and
any accrued but unpaid amounts thereunder (as shown on a balance sheet prepared
for Loomis on a consolidated basis in accordance with GAAP) as of the Closing
Date (other than the capitalized leases listed in Section 1.2(c) of the
Disclosure Schedule) (the indebtedness included in clauses (x) and (y),
collectively, the "Loomis Indebtedness"), and (z) accrued fees due to Wingate
-------------------
Partners, L.P., a Delaware limited partnership ("Wingate"), pursuant to that
-------
certain Financial Advisory Agreement, dated as of May 6, 1991, among Loomis,
3
<PAGE>
Loomis Armored and Wingate (the "Financial Advisory Fees" and, together with the
-----------------------
Loomis Indebtedness, the "Loomis Closing Liabilities");
--------------------------
(ii) "Loomis Casualty and Employee Claims" means any and all
-----------------------------------
claims, actions, suits or other proceedings asserted against Loomis or any of
its Subsidiaries (and any amounts payable in respect thereof) that are not paid
or reimbursed under insurance policies of Loomis existing on the date hereof (or
any renewal thereof containing substantially similar terms) and with respect to
events, circumstances or activities occurring at or prior to the Closing Date
(x) for worker's compensation, (y) arising out of or relating to the use of
motor vehicles or firearms in connection with or related to its business or
operations, or acts or omissions of its drivers, courier guards, security guards
or their supervisors relating to their employment, in each case that is an act
or omission that otherwise is of a type covered under typical general liability
insurance policies, or (z) alleging discrimination, wrongful discharge, sexual
harassment or other unlawful hiring or employment practices; provided that the
--------
Loomis Casualty and Employee Claims shall not include (I) any Environmental
Claim or any other claim for Environmental Costs and Liabilities, and (II) any
claims related to cargo losses; and
(iii) "Loomis Excess Claims Assumption Agreement" means that
-----------------------------------------
certain Assumption Agreement, to be dated as of the Closing Date and in form and
substance reasonably acceptable to Borg-Warner and the Loomis Stockholders
Trust, among Loomis, Loomis Armored and the Loomis Stockholders Trust, providing
for the assumption by the Loomis Stockholders Trust of (x) the Loomis Casualty
and Employee Claims in excess of the aggregate amount of the corpus of the
Loomis Casualty and Employee Claims Trust, if any, and (y) any indemnity or
payment obligations of the Loomis Stockholders Trust pursuant to this Agreement
other than in respect of the Loomis Casualty and Employee Claims in excess of
the aggregate amount of the corpus of the Loomis Indemnity Trust.
SECTION 1.3. Issuance of NOL Note. At the Closing, Newco shall issue to
--------------------
the Loomis Stockholders Trust a note (the "NOL Note") in the original principal
--------
amount of $6,000,000, in form and substance reasonably acceptable to Borg-Warner
and the Loomis Stockholders Trust, provided that the NOL Note (i) shall be
-------- ----
issued in an original principal amount of $6,000,000; (ii) shall not bear
interest; and (iii) shall have a term of fifteen years subject to mandatory
prepayment as, and to the extent that, the federal Tax Return filed by Newco for
any taxable period during the term of the NOL Note reflects the realization by
Newco of a tax benefit attributable to the utilization of net operating losses
of Loomis or Loomis Armored available as of the Closing Date ("NOL Tax
-------
Benefit"), calculated on the basis of an assumed tax rate of 40%.
- -------
4
<PAGE>
SECTION 1.4. Redemption of Preferred Stock and Payment of Loomis Closing
-----------------------------------------------------------
Liabilities. At the Closing, (a) Loomis shall redeem all outstanding shares of
- -----------
the Series I Preferred Stock, $0.01 par value per share, of Loomis (the "Series
------
I Preferred Stock") by paying an amount necessary to redeem all such shares to
- -----------------
the holders of the Series I Preferred Stock, which amount shall not exceed
$3,500,000 in the aggregate, by wire transfer of immediately available funds to
an account or accounts designated by the holders thereof in writing prior to
Closing against receipt by Loomis of a stock certificate or certificates
evidencing the Series I Preferred Stock, accompanied by duly executed stock
powers assigning such Series I Preferred Stock in blank or otherwise in good
form for transfer, and (b) Newco shall contribute to the capital of Loomis an
amount equal to the Loomis Closing Liabilities and Loomis shall pay the
Financial Advisory Fees to Wingate by wire transfer of immediately available
funds to an account designated by Wingate in writing prior to the Closing and
repay the Loomis Indebtedness (excluding capital lease obligations) to each of
the parties entitled thereto by wire transfer of immediately available funds to
the account or accounts designated by such parties in writing prior to Closing
and obtain the written release of each of such parties with respect to their
respective portions of such Loomis Closing Liabilities.
ARTICLE II
SALE AND TRANSFER OF WELLS FARGO ASSETS AND LIABILITIES
-------------------------------------------------------
SECTION 2.1. Transfer of Assets and Assumption of Liabilities.
------------------------------------------------
(a) Upon the terms and subject to the conditions hereof, Wells Fargo
agrees to sell, assign, transfer, convey and deliver to Newco at the Closing all
of Wells Fargo's assets, properties and rights of every kind and description,
wherever located, real, personal or mixed, tangible or intangible, owned by
Wells Fargo or otherwise used in its business (including, without limitation,
all of the outstanding capital stock of all Subsidiaries of Wells Fargo) as the
same shall exist on the Closing Date (the "Transferred Assets"), except as
------------------
provided in Section 8.18, free and clear of all mortgages, liens, pledges,
security interests, charges, claims, restrictions and encumbrances of any nature
except Permitted Liens; provided, however, that notwithstanding anything else
-------- -------
contained herein, the Transferred Assets shall not include the assets,
properties and rights set forth in Section 2.1(a) of the Disclosure Schedule
(the "Excluded Assets"). At the written direction of Newco, legal title to a
---------------
portion of the Transferred Assets (the "Designated Transferred Assets") may be
-----------------------------
conveyed on behalf of Newco directly to a direct or indirect wholly-owned
subsidiary of Newco. The parties hereto agree that any Designated Transferred
Assets are being contributed to the capital of Newco, followed by one or more
capital contributions of
5
<PAGE>
such Designated Transferred Assets to the applicable subsidiary of Newco, and
all corporate resolutions and other documents, all accounting records and
reports, and all income Tax Returns shall be consistent therewith.
(b) Upon the terms and subject to the conditions hereof, effective at
the Closing, Newco shall assume all of the liabilities and obligations of Wells
Fargo, known and unknown, whether absolute, accrued, contingent or otherwise, of
every kind and description (the "Assumed Liabilities"); provided, however, that
------------------- -------- -------
notwithstanding anything else contained herein, Assumed Liabilities shall not
include (i) any liability for Wells Fargo Excluded Taxes, (ii) any liability for
the WF Casualty and Employee Claims, (iii) except for obligations or liabilities
to be assumed by Newco pursuant to Section 8.21, any obligation or liability
arising from or relating to the WF Employee Benefit Plans, and (iv) the
liabilities set forth in Section 2.1(b) of the Disclosure Schedule as Excluded
Liabilities (clauses (i) through (iv) being collectively referred to herein as
the "Excluded Liabilities"). As used in this Agreement, "WF Casualty and
-------------------- ---------------
Employee Claims" means any and all claims, actions, suits or other proceedings
- ---------------
asserted against Wells Fargo or any of its Subsidiaries with respect to events,
circumstances or activities occurring at or prior to the Closing Date (x) for
worker's compensation, (y) arising out of or relating to the use of motor
vehicles or firearms in connection with or related to its business or
operations, or acts or omissions of its drivers, courier guards, security guards
or their supervisors relating to their employment, in each case that is an act
or omission that otherwise is of a type generally covered under typical general
liability insurance policies, or (z) alleging discrimination, wrongful
discharge, sexual harassment or other unlawful hiring or employment practices;
provided that the WF Casualty and Employee Claims shall not include (I) any
- --------
Environmental Claim or any other claim for Environmental Costs and Liabilities,
and (II) any claims related to cargo losses.
(c) After the Closing Date, Newco shall pay, perform, satisfy or
otherwise discharge the Assumed Liabilities and shall indemnify and hold
harmless Borg-Warner and Wells Fargo and any of their Affiliates from and
against any Indemnifiable Losses incurred or suffered by Borg-Warner or Wells
Fargo or any such Affiliate with respect to (x) any Assumed Liability and (y)
any obligation of Borg-Warner or Wells Fargo (whether such obligation is created
by contract, law, regulation, or otherwise and whether or not joint and
several), to the extent such obligation arises out of any Assumed Liability
(including any guarantee of any Assumed Liability).
(d) After the Closing Date, Borg-Warner on behalf of Wells Fargo shall
pay, perform, satisfy or otherwise discharge the Excluded Liabilities and shall
indemnify and hold harmless Newco and its Affiliates from and against any
Indemnifiable Losses incurred or suffered by Newco or any such Affiliate with
respect to any Excluded Liability.
6
<PAGE>
(e) The general procedures set forth in Section 12.5(c) shall be
applied to resolve any disputes arising pursuant to clauses (c) and (d) of this
Section 2.1.
SECTION 2.2. Assignment of Contracts and Rights; Associates Lease.
----------------------------------------------------
(a) Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any Transferred Asset if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach or other contravention thereof or in any way adversely
affect the rights of Newco or Wells Fargo or any of their Affiliates thereunder.
Newco and Wells Fargo will use commercially reasonable efforts to obtain the
consent, if required or necessary, of the other parties to any such Transferred
Asset for the assignment thereof to Newco or its Subsidiaries as Newco may
reasonably request; provided that any costs associated therewith shall be borne
--------
by Newco. If such consent is not obtained, or if an attempted assignment
thereof would be ineffective or would adversely affect the rights of Newco or
Wells Fargo or any of their Affiliates thereunder so that Newco would not in
fact receive all such rights, Wells Fargo will cooperate in a mutually agreeable
arrangement under which Newco shall obtain the benefits and assume the
obligations thereunder in accordance with this Agreement, including
subcontracting, sublicensing, or subleasing to Newco, or under which Wells Fargo
would enforce for the benefit of Newco, with Newco assuming Wells Fargo's
obligations with respect to any and all rights of Wells Fargo or any of its
Affiliates against a third party thereto. Newco shall reimburse Wells Fargo for
all reasonable expenses incurred by Wells Fargo in enforcing any agreement,
claim, right or benefit on behalf of Newco. From and after the Closing, Wells
Fargo will promptly pay to Newco when received all monies or other property
received at or after the Closing by Wells Fargo or any of its Affiliates in
respect of any Transferred Asset, including, without limitation, any payment
received in respect of any WF Accounts Receivable.
(b) Each of Newco, Wells Fargo and Borg-Warner shall use its best
efforts to secure the consent of the lessor thereunder to the assignment to
Newco of the Associates Lease. If, in connection with such assignment, the
lessor requires the provision or payment of any credit enhancement, additional
lease payments, additional deposit or other incremental costs in addition to
those direct costs currently borne by Wells Fargo pursuant to the terms of such
lease (without giving effect to this transaction or any acceleration of payments
or other penalties that could be incurred as a result of an attempt to assign
the Associates Lease without the consent of the lessor), Newco shall be
responsible for the first $200,000 in the aggregate in such additional
incremental costs and Borg-Warner shall be responsible for any additional
incremental costs over such $200,000 (but only to the extent that such
incremental costs exceed $200,000); provided, that such incremental additional
costs shall be net of the amount of any reduction in the lease or other payments
owed to the lessor under the
7
<PAGE>
Associates Lease in effect of the date hereof that is negotiated by the parties
in connection with securing an assignment of the Associates Lease. In
connection with its obligations under the prior sentence, Borg-Warner agrees
that it will provide additional payments or credit enhancement to the lessor
under the Associates Lease to the extent necessary to secure the consent to the
assignment of the Associates Lease.
SECTION 2.3. Consideration for Transferred Assets. As consideration for
------------------------------------
the Transferred Assets, at the Closing, Newco shall (a) deliver to Wells Fargo
cash in the amount of $106,000,000 plus (x) Transaction Costs incurred by Borg-
----
Warner, Wells Fargo or its Subsidiaries prior to Closing and (y) the amount of
any cash retained in Wells Puerto Rico pursuant to Section 8.19 minus the amount
-----
of any indebtedness for borrowed money (including any intercompany debt) of
Wells Fargo (as shown on a balance sheet prepared for Wells Fargo on a
consolidated basis in accordance with GAAP) as of the Closing Date that is an
Assumed Liability by wire transfer of immediately available funds to an account
designated in writing by Wells Fargo to Newco prior to the Closing Date, (b)
issue and deliver to Wells Fargo 4,900,000 shares of Newco Common Stock and (c)
assume the Assumed Liabilities in accordance with Section 2.1(b) hereof.
ARTICLE III
POST-CLOSING ADJUSTMENTS
------------------------
SECTION 3.1. Minimum Adjusted Working Capital.
--------------------------------
(a) Within 90 days following the Closing, at the expense of Newco, (i)
Borg-Warner on behalf of Wells Fargo shall cause Deloitte & Touche LLP
("Deloitte") to deliver to each of Newco and the Loomis Stockholders Trust the
- ----------
balance sheet of Wells Fargo, certified by Deloitte and audited on a
consolidated basis as of the Closing Date (the "WF Closing Balance Sheet") and a
------------------------
certificate setting forth such auditor's calculation of Adjusted Working Capital
of the Transferred Assets and Assumed Liabilities as determined therefrom and
(ii) the Loomis Stockholders Trust shall cause Ernst & Young LLP ("E&Y") to
---
deliver to each of Newco and Borg-Warner the balance sheet of Loomis, certified
by E&Y and audited on a consolidated basis as of the Closing Date (the "Loomis
------
Closing Balance Sheet", and, together with the WF Closing Balance Sheet, the
- ---------------------
"Closing Balance Sheets") and a certificate setting forth such auditor's
- -----------------------
calculation of Adjusted Working Capital of Loomis as determined therefrom;
provided, however, that at least 10 days prior to the delivery by Deloitte of
- -------- -------
the WF Closing Balance Sheet and certificate setting forth the calculation of
Adjusted Working Capital of the Transferred Assets and Assumed Liabilities,
Deloitte shall consult with E&Y with respect to the treatment of vacation
accruals on the WF Closing
8
<PAGE>
Balance Sheet and shall make such adjustments with respect to such accruals as
shall be reasonably recommended by E&Y in accordance with GAAP; provided,
--------
further, that to the extent the WF Closing Balance Sheet is required to reflect
- -------
an additional amount to be booked for purposes of vacation accruals, the WF Base
Amount shall be reduced by such additional accrual amount. The Closing Balance
Sheets shall be prepared in accordance with GAAP consistent with the accounting
policies and practices for Borg-Warner and Wells Fargo used in connection with
preparation of the WF Financial Statements, on the one hand, and for Loomis used
in connection with preparation of the Loomis Financial Statements, on the other
hand, except as may be required pursuant to this Section 3.1(a). Each of the
Closing Balance Sheets (x) shall be prepared without regard to any effects from
the closing of the transactions contemplated hereby or any financing relating
thereto and (y) shall reflect all proposed audit adjustments determined by
Deloitte or E&Y, as the case may be, to be necessary in order to reflect the
respective Closing Balance Sheets in accordance with GAAP on a basis consistent
with such accounting policies and practices. Notwithstanding the foregoing, an
adjustment shall be made to the Loomis Closing Balance Sheet and the WF Closing
Balance Sheet, as the case may be, if the net amount of passed audit adjustments
in connection with the preparation of such balance sheet is greater than
$1,000,000; provided, however, that the amount of any such adjustment shall be
-------- -------
equal only to the extent of any excess over $1,000,000; provided further that,
-------- -------
for purposes hereof, in the case of the WF Closing Balance Sheet, the net amount
of such passed audit adjustments shall exclude (i) any such adjustment for the
reserve for the collection of doubtful accounts receivable unless such
adjustment for the reserve for collection of doubtful accounts receivable
exceeds $500,000 and then only to the extent of such excess and (ii) except as
recommended by E&Y pursuant to the first sentence of this Section 3.1(a), any
adjustment with respect to vacation accruals.
(b) If the Adjusted Working Capital of the Transferred Assets and
Assumed Liabilities as set forth in the Deloitte certificate delivered pursuant
to Section 3.1(a)(i) is less than $20,200,000 (the "WF Base Amount"), Borg-
--------------
Warner on behalf of Wells Fargo shall promptly pay to Newco an amount equal to
such deficit. If the Adjusted Working Capital of Loomis as set forth in the E&Y
certificate delivered pursuant to Section 3.1(a)(ii) is less than negative
$3,400,000, the Loomis Indemnity Trust shall promptly pay to Newco an amount
equal to such deficit. Any payment required to be made pursuant to this Article
III shall be payable in cash by wire transfer of immediately available funds to
an account designated in writing by Newco and shall bear interest from the
Closing Date to but not including the date of such payment at a rate per annum
equal to 5%. Any payment pursuant to this Article III shall be treated for all
purposes as an adjustment to the consideration received by Wells Fargo or by the
Loomis Stockholders Trust in connection with the recipient's original
contribution pursuant to Article I or Article II hereof, as the case may be.
9
<PAGE>
(c) As used in this Agreement, "Adjusted Working Capital" means, as of
------------------------
the Closing Date prior to the consummation of the transactions contemplated
hereby, and in each case as derived from the respective Closing Balance Sheets,
(i) in the case of Loomis, an amount equal to current assets (excluding the
deferred taxes associated with the net operating losses of Loomis and its
Subsidiaries) minus cash and cash equivalents (including, without limitation, an
-----
amount equal to amounts held in lock-box accounts for the benefit of Loomis
Armored) minus accounts receivable due from Affiliates (other than employees)
-----
minus current liabilities (net of the current portion of Loomis Closing
- -----
Liabilities and current reserve and other liabilities in respect of the Loomis
Casualty and Employee Claims), and (ii) in the case of the Transferred Assets
and Assumed Liabilities, an amount equal to current Transferred Assets minus
-----
accounts receivable due from Affiliates (other than employees) that are included
in Transferred Assets minus the current portion of Assumed Liabilities.
-----
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF BORG-WARNER AND WELLS FARGO
-----------------------------------------
Each of Borg-Warner and Wells Fargo, jointly and severally, represents and
warrants to each of the Loomis Stockholders Trust, Newco, Loomis and Loomis
Armored as set forth below.
SECTION 4.1. Organization and Qualification. Except as set forth in
------------------------------
Section 4.1 of the Disclosure Schedule, each of Borg-Warner, Wells Fargo and the
Subsidiaries of Wells Fargo is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
of Wells Fargo and its Subsidiaries has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted, and, except as would not, individually or in the
aggregate, have a Material Adverse Effect on Wells Fargo is qualified or
licensed to do business and is in good standing in every jurisdiction where the
nature of the business conducted by it or the properties owned or leased by it
requires qualification. Borg-Warner has delivered to the Loomis Stockholders
Trust complete and correct copies of the Certificate or Articles of
Incorporation and Bylaws (or similar organizational documents) of each of Borg-
Warner, Wells Fargo and the Subsidiaries of Wells Fargo.
SECTION 4.2. Authorization. Each of Borg-Warner and Wells Fargo has full
-------------
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Borg-Warner and Wells Fargo, the performance by each
of Borg-Warner and Wells Fargo of
10
<PAGE>
its obligations hereunder, and the consummation by it of the transactions
contemplated hereby, have been duly authorized, as applicable, by the respective
Boards of Directors thereof and by Borg-Warner as the sole stockholder of Wells
Fargo. No other corporate action on the part of Borg-Warner or Wells Fargo is
necessary to authorize the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Borg-Warner and Wells Fargo
and constitutes a valid and binding obligation of each of Borg-Warner and Wells
Fargo, enforceable against it in accordance with its terms, except to the extent
that such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
SECTION 4.3. No Violation. Except as set forth in Section 4.3 of the
------------
Disclosure Schedule, and (with respect to clauses (b) and (c) only) except for
such matters that would not, individually or in the aggregate, have a Material
Adverse Effect on Wells Fargo, neither the execution and delivery of this
Agreement by Borg-Warner or Wells Fargo, the performance by Borg-Warner or Wells
Fargo of its obligations hereunder nor the consummation by Borg-Warner or Wells
Fargo of the transactions contemplated hereby will (a) violate, conflict with or
result in any breach of any provision of the Certificate or Articles of
Incorporation or Bylaws of any of Borg-Warner or Wells Fargo or any Subsidiary
of Wells Fargo, (b) violate, conflict with or result in a breach of, or
constitute a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or require the consent of any other party
under, or result in the acceleration of, or entitle any party to accelerate
(whether as a result of a change in control of Wells Fargo or any of its
Subsidiaries or otherwise) any obligation under, or result in the loss of any
benefit under, or give rise to the creation of any Lien upon any of the
properties or assets of Wells Fargo or any Subsidiary of Wells Fargo under, any
of the terms, conditions or provisions of any Contract or obligation to which
Borg-Warner, Wells Fargo or any Subsidiary of Wells Fargo is a party or by which
any of them are bound or affected or by which any of the properties or assets of
Wells Fargo or any Subsidiary of Wells Fargo may be bound or affected, or (c)
violate any order, writ, judgment, injunction, decree, statute, rule or
regulation of any court, governmental authority or stock exchange applicable to
Borg-Warner or Wells Fargo or any Subsidiary of Wells Fargo or any of the
respective properties or assets of Wells Fargo or any Subsidiary of Wells Fargo.
11
<PAGE>
SECTION 4.4. Subsidiaries and Equity Investments.
-----------------------------------
(a) Section 4.4 of the Disclosure Schedule sets forth (i) the name of
each direct or indirect Subsidiary of Wells Fargo; (ii) the name of each
corporation, partnership, joint venture or other entity in which Wells Fargo or
any of its Subsidiaries has, or pursuant to any agreement has the right to
acquire at any time by any means, a material equity interest or investment;
(iii) in the case of each of the Subsidiaries of Wells Fargo and such other
entities described in the foregoing clauses (i) and (ii) that is a corporation,
(A) the jurisdiction of incorporation, (B) the capitalization thereof and (C)
the percentage of each class of voting stock or other equity security owned on a
fully-diluted basis by Wells Fargo or any of its Subsidiaries on the date
hereof; and (iv) in the case of each of such unincorporated entities, the
equivalent of the information provided pursuant to the preceding clause (iii)
with regard to corporate entities.
(b) All of the outstanding shares of capital stock of each direct or
indirect Subsidiary of Wells Fargo have been duly authorized and validly issued,
are fully paid and non-assessable, have not been issued in violation of any
preemptive rights and (except as specified in Section 4.4 of the Disclosure
Schedule) are owned of record and beneficially, directly or indirectly, by Wells
Fargo or its Subsidiaries specified in Section 4.4 of the Disclosure Schedule,
free and clear of any Liens. There is no other security outstanding that has
presently, or upon the occurrence of any event would have, the right to vote
with Wells Fargo as the holder of the voting stock of such Subsidiaries on any
matter.
(c) There are no options, warrants, calls, subscriptions, conversion
or other rights, agreements or commitments obligating any of the direct or
indirect Subsidiaries of Wells Fargo to issue any additional shares of capital
stock of such Subsidiary or any other securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of such capital stock.
There are no outstanding rights allowing any Person to otherwise participate in
the equity of any Subsidiary of Wells Fargo.
SECTION 4.5. Consents and Approvals. Except (a) as set forth in Section
----------------------
4.5 of the Disclosure Schedule, (b) for any consents and approvals of or filings
or registrations with the Antitrust Division of United States Department of
Justice (the "DOJ") and the Federal Trade Commission (the "FTC") pursuant to the
--- ---
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act"), and (c) for such filings, notices, registration, permits, authorizations,
- ---
consents or other approvals which the failure to make or obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Wells Fargo,
no filing or registration with, no notice to and no permit, authorization,
consent or approval of any governmental authority, stock exchange or other third
Person is necessary for the execution
12
<PAGE>
and delivery of this Agreement by Borg-Warner and/or Wells Fargo or for the
consummation by Borg-Warner and/or Wells Fargo of the transactions contemplated
by this Agreement.
SECTION 4.6. Financial Statements. Borg-Warner has delivered to Loomis
--------------------
(a) copies of the audited consolidated balance sheets of Wells Fargo as of
December 31, 1994 and December 31, 1995 (the "WF Year End Balance Sheets"),
--------------------------
together with the related audited consolidated statements of income,
stockholder's equity and cash flows for the fiscal years ended on such dates,
and the notes thereto, accompanied by the reports thereon of the applicable firm
of independent public accountants, and (b) copies of the unaudited consolidated
balance sheet of Wells Fargo as of September 30, 1996 (the "WF Interim Balance
------------------
Sheet"), together with the related unaudited consolidated statements of income,
- -----
stockholder's equity and cash flows for the nine-month period ended on September
30, 1996 (collectively, the "WF Interim Financial Statements") (such audited and
-------------------------------
unaudited financial statements being hereinafter referred to as the "WF
--
Financial Statements"). The WF Financial Statements, including the notes
- --------------------
thereto, (i) were prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") throughout the periods covered
----
thereby, except as otherwise disclosed in Section 4.6 of the Disclosure Schedule
and (ii) present fairly in all material respects the consolidated financial
position, results of operations and cash flows of Wells Fargo and its
Subsidiaries as of such dates and for the periods then ended (subject, in the
case of the unaudited WF Financial Statements, to normal year-end audit
adjustments consistent with prior periods that would not be material,
individually or in the aggregate). The accounts receivable shown on the WF Year
End Balance Sheets and the WF Interim Balance Sheet arose out of transactions in
the ordinary course of business of Wells Fargo and its consolidated
Subsidiaries.
SECTION 4.7. Absence of Undisclosed Liabilities. Except for matters
----------------------------------
relating to the transactions contemplated by the Agreement, there are no
liabilities or financial obligations of Wells Fargo or any of its Subsidiaries
of any kind whatsoever (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) that will be assumed by Newco at Closing that are
material individually or in the aggregate to the business of Wells Fargo and its
Subsidiaries that are required to be reflected on, or disclosed in the notes to,
a balance sheet prepared in accordance with GAAP, other than liabilities and
obligations: (a) provided for or reserved against in the WF Financial
Statements, (b) arising after September 30, 1996 in the ordinary course of
business consistent with past experience, or (c) disclosed in Section 4.7 of the
Disclosure Schedule. The provisions of this Section do not apply to any
liabilities or financial obligations for or relating to Taxes or arising under
or relating to any Environmental Law, which are covered elsewhere in this
Agreement.
SECTION 4.8. Absence of Certain Changes. Except as disclosed in Section
--------------------------
4.8 of the Disclosure Schedule, and except for matters contemplated by this
Agreement (including,
13
<PAGE>
without limitation, Section 8.1) or relating to the transactions contemplated
hereby, since September 30, 1996, each of Wells Fargo and its Subsidiaries has
conducted its respective business in the ordinary course and since September 30,
1996 there has not occurred (a) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the equity interests of Wells Fargo or any of its Subsidiaries, (b) any
forgiveness, cancellation or waiver by any of Wells Fargo or any of its
Subsidiaries of debts owed to Wells Fargo or any of its Subsidiaries or claims
or rights of Wells Fargo or any of its Subsidiaries against others, or any
discharge by Wells Fargo or any of its Subsidiaries of any Lien against assets
of others or any payment by Wells Fargo or any of its Subsidiaries of any
liability or obligation owed to others, other than, as relates to all of the
foregoing, in the ordinary course of business consistent with past practices,
(c) any material change in the credit practices of Wells Fargo or any of its
Subsidiaries, (d) (i) any increase in the rate or terms of compensation
(including termination and severance pay) payable or to become payable by Wells
Fargo or its Subsidiaries to any of their respective directors, officers or
employees, or any increase in the rate or terms of any bonus, insurance, pension
or other employee benefit plan, program or arrangement made to, for or with any
such directors, officers or employees, except, in each case, increases occurring
in the ordinary course of business consistent with past practices or as required
by applicable law or agreements existing on the date hereof, or (ii) any entry
by Wells Fargo or any of its Subsidiaries into any employment, severance or
termination agreement with any such person other than in the ordinary course of
business consistent with past practices, (e) any entry into any agreement
relating to the borrowing of money or any material agreement, commitment or
transaction by Wells Fargo or any of its Subsidiaries, except any such
agreements, commitments or transactions entered into in the ordinary course of
business consistent with past practices, (f) any damage, destruction or theft or
other casualty loss to the properties or assets owned or leased by Wells Fargo
or any of its Subsidiaries (other than Excluded Assets), or to property of
others in the custody of Wells Fargo or any of its Subsidiaries, whether or not
insured, which individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on Wells Fargo, (g) any material change by Wells
Fargo or any of its Subsidiaries in their financial or tax accounting principles
or methods, except insofar as may be required by a change in GAAP, applicable
law or circumstances which did not exist as of the date of the respective WF
Financial Statements, (h) any change made or authorized in the Certificate or
Articles of Incorporation or Bylaws of Wells Fargo or any of its Subsidiaries,
(i) any purchase, redemption, issue, sale or other acquisition or disposition by
Wells Fargo or any of its Subsidiaries of any shares of capital stock or other
equity securities of any of its Subsidiaries, or the grant of any options,
warrants or other rights to purchase, or convert or exchange any obligation
into, shares of capital stock or any evidence of indebtedness or other
securities of any of its Subsidiaries, (j) any sale, lease, license, encumbrance
or disposition by Wells Fargo or any of its Subsidiaries of any of their
material assets which is not in the ordinary course of business, (k) any
intercompany loan, advance or
14
<PAGE>
material acquisition by Wells Fargo or any of its Subsidiaries, taken as a
whole, (l) any cash payment by Wells Fargo or any of its Subsidiaries to Borg-
Warner or its Affiliates except in the ordinary course of business consistent
with past practice, (m) any transfer of assets (other than cash or Excluded
Assets) by Wells Fargo or any of its Subsidiaries to Borg-Warner or its
Affiliates, except for amounts not to exceed $100,000 in the aggregate
transferred at fair market value, or (n) an event or condition that has had or
would reasonably be expected to result in a Material Adverse Effect on Wells
Fargo.
SECTION 4.9. Litigation.
----------
(a) Except as set forth in Section 4.9 of the Disclosure Schedule, as
of the date hereof, there is no action, suit, judicial or administrative
proceeding, arbitration or investigation (collectively, "Litigation") pending
----------
or, to the knowledge of Borg-Warner or Wells Fargo, threatened against or
affecting Wells Fargo or its Subsidiaries or any of their respective properties,
assets or rights before any court, arbitrator or administrative or governmental
body as of the date hereof where alleged damages are either unspecified or in
excess of $50,000, individually or in the aggregate, nor is there any judgment,
decree, injunction, or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against Wells Fargo or any of
its Subsidiaries or against Borg-Warner affecting Wells Fargo or any Subsidiary
of Wells Fargo that would reasonably be expected to have a Material Adverse
Effect on Wells Fargo.
(b) As of the Closing, except as set forth in Section 4.9 of the
Disclosure Schedule, there will be no Litigation pending or, to the knowledge of
Borg-Warner or Wells Fargo threatened against or affecting Wells Fargo or any
Subsidiary of Wells Fargo that would reasonably be expected to have a Material
Adverse Effect on Wells Fargo.
(c) The provisions of this Section 4.9 do not apply to any Litigation
arising out of or relating to Taxes or under any Environmental Law, which are
covered elsewhere in this Agreement.
SECTION 4.10. Liens and Encumbrances. All of the Transferred Assets are
----------------------
free and clear of all title defects, liens, pledges, claims, security interests,
restrictions, mortgages, tenancies and other possessory interests, conditional
sale or other title retention agreements, assessments, easements, rights of way,
covenants, restrictions, rights of first refusal, defects in title,
encroachments and other burdens, options or encumbrances of any kind
(collectively, "Liens") except (a) Liens disclosed in Section 4.10 of the
-----
Disclosure Schedule, (b) statutory Liens in respect of obligations not yet
delinquent or the validity of which is being contested in good faith by
appropriate actions, (c) Liens for taxes not yet delinquent or the validity of
which is being contested in good faith by appropriate actions, (d) Liens
reflected in the WF
15
<PAGE>
Financial Statements (which have not been discharged) and (e) Liens which in the
aggregate do not materially detract from the value of, or materially impair the
continued use by Wells Fargo and its Subsidiaries in the normal conduct of their
business of, the Transferred Assets, taken as a whole (the items referred to in
(a) through (e) of this Section 4.10 being hereinafter referred to collectively
as "Permitted Liens"). Except as set forth on Section 4.10 of the Disclosure
---------------
Schedule, all of the material property, plant and equipment of Wells Fargo and
its Subsidiaries, taken as a whole, used from time to time in the operation of
its business is owned or leased by them, as the case may be, and is in
satisfactory condition to conduct the business of Wells Fargo and its
Subsidiaries as presently conducted.
SECTION 4.11. Certain Agreements. Except as disclosed in Section 4.11 of
------------------
the Disclosure Schedule, neither Wells Fargo nor any of its Subsidiaries is a
party to any agreement, plan or arrangement with any officer, director or
employee of Wells Fargo or any of its Subsidiaries (a) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
any of the transactions contemplated by this Agreement, (b) providing benefits
after the termination of employment regardless of the reason for such
termination of employment, other than benefits generally applicable to Wells
Fargo's or any Subsidiary's salaried or hourly employees, (c) under which any
person may receive payments subject to the tax imposed by Section 4999 of the
Code, or (d) any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement. Except as disclosed in Section 4.11 of the Disclosure
Schedule, neither Wells Fargo nor any of its Subsidiaries is a party to any (i)
Contract relating to or granting a Lien on the Transferred Assets securing the
borrowing of money or the guarantee of any obligation for the borrowing of
money, (ii) Contract or other document that substantially limits the freedom of
Wells Fargo or any of its Subsidiaries to compete in any line of business or
with any Person or in any area or which would so limit the freedom of Newco or
any of its Subsidiaries to so compete after the Closing, (iii) Contract relating
to the acquisition or disposition of any business by Wells Fargo or any of its
Subsidiaries that will be assumed by Newco at the Closing, (iv) Contract with
Borg-Warner or any of its other Affiliates that will be assumed by Newco at the
Closing or (v) other Contract that is material to Wells Fargo and its
Subsidiaries, taken as a whole. Except as set forth in Section 4.11 of the
Disclosure Schedule and except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Wells Fargo, each
Contract described in Section 4.11 of the Disclosure Schedule, or required to be
so described, is a valid and binding obligation of the parties thereto and is in
full force and effect without amendment and neither Wells Fargo nor any of its
Subsidiaries nor, to the knowledge of Wells Fargo, any other party thereto is
(or with the giving of notice or lapse of time or both would be) in breach or
default under any such Contract.
16
<PAGE>
SECTION 4.12. Employee Benefit Plans.
----------------------
(a) Section 4.12(a) of the Disclosure Schedule sets forth a true and
complete list of each material bonus, deferred compensation, incentive
compensation, stock purchase, stock option, employment, consulting, severance or
termination pay, medical, life insurance, supplemental unemployment benefits,
profit-sharing, tuition assistance, leave of absence, vacation or retirement
plan, program, agreement or arrangement, and each other material "employee
benefit plan" (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is maintained or
-----
contributed to by Wells Fargo or any of its Subsidiaries ("WF Employee Benefit
-------------------
Plans") as of the date of this Agreement. A true and complete copy of each WF
- -----
Employee Benefit Plan has been delivered or made available to Loomis.
(b) Except as set forth in Section 4.12(b) of the Disclosure Schedule
and except for such matters as would not reasonably be expected to have a
Material Adverse Effect on Wells Fargo, neither Wells Fargo nor any of its
Subsidiaries maintains or contributes to, or on or after the date which is six
years prior to the date of this Agreement (the "6-Year Look Back Date") has
---------------------
maintained or contributed to, any "multiemployer plan," as such term is defined
in Section 3(37) or Section 4001(a)(3) of ERISA, or any single-employer defined
benefit plans covered by Title IV of ERISA. Except as set forth in Section 4.12
of the Disclosure Schedule, each WF Employee Benefit Plan which is intended to
be qualified under Section 401(a) and, if applicable, Section 401(k) of the
Code, is so qualified, and to the knowledge of Borg-Warner or Wells Fargo, no
event or condition has occurred which would cause any such plan to lose such
qualified status.
(c) Except as disclosed in Section 4.12(c) of the Disclosure Schedule
and except for such matters as would not reasonably be expected to have a
Material Adverse Effect on Wells Fargo, (i) no action, suit, inquiry, judicial
or administrative proceeding, arbitration or investigation relating to any WF
Employee Benefit Plan (other than claims for benefits for which the plan
administrative procedures have not been exhausted and "qualified domestic
relations orders" as defined in Section 414(p) of the Code) is pending or, to
the knowledge of Borg-Warner or Wells Fargo, threatened against Wells Fargo, any
of its Subsidiaries or any WF Employee Benefit Plan before any court, arbitrator
or administrative or governmental body, (ii) neither Wells Fargo nor any of its
Subsidiaries has failed to make contributions to any WF Employee Benefit Plan
that are required to be made on or after January 1, 1994 under the terms of such
WF Employee Benefit Plans or under applicable law and (iii) each of the WF
Employee Benefit Plans has been maintained and administered in all material
respects in compliance with all applicable laws and the terms of such WF
Employee Benefit Plans.
17
<PAGE>
SECTION 4.13. Taxes. (a) Except as disclosed in Section 4.13 of the
-----
Disclosure Schedule and except for such matters as would not reasonably be
expected to have a Material Adverse Effect on Wells Fargo:
(i) All Tax Returns required to be filed by or with respect to
Wells Fargo or any of its Subsidiaries have been duly and timely filed, and
all such Tax Returns are true, correct and complete in all material
respects. None of Wells Fargo or any of its Subsidiaries has requested any
extension of time within which to file any federal income or other material
Tax Return that has not yet been filed. Each of Wells Fargo and its
respective Subsidiaries has duly and timely paid (or there has been paid on
its behalf) all Taxes that are due from or with respect to it. Each of
Wells Fargo and its Subsidiaries has made (or there has been made on its
behalf) all required estimated Tax payments sufficient to avoid any
underpayment penalties. Each of Wells Fargo and its Subsidiaries has
withheld and paid all Taxes required by all applicable laws to be withheld
or paid in connection with any amounts paid or owing to any employee,
stockholder, creditor, independent contractor or other third Person. All
federal income Tax Returns filed with respect to Tax periods of Wells Fargo
or any of its Subsidiaries through the Tax period ending December 31, 1991
have been examined and closed or are Tax Returns with respect to which the
applicable statute of limitations for the assessment of federal income
Taxes, after giving effect to any extension or waiver, has expired.
(ii) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due
from or with respect to Wells Fargo or any of its Subsidiaries for any
taxable period, and no power of attorney granted by or with respect to
Wells Fargo or any of its Subsidiaries relating to Taxes is currently in
force. No closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any state, local, or
foreign law has been entered into by or with respect to Wells Fargo or any
of its Subsidiaries. No audit or other proceeding by any court,
governmental or regulatory authority, or similar person is pending or, to
the knowledge of Wells Fargo, threatened in regard to any Taxes due from or
with respect to Wells Fargo or any of its Subsidiaries or any Tax Return
filed by or with respect to Wells Fargo or any of its Subsidiaries. No
written assessment of Taxes is proposed against Wells Fargo or any of its
Subsidiaries or against any assets of Wells Fargo or its Subsidiaries.
There are no requests for rulings or determinations by a Tax authority
pending with respect to any Taxes of Wells Fargo or any of its
Subsidiaries.
18
<PAGE>
(iii) No consent to the application of Section 341(f)(2) of
the Code (or any predecessor provision) has been made or filed by or with
respect to Wells Fargo or any of its Subsidiaries or against any assets of
Wells Fargo or its Subsidiaries. Neither Wells Fargo nor any of its
Subsidiaries has agreed (and no agreement has been made on any of their
behalf) to make any adjustment pursuant to Section 481(a) of the Code (or
any predecessor provision) by reason of any change in any accounting
method, and there is no application pending with any taxing authority
requesting permission for any changes in any accounting method of Wells
Fargo. None of the assets of Wells Fargo or any of its Subsidiaries is or
will be required to be treated as being owned by any Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately before the enactment of the Tax Reform
Act of 1986.
(b) None of Wells Fargo or Wells Fargo's Subsidiaries is a party to,
is bound by, and has any obligation under, any Tax sharing agreement, Tax
allocation agreement or similar contract.
SECTION 4.14. Compliance with Applicable Law. Except as set forth in
------------------------------
Section 4.14 of the Disclosure Schedule and except as would not, individually or
in the aggregate, have a Material Adverse Effect on Wells Fargo, each of Wells
Fargo and its Subsidiaries holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business (collectively,
"Permits"), and the business of each of Wells Fargo and its Subsidiaries is not
- --------
being conducted in violation of any provision of any Federal, state, local or
foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
Permit or other governmental authorization or approval applicable to any of
them. The provisions of this Section do not apply to Environmental Laws, or
matters relating to Taxes, which are covered elsewhere in this Agreement.
SECTION 4.15. Brokers' Fees and Commissions. None of Borg-Warner, Wells
-----------------------------
Fargo or any Subsidiary of Wells Fargo, nor any Person acting on behalf of any
of them, has agreed to pay or is liable with respect to any commission, finder's
fee or similar payment to any Person in connection with the transactions
contemplated hereby which payment or liability will become an obligation of
Newco at or after the Closing.
SECTION 4.16. Proprietary Rights. Section 4.16 of the Disclosure Schedule
------------------
contains an accurate and complete list of all software licenses and know-how
licenses, trade names, trademarks, registered copyrights, service marks,
trademark registrations and applications or service mark registrations and
applications ("Intellectual Property") owned or used by any of Wells Fargo or
---------------------
any of its Subsidiaries in the operation of its businesses that are material to
Wells Fargo and its Subsidiaries, taken as a whole (collectively, the "WF
--
19
<PAGE>
Intellectual Property"). Except as set forth in Section 4.16 of the Disclosure
- ---------------------
Schedule, each of Wells Fargo and its Subsidiaries owns the entire right, title
and interest in and to the WF Intellectual Property, trade secrets and other
confidential proprietary information used in and material to the operation of
its business (including, without limitation, the right to use and license the
same) that are part of the Transferred Assets. Section 4.16 of the Disclosure
Schedule lists all notices or claims currently pending or received by Wells
Fargo or any of its Subsidiaries which claim infringement of any Intellectual
Property by Wells Fargo or any of its Subsidiaries. Except as set forth in
Section 4.16 of the Disclosure Schedule, to the knowledge of Borg-Warner or
Wells Fargo, neither Wells Fargo nor any of its Subsidiaries infringes or has
misappropriated any Intellectual Property of another Person or has
misappropriated any trade secrets or other confidential proprietary information.
Except as set forth in Section 4.16 of the Disclosure Schedule, all
registrations and certificates issued by any governmental authority relating to
any of the WF Intellectual Property and all licenses and other agreements
pursuant to which Wells Fargo or any of its Subsidiaries use any of the WF
Intellectual Property, are valid and subsisting, have been properly maintained
and none of Wells Fargo, its Subsidiaries or, to the knowledge of Borg-Warner or
Wells Fargo, any other Person is in default or violation in any material respect
thereunder.
SECTION 4.17. Labor Relations. (a) Section 4.17 of the Disclosure
---------------
Schedule sets forth an accurate and complete list as of the date hereof of all
written agreements with officers, directors and employees of Wells Fargo and its
Subsidiaries regarding services to be rendered, including collective bargaining
agreements. Except as listed or described on Section 4.17 of the Disclosure
Schedule, as of the date hereof, (i) each of Wells Fargo and its Subsidiaries
(A) is, and has been for the past year, in material compliance with all
applicable laws regarding employment and employment practices, terms and
conditions of employment, wages and hours, and plant closing, occupational
safety and health and workers' compensation and is not engaged in any material
unfair labor practices, (B) has no, and has not had in the past year any,
material unfair labor practice charges or complaints pending or, to the
knowledge of Borg-Warner or Wells Fargo, threatened against any of them before
the National Labor Relations Board, (C) has no, and has not had in the past year
any, material grievances pending or, to the knowledge Borg-Warner or Wells
Fargo, threatened against them and (D) has no, and has not had in the past year
any, material charges pending before the Equal Employment Opportunity Commission
or any state or local agency responsible for the prevention of unlawful
employment practices (the items referred to in clauses (A) through (D),
collectively, the "WF Labor Matters"), (ii) there is no material labor strike,
----------------
slowdown, work stoppage or lockout actually pending or, to the knowledge of
Borg-Warner or Wells Fargo, threatened against or affecting Wells Fargo or any
of its Subsidiaries, and (iii) to the knowledge of Borg-Warner or Wells Fargo,
no material union organizational campaign or representation petition is
currently pending with respect to the employees of Wells Fargo or any of its
Subsidiaries.
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<PAGE>
(b) As of the Closing Date, except as set forth in Section 4.17 of
the Disclosure Schedule and except for such matters that would not reasonably be
expected to have a Material Adverse Effect on Wells Fargo, (i) there will be no
WF Labor Matters pending or, to the knowledge of Borg-Warner or Wells Fargo,
threatened against or affecting Wells Fargo or any Subsidiary of Wells Fargo,
(ii) except as a result of the nonassumption by Newco of the collective
bargaining agreements of Wells Fargo or actions taken by Newco after the date
hereof and relating to such collective bargaining agreements, there will be no
labor strike, slowdown, work stoppage or lockout pending or, to the knowledge of
Borg-Warner or Wells Fargo, threatened against or affecting Wells Fargo or any
of its Subsidiaries and (iii) to the knowledge of Borg-Warner or Wells Fargo, no
union organizational campaign or representation petition will be pending with
respect to the employees of Wells Fargo or any of its Subsidiaries.
SECTION 4.18. Real Estate. Except as set forth in Section 4.18 of the
-----------
Disclosure Schedule, each of Wells Fargo and its Subsidiaries has good and
marketable title in fee simple to all real properties owned by it and good and
transferable leaseholds in all real estate leased by it under valid and
enforceable leases. Section 4.18 of the Disclosure Schedule lists (i) the
street address of each parcel of real property owned by each of Wells Fargo and
its Subsidiaries (the "WF Owned Real Property"), and (ii) the street address of
----------------------
each parcel of real property leased or licensed by each of Wells Fargo and its
Subsidiaries.
SECTION 4.19. Personal Property. Except as set forth in Section 4.19 of
-----------------
the Disclosure Schedule, Wells Fargo and its Subsidiaries have good title to all
the machinery, equipment, furniture, fixtures, inventory, receivables and other
tangible or intangible personal property reflected on the WF Interim Balance
Sheet and all such property acquired since the date thereof, except for sales
and other dispositions made in the ordinary course of business consistent with
past practices since such date. Except for the Excluded Assets and except as set
forth in Section 4.19 of the Disclosure Schedule, the Transferred Assets
constitute all assets and rights necessary to operate the consolidated business
currently conducted by Wells Fargo.
SECTION 4.20. Environmental Matters.
---------------------
(a) Section 4.20(a) of the Disclosure Schedule contains a true and
complete list to the knowledge of Borg-Warner and Wells Fargo, of (i) all
Environmental Claims and accrued and unpaid Environmental Costs and Liabilities
as of the date of this Agreement (collectively, "Known Environmental
-------------------
Conditions"), and (ii) the street address and description of each parcel of WF
Owned Property and any parcel of real property leased, licensed or otherwise
used by Wells Fargo or its Subsidiaries that have USTs on such property, which
are under the ownership, operation or control of Wells Fargo or its Subsidiaries
or which
21
<PAGE>
have had USTs that have been removed or closed and at which Wells Fargo has not
yet obtained UST Closure (collectively, the "Wells Fargo Sites").
-----------------
(b) Except as set forth in Section 4.20(b) of the Disclosure Schedule
and except as would not reasonably be expected to result in a Material Adverse
Effect on Wells Fargo:
(i) the operations of Wells Fargo and its Subsidiaries have
been and are in material compliance with all applicable Environmental Laws;
(ii) (x) each of Wells Fargo and its Subsidiaries has obtained
and currently maintains all Environmental Permits necessary for its
operations and has been and is in material compliance with such
Environmental Permits, (y) there are no Legal Proceedings pending or, to
the knowledge of Borg-Warner or Wells Fargo, threatened to revoke such
Environmental Permits, and (z) none of Wells Fargo or its Subsidiaries has
received any notice from any governmental authority or written notice from
any Person to the effect that there is lacking any Environmental Permit
required for the current use or operation of any property owned, operated
or leased by Wells Fargo or any of its Subsidiaries;
(iii) there are no Legal Proceedings or investigations pending
or, to the knowledge of Borg-Warner or Wells Fargo, threatened against
Wells Fargo or any of its Subsidiaries alleging the violation of or seeking
to impose liability pursuant to any Environmental Law or Environmental
Permit;
(iv) none of Wells Fargo, its Subsidiaries or, to the knowledge
of Borg-Warner or Wells Fargo, any predecessor of any of Wells Fargo or its
Subsidiaries has filed any notice under any Environmental Law indicating
past or present treatment, storage, or disposal of or reporting a Release
or threatened Release of any Hazardous Material;
(v) none of Wells Fargo or its Subsidiaries or any of their
current or, to the knowledge of Borg-Warner or Wells Fargo, past facilities
and operations are subject to any outstanding written Order or Contract
with any governmental authority or other Person respecting (w)
Environmental Laws, (x) Remedial Action, (y) any Environmental Claim or (z)
the Release or threatened Release of any Hazardous Material;
(vi) none of the real property currently or, to the knowledge
of Borg-Warner or Wells Fargo, formerly owned, operated or leased by Wells
Fargo or
22
<PAGE>
any of its Subsidiaries has been or is contaminated by or from any
Hazardous Materials in quantities or at levels that would require
remediation by Wells Fargo or its Subsidiaries under Environmental Laws;
(vii) none of the operations of Wells Fargo, its Subsidiaries,
or any predecessor of any of Wells Fargo or its Subsidiaries, or, to the
knowledge of Borg-Warner or Wells Fargo, of any owner of premises currently
leased or operated by any of Wells Fargo or its Subsidiaries involves or
previously involved the treatment, storage or disposal of hazardous waste,
as defined under 40 C.F.R. Parts 260-270 or any state, local or foreign
equivalent;
(viii) there is not now, nor (to the knowledge of Borg-Warner or
Wells Fargo for all periods prior to their ownership, lease or operation of
such real property) has there been in the past, on, in or under any real
property currently or, to the knowledge of Borg-Warner and Wells Fargo,
formerly owned, leased or operated by Wells Fargo, its Subsidiaries or any
of their predecessors (i) any USTs, above-ground storage tanks, dikes or
impoundments containing Hazardous Materials, (ii) any asbestos-containing
materials, (iii) any polychlorinated biphenyls or (iv) any radioactive
substances, in each case the presence of which would reasonably be expected
to result in Wells Fargo and its Subsidiaries incurring material
Environmental Costs and Liabilities;
(ix) to the knowledge of Borg-Warner and Wells Fargo, no facts
or circumstances exist which would reasonably be expected to result in
Wells Fargo and its Subsidiaries incurring material Environmental Costs and
Liabilities;
(x) neither the operations of Wells Fargo nor its Subsidiaries
nor any real property owned, operated or leased by Wells Fargo or its
Subsidiaries is of a nature or type that, as a result of the transaction
contemplated hereunder, trigger any environmental property transfer law,
including but not limited to The Connecticut Transfer Act, Con. Gen. Stat.
Ann. (S) 22a-134(b), the Illinois Responsible Property Transfer Act, Pub.
Act 85-1228, the Indiana Responsible Property Transfer Law, or the New
Jersey Industrial Site Recovery Act, 1993 N.J. Laws 139; and
(xi) Borg-Warner and Wells Fargo have delivered to Loomis
copies of all environmental investigations, studies, audits, tests, reviews
and other analyses, including soil and groundwater analysis, conducted by
or on behalf of, or that are in the possession, custody or control of Borg-
Warner or Wells Fargo and its Subsidiaries, in relation to any site or
facility owned, operated or leased, at any time, by Wells Fargo or any of
its Subsidiaries or any of their respective predecessors or a
23
<PAGE>
site at which Wells Fargo or its Subsidiaries may have disposed of or
arranged for the disposal of Hazardous Materials.
SECTION 4.21. Certain Business Practices and Regulations. To the
------------------------------------------
knowledge of Borg-Warner and Wells Fargo, as of the date hereof, none of Wells
Fargo, its Subsidiaries or any director, officer, agent or employee of any of
Wells Fargo or its Subsidiaries has (a) used any corporate funds for
contributions, gifts, entertainment or other expenses relating to political
activity in material violation of any Law, or (b) made any payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds in material violation of any Law or
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended.
SECTION 4.22. Related Party Transactions. Except as disclosed in Section
--------------------------
4.22 of the Disclosure Schedule, since January 1, 1995, there have been no
material transactions between Wells Fargo or any of its Subsidiaries on the one
hand, and (a) any officer or director of Borg-Warner, Wells Fargo or any of
their Subsidiaries, (b) to the knowledge of Wells Fargo or Borg-Warner, any
record or beneficial owner of five percent or more of the voting securities of
Borg-Warner, or (c) to the knowledge of Wells Fargo or Borg-Warner, any
Affiliate of any such officer, director or 5% beneficial owner, on the other
hand, other than in the ordinary course of business on an arm's length basis.
SECTION 4.23. Investment Intent.
-----------------
(a) The Newco Common Stock is being acquired by Wells Fargo solely
for its own account, for investment, and not with a view to any distribution
thereof in violation of the Securities Act or the applicable securities laws of
any state.
(b) Each of Borg-Warner and Wells Fargo understands that the Newco
Common Stock has not been registered under the Securities Act or the securities
laws of any state and must be held indefinitely unless subsequently registered
under the Securities Act and any applicable state securities laws or unless an
exemption from such registration becomes or is available.
24
<PAGE>
SECTION 4.24. Continued Stock Ownership. Neither Wells Fargo nor Borg-
-------------------------
Warner has any plan or intention, and neither Wells Fargo nor Borg-Warner is
subject to any obligation or commitment, to sell, exchange or otherwise dispose
of, reduce the risk of loss by short sale or otherwise, or consent to the sale,
exchange or other disposition of any interest in the Newco Common Stock. Borg-
Warner has no plan or intention, and is not subject to any obligation or
commitment, to dissolve, liquidate, merge, or consolidate Wells Fargo, or to
cause Wells Fargo to sell, exchange or otherwise dispose of, reduce the risk of
loss by short sale or otherwise or consent to the sale, exchange or other
disposition of any interest in the Newco Common Stock. Neither Wells Fargo nor
Borg-Warner has any plan or intention to take any action following the Closing
that would prevent Section 351 of the Code from applying to the exchanges
required by Articles I and II of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF LOOMIS AND LOOMIS ARMORED
------------------------------
Each of Loomis and Loomis Armored, jointly and severally, represents
and warrants to each of Borg-Warner, Wells Fargo and Newco as set forth below.
SECTION 5.1. Organization and Qualification. Each of Loomis and its
------------------------------
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of Loomis
and its Subsidiaries has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is now being
conducted, and, except as would not, individually or in the aggregate, have a
Material Adverse Effect on Loomis, is qualified or licensed to do business and
is in good standing in every jurisdiction where the nature of the business
conducted by it or the properties owned or leased by it requires qualification.
Loomis has delivered to Borg-Warner complete and correct copies of the
Certificate or Articles of Incorporation and Bylaws of each of Loomis and its
Subsidiaries.
SECTION 5.2. Authorization. Each of Loomis and Loomis Armored has full
-------------
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Loomis and Loomis Armored, the performance by each of
Loomis and Loomis Armored of its obligations hereunder, and the consummation by
it of the transactions contemplated hereby, have been duly authorized, as
applicable, by the respective Boards of Directors thereof and the stockholders
of Loomis. No other corporate action on the part of Loomis or Loomis Armored is
necessary to authorize the execution and delivery of this Agreement or
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the consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by each of Loomis and Loomis
Armored and constitutes a valid and binding obligation of each of Loomis and
Loomis Armored, enforceable against them in accordance with its terms, except to
the extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 5.3. No Violation. Except as set forth in Section 5.3 of the
------------
Disclosure Schedule and (with respect to clauses (b) and (c) only) except for
such matters that would not, individually or in the aggregate, have a Material
Adverse Effect on Loomis, neither the execution and delivery of this Agreement
by Loomis or Loomis Armored, the performance by Loomis or Loomis Armored of its
obligations hereunder nor the consummation by Loomis or Loomis Armored of the
transactions contemplated hereby will (a) violate, conflict with or result in
any breach of any provision of the Certificate or Articles of Incorporation or
Bylaws of Loomis or any of its Subsidiaries, (b) violate, conflict with or
result in a breach of, or constitute a default (with or without due notice or
lapse of time or both) under, or permit the termination of, or require the
consent of any other party to, or result in the acceleration of, or entitle any
party to accelerate (whether as a result of a change in control of any of Loomis
or any of its Subsidiaries or otherwise) any obligation under, or result in the
loss of any benefit under, or give rise to the creation of any Lien upon any of
the properties or assets of Loomis or any of its Subsidiaries under, any of the
terms, conditions or provisions of any Contract or obligation to which Loomis or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or affected, or (c) violate any order, writ,
judgment, injunction, decree, statute, rule or regulation of any court,
governmental authority or stock exchange applicable to Loomis or any of its
Subsidiaries or any of the respective properties or assets of Loomis or its
Subsidiaries.
SECTION 5.4. Capitalization of Loomis and Loomis Armored.
-------------------------------------------
(a) The authorized capital stock of Loomis consists of 10,000,000
shares of Loomis Common Stock, 2,000,000 shares of Class B Common Stock, par
value $.01 per share, of Loomis (the "Loomis Class B Common Stock") and
---------------------------
5,000,000 shares of preferred stock, $0.01 par value per share, of which
4,000,000 shares have been designated as Series I Preferred Stock. As of the
date of this Agreement, there are 1,500,000 shares of Loomis Common Stock, no
shares of Loomis Class B Common Stock and 3,500,000 shares of Series I Preferred
Stock issued and outstanding. All of the issued and outstanding shares of
capital stock of Loomis have been validly issued, are fully paid and non-
assessable and were not
26
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issued in violation of any preemptive rights. The issued and outstanding shares
of Loomis Common Stock and Series I Preferred Stock are beneficially owned and
owned of record by Persons set forth in Section 5.4 of the Disclosure Schedule,
free and clear of any Liens. Other than the Series I Preferred Stock, there is
no other outstanding security that has presently, or upon the occurrence of any
event would have, the right to vote with the holders of Loomis Common Stock on
any matter ("Loomis Voting Securities"). Except as set forth in Section 5.4 of
------------------------
the Disclosure Schedule, there are no options, warrants, calls, subscriptions,
conversion or other rights, agreements or commitments obligating Loomis to issue
any additional shares of its capital stock or Loomis Voting Securities or any
other securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of its capital stock or Loomis Voting Securities or to
participate in the equity of Loomis nor are there any options, warrants, calls,
other rights, agreements or commitments obligating any Stockholder to sell,
transfer or otherwise convey any Loomis Common Stock to any other Person.
Immediately prior to the Closing Date (assuming all of the options and warrants
set forth on Section 5.4 of the Disclosure Schedule shall have been exercised),
Loomis will have, in the aggregate, 2,658,970 shares of Loomis Common Stock
issued and outstanding and held of record by the Loomis Stockholders Trust, and
no shares of Class B Common Stock and 3,500,000 shares of Series I Preferred
Stock will be issued and outstanding, all of which issued and outstanding
capital stock will be validly issued, fully paid and non-assessable and will not
have been issued in violation of any preemptive rights. Immediately prior to the
Closing Date and following the transfer by the Stockholders of all outstanding
shares of Loomis Common Stock to the Loomis Stockholders Trust and the
cancellation of the Units under the MEGA Plan, there will be no options,
warrants, calls, subscriptions, conversion or other rights, agreements or
commitments obligating Loomis to issue any additional shares of its capital
stock or Loomis Voting Securities or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of capital
stock of Loomis Voting Securities or to participate in the equity of Loomis nor
will there be any options, warrants, calls, other rights, agreements or
commitments obligating the Loomis Stockholders Trust to sell, transfer or
otherwise convey any Loomis Common Stock to any other Person.
(b) The authorized capital stock of Loomis Armored consists of 50,000
shares of Common Stock, par value $10.00 per share ("Armored Common Stock"),
--------------------
46,769 shares of which are issued and outstanding and all of which have been
validly issued, are fully paid and non-assessable and were not issued in
violation of any preemptive rights. Except as set forth in Section 5.4(b) of
the Disclosure Schedule, all of the outstanding shares of Armored Common Stock
are beneficially owned and owned of record by Loomis, free and clear of any
Liens. There is no other security outstanding that has presently, or upon the
occurrence of any event would have, the right to vote with the holders of
Armored Common Stock on any matter. There are no options, warrants, calls,
subscriptions, conversion or
27
<PAGE>
other rights, agreements or commitments obligating Loomis Armored to issue any
additional shares of its capital stock or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock or to participate in the equity of Loomis Armored nor are there
any options, warrants, calls, other rights, agreements or commitments obligating
Loomis to sell, transfer or otherwise convey any Armored Common Stock to any
other Person.
SECTION 5.5. Subsidiaries and Equity Investments.
-----------------------------------
(a) Section 5.5 of the Disclosure Schedule sets forth (i) the name of
each direct or indirect Subsidiary of Loomis; (ii) the name of each corporation,
partnership, joint venture or other entity in which Loomis or any of its
Subsidiaries has, or pursuant to any agreement has the right to acquire at any
time by any means, a material equity interest or investment; (iii) in the case
of each of the Subsidiaries of Loomis and such other entities described in the
foregoing clauses (i) and (ii) that is a corporation, (A) the jurisdiction of
incorporation, (B) the capitalization thereof and (C) the percentage of each
class of voting stock or other equity security owned on a fully-diluted basis by
Loomis or any of its Subsidiaries on the date hereof; and (iv) in the case of
each of such unincorporated entities, the equivalent of the information provided
pursuant to the preceding clause (iii) with regard to corporate entities.
(b) All of the outstanding shares of capital stock of each direct or
indirect Subsidiary of Loomis have been duly authorized and validly issued, are
fully paid and non-assessable, have not been issued in violation of any
preemptive rights, and (except as specified in Section 5.5 of the Disclosure
Schedule) are owned of record and beneficially, directly or indirectly, by
Loomis or its Subsidiary specified in Section 5.5 of the Disclosure Schedule,
free and clear of any Liens.
(c) There are no options, warrants, calls, subscriptions, conversion
or other rights, agreements or commitments obligating any of the direct or
indirect Subsidiaries of Loomis to issue any additional shares of capital stock
of such Subsidiary or any other securities convertible into, exchangeable for or
evidencing the right to subscribe for any shares of such capital stock. There
are no outstanding rights allowing any Person to otherwise participate in the
equity of any Subsidiary of Loomis.
SECTION 5.6. Consents and Approvals. Except (a) as set forth in Section
----------------------
5.6 of the Disclosure Schedule, (b) for any consents and approvals of or filings
or registrations with the DOJ and FTC pursuant to the HSR Act, and (c) for such
filings, notices, registration, permits, consents or other approvals which the
failure to obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Loomis, no filing or registration with, no
28
<PAGE>
notice to and no permit, authorization, consent or approval of any governmental
authority, stock exchange or other third Person is necessary for the execution
and delivery of this Agreement by Loomis and/or Loomis Armored, or for the
consummation by Loomis and/or Loomis Armored of the transactions contemplated by
this Agreement.
SECTION 5.7. Financial Statements. Loomis has delivered to Borg-Warner
--------------------
(a) copies of the audited balance sheets of Loomis Armored as of June 30, 1995
and June 30, 1996 (the "Loomis Year End Balance Sheets"), together with the
------------------------------
related audited statements of income, stockholders' equity and changes in cash
flows for the fiscal years ended on such dates, and the notes thereto,
accompanied by the reports thereon of the applicable firm of independent public
accountants, and (b) copies of the unaudited balance sheet of Loomis Armored as
of September 30, 1996 (the "Loomis Interim Balance Sheet"), together with the
----------------------------
related unaudited statements of income, stockholders' equity and changes in cash
flows for the three-month period ended on September 30, 1996 (collectively, the
"Loomis Interim Financial Statements") (such audited and unaudited financial
-----------------------------------
statements being hereinafter referred to as the "Loomis Financial Statements").
---------------------------
The Loomis Financial Statements, including the notes thereto, (i) were prepared
in accordance with GAAP throughout the periods covered thereby, except as
otherwise disclosed in Section 5.7 of the Disclosure Schedule and (ii) present
fairly in all material respects the consolidated financial position, results of
operations and changes in cash flows of Loomis Armored as of such dates and for
the periods then ended (subject, in the case of the unaudited Loomis Financial
Statements, to normal year-end audit adjustments consistent with prior periods
that would not be material, individually or in the aggregate). The accounts
receivable shown on the Loomis Year End Balance Sheets and the Loomis Interim
Balance Sheet arose out of transactions in the ordinary course of business of
Loomis Armored.
SECTION 5.8. Absence of Undisclosed Liabilities. Except for matters
----------------------------------
relating to the transactions contemplated by the Agreement, there are no
liabilities or financial obligations of Loomis, Loomis Armored, or any of their
Subsidiaries of any kind whatsoever (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) that are material individually or
in the aggregate to the business of Loomis and its Subsidiaries that are
required to be reflected on, or disclosed in the notes to, a balance sheet
prepared in accordance with GAAP, other than liabilities and obligations: (a)
provided for or reserved against in the Loomis Financial Statements, (b) arising
after September 30, 1996 in the ordinary course of business consistent with past
experience, or (c) disclosed in Section 5.8 of the Disclosure Schedule. The
provisions of this Section do not apply to any liabilities or financial
obligations for or relating to Taxes or arising under or relating to any
Environmental Law, which are covered elsewhere in this Agreement.
29
<PAGE>
SECTION 5.9. Absence of Certain Changes. Except as disclosed in Section
--------------------------
5.9 of the Disclosure Schedule, and except for matters contemplated by this
Agreement (including, without limitation, Section 8.1) or relating to the
transactions contemplated hereby, since September 30, 1996, each of Loomis and
its Subsidiaries has conducted its respective business in the ordinary course
and since September 30, 1996 there has not occurred (a) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to the equity interests of Loomis or any of its
Subsidiaries, (b) any forgiveness, cancellation or waiver by any of Loomis or
any of its Subsidiaries of debts owed to Loomis or any of its Subsidiaries or
claims or rights of Loomis or any of its Subsidiaries against others, or any
discharge by Loomis or any of its Subsidiaries of any Lien against assets of
others or any payment by Loomis or any of its Subsidiaries of any liability or
obligation owed to others, other than, as relates to all of the foregoing, in
the ordinary course of business consistent with past practices, (c) any material
change in the credit practices of Loomis or any of its Subsidiaries, (d) (i) any
increase in the rate or terms of compensation (including termination and
severance pay) payable or to become payable by Loomis or its Subsidiaries to any
of their respective directors, officers or employees, or any increase in the
rate or terms of any bonus, insurance, pension or other employee benefit plan,
program or arrangement made to, for or with any such directors, officers or
employees, except, in each case, increases occurring in the ordinary course of
business consistent with past practices or as required by applicable law or
agreements existing on the date hereof, or (ii) any entry by Loomis or any of
its Subsidiaries into any employment, severance or termination agreement with
any such person other than in the ordinary course of business consistent with
past practices, (e) any entry into any agreement relating to the borrowing of
money or any material agreement, commitment or transaction by Loomis or any of
its Subsidiaries, except any such agreements, commitments or transactions
entered into in the ordinary course of business consistent with past practices,
(f) any damage, destruction or theft or other casualty loss to the properties or
assets owned or leased by Loomis or any of its Subsidiaries, or to property of
others in the custody of Loomis or any of its Subsidiaries, whether or not
insured, which individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on Loomis, (g) any material change by Loomis or
any of its Subsidiaries in their financial or tax accounting principles or
methods, except insofar as may be required by a change in GAAP, applicable law
or circumstances which did not exist as of the date of the respective Loomis
Armored Financial Statements, (h) any change made or authorized in the
Certificate or Articles of Incorporation or Bylaws of Loomis or any of its
Subsidiaries, (i) any purchase, redemption, issue, sale or other acquisition or
disposition by Loomis or any of its Subsidiaries of any shares of capital stock
or other equity securities of Loomis or any of its Subsidiaries, or the grant of
any options, warrants or other rights to purchase, or convert or exchange any
obligation into, shares of capital stock or any evidence of indebtedness or
other securities of Loomis or any of its Subsidiaries, (j) any sale, lease,
license, encumbrance or disposition by Loomis or any
30
<PAGE>
of its Subsidiaries of any of their material assets which is not in the ordinary
course of business, (k) any intercompany loan, advance or material acquisition
by Loomis or any of its Subsidiaries, taken as a whole, (l) any cash payment by
Loomis or any of its Subsidiaries to the stockholders of Loomis or their
Affiliates except in the ordinary course of business consistent with past
practice, (m) any transfer of assets (other than cash) by Loomis or any of its
Subsidiaries to the stockholders of Loomis or their Affiliates except for
amounts not to exceed $100,000 in the aggregate transferred at fair market
value, or (n) an event or condition that has had or would reasonably be expected
to result in a Material Adverse Effect on Loomis.
SECTION 5.10. Litigation.
----------
(a) Except as set forth in Section 5.10 of the Disclosure Schedule,
as of the date hereof, there is no Litigation pending or, to the knowledge of
Loomis or Loomis Armored, threatened against or affecting Loomis, any of its
Subsidiaries or any of their respective properties, assets or rights before any
court, arbitrator or administrative or governmental body as of the date hereof
where alleged damages are either unspecified or in excess of $50,000,
individually or in the aggregate, nor is there any judgment, decree, injunction,
or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Loomis or any of its
Subsidiaries that would reasonably be expected to have a Material Adverse Effect
on Loomis.
(b) As of the Closing, except as set forth in Section 5.10 of the
Disclosure Schedule, there will be no Litigation pending or, to the knowledge of
Loomis or Loomis Armored, threatened against or affecting Loomis or any of its
Subsidiaries that would reasonably be expected to have a Material Adverse Effect
on Loomis.
(c) The provisions of this Section 5.10 do not apply to any
Litigation arising out of or relating to Taxes or under any Environmental Law,
which are covered elsewhere in this Agreement.
SECTION 5.11. Liens and Encumbrances. All properties and assets owned by
----------------------
each of Loomis and its Subsidiaries are free and clear of all Liens except (a)
Liens disclosed in Section 5.11 of the Disclosure Schedules, (b) statutory Liens
in respect of obligations not yet delinquent or the validity of which are being
contested in good faith by appropriate actions, (c) Liens for taxes not yet
delinquent or the validity of which is being contested in good faith by
appropriate actions, (d) Liens reflected in the Loomis Financial Statements
(which have not been discharged) and (e) Liens which in the aggregate do not
materially detract from the value of, or materially impair the continued use by
Loomis and its Subsidiaries in the normal conduct of their business of, their
properties or assets, taken as a whole. Except as set forth
31
<PAGE>
on Section 5.11 of the Disclosure Schedule, all of the material property, plant
and equipment of Loomis and its Subsidiaries, taken as a whole, used from time
to time in the operations of its business is owned or leased by them, as the
case may be, and is in satisfactory condition to conduct the business of Loomis
and its Subsidiaries as presently conducted.
SECTION 5.12. Certain Agreements. Except as disclosed in Section 5.12 of
------------------
the Disclosure Schedule, neither Loomis nor any of its Subsidiaries is a party
to any agreement, plan or arrangement with any officer, director or employee of
Loomis or any of its Subsidiaries (a) the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by this Agreement, (b) providing benefits after the
termination of employment regardless of the reason for such termination of
employment, other than benefits generally applicable to Loomis' or any of its
Subsidiaries' salaried or hourly employees, (c) under which any person may
receive payments subject to the tax imposed by Section 4999 of the Code, or (d)
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement. Except as disclosed in Section 5.12 of the Disclosure Schedule,
neither Loomis nor any of its Subsidiaries is a party to any (i) Contract
relating to or granting a Lien securing the borrowing of money or the guarantee
of any obligation for the borrowing of money, (ii) Contract or other document
that substantially limits the freedom of Loomis or any of its Subsidiaries to
compete in any line of business or with any Person or in any area or which would
so limit the freedom of Newco or any of its Subsidiaries to so compete after the
Closing, (iii) Contract relating to the acquisition or disposition of any
business by Loomis or any of its Subsidiaries, (iv) Contract with the
Stockholders or any of their other Affiliates or (v) other Contract that is
material to Loomis and its Subsidiaries, taken as a whole. Except as set forth
in Section 5.12 of the Disclosure Schedule and except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Loomis, each Contract described in Section 5.12 of the Disclosure Schedule, or
required to be so described, is a valid and binding obligation of the parties
thereto and is in full force and effect without amendment and neither Loomis nor
any of its Subsidiaries nor, to the knowledge of Loomis, any other party thereto
is (or with the giving of notice or lapse of time or both would be) in breach or
default under any such agreements in any material respect. Except as set forth
in the Section 5.12 of the Disclosure Schedule, each party has performed all
obligations required to be performed by it through the date hereof under the
agreements so described in Section 5.12 of the Disclosure Schedule and is not
(with or without lapse of time or giving notice, or both) in breach or default
under any such Contract.
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SECTION 5.13. Employee Benefit Plans.
----------------------
(a) Section 5.13 of the Disclosure Schedule sets forth a true and
complete list of each material bonus, deferred compensation, incentive
compensation, stock purchase, stock option, employment, consulting, severance or
termination pay, medical, life insurance, supplemental unemployment benefits,
profit-sharing, tuition assistance, leave of absence, vacation, or retirement
plan, program, agreement or arrangement, and each other material "employee
benefit plan" (within the meaning of Section 3(3) of ERISA) that is maintained
or contributed to by Loomis or any of its Subsidiaries ("Loomis Employee Benefit
-----------------------
Plans") as of the date of this Agreement. A true and complete copy of each
- -----
Loomis Employee Benefit Plan has been delivered or made available to Borg-
Warner.
(b) Except as set forth in Section 5.13 of the Disclosure Schedule
and except for such matters as would not reasonably be expected to have a
Material Adverse Effect on Loomis, neither Loomis nor any of its Subsidiaries
maintains or contributes to, or on or after the 6-Year Look Back Date has
maintained or contributed to, any "multiemployer plan," as such term is defined
in Section 3(37) or Section 4001(a)(3) of ERISA, or any single-employer defined
benefit plans covered by Title IV of ERISA. Each Loomis Employee Benefit Plan
which is intended to be qualified under Section 401(a) and, if applicable,
Section 401(k) of the Code, is so qualified, and to the knowledge of Loomis or
Loomis Armored, no event or condition has occurred which would cause any such
plan to lose such qualified status.
(c) Except as disclosed in Section 5.13 of the Disclosure Schedule
and except for such matters as would not reasonably be expected to have a
Material Adverse Effect on Loomis, (i) no action, suit, inquiry, judicial or
administrative proceeding, arbitration or investigation relating to any Loomis
Employee Benefit Plan (other than claims for benefits for which the plan
administrative procedures have not been exhausted and "qualified domestic
relations orders" as defined in Section 414(p) of the Code) is pending or, to
the knowledge of Loomis, threatened against Loomis, any of its Subsidiaries or
any Loomis Employee Benefit Plan before any court, arbitrator or administrative
or governmental body, (ii) neither Loomis nor any of its Subsidiaries has failed
to make contributions to any Loomis Employee Benefit Plan that are required to
be made on or after January 1, 1994 under the terms of such Loomis Employee
Benefit Plans or under applicable law, and (iii) each of the Loomis Employee
Benefit Plans has been maintained and administered in all material respects in
compliance with all applicable laws and the terms of such Loomis Employee
Benefit Plans.
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SECTION 5.14. Taxes. Except as disclosed in Section 5.14 of the
-----
Disclosure Schedule and except for such matters as would not reasonably be
expected to have a Material Adverse Effect on Loomis:
(a) All Tax Returns required to be filed by or with respect to Loomis
or any of its Subsidiaries have been duly and timely filed, and all such Tax
Returns are true, correct and complete in all material respects. None of Loomis
or any of its Subsidiaries has requested any extension of time within which to
file any federal income or other material Tax Return that has not yet been
filed. Each of Loomis and its Subsidiaries has duly and timely paid (or there
has been paid on its behalf) all Taxes that are due, or claimed or asserted by
any taxing authority to be due, from or with respect to it. Each of Loomis and
its Subsidiaries has made (or there has been made on its behalf) all required
estimated Tax payments sufficient to avoid any underpayment penalties. Each of
Loomis and its Subsidiaries has withheld and paid all Taxes required by all
applicable laws to be withheld or paid in connection with any amounts paid or
owing to any employee, stockholder, creditor, independent contractor or other
third party. All federal income Tax Returns filed with respect to Tax periods of
Loomis or any of its Subsidiaries through the Tax period ending June 30, 1992
have been examined and closed or are Tax Returns with respect to which the
applicable statute of limitations for the assessment of federal income Taxes,
after giving effect to any extension or waiver, has expired.
(b) There are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitation applicable to any claim for, or the
period for the collection or assessment of, Taxes due from or with respect to
Loomis or any of its Subsidiaries for any taxable period, and no power of
attorney granted by or with respect to Loomis or any of its Subsidiaries
relating to Taxes is currently in force. No closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar provision
of any state, local, or foreign law has been entered into by or with respect to
Loomis or any of its Subsidiaries. No audit or other proceeding by any court,
governmental or regulatory authority, or similar person is pending or, to the
knowledge of Loomis, threatened in regard to any Taxes due from or with respect
to Loomis or any of its Subsidiaries or any Tax Return filed by or with respect
to Loomis or any of its Subsidiaries. No written assessment of Taxes is proposed
against Loomis or any of its Subsidiaries or against any assets of Loomis or any
of its Subsidiaries. There are no requests for rulings or determinations by a
Tax authority pending with respect to Taxes of Loomis or any of its
Subsidiaries.
(c) No election under Section 338 of the Code has been made or filed
by or with respect to Loomis or any of its Subsidiaries. No consent to the
application of Section 341(f)(2) of the Code (or any predecessor provision) has
been made or filed by or
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with respect to Loomis or any of its Subsidiaries or against any assets of
Loomis or any of its Subsidiaries. Neither Loomis nor any of its Subsidiaries
has agreed (and no agreement has been made on any of their behalf) to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor provision)
by reason of any change in any accounting method, and there is no application
pending with any taxing authority requesting permission for any changes in any
accounting method of Loomis. None of the assets of Loomis or any of its
Subsidiaries is or will be required to be treated as being owned by any person
(other than Newco) pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986.
(d) Neither Loomis nor any of its Subsidiaries is a party to, is
bound by, and has any obligation under, any Tax sharing agreement, Tax
allocation agreement or similar contract under which payments may be required to
be made to any person other than Loomis or a Loomis Subsidiary.
(e) There is no contract, agreement, plan or arrangement covering any
Person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by Loomis by reason of Section 280G of the
Code.
SECTION 5.15. Compliance with Applicable Law. Except as set forth in
------------------------------
Section 5.15 of the Disclosure Schedule and except as would not, individually or
in the aggregate, have a Material Adverse Effect on Loomis, each of Loomis and
its Subsidiaries holds all Permits, and the business of each of Loomis and its
Subsidiaries is not being conducted in violation of any provision of any
Federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, Permit or other governmental authorization or approval
applicable to any of them. The provisions of this Section 5.15 do not apply to
Environmental Laws, or matters relating to Taxes, which are covered elsewhere in
this Agreement.
SECTION 5.16. Brokers' Fees and Commissions. Except as disclosed in
-----------------------------
Section 5.16 of the Disclosure Schedule, neither Loomis, any Subsidiary of
Loomis, nor any Person acting on behalf of any of them, has agreed to pay or is
liable with respect to any commission, finder's fee or similar payment to any
Person in connection with the transactions contemplated hereby.
SECTION 5.17. Proprietary Rights. Section 5.17 of the Disclosure Schedule
------------------
contains an accurate and complete list of all Intellectual Property owned or
used by any of Loomis or any of its Subsidiaries in the operation of its
businesses that is material to Loomis and its Subsidiaries, taken as a whole
(collectively, the "Loomis Intellectual Property").
----------------------------
35
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Except as set forth in Section 5.17 of the Disclosure Schedule, each of Loomis
and its Subsidiaries owns the entire right, title and interest in and to the
Loomis Intellectual Property, trade secrets and other confidential proprietary
information used in and material to the operation of its business (including,
without limitation, the right to use and license the same). Section 5.17 of the
Disclosure Schedule lists all notices or claims currently pending or received by
Loomis or any of its Subsidiaries which claim infringement of any Intellectual
Property by Loomis or any of its Subsidiaries. Except as set forth in Section
5.17 of the Disclosure Schedule, to the knowledge of Loomis or Loomis Armored,
neither Loomis nor any of its Subsidiaries infringes or has misappropriated any
Intellectual Property of another Person or has misappropriated any trade secrets
or other confidential proprietary information. Except as set forth in Section
5.17 of the Disclosure Schedule, all registrations and certificates issued by
any governmental authority relating to any of the Loomis Intellectual Property
and all licenses and other agreements pursuant to which Loomis or any of its
Subsidiaries use any of the Loomis Intellectual Property, are valid and
subsisting, have been properly maintained and none of Loomis, its Subsidiaries
or, to the knowledge of Loomis or Loomis Armored, any other Person is in default
or violation in any material respect thereunder.
SECTION 5.18. Labor Relations. (a) Section 5.18 of the Disclosure
---------------
Schedule sets forth an accurate and complete list as of the date hereof of all
written agreements with officers, directors and employees of Loomis and its
Subsidiaries regarding services to be rendered, including collective bargaining
agreements. Except as listed or described on Section 5.18 of the Disclosure
Schedule, as of the date hereof each of Loomis and its Subsidiaries (A) is, and
has been for the past year, in material compliance with all applicable laws
regarding employment and employment practices, terms and conditions of
employment, wages and hours, and plant closing, occupational safety and health
and workers' compensation and is not engaged in any material unfair labor
practices, (B) has no, and has not had in the past year any, material unfair
labor practice charges or complaints pending or, to the knowledge of Loomis or
Loomis Armored, threatened against any of them before the National Labor
Relations Board, (C) has no, and has not had in the past year any, material
grievances pending or, to the knowledge of Loomis or Loomis Armored, threatened
against them and (D) has no, and has not had in the past year any, material
charges pending before the Equal Employment Opportunity Commission or any state
or local agency responsible for the prevention of unlawful employment practices
(the items referred to in clauses (A) through (D), collectively, the "Loomis
------
Labor Matters"), (ii) there is no material labor strike, slowdown, work stoppage
- -------------
or lockout actually pending or, to the knowledge of Loomis or Loomis Armored,
threatened against or affecting Loomis or any of its Subsidiaries, and (iii) to
the knowledge of Loomis or Loomis Armored, no material union organizational
campaign or representation petition is currently pending with respect to the
employees of Loomis or any of its Subsidiaries.
36
<PAGE>
(b) As of the Closing Date, except as set forth in Section 5.18 of the
Disclosure Schedule and except for such matters that would not reasonably be
expected to have a Material Adverse Effect on Loomis, (i) there will be no
Loomis Labor Matters pending or, to the knowledge of Loomis, threatened against
or affecting Loomis or any Subsidiary of Loomis, (ii) there will be no labor
strike, slowdown, work stoppage or lockout pending or, to the knowledge of
Loomis, threatened against or affecting Loomis or any of its Subsidiaries and
(iii) to the knowledge of Loomis, no union organizational campaign or
representation petition will be pending with respect to the employees of Loomis
or any of its Subsidiaries.
SECTION 5.19. Insurance. Loomis has and at all times since June 30, 1996
---------
has had insurance policies in full force and effect for such amounts as are
sufficient for material compliance with all requirements of law and of all
material agreements to which any of Loomis and its Subsidiaries are parties or
by which they are bound. Set forth in Section 5.19 of the Disclosure Schedule
is a list of all fire, liability, cargo and other forms of insurance and all
fidelity bonds held by or applicable to Loomis or any of its Subsidiaries or
their businesses or properties, setting forth in respect of each such policy the
policy name, policy number, carrier, term, type of coverage and annual premium.
Except as set forth in Section 5.19 of the Disclosure Schedule, no event
relating to Loomis or its Subsidiaries or their business has occurred which can
reasonably be expected to result in a material retroactive upward adjustment in
premiums under any such insurance policies or which is likely to result in a
material prospective upward adjustment in such premiums. Excluding insurance
policies that have expired and been replaced in the ordinary course of business,
no material insurance policy has been cancelled within the last two years and,
to the knowledge of Loomis or Loomis Armored, no cancellation of any material
insurance policy of Loomis or relating to Loomis and its Subsidiaries is
currently threatened. Except as noted on Section 5.19 of the Disclosure
Schedule, all such insurance will remain in full force and effect with respect
to periods before the Closing after giving effect to the transactions
contemplated hereby. No event has occurred, including, without limitation, the
failure by Loomis or Loomis Armored to give any notice or information or Loomis
or Loomis Armored giving any inaccurate or erroneous notice or information,
which materially limits or impairs the rights of any of Loomis or Loomis Armored
under any such insurance policies.
SECTION 5.20. Real Estate. Except as set forth in Section 5.20 of the
-----------
Disclosure Schedule, each of Loomis and its Subsidiaries has good and marketable
title in fee simple to all real properties owned by it and good and transferable
leaseholds in all real estate leased by it under valid and enforceable leases.
Section 5.20 of the Disclosure Schedule lists (i) the street address of each
parcel of real property owned by each of Loomis and its Subsidiaries (the
"Loomis Owned Real Property"), and (ii) the street address of each parcel of
- ---------------------------
real property leased or licensed by each of Loomis and its Subsidiaries.
37
<PAGE>
SECTION 5.21. Personal Property. Except as set forth in Section 5.21 of
-----------------
the Disclosure Schedule, Loomis and its Subsidiaries have good title to all the
machinery, equipment, furniture, fixtures, inventory, receivables and other
tangible or intangible personal property reflected on the Loomis Interim Balance
Sheet and all such property acquired since the date thereof, except for sales
and other dispositions made in the ordinary course of business consistent with
past practices since such date.
SECTION 5.22. Environmental Matters.
---------------------
(a) Section 5.22(a) of the Disclosure Schedule contains a true and
complete list of, to the knowledge of Loomis and Loomis Armored, of (i) all
Known Environmental Conditions, and (ii) the street address and description of
each parcel of Loomis Owned Property and any parcel of real property leased,
licensed or otherwise used by Loomis or its Subsidiaries that have USTs on such
property, which are under the ownership, operation or control of Loomis or its
Subsidiaries or which have had USTs that have been removed or closed and at
which Loomis has not yet obtained UST Closure (collectively, the "Loomis
------
Sites").
- -----
(b) Except as disclosed in Section 5.22(b) of the Disclosure Schedule
and except as would not reasonably be expected to result in a Material Adverse
Effect on Loomis:
(i) the operations of Loomis and its Subsidiaries have been and
are in material compliance with all applicable Environmental Laws;
(ii) (x) each of Loomis and its Subsidiaries has obtained and
currently maintains all Environmental Permits necessary for its operations
and has been and is in material compliance with such Environmental Permits,
(y) there are no Legal Proceedings pending or, to the knowledge of Loomis
or Loomis Armored, threatened to revoke such Environmental Permits, and (z)
none of Loomis or its Subsidiaries has received any notice from any
governmental authority or written notice from any Person to the effect that
there is lacking any Environmental Permit required for the current use or
operation of any property owned, operated or leased by Loomis or any of its
Subsidiaries;
(iii) there are no Legal Proceedings or investigations pending
or, to the knowledge of Loomis or Loomis Armored, threatened against Wells
Fargo or any of its Subsidiaries alleging the violation of or seeking to
impose liability pursuant to any Environmental Law or Environmental Permit;
38
<PAGE>
(iv) none of Loomis, its Subsidiaries or, to the knowledge of
Loomis or Loomis Armored, any predecessor of any of Loomis or its
Subsidiaries has filed any notice under any Environmental Law indicating
past or present treatment, storage, or disposal of or reporting a Release
or threatened Release of any Hazardous Material;
(v) none of Loomis or its Subsidiaries or any of their current
or, to the knowledge of Loomis or Loomis Armored, past facilities and
operations are subject to any outstanding written Order or Contract with
any governmental authority or other Person respecting (w) Environmental
Laws, (x) Remedial Action, (y) any Environmental Claim or (z) the Release
or threatened Release of any Hazardous Material;
(vi) none of the real property currently or, to the knowledge
of Loomis or Loomis Armored, formerly owned, operated or leased by Loomis
or any of its Subsidiaries has been or is contaminated by or from any
Hazardous Materials in quantities or at levels that would require
remediation by Loomis or its Subsidiaries under Environmental Laws;
(vii) none of the operations of Loomis, its Subsidiaries, or
any predecessor of any of Loomis or its Subsidiaries, or, to the knowledge
of Loomis or Loomis Armored, of any owner of premises currently leased or
operated by any of Loomis or its Subsidiaries involves or previously
involved the treatment, storage or disposal of hazardous waste, as defined
under 40 C.F.R. Parts 260-270 or any state, local or foreign equivalent;
(viii) there is not now, nor (to the knowledge of Loomis or
Loomis Armored for all periods prior to their ownership, lease or operation
of such real property) has there been in the past, on, in or under any real
property currently or, to the knowledge of Loomis or Loomis Armored,
formerly owned, leased or operated by Loomis, its Subsidiaries or any of
their predecessors (i) any USTs, above-ground storage tanks, dikes or
impoundments containing Hazardous Materials, (ii) any asbestos-containing
materials, (iii) any polychlorinated biphenyls or (iv) any radioactive
substances, in each case the presence of which would reasonably be expected
to result in Loomis and its Subsidiaries incurring material Environmental
Costs and Liabilities;
(ix) to the knowledge of Loomis or Loomis Armored, no facts or
circumstances exist which would reasonably be expected to result in Loomis
and its Subsidiaries incurring material Environmental Costs and
Liabilities;
39
<PAGE>
(x) neither the operations of Loomis nor its Subsidiaries nor
any real property owned, operated or leased by Loomis or its Subsidiaries
is of a nature or type that, as a result of the transaction contemplated
hereunder, trigger any environmental property transfer law, including but
not limited to The Connecticut Transfer Act, Con. Gen. Stat. Ann. (S) 22a-
134(b), the Illinois Responsible Property Transfer Act, Pub. Act 85-1228,
the Indiana Responsible Property Transfer Law, or the New Jersey Industrial
Site Recovery Act, 1993 N.J. Laws 139; and
(xi) Loomis has delivered to Wells Fargo copies of all
environmental investigations, studies, audits, tests, reviews and other
analyses, including soil and groundwater analysis, conducted by or on
behalf of, or that are in the possession, custody or control of Loomis and
its Subsidiaries, in relation to any site or facility owned, operated or
leased, at any time, by Loomis or any of its Subsidiaries or any of their
respective predecessors or a site at which Loomis or its Subsidiaries may
have disposed of or arranged for the disposal of Hazardous Materials.
SECTION 5.23. Certain Business Practices and Regulations. To the
------------------------------------------
knowledge of Loomis or Loomis Armored, as of the date hereof, none of Loomis,
its Subsidiaries or any director, officer, agent or employee of any of Loomis or
its Subsidiaries has (a) used any corporate funds for contributions, gifts,
entertainment or other expenses relating to political activity in material
violation of any Law or (b) made any payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds in material violation of any Law or violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended.
SECTION 5.24. Related Party Transactions. Except as disclosed in Section
--------------------------
5.24 of the Disclosure Schedule, since January 1, 1995, there have been no
material transactions between Loomis or any of its Subsidiaries on the one hand,
and (a) any officer or director of Loomis, Loomis Armored or any of their
Subsidiaries, (b) to the knowledge of Loomis or Loomis Armored, any record or
beneficial owner of five percent or more of the voting securities of Loomis, or
(c) to the knowledge of Loomis or Loomis Armored, any Affiliate of any such
officer, director or 5% beneficial owner, on the other hand, other than payment
of compensation for services rendered to or by Loomis Armored or any of its
Subsidiaries in the ordinary course of business.
40
<PAGE>
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF LOOMIS STOCKHOLDERS TRUST
---------------------------------------
The Loomis Stockholders Trust represents and warrants to Borg-Warner and
Wells Fargo as set forth below.
SECTION 6.1. Ownership of Shares. Upon the transfer of all of the issued
-------------------
and outstanding shares of Loomis Common Stock to the Loomis Stockholders Trust
by the Stockholders as contemplated hereby and pursuant to the Business Trust
Agreement, the Loomis Stockholders Trust will be the holder of record and own
beneficially all of the issued and outstanding shares of Loomis Common Stock.
As of the date hereof, the Loomis Stockholders Trust owns 1,344,433 shares of
Loomis Common Stock. At or immediately prior to the Closing, the Loomis
Stockholders Trust will own all of the issued and outstanding shares of Loomis
Common Stock free and clear of any Liens. The Loomis Stockholders Trust is not
a party to any voting trust, proxy or other agreement with respect to the voting
of any shares of Loomis Common Stock other than the Stockholders Agreement among
Loomis and the Stockholders.
SECTION 6.2. Authority.
---------
(a) The Loomis Stockholders Trust has been duly created and is validly
existing under the laws of the State of Delaware. The Loomis Stockholders Trust
has all requisite trust power and authority to execute and deliver this
Agreement and to perform the obligations of the Loomis Stockholders Trust
hereunder, and the execution, delivery and performance by the Loomis
Stockholders Trust of this Agreement and the consummation by the Loomis
Stockholders Trust of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Loomis Stockholders Trust.
(b) This Agreement has been duly and validly executed and delivered by
the Loomis Stockholders Trust and constitutes a valid and binding obligation of
the Loomis Stockholders Trust, enforceable against it in accordance with its
terms, except to the extent that such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
41
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SECTION 6.3. No Conflicts. The execution, delivery and performance by the
------------
Loomis Stockholders Trust of this Agreement does not (i) violate or breach any
provision of any Law applicable to the Loomis Stockholders Trust, except where
the violation or breach would not affect the Loomis Stockholders Trust's ability
to perform its obligations under this Agreement in any material respect or (ii)
violate, breach, cause a default under, or result in the creation of a Lien
pursuant to, any agreement or instrument to which the Loomis Stockholders Trust
is a party or to which it or any of its properties may be subject, except where
the violation, breach, default or creation of a Lien would not affect the Loomis
Stockholders Trust's ability to perform its obligations under this Agreement in
any material respect.
SECTION 6.4. Investment Intent.
-----------------
(a) The Newco Common Stock is being acquired by the Loomis
Stockholders Trust solely for its own account, for investment, and not with a
view to any distribution thereof in violation of the Securities Act or the
applicable securities laws of any state.
(b) The Loomis Stockholders Trust understands that the Newco Common
Stock has not been registered under the Securities Act or the securities laws of
any state and must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration becomes or is available.
SECTION 6.5. Continued Stock Ownership. The Loomis Stockholders Trust has
-------------------------
no plan or intention, and is not subject to any obligation or commitment, to
sell, exchange or otherwise dispose of, reduce the risk of loss by short sale or
otherwise, or consent to the sale, exchange or other disposition of any interest
in the Newco Common Stock.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF NEWCO
---------------------------------------
Newco represents and warrants to each of Borg-Warner, Wells Fargo, Loomis,
and the Loomis Stockholders Trust as set forth below.
SECTION 7.1. Organization and Qualification. Newco is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with all requisite corporate power and authority
to own, operate and lease its
42
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properties and to carry on its business as it is now being, and as currently
proposed to be, conducted, and, except as would not, individually or in the
aggregate, have a Material Adverse Effect on Newco, is qualified or licensed to
do business and is in good standing in every jurisdiction where the nature of
the business conducted by it or the properties owned or leased by it requires
qualification. Newco has delivered to Borg-Warner complete and correct copies
of the Certificate of Incorporation and Bylaws of Newco. As of the Closing,
Newco shall (i) be qualified or licensed to do business and in good standing in
every jurisdiction where the nature of the business to be conducted by it or the
properties to be owned or leased by it requires qualification and (ii) hold all
material Permits necessary for the lawful conduct of its business, in each case,
after giving effect to the transactions contemplated hereby.
SECTION 7.2. Authorization. Newco has full corporate power and authority
-------------
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Newco, the
performance by Newco of its obligations hereunder, and the consummation by it of
the transactions contemplated hereby, have been duly authorized by its Board of
Directors. No other corporate action on the part of Newco is necessary to
authorize the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Newco and constitutes a valid and binding obligation
of Newco, enforceable against it in accordance with its terms, except to the
extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 7.3. Capitalization of Newco. The authorized capital stock of
-----------------------
Newco consists of 20,000,000 shares of Newco Common Stock, no shares of which
are issued and outstanding, and 1,000,000 shares of preferred stock, $0.01 par
value, no shares of which are issued and outstanding. Except as set forth in
Section 7.3 of the Disclosure Schedule, there are no options, warrants, calls,
subscriptions, conversion or other rights, agreements or commitments obligating
Newco to issue any additional shares of its capital stock or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of its capital stock. As of the Closing after giving
effect to the capital stock issuances set forth in Sections 1.2(b) and 2.3,
Newco will have 10,000,000 shares of Newco Common Stock issued and outstanding,
all of which will be validly issued, fully-paid, non-assessable and free and
clear of any Liens (other than those arising by virtue of the Stockholders
Agreement).
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SECTION 7.4. Consents and Approvals. Other than any consents and
----------------------
approvals of or filings or registrations with the DOJ and FTC pursuant to the
HSR Act, no filing or registration with, no notice to and no permit,
authorization, consent or approval of any governmental authority or other third
party is necessary for the consummation by Newco of the transactions
contemplated by this Agreement.
SECTION 7.5. No Operations. Newco was formed solely for the purpose of
-------------
engaging in the transactions contemplated by this Agreement. Prior to the date
hereof, Newco has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
SECTION 7.6. Disposition of Property. Newco has no plan or intention to
-----------------------
sell or otherwise dispose of (or to cause Loomis or any Subsidiary to sell or
otherwise dispose of) any of the Transferred Assets or the Loomis Common Stock
acquired in the transaction, except for dispositions made in the ordinary course
of business or contributions of the Designated Transferred Assets to Loomis and
Loomis Armored.
SECTION 7.7. No Redemption of Stock. Newco has no plan or intention to
----------------------
redeem or otherwise reacquire any of its stock issued in the transaction, except
in connection with employee benefit programs or otherwise in the ordinary course
of business.
SECTION 7.8. Loomis Common Stock. Newco has no plan or intention to
-------------------
dissolve, liquidate, merge or consolidate Loomis or to sell or otherwise dispose
of any of the Loomis Common Stock acquired by Newco.
ARTICLE VIII
COVENANTS
---------
SECTION 8.1. Conduct of Business of Each of Loomis and Wells Fargo Prior
-----------------------------------------------------------
to the Closing Date. During the period from the date of this Agreement and
- -------------------
continuing until the Closing Date, Borg-Warner and Wells Fargo agree that except
as set forth in Section 8.1 of the Disclosure Schedule or as expressly
contemplated or permitted by this Agreement or to the extent that the Loomis
Stockholders Trust shall otherwise consent in writing, each of Wells Fargo and
its Subsidiaries shall carry on its respective business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted and
other than actions taken in the ordinary course of business consistent with
prior practice, shall use commercially reasonable efforts to (i) preserve intact
its present business organizations, (ii) keep available the services of its
present officers and key employees and (iii) preserve its
44
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relationships with material customers and suppliers and others having material
business dealings with it; provided, however, that nothing in this Section 8.1
-------- -------
shall require Wells Fargo or any of its Subsidiaries to deviate from its normal
business practices or to offer any additional compensation or incentives to
employees, customers, suppliers or others. During the period from the date of
this Agreement and continuing until the Closing Date, Loomis agrees that except
as set forth in Section 8.1 of the Disclosure Schedule or as expressly
contemplated or permitted by this Agreement or to the extent that Borg-Warner
shall otherwise consent in writing, each of Loomis and its Subsidiaries shall
carry on its respective business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and other than actions
taken in the ordinary course of business consistent with prior practice, shall
use commercially reasonable efforts to (i) preserve intact its present business
organizations, (ii) keep available the services of its present officers and key
employees and (iii) preserve its relationships with material customers and
suppliers and others having material business dealings with it; provided,
--------
however, that nothing in this Section 8.1 shall require Loomis or any of its
- -------
Subsidiaries to deviate from its normal business practices or to offer any
additional compensation or incentives to employees, customers, suppliers or
others. Without limiting the generality of the foregoing, prior to the Closing
Date, and except as expressly contemplated or permitted by this Agreement,
required by applicable law, or disclosed in Section 8.1 of the Disclosure
Schedule, Wells Fargo will not, and Borg-Warner will not permit Wells Fargo or
any of its Subsidiaries to, without the prior written consent of the Loomis
Stockholders Trust, and Loomis will not, and will not permit any of its
Subsidiaries to, without the prior written consent of Borg-Warner:
(a) split, combine or reclassify any shares of its capital stock,
declare, pay or set aside for payment any dividend or other distribution
(whether in cash, stock or property) in respect of its equity interests;
(b) purchase, redeem, issue, sell, or otherwise acquire or dispose of
any of its shares of capital stock or other equity securities, or grant any
options, warrants or other rights to purchase, or convert or exchange any
obligation into, shares of its capital stock or any evidence of its indebtedness
or other securities (other than issuance of certificates in replacement of lost
certificates);
(c) incur any indebtedness for borrowed money or issue any debt
securities other than in the ordinary course of business consistent with past
practices or, other than in the ordinary course consistent with past practices,
assume, guarantee, endorse or otherwise as an accommodation become responsible
for or grant any Lien securing the obligations of any other Person;
45
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(d) acquire or agree to acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division or significant assets thereof or acquire, or agree to
acquire, directly or indirectly, any equity interest in any person or incur any
capital expenditures other than the capital expenditures set forth in Section
8.1 of the Disclosure Schedule or incurred in the ordinary course of business
consistent with past practices;
(e) amend or modify its Certificate or Articles of Incorporation or
Bylaws;
(f) sell, lease, license, encumber or dispose of any of its material
assets (other than, in the case of Wells Fargo, any Excluded Assets), other than
pursuant to executory contracts or commitments in existence as of the date of
this Agreement and set forth in Section 8.1(g) of the Disclosure Schedule;
(g) amend or terminate any material Contract, other than in the
ordinary course of business consistent with past practices;
(h) make any material change in financial or tax accounting methods,
principles or practices, or make or cause to be made any material elections on
Tax Returns other than, in the case of Wells Fargo, any such changes or
elections that would not have an adverse effect on the Transferred Assets and
Assumed Liabilities, unless required by GAAP or applicable law;
(i) extend credit in the sale of products, collection of receivables
or otherwise, other than in the ordinary course of business consistent with past
practices;
(j) fail to maintain its books, accounts and records in the usual,
regular and ordinary manner on a basis consistent with prior years, unless
otherwise required by GAAP or applicable law;
(k) knowingly take any action or, in the ordinary course of business,
omit to take any commercially reasonable action that would cause (x) any
representation or warranty in Article IV hereof (in the case of Borg-Warner and
Wells Fargo) or Article V hereof (in the case of Loomis and Loomis Armored) (but
excluding any representations or warranties which specifically relate to an
earlier date) to be untrue or incorrect in any material respect as of the
Closing or (y) any of the conditions set forth in Article IX not to be satisfied
as of the Closing;
46
<PAGE>
(l) adopt or amend in any material respect any collective bargaining
agreement or WF Employee Benefit Plan or Loomis Employee Benefit Plan, as
applicable, other than in the ordinary course of business consistent with prior
practices;
(m) except as set forth in Section 8.1(m) of the Disclosure Schedule,
grant to any executive officer any increase in compensation or in severance or
termination pay, grant any severance or termination pay, or enter into any
employment agreement with any executive officer, except as may be required under
agreements in effect on the date of this Agreement;
(n) enter into any agreement, including an agreement to purchase or
lease assets or operating supplies, which includes an aggregate payment or
commitment on the part of either party of more than $100,000 other than
agreements or arrangements entered into in the ordinary course of business
consistent with prior practices;
(o) submit any binding bid with respect to the sale or purchase of
goods or services other than in the ordinary course of business as currently
conducted;
(p) make any changes or agree to make any changes to any federal or
state income Tax returns filed prior to the date hereof or file any amended
federal or state income Tax Returns other than, in the case of Wells Fargo, any
such changes or agreements that would not have an adverse effect on the
Transferred Assets and Assumed Liabilities;
(q) make any cash payment to its stockholder(s) or Affiliates of its
stockholder(s) except in the ordinary course of business consistent with past
practice;
(r) effect any transfer of assets (other than cash except for amounts
not to exceed $100,000 in the aggregate transferred at fair market value or, in
the case of Wells Fargo, Excluded Assets) to its stockholder(s) or Affiliates of
its stockholder(s); and
(s) agree, in writing or otherwise, to do any of the foregoing.
SECTION 8.2. Access to Information.
---------------------
(a) Between the date of this Agreement and the Closing Date, upon
reasonable notice and at reasonable times without significant disruption to the
business of the other and subject to the advice of antitrust counsel to each
party, each of Wells Fargo and Loomis will give the other and its authorized
representatives (which representatives shall include but not be limited to
financial advisers, attorneys and environmental professionals) reasonable access
to all personnel, offices and other facilities, and to all of its and its
47
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Subsidiaries' books and records (including Tax Returns and accounting work
papers) and will permit the other to make and will fully cooperate with regard
to such inspections as the other may reasonably require and will cause its
officers to furnish the other such financial and operating data and other
information with respect to its and its Subsidiaries' business and properties as
the other may from time to time reasonably request. Notwithstanding the
foregoing, each of the parties agree that the above described access to
information shall not include any right to sample the soil and/or groundwater at
any of the other party's properties without prior written consent (and in the
sole discretion) of the party that owns or operates the site at which such
sampling has been requested.
(b) On and after the Closing Date, upon reasonable notice and at
reasonable times without significant disruption to the business of the other,
Newco will give each of Borg-Warner, Wells Fargo and the Loomis Stockholders
Trust and their authorized representatives (which representatives of each party
shall include but not be limited to financial advisors, attorneys and
environmental professionals) reasonable access to all personnel, offices and
other facilities, and to all of its and its Subsidiaries' books and records
(including Tax Returns and accounting work papers), and Newco will permit Borg-
Warner, Wells Fargo and the Loomis Stockholders Trust, and Borg-Warner, Wells
Fargo and the Loomis Stockholders Trust will permit Newco, to make and will
fully cooperate with regard to, such inspections as the other may reasonably
require and will cause its officers to furnish the other such financial and
operating data and other information with respect to its and its Subsidiaries'
business and properties as the other may from time to time reasonably request to
determine any matter relating to its rights and obligations under this Agreement
or, in the case of Borg-Warner, Wells Fargo or the Loomis Stockholders Trust,
any matter arising in any period ending on or before the Closing Date.
SECTION 8.3. All Reasonable Efforts. Subject to the terms and conditions
----------------------
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done as
promptly as practicable, all things necessary, proper and advisable under
applicable laws and regulations to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to effect the
Financing. If at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, including,
without limitation, the execution of additional instruments, the proper officers
and directors of each party to this Agreement shall take all such necessary
action.
SECTION 8.4. Consents and Approvals. The parties hereto each will
----------------------
cooperate with one another and use all reasonable efforts to prepare all
necessary documentation (including, without limitation, furnishing all
information required under the HSR Act), to effect promptly all necessary
filings and to obtain all necessary permits, consents, approvals, orders
48
<PAGE>
and authorizations of or any exemptions by, all third parties and governmental
bodies necessary to consummate the transactions contemplated by this Agreement
(including, without limitation, all Permits and Environmental Permits required
by Newco to operate the combined businesses of Loomis and Wells Fargo and their
Subsidiaries). Each party will keep the other party apprised of the status of
any inquiries made of such party by the DOJ or the FTC or any other governmental
agency or authority or members of their respective staffs with respect to this
Agreement or the transactions contemplated hereby.
SECTION 8.5. Public Announcements. Borg-Warner and the Loomis
--------------------
Stockholders Trust will consult with each other and will mutually agree (the
agreement of each party not to be unreasonably withheld) upon the content and
timing of any press release or other public statements with respect to the
transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation and
agreement, except as may be required by applicable Law or by obligations
pursuant to any listing agreement with any securities exchange or any stock
exchange regulations; provided, however, that any party required to make any
-------- -------
such press release or other public statement will give prior notice to the other
party of the content and timing of any such press release or other public
statement required by applicable Law or by obligations pursuant to any listing
agreement with any securities exchange or any stock exchange regulations.
SECTION 8.6. Notice of Certain Events. Prior to the Closing, (i) Borg-
------------------------
Warner will promptly notify the Loomis Stockholders Trust and Newco of the
occurrence of any event or condition which would reasonably be expected to have
a Material Adverse Effect on Wells Fargo and (ii) Loomis will promptly notify
Wells Fargo and Newco of the occurrence of any event or condition which would
reasonably be expected to have a Material Adverse Effect on Loomis.
SECTION 8.7. No Other Bids; Liquidated Damages; Failure to Obtain Director
-------------------------------------------------------------
Consents.
- --------
(a) From and after the date hereof, neither Borg-Warner nor Loomis
shall, nor shall they permit any of their Subsidiaries to, nor shall they
authorize or permit any officer, director or employee of or any investment
banker, attorney, accountant or other representative retained by them or any of
their Subsidiaries to, solicit, initiate or encourage submission of any proposal
or offer (including by way of furnishing information) from any Person which
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
As used in this Agreement, "Acquisition Proposal" shall mean any proposal for a
--------------------
merger or other business combination involving any of Wells Fargo or Loomis or
any of their Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in any of Wells Fargo or Loomis or any of their
Subsidiaries or a substantial portion
49
<PAGE>
of the assets of any of Wells Fargo or Loomis or any of their Subsidiaries other
than as contemplated hereby.
(b) In the event that the Wells Fargo Parties, on the one hand, or the
Loomis Parties, on the other hand, receive an Acquisition Proposal from any
Person and thereafter consummate a merger, business combination or other similar
transaction with such Person or an Affiliate of such Person arising out of such
Acquisition Proposal (a "Competing Transaction"), then Borg-Warner, in the case
---------------------
of the Wells Fargo Parties consummating such Competing Transaction, or Loomis
Armored, in the case of the Loomis Parties consummating such Competing
Transaction, shall be obligated to pay the other party liquidated damages in the
amount of $4,000,000, plus all reasonable costs and expenses actually incurred
by such party in connection with this Agreement and the transactions
contemplated hereby.
SECTION 8.8. Stockholders Agreement. At the Closing, Wells Fargo, the
----------------------
Loomis Stockholders Trust and Newco shall enter into the Stockholders Agreement
in the form attached hereto as Exhibit A (the "Stockholders Agreement").
--------- ----------------------
SECTION 8.9. Election of Officers or Directors. Prior to the Closing
---------------------------------
Date, Newco shall cause the Persons set forth on Exhibit B hereto to be elected
---------
as directors and officers of Newco and such Persons shall hold such
directorships and offices at the Closing Date. Effective as of the Closing,
Newco and Loomis shall cause the Persons set forth on Exhibit C hereto to be
---------
elected as directors and officers of Loomis.
SECTION 8.10. The Financing. Each of Loomis, Borg-Warner and Wells Fargo
-------------
agree to use commercially reasonable efforts to secure the Financing prior to
the Closing, including by making available, subject to reasonable
confidentiality provisions, its books and records and such officers of such
entity as may be reasonably necessary for prospective lenders and their agents
to complete customary due diligence. The "Financing" shall consist of a senior
---------
subordinated notes offering and a step-down revolving credit facility providing
aggregate proceeds or borrowing capacity to Newco of at least $185,000,000.
SECTION 8.11. Wells Fargo Corporate Existence. From and after the Closing
-------------------------------
for a period of two years after the Closing Date, Wells Fargo shall, and Borg-
Warner shall cause Wells Fargo to, do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence, and,
without the prior written consent of the Loomis Stockholders Trust, Wells Fargo
shall not, and Borg-Warner shall not cause Wells Fargo to, merge or consolidate
with any Person or dissolve or adopt a plan of liquidation. From and after the
Closing, for a period of two years after the Closing Date, without the prior
written consent of the Loomis Stockholders Trust, Wells Fargo shall not, and
Borg-Warner shall not
50
<PAGE>
cause Wells Fargo to, sell, convey, assign or otherwise transfer the shares of
Newco Common Stock received by Wells Fargo at the Closing pursuant to this
Agreement; provided that nothing in this Agreement shall preclude Borg-Warner or
--------
Wells Fargo from pledging such shares to secure indebtedness for borrowed money
of Borg-Warner or Wells Fargo.
SECTION 8.12. Cancellation of MEGA Units. At or prior to the Closing,
--------------------------
Loomis shall terminate the Loomis Management Equity Growth and Appreciation Plan
(the "MEGA Plan") and cause the units granted pursuant thereto to be cancelled,
---------
and the holders thereof shall in lieu of such units receive options to purchase
a number of shares of Newco Common Stock that is equivalent in value pursuant to
a Newco MEGA Units Holder Plan reasonably satisfactory to the parties hereto to
be established by Newco (the "New MEGA Plan"). Such options shall be subject to
-------------
the same vesting schedule and other limitations on exercise and transfer as
presently exist with respect to the units outstanding under the MEGA Plan. Upon
exercise of any option issued pursuant to the New MEGA Plan, the Loomis
Stockholders Trust shall deliver one share of Newco Common Stock to Newco for
each share of Newco Common Stock to be issued by Newco with respect to such
exercise and Newco shall deliver to the Loomis Stockholders Trust the exercise
price paid by such option holder with respect to such exercise, in each case in
accordance with a Stock Contribution Agreement by and between the Loomis
Stockholders Trust and Newco in form and substance that is reasonably
satisfactory to the parties hereto.
SECTION 8.13. Tax Reporting.
-------------
(a) Within 90 days after the Closing Date, Borg-Warner on behalf of
Wells Fargo shall prepare or caused to be prepared and delivered to each of
Newco and the Loomis Stockholders Trust a schedule setting forth in detail the
basis of the Transferred Assets, its proposed computation of gain and loss to be
recognized with respect to the Transferred Assets upon the transfer of the
Transferred Assets to Newco, its estimation of the fair market value and useful
lives of those Transferred Assets (the "Amortizable Intangibles") that are
-----------------------
eligible for amortization or depreciation deductions under the applicable
federal income Tax law in effect prior to the effective date of Section 197 of
the Code, and its proposal with respect to Newco's Tax basis in the Transferred
Assets (the "Basis Schedule"). In the event that the Loomis Stockholders Trust
--------------
delivers written notice to Borg-Warner to the effect that a majority of the
unitholders of the Loomis Stockholders Trust disagrees with all or any portion
of the Basis Schedule or with Wells Fargo's determinations as to the existence
or basis of Amortizable Intangibles, Wells Fargo and a representative appointed
by a majority of the unitholders of the Loomis Stockholders Trust shall
negotiate in good faith in order to resolve any such disagreements regarding the
Basis Schedule or Amortizable Intangibles. In the event that Wells Fargo and
the representative of the Loomis Stockholders Trust are unable to reach
agreement regarding the Basis Schedule or certain aspects of Wells Fargo's
51
<PAGE>
determinations relating to the Amortizable Intangibles within thirty days of the
receipt thereof by the Loomis Stockholders Trust, such disagreement shall be
submitted for resolution to the CPA Firm, and such resolution shall be binding
among the parties hereto. All of the costs and expenses of the parties incurred
in connection with this Section 8.13 (including, without limitation, reasonable
accountants' and appraisers' fees) shall be borne by Newco.
(b) Unless there has been a Final Determination to the contrary, the
parties covenant and agree for all Tax purposes, including the filing of Tax
Returns and in any audit, administrative or judicial proceeding relating to
Taxes, to (and to cause any Affiliate or successor to) take each of the
positions set forth below and not to take any positions or agree to any
settlements inconsistent therewith:
(i) the transfer of the Transferred Assets by Wells Fargo to
Newco and the transfer of the Loomis Common Stock by the Loomis Stockholders
Trust together constitute an exchange qualifying under Section 351 of the Code;
(ii) the transfer of the Transferred Assets by Newco to Loomis
constitutes an exchange qualifying under Section 351 of the Code;
(iii) Wells Fargo will recognize gain or loss with respect to
each of the Transferred Assets in a manner which is consistent with the Basis
Schedule, as finally determined hereunder;
(iv) the Tax basis of each of the Transferred Assets is as set
forth in the Basis Schedule, as finally determined hereunder; and
(v) the holding period of each Transferred Asset will include
the period during which such asset was held by Wells Fargo.
(c) Each of the parties hereto agrees to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Transferred Assets and the business
as is reasonably necessary for the filing of all Tax Returns, the making of any
election relating to Taxes, the preparation for any audit by any Tax Authority,
and the prosecution or defense of any claim, suit or proceeding relating to any
Tax Return. The parties will cooperate with each other in the conduct of any
audit or other proceeding relating to the Transferred Assets or to the business,
and each will execute and deliver such powers of attorney and other documents as
are necessary to carry out the intent of this section.
52
<PAGE>
(d) The term "Final Determination" means (i) a final, unappealable
-------------------
decision by a court of competent jurisdiction; (ii) the expiration of the time
for filing a claim for refund or, if a refund claim has been timely filed, the
expiration of the time for instituting suit in respect of such refund claim, if
no further adjustment to the items of income, gain, deduction, loss, or credit
may thereafter be made; (iii) the execution by or on behalf of the taxpayer and
the Internal Revenue Service of a closing agreement under Section 7121 of the
Code (or any comparable agreement under state, local or foreign law); (iv) the
acceptance by the Internal Revenue Service of a tender pursuant to an offer in
compromise pursuant to Section 7122 of the Code (or any comparable procedure
under state, local or foreign law); (v) the execution of a Form 870-AD (or any
comparable form under state, local or foreign law); or (vi) any other final and
irrevocable determination of Tax liability.
SECTION 8.14. Insurance Coverage. From and after the date hereof until
------------------
Closing, Borg-Warner shall maintain in place and shall not amend in any material
respect any fire or other property damage insurance covering any of the
Transferred Assets. In the event of the occurrence of any property loss
suffered by Wells Fargo or its Subsidiaries with respect to any Transferred
Asset from and after the date hereof until Closing that is covered by any fire
or other property damage insurance policy of Wells Fargo or its Subsidiaries,
Borg-Warner and Wells Fargo shall submit such claim to the insurer pursuant to
such policy, and to the extent any proceeds are collected by Borg-Warner or
Wells Fargo after the Closing in respect of such claim, such proceeds shall be
promptly delivered to Newco.
SECTION 8.15. Title Policies. Wells Fargo shall use its best efforts to
--------------
locate all title policies which exist with respect to the WF Owned Real Property
and deliver any such located title policies to Newco at Closing. Loomis shall
use its best efforts to locate all title policies which exist with respect to
the Loomis Owned Real Property and deliver any such located title policies to
Newco prior to Closing.
SECTION 8.16. Information Supplied.
--------------------
(a) Borg-Warner and Wells Fargo agree that none of the information
supplied or to be supplied solely by Borg-Warner or Wells Fargo specifically for
inclusion or incorporation by reference in the offering memorandum (the
"Offering Memorandum") or the registration statement (the "Registration
- -------------------- ------------
Statement") with respect to the offer, sale and exchange of the senior
- ---------
subordinated notes of Newco which shall constitute part of the Financing will,
at the time the Offering Memorandum is first distributed to potential investors
or the Registration Statement is filed with the Securities and Exchange
Commission, or at any time the Offering Memorandum or Registration Statement is
supplemented or amended, or at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any
53
<PAGE>
material fact required to be stated therein as necessary to make the statements
therein not misleading.
(b) Loomis and the Loomis Stockholders Trust agree that none of the
information supplied or to be supplied solely by Loomis or the Loomis
Stockholders Trust specifically for inclusion or incorporation by reference in
the Offering Memorandum or the Registration Statement with respect to the offer,
sale and exchange of the senior subordinated notes of Newco which shall
constitute part of the Financing will, at the time the Offering Memorandum is
first distributed to potential investors or the Registration Statement is filed
with the Securities and Exchange Commission, or at any time the Offering
Memorandum or Registration Statement is supplemented or amended, or at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein as necessary to make the statements therein not
misleading.
SECTION 8.17. Transition Services. At the Closing, Newco and Borg-Warner
-------------------
will enter into a "Transition Services Agreement" pursuant to which Borg-Warner,
through its Subsidiaries, shall provide to Newco (a) those services currently
provided to Wells Fargo pursuant to the licensing and other agreements listed in
Section 8.17 of the Disclosure Schedule and (b) assistance in the administration
of the Wells Fargo medical insurance plans in respect of Assumed Liabilities
arising thereunder ("Administrative Assistance"). The Transition Services
-------------------------
Agreement shall contain mutually acceptable terms and conditions customary to
such agreements and shall provide that:
(i) Borg-Warner shall cause such services to be provided to
Newco for a period not to exceed 150 days;
(ii) Newco shall pay to Borg-Warner or its Subsidiaries a fee
equal to (A) the percentage of the costs and expenses currently allocated to
Wells Fargo in respect of such services multiplied by (B) the costs and expenses
of such services, in each case, consistent with past practices; provided that
--------
the fee paid by Newco for Administrative Assistance shall be equal to the actual
cost to Borg-Warner, through its Subsidiaries, of administering the applicable
plans;
(iii) In addition to the fee referred to in clause (ii), Newco
shall be responsible for all incremental third party costs or charges, if any,
incurred for services rendered directly or indirectly to it pursuant to the
agreements set forth in Section 8.17 of the Disclosure Schedule; and
54
<PAGE>
(iv) upon 30 days prior written notice to Borg-Warner, Newco
may terminate the Transition Services Agreement prior to the last date on which
Borg-Warner is required to provide such services to Newco thereunder and, upon
such termination, Newco shall not be responsible for any fees, costs, expenses
or charges with respect to such services or pursuant to the agreements set forth
in Section 8.17 of the Disclosure Schedule other than such fees, costs, expenses
and charges payable in respect of such services by Newco for the period prior to
such termination.
SECTION 8.18. Accounts Receivable. At the Closing, before giving effect
-------------------
to the transactions contemplated hereby, Wells Fargo will deliver to Newco all
of the accounts receivable set forth on the WF Closing Balance Sheet free and
clear of any Liens.
SECTION 8.19. Wells Fargo Armored Service Corporation of Puerto Rico. The
------------------------------------------------------
parties hereby agree that the amount of cash held as an asset by Wells Fargo
Armored Service Corporation of Puerto Rico, a Tennessee corporation that is a
wholly-owned subsidiary of Wells Fargo ("Wells Puerto Rico"), immediately prior
-----------------
to Closing and not retained as an Excluded Asset will be not more than $900,000
nor less than $200,000 and that Wells Fargo shall be reimbursed at Closing for
such amount pursuant to Section 2.3.
SECTION 8.20. Loomis Casualty Insurance Deposits. Newco agrees that any
----------------------------------
Loomis Casualty Insurance Deposits shall be for the benefit of the Loomis
Casualty and Employee Claims Trust and that Newco will not act to reduce such
deposit in any way. From and after the Closing, upon the earlier of termination
of the casualty insurance policy or policies in effect in respect of the Loomis
Casualty and Employee Claims or the satisfaction and discharge of all Loomis
Casualty and Employee Claims, Loomis shall promptly pay to the Loomis Casualty
and Employee Claims Trust an amount equal to all Loomis Casualty Insurance
Deposits maintained with respect to such policy.
SECTION 8.21. Employees and Employee Benefits.
-------------------------------
(a) Except for certain headquarters employees of Wells Fargo set forth
on a list to be provided by Newco to Wells Fargo at least five days prior to the
Closing Date, Newco shall offer employment as of the Closing Date on an "at
will" basis to substantially all employees of Wells Fargo and its Subsidiaries
who are actively employed on such date ("Active Employees"). Each such offer of
----------------
employment (i) to each non-bargaining unit employee shall be on terms and
conditions to be determined by Newco in its sole discretion and (ii) to each
bargaining unit employee shall be at least the same wage rate and with
substantially comparable benefits, other than participation in a tax-qualified
defined benefit plan, in the aggregate (based on the prior year's cost), as in
effect for such employee immediately prior to the Closing Date, and other terms
and conditions to be determined by
55
<PAGE>
Newco in its sole discretion. All Active Employees who accept Newco's offer of
employment by the Closing Date shall be deemed "Transferred Employees." Newco
---------------------
shall also offer employment to employees of Wells Fargo or any of its
Subsidiaries who are not actively employed on the Closing Date and have a right
to re-employment with Wells Fargo or any of its Subsidiaries, on terms and
conditions to be determined by Newco in its sole discretion; provided, however,
that any such employee shall be offered employment by Newco only if he or she is
fully able to return to active employment in accordance with Newco's employment
policies within six (6) months after the Closing Date.
(b) With respect to each Transferred Employee, service with Wells
Fargo or any of its Affiliates shall be counted for purposes of determining any
period of eligibility to participate or to vest in benefits under Newco's
benefit plans to the same extent such service was counted under any similar type
of WF Benefit Plan under which such Transferred Employee was covered immediately
prior to the Closing Date, except that such service with Wells Fargo shall not
be counted for purposes of Newco's severance policies to the extent that
Transferred Employees have received severance benefits for such service. Newco,
for purposes of deductible limits under its welfare plans, shall credit each
Transferred Employee with the amounts so credited with respect to the portion of
the calendar year preceding the Closing Date under the same type of WF Benefit
Plan in which such Transferred Employee is participating as of the Closing Date.
With respect to each Transferred Employee, Newco's group health plans shall not
exclude coverage for pre-existing conditions that were not excluded under
similar WF Benefit Plans in which such Transferred Employee is participating as
of the Closing Date.
(c) Newco agrees that, within ten business days after the date
hereof, it will advise each union with which Wells Fargo has a collective
bargaining agreement that it does not intend to assume such collective
bargaining agreement in connection with the transactions set forth herein.
Newco also agrees that it will bargain in good faith with representatives of
each such union regarding the employment terms and conditions of each bargaining
unit employee.
(d) As of the Closing Date, Newco shall assume the obligations and
liabilities under the Wells Fargo Non-Officers Severance Compensation and
Benefits Policy, as amended and restated as of October 29, 1996, and Senior
Officer Severance Compensation and Benefits Policy, as adopted effective October
29, 1996, and Newco or its designee shall replace Wells Fargo and its management
as the plan administrator under both policies. At a time (but in any event
prior to the Closing Date) and in a manner reasonably satisfactory to Newco,
Wells Fargo shall communicate and make available to its officers and home office
employees the terms of its severance policies described above and shall clearly
indicate that the terms of such severance policies shall govern any terminations
of employment on account
56
<PAGE>
of the transactions contemplated hereby and supersede any prior communications
with respect thereto.
(e) Newco shall assume the liability as of the Closing Date for the
accrued and unpaid vacation and sick days with respect to the employees of Wells
Fargo or any of its Subsidiaries.
(f) Newco shall promptly reimburse Wells Fargo for the liability of
Wells Fargo and its Subsidiaries for claims incurred and unpaid prior to the
Closing Date under the WF Employee Benefit Plans which constitute welfare
benefit plans (including the related portion of any retrospective insurance
premiums, but excluding any WF Casualty and Employee Claims) to the extent such
liability (i) is not covered under a non-experience-rated insurance contract and
(ii) exceeds the amount of the related portion of any retention or reserves
(including but not limited to amounts held in a voluntary employee beneficiary
association or under an experience-rated insurance contract, and intercompany
contributions and insurance premiums paid in excess of claims paid). As of the
end of the plan year following the Closing Date, Wells Fargo shall pay to Newco
the excess portion of any retention or reserves under the WF Employee Benefit
Plans which constitute welfare benefit plans to the extent allocable to Wells
Fargo and its Subsidiaries.
(g) As soon as practicable after the Closing Date, the account
balances as of the Closing Date of the Transferred Employees held in the Borg-
Warner Security Corporation Investment Plan (the "401(k) Plan"), as equitably
-----------
adjusted for earnings thereon, additional contributions thereto with respect to
the period prior to the Closing Date and distributions therefrom through the
date of transfer, shall be transferred to a tax-qualified defined contribution
plan sponsored, maintained or contributed to by Newco ("Newco Plan"). Such
----------
transfer shall be effected in accordance with applicable law and regulations.
Newco shall make or cause to be made, and Borg-Warner or Wells Fargo, as the
case may be, shall make or cause to be made, any required filings in connection
therewith. Newco and Borg-Warner may each require, as a condition to the making
of any such transfer, evidence reasonably satisfactory to it of the qualified
status of the 401(k) Plan and Newco Plan, including, without limitation, a copy
of a favorable determination letter from the Internal Revenue Service. In
consideration of and effective upon such transfer, the Newco Plan shall assume
all liabilities to Transferred Employees under the 401(k) Plan to the extent of
the amount of assets transferred by the 401(k) Plan to the Newco Plan. Each of
the parties shall pay its own expenses in connection with such transfer. Newco
shall not assume any other obligations or liabilities arising under or
attributable to the 401(k) Plan, the same to be retained or assumed by Borg-
Warner.
57
<PAGE>
(h) Wells Fargo and Borg-Warner, on one hand, and Newco, on the other
hand, shall each promptly and reasonably cooperate in good faith with each other
to ensure that their respective obligations with respect to employee benefit
plans are timely and properly satisfied, including sharing information regarding
employees and coordinating communications with employees.
SECTION 8.22. Termination of Management Agreements. The parties hereby
------------------------------------
agree that, effective as of the Closing, all management or other advisory
agreements between (a) Wingate and any of its Affiliates, on the one hand, and
Loomis and/or Loomis Armored, on the other, and (b) Borg Warner and any of its
Affiliates, on the one hand, and Wells Fargo or any of its Subsidiaries, on the
other, in each case, shall be terminated with no further obligation of any party
thereunder other than the payment of any fees or expenses owing as of the
Closing Date.
SECTION 8.23. Use of Name. Wells Fargo and Borg-Warner agree that they
-----------
will use their best efforts to secure by December 13, 1996 the consent of Wells
Fargo & Company and Wells Fargo Bank, National Association (together, "Wells
-----
Fargo Bank"), to the use by Newco of the word "Fargo" in its name by means of a
- ----------
perpetual, royalty-free license containing covenants and restrictions that are
customary for similar licenses or, in the alternative, an acknowledgement in
writing from Wells Fargo Bank that such use of the name "Fargo" does not
infringe on any intellectual property rights of Wells Fargo Bank.
SECTION 8.24. Consents of Equity Holders. Loomis agrees that it will use
--------------------------
its best efforts to secure the consent of the Loomis Other Equity Holders to
convert or exchange their Loomis Other Equity Interests for shares of Loomis
Common Stock and contribute such shares of Loomis Common Stock to the Loomis
Stockholders Trust prior to Closing, all pursuant to the terms of the Waiver and
Termination of Purchase Agreement and Exercise Agreement, the Waiver, Exercise,
and Termination of Warrant Agreement, the Contingent Contribution Agreement and
the Optionholder Acknowledgement Agreement (collectively, the "Contingent
----------
Exercise Agreements") in the forms attached hereto as Exhibit D, as applicable.
- ------------------- ---------
Loomis agrees that it will not modify the forms of Contingent Exercise
Agreements or amend, terminate or modify any such Contingent Exercise Agreements
after the execution and delivery thereof by a Loomis Other Equity Holder, in
each case, without the prior written consent of Wells Fargo. Further, the
Loomis Stockholders Trust agrees that it will use its best efforts to secure the
agreement of each of the holders of rights under the MEGA Plan to exchange such
rights for options issued pursuant to the New MEGA Plan, without any further
liability or obligation on the part of Loomis.
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SECTION 8.25. Contribution to Reserve. On the Closing Date, the reserve
-----------------------
in respect of doubtful accounts reflected in the financial statements of Wells
Fargo shall be at least $2 million.
SECTION 8.26. Support Payment. In the event that any participant in the
---------------
MEGA Plan declines to exchange such participant's rights therein for options for
Newco Common Stock issued pursuant to the New MEGA Plan, and, thereafter, such
participant becomes entitled to any payment as a result of participation in the
MEGA Plan, the Loomis Stockholders Trust shall promptly pay to such participant
the amount of any such payment to which such participant would otherwise be
entitled from Loomis and will indemnify and hold Newco harmless from any and all
claims, damages or losses in respect of such nonexchanged MEGA Plan units.
ARTICLE IX
CLOSING CONDITIONS
------------------
SECTION 9.1. Conditions to Each Party's Obligations under this Agreement.
-----------------------------------------------------------
The respective obligations of each party under this Agreement shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated;
(b) No injunction, restraining order or other ruling or order issued
by any court of competent jurisdiction or governmental authority prohibiting the
consummation of the transactions contemplated hereby shall be in effect;
(c) Wells Fargo, the Loomis Stockholders Trust and Newco shall have
executed and delivered the Stockholders Agreement, and the Stockholders
Agreement shall be in full force and effect;
(d) the Financing shall be available and the lenders thereunder shall
have informed the parties that they are willing to fund the entire amount of the
Financing (subject to any applicable agreed-upon borrowing base) without
reservation, other than subject to the consummation of the transactions
contemplated hereby; and
(e) the consent of the Lessor under the Associates Lease to the
assignment of such Lease to Newco shall have been obtained.
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SECTION 9.2. Conditions to the Obligations of the Loomis Stockholders
--------------------------------------------------------
Trust, Loomis and Loomis Armored under this Agreement. The obligations of the
- -----------------------------------------------------
Loomis Stockholders Trust, Loomis and Loomis Armored under this Agreement shall
be further subject to the satisfaction, at or prior to the Closing Date, of the
following conditions:
(a) Each of the obligations of Borg-Warner and Wells Fargo,
respectively, required to be performed by them at or prior to the Closing
pursuant to this Agreement shall have been duly performed and complied with in
all material respects, and the representations and warranties of each of Borg-
Warner and Wells Fargo contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing as
though made at and as of the Closing (except as to any representation or
warranty which specifically relates to an earlier date), and the Loomis
Stockholders Trust shall have received a certificate to that effect signed by an
officer of each of Borg-Warner and Wells Fargo, as applicable;
(b) Any and all material Permits, consents, waivers, clearances, and
approvals of all governmental bodies which are necessary in connection with the
consummation of the transactions contemplated hereby and all third party
consents which are set forth in Section 9.2(b) of the Disclosure Schedule shall
have been obtained and there shall have not been imposed in connection with
obtaining the same any materially adverse or burdensome terms on Loomis or
Newco;
(c) The Loomis Stockholders Trust shall have received from Davis Polk
& Wardwell, counsel to Borg-Warner and Wells Fargo, an opinion substantially in
the form of Exhibit E hereto; and
---------
(d) The Loomis Stockholders Trust shall have received from the General
Counsel of Borg-Warner an opinion substantially in the form of Exhibit F hereto.
---------
SECTION 9.3. Conditions to the Obligations of Borg-Warner and Wells Fargo
-------------------------------------------------------------
under this Agreement. The obligations of each of Borg-Warner and Wells Fargo
- --------------------
under this Agreement shall be further subject to the satisfaction, at or prior
to the Closing Date, of the following conditions:
(a) Each of the obligations of the Loomis Stockholders Trust, Loomis,
Loomis Armored and Newco, respectively, required to be performed by it at or
prior to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects, and the
representations and warranties of each of the Loomis Stockholders Trust, Loomis,
Loomis Armored and Newco, respectively, contained in this Agreement shall be
true and correct in all material respects as of the date of this
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Agreement and as of the Closing Date as though made at and as of the Closing
Date (except as to any representation or warranty which specifically relates to
an earlier date), and Borg-Warner and Wells Fargo shall have received a
certificate to that effect signed by an officer or other authorized
representative of each of Loomis, Newco and the Loomis Stockholders Trust, as
applicable;
(b) Any and all material Permits, consents, waivers, clearances,
approvals and authorizations of all governmental bodies which are necessary in
connection with the consummation of the transactions contemplated hereby and all
third party consents which are set forth in Section 9.3(b) of the Disclosure
Schedule shall have been obtained and there shall have not been imposed in
connection with obtaining the same any materially adverse or burdensome terms on
Wells Fargo or Newco;
(c) Borg-Warner shall have received from Weil, Gotshal & Manges LLP,
counsel to Loomis, an opinion in substantially the form of Exhibit G hereto;
---------
(d) Borg-Warner shall have received from Prickett, Jones, Elliott,
Kristol & Schnee, counsel to the Loomis Stockholders Trust, an opinion
substantially in the form of Exhibit H hereto;
---------
(e) The Loomis Stockholder Trust and Newco shall have executed and
delivered the Loomis Excess Claims Assumption Agreement, and the Loomis Excess
Claims Assumption Agreement shall be in full force and effect; and
(f) Newco shall have established each of the Loomis Casualty and
Employee Claims Trust and the Loomis Indemnity Trust, each in form and substance
reasonably satisfactory to Wells Fargo and the Loomis Stockholders Trust.
ARTICLE X
CLOSING
-------
SECTION 10.1. Closing. The closing of the transactions contemplated by
-------
this Agreement (the "Closing") shall take place at the offices of Weil, Gotshal
-------
& Manges LLP, 767 Fifth Avenue, New York, NY 10153, subject to the satisfaction
or waiver of the conditions set forth in Article IX, on the later of (i) two
business days after the receipt of all requisite governmental approvals and (ii)
the date of the closing of the Financing, or at such other time and place and on
such other date as Borg-Warner and the Loomis Stockholders Trust shall agree
(the "Closing Date"). At the Closing:
------------
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(a) Borg-Warner and Wells Fargo shall deliver the following:
(i) the certificates described in Section 9.2(a); and
(ii) copies of such bills of sale, assignments, general
warranty deeds, and other good and sufficient instruments of transfer as
Loomis and the Loomis Stockholders Trust may reasonably request conveying
and transferring to Newco title to the Transferred Assets.
(b) the Loomis Stockholders Trust shall deliver or cause to be
delivered the following:
(i) the certificates described in Section 9.3(a);
(ii) certificate(s) representing all of the outstanding
shares of Loomis Common Stock duly endorsed or accompanied by stock powers
duly endorsed in blank or for transfer to Newco; and
(iii) the Loomis Excess Claims Assumption Agreement.
(c) Newco shall deliver the following:
(i) to Wells Fargo, a certificate for 4,900,000 shares of
Newco Common Stock registered in the name of Wells Fargo;
(ii) to Wells Fargo, an assignment and assumption
agreement with respect to the transfer of the Transferred Assets and the
assumption of the Assumed Liabilities;
(iii) to Wells Fargo, a cash payment in accordance with
Section 2.3;
(iv) to the Loomis Stockholders Trust, a certificate for
5,100,000 shares of Newco Common Stock registered in the name of the Loomis
Stockholders Trust;
(v) to the Loomis Stockholders Trust, the NOL Note;
(vi) to the Loomis Indemnity Trust, a cash payment in
accordance with Section 1.2(b);
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(vii) to the Loomis Casualty and Employee Claims Trust, a
cash payment in accordance with Section 1.2(b);
(viii) to Loomis, a capital contribution consisting of a
cash payment in the amount of the Loomis Closing Liabilities;
(ix) to Loomis, a capital contribution consisting of the
Class I beneficial interests in the Loomis Indemnity Trust and the Loomis
Casualty and Employee Claims Trust; and
(x) to the Loomis Stockholders Trust, an assignment of
the Class II beneficial interests in the Loomis Indemnity Trust and the
Loomis Casualty and Employee Claims Trust.
(d) Loomis shall redeem the Series I Preferred Stock in accordance
with Section 1.4.
ARTICLE XI
TERMINATION AND ABANDONMENT
---------------------------
SECTION 11.1. Termination. This Agreement may be terminated and the
-----------
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) by mutual consent of Borg-Warner and the Loomis Stockholders
Trust; or
(b) by either of Borg-Warner and the Loomis Stockholders Trust:
(i) if there shall have been a breach of any representation,
warranty, covenant or agreement on the part of Borg-Warner or Wells Fargo
on the one hand, or Loomis, Loomis Armored or the Loomis Stockholders Trust
on the other, set forth in this Agreement which breach would result in a
Material Adverse Effect on Wells Fargo or Loomis, respectively, and which
shall not have been cured within 20 business days following receipt by the
breaching party of notice of such breach; provided, however, that such 20
-------- -------
business day period shall be extended so long as the breaching party shall
use its best efforts to cure such breach and such breach is capable of
being cured prior to the Closing;
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(ii) if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action (which order, decree or
ruling the parties hereto shall use their best efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable; or
(iii) if the Closing Date shall not have occurred on or
before April 1, 1997; provided, however, that the right to terminate this
-------- -------
Agreement shall not be available to any party whose material breach of this
Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date.
SECTION 11.2. Procedure and Effect of Termination. In the event of
-----------------------------------
termination pursuant to Section 11.1, written notice thereof shall forthwith be
given to the other parties to this Agreement and this Agreement shall terminate
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein:
(a) upon request therefor, each party will redeliver all documents,
work papers and other material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same; and
(b) no party hereto shall have any liability or further obligation to
any other party to this Agreement resulting from such termination except (i)
that the provisions of Sections 8.5 and 8.7(b) (but, in the case of Section
8.7(b), only if there has been a breach of Section 8.7(a) prior to such
termination) and this Section 11.2 shall remain in full force and effect and
(ii) no party waives any claim or right against a breaching party to the extent
that such termination results from (x) a knowing material breach by a party
hereto of any of its covenants or agreements set forth in this Agreement or (y)
a knowing material breach by a party hereto of any representation or warranty
set forth in this Agreement, but only if such breach shall have occurred or was
otherwise existing as of the date of this Agreement.
ARTICLE XII
INDEMNIFICATION
---------------
SECTION 12.1. Environmental Indemnification.
-----------------------------
(a) From and after the Closing until the date set forth in clause (d)
below,
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(i) Borg-Warner shall indemnify, pay, reimburse, defend and
otherwise hold harmless Newco and its Subsidiaries (collectively, the
"Newco Parties") from and against any and all reasonable costs and expenses
--------------
incurred by Newco to (x) remove or upgrade any USTs on the Wells Fargo
Sites as necessary to bring such USTs into compliance, by December 31,
1998, with the UST Rules, (y) investigate, monitor, remediate or otherwise
clean up any Hazardous Materials Released on or prior to the Closing or in
conjunction with actions required pursuant to clause (x) immediately above,
in each case, from any USTs on the Wells Fargo Sites with respect to which
UST Closure has not been obtained prior to Closing, and (z) investigate,
monitor, remediate or otherwise address any Known Environmental Condition
existing as of the date of this Agreement and set forth in Section 4.20(a)
of the Disclosure Schedule; and
(ii) the Loomis Stockholders Trust shall indemnify, pay,
reimburse, defend and otherwise hold harmless the Newco Parties from and
against any and all reasonable costs and expenses incurred by Newco to (x)
remove or upgrade any USTs on the Loomis Sites as necessary to bring such
USTs into compliance, by December 31, 1998, with the UST Rules, (y)
investigate, monitor, remediate or otherwise clean up any Hazardous
Materials Released on or prior to the Closing or in conjunction with
actions required by clause (x) immediately above, in each case, from any
USTs on the Loomis Sites with respect to which UST Closure has not been
obtained prior to the Closing, and (z) investigate, monitor, remediate or
otherwise address any Known Environmental Condition existing as of the date
of this Agreement and disclosed in Section 5.22(a) of the Disclosure
Schedule.
(b) Any removal, upgrade, investigation, monitoring, remedial
or other actions undertaken pursuant to Section 12.1(a)(i)(x) or Section
12.1(a)(ii)(x) shall be performed in a reasonable and cost-effective manner,
taking into account the current use of the site, and shall be limited to those
actions necessary to comply with the UST Rules and, if applicable, to receive
UST Closure and, with respect to any remedial, monitoring, investigation or
clean-up activities undertaken pursuant to Section 12.1(a)(i)(y) or (z) or
Section 12.1(a)(ii)(y) or (z), shall be limited to those activities required by
applicable regulatory authorities to comply with Environmental Laws and shall be
performed in a reasonable and cost-effective manner, taking into account the
current use of the site. In the event Newco shall cause the removal of any UST
that could otherwise be upgraded pursuant to Section 12.1(a) in a reasonable and
cost-effective manner, Borg-Warner or the Loomis Stockholders Trust, as the case
may be, shall only be liable for that amount which would have been necessary (as
provided in the prior sentence) to upgrade such UST (including, if necessary,
for any remedial actions which would have been necessary in connection with such
upgrade).
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(c) Newco agrees to (i) use reasonable efforts to perform any
investigatory, remedial or other actions in a manner which will permit Newco to
recover the maximum available funds under any applicable state UST funds and any
applicable insurance policies, (ii) apply for any reimbursements or payments
from such funds or policies on a timely basis and (iii) promptly reimburse Wells
Fargo or the Loomis Stockholders Trust, as applicable, for any amounts received
from such funds or policies.
(d) The respective obligations of Borg-Warner and the Loomis
Stockholders Trust pursuant to the provisions set forth in Section 12.1(a) shall
survive until the earlier to occur of (i) December 31, 1998 and (ii) the first
anniversary of the initial public offering of Newco Common Stock. Thereafter,
except as set forth in the next sentence, each of Newco, Wells Fargo and the
Loomis Stockholders Trust hereby waives any contribution or similar rights any
may have against the others, whether in law or in equity, with respect to
environmental matters covered by this Agreement. To the extent there are
remedial activities in process as of the date the indemnification obligation
terminates pursuant to this clause (d), Newco shall provide Borg-Warner or the
Loomis Stockholders Trust, as applicable, with a written estimate describing in
reasonable detail the remaining costs and expenses expected to be incurred by
Newco which would otherwise have been covered by this Section 12.1. Such costs
and expenses may be satisfied in cash (subject to a present value discount rate
equal to 8%) or pursuant to an irrevocable letter of credit issued in the full
amount of such costs and expenses; provided, however, that prior to the issuance
-------- -------
of any such letter of credit, Borg-Warner and the Loomis Stockholders Trust
shall agree upon the period of time in which such pending remedial activities
are reasonably expected to be completed and such letter of credit shall be
maintained without interruption until the expiration of such period. Except as
otherwise provided in the preceding sentence, the procedure for payment of such
estimated amounts, or objections thereto, shall be addressed as set forth in
clause (e) below.
(e) As costs and expenses are incurred by Newco from time to time
after the Closing pursuant to this Section 12.1, Newco shall provide Borg-Warner
or the Loomis Stockholders Trust, as applicable, with a written statement
describing in reasonable detail such costs and expenses incurred or estimated in
good faith to be incurred by Newco. In the event that Borg-Warner or the Loomis
Stockholders Trust, as applicable, has no objections to such statement, such
party shall pay Newco the amount set forth in such statement within 60 days of
receipt of such statement. In the event that Borg-Warner or the Loomis
Stockholders Trust, as applicable, objects to any such costs and expenses set
forth in any statement, such party shall, within 30 days of receipt of such
statement, submit to Newco a written notice of objection thereto stating in
reasonable detail the reason for such objection. In the event that such party
and Newco cannot come to a mutual agreement regarding the costs and expenses
objected to by such party within 30 days after the receipt by Newco of written
notice
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objecting to such costs and expenses, the matter shall be settled exclusively by
arbitration in the manner set forth in Section 12.5(c) hereof. Any amounts due
to Newco as a result of such arbitration shall be paid promptly following the
conclusion of such arbitration.
SECTION 12.2. Accounts Receivable Indemnification. From and after the
-----------------------------------
Closing, Borg-Warner shall indemnify, pay, reimburse, defend and otherwise hold
harmless the Loomis Stockholders Trust from and against any Accounts Receivable
Reserve Excess; provided, however, that notwithstanding anything in this
-------- -------
Agreement to the contrary, in no event will Borg-Warner be liable hereunder for
any amount of Accounts Receivable Reserve Excess greater than $500,000 in the
aggregate. As used in this Agreement, "Accounts Receivable Reserve Excess"
----------------------------------
means the amount in excess of $2,000,000, if any, of gross accounts receivable
of Wells Fargo reflected on the WF Final Balance Sheet ("WF Accounts
-----------
Receivable") that are not collected within 180 days after the Closing Date,
- ----------
minus any amounts previously paid by Borg-Warner to the Loomis Stockholders
- -----
Trust for Accounts Receivable Reserve Excess pursuant to this Section 12.2.
Newco hereby agrees to pursue the collection of the WF Accounts Receivable in
the same manner and at the same level of diligence as Newco shall pursue the
collection of its other similar accounts receivable. Not later than 195 days
after the Closing Date, Newco shall give notice, certified by the Chief
Financial Officer of Newco (the "Receivables Notice"), to Borg-Warner and the
------------------
Loomis Stockholders Trust setting forth the collection of WF Accounts Receivable
through such 180th day and the amount, if any, of any Accounts Receivable
Reserve Excess, together with a written description in reasonable detail of the
calculation thereof. Following the date of such Receivables Notice, Borg-Warner
shall have 30 days within which to (i) pay the amount of any Accounts Receivable
Reserve Excess set forth in the Receivables Notice to the Loomis Stockholders
Trust or (ii) provide Newco and the Loomis Stockholders Trust written objection
(the "Receivables Objection") to the calculation of the amount of Accounts
---------------------
Receivable Reserve Excess, if any. The Loomis Stockholders Trust shall then have
30 days to review and respond in writing to the Receivables Objection. If Borg-
Warner and the Loomis Stockholders Trust are unable to resolve any disagreements
with respect to the determination of the Accounts Receivable Reserve Excess
within 30 days following the Loomis Stockholders Trust's response to the
Receivables Objection, Borg-Warner may refer their remaining differences to the
CPA Firm, which shall, acting as arbitrators, determine, only with respect to
the remaining differences so submitted, whether and to what extent the Accounts
Receivable Reserve Excess set forth in the Receivables Notice requires
adjustment. The CPA Firm's determination shall be delivered in writing to Borg-
Warner and the Loomis Stockholders Trust and shall be conclusive and binding
upon Borg-Warner and the Loomis Stockholders Trust. In the event that the CPA
Firm determines that any amount is due and owing to the Loomis Stockholders
Trust pursuant to this Section 12.2, or Borg-Warner and the representative for
the Loomis Stockholders Trust agree as to any amount due and owing pursuant
hereto, such amount shall be paid promptly to the Loomis Stockholders Trust by
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wire transfer to an account designated by the Loomis Stockholders Trust. The
fees and disbursements of the CPA Firm shall be paid (x) by Borg-Warner if the
difference between Borg-Warner's calculation of the Accounts Receivable Reserve
Excess and the CPA Firm's calculation thereof is greater than the difference
between the Loomis Stockholders Trust's calculation of the Accounts Receivables
Reserve Excess and the CPA Firm's calculation thereof and (y) by the Loomis
Stockholders Trust if the difference between the Loomis Stockholders Trust's
calculation of the Accounts Receivable Reserve Excess and the CPA Firm's
calculation thereof is greater than the difference between Borg-Warner's
calculation of the Accounts Receivable Reserve Excess and the CPA Firm's
calculation. Borg-Warner and Newco shall make readily available to the CPA Firm
all relevant books and records and any work papers relating to the Accounts
Receivable Reserve Excess calculation and all other items reasonably requested
by the CPA Firm and shall, at the request of the CPA Firm, request that Deloitte
make available its work papers as permitted under relevant professional
standards.
SECTION 12.3. General Indemnification.
-----------------------
(a) After the Closing, subject to Sections 12.6(a) and 13.12 hereof,
Borg-Warner and Wells Fargo, jointly and severally, will indemnify, defend and
hold harmless the Newco Parties from and against any and all Indemnifiable
Losses to the extent relating to, resulting from or arising out of any breach by
Borg-Warner or Wells Fargo of any of their respective representations,
warranties, covenants or agreements contained in Article IV (except for Section
4.20, which indemnity shall be governed exclusively by Section 12.1 hereof;
Section 4.13, which indemnity shall be governed exclusively by Section 12.4; and
any breach of a representation or warranty by Borg-Warner or Wells Fargo
relating to WF Accounts Receivable, which indemnity shall be governed
exclusively by Section 12.2) and Article VIII hereof.
(b) After the Closing, subject to Sections 12.6(b) and 13.12 hereof,
the Loomis Stockholders Trust will indemnify, defend and hold harmless the Newco
Parties from and against any and all Indemnifiable Losses to the extent relating
to, resulting from or arising out of any breach by Loomis, Loomis Armored, or
the Loomis Stockholders Trust of any of their respective representations,
warranties, covenants or agreements contained in Articles V (except for Section
5.22, which indemnity shall be governed exclusively by Section 12.1 hereof; and
Section 5.14, which indemnity shall be governed exclusively by Section 12.4),
Article VI and Article VIII hereof.
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SECTION 12.4. Tax Indemnification.
-------------------
(a) Subject to Section 12.4(c), after the Closing, Borg-Warner and
Wells Fargo, jointly and severally, will indemnify, defend and hold harmless the
Newco Parties from and against any and all Wells Fargo Indemnifiable Taxes and
the Indemnifiable Losses relating to, resulting from or arising out of such
Wells Fargo Indemnifiable Taxes and any and all Indemnifiable Losses to the
extent relating to, resulting from or arising out of any breach by Borg-Warner
or Wells Fargo of the representations and warranties set forth in Section
4.13(b); provided that neither Borg-Warner nor Wells Fargo shall have any
--------
obligation to make any payment to any of the Newco Parties pursuant to this
Section 12.4(a) unless and until the aggregate amount of all claims arising
pursuant hereto exceeds $250,000 and then only for the amount of such excess.
(b) Subject to Section 12.4(c), after the Closing, the Loomis
Stockholders Trust will indemnify, defend and hold harmless the Newco Parties
from and against any and all Loomis Excluded Taxes and the Indemnifiable Losses
relating to, resulting from or arising out of such Loomis Excluded Taxes and any
and all Indemnifiable Losses to the extent relating to, resulting from or
arising out of any breach by Loomis or Loomis Armored of the representations and
warranties set forth in Section 5.14(d); provided that the Loomis Stockholders
--------
Trust shall have no obligation to make any payment to any of the Newco Parties
pursuant to this Section 12.4(b) unless and until the aggregate amount of all
claims arising pursuant hereto exceeds $250,000 and then only for the amount of
such excess.
(c) The indemnification obligations set forth in this Section 12.4
shall survive until the earlier of the second anniversary of the Closing Date
and the consummation of the initial public offering of Newco Common Stock;
provided, however, that any claim asserted by the relevant taxing authority
- -------- -------
prior to such time shall survive until paid or until there is a Final
Determination that no portion of such claim is owed to such taxing authority. In
the event that Borg-Warner or the Loomis Stockholders Trust, as applicable,
objects to the calculation of any such indemnification obligations, such party
shall, within 30 days of receipt of such claim, submit to Newco a written notice
of objection thereto stating in reasonable detail the reason for such objection.
In the event that the such party and Newco cannot come to a mutual agreement
regarding the claim objected to by such party within 30 days after the receipt
by Newco of written notice objecting to such claim, the matter shall be settled
exclusively by arbitration in the manner set forth in Section 12.5(c) hereof.
Any amounts due to Newco as a result of such arbitration shall be paid promptly
following the conclusion of such arbitration.
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SECTION 12.5. Defense and Payment of Claims.
-----------------------------
(a) If Newco receives notice of the assertion or commencement of any
Third Party Claim which is subject to indemnification under this Agreement,
Newco will give Borg-Warner and the Loomis Stockholders Trust reasonably prompt
written notice thereof. Such notice will (i) describe the Third Party Claim in
reasonable detail, (ii) include copies of all material written evidence thereof
and (iii) indicate the estimated amount, if reasonably practicable, of the cost,
expense, loss or diminution in value that has been or may be sustained by Newco
as a result of such Third Party Claim. The indemnifying party shall have the
right to participate in, or, by giving written notice to Newco, to assume and
control the defense of any Third Party Claim at such indemnifying party's own
expense and by such indemnifying party's own counsel (reasonably satisfactory to
Newco), and Newco will, and, to the extent that such Third Party Claim relates
to acts or omissions of Wells Fargo prior to the Closing, Borg-Warner and Wells
Fargo will, cooperate in good faith in such defense. If an indemnifying party
shall not assume the defense of a Third Party Claim or shall not diligently
defend a Third Party Claim so assumed by such indemnifying party, Newco shall
defend such Third Party Claims and may settle such claims at the discretion of
the Board of Directors of Newco. The indemnifying party shall not be liable for
any settlement of any Third Party Claim effected without its consent, which
shall not be unreasonably withheld. Within thirty days after the receipt of
notice from Newco of such settlement or a judgment in respect of such claim
which is final and nonappealable or as to which a decision by Newco and the
indemnifying party has been made not to undertake any further appeal, the
indemnifying party shall deliver cash payment to Newco in the amount of such
Indemnifiable Loss.
(b) Newco will give Borg-Warner and the Loomis Stockholders Trust
reasonably prompt notice of the incurrence of any Indemnifiable Loss which does
not result from a Third Party Claim (a "Direct Claim"). Any such notice will
------------
(i) describe the Direct Claim in reasonable detail, (ii) include copies of all
material written evidence thereof and (iii) indicate the estimated amount, if
reasonably practicable, of the Indemnifiable Loss that has been or may be
sustained by the Loomis Parties or the Wells Fargo Parties, as the case may be,
as a result of such Direct Claim. Within thirty days after the receipt of the
notice of a Direct Claim, the Loomis Stockholders Trust or Borg-Warner, as the
case may be, shall deliver cash payment to Newco in the amount set forth in such
notice, unless the procedures for arbitration set forth in Section 12.5(c) are
elected by such party for any disputed Indemnifiable Loss as a result of a
Direct Claim within such thirty days.
(c) Subject to Section 12.6 hereof, in the event that either Borg-
Warner or the Loomis Stockholders Trust disagree as to the amount of any
Indemnifiable Loss which arises out of a Direct Claim or in connection with
Section 12.1, 12.3 or 12.4 hereof, at the
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request of either the Loomis Stockholders Trust or Borg-Warner, as the case may
be, the matter shall be settled exclusively by arbitration held in such place as
is determined by the arbitrators, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. The arbitration shall be heard before
three arbitrators, each experienced in the matters at issue, one to be selected
by the Loomis Stockholders Trust or Borg-Warner, as the case may be, one to be
selected by Newco and the third to be selected by the first two arbitrators. The
arbitrators shall apply the law of the State of New York applicable to contracts
made and to be performed entirely in such state (without giving effect to
conflicts of law provisions thereof) in resolving any such dispute. The
arbitrators shall not have the power or authority to alter, modify, amend, add
to or subtract from any term or provision of this Agreement, nor to grant any
injunctive relief, including interim relief, of any nature. In all other
respects, the Commercial Arbitration Rules of the American Arbitration
Association shall govern the arbitration. The parties acknowledge and agree that
the decision of the arbitrators pursuant to this Section 12.5(c) shall be final
and nonappealable and may be enforced by either the Loomis Stockholders Trust or
Borg-Warner, as the case may be, or Newco in any court of record having
jurisdiction over the subject matter or over any of the parties to this
Agreement. Any amount awarded by the arbitrator pursuant to this Section 12.5
shall be paid promptly to the appropriate party by wire transfer to an account
designated by such party.
SECTION 12.6. Limitation of Liability.
-----------------------
(a) Newco shall not be entitled to make a claim pursuant to Section
12.3 against Borg-Warner or Wells Fargo for any Indemnifiable Losses unless and
until the aggregate amount of such Indemnifiable Losses exceeds $500,000 and
then only in the amount of such excess; provided, however, that in no event
-------- -------
shall Borg-Warner and Wells Fargo, together, be liable pursuant to Section 12.3
for any Indemnifiable Losses in excess of $5,000,000 in the aggregate.
(b) Newco shall not be entitled to make a claim pursuant to Section
12.3 against the Loomis Stockholders Trust for any Indemnifiable Losses unless
and until the aggregate amount of such Indemnifiable Losses exceeds $500,000 and
then only in the amount of such excess; provided, however, that in no event
-------- -------
shall the Loomis Stockholders Trust be liable pursuant to Section 12.3 for any
Indemnifiable Losses in excess of $5,000,000 in the aggregate; provided further
-------- -------
that the limitations set forth in this Section 12.6(b) shall not apply to any
Indemnifiable Losses incurred by Newco pursuant to Section 8.26.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
SECTION 13.1. Amendment and Modification. This Agreement may be amended
--------------------------
by a written instrument signed by Loomis, the Loomis Stockholders Trust, Borg-
Warner and Wells Fargo and, as applicable, approved by action taken by their
respective Boards of Directors, at any time.
SECTION 13.2. Waiver of Compliance; Consents. Any failure of Loomis,
------------------------------
Loomis Armored or the Loomis Stockholders Trust, on the one hand, or Borg-Warner
or Wells Fargo, on the other hand, to comply with any obligation, covenant,
agreement or condition contained herein may be waived in writing by Borg-Warner
or the Loomis Stockholders Trust, respectively, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
other failure.
SECTION 13.3. Validity. The invalidity or unenforceability of any
--------
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 13.4. Expenses and Obligations. The filing fees incurred in
------------------------
connection with the filings or registrations with the DOJ and FTC pursuant to
the HSR Act shall be borne equally by Wells Fargo and Loomis. Except as
otherwise provided in this Agreement, Newco shall pay or otherwise be
responsible for all Transaction Costs incurred by Loomis, Borg-Warner or their
Subsidiaries; provided that Newco shall not pay or otherwise be responsible for
--------
any costs or expenses related to any fairness opinion to be obtained by Borg-
Warner in connection with the consummation of the transactions contemplated
hereby.
SECTION 13.5. Parties in Interest. This Agreement shall be binding upon
-------------------
and, except as provided below, inure solely to the benefit of each party hereto,
and, nothing in this Agreement, except as set forth below, express or implied,
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 13.6. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given upon the earlier of delivery
thereof if by hand or upon receipt if sent by mail (registered or certified
mail, postage prepaid, return receipt requested) or on the second next business
day after deposit if sent by a recognized overnight delivery
72
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service or upon transmission if sent by telecopy or facsimile transmission (with
request of assurance of receipt in a manner customary for communication of such
type) as follows:
(a) If to Loomis, to:
Loomis Holding Corporation
c/o Wingate Partners, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Facsimile No.: 214/871-8799
with copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby, Esq.
Facsimile No.: 214/746-7777
(b) If to Borg-Warner or Wells Fargo, to:
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: J. Joe Adorjan
Facsimile No.: 312/322-8629
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William Rosoff, Esq.
Facsimile No.: 212/450-5954
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<PAGE>
(c) If to the Loomis Stockholders Trust, to:
Wingate Partners, L.P.
750 North St. Paul
Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Facsimile No.: 214/871-8799
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201-6950
Attention: Mary R. Korby, Esq.
Facsimile No.: 214/746-7777
SECTION 13.7. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York without regard to
the conflicts-of-laws rules thereof.
SECTION 13.8. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
SECTION 13.9. Headings. The article and section headings contained in
--------
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 13.10. Entire Agreement. This Agreement, the Loomis Indemnity
----------------
Trust Agreement, the Loomis Casualty and Employee Claims Trust Agreement, the
Loomis Excess Claims Assumption Agreement, the Stockholders Agreement and the
Disclosure Schedule embody the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein or therein. There are
no agreements, representations, warranties or covenants in respect of the
subject matter contained herein or therein other than those expressly set forth
herein or therein. This Agreement, the Loomis Indemnity Trust Agreement, the
Loomis Casualty and Employee Claims Trust Agreement, the Loomis Excess Claims
Assumption Agreement, the Stockholders Agreement and the Disclosure Schedule
74
<PAGE>
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
SECTION 13.11. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise.
SECTION 13.12. Termination of Representations and Warranties. All
---------------------------------------------
representations and warranties of Borg-Warner, Wells Fargo, Newco, the Loomis
Stockholders Trust, Loomis and Loomis Armored shall survive the Closing until
the date which is 30 days following the date of delivery to Newco, Borg-Warner
and the Loomis Stockholders Trust of the unqualified report by Newco's
independent auditor on the audited consolidated balance sheet of Newco as of
December 31, 1997, together with the related audited consolidated statements of
income, stockholders' equity and changes in cash flows for the fiscal year ended
December 31, 1997 (the "Newco Audited Financials"); provided, that the
------------------------ --------
representations and warranties set forth in Sections 4.13(a), 4.20, 5.14(a),
(b), (c) and (e) and 5.22 and any representation and warranty of Borg-Warner or
Wells Fargo relating to WF Accounts Receivable shall terminate on the Closing
Date and provided further that the representations and warranties set forth in
Section 4.13(b) and 5.14(d) shall survive for the period specified in Section
12.4(c). Newco agrees that is shall cause its independent auditor to deliver
copies of the Newco Audited Financials to Borg-Warner and the Loomis
Stockholders Trust simultaneously with the delivery thereof to Newco. Any claims
for indemnification with respect to any of such matters which are not asserted
by notice given to the indemnifying party relating thereto within such specified
period of survival may not be pursued and are hereby irrevocably waived after
such time. Any claims for indemnification asserted within such period of
survival as herein provided will be timely made for purposes hereof, and the
representations and warranties which are the subject of such claims will be
deemed to survive but only with respect to such claims and only until such
claims are resolved in accordance with the indemnification procedures set forth
herein.
SECTION 13.13. Bulk Sales. Newco waives compliance by Wells Fargo with
----------
the provisions of the so-called bulk sales Law of any jurisdiction; provided,
--------
however, that Borg-Warner and Wells Fargo will jointly and severally indemnify,
- -------
defend and hold harmless Newco and its Affiliates in respect of any
Indemnifiable Loss relating to, resulting from or arising out of Wells Fargo's
failure to so comply with such Laws in connection with the transactions
contemplated by this Agreement.
SECTION 13.14. Exclusive Remedy. Each party hereto agrees that, to the
----------------
fullest extent permitted by law, such party's sole and exclusive remedy after
the Closing with respect to any claim or cause of action asserted by it relating
to or arising from breaches of the representations and warranties of any other
party contained in this Agreement or the
75
<PAGE>
covenants of any other party contained in Article VIII of this Agreement shall
be limited to its rights under, and shall be subject to the terms and conditions
of, this Agreement.
SECTION 13.15. Jurisdiction and Venue. The parties hereto agree that any
----------------------
suit, action or proceeding arising out of or relating to this Agreement shall be
instituted only in the United States District Court for the District of New
York, United States of America or, in the absence of jurisdiction, the Supreme
Court of New York. Each party waives any objection it may have now or hereafter
to the laying of the venue of any such suit, action or proceeding, and
irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding.
[The remainder of this page is intentionally left blank]
76
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
signed on its behalf by its duly authorized officers, all as of the day and year
first above written.
BORG-WARNER SECURITY CORPORATION
By: /s/ Timothy M Wood
-----------------------------------
Name: Timothy M. Wood
---------------------------------
Title: Vice President
---------------------------------
WELLS FARGO ARMORED SERVICE CORPORATION
By: /s/ Timothy M. Wood
-------------------------------------
Name: Timothy M. Wood
-----------------------------------
Title: Vice President
-----------------------------------
LOOMIS-WELLS CORPORATION
By: /s/ F.B Hegi Jr
-------------------------------------
Name: Frederick B. Hegi, Jr.
------------------------------------
Title: President
-----------------------------------
LOOMIS HOLDING CORPORATION
By: /s/ F.B Hegi Jr
---------------------------------------
Name: Frederick B. Hegi, Jr.
Title: Chairman and Chief Executive Officer
------------------------------------
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<PAGE>
LOOMIS ARMORED INC.
By: /s/ F B Hegi Jr
---------------------------
Name: Frederick B Hegi, Jr
--------------------------
Title: Chairman
-------------------------
LOOMIS STOCKHOLDERS TRUST
By: /s/ F B Hegi Jr
---------------------------
Name: Frederick B. Hegi, Jr
-------------------------
Title: Manager
------------------------
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APPENDIX A
Defined Terms
-------------
For purposes of the Agreement and the Disclosure Schedule, the term:
"Accounts Receivable Reserve Excess" shall have the meaning set forth
in Section 12.2.
"Acquisition Proposal" shall have the meaning set forth in Section
8.7(a).
"Active Employees" shall have the meaning set forth in Section
8.21(a).
"Adjusted Working Capital" shall have the meaning set forth in Section
3.1(c).
"Administrative Assistance" shall have the meaning set forth in
Section 8.17.
"Affiliate" shall mean a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, another Person; provided, that for purposes of this Agreement,
--------
Newco shall not be an Affiliate of any other party hereto.
"Agreement" shall have the meaning set forth in the introductory
paragraph.
"Amortizable Intangibles" shall have the meaning set forth in Section
8.13(a).
"Armored Common Stock" shall have the meaning set forth in Section
5.4(b).
"Associates Lease" shall mean that certain Truck Lease Agreement,
dated as of June 16, 1993, between Associates Leasing, Inc. and Wells Fargo.
"Assumed Liabilities" shall have the meaning set forth in Section
2.1(b).
"Basis Schedule" shall have the meaning set forth in Section 8.13(a).
"Borg-Warner" shall have the meaning set forth in the introductory
paragraph.
"Business Trust Agreement" shall have the meaning set forth in the
Recitals.
<PAGE>
"Closing" shall have the meaning set forth in Section 10.1.
"Closing Balance Sheets" shall have the meaning set forth in Section
3.1(a).
"Closing Date" shall have the meaning set forth in Section 10.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Transaction" shall have the meaning set forth in Section
8.7(b).
"Contingent Exercise Agreements" shall have the meaning set forth in
Section 8.24.
"Contract" means any contract, agreement, indenture, note, bond, loan,
instrument, deed of trust, lease, license, conditional sales contract, mortgage,
license, franchise, insurance policy, commitment or other arrangement or
agreement.
"CPA Firm" means an independent public accounting firm of national
prominence that is unanimously approved by the executive committee of Newco or,
failing such approval, chosen by Deloitte and E&Y.
"Deloitte" shall have the meaning set forth in Section 3.1(a).
"Designated Transferred Assets" shall have the meaning set forth in
Section 2.1(a).
"Direct Claim" shall have the meaning set forth in Section 12.5(b).
"Disclosure Schedule" shall mean the Disclosure Schedule delivered by
Loomis, Loomis Armored and the Loomis Stockholders Trust, on the one hand, and
Borg-Warner and Wells Fargo, on the other hand, at or prior to the execution of
this Agreement.
"DOJ" shall have the meaning set forth in Section 4.5.
"E&Y" shall have the meaning set forth in Section 3.1(a).
"Environmental Claim" means any notice of violation, action, claim,
Environmental Lien, demand, abatement or other Order or direction (conditional
or otherwise) by any governmental authority or any other person for personal
injury (including
2
<PAGE>
sickness, disease or death), tangible or intangible property damage, damage to
the environment (including natural resources), nuisance, pollution,
contamination, trespass or other adverse effects on the environment, or for
fines, penalties or restrictions resulting from or based upon (i) the existence,
or the continuation of the existence, of a Release (including, without
limitation, sudden or non-sudden accidental or non-accidental Releases) of, or
exposure to, any Hazardous Material, odor or audible noise in, into or onto the
environment (including, without limitation, the air, soil, surface water or
groundwater) in quantities or at levels that would require remediation under the
Environmental Laws; (ii) the transportation, storage, treatment or disposal of
Hazardous Materials on or prior to the Closing Date; or (iii) the violation, or
alleged violation, of any Environmental Law, Order or Environmental Permit of or
from any governmental authority relating to environmental matters in existence
on the Closing Date.
"Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions,
claims, costs and expenses (including, without limitation, fees, disbursements
and expenses of legal counsel, experts, engineers and consultants and the costs
of investigation and feasibility studies and Remedial Action) of or relating to
Wells-Fargo and/or Loomis or arising in connection with or relating to the
business, the Transferred Assets or activities or operations conducted at any
property now or previously owned, licensed, or leased by Wells-Fargo and/or
Loomis, respectively, arising from or under any (i) Environmental Law,
Environmental Claim or (ii) Contract in existence as of the Closing Date with
any governmental authority or other Person relating to any Environmental Law.
"Environmental Law" means any applicable federal, state, local, or
foreign law (including common law), statute, code, ordinance, rule, regulation
or other requirement relating to the environment, or natural resources, or
public or employee health and safety and includes, but is not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
------
42 U.S.C. (S) 9601 et seq., the Hazardous Materials Transportation Act, 49
-- ----
U.S.C. (S) 1801 et seq., the Resource Conservation and Recovery Act
-- ----
("RCRA"), 42 U.S.C. (S) 6901 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et
---- -- ---- --
seq., the Clean Air Act, 33 U.S.C. (S) 2601 et seq., the Toxic Substances
- ---- -- ----
Control Act, 15 U.S.C. (S) 2601 et seq., the Federal Insecticide, Fungicide, and
-- ----
Rodenticide Act, 7 U.S.C. (S) 136 et seq., the Oil Pollution Act of 1990, 33
-- ----
U.S.C. (S) 2701 et seq., and Federal Safe Drinking Water Act 42 U.S.C. (S) 300 F
-- ----
et seq., as such laws have been amended or supplemented, on or prior to the
- -- ----
Closing Date and the regulations promulgated pursuant thereto on or prior to the
Closing Date, and all analogous state or local statutes as in effect on or prior
to the Closing Date.
3
<PAGE>
"Environmental Permit" means any permit, approval, authorization,
license, variance, registration, or permission required under any applicable
Environmental Law or any Order relating to any Environmental Law.
"ERISA" shall have the meaning set forth in Section 4.12(a).
"Excluded Assets" shall have the meaning set forth in Section 2.1(a).
"Excluded Liabilities" shall have the meaning set forth in Section
2.1(b).
"Final Determination" shall have the meaning set forth in Section
8.13(d)
"Financial Advisory Fees" shall have the meaning set forth in Section
1.2(c).
"Financing" shall have the meaning set forth in Section 8.10.
"FTC" shall have the meaning set forth in Section 4.5.
"GAAP" shall have the meaning set forth in Section 4.6.
"Hazardous Material" means any substance, material or waste which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous substance," "restricted hazardous waste," "contaminant,"
"toxic waste" or "toxic substance" under any provision of, or otherwise
regulated under, any Environmental Law, and includes, but is not limited to,
petroleum, petroleum products (including crude oil and any fraction thereof),
asbestos, asbestos-containing materials, urea formaldehyde and polychlorinated
biphenyls.
"HSR Act" shall have the meaning set forth in Section 4.5.
"Indemnifiable Losses" means any and all damages, losses, liabilities,
obligations, costs and expenses, and any and all claims, demands or suits (by
any Person), including without limitation the reasonable costs and expenses of
any and all actions, suits, proceedings, demands, assessments, judgments,
settlements and compromises relating thereto and including reasonable attorneys'
fees and expert consultant and engineering fees and expenses in connection
therewith.
"Intellectual Property" shall have the meaning set forth in Section
4.16.
4
<PAGE>
"knowledge" of Borg-Warner or Wells Fargo shall mean the actual
knowledge, after due inquiry, of J. Joe Adorjan, Timothy M. Wood, John D.
O'Brien and each of the executive officers of Wells Fargo, and "knowledge" of
Loomis or Loomis Armored shall mean the knowledge, after due inquiry, of
Frederick B. Hegi, Jr., Jay I. Applebaum and each of the executive officers of
Loomis.
"Known Environmental Conditions" shall have the meaning set forth in
Section 4.20(a).
"Law" means any domestic or foreign statute, law, ordinance, rule or
regulation of any domestic or foreign court, government, governmental agency,
authority, entity or instrumentality.
"Legal Proceedings" means any judicial, administrative or arbitral
actions, suits, proceedings (public or private) or governmental proceedings.
"Liens" shall have the meaning set forth in Section 4.10.
"Litigation" shall have the meaning set forth in Section 4.9.
"Loomis" shall have the meaning set forth in the introductory
paragraph.
"Loomis Armored" shall have the meaning set forth in the introductory
paragraph.
"Loomis Casualty and Employee Claims" shall have the meaning set forth
in Section 1.2(c).
"Loomis Casualty and Employee Claims Trust" shall have the meaning set
forth in Section 1.2(b).
"Loomis Casualty Insurance Deposits" mean all deposits with respect to
the casualty insurance policy or policies with CIGNA in effect immediately prior
to Closing in respect of the Loomis Casualty and Employee Claims, whether such
deposits are, for accounting purposes, reported as cash or a reduction of
insurance reserves.
"Loomis Class B Common Stock" shall have the meaning set forth in
Section 5.4(a).
5
<PAGE>
"Loomis Closing Balance Sheet" shall have the meaning set forth in
Section 3.1(a).
"Loomis Closing Liabilities" shall have the meaning set forth in
Section 1.2(c).
"Loomis Common Stock" shall have the meaning set forth in the
Recitals.
"Loomis Employee Benefit Plans" shall have the meaning set forth in
Section 5.13(a).
"Loomis Excess Claims Assumption Agreement" shall have the meaning set
forth in Section 1.2(c).
"Loomis Excess Payment" shall have the meaning set forth in Section
1.2(c).
"Loomis Excluded Taxes" shall mean (A) any liability for Taxes with
respect to any taxable period (or portion thereof) of Loomis or any Subsidiary
(or any predecessor) ending on or before the Closing Date (including a period
deemed to end on the Closing Date as herein provided), except to the extent such
Taxes are reflected as liabilities set forth in the Loomis Closing Balance
Sheet; (B) any liability for Taxes of any member of an affiliated, consolidated,
combined or unitary group (other than Loomis or any Subsidiary) of which Loomis
or any Subsidiary (or any predecessor) is or was a member on or prior to the
Closing Date by reason of the liability of Loomis or any Subsidiary pursuant to
Treasury Regulation Section 1.1502-6(a) or any analogous or similar state, local
or foreign law or regulation; and (C) any liability for Taxes attributable to or
resulting from the transactions occurring pursuant to Article I of this
Agreement, other than sales, use, recording, transfer or other similar Taxes
included within the definition of Transaction Costs. With respect to any taxable
period which includes but does not end on the Closing Date, any liability for
Taxes allocable to Loomis and its Subsidiaries shall be determined by closing
the books of Loomis and its Subsidiaries as of the close of business on the
Closing Date or, where not susceptible to such allocation, based on the number
of elapsed days through the Closing Date, and by allocating Taxes through the
Closing Date to Loomis.
"Loomis Financial Statements" shall have the meaning set forth in
Section 5.7.
"Loomis Indebtedness" shall have the meaning set forth in Section
1.2(c).
"Loomis Indemnity Trust" shall have the meaning set forth in Section
1.2(b).
6
<PAGE>
"Loomis Intellectual Property" shall have the meaning set forth in
Section 5.17.
"Loomis Interim Balance Sheet" shall have the meaning set forth in
Section 5.7.
"Loomis Interim Financial Statements" shall have the meaning set forth
in Section 5.7.
"Loomis Labor Matters" shall have the meaning set forth in Section
5.18(a).
"Loomis Other Equity Holders" shall have the meaning set forth in the
Recitals.
"Loomis Other Equity Interests" shall have the meaning set forth in
the Recitals.
"Loomis Owned Real Property" shall have the meaning set forth in
Section 5.20.
"Loomis Sites" shall have the meaning set forth in Section 5.22.
"Loomis Stockholders Trust" shall have the meaning set forth in the
introductory paragraph; provided, that upon the dissolution for any reason of
the Loomis Stockholders Trust, such term shall, for purposes of any notice or
consent required hereunder, mean Wingate for so long as Wingate and its
Affiliates hold 50% or more of the Newco Common Stock held beneficially by them
on the Closing Date (as such stock may subsequently be split, combined,
exchanged or recapitalized).
"Loomis Voting Securities" shall have the meaning set forth in Section
5.4(a).
"Loomis Year End Balance Sheets" shall have the meaning set forth in
Section 5.7.
"material" means with respect to any Person, an event, change or
effect related to the condition of (financial or otherwise), properties, assets,
liabilities, business or operations of such Person or any of its Subsidiaries
that is material to such Person and its Subsidiaries, taken as a whole.
7
<PAGE>
"Material Adverse Effect" means a material adverse effect on the
business, operations, liabilities, properties, assets or financial condition of
the referenced entity and its Subsidiaries taken as a whole.
"MEGA Plan" shall have the meaning set forth in Section 8.12.
"New MEGA Plan" shall have the meaning set forth in Section 8.12.
"Newco" shall have the meaning set forth in the introductory
paragraph.
"Newco Audited Financials" shall have the meaning set forth in Section
13.12.
"Newco Common Stock" shall have the meaning set forth in Section
1.2(b).
"Newco Parties" shall have the meaning set forth in Section 12.1(a).
"Newco Plan" shall have the meaning set forth in Section 8.21(g).
"NOL Note" shall have the meaning set forth in Section 1.3.
"NOL Tax Benefit" shall have the meaning set forth in Section 1.3.
"Offering Memorandum" shall have the meaning set forth in Section
8.16(a).
"Order" means any order, injunction, judgment, decree, ruling,
assessment or arbitration award.
"Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or, as applicable, any
other entity.
"Permitted Liens" shall have the meaning set forth in Section 4.10.
"Permits" shall have the meaning set forth in Section 4.14.
"Receivables Notice" shall have the meaning set forth in Section
12.2.
"Receivables Objection" shall have the meaning set forth in Section
12.2.
"Registration Statement" shall have the meaning set forth in Section
8.16(a).
8
<PAGE>
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching, or migration on or into the indoor or outdoor environment or into or
out of any property;
"Remedial Action" means all actions, including, without limitation,
any capital expenditures, required to be taken under Environmental Laws to (i)
clean up, remove, treat, or in any other way address a release or threatened
release of any Hazardous Material or (ii) bring any property owned, operated or
leased by the facilities located and operations conducted thereon by Wells-Fargo
or Loomis or any of their respective Subsidiaries, as applicable into compliance
with all Environmental Laws and Environmental Permits.
"Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, as amended.
"Series I Preferred Stock" shall have the meaning set forth in Section
1.4.
"Stockholders" shall have the meaning set forth in the Recitals.
"Stockholders Agreement" shall have the meaning set forth in Section
8.8.
"Subsidiary" of any Person means any entity of which securities or
other ownership interests have ordinary voting power to elect a majority of the
board of directors of other persons performing similar functions are owned
directly or indirectly by such Person.
"Taxes" shall mean all taxes, charges, fees, levies, or other similar
assessments or liabilities, including without limitation (i) income, gross
receipts, ad valorem, premium, excise, real property, personal property, sales,
use, transfer, withholding, employment, payroll, medicare, and franchise taxes
imposed by the United States of America, or by any state, local, or foreign
government, or any subdivision, agency, or other similar Person of the United
States or any such government; and (ii) any interest, fines, penalties,
assessments, or additions to taxes resulting from, attributable to, or incurred
in connection with any Tax or any contest, dispute, or refund thereof.
"Tax Returns" shall mean any report, return, or statement required to
be supplied to a taxing authority in connection with Taxes.
9
<PAGE>
"Third Party Claim" means any claim, action or proceeding made or
brought by any Person who is not a party to the Agreement or an Affiliate of a
party to the Agreement.
"Transaction Costs" means all costs, fees, expenses and other
disbursements (including, without limitation, sales, use, recording, transfer or
other similar Taxes) incurred by Loomis, Borg-Warner or Wells Fargo, as
applicable, in connection with the consummation of the transactions contemplated
by this Agreement, including without limitation, all fees and expenses of legal,
accounting and other experts and professional representatives; provided,
--------
however, that Transaction Costs shall not include any costs, fees, expenses or
- -------
disbursements related solely to the rendering of a fairness opinion to the board
of directors of Borg-Warner.
"Transferred Assets" shall have the meaning set forth in Section
2.1(a).
"Transferred Employees" shall have the meaning set forth in Section
8.21.
"Transition Services Agreement" shall have the meaning set forth in
Section 8.17.
"UST Closure" means a "no further action" letter from the governmental
authority having jurisdiction over a UST or other reasonably satisfactory proof
of closure of a UST under or pursuant to Environmental Laws.
"UST Rules" means those federal requirements relating to Underground
Storage Tanks set forth in 42 U.S.C. Section 6991 et seq. and any regulations
promulgated pursuant to such statutory provisions or as set forth in any state
UST program.
"UST" means underground storage tanks as defined in 42 U.S.C. (S) 6991
et seq.
"Wells Fargo" shall have the meaning set forth in the introductory
paragraph.
"Wells Fargo Bank" shall have the meaning set forth in Section 8.23.
"Wells Fargo Excluded Taxes" shall mean (A) any liability for Taxes of
any member of an affiliated, consolidated, combined, or unitary group (other
than Wells Fargo or any Subsidiary) of which Wells Fargo or any Subsidiary (or
any predecessor) is or was a member on or prior to the Closing Date by reason of
the liability of Wells Fargo or any
10
<PAGE>
Subsidiary pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous
or similar state, local or foreign law or regulation; and (B) any liability for
Taxes attributable to or resulting from the transactions occurring pursuant to
Article II of this Agreement, other than sales, use, recording, transfer or
other similar Taxes included within the definition of Transaction Costs.
"Wells Fargo Indemnifiable Taxes" shall mean any liability for Taxes
with respect to any taxable period (or portion thereof) of Wells Fargo or any
Subsidiary (or any predecessor) ending on or before the Closing Date (including
a period deemed to end on the Closing Date as herein provided), except to the
extent such Taxes are reflected as liabilities set forth in the WF Closing
Balance Sheet. With respect to any taxable period which includes but does not
end on the Closing Date, any liability for Taxes allocable to Wells Fargo and
its Subsidiaries shall be determined by closing the books of Wells Fargo and its
Subsidiaries as of the close of business on the Closing Date or, where not
susceptible to such allocation, based on the number of elapsed days through the
Closing Date, and by allocating Taxes through the Closing Date to Wells Fargo.
"Wells Fargo Sites" shall have the meaning set forth in Section
4.20(a).
"Wells Puerto Rico" shall have the meaning set forth in Section 8.19.
"Wingate" shall have the meaning set forth in Section 1.2(c).
"WF Accounts Receivable" shall have the meaning set forth in Section
12.2.
"WF Base Amount" shall have the meaning set forth in Section 3.1(b).
"WF Casualty and Employee Claims" shall have the meaning set forth in
Section 2.1(b).
"WF Closing Balance Sheet" shall have the meaning set forth in Section
3.1(a).
"WF Employee Benefit Plans" shall have the meaning set forth in
Section 4.12(a).
"WF Financial Statements" shall have the meaning set forth in Section
4.6.
"WF Intellectual Property" shall have the meaning set forth in Section
4.16.
11
<PAGE>
"WF Interim Balance Sheet" shall have the meaning set forth in Section
4.6.
"WF Interim Financial Statements" shall have the meaning set forth in
Section 4.6.
"WF Labor Matters" shall have the meaning set forth in Section 4.17.
"WF Owned Real Property" shall have the meaning set forth in Section
4.18.
"WF Year End Balance Sheets" shall have the meaning set forth in
Section 4.6.
"6-Year Look Back Date" shall have the meaning set forth in Section
4.12(b).
"401(k) Plan" shall have the meaning set forth in Section 8.21(g).
12
<PAGE>
EXHIBIT 2.2
BUSINESS TRUST AGREEMENT
BUSINESS TRUST AGREEMENT (this "Agreement"), dated as of November 27,
1996, among Wingate Partners, L.P., a Delaware limited partnership ("Wingate")
and Wingate Affiliates, L.P., a Delaware limited partnership ("WALP"), together
as initial grantors (the "Initial Grantors"), Wilmington Trust Company, a
Delaware banking corporation, as Trustee (the "Trustee"), Frederick B. Hegi,
Jr., as Manager (the "Manager"), and the Unitholders listed on the signature
pages hereto and any Person which may hereafter become a Unitholder pursuant to
the terms hereof and the Trust Unit Exchange Agreement (as hereinafter defined).
WHEREAS, the Initial Grantors, the Unitholders, and the Trustee desire
to establish a trust to exchange the Class A Common Stock, $0.01 par value
("Loomis Common Stock"), of Loomis Holding Corporation, a Delaware corporation
("Loomis"), contributed hereto for the purpose of acquiring the common stock,
$0.01 par value ("Newco Common Stock", and, together with Loomis Common Stock,
the "Securities"), of Loomis-Wells Corporation, a Delaware corporation (the
"Company"), pursuant to a Contribution Agreement, as it may be amended and in
effect from time to time (the "Contribution Agreement"), among the Company,
Loomis, Loomis Armored Inc., a Texas corporation, Wells Fargo Armored Service
Corporation, a Delaware corporation ("Wells Fargo"), Borg-Warner Security
Corporation, a Delaware corporation, and the Trust;
WHEREAS, the Initial Grantors and the Trustee desire to establish this
Trust solely for the purposes of exercising voting rights with respect to the
Securities, satisfying indemnity claims against, and other obligations of, the
Trust arising pursuant to the Contribution Agreement, and holding, liquidating
or disposing of the Securities in accordance with the terms set forth herein and
in the Stockholders Agreement (the "Stockholders Agreement"), to be entered into
among the Trust, the Company and Wells Fargo;
WHEREAS, the Initial Grantors and the Trustee desire that the
beneficial interest in the assets of the Trust be divided into percentage
interests of beneficial interest in the Trust as hereinafter provided;
WHEREAS, pursuant to the Contribution Agreement, the Trust will agree
to assume certain contingent liabilities and enter into an assignment and
assumption agreement (the "Excess Claims Assumption Agreement") with respect
thereto;
<PAGE>
WHEREAS, in connection with the transactions contemplated by the
Contribution Agreement and at the direction of the Unitholders holding a
majority in interest of the Units, the Trust will enter into a Stock
Contribution Agreement (the "Stock Contribution Agreement"), whereby the Trust
may be obligated to contribute certain shares of Newco Common Stock held by the
Trust to the Company in connection with the exercise by employees of certain
stock options for shares of Newco Common Stock; and
WHEREAS, the Trust is intended to be classified for tax purposes as a
grantor trust for purposes of Section 671 to Section 679 of the Code (and under
any comparable provisions of state or local law) as to which the Unitholders are
treated as the owners of the underlying assets and income;
NOW THEREFORE, the Initial Grantors, the Unitholders, the Manager and
the Trustee hereby declare that all money and property contributed to the Trust
established hereunder shall be held and managed in trust for the benefit of the
Unitholders subject to the provisions hereof and further agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Capitalized Terms. For all purposes of this Agreement, the following
-----------------
terms shall have the meaning set forth below:
"Act" means the Delaware Business Trust Act, 12 Del. C. (S)(S) 3801-
-------
3822, or the corresponding provisions of any succeeding law.
"Affiliate" means, when used with reference to a specified Person, (a)
any Person directly or indirectly controlling, controlled by or under common
control with such specified Person, (b) any Person owning or controlling at
least a majority of the outstanding voting securities of such specified Person,
(c) any officer, director or partner of such specified Person and (d) if such
specified Person is an officer, director or general partner, any company for
which such specified Person acts in such capacity.
"Agreement" means this Business Trust Agreement, as it may be amended
from time to time.
2
<PAGE>
"Borrower" shall have the meaning set forth in Section 4.6(a).
"Cash Shortfall" shall have the meaning set forth in Section 4.6(a).
"Certificate of Trust" means the certificate filed with the Office of
the Secretary of State of the State of Delaware as required under the Act to
form the Trust.
"Closing Date" shall have the meaning set forth in Section 3.1(a).
"Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time and as it may be interpreted under regulations promulgated by
the Treasury Department.
"Company" means Loomis-Wells Corporation, a Delaware corporation, and
its successors by merger, consolidation, or otherwise.
"Contribution/Loan Amount" shall have the meaning set forth in Section
4.6(a).
"Contributions" shall have the meaning set forth in Section 4.6(a).
"Dissolution Triggering Date" shall have the meaning set forth in
Section 9.1.
"Fair Market Value" shall mean, as to any non-cash property of the
Trust (i) as to publicly-traded securities which constitute non-cash property of
the Trust, the average of the Sales Price of a share of such securities during
the 45 Trading Days immediately preceding the date of the event requiring the
determination of Fair Market Value; provided, however, that if the Trust is
-------- -------
terminated upon the consummation of an Initial Public Offering in accordance
with Section 9.1, the Fair Market Value of publicly-traded securities which
constitute non-cash property shall equal the public offering price per share of
such non-cash property or (ii) as to any non-cash property of the Trust other
than publicly-traded securities, the fair market value of such property as
determined by any qualified Person (other than the Trustee or Manager) selected
by the holders of a majority in interest of the Units as evidenced in writing.
"Fiscal Year" means the fiscal year of the Trust, which shall
initially be the calendar year.
3
<PAGE>
"Initial Grantors" means, collectively, Wingate and WALP.
"Initial Public Offering" means the consummation of an underwritten
public offering or series of underwritten public offerings of Newco Common Stock
producing aggregate gross proceeds to the Company and any stockholders of the
Company selling shares of Newco Common Stock thereunder of at least $100 million
in the aggregate, pursuant to one or more effective registration statements
under the Securities Act.
"Loan Amount" shall have the meaning set forth in Section 4.6(b).
"Loans" shall have the meaning set forth in Section 4.6(a).
"Manager" means Frederick B. Hegi, Jr., or any successor appointed
pursuant to the terms of this Agreement.
"Ownership Percentage" means, with respect to a Unitholder, the
proportion (expressed as a percentage) of the beneficial interest in the Trust
held by such Unitholder based on the number of Units owned by such Unitholder as
compared to the number of Units owned by all Unitholders at the time of
calculation.
"Person" means an individual, partnership, limited liability company,
joint venture, corporation, trust, estate or other entity.
"Quarterly Distribution Date" means March 31, June 30, September 30
and December 31 of each year of the Trust's existence.
"Regulations" means the income tax regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Reserve" shall have the meaning ascribed to such term in the
Stockholders Agreement.
"Sales Price" means, with respect to any publicly-traded securities
which constitute non-cash property of the Trust, for any given day, the closing
sale price (or, if no closing sale price is reported, the average of the bid and
ask prices or if more than one in either case, the average of the
4
<PAGE>
average bid and ask prices on such day) of a share of such security as reported
by the national or regional securities exchange upon which such security is
listed and principally traded (or, if applicable, quoted on the Nasdaq Stock
Market); provided, however, that if any such date shall not be a Trading Day,
-------- -------
the Sale Price shall be based on the specified price on the Trading Day
preceding such date.
"Securities Act" means the Securities Act of 1933, as amended.
"Service" means the United States Internal Revenue Service or its
successor.
"Trading Day" means each day on which the securities exchange or
inter-dealer quotation system on which any publicly-traded securities that
constitute non-cash property of the Trust are traded is open for the transaction
of business.
"Transfer" means the sale, assignment, conveyance, transfer, gift,
pledge, hypothecation, mortgage, exchange or other disposition whether
voluntary, involuntary, by operation of law or otherwise, of any Unit or any
right, title or interest therein or thereto including without limitation,
disposition upon death by a Unitholder of his or her Units; provided, however,
-------- -------
that granting a security interest in a Borrower's rights to distributions
pursuant to Section 4.6 hereof shall not be deemed to be a Transfer.
"Trust" means the trust established by this Agreement which shall be
known as the Loomis Stockholders Trust.
"Trust Certificate" means a certificate evidencing the Ownership
Percentage of a Unitholder in substantially the form attached as Exhibit A to
the Trust Unit Exchange Agreement.
"Trustee" means Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as Trustee under this
Agreement, and any successor Trustee hereunder.
"Trust Note" shall have the meaning set forth in Section 4.6(b).
"Trust Property" means all right, title and interest of the Trust in
and to any property contributed to the Trust by the Initial Grantors and the
Unitholders or otherwise acquired by the
5
<PAGE>
Trust, including without limitation all distributions, payments or proceeds
thereon.
"Trust Unit Exchange Agreement" means the Trust Unit Exchange
Agreement, to be entered into among the Company, the Trust, the Manager and the
Persons that become Unitholders to this Trust listed on the signature pages
thereof on or prior to the Closing Date.
"Unitholder" means a holder of a Unit.
"Units" means percentage interests of beneficial interests in the
Trust consisting of a maximum of 2,658,970 Units.
ARTICLE II
ORGANIZATION
------------
2.1 Name. The Trust created hereby shall be known as the Loomis
----
Stockholders Trust (the "Trust") in which name, or any subsequent name as shall
be selected by the Manager, subject to the terms hereof, the Manager shall
conduct the affairs of the Trust.
2.2 Declaration of Trust. The Trustee hereby declares that it will hold
--------------------
the Trust Property in trust upon and subject to the conditions set forth herein
for the use and benefit of the Unitholders. It is the intention of the parties
hereto that the Trust constitute a business trust under the Act and that this
Trust Agreement shall constitute the governing instrument (as that term is used
in the Act) of the Trust.
2.3 Transfer of Trust Property to the Trust. The Initial Grantors have
---------------------------------------
granted to the Trust all of its right, title and interest in and to the initial
Trust Property. The Initial Grantors hereby grant to the Trust an aggregate of
1,344,433 shares of Loomis Common Stock as initial Trust Property.
2.4 Appointment of the Trustee. Except as otherwise permitted by this
--------------------------
Agreement, the number of Trustees shall be one. The Initial Grantors hereby
appoint Wilmington Trust Company as Trustee of the Trust to satisfy the
requirements of Section 3807 of the Act, effective as of the date hereof, and to
have all the rights, powers and duties as set forth herein. The management of
the affairs of the Trust is hereby delegated to the Manager; provided, however,
-------- -------
the Trustee shall only take such action with
6
<PAGE>
respect to the Trust as shall be specifically provided in this Agreement. The
Trustee acknowledges receipt in trust from the Initial Grantors as of the date
hereof, of an aggregate of 1,344,433 shares of Loomis Common Stock, constituting
the initial Trust Property. As soon as practicable upon the date hereof, the
Trustee shall file the Certificate of Trust required by Section 3810(a) of the
Act in the office of the Secretary of State of the State of Delaware.
2.5 Resident Trustee. The name of the resident Trustee of the Trust in
----------------
the State of Delaware is Wilmington Trust Company.
2.6 Office. The office of the Trust shall be in care of the Trustee,
------
addressed to Wilmington Trust Company, Rodney Square North, 1100 North Market
Street, Wilmington, Delaware 19890-0001, Attention: Corporate Custody, or at
such other address as the Manager may designate by notice to the Unitholders.
2.7 Purposes and Powers. The sole purposes of the Trust shall be (a) to
-------------------
exchange shares of Loomis Common Stock held as Trust Property for shares of
Newco Common Stock pursuant to and in accordance with the terms of the
Contribution Agreement, (b) to perform the obligations and enforce the rights of
the Trust under the Contribution Agreement, the Stockholders Agreement, the
Excess Claims Assumption Agreement and the Stock Contribution Agreement,
including the satisfaction of indemnity claims and other obligations of the
Trust arising pursuant to the Contribution Agreement, (c) to receive, hold,
liquidate, dispose, sell, and exercise voting rights with respect to Securities,
and (d) to engage in such other activities as are permitted hereby or are
incidental or ancillary thereto as the Manager shall deem necessary, advisable,
or appropriate, all upon the terms and conditions set forth in this Agreement.
2.8 Duties of Manager and Trustee. The Manager shall devote to the
-----------------------------
affairs of the Trust such time as may be necessary for the proper performance of
its duties hereunder, but neither the Manager nor the officers, directors,
trustees, shareholders, partners or Affiliates of the Manager shall be expected
to devote their full time to the performance of such duties. The Manager, or
any Affiliate, shareholder, officer, director, partner or employee thereof, or
any person owning a legal or beneficial interest therein, may engage in or
possess an interest in any other business or venture of any nature and
description, independently or with or for the account of others. The Trustee
shall be responsible for performing only the following duties with respect to
the Trust: (i) to execute, deliver, acknowledge and file any Certificates of
Trust and any amendments thereto
7
<PAGE>
required to be filed pursuant to applicable law, (ii) to execute amendments to
this Agreement, (iii) to execute, deliver, acknowledge and file certificates of
cancellation required to be filed pursuant to applicable law, and (iv) to
execute Trust Certificates pursuant to the direction of the Manager; provided,
--------
however, the Manager may execute such Trust Certificates on behalf of the
- -------
Trustee. The Trustee shall provide prompt notice to the Manager of its
performance of any of the foregoing. The Manager shall keep the Trustee
reasonably informed of any actions of the Manager or other instances that could
affect the rights, duties or liabilities of the Trustee. The Trustee shall have
no other authority, duties or liabilities, except as are expressly set forth
above or as directed in writing by the Manager and consented to by the Trustee,
and shall have no implied authority or duties with respect to the affairs of the
Trust. In no event shall the Trustee have any liability for the acts or
omissions of the Manager. Finally, any provision of this Agreement to the
contrary notwithstanding, neither the Manager nor the Trustee shall have any
power, right or authority to undertake any act or exercise any discretion which
would cause the Trust to fail to be classified as a "Trust" under Section 7701
of the Code.
2.9 Other Expenses, Liabilities of Trust. The Unitholders shall be
------------------------------------
entitled to the same limitation of personal liability extended to shareholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware. The Unitholders shall not be liable for any
liabilities and obligations of the Trust, including without limitation any
liability under Article VIII hereof. If any Unitholder as such, of the Trust,
is made a party to any suit or proceeding to enforce any such liability, he
shall not, on account thereof, be held to any personal liability.
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTEREST
-------------------------------------------
3.1 Issuance of Trust Certificate. (a) The interest of the Unitholders
-----------------------------
shall be divided into units of beneficial interest which shall be designated
"Units." The Units will initially be transferred to the Unitholders pursuant to
this Agreement and additional Units will be issued pursuant to the Trust Unit
Exchange Agreement on or prior to the date of the closing of the transactions
contemplated by the Contribution Agreement (the "Closing Date"). The number of
Units originally issued to the Initial Grantors, as Unitholders, pursuant to
this Agreement is set forth opposite each of such Initial Grantor's name on
Exhibit
- -------
8
<PAGE>
A hereto. Upon executing the Trust Unit Exchange Agreement, the Persons
- -
receiving Units thereunder will be obligated, as of the time of such execution
of the Trust Unit Exchange Agreement, to become Unitholders under this Agreement
and to execute a joinder or amendment to this Agreement in such capacity.
(b) Ownership of Units shall be evidenced by Trust Certificates.
Every Unitholder shall be entitled to receive a Trust Certificate specifying the
number of Units held by such Unitholder. Following the Closing Date, no
additional Units shall be issued by the Trust, except in the case of a permitted
Transfer of an outstanding Unit pursuant to Section 3.2 hereof, and from and
after the Closing Date there shall be no reduction in or other adjustment to the
number of outstanding Units.
(c) Each Trust Certificate shall be executed by manual or facsimile
signature on behalf of the Trustee or the Manager by one of its authorized
officers or representatives. Trust Certificates bearing the manual or facsimile
signature of an individual, who was, at the time when such signature was
affixed, authorized to sign on behalf of the Trustee or the Manager, shall,
notwithstanding that such individual has ceased to be so authorized prior to the
delivery of such Trust Certificate or does not hold such office at the date of
such Trust Certificate, bind the Trust. Each Trust Certificate shall be dated
the date of its issuance.
(d) Each Unit shall have the same rights and obligations as every
other Unit under this Trust.
3.2 Registration and Transfer of Certificates. (a) The Manager, or any
-----------------------------------------
agent appointed by him, shall maintain a register for the registration and
Transfer of Trust Certificates and the number of Units represented by each Trust
Certificate.
(b) A Unitholder may Transfer a Unit only if all of the following
conditions have been satisfied:
(i) all of the non-transferring Unitholders shall have consented
to the Transfer, which consent of any such Unitholder may be granted or
withheld in the sole discretion of such Unitholder and may be unreasonably
withheld;
(ii) the transferor has delivered to the Manager an opinion of
counsel reasonably satisfactory to the Manager to the effect that (A) the
Transfer is not required to be registered under the Securities Act or any
applicable state securities law and (B) the Transfer will not cause the
Trust
9
<PAGE>
to be required to register (or seek an exemption from registration) under
the Investment Company Act of 1940, as amended (the "Investment Company
Act");
(iii) each of the transferor and the transferee has agreed to
reimburse the Trust for costs incurred by the Trust in connection with the
Transfer, including the costs incurred as a result of Section 3.2(b)(ii)
above; and
(iv) the transferee has delivered to the Manager an instrument
in writing signed by the transferor and the transferee reasonably
satisfactory to the Manager, stating that the transferor has the right to
Transfer, and the transferee has the right to acquire, the transferor's
Units proposed to be transferred and acknowledging that the transferee
accepts and agrees to be bound by the terms and provisions of this
Agreement, including the assumption of any obligation of the transferor to
the Trust.
In the event of the death of a Unitholder, any transferee, beneficiary or
devisee will receive an economic interest only with respect to Units held by
such Unitholder and shall have no other rights of a Unitholder hereunder until
such Person shall have complied with each of the provisions in this Section
3.2(b).
(c) An attempted Transfer of a Unit will be void ab initio and of no
-- ------
effect whatsoever if such attempted Transfer of a Unit would, if effected, cause
the Trust to be subject to the registration requirements of the Securities Act
or the Securities Exchange Act of 1934, as amended (the "Exchange Act") or any
successor statute or statutes, or cause the Trust to be required to register (or
seek an exemption from registration) as an investment company under the
Investment Company Act.
(d) If the conditions set forth in Section 3.2(b) are satisfied,
promptly upon the receipt by the Manager of the transferor's Trust Certificate,
the Manager shall record on the trust register the name of the transferee as a
Unitholder and its Ownership Percentage and shall register and issue, execute
and deliver to such Unitholder a Trust Certificate evidencing such Ownership
Percentage. In the event a transferor Transfers only a portion of its
beneficial interest in the Trust, the Manager shall register and issue to such
transferor a new Trust Certificate evidencing such transferor's new Ownership
Percentage. Subsequent to a Transfer and upon the issuance of the new Trust
Certificate or Trust Certificates, the Manager shall cancel the Trust
Certificate surrendered to it in connection with such Transfer. The Manager may
treat the person
10
<PAGE>
in whose name any Trust Certificate is registered as the sole Unitholder of the
beneficial interest in the Trust evidenced by such Trust Certificate. No
fractional Units shall be created by the Transfer of Units.
(e) As a condition precedent to any registration of Transfer, the
Manager may require the payment of a sum sufficient to cover the payment of any
tax or taxes or other governmental charges required to be paid in connection
with such Transfer.
3.3 Lost, Stolen, Mutilated or Destroyed Certificates. If (i) any
-------------------------------------------------
mutilated Trust Certificate is surrendered to the Manager, or (ii) the Manager
receives evidence to its satisfaction that any Trust Certificate has been
destroyed, lost or stolen, and upon proof of ownership satisfactory to the
Manager, together with such security or indemnity as may be requested by the
Manager to save it harmless, the Manager shall execute and deliver a new Trust
Certificate for the same Ownership Percentage as the Trust Certificate so
mutilated, destroyed, lost or stolen, of like tenor and bearing a different
issue number, with such notations, if any, as the Manager shall determine.
ARTICLE IV
CONCERNING THE UNITHOLDERS
--------------------------
4.1 Action by Unitholders with Respect to Certain Matters. The Manager
-----------------------------------------------------
shall not, without prior written consent of all Unitholders (each determined
pursuant to Section 4.4 of this Agreement), have the power to amend the terms of
this Agreement or merge or consolidate the Trust.
4.2 Removal of Trustee; Manager. The Manager may remove the Trustee with
---------------------------
or without cause; provided, however, that if such Trustee is the sole Trustee,
-------- -------
the Manager may only remove such Trustee after the appointment of a successor
Trustee who complies with Section 3807 of the Act. The Unitholders may remove
the Manager with or without cause; provided, however, that the Unitholders may
-------- -------
only remove such Manager after the appointment of a successor Manager who agrees
to be bound by the terms of this Agreement.
4.3 Restrictions on Unitholders' Power. Each Unitholder shall comply with
----------------------------------
the applicable provisions of the Code and the applicable Treasury regulations
thereunder in the manner necessary to effect the intention of the parties that
the Trust
11
<PAGE>
be treated as a grantor trust pursuant to Section 671 to Section 679 of the Code
(and any comparable provisions of state or local law) for tax purposes as to
which the Unitholders are treated as the owners of the assets and income in
proportion to their respective Ownership Percentage, and that the Trust be
accorded such treatment until its termination pursuant to Section 9.1 hereof,
and shall take any action required by the Code or Regulations in order to
maintain the classification of the Trust as a grantor trust for federal income
tax purposes.
4.4 Consent of Unitholders. Except as provided in the definition of "Fair
----------------------
Market Value" and Sections 6.1(c) and 9.1 hereof, any action which may be taken
or consent which may be given by Unitholders under this Agreement may be
effected only by a unanimous written consent given by the Unitholders, which
consent must be received by the Manager prior to its effectiveness.
4.5 Voting Rights. Except as otherwise expressly provided in this
-------------
Agreement or required by applicable law, Unitholders shall have no voting rights
whatsoever. On any matter which, pursuant to the express provisions of this
Agreement or applicable law, is the proper subject of a vote (by written
consent) by the Unitholders, each Unitholder entitled to vote shall be entitled
to cast one vote for each Unit which he holds. The exercise by the Unitholders
of any of their voting and other rights pursuant to and in accordance with this
Agreement shall not constitute participation in or control over Trust business.
4.6 Cash Contribution and Incurrence of Indebtedness. (a) In the event
------------------------------------------------
that the Trust shall require funds (the "Cash Shortfall") in order to satisfy
obligations of the Trust arising pursuant to the Loomis Excess Claims Assumption
Agreement (as defined in the Contribution Agreement), satisfy any collateral
requirements of insurance policies of the Loomis Casualty and Employee Claims
Trust (as defined in the Contribution Agreement) or allow for the sale and
transfer of all or a portion of the Loomis Casualty and Employee Claims (as
defined in the Contribution Agreement) to a third party insurer, upon the
request of the Manager each Unitholder may, but shall not be obligated to, for
the purpose of satisfying the Cash Shortfall, make a cash contribution to the
Trust equal to the product of the amount of the Cash Shortfall (subject to the
limitation set forth below) times such Unitholder's Ownership Percentage (the
"Contributions") (with each Unitholder who fails to make a Contribution being
referred to herein as a "Borrower"); provided, however, that to the extent that
-------- -------
the total of the Contributions is less than the Cash Shortfall, Wingate may make
a loan to the
12
<PAGE>
Borrowers in the amount of the remainder of the Cash Shortfall in the manner
herein provided (the "Loans"), and Wingate shall pay the amount of the Loans
directly to the Trust; provided, however, that in no event shall the aggregate
-------- -------
Contributions and Loans (the "Contribution/Loan Amount") at any one time
outstanding with respect to a Cash Shortfall pursuant to this Section 4.6 exceed
$3,000,000.
(b) Upon the making of any Loans by Wingate pursuant to Section
4.6(a), the Trust shall execute and deliver a promissory note (a "Trust Note")
to Wingate in an amount equal to the product of the Contribution/Loan Amount
times the total Ownership Percentages of the Borrowers (the "Loan Amount").
Interest on the Loan Amount shall accrue at a rate of 10% per annum from the
date of issuance of the Trust Note until the principal amount thereof, together
with accrued interest thereon, is repaid in full. Each Trust Note shall be
secured by each Borrower's rights to distributions pursuant to Section 5.1. The
principal amount and accrued interest of any Trust Note shall be repaid in full
on or following the Dissolution Triggering Date in accordance with Section 9.1
hereof; provided, however, that if and to the extent any cash is distributed to
-------- -------
the Unitholders pursuant to Section 5.1, such cash otherwise distributable to
any Unitholder that is a Borrower shall be first applied to repaying such
Unitholder's allocation of interest in respect of such Trust Note, then to
repaying such Unitholder's allocation of principal in respect of such Trust
Note, and the remainder, if any, shall be distributed to such Unitholder in
accordance with Section 5.1. Each Borrower may, at its option, prepay the
amount of its Loan, plus accrued interest, at any time, by making full payment
of such amount to Wingate (or the Trust), and upon such repayment such
Borrower's rights to distribution pursuant to Section 5.1 hereof shall be
released (as evidenced in writing by the Trust) as security for the Trust Note.
The Borrowers shall have no obligations to repay the Loan Amount or any accrued
interest thereon except out of distributions pursuant to Section 5.1.
ARTICLE V
DISTRIBUTIONS OF TRUST FUNDS
----------------------------
5.1 Distributions. Subject to Section 4.6, all distributions of cash and
-------------
other property of the Trust shall be made to the Unitholders pro rata in
--- ----
proportion to their Ownership Percentages immediately prior to such
distribution. Except for (i) Newco Common Stock, (ii) any securities received
by the Trust in exchange for Newco Common Stock which are not publicly-traded
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so long as the Manager receives the unanimous written consent of the Unitholders
within 60 days following receipt of such securities, (iii) any interest in the
Loomis Casualty and Employee Claims Trust and the Loomis Indemnity Trust (each
as defined in the Contribution Agreement), and (iv) the Reserve, Trust cash and
any other Trust Property (including, without limitation, any cash received by
the Trust from the sale of Securities and excluding cash resulting from capital
contributions), less any amounts required to fund the Reserve and such
additional amounts (if any) as the holders of a majority in interest of the
Units reasonably deem necessary to meet current or future Trust administrative
costs and administrative obligations, shall be distributed on or before each
Quarterly Distribution Date. Newco Common Stock, any securities received by the
Trust in exchange for Newco Common Stock which are not publicly-traded and for
which the unanimous written consent of the Unitholders to retention of such
securities by the Trust has been given, and any interest in the Loomis Casualty
and Employee Claims Trust and the Loomis Indemnity Trust shall not be
distributed prior to the Dissolution Triggering Date. In the event of the
dissolution of the Trust pursuant to the provisions of Section 9.1, the Fair
Market Value of Trust Property other than cash shall be determined as promptly
as practicable following such Dissolution Triggering Date, and following the
completion of such valuation, such non-cash Trust Property and any cash shall be
distributed (except for amounts withheld pursuant to clause (iv) of this Section
5.1), after compliance with Section 3808 of the Act as required by Section 9.1
hereof, to the Unitholders in accordance with the formula set forth above.
5.2 Compensation and Expenses. The Trustee will receive compensation in
-------------------------
accordance with the fee arrangement between the Trustee and the Trust. In
addition, the Trustee shall be entitled to reimbursement for any and all
reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel), including without limitation filing fees incurred in connection with
the performance of its duties under Section 2.8 hereof. Notwithstanding
anything in this Agreement to the contrary, no distributions will be made to
Unitholders hereunder until all fees and expenses then payable to the Trustee
have been paid.
5.3 Employment of Manager and other Persons. The Manager is responsible
---------------------------------------
for the general policies of the Trust and for such general supervision and
management of the affairs of the Trust as may be necessary to assure that such
affairs conform to the provisions of this Agreement. However, the Manager shall
not be
14
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required personally to conduct all the affairs of the Trust. Consistent with its
ultimate responsibility as stated herein, the Manager shall have the power to
appoint, employ or contract with any Person as the Manager may deem necessary or
proper for the transaction of the affairs of the Trust. Neither this Agreement
nor any principle of law or equity shall preclude or limit, in any respect, the
right of the Manager or any Affiliate thereof to engage in or derive profit or
compensation from any activities or investments, nor give any Unitholder any
right to participate or share in such activities or investments or any profit or
compensation derived therefrom.
5.4 Method of Payment. All cash amounts payable to any Unitholder
-----------------
pursuant to this Agreement shall be paid by the Trust to such Unitholder or a
nominee therefor by check payable to such Unitholder, mailed first class to the
address of such Unitholder appearing on the register of the Trust.
5.5 Investment of Monies. Monies received by the Trustee or the Manager
--------------------
hereunder need not be segregated in any manner except to the extent required by
law. Pending distribution of any cash received by the Trust, the Trustee or the
Manager shall be prohibited from investing such cash other than in demand or
time deposits in one or more financial institutions having a net worth of at
least $500 million each, the U.S. Government portfolio of the Rodney Square
Fund, a money market mutual fund managed by an Affiliate of the Trustee,
commercial paper of one or more corporations having a credit rating of at least
"A," United States treasury obligations or short-term certificates of deposit,
each having a maturity date on or before the next Quarterly Distribution Date,
except in the case of the Reserve, as to which a term of three months or less is
permissible. The Trustee and the Manager shall hold all such investments to the
maturity thereof. Neither the Manager nor the Trustee shall be liable for any
loss or depreciation resulting from the investment of such cash in accordance
with the provisions hereof.
5.6 Certain Obligations of Trust. Notwithstanding anything else in this
----------------------------
Agreement to the contrary, the Manager, Trustee and Unitholders each acknowledge
and agree that the Trust is subject to certain indemnification and other
obligations pursuant to the Contribution Agreement, the Stockholders Agreement
and the Excess Claims Assumption Agreement and certain obligations with respect
to the Newco Common Stock to be owned by the Trust following the Closing
pursuant to the Stock Contribution Agreement. Each of the Unitholders hereby
expressly agrees that the Manager shall have the authority to comply with the
Trust's obligations under the Contribution Agreement, the Stockholders
Agreement, the
15
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Excess Claims Assumption Agreement and the Stock Contribution Agreement. The
Manager's authority to comply with the Trust's obligations under such agreements
shall include the authority to appoint an independent third party following a
Dissolution Triggering Date to evaluate any potential liabilities, obligations
or claims against the Trust pursuant to its obligations thereunder, and to
reserve and hold back a portion of the Trust Property from distribution which
such third party deems necessary to satisfy such liabilities or claims.
ARTICLE VI
AUTHORITY AND DUTIES OF THE MANAGER OR TRUSTEE
----------------------------------------------
6.1 Powers of the Manager. (a) The Manager shall, as to all Securities
---------------------
held by the Trust, possess and be entitled to exercise all rights of the holders
of the Securities of every kind, including, without limitation, (i) the right to
vote for election and/or removal of directors and all other matters as may be
voted upon by the holders of Securities, including without limitation the right
to vote as to any merger or consolidation or disposition of assets involving the
Company, (ii) the right to dispose of the Loomis Common Stock in exchange for
Newco Common Stock pursuant to the terms and subject to the conditions set forth
in the Contribution Agreement, and (iii) the right to sell, transfer, assign or
otherwise dispose of all or any portion of the shares of Newco Common Stock;
provided, however, that the Manager shall have no authority to invest any
- -------- -------
distributions or sales proceeds with respect to the Newco Common Stock other
than in accordance with Section 5.5 hereof. No Unitholder shall have the right
to request that the Trust sell or otherwise dispose of any Securities. The
Manager may be a director of Loomis and/or the Company and may vote all shares
of Loomis Common Stock and Newco Common Stock deposited pursuant to this
Agreement in favor of his election as director. The holders of Trust
Certificates shall not have any right with respect to any such stock held by the
Trust to vote, take part in or consent to any corporate or stockholders' action
of Loomis or the Company or to any disposition of the Loomis Common Stock or
Newco Common Stock pursuant to the terms hereof.
(b) The Manager, on behalf of the Trust, shall vote on matters which
may come before him at any meeting of the Loomis' or the Company's stockholders,
and shall vote for directors of Loomis or the Company. The Manager may vote all
Securities held pursuant to this Agreement in person or by such person or
persons as he shall select as his proxy.
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(c) The Manager is hereby authorized to act on behalf of the
Unitholders and the Trust created hereby to enter into agreements on behalf of
the Trust that have been approved by Unitholders holding a majority in interest
of the Units, to execute, deliver, and thereafter perform the obligations of the
Trust under or pursuant to any document, agreement, certificate or instrument
necessary or appropriate to further the purposes of the Trust that has been
executed or approved by Unitholders holding a majority in interest of the Units
and to comply with the obligations (and enforce the rights) of the Trust under
the Contribution Agreement, the Stockholders Agreement, the Stock Contribution
Agreement, and the Excess Claims Assumption Agreement, including without
limitation, any agreement and related documents requiring a distribution or
delivery of Newco Common Stock to the Company pursuant to the terms of the Stock
Contribution Agreement or the delivery of a portion of any proceeds from the
sale or disposition of Securities to a third party to meet the obligations of
the Trust. Any disposition of Securities or proceeds from a disposition
therefrom that are delivered to a third party shall be deemed to be delivered on
behalf of the Unitholders, pro rata as their Ownership Percentages may appear.
The Manager is hereby authorized to collect proceeds from the disposition of
assets of the Trust. In furtherance of the foregoing, and subject to the
following limitations, the Manager is hereby authorized to:
(i) Retain all or any assets constituting part of the Trust assets, to
hold legal title to property of the Trust in the name of the
Trust, to invest or reinvest funds of the Trust only as provided
in Section 5.5 and to cause such investment or any part thereof to
be registered and held in his name, as Manager, or in the names of
nominees.
(ii) Maintain appropriate books and records relating to the Trust and
the Trust assets.
(iii) Subject to the consent or approval of Unitholders holding a
majority in interest of the Units, initiate, prosecute, defend,
supervise, direct, compromise or settle any claim, demand, action
or proceeding relating to the Trust or this Agreement, and, in
connection therewith, to retain and employ such agents and
professionals (including professionals which are Affiliates of the
Manager) and to confer upon them such authority as Unitholders
holding a majority in interest of the Units may deem expedient to
carry
17
<PAGE>
out the provisions and purposes of the Trust or any agreement to
which the Trust is a party, and to pay reasonable compensation
therefor from the assets of the Trust; provided that the Manager
shall not be required to enter into or maintain any claim, demand,
action or proceeding relating to the Trust unless he shall have
sufficient Trust funds on hand for that purpose or unless he shall
have been indemnified to his satisfaction against all expenses and
liabilities to which he may, in his judgment, be subjected by any
such action or his part.
(iv) Subject to the consent or approval of Unitholders holding a
majority in interest of the Units, if any proceeds from
disposition of any assets of the Trust are recovered in a form
other than cash and are not reasonably susceptible to
distribution, or if valuation of such proceeds is otherwise
necessary or appropriate in order for the Manager to carry out the
purposes of this Trust, to take such action as may, in the opinion
of Unitholders holding a majority in interest of the Units, be
necessary or appropriate to reduce such proceeds to a form
susceptible to distribution, including, but not limited to,
retaining professionals for such purpose, which professionals may
be reasonably compensated therefor from the assets of the Trust.
(v) Perform any and all acts, exercise any and all rights, enter into
any and all proceedings, contracts and other instruments
(including, but not limited to, the preparation and filing of any
statement, document or instrument with any governmental body
having jurisdiction over the Trust) that are not inconsistent with
the provisions hereof and that the Manager deems necessary and
advisable in his opinion for the exercise by the Manager of all
the rights and privileges accorded to him hereunder, subject to
all limitations on his authority hereunder, for the protection and
safekeeping of the assets of the Trust and for the administration
of the Trust in accordance with the terms of this Agreement and
applicable law.
18
<PAGE>
(d) Notwithstanding anything to the contrary herein, the Manager
shall not at any time, on behalf of the Trust or the Unitholders, enter into or
engage in any trade or business, and no part of the Trust assets shall be used
or disposed of by the Manager in furtherance of any trade or business, and,
except as provided by Section 5.5, the Manager shall have no power to invest or
reinvest Trust Property. Subject to the limitations herein, the Manager shall
be restricted to receiving the contribution of the Unitholders and the Initial
Grantors pursuant to this Agreement and the Unitholders Trust Exchange
Agreement, performing the obligations and enforcing the rights of the Trust
pursuant to the Contribution Agreement, the Excess Claims Assumption Agreement,
the Stockholders Agreement, the Loomis Casualty and Employee Claims Trust, the
Loomis Indemnity Trust, and any related documents, and exercising such other
rights and obligations as are specifically provided for in this Agreement. In
no event shall the Trust own or retain any marketable stocks or securities,
readily marketable assets, operating assets of a going business, unlisted
securities of a single issuer constituting 80% or more of the equity securities
of such issuer or any general or limited partnership interests. Finally,
notwithstanding any other provision of this Agreement to the contrary, the
Manager shall not be entitled to undertake any action or exercise any discretion
that would result in the Trust not being classified as a "trust" pursuant to
Section 7701 of the Code. The foregoing limitations shall also apply to the
Trustee.
(e) Subject to the powers of the Manager set forth in Section
6.1(c)(iii) hereof, the Manager shall pay or deliver to the Company or Loomis,
as the case may be, the amount of the Trust's liabilities pursuant to the
obligations of the Trust under the Contribution Agreement, the Stock
Contribution Agreement and the Excess Claims Assumption Agreement as certified
to the Trust by the Chief Financial Officer of the Company (based upon the
instructions of the Board of Directors of the Company upon approval by at least
five of the seven directors of the Company (or a proportionate number in the
event that the number of directors comprising the Board of Directors of the
Company is increased or decreased)).
6.2 General Duties. It shall be the duty of the Trustee and the Manager
--------------
to discharge (or cause to be discharged) all of their respective
responsibilities pursuant to the terms of this Agreement and to administer the
Trust in the interest of the Unitholders.
6.3 Accounting and Reports to the Unitholders. The Manager, if
-----------------------------------------
applicable, shall (i) maintain or cause to be
19
<PAGE>
maintained the books of the Trust on a calendar year basis on the accrual method
of accounting, (ii) deliver to each Unitholder, within 60 days of the end of
each Fiscal Year, or more often, a copy of the annual financial statement of the
Trust for such Fiscal Year.
6.4 No Duties Except as Specified in this Agreement. The Trustee and the
-----------------------------------------------
Manager shall not have any duty or obligation to manage, make any payment in
respect of, register, record, sell, dispose of or otherwise deal with the Trust
Property, or to otherwise take or refrain from taking any action under, or in
connection with, any document contemplated hereby to which the Trustee or the
Manager is a party, except as expressly provided by the terms of this Agreement
and no implied duties or obligations shall be read into this Agreement against
the Manager or the Trustee. The Manager and the Trustee nevertheless agree that
they will, at their own cost and expense, promptly take all action as may be
necessary to discharge any liens on any part of the Trust Property which result
from claims against the Trustee or the Manager personally that are not related
to the ownership or the administration of the Trust Property.
6.5 Notice of Limitation of Liability. The Manager shall use commercially
---------------------------------
reasonable efforts, in the conduct of the Trust's business, to put all suppliers
and other persons with whom the Trust does business on notice that the
Unitholders, the Manager and the Trustee are not liable for Trust obligations
and that such suppliers and other persons shall look solely to the assets of the
Trust for payment, and all agreements to which the Trust is a party shall
include a statement to the effect that the Trust is a business trust organized
under the Act; but the Manager shall not be liable to the Unitholders for any
failure to give such notice to such suppliers or other persons.
ARTICLE VII
CONCERNING THE TRUSTEE AND PERSON DELEGATED
ANY OF THE POWERS AND DUTIES OF THE TRUSTEE
-------------------------------------------
7.1 Acceptance of Trust and Duties. The Trustee and the Manager accept
------------------------------
the Trust hereby created and agree to perform their respective duties hereunder
with respect to the same but only upon the terms of this Agreement. Neither the
Trustee nor the Manager shall be liable to any third party for any liability or
obligation of the Trust. Notwithstanding anything to the contrary set forth in
this Agreement, neither the Trustee nor the Manager shall be personally liable
to the Trust, nor the
20
<PAGE>
Unitholders or third parties for any of their respective acts or omissions
except that the Trustee and the Manager shall be personally liable to the Trust,
the Unitholders and third parties (i) with respect to the Trustee's (or its
Affiliates, successors, assigns, agents or servants) explicit duties under
Section 2.8 of this Agreement or in all cases with respect to the Manager
hereunder, for its acts or omissions (or those of its Affiliates, successors,
assigns, agents or servants), as the case may be, constituting fraud, gross
negligence, bad faith, recklessness or willful misconduct and (ii) with respect
to the Trustee other than with respect to the Trustee's explicit duties under
Section 2.8 of this Agreement, for acts or omissions of the Trustee (or its
Affiliates, successors, assigns, agents or servants) constituting fraud, gross
negligence, bad faith, recklessness or willful misconduct. Moreover, the
Manager shall not be personally liable for any error of judgment made in good
faith by any person or entity to whom the Manager has reasonably and in good
faith delegated any of its day-to-day duties in managing the Trust. For
purposes of this Section 7.1, no partner of the Manager shall be deemed to be an
Affiliate thereof.
7.2 Reliance; Advice of Counsel. (a) The Trustee, the Manager, and any
---------------------------
other person or entity to whom the Trustee or the Manager has delegated its
duties in managing the Trust, shall incur no liability to anyone in acting upon
any signature, instrument, notice, resolution, request, consent, order,
certificate, report, opinion, bond or other document or paper believed by it to
be genuine and believed by it to be signed by the proper party or parties. The
Trustee, the Manager and any other person or entity to whom the Trustee or the
Manager has delegated its duties in managing the Trust may accept a certified
copy of a resolution or certificate of the board of directors, general partner
or other governing body of any corporate or partnership party as conclusive
evidence that such resolution or certificate has been duly adopted by such body
and that the same is in full force and effect. As to any fact or matter the
manner of ascertainment of which is not specifically prescribed herein, the
Trustee, the Manager, and any other person or entity to whom the Trustee or the
Manager has delegated its duties in managing the Trust, may for all purposes
hereof rely on a certificate, signed by the president or any vice president,
general partner, or by the treasurer or any assistant treasurer or the secretary
of any assistant secretary of the relevant party, as to such fact or matter, and
such certificate shall constitute full protection to the Trustee, the Manager,
and any other person or entity to whom the Trustee or the Manager has delegated
its duties in managing the Trust, for any action taken or omitted to be taken by
them in good faith in reliance thereon.
21
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(b) In the exercise or administration of the Trust hereunder and in
the performance of its duties and obligations under this Agreement, the Trustee,
the Manager, and any other person or entity to whom the Trustee or the Manager
has delegated its duties in managing the Trust, (i) may act directly or, at the
expense of the Trust, through agents or attorneys pursuant to agreements entered
into with any of them, and the Trustee, Manager, and any person or entity to
whom the Trustee or the Manager has delegated its duties in managing the Trust,
shall not be liable for the default or misconduct of such agents or attorneys if
such agents or attorneys shall have been selected by the Trustee, Manager, or
any person or entity to whom the Trustee or the Manager has delegated its duties
in managing the Trust, reasonably and in good faith; and (ii) may, at the
expense of the Trust, consult with counsel, accountants and other skilled
persons to be selected in good faith and employed by it, and the Trustee,
Manager, and any person or entity to whom the Trustee or the Manager has
delegated its duties in managing the Trust, shall not be liable for anything
done, suffered or omitted reasonably and in good faith by them in accordance
with the advice or opinion of any such counsel, accountants or other skilled
persons.
(c) No provision of this Trust Agreement shall require either the
Trustee or the Manager to take any action, to expend or risk its personal funds
or otherwise incur any financial liability in the performance of its rights,
powers or obligations hereunder if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such
action, risk or liability is not reasonably assured or provided to it.
(d) Under no circumstance shall either the Trustee or the Manager be
personally liable for any representation, warranty, covenant or other obligation
or indebtedness of the Trust.
(e) Neither the Trustee nor the Manager shall be personally
responsible for or in respect of the validity or sufficiency of this Trust
Agreement, or for the due execution hereof by the Initial Grantors or the
Unitholders, the form, validity, value or sufficiency of the Trust Property, or
for the validity and sufficiency of any Trust Certificate.
(f) Neither the Trustee nor the Manager shall be personally liable
for its good faith reliance on the provisions of this Trust Agreement, the Trust
Unit Exchange Agreement, the Contribution Agreement, the Stockholders Agreement,
the Stock
22
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Contribution Agreement, the Excess Claims Assumption Agreement, the Loomis
Casualty and Employee Claims Trust, the Loomis Indemnity Trust, and any other
related agreements or documents.
7.3 Not Acting in Individual Capacity. Except as expressly provided in
---------------------------------
this Article VII, in accepting the trust hereby created, the Trustee acts solely
as Trustee hereunder and not in its individual capacity, and all Persons having
any claim against the Trustee by reason of the transactions contemplated by this
Agreement shall look only to the Trust Property for payment or satisfaction
thereof.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1 Unitholders. If any Unitholder, as such, of the Trust, is made a
-----------
party to any suit or proceeding, he shall not, on account thereof, be held to
any personal liability. To the fullest extent permitted by law, the Trust shall
indemnify and hold each Unitholder harmless from and against all claims and
liabilities to which such Unitholder may become subject by reason of his being
or having been a Unitholder, and shall reimburse such Unitholder for all legal
and other expenses reasonably incurred by him in connection with any such claim
or liability.
8.2 The Trustee, Manager and its Affiliates, Their Successors, Assigns,
-------------------------------------------------------------------
Agents and Servants. To the fullest extent permitted by law, the Trust shall
- -------------------
indemnify and hold harmless the Trustee, Manager and its Affiliates, their
successors, assigns, agents and servants from and against any and all
liabilities, obligations, losses, damages, taxes, claims, actions, suits, costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever which may be imposed on, incurred by or asserted at
any time against any of the Trustee, the Manager or its Affiliates, their
successors, assigns, agents or servants hereunder in any way relating to or
arising out of this Agreement, the Contribution Agreement, the Stockholders
Agreement, the Excess Claims Assumption Agreement, the Stock Contribution
Agreement, the Loomis Casualty and Employee Claims Trust, or the Loomis
Indemnity Trust or the administration of the Trust Property or the action or
inaction of the Trustee, Manager or its Affiliates, or their successors,
assigns, agents or servants hereunder, except that the Trust shall not be
required to indemnify the Trustee, or the Manager or its Affiliates, their
successors, assigns, agents or servants for expenses arising out of or resulting
from (i) with respect to the
23
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Trustee's (or its Affiliates, Successors, assigns, agents or servants) explicit
duties under Section 2.8 of this Agreement or in all cases with respect to the
Manager hereunder, for its acts or omissions (or those of its Affiliates,
successors, assigns, agents or servants), as the case may be, constituting
fraud, gross negligence, bad faith, recklessness or willful misconduct and (ii)
with respect to the Trustee other than with respect to the Trustee's explicit
duties under Section 2.8 of this Agreement, for acts or omissions of the Trustee
(or its Affiliates, successors, assigns, agents or servants) constituting fraud,
gross negligence, bad faith, recklessness or willful misconduct. The
indemnities contained in this Section 8.2 shall survive the termination of this
Agreement.
8.3 Advancement of Expenses. The Trustee, Manager and its Affiliates,
-----------------------
their successors, assigns, agents and servants shall receive advances from the
Trust for payment of their costs and attorneys' fees as incurred only if each of
the following conditions are satisfied:
(a) the legal action relates to the performance of duties or services
by such Person on behalf of the Trust; and
(b) such Person undertakes to repay the advanced funds with interest
to the Trust in cases in which it is not entitled to indemnification.
ARTICLE IX
WINDING UP AND TERMINATION OF TRUST
-----------------------------------
9.1 Termination of the Trust. The Trust created hereby: shall be
------------------------
dissolved upon the earliest to occur of the following (i) the sale or other
final disposition by the Manager of the Trust Property, (ii) the date of the
consummation of an Initial Public Offering, (iii) the election by Unitholders
holding a majority in interest of the Units to terminate the Trust, (iv)
November 27, 2006, (v) the bankruptcy, dissolution, resignation or removal of
the Manager, unless the Unitholders unanimously agree to the continuation of the
Trust and to the appointment of a new Manager, (vi) the bankruptcy, termination,
dissolution, resignation or expulsion of the Trustee, unless a successor Trustee
is appointed in accordance with Section 10.1, (vii) the date ten days after the
dissolution, termination or bankruptcy of Wingate (or any transferee of all of
Wingate's Units), unless all the remaining Unitholders agree in writing to the
continuation of the Trust by delivery of written notice to
24
<PAGE>
the Manager prior to the expiration of the ten-day period, (viii) after the
consummation of the transactions contemplated by the Contribution Agreement,
such time as this Trust shall hold of record less than 25% of the issued and
outstanding voting securities of the Company, (ix) April 1, 1997 if the closing
of the transactions contemplated by the Contribution Agreement have not been
consummated by that Date, or (x) the consent of the Manager (the date on which
the first to occur of the events set forth in (i) - (x) above shall be referred
to herein as the "Dissolution Triggering Date"). Following a Dissolution
Triggering Date, the affairs of the Trust shall be wound up by the Manager in
accordance with Section 3808 of the Act and, pursuant thereto, the Trust
Property shall be distributed to the Unitholders in accordance with Section 5.1
hereof. As soon as practicable thereafter, a Certificate of Cancellation shall
be filed with the office of the Secretary of State of the State of Delaware at
which time the legal existence of the Trust shall terminate. If the bankrupt,
terminated, dissolved, expelled or resigned Trustee is the sole Trustee or the
Trustee which meets the requirements of Section 3807 of the Act, a successor
Trustee who meets the requirements of Section 3807 of the Act shall be appointed
by the Manager.
ARTICLE X
SUCCESSOR TRUSTEE AND ADDITIONAL TRUSTEES
-----------------------------------------
10.1 Resignation of Trustee; Appointment of Successor. (a) The Trustee may
------------------------------------------------
resign at any time without cause by giving at least 60 days' prior written
notice to the Unitholders, such resignation to be effective upon the acceptance
of appointment by a successor Trustee under Section 10.1(b) below. In addition,
the Manager may at any time remove the Trustee without cause by an instrument in
writing delivered to the Trustee, such removal to be effective upon the
acceptance of appointment by a successor Trustee under Section 10.1(b) below.
In case of the resignation or removal of the Trustee, the Manager may appoint a
successor Trustee. If a successor Trustee shall not have been appointed within
30 days after the giving of written notice of such resignation or the delivery
of the written instrument with respect to such removal, the Trustee, the
Manager, or any Unitholder may apply to any court of competent jurisdiction to
appoint a successor Trustee to act until such time, if any, as a successor
Trustee shall have been appointed as provided above. Any successor Trustee so
appointed by such court shall immediately and without further act be superseded
by any
25
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successor Trustee appointed as above provided within one year from the date of
the appointment by such court.
(b) Any successor Trustee, however appointed, shall execute and
deliver to the predecessor Trustee an instrument accepting such appointment, and
thereupon such successor Trustee, without further act, shall become vested with
all the estates, properties, rights, powers, duties and trust of the predecessor
Trustee in the trusts hereunder with like effect as if originally named the
Trustee herein; but nevertheless, upon the written request of such successor
Trustee, such predecessor Trustee shall execute and deliver a Certificate of
Amendment to the Certificate of Trust and an instrument transferring to such
successor Trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, duties and trusts of such predecessor Trustee, and
such predecessor Trustee shall duly assign, transfer, deliver and pay over to
such successor Trustee all monies or other property then held or subsequently
received by such predecessor Trustee upon the trusts herein expressed.
(c) If a successor Trustee shall be the sole Trustee, such Trustee
shall meet the requirements set forth in Section 3807(a) of the Act, and shall
be a bank or trust company incorporated and doing business within the United
States of America and having a combined capital and surplus of at least
$50,000,000, if there be such an institution willing, able and legally qualified
to perform the duties of the Trustee hereunder upon reasonable or customary
terms.
(d) Appointment of Additional Trustees. At any time or times for the
----------------------------------
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property may at the time be located, the Manager by an instrument
in writing, may appoint one or more individuals or corporations to act as
separate Trustee or separate Trustees of all or any part of the Trust Property
to the full extent that local law makes it necessary or appropriate for such
separate Trustee or separate Trustees to act alone.
10.2 Legal Title. Legal title to all the Trust Property shall be vested at
-----------
all times in the name of the Trust except where applicable law in any
jurisdiction requires title to any part of Trust Property to be vested in the
Trustee.
26
<PAGE>
ARTICLE XI
TAX MATTERS
-----------
11.1 Tax Status of the Trust. The Trust is intended to be treated as a
-----------------------
trust pursuant to Regulation (S) 301.7701-4 and as a grantor trust subject to
the provisions of Subchapter J, Subpart E of the Code owned by each Unitholder
as grantor in proportion to the Ownership Percentage of each Unitholder. This
Agreement shall be construed in a manner consistent with such intention. Except
with respect to the Loans, which for tax purposes shall be treated as loans
between Wingate and each Borrower and a contribution of the loan proceeds by the
Borrower to the Trust, any items of income, deduction, credit or loss of the
Trust shall be allocated to the Unitholders for federal income tax purposes in
accordance with the Ownership Percentages of the Unitholders.
11.2 Tax Returns and Reports. In accordance with (S) 1.671-4(a) of the
-----------------------
Regulations, the Manager will file with the Service annual information tax
returns (Form 1041), as provided in this Section. Items of income, deduction
and credit attributable to the Trust will not be reported on the Form 1041.
Instead, the Manager will attach to the Form 1041 a separate statement showing
the items of income, deduction and credit attributable to the Trust and
detailing the allocation of such items to the Unitholders. As soon as
practicable after the end of each calendar year (and within the time required by
applicable law), the Manager shall cause to be prepared and mailed to the
Unitholders such information with respect to the Trust as shall be necessary for
each Unitholder to complete and file its federal, state and local income and
other tax returns.
11.3 Withholding. Notwithstanding the preceding provisions of this
-----------
section, the Manager may withhold from any amount distributable from the Trust
at any time to any person such sum or sums as may be sufficient to pay any tax
or taxes or other charge or charges which have been or may be imposed on such
person or upon the Trust with respect to the amount distributable or to be
distributed under the income tax laws of the United States or of any state or
political subdivision or entity by reason of any distribution provided for in
this Agreement, whenever such withholding is determined by the Manager to be
required by any law, regulation, rule, ruling, directive or other governmental
requirement.
27
<PAGE>
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Amendments. This Agreement may be amended only by a written
----------
instrument signed by the Manager, the Trustee and each Unitholder then a party
hereto; provided, however, that the issuance of additional Units in exchange for
-------- -------
shares of Loomis Common Stock pursuant to the Trust Unit Exchange Agreement and
the execution of a joinder hereto shall not be deemed to be an amendment
requiring the consent of the Unitholders.
12.2 Filings. The Manager shall, within a reasonable time after the
-------
adoption of any amendment to this Agreement, make any filings or publications
required or desirable to reflect such amendment, and within thirty days of the
adoption of any amendment, send a copy thereof to the Unitholders.
12.3 No Legal Title to Trust Property in Unitholders. The Unitholders
-----------------------------------------------
shall not have legal title to any part of the Trust Property and shall only have
an undivided beneficial interest therein. No transfer, by operation of law or
otherwise, of any right, title and interest of the Unitholders in and to their
undivided beneficial interest in the Trust Property hereunder shall operate to
terminate this Agreement or the Trust hereunder or entitle any successor
transferee to an accounting or to the Transfer to it of legal title to any part
of the Trust Property.
12.4 Limitations on Rights of Others. Nothing in this Agreement, whether
-------------------------------
express or implied, shall be construed to give to any Person other than the
Trustee and the Unitholders any legal or equitable right, remedy or claim in the
Trust Property or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
12.5 Notices. Unless otherwise expressly specified or permitted by the
-------
terms hereof, all notices shall be in writing and delivered by hand, by telecopy
or mailed by certified mail, postage prepaid, and, if to the Trustee, addressed
to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Custody
Telecopy: (302) 651-8464
28
<PAGE>
or to such other address as the Trustee may have set forth in a written notice
to the Unitholders; if to the Manager, addressed to:
Frederick B. Hegi, Jr.
c/o Wingate Partners, L.P.
750 N. St. Paul Street
Suite 1200
Dallas, TX 75201
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Mary R. Korby, Esq.
and if to a Unitholder, addressed to the Unitholder at the address set forth for
such Unitholder in the register maintained by the Manager. Whenever any notice
in writing is required to be given by the Manager hereunder, such notice shall
be deemed given and such requirement satisfied 72 hours after such notice is
mailed by certified mail, postage prepaid, addressed as provided above; any
notice given by a Unitholder to the Manager shall be effective upon receipt by
an authorized officer of the Manager.
12.6 Severability. Any provision of this Agreement which is prohibited or
------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
12.7 Separate Counterparts. This Agreement may be executed by the parties
---------------------
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
12.8 Successors and Assigns. All representations, warranties, covenants
----------------------
and agreements contained herein shall be binding upon, and inure to the benefit
of, each of the parties hereto and its respective successors and assigns, all as
herein provided. Any request, notice, direction, consent, waiver or other
instrument or action by a Unitholder shall bind the successors and assigns of
such Unitholder.
29
<PAGE>
12.9 Headings. The headings of the various Articles and Sections herein
--------
are for convenience or reference only and shall not define or limit any of the
terms or provisions hereof.
12.10 Governing Law. This Agreement shall in all respects be governed by,
-------------
and construed in accordance with, the laws of the State of Delaware (excluding
conflict of law rules), including all matters of construction, validity and
performance; provided, however, that there shall not be applicable to the Trust,
-------- -------
the Trustee or this Trust Agreement any provisions of the laws (statutory or
common) of the State of Delaware, other than the Delaware Business Trust Act,
pertaining to trusts that relate to or regulate, in a manner inconsistent with
the terms hereof (i) the filing with any court or governmental body or agency of
trustee accounts or schedules of trustee fees and charges, (ii) affirmative
requirements to post bonds for trustees, officers, agents or employees of a
trust, (iii) the necessity for obtaining court or other governmental approval
concerning the acquisition, holding or disposition of real or personal property,
(iv) fees or other sums payable to trustees, officers, agents or employees of a
trust, (v) the allocation of receipts and expenditures to income and principal,
(vi) restrictions or limitations on the permissible nature, amount or
concentration of trust investments or requirements relating to the titling,
storage or other manner of holding or investing trust assets, (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, or (viii) the provisions of 12 Del.C. (S)
------
3540.
12.11 Intent of the Parties. This Trust is intended to create a trust
---------------------
without transferable beneficial interests (except as otherwise permitted herein)
and this Trust shall be governed and construed in all respects as a trust.
[The remainder of this page is intentionally left blank.]
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers hereunto duly authorized, as of the day
and year first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/ SIGNATURE ILLEGIBLE
----------------------------
Name: ILLEGIBLE
----------------------------
Title: ILLEGIBLE
---------------------------
/s/ F. B. Hegi, Jr.,
---------------------------------
Frederick B. Hegi, Jr.,
as Manager and not individually
WINGATE PARTNERS, L.P.,
as Initial Grantor
By: WINGATE MANAGEMENT COMPANY, L.P., its
general partner
By:/s/ F. B. Hegi, Jr.
------------------------
Frederick B. Hegi, Jr.,
General Partner
WINGATE AFFILIATES, L.P.,
as Initial Grantor
By:/s/ F. B. Hegi, Jr.
------------------------------
Frederick B. Hegi, Jr.,
General Partner
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
WILMINGTON TRUST COMPANY,
as Trustee
By:____________________________
Name:____________________________
Title:____________________________
/s/ F. B. Hegi, Jr.,
---------------------------------
Frederick B. Hegi, Jr.,
as Manager and not individually
WINGATE PARTNERS, L.P.,
as Initial Grantor
By: WINGATE MANAGEMENT COMPANY, L.P. its
general partner
By:/s/ F.B. Hegi, Jr.,
------------------------
Frederick B. Hegi, Jr.,
General Partner
WINGATE AFFILIATES, L.P.,
as Initial Grantor
By:/s/ F.B. Hegi, Jr.,
------------------------------
Frederick B. Hegi, Jr.,
General Partner
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers hereunto duly authorized, as of the
day and year first above written.
WINGATE AFFILIATES, L.P.
as Unitholder
By: WINGATE MANAGEMENT COMPANY, L.P.
its general partner
By:/s/ F.B. Hegi Jr.
-----------------------------
Frederick B. Hegi, Jr.,
General Partner
Address:
750 N. St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Telecopy: (214) 871-8799
With a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby, Esq.
Telecopy: (214) 746-777
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed by their respective officers hereunto duly authorized, as of
the day and year first above written.
WINGATE AFFILIATES, L.P.,
as Unitholder
By:/s/ F.B Hegi, Jr.,
-----------------------------
Frederick B. Hegi, Jr.,
General Partner
Address:
750 N. St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Telecopy: (214) 871-8799
With a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby, Esq.
Telecopy: (214) 746-777
<PAGE>
EXHIBIT A
---------
Unitholder: Wingate Partners, L.P.
Number of Units Issued: 1,320,773 Units
Shares of Loomis Common Stock contributed to the Trust: 1,320,773
Unitholder: Wingate Affiliates, L.P.
Number of Units Issued: 23,660 Units
Shares of Loomis Common Stock contributed to the Trust: 23,660
<PAGE>
EXHIBIT 2.3
January 24, 1997
Loomis Stockholders Trust
c/o Frederick B. Hegi, Jr.,
as Manager
Wingate Partners, L.P.
750 N. St. Paul Street, Suite 1200
Dallas, Texas 75201
Re: Trust Unit Exchange Agreement
Dear Sirs:
This letter (this "Agreement") will evidence the agreement of the
undersigned (each an "Exchanging Shareholder" and, collectively, the "Exchanging
Shareholders") to transfer, sell, assign, and convey to the Loomis Stockholders
Trust, a Delaware business trust (the "Loomis Stockholders Trust"), the number
of shares of Class A Common Stock, par value $.01 per share, of Loomis Holding
Corporation, a Delaware corporation ("LHC"), set forth below the name of such
Exchanging Shareholder on the signature page hereof (the "LHC Common Shares") in
exchange for the consideration hereinafter set forth, on the terms and subject
to the conditions contained herein.
1. Share Exchange. At the Closing (as hereinafter defined), each
--------------
Exchanging Shareholder shall deliver to Wilmington Trust Company, as Trustee of
the Loomis Stockholders Trust (the "Trustee"), one or more certificates
representing the LHC Common Shares, such certificate or certificates to be
endorsed in blank or accompanied by duly executed stock powers endorsed in
blank. In consideration therefor, and contemporaneously therewith, the Trustee
shall deliver to such Exchanging Shareholder that number of units of beneficial
interest in the Loomis Stockholders Trust set forth below the name of the
Exchanging Shareholder on the signature page hereof (the "Units"). The trust
certificates representing the Units,
<PAGE>
substantially in the form attached as Exhibit A hereto, shall be registered in
---------
the name of the Exchanging Shareholder.
2. Closing. The exchange transactions contemplated by this Agreement
-------
will take place at a closing (the "Closing") at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York 10153, at 10:00 a.m., local
time, on January 24, 1997, or on such other date as is specified by the Manager
(as hereinafter defined) to the Exchanging Shareholders in writing at least one
(1) business day prior thereto.
3. Conditions to Exchange.
----------------------
(a) General. The Closing shall occur simultaneously with, but shall
-------
be conditioned upon the occurrence of, the closing of the transactions
contemplated by the Contribution Agreement, dated November 28, 1996, by and
among LHC, Loomis Armored Inc., a Texas corporation, Borg-Warner Security
Corporation, a Delaware corporation, Wells Fargo Armored Service Corporation, a
Delaware corporation, Loomis, Fargo & Co. (formerly known as Loomis-Wells
Corporation), a Delaware corporation, and the Loomis Stockholders Trust.
(b) Additional Exchanging Shareholder Conditions. The obligation of
--------------------------------------------
each Exchanging Shareholder to consummate the transactions contemplated
hereunder is subject, at the Closing, to the satisfaction or waiver in writing
by each Exchanging Shareholder of the following conditions:
(i) The Units shall have been delivered, duly executed, at the
Closing or to the Exchanging Shareholders;
(ii) All representations and warranties made by or on behalf of
the Loomis Stockholders Trust in this Agreement shall be true and correct in all
material respects as of the Closing. The Loomis Stockholders Trust shall have
performed and complied in all respects with the covenants contained in this
Agreement required to be performed and complied with by it prior to or at the
Closing; and
(iii) At the Closing, the transactions contemplated hereunder
shall not be prohibited or enjoined (temporarily or permanently) by any
applicable law, claim or governmental regulation.
2
<PAGE>
(c) Additional Loomis Stockholders Trust Conditions. The obligation
-----------------------------------------------
of the Loomis Stockholders Trust to consummate the transactions contemplated
hereunder is subject, at the Closing, to the satisfaction or waiver by the
Loomis Stockholders Trust of the following conditions:
(i) The LHC Common Shares shall have been delivered endorsed
in blank or accompanied by duly executed stock powers endorsed in blank;
(ii) All representations and warranties made by or on behalf of
the Exchanging Shareholders in this Agreement shall be true and correct in all
material respects as of the Closing. The Exchanging Shareholders shall have
performed and complied in all respects with the covenants contained in this
Agreement required to be performed and complied with by them prior to or at the
Closing; and
(iii) At the Closing, the transactions contemplated hereunder
shall not be prohibited or enjoined (temporarily or permanently) by any
applicable law, claim or governmental regulation.
4. Representations and Warranties of the Exchanging Shareholders. Each
-------------------------------------------------------------
Exchanging Shareholder (as to itself only) represents and warrants to the Loomis
Stockholders Trust as follows:
(a) Title to LHC Common Shares. Such Exchanging Shareholder has good
--------------------------
title to the LHC Common Shares, free and clear of any and all liens, pledges,
charges, reservations, restrictions, options, rights of first offer or refusal,
security interests, adverse claims or other encumbrances of any character
whatsoever, whether written or oral and whether or not relating to the extension
of credit or the borrowing of money ("Encumbrances"). Such Exchanging
Shareholder has the full right, power and authority to exchange the LHC Common
Shares for the Units. The delivery of the LHC Common Shares to the Trustee
pursuant to Section 1 will vest in the Loomis Stockholders Trust legal and valid
title to the LHC Common Shares, free and clear of all Encumbrances. Except for
this Agreement, the Contribution Agreement, the Shareholders Agreement, dated as
of May 6, 1991, by and among LHC and the stockholders signatory thereto, as
amended by the First Amendment to the Shareholders Agreement, dated as of May
22, 1992 (the "Shareholders Agreement"), and the Registration Agreement, dated
as of May 6, 1991, by and among LHC and the parties signatory thereto, as
amended by the First Amendment to the Registration Agreement, dated as of May
22, 1992 (the "Registration
3
<PAGE>
Agreement"), there are no agreements or understandings between such Exchanging
Shareholder and any other person or entity with respect to any matter pertaining
to the LHC Common Shares.
(b) Authority. The Exchanging Shareholder has full legal power and
---------
capacity to execute, deliver, and perform this Agreement and to deliver the LHC
Common Shares, and now has and at the time the LHC Common Shares are delivered
to the Trustee, will have full legal power to transfer and deliver the LHC
Common Shares to the Loomis Stockholders Trust in accordance with this
Agreement. This Agreement has been duly and validly executed and delivered by
the Exchanging Shareholder and constitutes the legal, valid and binding
obligation of the Exchanging Shareholder, enforceable against such Exchanging
Shareholder in accordance with its terms subject, as to enforceability, to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other laws of general applicability affecting the rights of creditors and to
general principles of equity.
(c) No Intent to Distribute. The Units to be acquired by the
-----------------------
Exchanging Shareholder pursuant to this Agreement are being acquired for his or
her own account and without a view to the distribution or resale of such
securities or any interest therein in violation of the Securities Act of 1933,
as amended (the "Securities Act"), or any similar federal statute, and the rules
and regulations of the Securities and Exchange Commission promulgated thereunder
or in violation of any state securities or blue sky laws, all as the same shall
be in effect at any time of determination.
(d) Accredited Investor. The Exchanging Shareholder is an
-------------------
"Accredited Investor" as such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
(e) Experience. The Exchanging Shareholder has such experience in
----------
business and financial matters as to be fully capable of evaluating the risks
and merits of an investment in the Units, and the Exchanging Shareholder's
financial position is such that he or she is able to bear the risk of such
investment in the Units, including the risk of possible loss of his or her
entire investment.
5. Representations and Warranties of the Loomis Stockholders Trust. The
---------------------------------------------------------------
Loomis Stockholders Trust hereby represents and warrants to each Exchanging
Shareholder as follows:
4
<PAGE>
(a) Existence. The Loomis Stockholders Trust is duly organized and
---------
validly existing under the laws of the State of Delaware.
(b) Authorization. The Loomis Stockholders Trust has all requisite
-------------
power and authority to enter into this Agreement, issue the Units and perform
its obligations hereunder. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on the part of the
Loomis Stockholders Trust, and this Agreement has been duly executed and
delivered by the Loomis Stockholders Trust. This Agreement constitutes the
legal, valid and binding obligation of the Loomis Stockholders Trust,
enforceable against the Loomis Stockholders Trust in accordance with its terms
subject, as to enforceability, to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws of general applicability affecting the
rights of creditors and to general principles of equity.
6. Limitations on Transfer.
-----------------------
(a) Restrictions on Transfer. From and after the Closing, neither
------------------------
the Units nor any interest therein shall be transferable except upon the
conditions specified in Article 3 of the Trust Agreement. Any purported transfer
in violation of Article 3 of the Trust Agreement shall be void ab initio and of
-- ------
no force or effect.
(b) Restrictive Legends. Except as otherwise permitted by Article 3
-------------------
of the Trust Agreement, each certificate for the Units issued to an Exchanging
Shareholder or to a subsequent transferee shall include legends in substantially
the following forms:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT
TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT
TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144
UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT.
5
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH IN
THE BUSINESS TRUST AGREEMENT DATED AS OF NOVEMBER 27, 1996, A COPY OF
WHICH MAY BE OBTAINED FROM THE MANAGER AT ITS PRINCIPAL EXECUTIVE
OFFICES.
7. Covenant of Exchanging Shareholders.
-----------------------------------
By execution of this Agreement, the Exchanging Shareholders hereby
agree to be bound by the terms and conditions of the Business Trust Agreement
(the "Trust Agreement"), dated as of November 27, 1996, by and among Wingate
Partners, L.P., a Delaware limited partnership, and Wingate Affiliates, L.P., a
Delaware limited partnership, together as the initial grantors, the Trustee,
Frederick B. Hegi, Jr., as Manager (the "Manager"), and the Unitholders listed
on the signature pages thereto. A copy of the Trust Agreement is attached to
this Agreement as Exhibit B.
---------
8. Miscellaneous.
-------------
(a) Notices. Any notices or other communications required or
-------
permitted hereunder shall be in writing, and shall be sufficiently given if made
by hand delivery, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows (or at such other
address as may be substituted by notice given as herein provided):
6
<PAGE>
If to the Manager:
Frederick B. Hegi, Jr.
c/o Wingate Partners, L.P.
750 N. St. Paul Street
Suite 1200
Dallas, Texas 75201
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby, Esq.
If to the Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Custody
Telecopy: (302) 651-8464
If to any Exchanging Shareholder, at its address listed on the signature
pages hereof or such other address as any Exchanging Shareholder may
provide by notice to the Manager.
(b) No Waivers; Amendments.
----------------------
(i) No failure or delay on the part of the Manager or any of the
Exchanging Shareholders in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies
provided for herein are cumulative and are not exclusive of any remedies
that may be available to the Loomis Stockholders Trust or any of the
Exchanging Shareholders at law or in equity or otherwise.
7
<PAGE>
(ii) Any provision of this Agreement may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed by
the parties hereto.
(c) Documentary Taxes. The Loomis Stockholders Trust agrees to pay
-----------------
any and all stamp, transfer and other similar taxes, other than any income
taxes, payable or determined to be payable in connection with the execution and
delivery of this Agreement or the issuance of the Units.
(d) Successors and Assigns. Whether or not an express assignment has
----------------------
been made pursuant to the provisions of this Agreement, provisions of this
Agreement that are for the Exchanging Shareholders' benefit as the holders of
any Units are also for the benefit of, and enforceable by, all subsequent
holders of such Units, except as otherwise expressly provided herein. This
Agreement shall be binding upon each of the parties hereto, and their respective
successors and assigns.
(f) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, EXCLUDING ANY CHOICE-OF-LAW
RULES THEREOF.
(g) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
(h) Counterparts; Effectiveness. This Agreement may be executed in
---------------------------
any number of counterparts, each of which shall be an original with the same
effect as if the signatures thereto and hereto were upon the same instrument.
(i) Entire Agreement. This Agreement supersedes all prior agreements
----------------
and understandings, whether written or oral, of the parties hereto with respect
to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
If the provisions set forth above accurately reflect our agreement,
kindly so indicate by executing the counterpart hereof and returning it to the
undersigned whereupon this letter will constitute the valid and binding
agreement of the parties hereto.
EXCHANGING SHAREHOLDER:
----------------------
DIOGENES INTERNATIONAL LTD.
By: /s/ David S. Teed
-------------------------
David S. Teed
President
LHC Common Shares: 127,000
Units: 127,000
Address of Exchanging Shareholder:
380 Chemin Gore
Ulverton, Quebec
Canada JOB 2B0
<PAGE>
If the provisions set forth above accurately reflect our agreement,
kindly so indicate by executing the counterpart hereof and returning it to the
undersigned whereupon this letter will constitute the valid and binding
agreement of the parties hereto.
EXCHANGING SHAREHOLDER:
----------------------
TEED MANAGEMENT SERVICES INC. PROFIT SHARING PLAN
By: /s/ David S. Teed
-----------------------------
David S. Teed
Trustee
LHC Common Shares: 23,000
Units: 23,000
Address of Exchanging Shareholder:
380 Chemin Gore
Ulverton, Quebec
Canada JOB 2B0
<PAGE>
If the provisions set forth above accurately reflect our agreement,
kindly so indicate by executing the counterpart hereof and returning it to the
undersigned whereupon this letter will constitute the valid and binding
agreement of the parties hereto.
EXCHANGING SHAREHOLDER:
----------------------
/s/ JAY I. APPLEBAUM
--------------------------
JAY I. APPLEBAUM
LHC Common Shares: 5,567
Units: 5,567
Address of Exchanging Shareholder:
c/o Wingate Partners, L.P.
750 N. St. Paul Street, Suite 1200
Dallas, Texas 75201
<PAGE>
If the provisions set forth above accurately reflect our agreement,
kindly so indicate by executing the counterpart hereof and returning it to the
undersigned whereupon this letter will constitute the valid and binding
agreement of the parties hereto.
EXCHANGING SHAREHOLDER:
----------------------
KEY CAPITAL CORPORATION
By: /s/ James P. Marra, Jr.
----------------------------
Name: James P. Marra, Jr.
--------------------------
Title: Vice President
--------------------------
LHC Common Shares: 268,794
Units: 268,794
Address of Exchanging Shareholder:
127 Public Square, 4th Floor
Cleveland, Ohio 44114-1306
<PAGE>
If the provisions set forth above accurately reflect our agreement,
kindly so indicate by executing the counterpart hereof and returning it to the
undersigned whereupon this letter will constitute the valid and binding
agreement of the parties hereto.
EXCHANGING SHAREHOLDER:
----------------------
WINGATE PARTNERS, L.P.
By: Wingate Management Company, L.P.,
its general partner
By: /s/ Frederick B. Hegi, Jr.
----------------------------
Frederick B. Hegi, Jr.
General Partner
LHC Common Shares: 786,385
Units: 786,385
Address of Exchanging Shareholder:
750 N. St. Paul Street, Suite 1200
Dallas, Texas 75201
<PAGE>
If the provisions set forth above accurately reflect our agreement,
kindly so indicate by executing the counterpart hereof and returning it to the
undersigned whereupon this letter will constitute the valid and binding
agreement of the parties hereto.
EXCHANGING SHAREHOLDER:
----------------------
WINGATE AFFILIATES, L.P.
By: /s/ Frederick B. Hegi, Jr.
------------------------------
Frederick B. Hegi, Jr.
General Partner
LHC Common Shares: 12,260
Units: 12,260
Address of Exchanging Shareholder:
750 N. St. Paul Street, Suite 1200
Dallas, Texas 75201
<PAGE>
If the provisions set forth above accurately reflect our agreement,
kindly so indicate by executing the counterpart hereof and returning it to the
undersigned whereupon this letter will constitute the valid and binding
agreement of the parties hereto.
EXCHANGING SHAREHOLDER:
----------------------
THE CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ Timothy S. Culver
---------------------------
Name: TIMOTHY S. CULVER
-------------------------
Title: AVP
------------------------
LHC Common Shares: 39,301
Units: 39,301
Address of Exchanging Shareholder:
Two Lincoln Centre, Suite 200
5420 LBJ Freeway
Dallas, Texas 75240
<PAGE>
If the provisions set forth above accurately reflect our agreement,
kindly so indicate by executing the counterpart hereof and returning it to the
undersigned whereupon this letter will constitute the valid and binding
agreement of the parties hereto.
EXCHANGING SHAREHOLDER:
----------------------
By: /s/ James B. Mattly
----------------------
JAMES B. MATTLY
LHC Common Shares: 45,965
Units: 45,965
Address of Exchanging Shareholder:
16225 Park Ten Place, Suite 600
Houston, Texas 77084
<PAGE>
Accepted and agreed to as of
the date first above written.
LOOMIS STOCKHOLDERS TRUST
By: /s/ Frederick B. Hegi, Jr.,
----------------------------------
Frederick B. Hegi, Jr.,
as Manager and not individually
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
______________________________________________________________
$85,000,000
10% Senior Subordinated Notes due 2004
______________________
INDENTURE
Dated as of January 24, 1997
______________________
Among
Loomis, Fargo & Co.,
as Issuer
and
Loomis Holding Corporation,
Loomis Armored Inc.,
Wells Fargo Armored Service Corporation of Texas,
and
Wells Fargo Armored Service Corporation of Puerto Rico,
as Guarantors,
and
Marine Midland Bank,
as Trustee
______________________________________________________________
<PAGE>
CROSS REFERENCE TABLE*
<TABLE>
<CAPTION>
Indenture
Trust Indenture Act Section Section
- --------------------------- -----------
<S> <C>
310 (a)(1)......................................................... 7.10
(a)(2)......................................................... 7.10
(a)(3)......................................................... N.A.
(a)(4)......................................................... N.A.
(a)(5)......................................................... 7.10
(b)............................................................ 7.3
7.8
7.10
(c)............................................................ N.A.
311(a)......................................................... 7.11
(b)............................................................ 7.11
(c)............................................................ N.A.
312(a)......................................................... 2.5
(b)............................................................ 12.3
(c)............................................................ 12.3
313(a)......................................................... 7.6
(b)(1)......................................................... N.A.
(b)(2)......................................................... 7.6
(c)............................................................ 7.6
12.2
314(a)......................................................... 4.3
4.4
(b)............................................................ N.A.
(c)(1)......................................................... 12.4
(c)(2)......................................................... 12.4
(c)(3)......................................................... 12.4
(d)............................................................ N.A.
(e)............................................................ 12.5
(f)............................................................ N.A.
315(a)......................................................... 7.2
(b)............................................................ 7.5
12.2
(c)............................................................ 7.1
(d)............................................................ 7.1
(e)............................................................ 6.12
316(a)(last sentence).......................................... 2.9
(a)(1)(A)...................................................... 6.5
(a)(1)(B)...................................................... 6.4
(a)(2)......................................................... N.A.
(b)............................................................ 6.7
(c)............................................................ N.A.
317(a)(1)...................................................... 6.8
(a)(2)......................................................... 6.10
(b)............................................................ 2.4
</TABLE>
_____________________
* This Cross Reference Table shall not, for any purpose, be deemed a part of
the Indenture.
<PAGE>
<TABLE>
<S> <C>
318(a)......................................................... 12.1
318(b)......................................................... N.A.
318(c)......................................................... 12.1
N.A. means not applicable.
</TABLE>
<PAGE>
TABLE OF CONTENTS**
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.................... 1
Section 1.1. Definitions.............................................. 1
Section 1.2. Other Definitions........................................ 22
Section 1.3. Incorporation by Reference of Trust Indenture Act........ 23
Section 1.4. Rules of Construction.................................... 23
Section 1.5. Acts of Holders.......................................... 23
ARTICLE II. THE NOTES................................................... 24
Section 2.1. Form and Dating.......................................... 24
Section 2.2. Execution and Authentication............................. 26
Section 2.3. Registrar and Paying Agent; Depositary................... 27
Section 2.4. Paying Agents To Hold Money in Trust..................... 27
Section 2.5. Holder Lists............................................. 28
Section 2.6. Transfer and Exchange.................................... 28
Section 2.7. Replacement Notes........................................ 37
Section 2.8. Outstanding Notes........................................ 38
Section 2.9. Treasury Notes........................................... 38
Section 2.10. Temporary Notes.......................................... 38
Section 2.11. Cancellation............................................. 39
Section 2.12. Defaulted Interest....................................... 39
Section 2.13. Persons Deemed Owners.................................... 39
Section 2.14. CUSIP Numbers............................................ 39
ARTICLE III. REDEMPTION AND REPURCHASE................................... 40
Section 3.1. Notices to Trustee....................................... 40
Section 3.2. Selection of Notes....................................... 40
Section 3.3. Notice of Optional Redemption............................ 41
Section 3.4. Effect of Notice of Redemption........................... 42
Section 3.5. Deposit of Redemption Price or Purchase Price............ 42
Section 3.6. Notes Redeemed or Repurchased in Part.................... 42
Section 3.7. Optional Redemption...................................... 42
Section 3.8. Repurchase upon Change of Control Offer.................. 43
Section 3.9. Repurchase upon Application of Excess Proceeds........... 45
ARTICLE IV. COVENANTS.................................................... 47
Section 4.1. Payment of Principal and Interest........................ 47
Section 4.2. Maintenance of Office or Agency.......................... 47
Section 4.3. Reports.................................................. 48
Section 4.4. Compliance Certificate................................... 48
Section 4.5. Taxes.................................................... 49
Section 4.6. Stay, Extension and Usury Laws........................... 49
</TABLE>
_____________________
** This Table on Contents shall not, for any purpose, be deemed a part of the
Indenture.
-i-
<PAGE>
<TABLE>
<S> <C>
Section 4.7. Restricted Payments...................................... 49
Section 4.8. Dividend and Other Payment Restrictions Affecting
Subsidiaries......................................... 52
Section 4.9. Incurrence of Indebtedness and Issuance of Preferred
Stock................................................ 53
Section 4.10. Asset Sales.............................................. 56
Section 4.11. Transactions with Affiliates............................. 57
Section 4.12. Liens.................................................... 58
Section 4.13. Continued Existence...................................... 58
Section 4.14. Insurance Matters........................................ 58
Section 4.15. Offer to Repurchase upon Change of Control............... 58
Section 4.16. Limitation on Future Subordinated Indebtedness........... 59
Section 4.17. Payments for Consent.................................... 59
Section 4.18. Restrictions under Senior Debt.......................... 59
Section 4.19. Sale and Leaseback Transactions......................... 59
Section 4.20. Subsidiary Guarantees................................... 60
ARTICLE V. SUCCESSORS.................................................... 61
Section 5.1. Merger, Consolidation, or Sale of Assets................. 61
Section 5.2. Successor Corporation Substituted........................ 62
ARTICLE VI. DEFAULTS AND REMEDIES........................................ 62
Section 6.1. Events of Default........................................ 62
Section 6.2. Acceleration............................................. 64
Section 6.3. Other Remedies........................................... 64
Section 6.4. Waiver of Past Defaults; Recission of Acceleration....... 65
Section 6.5. Control by Majority...................................... 65
Section 6.6. Limitation on Suits...................................... 66
Section 6.7. Rights of Holders of Notes to Receive Payment............ 66
Section 6.8. Collection Suit by Trustee............................... 66
Section 6.9. Event of Default to Avoid Premium........................ 67
Section 6.10. Trustee May File Proofs of Claim........................ 67
Section 6.11. Priorities.............................................. 67
Section 6.12. Undertaking for Costs................................... 68
ARTICLE VII. TRUSTEE..................................................... 68
Section 7.1. Duties of Trustee........................................ 68
Section 7.2. Rights of Trustee........................................ 69
Section 7.3. Individual Rights Of Trustee............................. 70
Section 7.4. Trustee's Disclaimer..................................... 70
Section 7.5. Notice of Defaults....................................... 70
Section 7.6. Reports by Trustee to Holders of the Notes............... 71
Section 7.7. Compensation, Reimbursement and Indemnity................ 71
Section 7.8. Replacement Of Trustee................................... 72
Section 7.9. Successor Trustee by Merger, Etc......................... 73
Section 7.10. Eligibility; Disqualification........................... 73
Section 7.11. Preferential Collection of Claims against Company....... 73
ARTICLE VIII. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................... 73
Section 8.1. Option to Effect Legal Defeasance or Covenant
Defeasance........................................... 73
Section 8.2. Legal Defeasance and Discharge........................... 74
Section 8.3. Covenant Defeasance...................................... 74
Section 8.4. Conditions to Legal or Covenant Defeasance............... 75
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 8.5. Deposited Money and U.S. Government Securities to Be
Held in Trust; Other Miscellaneous Provisions............ 76
Section 8.6. Repayment to the Company................................. 77
Section 8.7. Reinstatement............................................ 77
ARTICLE IX. AMENDMENT, SUPPLEMENT AND WAIVER............................. 77
Section 9.1. Without Consent of Holders of Notes...................... 77
Section 9.2. With Consent of Holders of Notes......................... 78
Section 9.3. Compliance with Trust Indenture Act...................... 80
Section 9.4. Revocation And Effect Of Consents........................ 80
Section 9.5. Notation on or Exchange of Notes......................... 80
Section 9.6. Trustee to Sign Amendments, Etc.......................... 80
ARTICLE X. SUBORDINATION................................................. 81
Section 10.1. Notes Subordinated to Senior Debt........................ 81
Section 10.2. Priority and Payment Over of Proceeds in Certain
Events............................................ 81
Section 10.3. Payments May Be Made Prior to Dissolution................ 83
Section 10.4. Rights of Holders of Senior Debt Not to Be Impaired...... 84
Section 10.5. Authorization to Trustee to Take Action to Effectuate
Subordination..................................... 84
Section 10.6. Subrogation.............................................. 84
Section 10.7. Obligations of Company Unconditional..................... 85
Section 10.8. The Trustee Entitled to Assume Payments Not Prohibited
in Absence of Notice.............................. 85
Section 10.9. Right of Trustee to Hold Senior Debt..................... 86
Section 10.10.No Implied Covenants by or Obligations of the
Trustee........................................... 86
ARTICLE XI. SUBSIDIARY GUARANTEES........................................ 86
Section 11.1. Subsidiary Guarantees................................... 86
Section 11.2. Subordination of Guarantees............................. 87
Section 11.3. Execution and Delivery of Supplemental Indentures....... 88
Section 11.4. Guarantors May Consolidate, etc., on Certain Terms...... 88
Section 11.5. Effect of Defeasance.................................... 89
Section 11.6. Limitation on Guarantor Liability....................... 89
Section 11.7. Stay, Extension and Usury Laws.......................... 89
ARTICLE XII. MISCELLANEOUS............................................... 90
Section 12.1. Trust Indenture Act Controls............................ 90
Section 12.2. Notices................................................. 90
Section 12.3. Communication by Holders of Notes with Other Holders
of Notes.......................................... 91
Section 12.4. Certificate and Opinion as to Conditions Precedent...... 91
Section 12.5. Statements Required in Certificate or Opinion........... 92
Section 12.6. Rules by Trustee and Agents............................. 92
Section 12.7. No Personal Liability of Directors, Officers,
Employees and Stockholders........................ 92
Section 12.8. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial........................................ 92
Section 12.9. No Adverse Interpretation of Other Agreements........... 93
Section 12.10. Successors.............................................. 93
Section 12.11. Severability............................................ 93
Section 12.12. Counterpart Originals................................... 93
Section 12.13. Table of Contents, Headings, Etc........................ 93
Section 12.14. Qualification of Indenture.............................. 94
Section 12.15. Additional Rights of Transfer Restricted Securities..... 94
</TABLE>
-iii-
<PAGE>
EXHIBITS
- --------
Exhibit A-1 Form of Note
Exhibit A-2 Form of Regulation S Temporary Global Notes
Exhibit A-3 Form of New Senior Subordinated Note
Exhibit B-1 Form of Certificate For Registration of
Transfer From Restricted Global Note to
Regulation S Global Note
Exhibit B-2 Form of Certificate For Registration of
Transfer From Regulation S Global Note to
Restricted Global Note
Exhibit B-3 Form of Certificate For Exchange or
Registration of Transfer of Certificated Notes
Exhibit B-4 Form of Certificate For Exchange of
Restricted Global Note or Regulation S
Permanent Global Note to Certificated Note
Exhibit B-5 Form of Certificate For Registration of
Transfer From Accredited Restricted Note to QIB
Restricted Note
Exhibit B-6 Form of Certificate For Registration of
Transfer From QIB Restricted Note to Accredited
Restricted Note
Exhibit C Form of Supplemental Indenture
-iv-
<PAGE>
INDENTURE
INDENTURE, dated as of January 24, 1997, among Loomis, Fargo & Co., a
Delaware corporation (the "Company"), Loomis Holding Corporation ("LFC"), a
Delaware corporation (to be renamed LFC Holding Corporation), Loomis Armored
Inc. (the "Operating Subsidiary"), a Texas corporation (to be renamed Loomis,
Fargo & Co.), Wells Fargo Armored Service Corporation of Texas ("Wells Fargo of
Texas"), a Texas corporation (to be renamed LFC Armored of Texas Inc.), Wells
Fargo Armored Service Corporation of Puerto Rico ("Wells Fargo of Puerto Rico"),
a Tennessee corporation (to be renamed Loomis, Fargo & Co. of Puerto Rico), and
Marine Midland Bank, trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders (as defined below) of the Company's
10% Senior Subordinated Notes due 2004:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS.
"Accredited Restricted Note" means a Note initially bearing the CUSIP
number 543462 AB 1 through which Accredited Investors hold a beneficial
interest in the Restricted Global Note, or any replacement Note issued
therefor.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person or
assumed in connection with the acquisition of assets from such other
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person's merging with or into or
becoming a Subsidiary of such specified Person or such acquisition of
assets, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that beneficial ownership
of 10% or more of the voting securities of a Person shall be presumed to be
control, which presumption may be rebutted by evidence to the contrary.
"Agent" means any Registrar, Paying Agent or co-registrar.
<PAGE>
"Agent Member" means a member of, or a participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
exchange of beneficial interests in a Global Note, the rules and procedures
of the Depositary, Euroclear and Cedel that are applicable to such transfer
or exchange.
"Asset Sale" means (A) the sale, lease, conveyance or other
disposition of any assets (including, without limitation, by way of a sale
and leaseback) other than in the ordinary course of business consistent
with past practices (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole will be governed by the provisions of
Section 4.15 or Section 5.1 hereof, and not by Section 4.10 hereof), or (B)
the issue or sale by the Company or any of its Subsidiaries of Equity
Interests of any of the Company's Subsidiaries, in the case of either
clause (A) or (B), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $500,000 or (b)
for net proceeds in excess of $500,000. Notwithstanding the foregoing: (i)
a transfer of assets by the Company to a Wholly Owned Subsidiary of the
Company or by a Subsidiary of the Company to the Company or to a Wholly
Owned Subsidiary of the Company, (ii) an issuance or sale of Equity
Interests by a Subsidiary of the Company to the Company or to a Wholly
Owned Subsidiary of the Company, (iii) a Restricted Payment that is
permitted by Section 4.7 hereof, (iv) a disposition of inventory in the
ordinary course of business, and (v) a sale or other disposition or
abandonment of damaged, worn out or obsolete property that is no longer
useful in the conduct of business of the Company and its Subsidiaries in
the ordinary course of business, will not be deemed to be Asset Sales.
"Attributable Debt" means, in respect of a sale and leaseback
transaction, at the time of determination, the present value (discounted at
the rate of interest implicit in such transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during
the remaining term of the lease included in such sale and leaseback
transaction (including any period for which such lease has been extended).
"Bankruptcy Law" means Title 11 of the U.S. Code or any similar
Federal or state law for the relief of debtors.
"Board" means the Board of Directors of the Company or any duly
authorized committee of the Board of Directors.
"Borg-Warner Principals" means Borg-Warner Security Corporation and
the Management Group.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the City of New York or at a place of
payment are authorized by law, regulation or executive order to remain
closed. If a payment
2
<PAGE>
date is not a Business Day at a place of payment, payment may be made at
that place on the next succeeding day that is a Business Day, and no
interest shall accrue for the intervening period.
"Business Trust" means the Loomis Stockholders Trust, a Delaware
business trust.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or any other business entity, any
and all shares, interests, participations, rights or other equivalents
(however designated) in the equity of such association or entity, (iii) in
the case of a partnership, partnership interests (whether general or
limited), and (iv) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six months from
the date of acquisition, (ii) demand and time deposits, certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any
lender party to the New Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500.0 million and a Thompson
Bank Watch Rating of "B" or better, (iii) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (i) and (ii) above entered into with any financial
institution meeting the qualifications specified in clause (ii) above and
(iv) commercial paper rated at least P-1 by Moody's Investors Service, Inc.
or at least A-1 by Standard & Poor's Rating Group and in each case maturing
within six months after the date of acquisition.
"Cedel" shall mean Cedel Bank, societe anonyme.
"Certificated Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A-1, but do not include the information called
for by footnotes 1 and 3 thereof.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of
3
<PAGE>
related transactions, of all or substantially all of the assets of the
Company and its Subsidiaries taken as a whole, to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other than
the Principals or their Related Parties,
(ii) the approval by the requisite vote of the stockholders of
the Company of a plan of liquidation or dissolution of the Company,
(iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that
any "person" (as defined above), other than the Wingate Principals,
the Borg-Warner Principals and their Related Parties, becomes the
"beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly, of more than
40% of the total outstanding Voting Stock of the Company and at such
time neither the Wingate Principals and their Related Parties nor the
Borg-Warner Principals and their Related Parties beneficially own,
directly or indirectly (including through the Business Trust) more
Voting Stock of the Company than such person,
(iv) the first day on which a majority of the members of the
Board are not Continuing Directors, or
(v) the first day on which the Company ceases for any reason
to own, beneficially and legally, 100% of the outstanding Capital
Stock of the Operating Subsidiary.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means, with respect to any Person, Capital Stock of
such Person that does not rank prior, as to the payment of dividends or as to
the distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means Loomis, Fargo & Co., a Delaware corporation, until a
successor Person shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter means such successor Person.
"Consolidated Cash Flow" means, without duplication, with respect to
any Person for any period, the Consolidated Net Income of such Person for such
period plus, to the extent deducted in computing Consolidated Net Income:
4
<PAGE>
(i) an amount equal to any net loss realized in connection with any
Asset Sale, plus
(ii) provision for taxes based on income or profits of such Person
and its Subsidiaries for such period, plus
(iii) consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financing,
and net payments (if any) pursuant to Hedging Obligations, but excluding
any expenses related to Insurance Letters of Credit), plus
(iv) depreciation, amortization (including amortization of goodwill
and other intangibles, but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash charges (excluding any
such non-cash charge to the extent that it represents an accrual of or
reserve for cash charges in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period,
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash charges of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent (and in same proportion) that
the net income of such Subsidiary was included in calculating the Consolidated
Net Income of such Person and only if a corresponding amount would be permitted
at the date of determination to be paid as a dividend to the Company by such
Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to, the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the net income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided
that there shall be excluded therefrom, without duplication:
5
<PAGE>
(i) all items classified as extraordinary, unusual or nonrecurring
gains or losses;
(ii) any net loss or net income of any other Person (other than a
Subsidiary of such Person), except to the extent of the amount of dividends
or other distributions actually paid to such Person or its Subsidiaries by
such other Person during such period;
(iii) the net income of any Person acquired by such Person or a
Subsidiary thereof in a pooling-of-interests transaction for any period
prior to the date of such acquisition;
(iv) gains (but not losses) in respect of Asset Sales by such Person
or its Subsidiaries;
(v) the net income (but not net loss) of any Subsidiary of such
Person to the extent that the declaration or payment of dividends or
distributions to such Person is restricted by the terms of its constituent
documents or any agreement, instrument, contract, judgment, order, decree,
statute, rule, governmental regulation or otherwise, except for any
dividends or distributions actually paid by such Subsidiary to such Person
or another Subsidiary of such Person;
(vi) with regard to a Subsidiary of such Person (other than a Wholly
Owned Subsidiary of such Person), any aggregate net income (or loss) in
excess of such Person's pro rata share of such Subsidiary's net income (or
loss) ; and
(vii) the cumulative effect of any change in accounting principles.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the consolidated stockholders' equity of such Person and its consolidated
Subsidiaries, as determined in accordance with GAAP, less, to the extent
included therein, all amounts, if any, attributable to Disqualified Stock.
"Continuing Directors" means, as of any date of determination, any member
of the Board who (i) (x) was a member of the Board on the date of this Indenture
or (y) was identified to become a Director on Exhibit B to the Contribution
Agreement or (ii) was nominated for election or elected to the Board with the
approval of a majority of the Continuing Directors who were members of the Board
at the time of such nomination or election.
"Contribution Agreement" means that certain Contribution Agreement, dated
as of November 28, 1996, by and among Borg-Warner Security
6
<PAGE>
Corporation, Wells Fargo Armored Service Corporation, the Company, LFC, the
Operating Subsidiary and the Business Trust.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.2 hereof or such other address as to which the
Trustee may give notice to the Company.
"Default" means any event, occurrence or condition that, with the passage
of time, the giving of notice or both, would constitute an Event of Default.
"Depositary" means, with respect to the Notes issuable in whole or in part
in global form, the Person specified in Section 2.3 hereof as the Depositary
with respect to the Notes, until a successor shall have been appointed and
become such pursuant to the applicable provisions of this Indenture, and,
thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means (i) Indebtedness of the Company under the
New Credit Facility and (ii) any other Senior Debt permitted under the Indenture
which, at the date of creation thereof or determination, has an aggregate
principal amount outstanding of, or under which at the date of creation thereof
or determination, the holders thereof are committed to lend, at least $20.0
million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Debt as "Designated Senior Debt" for
purposes of this Indenture.
"disposition" or "sale" or "transfer" or other words of similar meaning do
not include the granting or suffering of a Permitted Lien in order to secure
Indebtedness permitted by the Indenture, provided that no steps or actions have
been taken by the holder of such Permitted Lien to realize upon or dispose of
the assets subject thereto.
"Disqualified Stock" means any Capital Stock of any Person which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event or with the passage of
time, matures or is redeemable, pursuant to a sinking fund obligation or
otherwise (excluding any redemption at the option of the issuer of such Capital
Stock on a date that is at least 91 days after the date on which the Notes
mature), or is redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the Notes
mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that shall be made by the Company pursuant
to the Registration Rights Agreement to exchange New Senior Subordinated Notes
for Senior Subordinated Notes.
"Existing Indebtedness" means all Indebtedness of the Company and its
Subsidiaries (other than under the New Credit Facility) in existence on the
Issue Date, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period.
In the event that the Company or any of its Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than repayments of revolving
credit borrowings) or issues or redeems Preferred Stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, Guarantee or redemption of Indebtedness or such issuance
or redemption of Preferred Stock, and the use of the proceeds therefrom, as if
the same had occurred at the beginning of the applicable four-quarter reference
period.
In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Company or any of its
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall
be calculated without giving effect to clause (iii) of the proviso set
forth in the definition of Consolidated Net Income, and
(ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded,
and
(iii) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving
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<PAGE>
rise to such Fixed Charges will not be obligations of the referent Person
or any of its Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(i) the consolidated interest expense of such Person and its
Subsidiaries for such period, whether paid or accrued (including, without
limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financing, and net payments (if
any) pursuant to Hedging Obligations, but excluding fees and expenses
related to Insurance Letters of Credit), plus
(ii) the consolidated interest expense of such Person and its
Subsidiaries that was capitalized during such period, plus
(iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Subsidiaries or secured by a Lien
on assets of such Person or one of its Subsidiaries (whether or not such
Guarantee or Lien is called upon), plus
(iv) the product of (a) all cash dividend payments (and non-cash
dividend payments in the case of a Person that is a Subsidiary) on any
series of Preferred Stock of such Person, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the
then current combined federal, state and local statutory tax rate of such
Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect from time to time.
"Global Notes" means, individually and collectively, the Regulation S
Temporary Global Note, the Regulation S Permanent Global Note and the Restricted
Global Note.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner, of all or any part of any Indebtedness.
"Guarantors" means each of (i) LFC, (ii) the Operating Subsidiary, (iii)
Wells Fargo of Texas, (iv) Wells Fargo of Puerto Rico, and (v) any other
Subsidiary of the Company that executes a Subsidiary Guarantee by signing a
Supplemental Indenture in accordance with the provisions of Section 4.20 and
Article XI hereof, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, without duplication,
(i) any liability of such Person (a) for borrowed money, or under
any reimbursement obligation relating to a letter of credit, bankers'
acceptance or note purchase facility; (b) evidenced by a bond, note,
debenture or similar instrument; (c) for the balance deferred and unpaid of
the purchase price for any property or service or any obligation upon which
interest charges are customarily paid (except for accrued expenses or trade
payables arising in the ordinary course of business); (d) for the payment
of money relating to a lease that is required to be classified as a Capital
Lease Obligation in accordance with GAAP; or (e) for the maximum fixed
repurchase price of any Disqualified Stock of such Person plus accrued and
unpaid dividends thereon;
(ii) any obligation of others secured by a Lien on any asset of such
Person, whether or not any obligation secured thereby has been assumed, by
such Person;
(iii) any obligations of such Person under any Hedging Obligation; and
(iv) any Guarantee of such Person or any obligation of such Person
which in economic effect is a guarantee with respect to any Indebtedness of
another Person.
For purposes of this definition, "maximum fixed repurchase price" of any
Disqualified Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were purchased on any date on which Indebtedness shall be
required to be
10
<PAGE>
determined pursuant to the Indenture, and if such price is based upon, or
measured by, the fair market value of such Disqualified Stock, such fair market
value shall be determined in good faith by the board of directors of the Person
issuing such Disqualified Stock.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Insurance Letters of Credit" means letters of credit issued for the
account of the Company or any Wholly Owned Subsidiary of the Company for
purposes of (i) securing certain deductible amounts payable by the Company or a
Wholly Owned Subsidiary of the Company under cargo, automobile or general
liability insurance policies or (ii) complying with workers' compensation
requirements under applicable law.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
"Investment" by any Person means any direct or indirect loan, advance (or
other extension of credit) or capital contribution (by means of any transfer of
cash or other Property) to another Person or any other payments for Property or
services for the account or use of another Person, including without limitation
the following:
(i) the purchase or acquisition of any Capital Stock or other
evidence of beneficial ownership in another Person;
(ii) the purchase, acquisition or Guarantee of the Indebtedness of
another Person or the issuance of a "keep well" with respect thereto; and
(iii) the purchase or acquisition of the business or assets of another
Person;
but shall exclude:
(a) accounts receivable and other extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices;
(b) the acquisition of property and assets from equipment suppliers
and other vendors in the ordinary course of business, provided that such
property and assets do not represent all or substantially all of the
production capacity of the supplier or other vendor; and
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<PAGE>
(c) the acquisition of assets, Capital Stock or other securities by
the Company for consideration consisting solely of the Capital Stock of the
Company other than Disqualified Stock.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of.
"Issue Date" means the date on which the Notes are first authenticated and
delivered under this Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Management Group" means the following persons: James B. Mattly, James K.
Jennings, Jr., Edward H. Hamlett, James E. McHale, Bruce J. McGelky, Michael
Tawney, Tommy E. Harden, Michael C. Read, James F. Lonsbery, Ricky L. Miller,
Larry E. Goswick, Curtis P. Balko, Timothy J. Simpson, Mark A. Clark and D. Mark
Shearer.
"NOL Note" means the note having a principal amount of $6.0 million issued
by the Company to the Business Trust pursuant to the terms of the Contribution
Agreement.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received in connection with the sale or other disposition
of any non-cash consideration received in any such Asset Sale), net of (i) the
direct costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, (ii) taxes paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), (iii) amounts required to be
applied to the repayment of Indebtedness that is (a) secured by a Lien on the
asset or assets that were the subject of such Asset Sale, or (b) Senior Debt,
the repayment of which is required
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<PAGE>
either pursuant to the terms thereof, by applicable law, or in order to obtain a
necessary consent to such transaction, and (iv) any reserves established in
accordance with GAAP for adjustment in respect of the sale price of such asset
or assets or for any liabilities associated with such Asset Sale; provided that
any reversal of any such reserve shall be added back in the determination of Net
Proceeds.
"New Credit Facility" means that certain credit facility, dated as of the
Issue Date, by and among the Company and the banks party thereto, providing for
up to $115.0 million of revolving credit borrowings and letters of credit,
including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.
"New Senior Subordinated Notes" means notes issued by the Company hereunder
containing terms identical to the Senior Subordinated Notes (except that (i)
interest thereon shall accrue from the last date on which interest was paid on
the Senior Subordinated Notes or, if no such interest has been paid, from the
date of original issuance, (ii) the legend or legends relating to
transferability and other related matters set forth on the Senior Subordinated
Notes, including the text referred to in footnote 2 of Exhibit A-1 hereto, shall
be removed or appropriately altered, and (iii) as otherwise set forth herein),
to be offered to Holders of Senior Subordinated Notes in exchange for Senior
Subordinated Notes pursuant to the Exchange Offer, substantially in the form of
Exhibit A-3 attached hereto.
"Note Custodian" means the Trustee, as custodian with respect to the Notes
in global form, or any successor entity thereto.
"Notes" means the Senior Subordinated Notes and the New Senior Subordinated
Notes, if any, that are issued under this Indenture, as amended or supplemented
from time to time.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, (a) with respect to any Person that is a corporation, the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, the Controller,
the Secretary or any Vice-President or Assistant Secretary of such Person and
(b) with respect to any other Person, the individuals selected by such Person to
perform functions similar to those of the officers listed in clause (a).
"Officers' Certificate" means a certificate signed on behalf of any Person
by two Officers of such Person, one of whom must be the Chief Executive Officer,
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<PAGE>
the Chief Financial Officer, the Treasurer or the principal accounting officer
of such Person, that meets the requirements of Sections 12.4 and 12.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Sections 12.4 and 12.5
hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Permitted Investments" means:
(a) any Investment in the Company or in a Subsidiary of the Company
that is a Guarantor;
(b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Subsidiary of the Company in
a Person, if as a result of such Investment (i) such Person becomes a
Subsidiary of the Company and a Guarantor or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Subsidiary of the Company that is a Guarantor;
(d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 hereof;
(e) any obligations or shares of Capital Stock received in connection
with or as a result of a bankruptcy, workout or reorganization of the
issuer of such obligations or shares of Capital Stock;
(f) any Investment received involuntarily;
(g) any Investment existing on the date of this Indenture; and
(h) Investments having an aggregate fair market value (together with
all other Investments made pursuant to this clause (h) and outstanding) at
any time not to exceed $1.0 million.
"Permitted Liens" means:
(i) Liens on assets of the Company securing the New Credit Facility
and other Senior Debt that was permitted by the terms of this Indenture to
be incurred;
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(ii) Liens on assets of Subsidiaries securing Senior Guarantees;
(iii) Liens in favor of the Company;
(iv) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to such merger or
consolidation and were not incurred in contemplation thereof and do not
extend to any assets other than those of the Person merged into or
consolidated with the Company or any Subsidiary of the Company;
(v) Liens on property existing at the time of acquisition thereof
by the Company or any Subsidiary of the Company, provided that such Liens
were in existence prior to such acquisition and were not incurred in
contemplation thereof and do not extend to any assets other than those so
acquired by the Company or any Subsidiary of the Company;
(vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business (or to secure
reimbursement obligations in respect of letters of credit issued in
connection with any of the foregoing obligations);
(vii) Liens existing on the date hereof;
(viii) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted to be incurred by clause (iv) of the second
paragraph of Section 4.9 hereof covering only the assets acquired with such
Indebtedness;
(ix) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(x) covenants, easements, rights-of-way, restrictions,
encroachments or other similar encumbrances not materially impairing the
marketability of the property encumbered thereby and not interfering in any
material respect with the use of such property
15
<PAGE>
or with the ordinary conduct of the business of the Company or any
Subsidiary;
(xi) Liens to secure any Indebtedness which is pari passu with or
subordinate in right of payment to the Notes, where (a) in the case of any
Lien securing Indebtedness that is pari passu in right of payment with the
Notes, all obligations with respect to the Notes are secured on an equal
and ratable basis with the Indebtedness so secured and (b) in the case of
any Lien securing Indebtedness that is subordinated in right of payment to
the Notes, all obligations with respect to the Notes are secured on a
senior basis reflecting the subordination of the Indebtedness so secured on
terms substantially similar to, or more favorable to senior creditors than,
those contained herein, in each case, until such time as such pari passu or
subordinated Indebtedness is no longer secured by such Lien, at which time
such Lien securing the Notes shall be automatically released;
(xii) Liens to secure obligations of the Company or its Subsidiaries
under Insurance Letters of Credit;
(xiii) Liens with respect to judgments which have been stayed or for
which a bond having a value equal to the judgment amount has been posted,
but only for so long as such judgment has been stayed or such bond remains
posted and outstanding;
(xiv) Liens securing the IRB or the property which is subject to the
IRB; and
(xv) Liens incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to obligations that
do not exceed $1.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of
advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value
of the property or materially impair the use thereof in the operation of
business by the Company or such Subsidiary.
"Permitted Refinancing Debt" means any Indebtedness of the Company or any
of its Subsidiaries issued in exchange for, or the net proceeds of which are
used to extend, refinance, renew, replace, defease or refund other Indebtedness
of the Company or any of its Subsidiaries, provided that:
(i) the principal amount (or accreted value, if applicable), of such
Permitted Refinancing Debt does not exceed the principal
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amount (or accreted value, if applicable), of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith);
(ii) such Permitted Refinancing Debt has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes, such Permitted Refinancing Debt has a final maturity date later than
the final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(iv) such Indebtedness is incurred either by the Company or by the
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, limited or general partnership,
limited liability company, joint venture, association, joint stock company,
trust, entity, unincorporated organization or government or any agency or
political subdivision thereof.
"PORTAL Market" means the Private Offerings, Resales and Trading through
Automated Linkages Market operated by the National Association of Securities
Dealers, Inc. or any successor thereto.
"Preferred Stock" means, with respect to any Person, all Capital Stock of
such Person of any class or classes (however designated, whether voting or non-
voting) that ranks prior, as to distribution in profit or liquidation, to shares
of Common Stock of such Person.
"Principals" means either the Borg-Warner Principals or the Wingate
Principals, as the case may be.
"Purchase Date" means each date on which the Company is obligated to
repurchase Notes pursuant to the terms of this Indenture.
"Purchase Price" means the amount payable for the repurchase of any Note on
a Purchase Date, exclusive of accrued and unpaid interest and Liquidated
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Damages (if any) thereon to the Purchase Date, unless otherwise specifically
provided.
"QIB" means a qualified institutional buyer as defined in Rule 144A under
the Securities Act.
"QIB Restricted Note" means a Note initially bearing CUSIP number 543462 AA
3 through which QIBs hold a beneficial interest in the Restricted Global Note,
or any replacement Note issued therefor.
"Redemption Date" means, with respect to any Note to be redeemed, the date
fixed for such redemption by or pursuant to Section 3.7 of this Indenture.
"Redemption Price" means the amount payable for the redemption of any Note
on a Redemption Date, exclusive of accrued and unpaid interest and Liquidated
Damages (if any) thereon to the Redemption Date, unless otherwise specifically
provided.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the Issue Date, among the Company, LFC, the Operating Subsidiary,
Wells Fargo of Texas, Wells Fargo of Puerto Rico., Lehman Brothers Inc., and
NationsBanc Capital Markets, Inc., as such agreement may be amended, modified or
supplemented from time to time.
"Regulation S" means Regulation S as promulgated under the Securities Act,
as such Regulation is in effect on the date hereof and, to the extent applicable
to the Notes, as such Regulation is amended or supplemented from time to time.
"Regulation S Global Note" means a Regulation S Temporary Global Note or
Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global note that
contains the paragraph referred to in footnote 1 and the additional schedule
referred to in footnote 3 to the form of the Note attached as Exhibit A-1, and
that is deposited with and registered in the name of the Depositary,
representing a series of Notes sold in reliance on Regulation S.
"Regulation S Temporary Global Note" means a single temporary global note
in the form of the Note attached hereto as Exhibit A-2 that is deposited with
and registered in the name of the Depositary, representing a series of Notes
sold in reliance on Regulation S.
"Related Party" means, with respect to either the Wingate Principals or the
Borg-Warner Principals, (A) any controlling stockholder, 80% (or more) owned
Subsidiary, or spouse or immediate family member or estate thereof (in the case
of an individual) of such Principals or (B) any trust, corporation, partnership
or other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially
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holding an 80% or more controlling interest of which consist of the Borg-Warner
Principals, the Wingate Principals and/or such other Persons referred to in the
immediately preceding clause (A).
"Responsible Officer" means, when used with respect to the Trustee, any
officer of the Trustee assigned by the Trustee to administer this Indenture and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject.
"Restricted Global Note" means an Accredited Restricted Note or a QIB
Restricted Note, which is a permanent global note that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 3
to the form of the Note attached hereto as Exhibit A-1, and that is deposited
with and registered in the name of the Depositary.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Rule 144A" means Rule 144A promulgated under the Securities Act as such
Rule is in effect on the date hereof, and, to the extent applicable to the
Notes, as such Regulation is amended or supplemented from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means Indebtedness of the Company, whether outstanding on the
date hereof or thereafter created, incurred or assumed, unless the instrument
under which such Indebtedness is incurred expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(i) Indebtedness evidenced by the Notes;
(ii) Indebtedness that is by its terms subordinate or junior in right
of payment to any other Indebtedness of the Company;
(iii) any liability for federal, state, local or other taxes owed or
owing by the Company;
(iv) Indebtedness of the Company to any of its Subsidiaries;
(v) Indebtedness for the purchase of goods or materials in the
ordinary course of business except purchase money
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Indebtedness secured by a security interest in or a Lien upon the goods or
materials purchased;
(vi) that portion of any Indebtedness that is incurred in violation
of this Indenture;
(vii) Indebtedness which is represented by Disqualified Stock;
(viii) Indebtedness of or amounts owing by the Company for
compensation to employees for services;
(ix) amounts owing under leases (other than Capital Lease
Obligations); and
(x) the NOL Note.
"Senior Guarantees" means Guarantees by a Guarantor with respect to Senior
Debt of the Company.
"Senior Representative" means any trustee, agent or representative (if any)
for the holders of any Designated Senior Debt.
"Senior Subordinated Notes" means the Company's 10% Senior Subordinated
Notes due 2004 issued pursuant to this Indenture, but excludes the New Senior
Subordinated Notes.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or in a
combination thereof) and (ii) any partnership or limited liability company (a)
the sole general partner or member or the managing general partner or member of
which is such Person or a Subsidiary of such Person or (b) the only general
partners or members of which are such Person or of one or more Subsidiaries of
such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by the Guarantors of the
Obligations under this Indenture, any Supplemental Indenture and the Notes.
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"Supplemental Indenture" means a supplemental indenture executed
substantially in the form of Exhibit C attached hereto.
"Transactions" means the formation of the Company and related transactions
contemplated by the Contribution Agreement.
"Transfer Restricted Security" means a Note that is a restricted security
as defined in Rule 144(a)(3) under the Securities Act.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture, and thereafter
means the successor serving hereunder.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA;
provided that in the event the Trust Indenture Act of 1939 is amended after such
date, "TIA" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"U.S. Government Securities" shall mean securities which are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such U.S. Government Securities or a specific payment of interest
on or principal of any such U.S. Government Securities held by such custodian
for the account of the holder of a depository receipt; provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the U.S. Government Securities or the specific
payment of interest on or principal of the U.S. Government Securities evidenced
by such depository receipt.
"U.S. Persons" means any U.S. Person as defined in Regulation S.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof
(whether at all times or at the times that such class of Capital Stock has
voting power by reason of the happening of any contingency) to vote in the
election of members of the board of directors or other governing body of such
Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
21
<PAGE>
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person,
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) is at the time owned by (i) such
Person or (ii) such Person and one or more Wholly Owned Subsidiaries of such
Person.
"Wingate Principals" means Wingate Partners, L.P., Wingate Affiliates, L.P.
and the Management Group.
SECTION 1.2. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Accredited Investors"..................................... 2.1
"Act"...................................................... 1.5
"Affiliate Transaction".................................... 4.11
"Asset Sale Offer"......................................... 4.10
"Asset Sale Offer Period".................................. 3.9
"Calculation Date"......................................... 1.1
"Change of Control Offer".................................. 4.15
"Change of Control Offer Period"........................... 3.8
"Covenant Defeasance"...................................... 8.3
"Event of Default"......................................... 6.1
"Excess Proceeds".......................................... 4.10
"incur".................................................... 4.9
"IRB"...................................................... 4.7
"IRB Payment Event"........................................ 4.7
"Legal Defeasance"......................................... 8.2
"Offer Amount"............................................. 3.9
"Paying Agent"............................................. 2.3
"Payment Blockage Notice".................................. 10.2
"Payment Blockage Period".................................. 10.2
"Payment Default".......................................... 6.1
"Private Placement Legend"................................. 2.6
"Registrar"................................................ 2.3
"Restricted Payments"...................................... 4.7
"Senior Covenant Default".................................. 10.2
"Senior Payment Default"................................... 10.2
"Surviving Entity"......................................... 5.1
</TABLE>
22
<PAGE>
SECTION 1.3.INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule under the TIA
have the meanings so assigned to them.
SECTION 1.4.RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act, the
Exchange Act and the TIA shall be deemed to include substitute, replacement
and successor sections or rules adopted by the Commission from time to
time.
SECTION 1.5. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders
may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent
duly appointed in writing; and, except as herein otherwise expressly
23
<PAGE>
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of Holders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 7.1) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him or her the execution thereof.
Where such execution is by an officer of a corporation or a member of a
partnership or a limited liability company, on behalf of such corporation,
partnership or limited liability company, such certificate or affidavit shall
also constitute sufficient proof of his or her authority.
(c) The ownership of Notes shall be proved by the register maintained by
the Registrar.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Note shall bind every future Holder of the
same Note and the holder of every Note issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or suffered to be done by the Trustee or the Company in reliance thereon,
whether or not notation of such action is made upon such Note.
ARTICLE II.
THE NOTES
SECTION 2.1. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1, A-2 and A-3 hereto. The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage in addition to those set forth in Exhibits A-1, A-2 and A-3 hereto. Each
Note shall be dated the date of its authentication. The Notes shall be in
denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
(a) Global Notes. Notes offered and sold to QIBs in reliance on Rule 144A
------ -----
and accredited institutional investors as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act ("Accredited Investors") who are not QIBs,
otherwise than in reliance on Regulation S shall be evidenced by one or more
Restricted Global Notes, deposited with the Trustee, as custodian for the
Depositary and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The
24
<PAGE>
aggregate principal amount of the Restricted Global Notes may from time to time
be increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on Regulation S
shall be issued initially in the form of a Regulation S Temporary Global Note,
deposited with the Trustee, as custodian for the Depositary and registered in
the name of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of Euroclear or Cedel, duly executed by the
Company and authenticated by the Trustee as hereinafter provided. The Restricted
Period shall be terminated upon the receipt by the Trustee of an Officers'
Certificate from the Company. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication of
Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S
Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
Each Global Note shall represent such of the outstanding Notes as shall be
specified therein and each shall provide that it shall represent the aggregate
amount of outstanding Notes from time to time endorsed thereon and that the
aggregate amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the amount of outstanding Notes represented thereby shall be made by
the Trustee or the Note Custodian, at the direction of the Trustee, in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
The provisions of the "Operating Procedures of the Euroclear System" and
"Terms and Conditions Governing Use of Euroclear" and the "Management
Regulations" and "Instructions to Participants" of Cedel shall be applicable to
interests in the Regulation S Temporary Global Note and the Regulation S
Permanent Global Note that are held by the Agent Members through Euroclear or
Cedel.
Except as set forth in Section 2.6 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
(b) Book-Entry Provisions. This Section 2.1(b) shall apply only to the
---- ----- ----------
Global Notes deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance with Section
2.2, authenticate and deliver the Global Notes that (i) shall be registered in
the name of the Depositary or the nominee of the Depositary and (ii) shall be
delivered by the Trustee to the Depositary or pursuant to the Depositary's
instructions or held by the Trustee as custodian for the Depositary.
25
<PAGE>
Agent Members shall have no rights either under this Indenture with respect
to any Global Note held on their behalf by the Depositary or by the Trustee as
custodian for the Depositary or under such Global Note, and the Depositary may
be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Note.
(c) Certificated Notes. Notes issued in certificated form shall be
------------ -----
substantially in the form of Exhibit A-1 attached hereto (but without including
the text referred to in footnotes 1 and 3 thereto).
SECTION 2.2. EXECUTION AND AUTHENTICATION.
Two Officers of the Company shall sign the Notes for the Company by manual
or facsimile signature. The seal of the Company shall be reproduced on the Notes
and may be in facsimile form.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee, upon a written order of the Company signed by two Officers of
the Company shall authenticate Senior Subordinated Notes for original issue up
to the aggregate principal amount stated in paragraph 3 of the Notes. The
Trustee, upon written order of the Company signed by two Officers of the Company
shall authenticate New Senior Subordinated Notes for original issue up to the
aggregate principal amount stated in paragraph 3 of the Notes; provided that
such New Senior Subordinated Notes shall be issuable only upon the valid
surrender for cancellation of Senior Subordinated Notes of a like aggregate
principal amount in accordance with the Exchange Offer. Such written order of
the Company shall specify the amount of Notes to be authenticated and the date
on which the original issue of Notes is to be authenticated. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
26
<PAGE>
SECTION 2.3. REGISTRAR AND PAYING AGENT; DEPOSITARY.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. At the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, provided that payment by wire transfer of immediately available funds
will be required with respect to principal, Redemption Price and Purchase Price
of, and interest and Liquidated Damages (if any) on, all Global Notes and all
other Notes the Holders of which shall have provided wire transfer instructions
to the Trustee or the Paying Agent. The Company may appoint one or more co-
registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company shall notify the Trustee in writing of the
name and address of any Paying Agent not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. The Company may act as Paying Agent or
Registrar. The Depositary shall, by acceptance of a Global Note, agree that
transfers of beneficial interests in such Global Note may be effected only
through a book-entry system maintained by the Depositary (or its agent), and
that ownership of a beneficial interest in the Note shall be required to be
reflected in a book entry.
The Company initially appoints The Depository Trust Company to act as
Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.4. PAYING AGENTS TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal
of, Redemption Price and Purchase Price of, and interest and Liquidated Damages,
if any, on the Notes, and will notify the Trustee of any default by the Company
in making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company) shall have no further liability for the money. If the Company acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to the Company, the Trustee shall serve
as Paying Agent for the Notes.
27
<PAGE>
SECTION 2.5. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each Interest Payment Date and at such other times as the
Trustee may request in writing a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes, and the Company shall otherwise comply with TIA (S) 312(a).
SECTION 2.6. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. The transfer and exchange
-------- --- -------- -- ------ -----
of Global Notes or beneficial interests therein shall be effected through the
Depositary, in accordance with this Indenture and the procedures of the
Depositary therefor, which shall include restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Beneficial
interests in a Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in the same Global Note in
accordance with the transfer restrictions set forth in the legend in subsection
(g) of this Section 2.6. Transfers of beneficial interests in the Global Notes
to Persons required to take delivery thereof in the form of an interest in
another Global Note shall be permitted as follows:
(i) Restricted Global Note to Regulation S Global Note. If, at any
---------- ------ ---- -- ---------- - ------ ----
time, an owner of a beneficial interest in a Restricted Global Note
deposited with the Depositary (or the Trustee as custodian for the
Depositary) wishes to transfer its interest in such Restricted Global Note
to a Person who is required or permitted to take delivery thereof in the
form of an interest in a Regulation S Global Note, such owner shall,
subject to the Applicable Procedures, exchange or cause the exchange of
such interest for an equivalent beneficial interest in a Regulation S
Global Note as provided in this Section 2.6(a)(i). Upon receipt by the
Trustee of (1) instructions given in accordance with the Applicable
Procedures from an Agent Member directing the Trustee to credit or cause to
be credited a beneficial interest in the Regulation S Global Note in an
amount equal to the beneficial interest in the Restricted Global Note to be
exchanged, (2) a written order given in accordance with the Applicable
Procedures containing information regarding the participant account of the
Depositary and, if applicable, the Euroclear or Cedel account to be
credited with such increase, and (3) a certificate in the form of Exhibit
B-1 hereto given by the owner of such beneficial interest stating that the
transfer of such interest has been made in compliance with the transfer
restrictions applicable to the Global Notes and pursuant to and in
accordance with Rule 903 or Rule 904 of Regulation S, then the Trustee, as
Registrar, shall instruct the Depositary to reduce or cause to be reduced
the aggregate principal amount at maturity of the applicable Restricted
Global Note and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable Regulation S Global Note by
the principal amount at maturity of the beneficial interest in the
Restricted Global Note to be exchanged, to credit or cause to be credited
to the account of the Person
28
<PAGE>
specified in such instructions a beneficial interest in the Regulation S
Global Note equal to the reduction in the aggregate principal amount at
maturity of the Restricted Global Note, and to debit, or cause to be
debited, from the account of the Person making such exchange or transfer
the beneficial interest in the Restricted Global Note that is being
exchanged or transferred.
(ii) Regulation S Global Note to Restricted Global Note. If, at any
---------- - ------ ---- -- ---------- ------ ----
time, an owner of a beneficial interest in a Regulation S Global Note
deposited with the Depositary or with the Trustee as custodian for the
Depositary wishes to transfer its interest in such Regulation S Global Note
to a Person who is required or permitted to take delivery thereof in the
form of an interest in a Restricted Global Note, such owner shall, subject
to the Applicable Procedures, exchange or cause the exchange of such
interest for an equivalent beneficial interest in a Restricted Global Note
as provided in this Section 2.6(a)(ii). Upon receipt by the Trustee of (1)
instructions from Euroclear or Cedel, if applicable, and the Depositary,
directing the Trustee, as Registrar, to credit or cause to be credited a
beneficial interest in the Restricted Global Note equal to the beneficial
interest in the Regulation S Global Note to be exchanged, such instructions
to contain information regarding the participant account with the
Depositary to be credited with such increase, (2) a written order given in
accordance with the Applicable Procedures containing information regarding
the participant account of the Depositary and (3) a certificate in the form
of Exhibit B-2 attached hereto given by the owner of such beneficial
interest stating (A) if the transfer is pursuant to Rule 144A, that the
Person transferring such interest in a Regulatin S Global Note reasonably
believes that the Person acquiring such interest in a Restricted Global
Note is a QIB and is obtaining such beneficial interest in a transaction
meeting the requirements of Rule 144A and any applicable blue sky or
securities laws of any state of the United States, (B) that the transfer
complies with the requirements of Rule 144 under the Securities Act and any
applicable blue sky or securities laws of any state of the United States or
(C) if the transfer is pursuant to any other exemption from the
registration requirements of the Securities Act, that the transfer of such
interest has been made in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the
requirements of the exemption claimed, such statement to be supported by an
Opinion of Counsel from the transferee or the transferor in form and
substance reasonably acceptable to the Company, then the Trustee, as
Registrar, shall instruct the Depositary to reduce or cause to be reduced
the aggregate principal amount at maturity of the applicable Regulation S
Global Note and to increase or cause to be increased the aggregate
principal amount at maturity of the applicable Restricted Global Note by
the principal amount at maturity of the beneficial interest in the
Regulation S Global Note to be exchanged, and the Trustee, as Registrar,
shall instruct the Depositary, concurrently with such reduction, to credit
or cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the applicable Restricted Global Note
equal to the reduction in the aggregate principal amount at maturity of
such Regulation S Global Note and
29
<PAGE>
to debit or cause to be debited from the account of the Person making such
transfer the beneficial interest in the Regulation S Global Note that is
being transferred.
(iii) Accredited Restricted Note to QIB Restricted Note. If, at any
time, an owner of a beneficial interest in an Accredited Restricted Note
deposited with the Depositary or with the Trustee as custodian for the
Depositary wishes to transfer its interest in such Accredited Restricted
Note to a Person who is required or permitted to take delivery thereof in
the form of an interest in a QIB Restricted Note, such owner shall, subject
to the Applicable Procedures, exchange or cause the exchange of such
interest for an equivalent beneficial interest in a QIB Restricted Note as
provided in this Section 2.6(a)(iii). Upon receipt by the Trustee of (1)
instructions from the Depositary, directing the Trustee, as Registrar, to
credit or cause to be credited a beneficial interest in the QIB Restricted
Note equal to the beneficial interest in the Accredited Restricted Note to
be transferred, such instructions to contain information regarding the
participant account with the Depositary to be credited with such increase,
(2) a written order given in accordance with the Applicable Procedures
containing information regarding the participant account of the Depositary
and (3) a certificate in the form of Exhibit B-5 attached hereto given by
the owner of such beneficial interest stating that the Person transferring
such interest in an Accredited Restricted Note reasonably believes that the
Person acquiring such interest in a QIB Restricted Note is a QIB and is
obtaining such beneficial interest in a transaction meeting the
requirements of Rule 144A and any applicable blue sky or securities laws of
any state of the United States, then the Trustee, as Registrar, shall
instruct the Depositary to reduce or cause to be reduced the aggregate
principal amount at maturity of the applicable Accredited Restricted Note
and to increase or cause to be increased the aggregate principal amount at
maturity of the applicable QIB Restricted Note by the principal amount at
maturity of the beneficial interest in the Accredited Restricted Note to be
exchanged, and the Trustee, as Registrar, shall instruct the Depositary,
concurrently with such reduction, to credit or cause to be credited to the
account of the Person specified in such instructions a beneficial interest
in the applicable QIB Restricted Note equal to the reduction in the
aggregate principal amount at maturity of such Accredited Restricted Global
Note and to debit or cause to be debited from the account of the Person
making such transfer the beneficial interest in the Accredited Restricted
Note that is being transferred.
(iv) QIB Restricted Note to Accredited Restricted Note. If, at any
time, an owner of a beneficial interest in a QIB Restricted Note deposited
with the Depositary or with the Trustee as custodian for the Depositary
wishes to transfer its interest in such QIB Restricted Note to a Person who
is required or permitted to take delivery thereof in the form of an
interest in an Accredited Restricted Note, such owner shall, subject to the
Applicable Procedures, exchange or cause the exchange of such interest for
an equivalent beneficial interest in Accredited Restricted Note as provided
in this Section 2.6(a)(iv). Upon receipt by the Trustee of (1) instructions
from the Depositary, directing the Trustee, as Registrar, to
30
<PAGE>
credit or cause to be credited a beneficial interest in the Accredited
Restricted Note equal to the beneficial interest in the QIB Restricted Note
to be transferred, such instructions to contain information regarding the
participant account with the Depositary to be credited with such increase,
(2) a written order given in accordance with the Applicable Procedures
containing information regarding the participant account of the Depositary
and (3) a certificate in the form of Exhibit B-6 attached hereto given by
the owner of such beneficial interest stating, that the transfer of such
interest has been made in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the
requirements of the exemption claimed, such statement to be supported by an
Opinion of Counsel from the transferee or the transferor in form and
substance reasonably acceptable to the Company, then the Trustee, as
Registrar, shall instruct the Depositary to reduce or cause to be reduced
the aggregate principal amount at maturity of the applicable QIB Restricted
Note and to increase or cause to be increased the aggregate principal
amount at maturity of the applicable Accredited Restricted Note by the
principal amount at maturity of the beneficial interest in the QIB
Restricted Note to be exchanged, and the Trustee, as Registrar, shall
instruct the Depositary, concurrently with such reduction, to credit or
cause to be credited to the account of the Person specified in such
instructions a beneficial interest in the applicable Accredited Restricted
Note equal to the reduction in the aggregate principal amount at maturity
of such QIB Restricted Note and to debit or cause to be debited from the
account of the Person making such transfer the beneficial interest in the
QIB Restricted Note that is being transferred.
(b) Transfer and Exchange of Certificated Notes. When Certificated Notes
-------- --- -------- -- ------------ -----
are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Certificated Notes; or
(y) to exchange such Certificated Notes for an equal principal amount
of Certificated Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested;
provided, however, that the Certificated Notes presented or surrendered for
register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder
or by his attorney, duly authorized in writing; and
(ii) in the case of a Certificated Note that contains the Private
Placement Legend, such request shall be accompanied by the following
additional information and documents, as applicable:
(A) if such Note is being delivered to the Registrar by a Holder
for registration in the name of such Holder, without
31
<PAGE>
transfer, or such Note is being transferred to the Company, a
certification to that effect from such Holder (in substantially the
form of Exhibit B-3 hereto);
(B) if such Note is being transferred to a QIB in accordance
with Rule 144A under the Securities Act or pursuant to an exemption
from registration in accordance with Rule 144 under the Securities Act
or pursuant to an effective registration statement under the
Securities Act, a certification to that effect from such Holder (in
substantially the form of Exhibit B-3 hereto); or
(C) if such Note is being transferred in reliance on any other
exemption from the registration requirements of the Securities Act, a
certification to that effect from such Holder (in substantially the
form of Exhibit B-3 hereto) and an Opinion of Counsel from such Holder
or the transferee reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act.
(c) Exchange of a Beneficial Interest in a Restricted Global Note or
-------- -- - ---------- -------- -- - ---------- ------ ---- --
Regulation S Permanent Global Note for a Certificated Note.
- ---------- - --------- ------ ---- --- - ------------ ----
(i) Any Person having a beneficial interest in a Restricted Global
Note or a Regulation S Permanent Global Note may upon request, subject to
the Applicable Procedures, exchange such beneficial interest for a
Certificated Note. Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the Depositary (or
Euroclear or Cedel, if applicable), from the Depositary or its nominee on
behalf of any Person having a beneficial interest in a Restricted Global
Note or Regulation S Permanent Global Note, and a certification (which may
be submitted by facsimile) to the effect that such beneficial interest is
being transferred to the same Person designated by the Depositary as having
the beneficial interest in the portion of the Restricted Global Note being
exchanged (in substantially the form of Exhibit B-4 hereto); in which case
the Trustee or the Note Custodian, at the direction of the Trustee, shall,
in accordance with the standing instructions and procedures existing
between the Depositary and the Note Custodian, cause the aggregate
principal amount of Restricted Global Notes or Regulation S Permanent
Global Notes, as applicable, to be reduced accordingly and, following such
reduction, the Company shall execute and the Trustee shall authenticate and
deliver to the Person requesting such exchange a Certificated Note in the
appropriate principal amount.
(ii) Certificated Notes issued in exchange for a beneficial interest
in a Restricted Global Note or Regulation S Permanent Global Note, as
applicable, pursuant to this Section 2.6(c) shall be registered in such
names and in such authorized denominations as the Depositary, pursuant to
instructions from its direct or indirect participants or otherwise, shall
instruct the Trustee. The Trustee
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shall deliver such Certificated Notes to the Persons in whose names such
Notes are so registered. Following any such issuance of Certificated Notes,
the Trustee, as Registrar, shall instruct the Depositary to reduce or cause
to be reduced the aggregate principal amount at maturity of the applicable
Global Note to reflect the transfer.
(d) Restrictions on Transfer and Exchange of Global Notes. Notwithstanding
------------ -- -------- --- -------- -- ------ -----
any other provision of this Indenture (other than the provisions set forth in
this Section 2.6(d)), a Global Note may not be transferred as a whole except by
the Depositary to a nominee of the Depositary or by a nominee of the Depositary
to the Depositary or another nominee of the Depositary or by the Depositary or
any such nominee to a successor Depositary or a nominee of such successor
Depositary.
(e) Transfer and Exchange of a Certificated Note for a Beneficial
-------- --- -------- -- - ------------ ---- --- - ----------
Interest in a Global Note. A Certificated Note may not be transferred or
- -------- -- - ------ ----
exchanged for a beneficial interest in a Global Note.
(f) Authentication of Certificated Notes in Absence of Depositary. If at
-------------- -- ------------ ----- -- ------- -- ----------
any time:
(i) the Depositary for the Notes notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the Global
Notes and a successor Depositary for the Global Notes is not appointed by
the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in
writing that it elects to cause the issuance of Certificated Notes under
this Indenture, then the Company shall execute, and the Trustee shall, upon
receipt of an authentication order in accordance with Section 2.2 hereof,
authenticate and deliver, Certificated Notes registered in such names and
principal amounts as specified by the Depositary in an aggregate principal
amount equal to the principal amount of the Global Notes in exchange for
such Global Notes.
(g) Legends.
-------
(i) Except as permitted by the following paragraphs (ii), (iii), and
(iv), each Note certificate evidencing Global Notes (and all Notes issued
in exchange therefor or substitution thereof) shall (x) be subject to the
restrictions on transfer set forth in this Section 2.6 (including those set
forth in the legend below) unless such restrictions on transfer shall be
waived by written consent of the Company, and the Holder of each Transfer
Restricted Security, by such Holder's acceptance thereof, agrees to be
bound by all such restrictions on transfer and (y) bear the legend set
forth below (the "Private Placement Legend"):
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
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<PAGE>
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT IN CONNECTION WITH THE SALE HEREOF, AND SUCH PURCHASER REPRESENTS,
ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE COMPANY THAT: (I) IT HAS
ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR OTHERWISE TRANSFER THIS
SECURITY PRIOR TO THE LATER OF THE DATE WHICH IS THREE YEARS AFTER THE DATE
OF ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF SUCH RESTRICTED SECURITIES (OR
ANY PREDECESSOR) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A,
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED
STATES IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THIS
SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE; ANY OFFER,
SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E)
IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE TRUSTEE FOR
SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN FORM AND
SUBSTANCE.
A HOLDER OF THIS NOTE SHALL HAVE ALL THE RIGHTS SET FORTH IN THE
REGISTRATION RIGHTS AGREEMENT."
(ii) Upon any sale or transfer of a Note that contains the Private
Placement Legend (including any beneficial interests in a Note represented
by a Global Note) pursuant to Rule 144A or Rule 144 under the Securities
Act or pursuant to an effective registration statement under the Securities
Act:
(a) in the case of any Certificated Note, the Registrar shall
permit the Holder thereof to exchange such Note for a Certificated
Note that does not bear the legend set forth in (i) above upon receipt
of a certification from the transferring Holder substantially in the
form of Exhibit B-3 hereto; and
(b) in the case of any beneficial interest in a Note represented
by a Global Note, such Note shall continue to be subject to the
provisions of Section 2.6(a) and (c) hereof; provided, however, that
with respect to any request for an exchange of a beneficial interest
in a Note that is represented by a Global Note for a Certificated Note
that does not bear the legend set forth in (i)
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<PAGE>
above, which request is made in reliance upon Rule 144A or Rule 144 or
pursuant to an effective registration statement, the Holder thereof
shall certify in writing to the Registrar that such request is being
made pursuant to Rule 144A or Rule 144 or pursuant to an effective
registration statement (such certifications to be substantially in the
form of Exhibit B-2) hereto).
(iii) Upon any sale or transfer of a Note that contains the Private
Placement Legend (including any beneficial interests in a Note represented
by a Global Note) in reliance on any exemption from the registration
requirements of the Securities Act (other than exemptions pursuant to Rule
144A, Rule 144 or an effective registration statement under the Securities
Act) in which the Holder or the transferee provides an Opinion of Counsel
to the Company and the Registrar in form and substance reasonably
acceptable to the Company (which Opinion of Counsel shall also state that
the transfer restrictions contained in the Private Placement Legend are no
longer applicable):
(a) in the case of any Certificated Note, the Registrar shall
permit the Holder thereof to exchange such Transfer Restricted
Security for a Certificated Note that does not bear the legend set
forth in (i) above; and
(b) in the case of any beneficial interest in a Note
represented by a Global Note, such Note shall continue to be subject
to the provisions of Section 2.6(a) and (c) hereof but may be
exchanged for a Certificated Note that does not bear the legend set
forth in (i) above.
(iv) Notwithstanding the foregoing, upon consummation of the
Exchange Offer in accordance with the Registration Rights Agreement, the
Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.2 hereof, the Trustee shall authenticate New
Senior Subordinated Notes in exchange for Senior Subordinated Notes
accepted for exchange in the Exchange Offer, which New Senior Subordinated
Notes shall not bear the legend set forth in (i) above, in each case unless
the Company has notified the Registrar in writing that the Holder of such
Senior Subordinated Notes is either (A) a broker-dealer, (B) a Person
participating in the distribution of the Senior Subordinated Notes or (C) a
Person who is an affiliate (as defined in Rule 144A) of the Company.
(v) Each Global Note, whether or not a Transfer Restricted
Security, shall also bear the following legend on the face thereof:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR
NOTES REGISTERED IN THE NAME OF A PERSON OTHER
35
<PAGE>
THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A
TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(vi) Any Global Note may be endorsed with or have incorporated in
the text thereof such legends or recitals or changes not inconsistent with
the provisions of this Indenture as may be required by the Note Custodian,
the Depositary or by the National Association of Securities Dealers, Inc.
in order for the Notes to be tradable on the PORTAL Market or tradable on
Euroclear or Cedel or as may be required for the Notes to be tradable on
any other market developed for trading of securities pursuant to Rule 144A
or Regulation S or required to comply with any applicable law or any
regulation thereunder or with the rules and regulations of any securities
exchange or automated quotation system upon which the Notes may be listed
or traded or to conform with any usage with respect thereto, or to indicate
any special limitations or restrictions to which any particular Notes are
subject.
(h) Cancellation or Adjustment of Global Notes. At such time as all
------------------------------------------
beneficial interests in Global Notes have been exchanged for Certificated Notes,
redeemed, repurchased or canceled, all Global Notes shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for Certificated Notes, redeemed, repurchased or canceled, the
principal amount of Notes represented by such Global Notes shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or the Note Custodian, at the direction of the Trustee, to reflect such
reduction.
(i) General Provisions Relating to Transfers and Exchanges.
------------------------------------------------------
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Certificated Notes and
Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection
36
<PAGE>
therewith (other than any such transfer taxes or similar governmental
charge payable upon exchange or transfer pursuant to Sections 3.6, 4.10,
4.15 and 9.5 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Certificated Notes and Global Notes issued upon any
registration of transfer or exchange of Certificated Notes or Global Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Certificated
Notes or Global Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required:
(a) to issue, to register the transfer of or to exchange Notes
during a period beginning at the opening of business 15 days before
the day of any selection of Notes for redemption under Section 3.2
hereof and ending at the close of business on the day of selection; or
(b) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part; or
(c) to register the transfer of or to exchange a Note between
a record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment of the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of all payments with respect to such Notes, and
neither the Trustee, any Agent nor the Company shall be affected by notice
to the contrary.
(vii) The Trustee shall authenticate Certificated Notes and Global
Notes in accordance with the provisions of Section 2.2 hereof.
SECTION 2.7. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or either the Company
or the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
authentication order in accordance with Section 2.2 hereof, shall authenticate a
replacement Note if the Trustee's requirements for replacement of Notes are met.
If required by the Trustee or the Company, an indemnity bond must be supplied by
the Holder that is sufficient in the judgment of the Trustee and the Company to
protect the
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<PAGE>
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Trustee and the Company may
charge the Holder for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
SECTION 2.8. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee or the
Note Custodian in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.9 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note.
If a Note is replaced pursuant to Section 2.7 hereof, it shall cease to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser for value.
If the principal amount of any Note is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a Redemption Date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 2.9. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or by any Affiliate thereof shall be considered as though not
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver of consent, only
Notes that a Responsible Officer of the Trustee knows are so owned shall be so
disregarded. The Company agrees to notify the Trustee of the existence of any
such treasury Notes or Notes owned by an Affiliate thereof.
SECTION 2.10. TEMPORARY NOTES.
Until Certificated Notes are ready for delivery, the Company may prepare
and the Trustee, upon receipt of an authentication order in accordance with
Section 2.2 hereof, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of Certificated Notes, but may have such variations as
the Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate Certificated Notes in exchange for temporary
Notes.
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Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy all
canceled Notes in accordance with the Trustee's usual procedures. The Trustee
shall maintain a record of the destruction of all canceled Notes. Certification
of the destruction of all canceled Notes shall be delivered to the Company. The
Company may not issue new Notes to replace Notes that have been paid or that
have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, the Company
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.1 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
SECTION 2.13. PERSONS DEEMED OWNERS.
Prior to due presentment of a Note for registration of transfer and subject
to Section 2.12 hereof, the Company, the Trustee, any Paying Agent, any co-
registrar and any Registrar may deem and treat the person in whose name any Note
shall be registered upon the register of Notes kept by the Registrar as the
absolute owner of such Note (whether or not such Note shall be overdue and
notwithstanding any notation of the ownership or other writing thereon made by
anyone other than the Company, any co-registrar or any Registrar) for the
purpose of receiving all payments with respect to such Note and for all other
purposes, and none of the Company, the Trustee, any Paying Agent, any co-
registrar or any Registrar shall be affected by any notice to the contrary.
SECTION 2.14. CUSIP NUMBERS.
The Company in issuing the Notes may use a "CUSIP" number, and if so, the
Trustee shall use the CUSIP number in notices of redemption or exchange as a
convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes.
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<PAGE>
ARTICLE III.
REDEMPTION AND REPURCHASE
SECTION 3.1 NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the provisions of Section
3.7 hereof, it shall furnish to the Trustee, at least 30 days but not more than
60 days before the Redemption Date, an Officers' Certificate of the Company
setting forth the Section of this Indenture pursuant to which the redemption
shall occur, the Redemption Date, the principal amount of Notes to be redeemed
and the Redemption Price.
If the Company is required to offer to repurchase Notes pursuant to the
provisions of Section 4.10 or 4.15 hereof, it shall notify the Trustee in
writing, at least 30 days but not more than 60 days before the Purchase Date, of
the Section of this Indenture pursuant to which the repurchase shall occur, the
Purchase Date, the principal amount of Notes required to be repurchased and the
Purchase Price and shall furnish to the Trustee an Officers' Certificate of the
Company to the effect that (a) the Company is required to make or has made an
Asset Sale Offer or a Change of Control Offer, as the case may be, and (b) the
conditions set forth in Section 4.10 or 4.15 hereof, as the case may be, have
been satisfied.
If the Registrar is not the Trustee, the Company shall, concurrently with
each notice of redemption or repurchase, cause the Registrar to deliver to the
Trustee a certificate (upon which the Trustee may rely) setting forth the
principal amounts of Notes held by each Holder.
SECTION 3.2 SELECTION OF NOTES.
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed by lot, pro rata or by such other
method as the Trustee shall deem fair and appropriate. In the event of partial
redemption by lot, the particular Notes or portions thereof to be redeemed shall
be selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the Redemption Date by the Trustee from the outstanding Notes not
previously called for redemption.
If less than all of the Notes tendered are to be repurchased pursuant to
the provisions of Section 4.10 hereof, the Trustee shall select the Notes or
portions thereof to be repurchased on a pro rata basis (with such adjustments as
may be deemed appropriate by the Trustee so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be repurchased).
The Trustee shall promptly notify the Company in writing of the Notes or
portions thereof selected for redemption or repurchase and, in the case of any
Note selected for partial redemption or repurchase, the principal amount thereof
to be redeemed or repurchased. Notes and portions thereof selected shall be in
amounts of $1,000 or integral multiples of $1,000; except that if all of the
Notes of a Holder are to be redeemed, the entire outstanding amount of Notes
held by such Holder, even if not a multiple of $1,000, shall be redeemed.
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<PAGE>
SECTION 3.3 NOTICE OF OPTIONAL REDEMPTION.
In the event Notes are to be redeemed pursuant to Section 3.7 hereof, at
least 30 days but not more than 60 days before the Redemption Date, the Company
shall mail a notice of redemption to each Holder whose Notes are to be redeemed
in whole or in part at its registered address, with a copy to the Trustee.
The notice shall identify the Notes or portions thereof to be redeemed and
shall state :
(a) the Redemption Date;
(b) the Redemption Price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion will be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price, Liquidated Damages, if any,
and, unless the Redemption Date is after a record date and on or before the
succeeding Interest Payment Date, accrued interest thereon to the
Redemption Date;
(f) that, unless the Company defaults in making the redemption
payment, interest and any Liquidated Damages on Notes called for redemption
will cease to accrue on and after the Redemption Date, and the only
remaining right of the Holders of such Notes is to receive payment of the
Redemption Price, any Liquidated Damages and, unless the Redemption Date is
after a record date and on or before the succeeding Interest Payment Date,
accrued interest thereon to the Redemption Date upon surrender to the
Paying Agent of the Notes redeemed;
(g) if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portions thereof) to be
redeemed, as well as the aggregate principal amount of the Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption; and
(h) the paragraph of the Notes pursuant to which the Notes called for
redemption are being redeemed.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided that the Company shall
deliver to the Trustee, at least 40 days prior to the Redemption Date, an
Officers' Certificate of the Company requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
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<PAGE>
SECTION 3.4. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes or portions thereof called for
redemption become due and payable on the Redemption Date at the Redemption
Price. Upon surrender to any Paying Agent, such Notes or portions thereof shall
be paid at the Redemption Price, plus Liquidated Damages, if any, and accrued
interest to the Redemption Date; provided, however, that installments of
interest which are due and payable on or prior to the Redemption Date shall be
payable to the Holders of such Notes, registered as such, at the close of
business on the relevant record date for the payment of such installment of
interest.
SECTION 3.5. DEPOSIT OF REDEMPTION PRICE OR PURCHASE PRICE.
On or before each Redemption Date or Purchase Date, the Company shall
irrevocably deposit with the Trustee or with the Paying Agent money sufficient
to pay the aggregate amount due on all Notes to be redeemed or repurchased on
that date, including without limitation any accrued and unpaid interest and
Liquidated Damages, if any, to the Redemption Date or the Purchase Date. Upon
written request by the Company, the Trustee or the Paying Agent shall promptly
return to the Company any money not required for that purpose.
Unless the Company defaults in making such payment, interest and any
Liquidated Damages on the Notes to be redeemed or repurchased will cease to
accrue on the applicable Redemption Date or Purchase Date, whether or not such
Notes are presented for payment. If any Note called for redemption or required
to be accepted for repurchase shall not be so paid upon surrender because of the
failure of the Company to comply with the preceding paragraph, interest will be
paid on the unpaid Redemption Price or Purchase Price, from the applicable
Redemption Date or Purchase Date until such amount is paid, and on any interest
and Liquidated Damages not paid on such amount, in each case at the rate
provided in the Notes and in Section 4.1 hereof.
SECTION 3.6. NOTES REDEEMED OR REPURCHASED IN PART.
Upon surrender of a Note that is redeemed or repurchased in part, the
Company shall issue and the Trustee shall authenticate for the Holder at the
expense of the Company a new Note equal in principal amount to portion of the
Note surrendered that is not to be redeemed or repurchased.
SECTION 3.7. OPTIONAL REDEMPTION.
(a) The Notes will not be redeemable at the Company's option prior to
January 15, 2001. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the Redemption Prices (expressed as percentages of principal
amount) set forth below, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the applicable Redemption Date, if redeemed during
the twelve-month period beginning on January 15 of the years indicated below:
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<TABLE>
<CAPTION>
REDEMPTION REDEMPTION
DATE PRICE
<S> <C>
2001 105.000%
2002 102.500%
2003 and thereafter 100.000%
</TABLE>
Notwithstanding the foregoing, prior to January 15, 2000, the Company may
in its discretion redeem up to an aggregate of $25.0 million in principal amount
of the Notes at a Redemption Price of 110% of the principal amount thereof, in
each case plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date, with the net proceeds of one or more public
offerings of Common Stock of the Company; provided, that at least $60.0 million
in aggregate principal amount of the Notes remain outstanding immediately after
the occurrence of such redemption; and provided, further, that such redemption
shall occur within 90 days of the date of the closing of such public offering of
Common Stock of the Company.
(b) Any redemption pursuant to this Section 3.7 shall be made pursuant to
the provisions of Sections 3.1 through 3.6 hereof.
SECTION 3.8. REPURCHASE UPON CHANGE OF CONTROL OFFER.
In the event that, pursuant to Section 4.15 hereof, the Company shall be
required to commence a Change of Control Offer, it shall follow the procedures
specified below.
The Change of Control Offer shall remain open for a period from the date of
the mailing of the notice of the Change of Control Offer described in the next
paragraph until a date determined by the Company which is at least 30 but no
more 60 days after the date of mailing of such notice and no longer, except to
the extent that a longer period is required by applicable law (the "Change of
Control Offer Period"). On the Purchase Date, which shall be no later than the
last day of the Change of Control Offer Period, the Company shall purchase the
principal amount of Notes properly tendered in response to the Change of Control
Offer. Payment for any Notes so purchased shall be made in the same manner as
interest payments are made.
Within 30 days following any Change of Control, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders. The notice
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Change of Control Offer. The Change of Control
shall be made to all Holders. The notice, which shall govern the terms of the
Change of Control Offer, shall state:
(a) the transaction or transactions that constitute the Change of
Control, providing information, to the extent publicly available, regarding
the Person or Persons acquiring control, and stating that the Change of
Control Offer is being made pursuant to this Section 3.8 and Section 4.15
hereof and that, to the extent lawful, all Notes tendered will be accepted
for payment;
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(b) the Purchase Price, the last day of the Change of Control Offer
Period, and the Purchase Date;
(c) that any Note not properly tendered will continue to accrue
interest and Liquidated Damages, if any;
(d) that, unless the Company defaults in the payment of the amount
due on the Purchase Date, all Notes or portions thereof accepted for
repurchase pursuant to the Change of Control Offer shall cease to accrue
interest and Liquidated Damages, if any, on the Purchase Date;
(e) that Holders electing to have any Notes purchased pursuant to the
Change of Control Offer will be required to tender the Notes, with the form
entitled "Option of Holder To Elect Purchase" on the reverse of the Notes
completed, or transfer by book-entry transfer, to the Company, a
Depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice not later than the third Business Day preceding the
Purchase Date;
(f) that Holders will be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the close of business on the Business Day immediately
preceding the Purchase Date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes
delivered for repurchase, and a statement that such Holder is withdrawing
his election to have the Notes redeemed in whole or in part; and
(g) that Holders whose Notes are being repurchased only in part will
be issued new Notes equal in principal amount to the portion of the Notes
tendered (or transferred by book-entry transfer) that is not to be
repurchased, which portion must be equal to $1,000 in principal amount or
an integral multiple thereof.
On the Purchase Date, the Company, shall, to the extent lawful, (i) accept
for payment all Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent an amount equal to
the Purchase Price, together with accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Purchase Date in respect of all Notes or
portions thereof so tendered and accepted for repurchase and (iii) deliver or
cause to be delivered to the Trustee the Notes so accepted together with an
Officers' Certificate of the Company stating the aggregate principal amount of
Notes or portions thereof being repurchased by the Company. The Paying Agent
shall promptly mail to each Holder of Notes so repurchased the amount due in
connection with such Notes, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company in the form of an Officers'
Certificate of the Company shall authenticate and mail or deliver (or cause to
transfer by book entry) to each relevant Holder a new Note, in a principal
amount equal to any unpurchased portion of the Notes surrendered, if any, to the
Holder thereof; provided, that each such new Note shall be in a principal amount
of $1,000 or an integral multiple thereof. The Company shall publicly announce
the results of the Change of Control Offer on or as soon as practicable after
the Purchase Date.
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If the Purchase Date is on or after an interest record date and on or
before the related Interest Payment Date, any accrued and unpaid interest and
Liquidated Damages, if any, in each case to the Purchase Date, shall be paid to
the Person in whose name a Note is registered at the close of business on such
record date, and no additional interest or Liquidated Damages shall be payable
to Holders pursuant to the Change of Control Offer.
SECTION 3.9. REPURCHASE UPON APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company shall be
required to commence an Asset Sale Offer, it shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period from the date of the
mailing of the notice of the Asset Sale Offer described in the next paragraph
until a date determined by the Company which is at least 30 but no more 60 days
after the date of mailing of such notice and no longer, except to the extent
that a longer period is required by applicable law (the "Asset Sale Offer
Period"). On the Purchase Date, which shall be no later than the last day of the
Asset Sale Offer Period, the Company shall purchase the principal amount of
Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer
Amount") or, if less than the Offer Amount has been properly tendered, all Notes
properly tendered in response to the Asset Sale Offer. Payment for any Notes so
purchased shall be made in the same manner as interest payments are made.
Within 30 days following the accumulation of sufficient Excess Proceeds to
obligate the Company to commence an Asset Sale Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders. The notice
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the Asset Sale
Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.9 and Section 4.10 hereof;
(b) the Offer Amount, the Purchase Price, the last day of the Asset
Sale Offer Period, and the Purchase Date;
(c) that any Note not properly tendered or otherwise not accepted for
repurchase shall continue to accrue interest and Liquidated Damages, if
any;
(d) that, unless the Company defaults in the payment of the amount
due on the Purchase Date, all Notes or portions thereof accepted for
repurchase pursuant to the Asset Sale Offer shall cease to accrue interest
and Liquidated Damages, if any, on the Purchase Date;
(e) that Holders electing to have any Notes repurchased pursuant to
any Asset Sale Offer shall be required to tender the Notes, with the form
entitled "Option of Holder To Elect Purchase" on the reverse of the Notes
completed, or transfer by book-entry transfer, to the Company, a
Depositary, if appointed by the
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Company, or a Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Purchase
Date;
(f) that Holders will be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the close of business on the Business Day immediately
preceding the Purchase Date, a telegram, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes
delivered for repurchase and a statement that such Holder is withdrawing
his election to have such Notes repurchased in whole or in part;
(g) that, if the aggregate principal amount of Notes tendered for
repurchase by Holders exceeds the Offer Amount, the Trustee shall select
the Notes or portions thereof to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Trustee so that only
Notes in denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(h) that Holders whose Notes are being repurchased only in part will
be issued new Notes equal in principal amount to the portion of the Notes
tendered (or transferred by book-entry transfer) that is not to be
repurchased, which portion must be equal to $1,000 in principal amount or
an integral multiple thereof.
On the Purchase Date, the Company shall, to the extent lawful, (i) accept
for payment, on a pro rata basis in accordance with this Indenture to the extent
necessary, the Offer Amount of Notes or portions thereof properly tendered
pursuant to the Asset Sale Offer, or if less than the Offer Amount has been
tendered, all Notes properly tendered, (ii) deposit with the Paying Agent an
amount equal to the Purchase Price, plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the Purchase Date in respect of all Notes
or portions thereof so tendered and accepted for repurchase and (iii) deliver or
cause to be delivered to the Trustee the Notes so accepted together with an
Officers' Certificate of the Company stating the aggregate principal amount of
Notes or portions thereof being repurchased by the Company. The Paying Agent
shall promptly mail to each Holder of Notes so tendered the amount due in
connection with such Notes, and the Company shall promptly issue a new Note, and
the Trustee, upon written request from the Company in the form of an Officers'
Certificate of the Company shall authenticate and mail or deliver (or cause to
be transferred by book entry) such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Notes surrendered, if any;
provided, that each such new Note shall be in a principal amount of $1,000 or an
integral multiple thereof. The Company shall publicly announce the results of
the Asset Sale Offer on or as soon as practicable after the Purchase Date.
If the Purchase Date is on or after an interest record date and on or
before the related Interest Payment Date, any accrued and unpaid interest and
Liquidated Damages, if any, in each case to the Purchase Date, shall be paid to
the Person in whose name a Note is registered at the close of business on such
record date, and no additional interest or Liquidated Damages shall be payable
to Holders to the Asset Sale Offer.
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ARTICLE IV.
COVENANTS
SECTION 4.1. PAYMENT OF PRINCIPAL AND INTEREST.
The Company shall pay or cause to be paid the principal, Redemption Price
and Purchase Price of, and interest on the Notes on the dates, in the amounts
and in the manner provided herein and in the Notes. Principal, Redemption Price,
Purchase Price and interest shall be considered paid on the date due if the
Paying Agent, if other than the Company, holds as of 12:00 noon Eastern Time on
the due date money deposited by the Company in immediately available funds and
designated for and sufficient to pay the aggregate amount then due. The Company
shall pay all Liquidated Damages, if any, on the dates, in the amounts and in
the manner set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal, Redemption Price and
Purchase Price at the rate equal to 1% per annum in excess of the then
applicable interest rate on the Notes to the extent lawful; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 4.2. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
or its obligations to maintain an office or agency in the Borough of Manhattan,
the City of New York. for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.3. The
Trustee may resign such agency at any time by giving written notice to the
Company no later than 30 days prior to the effective date of such resignation.
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SECTION 4.3. REPORTS.
Whether or not required by the rules and regulations of the Commission, so
long as any of the Notes are outstanding, the Company shall, and, if the Company
is required to file financial statements for any Guarantor, shall cause such
Guarantor to, furnish to the Holders of the Notes, within 15 days after they are
or would have been required to file such with the Commission, (i) all quarterly
and annual financial information that would be required to be contained in
filings with the Commission on Forms 10-Q and 10-K if the Company and/or any
Guarantor were required to file such forms, including "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to annual consolidated financial statements and schedules only, a report thereon
by the certified independent accountants of the Company and/or any Guarantor,
and (ii) all information that would be required to be contained in filings with
the Commission on Form 8-K if the Company and/or any Guarantor were required to
file such form. In addition, whether or not required by the rules and
regulations of the Commission, the Company and/or any Guarantor shall file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. Upon qualification of this Indenture under the TIA, the Company shall,
and shall cause each Guarantor to, at all times comply with TIA (S) 314(a). In
addition, the Company shall, and shall cause any Guarantor, for so long as any
Notes remain outstanding, to furnish to the Holders, and to securities analysts
and prospective investors upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.4. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 105 days after the
end of each fiscal year, an Officers' Certificate of the Company stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture in all material
respects, and further stating, as to each such Officer signing such certificate,
that to the best of his or her knowledge the Company has kept, observed,
performed and fulfilled each and every covenant contained in the Indenture in
all material respects and is not in Default in the performance or observance of
any of the terms, provisions and conditions of this Indenture (and, if a Default
or Event of Default shall have occurred, describing all such Defaults or Events
of Default) of which he or she may have knowledge, and that to the best of his
or her knowledge no event has occurred and remains in existence by reason of
which payments on account of the principal of or interest, if any, on the Notes
is prohibited or if such event has occurred, a description of the event.
(b) Each of the Guarantors shall deliver to the Trustee, within 105 days
after the end of each fiscal year, an Officers' Certificate of each such
Guarantor stating that a review of the activities of such Guarantor and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Guarantor has kept, observed, performed and fulfilled its obligations under this
Indenture in all material respects, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Guarantor
has kept, observed, performed and fulfilled each and every
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covenant contained in the Indenture in all material respects and is not in
Default in the performance or observance of any of the terms, provisions and
conditions of this Indenture (and, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default) of which he or she
may have knowledge.
(c) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3 above shall be accompanied by a
written statement of the independent public accountants (who shall be a firm of
established national reputation) of the Company or the Guarantor, as applicable,
that in making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to believe
that the Company or Guarantor, as the case may be, has violated any provisions
of Article IV or Article V hereof, in the case of the Company, and Article IV or
XI hereof, in the case of the Guarantor, or, if any such violation has occurred,
specifying the nature and period of existence thereof, it being understood that
such accountants shall not be liable directly or indirectly to any Person for
any failure to obtain knowledge of any such violation.
(d) The Company and each Guarantor shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith (and in any event within five
days) upon any of its Officers becoming aware of any Default or Event of Default
an Officers' Certificate of the Company or such Guarantor, as applicable,
specifying such Default or Event of Default.
SECTION 4.5. TAXES.
The Company shall pay or discharge, and shall cause each of its
Subsidiaries to pay or discharge, prior to delinquency, all material taxes,
assessments, and governmental levies except such as are contested in good faith
and by appropriate proceedings or where the failure to effect such payment is
not adverse in any material respect to the Holders of the Notes.
SECTION 4.6. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants shall it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though such law has not
been enacted.
SECTION 4.7. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution in respect of the Company's Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the
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Company's Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company or dividends or distributions payable to the Company or any Wholly Owned
Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire
for value any Equity Interests of the Company or any direct or indirect parent
of the Company or other Affiliate of the Company (other than a Wholly Owned
Subsidiary of the Company); (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund payment date, any
Indebtedness that is subordinated to the Notes; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.9 hereof; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Subsidiaries after the date
hereof (excluding Restricted Payments permitted by clauses (2) and (3) of
the next succeeding paragraph), is less than the sum of:
(i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the
first fiscal quarter commencing after the date hereof to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the
Company from the issue or sale since the date hereof of Equity
Interests of the Company or of debt securities of the Company that
have been converted into or exchanged for such Equity Interests (other
than Equity Interests (or convertible debt securities) sold to a
Subsidiary of the Company and other than Disqualified Stock or debt
securities that have been converted into Disqualified Stock), plus
(iii) to the extent that any Restricted Investment that was made
after the date hereof is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with
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respect to such Restricted Investment (less the cost of disposition,
if any) and (B) the initial amount of such Restricted Investment, plus
(iv) $500,000.
The foregoing provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement or other acquisition of
any Equity Interests of the Company in exchange for, or out of the proceeds
of, the substantially concurrent sale (other than to a Subsidiary of the
Company) of other Equity Interests of the Company (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or payment of principal of
Indebtedness that is subordinated to the Notes with the net cash proceeds
from an incurrence of Permitted Refinancing Debt or the substantially
concurrent sale (other than to a Subsidiary of the Company) of Equity
Interests of the Company (other than Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded
from clause (c)(ii) of the preceding paragraph;
(4) (A) the acquisition or assumption of the indebtedness evidenced
by the Bond Agreement by and among New Jersey Economic Development
Authority, Wells Fargo Armored Service Corporation, the purchasers
thereunder, and Mellon Bank, N.A., as trustee, dated June 1, 1984, in the
original principal amount of $1.0 million (the "IRB"), (B) the payment of
principal, interest, or premiums, if any, in connection with the
redemption, repurchase or maturity of the IRB, (C) the payment or
reimbursement of costs, expenses and taxes as may be incurred by Wells
Fargo Armored Service Corporation after the Issue Date with respect to
maintaining the property to which the IRB relates, (D) the payment to the
original holders under the IRB or their assignees of any amount required to
cancel or retire the IRB and the indebtedness evidenced thereby and (E) the
reimbursement of costs and expenses incurred by Wells Fargo Armored Service
Corporation in redeeming or repurchasing the IRB at the request or
direction of the Company;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Subsidiary of the
Company held by any member of the Company's (or any of its Subsidiaries')
management pursuant to any management equity subscription agreement or
stock option agreement in effect
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as of the date hereof; provided that (i) the aggregate price paid for all
such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $250,000 in any twelve-month period plus the aggregate cash proceeds
received by the Company during such twelve-month period from any reissuance
of Equity Interests by the Company to members of management of the Company
and its Subsidiaries; (ii) the cash proceeds from any such reissuance shall
be excluded from clause (c)(ii) of the preceding paragraph; and (iii) no
Default or Event of Default shall have occurred and be continuing
immediately after such transaction.
Notwithstanding anything contained in this Indenture to contrary, the
events described in clause (4) of the preceding paragraph (each, an "IRB
Payment Event") shall be excluded from the definition of Restricted
Payments.
The amount of all Restricted Payments (other than cash) shall be the fair market
value (evidenced by a resolution of the Board set forth in an Officers'
Certificate of the Company delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company or
such Subsidiary, as the case may be, pursuant to the Restricted Payment. Not
later than the date of making any Restricted Payment, the Company shall deliver
to the Trustee an Officers' Certificate of the Company stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.7 were computed, which calculations may
be based upon the Company's latest available financial statements.
SECTION 4.8. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of such Subsidiary to:
(i)(a) pay dividends or make any other distributions to the Company or
any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any
other interest or participation in, or measured by, its profits, or (b) pay
any Indebtedness owed to the Company or any of its Subsidiaries,
(ii) make loans or advances to the Company or any of its
Subsidiaries, or
(iii) transfer any of its properties or assets to the Company or any
of its Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:
(a) Existing Indebtedness as in effect on the date hereof,
(b) the New Credit Facility as in effect on the date hereof and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive with
respect to such dividend
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and other payment restrictions than those contained in the New Credit
Facility as in effect on the date hereof,
(c) this Indenture and the Notes,
(d) applicable law,
(e) any instrument or agreement governing Acquired Debt of the
Company or any of its Subsidiaries or Capital Stock of a Person acquired by
the Company or any of its Subsidiaries as in effect at the time of such
acquisition (except to the extent such Acquired Debt was incurred or such
Capital Stock was issued in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired, provided that in the
case of Indebtedness, such Indebtedness was permitted by the terms of this
Indenture to be incurred and provided, further, that the Consolidated Cash
Flow of such Person is not taken into account in determining whether such
Indebtedness is permitted,
(f) by reason of customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices,
(g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, or
(h) Permitted Refinancing Debt, provided that the restrictions
contained in the agreements governing such Permitted Refinancing Debt are
no more restrictive than those contained in the agreements governing the
Indebtedness being refinanced.
SECTION 4.9. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt) and the
Company shall not issue any Disqualified Stock and shall not permit any of its
Subsidiaries to issue any shares of Disqualified Stock or Preferred Stock (other
than to the Company or a Wholly Owned Subsidiary of the Company); provided,
however, that the Company and its Subsidiaries may incur Indebtedness (including
Acquired Debt) and the Company (but not any of its Subsidiaries) may issue
shares of Disqualified Stock, if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the
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additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.
The foregoing provisions shall not apply to the incurrence of the following
Indebtedness:
(i) the incurrence by the Company of Senior Debt under the New
Credit Facility and letters of credit thereunder in an aggregate principal
amount at any time outstanding (with letters of credit (other than
Insurance Letters of Credit) being deemed to have a principal amount equal
to the maximum potential liability of the Company and its Subsidiaries
thereunder) not to exceed an amount equal to $100.0 million under the New
Credit Facility less the aggregate amount of all Net Proceeds of Asset
Sales applied to permanently reduce the commitments with respect to such
Indebtedness pursuant to Section 4.10 hereof;
(ii) the incurrence by the Company and its Subsidiaries of Existing
Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by
the Notes;
(iv) the incurrence by the Company or any of its Subsidiaries of
additional Indebtedness represented by Capital Lease Obligations, mortgage
financings, purchase money obligations or Acquired Debt, in each case
incurred for the purpose of financing or refinancing all or any part of the
purchase price or cost of construction or improvement of property, plant or
equipment used in the business of the Company or such Subsidiary, in an
aggregate principal amount not to exceed $5.0 million at any time
outstanding;
(v) the incurrence in the ordinary course of business by the
Company or any of its Subsidiaries of Indebtedness in respect of Insurance
Letters of Credit;
(vi) the incurrence by any Subsidiary of the Company of Indebtedness
under a Guarantee of any Indebtedness permitted under this Indenture to be
incurred by the Company; provided that (a) in the case such Guarantee is of
Indebtedness that is pari passu in right of payment with the Notes, all
obligations with respect to the Notes are Guaranteed on an equal and
ratable basis with the Indebtedness so Guaranteed, and (b) in the case such
Guarantee is of Indebtedness that is subordinated in right of payment to
the Notes, all obligations with respect to the Notes are Guaranteed on a
senior basis reflecting the subordination of the Indebtedness so Guaranteed
on terms substantially similar to, or more favorable to senior creditors
than, those contained in this Indenture;
(vii) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Indenture to be incurred;
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(viii) the incurrence by the Company or any of its Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries; provided, however, that (x) if the Company is
the obligor of such Indebtedness, such Indebtedness is evidenced by a note
and expressly subordinate to the payment in full of all Obligations with
respect to the Notes and (y)(I) any subsequent issuance, transfer or other
disposition of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Wholly Owned Subsidiary and
(II) any sale, transfer or other disposition of any such Indebtedness to a
Person that is not either the Company or a Wholly Owned Subsidiary shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Subsidiary, as the case may be;
(ix) the incurrence by the Company or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(x) the incurrence by the Company or any of its Subsidiaries of
Indebtedness in respect of bid, performance or advance payment bonds, and
appeal and surety bonds;
(xi) the incurrence by the Company of Indebtedness as part of the
IRB Payment Even t;
(xii) the incurrence by the Company or any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $10.0 million; and
(xiii) the incurrence by the Company or any of its Subsidiaries of
interest, fees or other expenses on Indebtedness otherwise permitted under
this covenant, provided that such interest, fees or other expenses are
payable on a current basis no less frequently than semi-annually and are
paid when due or within any applicable customary grace period thereafter,
not to exceed thirty days.
For purposes of determining compliance with this covenant, (i) in the event that
an item of Indebtedness meets the criteria of more than one of the types of
Indebtedness permitted by this covenant, the Company in its sole discretion will
classify such item of Indebtedness and will only be required to include the
amount and type of each class of Indebtedness in the test specified in the first
paragraph of this covenant or in one of the clauses of the second paragraph of
this covenant; (ii) the amount of Indebtedness issued at a price which is less
than the principal amount thereof shall be equal to the amount of liability in
respect thereof determined in accordance with GAAP, unless the Company shall
elect upon written notice to the Trustee at the time of issuance of such
Indebtedness, to qualify the extended principal amount or final accreted value
thereof as permitted under the terms of this Section 4.9; and (iii) the amount
of Indebtedness represented by a Guarantee of a primary obligation of another
Person shall be deemed to be the lower of (x) an
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amount equal to the maximum amount of the primary obligation (including without
limitation all principal, premiums (if any), interest, fees and all other
amounts in respect thereof) in respect of which such Guarantee is made and (y)
the maximum amount for which such guaranteeing Person may be liable pursuant to
the terms of the applicable Guarantee, which, in any case in which such
Guarantee consists solely of the granting of a Lien on any asset of such
guaranteeing Person, shall be limited to the fair market value of such asset.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in an Asset Sale unless (i) the Company (or the Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at least equal to
the fair market value (evidenced by a resolution of the Board set forth in an
Officers' Certificate of the Company delivered to the Trustee) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by the Company or such Subsidiary is in
the form of Cash Equivalents; provided that the amount of (x) any liabilities
(as shown on the Company's or such Subsidiary's most recent balance sheet) of
the Company or any of its Subsidiaries (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Guarantee
thereof) that are assumed by the transferee of any such assets pursuant to an
agreement that releases the Company or such Subsidiary from further liability,
and (y) any securities received by the Company or any such Subsidiary from such
transferee that are immediately converted by the Company or such Subsidiary into
cash or Cash Equivalents (to the extent of the cash or Cash Equivalents
received), shall be deemed to be cash or Cash Equivalents for purposes of this
provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or the applicable Subsidiary may apply such Net Proceeds, at its
option, (a) to permanently reduce outstanding Senior Debt, including without
limitation Indebtedness under the New Credit Facility (and to correspondingly
reduce commitments with respect thereto) or (b) to the acquisition of a
controlling interest in another business, the making of a capital expenditure or
the acquisition of other long-term assets, in each case, in the same or a
similar line of business as the Company was engaged in on the date of the Asset
Sale. Pending the final application of any such Net Proceeds, the Company or the
applicable Subsidiary may temporarily reduce Senior Debt, including without
limitation Indebtedness under the New Credit Facility or otherwise invest such
Net Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
Within 30 days after the aggregate amount of Excess Proceeds exceeds $5.0
million, the Company shall make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase an aggregate principal amount of Notes equal to such Excess
Proceeds, at a Purchase Price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, thereon to the Purchase Date. The Asset Sale Offer shall be
made in compliance with all applicable laws, including, without limitation, Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Notes as a result of an Asset
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Sale, and the applicable procedures set forth in Article III hereof and shall
include all instructions and materials necessary to enable Holders to tender
their Notes.
To the extent that the aggregate amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company or the applicable
Subsidiary may use any remaining Excess Proceeds for any purpose not prohibited
by this Indenture. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the Offer Amount, the Trustee shall select the
particular Notes or portions thereof to be purchased in accordance with Article
III hereof. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless:
(i) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Subsidiary than those that could
have been reasonably obtained in a comparable transaction by the Company or
such Subsidiary with an unrelated Person and
(ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1.0 million, a resolution of the
Board set forth in an Officers' Certificate of the Company certifying that
such Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration
in excess of $5.0 million, an opinion as to the fairness to the Company of
such Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing;
provided that (u) the Contribution Agreement and the transactions contemplated
thereunder, (v) the stockholders agreement, entered into on the Issue Date,
among the Company and Wells Fargo Armored Service Corporation, the Business
Trust and Wingate Partners, L.P., including without limitation the issuance of
the NOL Note, (w) the indemnification of officers and directors of the Company
or its Subsidiaries in accordance with the charters and by-laws of the Company
and its Subsidiaries or pursuant to director indemnification agreements, (x) any
employment agreement entered into by the Company or any of its Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Company or such Subsidiary, (y) transactions between or among the Company or its
Wholly Owned Subsidiaries and (z) Restricted Payments, Permitted
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Investments and IRB Payment Events that are permitted by the provisions of
Section 4.7 of this Indenture in each case, shall not be deemed Affiliate
Transactions.
Notwithstanding the foregoing, clause (ii) in the preceding paragraph shall
not apply to any agreement for the provision of security services and related
goods in connection therewith between the Company or any of its Subsidiaries and
an Affiliate that (x) provides for rates that are at least as favorable as
standard published rates then offered by the Affiliate in question or (y) is
entered into pursuant to a commercially bid arrangement in which at least two
Persons that are not Affiliates have been asked to participate.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired, or any income or profits therefrom or
assign or convey any right to receive income therefrom, except Permitted Liens.
SECTION 4.13. CONTINUED EXISTENCE.
Subject to Article V hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence in accordance with the organizational documents (as the same may be
amended from time to time) of the Company and (ii) the material rights (charter
and statutory), licenses and franchises of the Company, except to the extent
that the Board determines in good faith that the preservation of such right,
license or franchise is no longer necessary or desirable in the conduct of the
business of the Company and its Subsidiaries taken as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 4.14. INSURANCE MATTERS.
The Company shall provide or cause to be provided, for itself and each of
its Subsidiaries, insurance (including appropriate self-insurance) against loss
or damage of the kinds that, in the reasonable, good faith opinion of the
Company, are adequate and appropriate for the conduct of the business of the
Company and its Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be either (i) consistent with past practices of the Company or
the applicable Subsidiary or (ii) customary, in the reasonable, good faith
opinion of the Company, for corporations similarly situated in the industry,
unless the failure to provide such insurance (together with all other such
failures) would not have a material adverse effect on the financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes (a "Change of Control
Offer") at a Purchase Price in cash equal to 101%
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of the aggregate principal amount thereof, together with accrued and unpaid
interest and Liquidated Damages, if any, thereon to the Purchase Date. The
Change of Control Offer shall be made in compliance with all applicable laws,
including, without limitation, Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control, and the applicable procedures set forth in
Article III hereof and shall include all instructions and materials necessary to
enable Holders to tender their Notes.
SECTION 4.16. LIMITATION ON FUTURE SUBORDINATED INDEBTEDNESS.
The Company shall not incur, create, issue, assume, Guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt and senior in right of payment to the Notes.
SECTION 4.17. PAYMENTS FOR CONSENT.
The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.18. RESTRICTIONS UNDER SENIOR DEBT.
Prior to giving notice to Holders of Notes relating to a Change of Control
Offer or an Asset Sale Offer, but in any event within 90 days following a Change
of Control or the accumulation of Excess Proceeds in excess of $5.0 million, the
Company shall (i) repay, or otherwise make arrangements satisfactory to the
holders of all Senior Debt for the repayment of, all Senior Debt in full or
offer to repay all such Senior Debt in full and have repaid, or otherwise made
arrangements satisfactory to the holders of all Senior Debt for the repayment
of, all Senior Debt in full of any lender who accepts such offer; or (ii) obtain
the requisite consents under the New Credit Facility or under agreements
relating to other Senior Debt to purchase Notes as required by this Indenture.
SECTION 4.19. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, nor shall it permit any of its Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company may
enter into a sale and leaseback transaction if (i) the Company could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating to
such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio
test set forth in Section 4.9 hereof and (b) incurred a Lien to secure such
Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash proceeds of
such sale and leaseback transaction are at least equal to the fair market value
(as determined in good faith by the Board and set forth in an Officers'
Certificate of the Company delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of assets
in
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such sale and leaseback transaction is permitted by, and the Company applies the
proceeds of such transaction in compliance with, Section 4.10 hereof.
SECTION 4.20. SUBSIDIARY GUARANTEES.
(a) The Company shall cause each of LFC, the Operating Subsidiary, Wells
Fargo of Texas and Wells Fargo of Puerto Rico to deliver a Subsidiary Guarantee
by executing this Indenture on the Issue Date. In addition, the Company shall
cause each Subsidiary of the Company created or acquired after the date hereof
that either (i) Guarantees any Senior Debt of the Company or any Indebtedness of
the Company that is pari passu in right of payment with the Notes or (ii) is or
becomes a Significant Subsidiary (whether as a result of creation, acquisition,
additional investment, internal growth or otherwise), not later than fifteen
(15) days after such execution, creation or acquisition to (A) execute a
Supplemental Indenture and deliver such Supplemental Indenture and an Opinion of
Counsel in form acceptable to the Trustee (as set forth in paragraph (b) below)
to the Trustee and (B) execute a written agreement (the "Letter Agreement") to
be bound by the terms of the Registration Rights Agreement with the same force
and effect as if such Subsidiary had been a Guarantor and an original party to
the Registration Rights Agreement and deliver such agreement and an Opinion of
Counsel in form acceptable to the Trustee (as set forth in paragraph (b) below)
to the Trustee.
(b) The Opinion of Counsel required by clause (a) above shall state that
the Supplemental Indenture and the Letter Agreement have been duly authorized,
executed and delivered by such Subsidiary, that the obligations of such
Subsidiary under such Supplemental Indenture and such Letter Agreement are
enforceable against such Subsidiary in accordance with their terms and that
delivery by such Subsidiary of each of the Supplemental Indenture and the Letter
Agreement will not (i) result in any violation of the provisions of the charter
or bylaws of such Subsidiary, (ii) to the best knowledge of such counsel,
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan or credit agreement or other agreement or instrument known to such
counsel to which such Subsidiary is a party, or (iii) to the best knowledge of
such counsel, result in any violation of the provisions of any federal or state
statute, or any order, rule or regulation of any federal or state court or
governmental agency or body having jurisdiction over such Subsidiary or any of
its properties or assets.
(c) In the event of a sale or other disposition of all or substantially
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition (including, without limitation, by
foreclosure) of all of the Capital Stock of any Guarantor to any Person other
than the Company or a Wholly Owned Subsidiary thereof, then such Guarantor shall
be automatically released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with Sections 3.9 and 4.10 hereof. Upon delivery by the
Company to the Trustee of an Officers' Certificate of the Company and an Opinion
of Counsel to the effect that such sale or other disposition was made by the
Company in accordance with the provisions of this Indenture, including without
limitation Sections 3.9
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and 4.10 hereof, the Trustee shall execute any documents reasonably required in
order to evidence the release of any Guarantor from its obligations under
Article XI hereof or pursuant to any Supplemental Indenture.
(d) Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal, Redemption
Price, and Purchase Price of and Liquidated Damages, if any, and interest on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article XI. The provisions of this Section 4.20 shall not
affect any of the Company's obligations under Section 4.9(vi) hereof.
ARTICLE V.
SUCCESSORS
SECTION 5.1. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into any other Person
(whether or not the Company is the surviving corporation), or permit any other
Person to consolidate or merge with or into the Company, nor will the Company
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets in one or more related transactions to another
corporation, Person or entity unless:
(i) the Company shall be the surviving corporation or the entity or
the Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (the "Surviving
Entity"), is a corporation organized and existing under the laws of the
United States, any state thereof, or the District of Columbia;
(ii) the Surviving Entity assumes by supplemental indenture in a
form reasonably satisfactory to the Trustee all of the obligations of the
Company under the Notes and this Indenture;
(iii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iv) immediately after giving effect to such transaction, the
Consolidated Net Worth of the Company or the Surviving Entity, as the case
may be, would be at least equal to the Consolidated Net Worth of the
Company immediately prior to such transaction; and
(v) immediately after giving effect to such transaction and after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four quarter period, the Company or the
Surviving Entity, as the case may be, would be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the first paragraph of Section
4.9 hereof.
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The Company shall deliver to the Trustee prior to the consummation of the
proposed transaction an Officers' Certificate of the Company to the foregoing
effect and an Opinion of Counsel stating that the proposed transaction and such
supplemental indenture comply with this Indenture.
SECTION 5.2. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1 hereof, the Surviving Entity shall succeed to and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such Surviving Entity had been named
as the Company herein; provided, however, that the predecessor Company shall not
be relieved from the obligation to pay the principal, Purchase Price or
Redemption Price of or interest or Liquidated Damages, if any, on the Notes
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.1 hereof.
ARTICLE VI.
DEFAULTS AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest or
Liquidated Damages, if any, on the Notes and such default continues for a
period of 30 days (whether or not prohibited by Article X hereof);
(b) the Company defaults in the payment when due of principal,
Redemption Price or Purchase Price of the Notes, whether at maturity, upon
redemption or repurchase or otherwise (whether or not prohibited by Article
X hereof);
(c) the Company fails to comply with any of the provisions of Section
4.10, 4.15 or 4.18 hereof;
(d) the Company fails to comply with any of the provisions of Section
4.7 or 4.9 hereof and such failure to comply continues for a period of 30
days after notice thereof from the Trustee or the Holders of at least 25%
in aggregate principal amount of the then outstanding Notes;
(e) the Company fails to comply with any other covenant,
representation, warranty or other agreement in this Indenture or the Notes
and such failure to comply continues for a period of 60 days after notice
thereof from the Trustee or the Holders of at least 25% in aggregate
principal amount of the then outstanding Notes;
(f) a default occurs under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any
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Indebtedness for money borrowed by the Company or any of its Subsidiaries
or the payment of which is Guaranteed by the Company or any of such
Subsidiaries, whether such Indebtedness or Guarantee now exists, or is
created after the date of this Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of any such Indebtedness prior to its express
maturity and, in each case, the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $7.5 million or more;
(g) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company
or any of its Subsidiaries and such judgment or judgments are not paid,
stayed or discharged for a period of 60 days, provided that the aggregate
of all such judgments exceeds $7.5 million (excluding judgments to the
extent covered by insurance in respect of which coverage has not been
disclaimed or denied);
(h) a Subsidiary Guarantee is held in any judicial proceeding to be
unenforceable or invalid, or with respect to any Guarantor that is a
Significant Subsidiary, the Subsidiary Guarantee of such Guarantor ceases
to be in full force and effect;
(i) the Company, any Guarantor or any Subsidiary that is obligated to
become a Guarantor pursuant to Section 4.20 of this Indenture:
(i) commences a voluntary case under any Bankruptcy Law,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment of a custodian or receiver of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become due; or
(j) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
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(i) is for relief in an involuntary case against the Company,
any Guarantor or any Subsidiary that is obligated to become a
Guarantor pursuant to Section 4.20 of this Indenture ;
(ii) appoints a custodian or receiver of the Company, any
Guarantor or any Subsidiary that is obligated to become a Guarantor
pursuant to Section 4.20 of this Indenture or for all or substantially
all of the property of any of the foregoing;
(iii) orders the liquidation of the Company, any Guarantor or
any Subsidiary that is obligated to become a Guarantor pursuant to
Section 4.20 of this Indenture;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
SECTION 6.2. ACCELERATION.
If any Event of Default (other than an Event of Default specified in clause
(i) or (j) of Section 6.1 hereof with respect to the Company, any Guarantor or
any Subsidiary that is obligated to become a Guarantor pursuant to Section 4.20
of this Indenture) occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the then outstanding Notes by written notice to
the Company (and the Trustee, if such notice is given by such Holders) may
declare all the Notes to be due and payable immediately. Upon any such
declaration, the entire principal amount of, and accrued and unpaid interest and
Liquidated Damages, if any, on the Notes shall become immediately due and
payable, unless all Events of Default specified in such acceleration notice
(other than any Event of Default in respect of non-payment of principal,
Redemption Price, Purchase Price, or interest, if any, which has become due
solely by reason of such declaration of acceleration) shall have been cured.
Notwithstanding the foregoing, if an Event of Default specified in clause
(i) or (j) of Section 6.1 hereof occurs with respect to the Company, any
Guarantor or any Subsidiary that is obligated to become a Guarantor pursuant to
Section 4.20 of this Indenture, all outstanding Notes shall be due and payable
immediately without further action or notice.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal, Redemption Price, Purchase Price, interest or
Liquidated Damages, if any) if it determines in good faith that withholding
notice is in their interest; provided, however, that the Company shall promptly
notify the holders of Senior Debt if payment of the Notes is accelerated because
of an Event of Default.
SECTION 6.3. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, Redemption Price, Purchase
Price, interest or Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding, and any recovery or
judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Notes. A delay or omission by the
Trustee or any Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. All remedies are cumulative to the extent
permitted by law.
SECTION 6.4. WAIVER OF PAST DEFAULTS; RECISSION OF ACCELERATION
Holders of all of the aggregate principal amount of the then outstanding
Notes by notice to the Trustee may, on behalf of the Holders of all of the
Notes, waive an existing Default or Event of Default and its consequences
hereunder with regard to a continuing Default or Event of Default in the payment
of the principal, Redemption Price or Purchase Price of, or interest or
Liquidated Damages, if any, on the Notes. Holders of not less than a majority in
aggregate principal amount of the then outstanding Notes by notice to the
Trustee may, on behalf of the Holders of all of the Notes, waive an existing
Default or Event of Default and its consequences hereunder for all Defaults or
Events of Default arising from provisions of this Indenture. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Indenture
but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon. After a declaration of acceleration has been made, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of not less than a majority in aggregate principal
amount of Notes outstanding, by written notice to the Company and the Trustee,
may annul such declaration if (i) the Company has paid or deposited with the
Trustee a sum sufficient to pay (a) all sums paid or advanced by the Trustee
under the Indenture and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, (b) all overdue interest and
Liquidated Damages, if any, on all Notes, and (c) to the extent that payment of
such interest is lawful, interest upon overdue interest and Liquidated Damages,
if any, at the rate borne by the Notes; and (ii) all Events of Default, other
than the non-payment of principal of the Notes which has become due solely by
such declaration of acceleration, have been cured or waived.
SECTION 6.5. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with applicable law or this Indenture that the Trustee reasonably determines may
be unduly prejudicial to the rights of other Holders of Notes or that may
subject the Trustee to personal liability and shall be entitled to the benefit
of Section 7.1(c)(iii) and (e) hereof. Notwithstanding any provision in this
Indenture to the contrary, the Trustee shall not be obligated to take any action
with respect to the provisions of Section 6.9 hereof unless directed to do so
pursuant to this Section 6.5 by the Holders of at least 10% in principal amount
of the then outstanding Notes.
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SECTION 6.6. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only
if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder or Holders of Notes offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.7. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of, or Redemption Price or
Purchase Price, interest or Liquidated Damages, if any, on the Note, on or after
the respective due dates therefor (including in connection with an offer to
repurchase), or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
written consent of such Holder.
SECTION 6.8. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal, Redemption Price, interest and Liquidated Damages, if any, remaining
unpaid on the Notes and interest on overdue principal, Redemption Price and
Purchase Price and, to the extent lawful, interest and Liquidated Damages, if
any, and such further amounts as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expense,
disbursements and advances of the Trustee, its agents and counsel.
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SECTION 6.9. EVENT OF DEFAULT TO AVOID PREMIUM.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions hereof, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to the first date
on which the Notes are subject to redemption at the option of the Company as
provided in Section 3.7 hereof by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company with the intention of
avoiding the prohibition on redemption of the Notes prior to such first date,
then the premium specified herein for an optional redemption of the Notes on
such first date shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
SECTION 6.10. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents (including accountants,
experts or such other professionals as the Trustee deems necessary, advisable or
appropriate) and counsel and the Holders of the Notes allowed in any judicial
proceedings relative to the Company (or any other obligor upon the Notes), its
creditors or its property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims, and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee, and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.7 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.11. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7 hereof, including payment of all compensation, expense and
liabilities
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incurred, and all advances made, by the Trustee and the costs and expenses
of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, Purchase Price, Redemption Price and Liquidated Damages, if
any, and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal,
Purchase Price, Redemption Price and Liquidated Damages, if any, and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a special record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.11.
SECTION 6.12. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section does
not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7
hereof, or a suit by Holders of more than 10% in principal amount of the then
outstanding Notes.
ARTICLE VII.
TRUSTEE
SECTION 7.1. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the TIA and the Trustee need
perform only those duties that are specifically set forth in this Indenture
and no others, and no implied covenants or obligations shall be read into
this Indenture or the TIA against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, without investigation, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any statements,
certificates or opinions
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furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and opinions
to determine whether or not they conform on their face to the requirements
of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to this Section 7.1.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, pursuant to the provisions of this Indenture, including,
without limitation, Section 6.5 hereof, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense which might be incurred by it in compliance with such
request or direction.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.2. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate of the Company or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate of the Company or Opinion of
Counsel. The Trustee may consult with counsel and the written advice of such
counsel and Opinions of Counsel shall be full and complete authorization and
protection from liability in respect of any action taken, suffered or omitted by
it hereunder in good faith and in reliance thereon.
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(c) The Trustee may act through its attorneys, accountants, experts and
such other professionals as the Trustee deems necessary, advisable or
appropriate and shall not be responsible for the misconduct or negligence of any
attorney, accountant, expert or other such professional appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficiently evidenced by
a written order signed by two Officers of the Company.
(f) The Trustee shall not be charged with knowledge of any Default or
Event of Default under Section 6.1 hereof (other than under Section 6.1(a)
(subject to the following sentence) or Section 6.1(b) hereof) unless either (i)
a Responsible Officer shall have actual knowledge thereof, or (ii) the Trustee
shall have received notice thereof in accordance with Section 12.2 hereof from
the Company or any Holder of the Notes. The Trustee shall not be charged with
knowledge of the Company's obligation to pay Liquidated Damages, or the
cessation of such obligation, unless the Trustee receives written notice thereof
from the Company or any Holder. The Trustee shall not be charged with knowledge
of any Default or Event of Default under Section 6.9 hereto unless the Trustee
shall have received notice thereof in accordance with Section 12.2 hereof from
any Holder of the Notes.
SECTION 7.3. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest within the meaning
of the TIA it must eliminate such conflict within 90 days, apply (subject to the
consent of the Company) to the Commission for permission to continue as trustee
or resign. Any Agent may do the same with like rights and duties. The Trustee
is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.4. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture, or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.5. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing, the Trustee
shall mail to Holders of Notes a notice of the Default or Event of Default
within 90 days after it occurs. Except in the
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case of a Default in payment on any Note (including the failure to make a
mandatory repurchase pursuant hereto), the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.6. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each January 15 beginning with the January 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA (S) 313(a) (but if no
event described in TIA (S) 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA (S) 313(b). The Trustee shall also transmit by mail all
reports as required by TIA (S) 313(c ).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the Commission and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
SECTION 7.7. COMPENSATION, REIMBURSEMENT AND INDEMNITY.
The Company shall pay to the Trustee from time to time such reasonable
compensation as the Company may negotiate with the Trustee in accordance with
industry standards for its acceptance of this Indenture and the rendering by it
of the services required hereunder. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by or on behalf of it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's attorneys,
accountants, experts and such other professionals as the Trustee deems
necessary, advisable or appropriate.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture (including its
duties under Section 9.6 hereof), including the costs and expenses of enforcing
this Indenture or any Subsidiary Guarantee against the Company or a Guarantor
(including this Section 7.7) and defending itself against or investigating any
claim (whether asserted by the Company, any Guarantor, any Holder or any other
Person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability or
expense may be attributable to its negligence or willful misconduct. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend any claim or threatened
claim asserted against the Trustee, and the Trustee shall cooperate in the
defense. The Trustee may have separate counsel and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not pay for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
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The obligations of the Company under this Section 7.7 shall survive the
resignation or removal of the Trustee, the satisfaction and discharge of this
Indenture and the termination of this Indenture.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal, Redemption
Price or Purchase Price of or Liquidated Damages, if any, or interest on,
particular Notes. Such Lien shall survive the resignation or removal of the
Trustee, the satisfaction and discharge of this Indenture and the termination of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(i) or (j) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 7.8. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian, receiver or public officer takes charge of the
Trustee or its property for the purpose of rehabilitation, conversation or
liquidation; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the date on which the successor Trustee takes
office, the Holders of a majority in principal amount of the then outstanding
Notes may appoint a successor Trustee to replace the successor Trustee appointed
by the Company.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
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If the Trustee, after written request by any Holder of a Note who has been
a bona fide holder of a Note or Notes for at least six months, fails to comply
with Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The Company shall mail a notice of the Trustee's succession to each
Holder of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation that
is eligible under Section 7.10 hereof, the successor corporation without any
further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof (including the District of Columbia) that is authorized
under such laws to exercise corporate trust power, that is subject to
supervision or examination by federal or state authorities and that has a
combined capital and surplus of at least $100.0 million as set forth in its most
recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE VIII.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board evidenced by a resolution set
forth in an Officers' Certificate of the Company, at any time, elect to have
either Section 8.2 or 8.3 hereof be
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applied to all outstanding Notes upon compliance with the conditions set forth
below in this Article VIII.
SECTION 8.2. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company and the Guarantors shall, subject to
the satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to
have been discharged from their obligations with respect to all outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"Legal Defeasance"). For this purpose, Legal Defeasance means that the Company
and the Guarantors shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall thereafter be
deemed to be "outstanding" only for the purposes of Section 8.5 hereof and the
other Sections of this Indenture referred to in clauses (a) through (d) below,
and to have satisfied all their other obligations under such Notes and this
Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder:
(a) the rights of Holders of outstanding Notes to receive solely from
the trust fund described in Section 8.4 hereof, and as more fully set forth
in such Section, payments in respect of the principal or Redemption Price
of, and interest and Liquidated Damages, if any, on such Notes when such
payments are due,
(b) the Company's obligations with respect to such Notes under Article
II and Section 4.2 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith, and
(d) this Article Eight.
Subject to compliance with this Article Eight, the Company may exercise its
option under this Section 8.2, notwithstanding the prior exercise of its option
under Section 8.3 hereof.
SECTION 8.3. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company and the Guarantors shall, subject to
the satisfaction of the conditions set forth in Section 8.4 hereof, be released
from their obligations under the covenants contained in Sections 3.8, 3.9, 4.5,
4.7 through 4.12 and 4.14 through 4.20 hereof, both inclusive, and Section
5.1(iv) and (v) with respect to the outstanding Notes on and after the date the
conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"),
and the Notes shall thereafter be deemed not "outstanding" for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder. For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in
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any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document, and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.1 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Company's exercise under Section 8.1 hereof of the option applicable to this
Section 8.3 hereof, subject to the satisfaction of the conditions set forth in
Section 8.4 hereof, Sections 6.1(c) through 6.1(h) hereof shall not constitute
Events of Default.
SECTION 8.4. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following are the conditions precedent to the application of either
Section 8.2 or 8.3 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in United States dollars,
U.S. Government Securities, or a combination thereof, in such amounts as
will be sufficient (without reinvestment), in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal or
Redemption Price of, and interest and Liquidated Damages, if any, on the
outstanding Notes on the stated date for payment thereof or on the
applicable Redemption Date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
Redemption Date;
(b) in the case of an election under Section 8.2 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company
has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date of this Indenture, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance
and will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance
had not occurred;
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(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Section 6.1(i) or (j) hereof is concerned, at any
time in the period ending on the ninety-first day after the date of deposit
(which condition shall not be deemed satisfied until such ninety-first
day);
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound;
(f) the Company shall deliver to the Trustee an Opinion of Counsel to
the effect that after the ninety-first day following the deposit, the trust
funds will not be subject to the effect of an avoidance or other order
under any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall deliver to the Trustee an Officers' Certificate
of the Company stating that the deposit was not made by the Company with
the intent of preferring the Holders of Notes over the other creditors of
the Company, with the intent of defeating, hindering, delaying or
defrauding any creditors of the Company or others; and
(h) the Company shall deliver to the Trustee an Officers' Certificate
of the Company and an Opinion of Counsel, each stating that the all
conditions precedent to the Legal Defeasance or Covenant Defeasance, as the
case may be, have been complied with.
SECTION 8.5. DEPOSITED MONEY AND U.S. GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all money and U.S. Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.5 only, the "Trustee")
pursuant to Section 8.4 hereof in respect of the outstanding Notes shall be held
in trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (other than the Company) as the Trustee may determine, to the Holders of
such Notes of all sums due and to become due thereon in respect of principal or
Redemption Price of, and Liquidated Damages, if any, interest on, the Notes, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or U.S. Government
Securities deposited pursuant to Section 8.4 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
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Anything in this Article VIII to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or U.S. Government Securities held by it as provided in
Section 8.4 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 8.6. REPAYMENT TO THE COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal or Redemption Price of,
or Liquidated Damages, if any, or interest on any Note and remaining unclaimed
for two years after such amount has become due and payable shall be paid to the
Company on its request or (if then held by the Company) shall be discharged from
such trust; and the Holder of such Note shall thereafter look only to the
Company for payment thereof as a general creditor, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, at the expense of the Company, shall cause to be published once, in
The New York Times and The Wall Street Journal (national editions), notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days after the date of such notification or
publication, any unclaimed balance of such money then remaining will be repaid
to the Company.
SECTION 8.7. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States dollars
or U.S. Government Securities in accordance with Section 8.2 or 8.3 hereof, as
the case may be, by reason of any order of judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the obligations of the Company under this Indenture, and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to Section 8.2
or 8.3 hereof until such time as the Trustee or Paying Agent is permitted to
apply all such money in accordance with Section 8.2 or 8.3 hereof, as the case
may be; provided, however, that, if the Company makes any payment with respect
to any Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE IX.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.2 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
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(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
Certificated Notes;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes in the case of a merger or consolidation pursuant to
Article V hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Notes;
(e) to comply with the requirements of the Commission in order to
effect or maintain the qualification of this Indenture under the TIA; or
(f) to add or release a Guarantor as provided in Section 4.20.
Upon the request of the Company, accompanied by a resolution of the Board
(evidenced by an Officers' Certificate of the Company) authorizing the execution
of any such amended or supplemental indenture, and upon receipt by the Trustee
of the documents described in Section 7.2 hereof, the Trustee shall join with
the Company and the Guarantors in the execution of any amended or supplemental
Indenture authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained,
but the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or immunities under
this Indenture or otherwise.
SECTION 9.2. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.2, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture (including Sections 3.8,
3.9, 4.10, and 4.15 and Article X and XI hereof, and including the defined terms
used therein) and the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for the Notes), and, subject to
Sections 6.2, 6.4 and 6.7 hereof, any existing Default or Event of Default or
compliance with any provision of this Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for the Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
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(b) reduce the principal, Redemption Price or Purchase Price of or
change the fixed maturity of any Note or alter or waive any of the
provisions with respect to the redemption of the Notes (except as provided
above with respect to Sections 3.8, 3.9, 4.10 and 4.15 hereof);
(c) reduce the rate of or change the time for payment of interest or
Liquidated Damages, if any, on or with respect to any Note;
(d) waive a Default or Event of Default in the payment of principal,
Redemption Price or Purchase Price of, or interest or Liquidated Damages,
if any, on the Notes (except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount of the
then outstanding Notes and a waiver of the payment default that resulted
from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal, Redemption Price or Purchase Price of, or interest
or Liquidated Damages, if any, on the Notes;
(g) waive a redemption or repurchase payment with respect to any Note
(except as provided above with respect to Sections 3.8, 3.9, 4.10 and 4.15
hereof); or make any change in the foregoing amendment and waiver
provisions.
Upon the written request of the Company and the Guarantors accompanied by a
resolution of the Board (evidenced by an Officers' Certificate of the Company)
authorizing the execution of any such amended or supplemental indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 7.2 hereof, the Trustee shall join with the
Company and the Guarantors in the execution of such amended or supplemental
indenture unless such amended or supplemental Indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion, but shall not be obligated to, enter
into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.2 becomes
effective, the Company shall mail to the Holders of Notes affected thereby and
the Guarantors a notice briefly describing the amendment, supplement or waiver.
Any failure of the Company to mail such
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notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amended or supplemental Indenture or waiver.
SECTION 9.3. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental indenture that complies with the TIA as then
in effect.
SECTION 9.4. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.5. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.6. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article IX if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. None of the
Company nor any of the Guarantors may sign an amendment or supplemental
Indenture until the Board or, in the case of the Guarantors, the board of
directors thereof approves such amendment or supplemental indenture. In
executing any amended or supplemental indenture, the Trustee shall be entitled
to receive, in addition to the documents required by Sections 12.4 and 12.5
hereof, and, subject to Section 7.1, shall be fully protected in relying upon,
an Officers' Certificate of the Company and an Opinion of Counsel stating that
(i) the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture, (ii) no Event of Default shall occur as a result of
the execution of such Officers' Certificate of the Company or the delivery of
such Opinion of Counsel and (iii) the amended or supplemental indenture complies
with the terms of this Indenture.
SECTION 9.7. GUARANTORS' SIGNATURE NOT REQUIRED.
Notwithstanding anything to the contrary in this Article IX, if any
Guarantor shall have been released from its Obligations under Article XI of this
Indenture or any Supplemental
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Indenture entered into by such Guarantor, the signature of such Guarantor shall
not be required in connection with any amendment of this Indenture.
ARTICLE X.
SUBORDINATION
SECTION 10.1. NOTES SUBORDINATED TO SENIOR DEBT.
Notwithstanding the provisions of this Agreement, but subject to this
Article X, the Company covenants and agrees, and the Trustee and each Holder of
the Notes by his acceptance thereof likewise covenant and agree, that all
payments on the Notes (including, without limitation, payments of the principal,
Redemption Price and Purchase Price of, and interest and Liquidated Damages (if
any) on, the Notes by the Company shall be subordinated and subject in right of
payment in accordance with the provisions of this Article X to the prior payment
in full of all amounts payable under Senior Debt of the Company whether
outstanding on the date hereof or hereafter incurred.
SECTION 10.2. PRIORITY AND PAYMENT OVER OF PROCEEDS IN CERTAIN EVENTS.
(a) Subordination on Dissolution, Liquidation or Reorganization of the
------------- -- ----------- ----------- -- -------------- -- ---
Company. In the event of any insolvency or bankruptcy case or proceeding, or any
- -------
receivership, liquidation, reorganization or other similar case or proceeding in
connection therewith, relative to the Company or its assets, or any liquidation,
dissolution or other winding up of the Company, whether voluntary or
involuntary, or any assignment for the benefit of creditors or other marshaling
of assets or liabilities of the Company (except in connection with the
consolidation or merger of the Company or its liquidation or dissolution
following the sale, assignment, transfer, lease or other disposition of all or
substantially all of its assets in one or more related transactions, upon the
terms and conditions described under Article V hereof to the extent permitted
under the terms of outstanding Senior Debt), all Obligations due and owing in
respect of any Senior Debt (including interest accruing after the commencement
of any such proceeding at the rate specified in the instrument evidencing the
applicable Senior Debt, whether or not a claim therefor is allowed in such
proceeding, to the date of payment of such Senior Debt) must be paid in full
before any payment or distribution of any assets of the Company of any kind or
character is made on account of the Notes (including, without limitation, the
principal, Redemption Price and Purchase Price of, and interest and Liquidated
Damages (if any) on, the Notes). Before any payment may be made by the Company
on account of the Notes (including, without limitation, the principal,
Redemption Price and Purchase Price of, and interest and Liquidated Damages (if
any) on, the Notes), and upon any such dissolution or winding up or liquidation
or reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders or the Trustee on their behalf would be entitled, except for
the provisions of this Article X, shall be made by the Company or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, directly to the holders of the Senior Debt
of the Company to the extent necessary to pay all such Senior Debt in full after
giving effect to any concurrent payment or distribution to the holders of such
Senior Debt (except that Holders may receive securities that are subordinated at
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least to the same extent as the Notes to the Senior Debt and any securities
issued in exchange for Senior Debt and payments made from the trust pursuant to
Article VIII hereof).
(b) Subordination on Default in Senior Debt. During the continuance of any
------------- -- ------- -- ------ ----
default in the payment of any principal of, premium, if any, or interest on, any
Designated Senior Debt (a "Senior Payment Default") beyond any applicable grace
period, no payment or distribution of any assets of the Company of any kind or
character may be made on account of the Notes (including, without limitation, on
account of the principal, Redemption Price and Purchase Price of, and interest
and Liquidated Damages (if any) on the Notes) unless and until such Senior
Payment Default has been cured, waived or has ceased to exist or such Designated
Senior Debt shall have been discharged or paid in full or the right under this
Indenture to prevent any such payment has been waived by or on behalf of the
holders of such Designated Senior Debt (except that Holders may receive
securities that are subordinated at least to the same extent as the Notes to the
Senior Debt and any securities issued in exchange for Senior Debt and payments
made from the trust pursuant to Article VIII hereof).
During the continuance of any event (other than a Senior Payment Default),
the occurrence of which entitles one or more Persons to accelerate the maturity
of any Designated Senior Debt (a "Senior Covenant Default"), and the receipt by
the Trustee from a Senior Representative for such Designated Senior Debt or the
Company of a written notice of such Senior Covenant Default (a "Payment Blockage
Notice"), no payment or distribution of any assets of the Company of any kind or
character may be made by the Company on account of Notes for the period
specified below (a "Payment Blockage Period") (except that Holders may receive
securities that are subordinated at least to the same extent as the Notes to the
Senior Debt and any securities issued in exchange for Senior Debt and payments
made from the trust pursuant to Article VIII hereof).
A Payment Blockage Period shall commence upon the receipt by the Trustee of
notice from a Senior Representative for Designated Senior Debt of a Senior
Covenant Default and shall end (subject to any blockage of payment that may be
in effect in respect of a Senior Payment Default or insolvency) on the earliest
of (i) 179 days after the receipt of a Payment Blockage Notice, provided such
Designated Senior Debt shall not theretofore have been accelerated; (ii) the
date on which such Senior Covenant Default is cured, waived or ceases to exist
or such Designated Senior Debt is discharged or paid in full; or (iii) the date
on which such Payment Blockage Period shall have been terminated by written
notice to the Company and the Trustee from the Senior Representative of the
Designated Senior Debt who had previously delivered the Payment Blockage Notice,
after which the Company shall promptly resume making any and all required
payments in respect of the Notes, including any missed payments. In no event
will a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Trustee of the Payment Blockage Notice initiating such Payment
Blockage Period. Any number of notices of a Senior Covenant Default may be
given during a Payment Blockage Period; provided, that no such notice shall
extend such Payment Blockage Period. No new period of payment blockage may be
commenced unless and until (i) 360 days have elapsed since the effectiveness of
the immediately prior Payment Blockage Notice and (ii) all scheduled payments of
principal, Redemption Price and Purchase Price of, and interest and Liquidated
Damages, if any, on the Notes that have become due have been paid in full in
cash or Cash Equivalents. No Senior
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Covenant Default with respect to Designated Senior Debt that existed or was
continuing on the date of the commencement of any Payment Blockage Period will
be, or can be, made the basis for the commencement of a second Payment Blockage
Period. The Company shall deliver a notice to the Trustee promptly after the
date on which any Senior Covenant Default is cured or waived or ceases to exist
or on which the Designated Senior Debt related thereto is discharged or paid in
full in Cash Equivalents.
(c) Rights and Obligations of Holders of Notes and Trustee. In the event
------ --- ----------- -- ------- -- ----- --- -------
that, notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Trustee or any Holder shall have received any payment on
account of the Notes (including, without limitation, the principal, Redemption
Price or Purchase Price of, or interest or Liquidated Damages (if any) on, the
Notes) (other than as permitted by subsections (a) and (b) of this Section 10.2)
at a time when such payment is prohibited by this Section 10.2 and before the
Senior Debt is paid in full, then and in such event (subject to the provisions
of Section 10.8) such payment or distribution shall be received and held in
trust for the holders of Senior Debt and shall be paid over or delivered to the
Senior Representative of Designated Senior Debt in the case of Designated Senior
Debt and to the holders of the Senior Debt in the case of Senior Debt which is
not Designated Senior Debt, in each case remaining unpaid at their written
direction to the extent necessary to pay such Senior Debt in full in accordance
with its terms after giving effect to any concurrent payment or distribution to
the holders of such Senior Debt.
Nothing contained in this Article X will limit the right of the Trustee or
the Holders of Notes to take any action to accelerate the maturity of the Notes
pursuant to Section 6.2 or to pursue any rights or remedies hereunder against
the Company; provided that, to the extent provided in this Article X, all Senior
Debt of the Company then or thereafter due or declared to be due shall first be
paid in full before the Holders or the Trustee are entitled to receive any
payment from the Company on account of the Notes (including, without limitation,
the principal, Redemption Price or Purchase Price of, or interest or Liquidated
Damages (if any) on, the Notes).
Upon any payment or distribution of assets or Notes referred to in this
Article X, the Trustee and the Holders shall be entitled to rely upon any order
or decree of a court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, and upon a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making any such payment or distribution, delivered to the
Trustee for the purpose of ascertaining the persons entitled to participate in
such distribution, the holders of Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article X.
SECTION 10.3. PAYMENTS MAY BE MADE PRIOR TO DISSOLUTION.
Nothing contained in this Article X or elsewhere in this Indenture shall
prevent (i) the Company, except under the conditions described in Section 10.2,
from making payments at any time for the purpose of making such payments of
principal, Redemption Price or Purchase Price of, or interest or Liquidated
Damages (if any) on, the Notes, or from depositing with the Trustee any monies
for such payments or (ii) the application by the Trustee of any monies deposited
with it for the purpose of making such payments of principal, Redemption Price
or Purchase Price of,
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or interest or Liquidated Damages (if any) on, the Notes, to the Holders
entitled thereto unless at least three Business Days prior to the date upon
which such payment would otherwise (except for the prohibitions contained in
Section 10.2) become due and payable, the Trustee shall have received the
written notice provided for in Section 10.2(b) (or there shall have been an
acceleration of the Notes prior to such application) or in Section 10.8 or (iii)
the application by the Trustee of monies held in the trust pursuant to Article
VIII.
SECTION 10.4. RIGHTS OF HOLDERS OF SENIOR DEBT NOT TO BE IMPAIRED.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act in good faith by any such holder, or by
any noncompliance by the Company, with the terms and provisions and covenants
herein regardless of any knowledge thereof any such holder may have or otherwise
be charged with.
The provisions of this Article X are tended to be for the benefit of, and
shall be enforceable directly by, the holders of Senior Debt.
SECTION 10.5. AUTHORIZATION TO TRUSTEE TO TAKE ACTION TO EFFECTUATE
SUBORDINATION.
Each Holder of Notes by his acceptance thereof authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate, as between the holders of Senior Debt and the Holders, the
subordination as provided in this Article X and appoints the Trustee his
attorney-in-fact for any and all such purposes. Whenever a distribution is to
be made or a notice given to holders of Senior Debt, the distribution or notice
may be made to the representatives and agents of such holders of Senior Debt as
such agents or representatives are identified by such holders in writing to the
Trustee.
Each Holder of Notes by his acceptance thereof authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effectuate, as between the Holders and the holders of Indebtedness that is
subordinate to the Notes, the subordination provisions of all Indebtedness
subordinate to the Notes, and appoints the Trustee his attorney-in-fact for any
and all such purposes. Whenever a distribution is to be made or a notice given
to holders of Indebtedness that is subordinate to the Notes, the distribution or
notice may be made to the representatives and agents of such holders of
Indebtedness that is subordinate to the Notes as such agents and representatives
are identified by such holders in writing to the Trustee.
SECTION 10.6. SUBROGATION.
Subject to the payment in full of all amounts payable under or in respect
of Senior Debt, the Holders shall be subrogated to the rights of the holders of
such Senior Debt to receive payments or distributions of assets of the Company
made on such Senior Debt until the Notes shall be paid in full in cash; and for
the purposes of such subrogation, no payments or distributions to holders of
such Senior Debt of any cash, property or securities to which Holders of the
Notes would be entitled except for the provisions of this Article X, and no
payment pursuant to the
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provisions of this Article X to holders of such Senior Debt by the Holders,
shall, as between the Company, its creditors other than holders of such Senior
Debt and the Holders, be deemed to be a payment by the Company to or on account
of such Senior Debt, it being understood that the provisions of this Article X
are solely for the purpose of defining the relative rights of the holders of
such Senior Debt, on the one hand, and the Holders, on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article X shall have been applied,
pursuant to the provisions of this Article X, to the payment of all amounts
payable under the Senior Debt, then and in such case, the Holders shall be
entitled to receive from the holders of such Senior Debt at the time outstanding
any payments or distributions received by such holders of Senior Debt in excess
of the amount sufficient to pay all amounts payable under or in respect of such
Senior Debt in full.
SECTION 10.7. OBLIGATIONS OF COMPANY UNCONDITIONAL.
Nothing contained in this Article X or elsewhere in this Indenture or in
any Note is intended to or shall impair, as between the Company and the Holders,
the obligations of the Company, which are absolute and unconditional to pay to
the Holders the principal, Redemption Price or Purchase Price of, or interest or
Liquidated Damages (if any) on, the Notes as and when the same shall become due
and payable in accordance with their terms, or is intended to or shall affect
the relative rights of the Holders and creditors of the Company other than the
holders of the Senior Debt, nor shall anything herein or therein prevent the
Trustee or any Holder from exercising all remedies otherwise permitted by
applicable law upon Default under this Indenture, subject to the rights, if any,
under this Article X of the holders of such Senior Debt in respect of cash,
property or Notes of the Company received upon the exercise of any such remedy.
The failure to make a payment on account of principal, Redemption Price or
Purchase Price of, or interest or Liquidated Damages (if any) on, the Notes by
reason of any provision of this Article X shall not be construed as preventing
the occurrence of an Event of Default under Section 6.1.
SECTION 10.8. THE TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN
ABSENCE OF NOTICE.
The Trustee or Paying Agent shall not at any time be charged with the
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee or Paying Agent, unless and until the Trustee or
Paying Agent shall have received written notice thereof from the Company or one
or more holders of Senior Debt or from any trustee or agent therefor; and, prior
to the receipt of any such written notice, the Trustee or Paying Agent shall be
entitled to assume conclusively that no such facts exist. Unless at least three
Business Days prior to the date on which by the terms of this Indenture any
payment is to be made by the Company for any purpose (including, without
limitation, the payment of the principal, Redemption Price or Purchase Price of,
or interest or Liquidated Damages (if any) on, any Note), the Trustee or Paying
Agent shall have full power and authority to apply all monies received to the
purpose for which they were received, and shall not be affected by any notice to
the contrary which may be received by it on or after such date, except for an
acceleration of the Notes prior to such application. The
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foregoing shall not apply to the Paying Agent if the Company is acting as Paying
Agent. Nothing contained in this Section 10.8 shall limit the right of the
holders of Senior Debt to recover payments as contemplated by Section 10.2. The
Trustee shall be entitled to rely on the delivery to it of a written notice by a
person representing himself or itself to be a holder of such Senior Debt (or a
trustee on behalf of, or other agent of, such holder) to establish that such
notice has been given by a holder of such Senior Debt or a trustee or agent on
behalf of any such holder. Nothing in this Article X shall apply to amounts due
the Trustee pursuant to Section 7.7 herein.
SECTION 10.9. RIGHT OF TRUSTEE TO HOLD SENIOR DEBT.
The Trustee and any agent for the holders of Senior Debt shall be entitled
to all of the rights set forth in this Article X in respect of any Senior Debt
at any time held by it to the same extent as any other holder of such Senior
Debt, and nothing in this Indenture shall be construed to deprive the Trustee or
any agent for the holders of Senior Debt of any of its rights as such holder.
SECTION 10.10. NO IMPLIED COVENANTS BY OR OBLIGATIONS OF THE TRUSTEE.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article X, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Article X against the Trustee. The Trustee shall not be deemed to have any
fiduciary duty to the holders of the Senior Debt.
ARTICLE XI.
SUBSIDIARY GUARANTEES
SECTION 11.1. SUBSIDIARY GUARANTEES.
Subject to this Article XI, each of the Guarantors, jointly and severally,
hereby unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company under this Indenture or the Notes, that: (a) the
principal, Redemption Price, and Purchase Price of and Liquidated Damages, if
any, and interest on the Notes shall be promptly paid in full when due, whether
at maturity, by acceleration, redemption or otherwise, and (to the extent
permitted by law) interest on the overdue principal, Redemption Price, and
Purchase Price of and Liquidated Damages, if any, and interest on the Notes, if
any, and all other obligations of the Company to the Holders or the Trustee
under this Indenture or the Notes shall be promptly paid in full or performed,
all in accordance with the terms of this Indenture and the Notes; and (b) in
case of any extension of time of payment or renewal of any Notes or any of such
other obligations, the same shall be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed for whatever reason, the Guarantors shall be obligated to pay the
same immediately whether or not such failure to pay has become an Event of
Default which could cause acceleration pursuant to Article VI hereof. Each
Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
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The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenants that, subject to this Article XI, this Subsidiary Guarantee shall
not be discharged except by complete performance of the obligations contained in
the Notes and this Indenture.
If any Holder of Notes or the Trustee is required by any court or otherwise
to return to the Company or the Guarantors, or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Guarantors, any amount paid by either to the Trustee or such Holder, the
Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders of Notes in respect of any Obligations
guaranteed hereby until payment in full of all Obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations guaranteed hereby may be accelerated as provided in Article VI
hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guaranteed hereby and (y) in the event of any declaration of
acceleration of such Obligations as provided in Article VI hereof, such
Obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantees.
SECTION 11.2. SUBORDINATION OF GUARANTEES.
The Obligations of each Guarantor under the Subsidiary Guarantee pursuant
to this Article XI shall be unsecured and subordinated to the prior payment in
full of all Senior Indebtedness of the Guarantor (including the Guarantor's
guarantee of the New Credit Facility), and the amounts for which the Guarantor
will be liable under the Senior Guarantees. The Obligations of the Guarantor
under the Subsidiary Guarantee shall be junior and subordinated to the
guarantees of such Guarantor which constitute Senior Indebtedness of the
Guarantor and all other Senior Indebtedness of the Guarantor on the same terms
and in the same manner as the Notes are junior and subordinated to Senior Debt
of the Company as set forth in the Indenture; provided, however, that the
Trustee and the Holders shall have the right to receive and/or retain payments
by the Guarantor only at such times as they may receive and/or retain payments
in respect of the Notes pursuant to this Indenture.
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No Guarantor shall incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to the Senior Indebtedness of such Guarantor and senior in any respect
in right of payment to the Subsidiary Guarantee.
For the purposes of the foregoing "Senior Indebtedness" shall mean
Indebtedness of the Guarantor that, if incurred by the Company, would constitute
Senior Debt.
SECTION 11.3. EXECUTION AND DELIVERY OF SUPPLEMENTAL INDENTURES.
If an Officer of the Guarantor whose signature is on this Indenture or a
Supplemental Indenture no longer holds that office at the time the Trustee
authenticates the related Note, the Subsidiary Guarantee shall be valid.
The delivery of any Note by the Trustee, shall constitute due delivery of
the Subsidiary Guarantee set forth in this Indenture or a Supplemental Indenture
on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries, if
required by Section 4.20 hereof, the Company and the Trustee shall, and the
Company shall cause such new Subsidiary to, execute a Supplemental Indenture to
this Indenture in accordance with Section 4.20 hereof and this Article XI, to
the extent applicable.
SECTION 11.4. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
(a) Except as set forth in Articles IV and V, nothing contained in
this Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor or
shall prevent any sale or conveyance of the property of a Guarantor as an
entirety or substantially as an entirety to the Company or another
Guarantor.
(b) No Guarantor may consolidate with or merge into (whether or not
such Guarantor is the surviving Person), another corporation, Person or
entity (other than the Company or another Guarantor) whether or not
affiliated with such Guarantor unless,
(i) the Person formed by or surviving any such consolidation
or merger (if other than such Guarantor) assumes all the Obligations
of such Guarantor under the Subsidiary Guarantee of such Guarantor;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists;
(iii) immediately after giving pro forma effect to such
transaction, the Company would be permitted under its Fixed Charge
Coverage Ratio test to incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of Section 4.9 hereof; and
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(iv) the Company shall deliver to the Trustee an Officers'
Certificate of the Company and an Opinion of Counsel which shall state
that the proposed transaction and the assumption of Obligations
specified in paragraph (b)(i) above comply with the provisions of this
Indenture and any applicable Supplemental Indenture .
Subject to Section 11.3 of this Indenture, in case of any such consolidation,
merger, sale or conveyance and upon the assumption by the successor corporation,
by Supplemental Indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the due and punctual performance of all
of the covenants and conditions of this Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be substituted for
the Guarantor with the same effect as if it had been named herein as a
Guarantor.
SECTION 11.5. EFFECT OF DEFEASANCE.
All Subsidiary Guarantees, whether pursuant to this Indenture or a
Supplemental Indenture, shall be of no further force and effect upon the
occurrence of a Legal Defeasance or a Covenant Defeasance, subject to
reinstatement pursuant to Section 8.7 hereof under the circumstances described
therein.
SECTION 11.6. LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under the Subsidiary Guarantee, Section
4.20 and this Article XI shall be limited to the maximum amount as will, after
giving effect to such maximum amount and all other contingent and fixed
liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under Section 4.20 or this Article XI,
result in the obligations of such Guarantor under its Subsidiary Guarantee not
constituting a fraudulent transfer or conveyance.
SECTION 11.7. STAY, EXTENSION AND USURY LAWS.
Each Guarantor covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of the Subsidiary Guarantee, and each Guarantor (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the
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execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though such law has not been
enacted.
ARTICLE XII.
MISCELLANEOUS
SECTION 12.1. TRUST INDENTURE ACT CONTROLS.
If any provision hereof limits, qualifies or conflicts with a provision of
the TIA or another provision that would be required or deemed under such Act to
be part of and govern this Indenture if this Indenture were subject thereto, the
latter provision shall control. If any provision of this Indenture modifies or
excludes any provision of the TIA that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
SECTION 12.2. NOTICES.
Any notice or communication by the Company, the Guarantors or the Trustee
to others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or to the Guarantors:
Loomis, Fargo & Co.
16225 Park Ten Place
Houston, Texas 77084
Attention: Chief Financial Officer
Fax: (713) 784-3319
With a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201-6950
Attention: Mary K. Korby
Fax: (214) 746-7864
If to the Trustee:
Marine Midland Bank
Attention: Corporate Trust Administration
140 Broadway, 12th Floor
New York, New York 10005-1180
Fax: (212) 658-6425
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The Company, the Guarantors or the Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class mail
or by overnight air courier guaranteeing next day delivery to its address shown
on the register kept by the Registrar. Any notice or communication shall also be
so mailed to any Person described in TIA (S) 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall mail a
copy to the Guarantors, the Trustee and each Agent at the same time.
SECTION 12.3. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF
NOTES.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Guarantors, the Trustee, the Registrar and anyone else shall have the protection
of TIA (S) 312(c).
SECTION 12.4. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or the Guarantors to the
Trustee to take any action under this Indenture, the Company or the Guarantors,
as applicable, shall furnish to the Trustee:
(a) an Officers' Certificate of the Company in form and substance
reasonably satisfactory to the Trustee (which shall include the statements
set forth in Section 12.5 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
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SECTION 12.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.6. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.7. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator or
stockholder of the Company or of any Guarantor, as such, shall have any
liability for any obligations of the Company under the Notes or this Indenture
or of a Guarantor under its Subsidiary Guarantee, or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
SECTION 12.8. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATION LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW
RULES. THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
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PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE NOTES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND THE
GUARANTORS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THAT IT MAY EFFECTIVELY DO
SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY HOLDER OF THE NOTES TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE COMPANY OR THE GUARANTOR IN ANY OTHER
JURISDICTION.
SECTION 12.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries, the Guarantors or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company and the Guarantors in this Indenture and the
Notes shall bind their successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture, which have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
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SECTION 12.14. QUALIFICATION OF INDENTURE.
The Company shall qualify this Indenture under the TIA in accordance with
the terms and conditions of the Registration Rights Agreement and shall pay all
reasonable costs and expenses (including attorneys' fees for the Company, the
Trustee and the Holders of the Notes) incurred in connection therewith,
including, but not limited to, costs and expenses of qualification of the
Indenture and the Notes and printing this Indenture and the Notes. The Trustee
shall be entitled to receive from the Company any such Officers' Certificates of
the Company, Opinions of Counsel or other documentation as it may reasonably
request in connection with any such qualification of this Indenture under the
TIA.
SECTION 12.15. ADDITIONAL RIGHTS OF TRANSFER RESTRICTED SECURITIES.
In addition to the rights provided to Holders of Securities under this
Indenture, Holders of Transfer Restricted Securities shall have all the rights
set forth in the Registration Rights Agreement.
[Signatures on following page]
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SIGNATURES
LOOMIS, FARGO & CO.
By: /s/ James K. Jennings, Jr.
--------------------------------
Name: JAMES K. JENNINGS, JR.
---------------------------
Title: EXECUTIVE VICE PRESIDENT
--------------------------
LOOMIS HOLDING CORPORATION
By: /s/ James K. Jennings, Jr.
--------------------------------
Name: JAMES K. JENNINGS, JR.
---------------------------
Title: EXECUTIVE VICE PRESIDENT
--------------------------
LOOMIS ARMORED INC.
By: /s/ James K. Jennings, Jr.
--------------------------------
Name: JAMES K. JENNINGS, JR.
---------------------------
Title: VICE PRESIDENT
--------------------------
WELLS FARGO ARMORED SERVICE
CORPORATION OF TEXAS
By: /s/ Timothy M. Wood
--------------------------------
Name: TIMOTHY M. WOOD
---------------------------
Title: VICE PRESIDENT
--------------------------
WELLS FARGO ARMORED SERVICE
CORPORATION OF PUERTO RICO
By: /s/ Timothy M. Wood
--------------------------------
Name: TIMOTHY M. WOOD
---------------------------
Title: VICE PRESIDENT
--------------------------
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MARINE MIDLAND BANK,
Trustee
By: /s/ Robert Conrad
--------------------------------
Name: ROBERT CONRAD
---------------------------
Title: ASSISTANT VICE PRESIDENT
--------------------------
96
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EXHIBIT A-1
FORM OF NOTE
(Face of Note)
LOOMIS, FARGO & CO.
10% SENIOR SUBORDINATED NOTE DUE 2004
[THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]/1/
[THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
IN CONNECTION WITH THE SALE HEREOF, AND SUCH PURCHASER
REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE
COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL
NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE
LATER OF THE DATE WHICH IS THREE YEARS AFTER THE DATE OF ORIGINAL
ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF SUCH RESTRICTED
SECURITIES (OR ANY PREDECESSOR) EXCEPT (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE
_____________________
/1/ To be included only if the Note is issued in global form.
A-1-1
<PAGE>
PURSUANT TO RULE 144A, TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN
EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY APPLICABLE JURISDICTION;
AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE
RESTRICTIONS SET FORTH IN (II) ABOVE; ANY OFFER, SALE OR OTHER
DISPOSITION PURSUANT TO THE FOREGOING CLAUSES (II)(D) AND (E) IS
SUBJECT TO THE RIGHT OF THE ISSUER OF THIS SECURITY AND THE
TRUSTEE FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO
THEM IN FORM AND SUBSTANCE.
A HOLDER OF THIS NOTE SHALL HAVE ALL THE RIGHTS SET FORTH IN THE
REGISTRATION RIGHTS AGREEMENT.]/2/
_____________________
/2/ To be included on the Senior Subordinated Notes and omitted from the New
Senior Subordinated Notes.
A-1-2
<PAGE>
LOOMIS, FARGO & CO.
10% SENIOR SUBORDINATED NOTE DUE 2004
No. __________ $_______________
Record Dates: January 1 and July 1 CUSIP No. ________________
Interest Payment Dates: January 15 and Maturity Date: January 15, 2004
July 15, commencing July 15, 1997
LOOMIS, FARGO & CO., a Delaware corporation (the "Company," which term
includes any successor corporation under the indenture hereinafter referred to),
for value received promises to pay to __________________________________________
or registered assigns, the principal sum ________________ of Dollars on January
15, 2004.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefits under the Indenture referred to on the reverse
hereof or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
[SEAL] LOOMIS, FARGO & CO.
By:_________________________
Name:
Dated: _____________ Title:
By:_________________________
Name:
Title:
This is one of the Notes referred to in
the within-mentioned Indenture:
MARINE MIDLAND BANK,
as Trustee
By:______________________________
Name:
Title:
A-1-3
<PAGE>
(Back of Note)
10% SENIOR SUBORDINATED NOTES DUE 2004
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. The Company promises to pay interest on the principal
amount of this Note at the rate of 10% per annum from the date of original
issuance until maturity and shall pay the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The Company
will pay interest and Liquidated Damages, if any, semi-annually on January 15
and July 15 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the Note
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance; provided that if there is no
existing Default in the payment of interest, and if this Note is authenticated
between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date; provided, further, that the first Interest Payment Date shall be
July 15, 1997. The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue payments of the
principal, Purchase Price and Redemption Price of this Note from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any, (without regard to any applicable grace periods) hereon from time to time
on demand at the same rate to the extent lawful. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the January 1 or July 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. Any such
installment of interest or Liquidated Damages, if any, not punctually paid or
duly provided for shall forthwith cease to be payable to the registered Holders
on such Interest Payment Date, and may be paid to the registered Holders at the
close of business on a special Interest Payment Date to be fixed by the Trustee
for the payment of such defaulted interest, notice whereof shall be given to the
registered Holders not less than 10 days prior to such special Interest Payment
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. The Notes will be payable as to principal,
Redemption Price, Purchase Price, interest and Liquidated Damages, if any, at
the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, provided that
payment by wire transfer of immediately available funds will be required with
respect to principal, Redemption Price and Purchase Price of, and interest and
Liquidated Damages (if any) on, all Global Notes and all other Notes the Holders
of which shall have provided wire transfer instructions to the Trustee or the
Paying Agent. Such payment shall be in
A-1-4
<PAGE>
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts.
3. INDENTURE. The Company issued the Notes under an Indenture dated as
of January 24, 1997 (the "Indenture") among the Company, Loomis Holding
Corporation (to be renamed LFC Holding Corporation), Loomis Armored Inc. (to be
renamed Loomis, Fargo & Co.), Wells Fargo Armored Service Corporation of Texas
(to be renamed LFC Armored of Texas Inc.), Wells Fargo Armored Service
Corporation of Puerto Rico (to be renamed Loomis, Fargo & Co. of Puerto Rico),
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes are general obligations of the Company
limited to $85.0 million in aggregate principal amount.
4. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company may act in any such capacity.
5. OPTIONAL REDEMPTION. The Company may redeem any or all of the Notes at
any time on or after January 15, 2001, upon not less than 30 nor more than 60
days' prior notice in amounts of $1,000 or an integral multiple thereof at the
Redemption Prices (expressed as a percentage of the principal amount) set forth
below, if redeemed during the 12-month period beginning January 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2001........................ 105.000%
2002........................ 102.500%
2003 and thereafter......... 100.000%
</TABLE>
in each case together with accrued and unpaid interest and Liquidated Damages,
if any, to the Redemption Date.
If less than all the Notes are to be redeemed, the Trustee will select the
particular Notes or portions thereof to be redeemed by lot, pro rata or by any
other method the Trustee shall deem fair and reasonable.
Notwithstanding the foregoing, prior to January 15, 2000, the Company may
in its discretion redeem up to an aggregate of $25.0 million in principal amount
of the Notes at a Redemption Price of 110% of the principal amount thereof, in
each case plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date, with the net proceeds of one or more public
offerings of Common Stock of the Company, provided, that at least $60.0 million
in aggregate principal amount of the Notes remain outstanding immediately after
the occurrence of such redemption; and provided, further, that such redemption
shall occur within 90 days of the date of the closing of such public offering of
Common Stock of the Company.
A-1-5
<PAGE>
If less than all the Notes are to be redeemed, the Trustee will select the
particular Notes or portions thereof to be redeemed by lot, pro rata or by any
other method the Trustee shall deem fair and reasonable.
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 8 below with
respect to repurchases of Notes in certain events, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. NOTICE OF REDEMPTION. Subject to the provisions of the Indenture, a
notice of redemption will be mailed at least 30 days but not more than 60 days
before the Redemption Date to each Holder whose Notes are to be redeemed at its
registered address. Notes in denominations larger than $1,000 may be redeemed in
part but only in whole multiples of $1,000, unless all of the Notes held by a
Holder are to be redeemed. On and after the redemption date interest ceases to
accrue on Notes or portions thereof called for redemption.
8. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a Purchase
Price equal to 101% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of repurchase, in
accordance with the procedures set forth in the Indenture. Within 30 days
following any Change of Control, the Company, shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sale, within 30
days after each date on which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.9 of the Indenture to repurchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at a Purchase Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use such balance for purposes not prohibited by the Indenture.
If the aggregate principal amount of Notes tendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes or portions
thereof to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Trustee so that only Notes in denominations of $1,000,
or integral multiples thereof, are purchased). Holders of Notes will receive an
Asset Sale Offer from the Company prior to any related purchase date and may
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" below.
9. SUBORDINATION. The Notes are subordinated to the prior payment in
full of all Senior Debt, whether outstanding on the date of the Indenture or
thereafter created, incurred or assumed, unless the instrument under which such
Indebtedness is incurred expressly provides that such Indebtedness shall not be
senior in right of payment to the Notes. The Company agrees, and each Holder by
accepting a Note agrees, to the subordination and authorizes the Trustee to give
it effect.
A-1-6
<PAGE>
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture and the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture and the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of Certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to add or release a Guarantor, to make any
change that would provide any additional rights or benefits to the Holders of
the Notes or that does not adversely affect the legal rights under the Indenture
of any such Holder, or to comply with the requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the Trust
Indenture Act.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest or Liquidated Damages, if any, on the
Notes; (ii) default in payment when due of principal, Redemption Price or
Purchase Price of the Notes when the same becomes due and payable at maturity,
upon redemption, repurchase or otherwise; (iii) failure by the Company to comply
with Sections 4.10, 4.15 or 4.18 of the Indenture; (iv) failure by the Company
to comply with Sections 4.7 or 4.9 of the Indenture for 30 days after notice to
the Company by the Trustee or the Holders of at least 25% of the aggregate
principal amount of the Notes outstanding; (v) failure by the Company for 60
days after notice to the Company to comply with certain other agreements in the
Indenture or the Notes by the Trustee or the Holders of at least 25% of the
aggregate principal amount of the Notes outstanding; (vi) default under certain
other agreements relating to Indebtedness of the Company which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the applicable grace period (a "Payment
Default") or (b) results in the acceleration of any Indebtedness prior to its
express maturity and, in each case, the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $7.5 million or more; (vii) certain final judgments for
the payment of money that remain undischarged for a period of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $7.5 million;
(viii) a Subsidiary Guarantee shall have been held unenforceable or invalid or
shall have ceased to be in full force and effect; and (ix) certain events of
bankruptcy
A-1-7
<PAGE>
or insolvency with respect to the Company, any Guarantor or any Subsidiary that
is obligated to become a Guarantor. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Notes
will become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
payment on any Note) if it determines in good faith that withholding notice is
in their interest. The Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of the principal, Redemption Price or Purchase
Price of, or interest, or Liquidated Damages, if any, on, the Notes (which may
be waived only by Holders of all of the Notes then outstanding). The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. Subject to certain limitations, the
Trustee under the Indenture, in its individual or any other capacity, may become
owner or pledgee of Notes and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
15. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Company or of any
Guarantor, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or of a Guarantor under the Subsidiary
Guarantee or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. DISCHARGE PRIOR TO MATURITY. If the Company deposits with the Trustee
or Paying Agent cash or U.S. Government Securities sufficient to pay the
principal or Redemption Price of, and interest and Liquidated Damages, if any,
on, the Notes to maturity or a specified Redemption Date and satisfies certain
conditions specified in the Indenture, the Company will be discharged from the
Indenture, except for certain Sections thereof. If the Company makes such
deposit and satisfies certain other conditions, the Company will be released
from certain covenants and related Events of Default.
A-1-8
<PAGE>
19. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement.
20. SUBSIDIARY GUARANTEES. This Note is entitled to the benefits of the
guarantee of each of the Guarantors made for the benefit of the Holders. Upon
the terms and subject to the conditions set forth in Article XI of the
Indenture, the Guarantors have unconditionally agreed that the principal,
Redemption Price and Purchase Price of, and interest and Liquidated Damages, if
any, on the Notes shall be promptly paid in full when due, whether at maturity,
by acceleration, redemption, repurchase or otherwise, and (to the extent
permitted by law) interest on overdue principal, Redemption Price and Purchase
Price of, and interest and Liquidated Damages, if any, on the Notes and all
other obligations of the Company to the Holders or the Trustee under the Notes
or the Indenture shall be promptly paid in full or performed.
21. GOVERNING LAW. The Indenture, any Supplemental Indenture and this Note
shall be governed by and construed in accordance with the laws of the State of
New York, including Section 5-1401 of the General Obligation Law, but otherwise
without regard to conflict of law rules. Each of the Company and each Guarantor
hereby irrevocably submits to the jurisdiction of any New York state court
sitting in the Borough of Manhattan in the City of New York or any Federal court
sitting in the Borough of Manhattan in the City of New York in respect of any
suit, action or proceeding arising out of or relating to the Indenture and the
Notes, and irrevocably accept for itself and in respect of its property,
generally and unconditionally, jurisdiction of the aforesaid courts. Each of the
Company and each Guarantor irrevocably waives, to the fullest extent that it may
effectively do so under applicable law, trial by jury and any objection which it
may now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of the Trustee or any Holder of the Notes
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company or any Guarantor in any
other jurisdiction.
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the correctness or accuracy of such numbers either as printed on the Notes
or as contained in any notice of redemption or repurchase and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
Loomis, Fargo & Co.
16225 Park Ten Place
Houston, Texas 77084
Attention: Secretary
A-1-9
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date:_____________________
Your Signature:_________________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee:_______________________________________________________
(Participant in recognized signature guarantee
medallion program)
A-1-10
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to elect to have all or any portion of this Note purchased by
the Company pursuant to Section 4.10 ("Asset Sale Offer") or Section 4.15
("Change of Control Offer") of the Indenture, check the applicable boxes:
[_] Asset Sale Offer: [_] Change of Control Offer:
in whole [_] in whole [_]
in part [_] in part [_]
Amount to be Amount to be
purchased: $______ purchased: $______
Dated:_____________ Signature: __________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature
Guarantee:______________________________________________________________________
(Participant in recognized signature guarantee medallion program)
Social Security Number or
Taxpayer Identification Number:_________________________________________________
A-1-11
<PAGE>
SCHEDULE OF EXCHANGES FOR CERTIFICATED NOTE
OR ANOTHER GLOBAL NOTE/3/
The following exchanges of a part of this Global Note for Certificated
Notes or another Global Note have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer of
Principal Amount of Principal Amount of following such Trustee or Note
Date of Exchange this Global Note this Global Note decrease (or increase) Custodian
- -------------------- ----------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
</TABLE>
___________________
/3/ This should be included only if the Note is issued in global form.
A-1-12
<PAGE>
EXHIBIT A-2
FORM OF REGULATION S TEMPORARY NOTE
(Face of Note)
LOOMIS, FARGO & CO.
10% SENIOR SUBORDINATED NOTE DUE 2004
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
IN CONNECTION WITH THE SALE HEREOF, AND SUCH PURCHASER
REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT OF THE
COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL
NOT OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE
LATER OF THE DATE WHICH IS THREE YEARS AFTER THE DATE OF ORIGINAL
ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF SUCH RESTRICTED
SECURITIES (OR ANY PREDECESSOR) EXCEPT (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (D) OUTSIDE THE UNITED STATES IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (E)
PURSUANT
A-2-1
<PAGE>
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY APPLICABLE JURISDICTION; AND (III) IT WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THIS SECURITY OF THE RESALE RESTRICTIONS SET FORTH IN (II) ABOVE;
ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE FOREGOING
CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF
THIS SECURITY AND THE TRUSTEE FOR SUCH SECURITIES TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS OR OTHER
INFORMATION ACCEPTABLE TO THEM IN FORM AND SUBSTANCE.
A HOLDER OF THIS NOTE SHALL HAVE ALL THE RIGHTS SET FORTH IN THE
REGISTRATION RIGHTS AGREEMENT.
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN).
THIS REGULATION S TEMPORARY GLOBAL NOTE IS EXCHANGEABLE IN WHOLE
OR IN PART FOR ONE OR MORE REGULATION S PERMANENT GLOBAL NOTES OR
RESTRICTED GLOBAL NOTES ONLY (i) AFTER THE TERMINATION OF THE
RESTRICTED PERIOD (AS DEFINED IN REGULATION S) AND (ii) UPON
PRESENTATION OF CERTIFICATES REQUIRED BY ARTICLE II OF THE
INDENTURE. UPON EXCHANGE OF THIS REGULATION S TEMPORARY GLOBAL
NOTE FOR ONE OR MORE REGULATION S PERMANENT GLOBAL NOTES OR
RESTRICTED GLOBAL NOTES, THE TRUSTEE SHALL CANCEL THIS REGULATION
S TEMPORARY GLOBAL NOTE.
A-2-2
<PAGE>
LOOMIS, FARGO & CO.
10% SENIOR SUBORDINATED NOTE DUE 2004
No. ___________ $_______________
Record Dates: January 1 and July 1 CUSIP No. _______________
Interest Payment Dates: January 15 and Maturity Date: January 15, 2004
July 15, commencing July 15, 1997
LOOMIS, FARGO & CO., a Delaware corporation (the "Company," which term
includes any successor corporation under the indenture hereinafter referred to),
for value received promises to pay to __________________________________________
or registered assigns, the principal sum of _______________ Dollars on January
15, 2004.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefits under the Indenture referred to on the reverse
hereof or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
[SEAL] Dated:
LOOMIS, FARGO & CO.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
This is one of the Notes referred to in the
within-mentioned Indenture:
MARINE MIDLAND BANK,
as Trustee
By:______________________________
Name:
Title:
A-2-3
<PAGE>
SCHEDULE OF EXCHANGES FOR GLOBAL NOTES
The following exchanges of a part of this Regulation S Temporary
Global Note for other Global Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer of
Principal Amount of Principal Amount of following such Trustee or Note
Date of Exchange this Global Note this Global Note decrease (or increase) Custodian
- -------------------- ----------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-4
<PAGE>
EXHIBIT A-3
FORM OF NEW SENIOR SUBORDINATED NOTE
(Face of New Note)
LOOMIS, FARGO & CO.
10% SENIOR SUBORDINATED NOTE DUE 2004
[THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A SUCCESSOR
DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE,
AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]/1/
_____________________
/1/ To be included only if the Note is issued in global form.
A-3-1
<PAGE>
LOOMIS, FARGO & CO.
10% SENIOR SUBORDINATED NOTE DUE 2004
No. ___________ $_______________
Record Dates: January 1 and July 1 CUSIP No. _______________
Interest Payment Dates: January 15 and Maturity Date: January 15, 2004
July 15, commencing _____________
LOOMIS, FARGO & CO., a Delaware corporation (the "Company," which term
includes any successor corporation under the indenture hereinafter referred to),
for value received promises to pay to __________________________________________
or registered assigns, the principal sum of ___________________ Dollars on
January 15, 2004.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefits under the Indenture referred to on the reverse
hereof or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
under its corporate seal.
[SEAL] LOOMIS, FARGO & CO.
By:_________________________
Name:
Dated: ____________ Title:
By:_________________________
Name:
Title:
This is one of the Notes referred to in the
within-mentioned Indenture:
MARINE MIDLAND BANK,
as Trustee
By:______________________________
Name:
Title:
A-3-2
<PAGE>
(Back of Note)
10% SENIOR SUBORDINATED NOTES DUE 2004
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. The Company promises to pay interest on the principal
amount of this Note at the rate of 10% per annum from the date of original
issuance until maturity and shall pay the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The Company
will pay interest and Liquidated Damages, if any, semi-annually on January 15
and July 15 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the Note
will accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance; provided that if there is no
existing Default in the payment of interest, and if this Note is authenticated
between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest
Payment Date; provided, further, that the first Interest Payment Date shall be
_________. The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue payments of the principal,
Purchase Price and Redemption Price of this Note from time to time on demand at
a rate that is 1% per annum in excess of the rate then in effect; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any, (without regard to any applicable grace periods) hereon from time to time
on demand at the same rate to the extent lawful. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the January 1 or July 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. Any such
installment of interest or Liquidated Damages, if any, not punctually paid or
duly provided for shall forthwith cease to be payable to the registered Holders
on such Interest Payment Date, and may be paid to the registered Holders at the
close of business on a special Interest Payment Date to be fixed by the Trustee
for the payment of such defaulted interest, notice whereof shall be given to the
registered Holders not less than 10 days prior to such special Interest Payment
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. The Notes will be payable as to principal,
Redemption Price, Purchase Price, interest and Liquidated Damages, if any, at
the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, provided that
payment by wire transfer of immediately available funds will be required with
respect to principal, Redemption Price and Purchase Price of, and interest and
Liquidated Damages (if any) on, all Global Notes and all other Notes the Holders
of which shall have provided wire transfer instructions to the Trustee or the
Paying Agent. Such payment shall be in
A-3-3
<PAGE>
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts.
3. INDENTURE. The Company issued the Notes under an Indenture dated as
of January 24, 1997 (the "Indenture") among the Company, Loomis Holding
Corporation (to be renamed LFC Holding Corporation), Loomis Armored Inc. (to be
renamed Loomis, Fargo & Co.), Wells Fargo Armored Service Corporation of Texas
(to be renamed LFC Armored of Texas Inc.), Wells Fargo Armored Service
Corporation of Puerto Rico (to be renamed Loomis, Fargo & Co. of Puerto Rico),
and the Trustee. The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes are general obligations of the Company
limited to $85.0 million in aggregate principal amount.
4. PAYING AGENT AND REGISTRAR. Initially, Marine Midland Bank, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company may act in any such capacity.
5. OPTIONAL REDEMPTION. The Company may redeem any or all of the Notes at
any time on or after January 15, 2001, upon not less than 30 nor more than 60
days' prior notice in amounts of $1,000 or an integral multiple thereof at the
Redemption Prices (expressed as a percentage of the principal amount) set forth
below, if redeemed during the 12-month period beginning January 15 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2001........................... 105.000%
2002........................... 102.500%
2003 and thereafter............ 100.000%
</TABLE>
in each case together with accrued and unpaid interest and Liquidated Damages,
if any, to the Redemption Date.
If less than all the Notes are to be redeemed, the Trustee will select the
particular Notes or portions thereof to be redeemed by lot, pro rata or by any
other method the Trustee shall deem fair and reasonable.
Notwithstanding the foregoing, prior to January 15, 2000, the Company may
in its discretion redeem up to an aggregate of $25.0 million in principal amount
of the Notes at a Redemption Price of 110% of the principal amount thereof, in
each case plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the Redemption Date, with the net proceeds of one or more public
offerings of Common Stock of the Company, provided, that at least $60.0 million
in aggregate principal amount of the Notes remain outstanding immediately after
the occurrence of such redemption; and provided, further, that such redemption
shall occur within 90 days of the date of the closing of such public offering of
Common Stock of the Company.
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<PAGE>
If less than all the Notes are to be redeemed, the Trustee will select the
particular Notes or portions thereof to be redeemed by lot, pro rata or by any
other method the Trustee shall deem fair and reasonable.
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 8 below with
respect to repurchases of Notes in certain events, the Company shall not be
required to make mandatory redemption payments with respect to the Notes.
7. NOTICE OF REDEMPTION. Subject to the provisions of the Indenture, a
notice of redemption will be mailed at least 30 days but not more than 60 days
before the Redemption Date to each Holder whose Notes are to be redeemed at its
registered address. Notes in denominations larger than $1,000 may be redeemed in
part but only in whole multiples of $1,000, unless all of the Notes held by a
Holder are to be redeemed. On and after the redemption date interest ceases to
accrue on Notes or portions thereof called for redemption.
8. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a Purchase
Price equal to 101% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of repurchase, in
accordance with the procedures set forth in the Indenture. Within 30 days
following any Change of Control, the Company, shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sale, within 30
days after each date on which the aggregate amount of Excess Proceeds exceeds
$5.0 million, the Company shall commence an offer to all Holders of Notes (as
"Asset Sale Offer") pursuant to Section 3.9 of the Indenture to repurchase the
maximum principal amount of Notes that may be purchased out of the Excess
Proceeds at a Purchase Price equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate principal amount of Notes tendered pursuant to an
Asset Sale Offer is less than the Excess Proceeds, the Company (or such
Subsidiary) may use such balance for purposes not prohibited by the Indenture.
If the aggregate principal amount of Notes tendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes or portions
thereof to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Trustee so that only Notes in denominations of $1,000,
or integral multiples thereof, are purchased). Holders of Notes will receive an
Asset Sale Offer from the Company prior to any related purchase date and may
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" below.
9. SUBORDINATION. The Notes are subordinated to the prior payment in
full of all Senior Debt, whether outstanding on the date of the Indenture or
thereafter created, incurred or assumed, unless the instrument under which such
Indebtedness is incurred expressly provides that such Indebtedness shall not be
senior in right of payment to the Notes. The Company agrees, and each Holder by
accepting a Note agrees, to the subordination and authorizes the Trustee to give
it effect.
A-3-5
<PAGE>
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, it need not
exchange or register the transfer of any Notes for a period of 15 days before a
selection of Notes to be redeemed or during the period between a record date and
the corresponding Interest Payment Date.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture and the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture and the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of Certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to add a Guarantor, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act.
13. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest or Liquidated Damages, if any, on the
Notes; (ii) default in payment when due of principal, Redemption Price or
Purchase Price of the Notes when the same becomes due and payable at maturity,
upon redemption, repurchase or otherwise; (iii) failure by the Company to comply
with Sections 4.10, 4.15 or 4.18 of the Indenture; (iv) failure by the Company
to comply with Sections 4.7 or 4.9 of the Indenture for 30 days after notice to
the Company by the Trustee or the Holders of at least 25% of the aggregate
principal amount of the Notes outstanding; (v) failure by the Company for 60
days after notice to the Company to comply with certain other agreements in the
Indenture or the Notes by the Trustee or the Holders of at least 25% of the
aggregate principal amount of the Notes outstanding; (vi) default under certain
other agreements relating to Indebtedness of the Company which default (a) is
caused by a failure to pay principal of or premium, if any, or interest on such
Indebtedness prior to the expiration of the applicable grace period (a "Payment
Default") or (b) results in the acceleration of any Indebtedness prior to its
express maturity and, in each case, the principal amount of such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $7.5 million or more; (vii) certain final judgments for
the payment of money that remain undischarged for a period of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $7.5 million;
(viii) a Subsidiary Guarantee shall have been held unenforceable or invalid or
shall have ceased to be in full force and effect; and (ix) certain events of
bankruptcy
A-3-6
<PAGE>
or insolvency with respect to the Company, any Guarantor or any Subsidiary that
is obligated to become a Guarantor. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Notes
will become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
payment on any Note) if it determines in good faith that withholding notice is
in their interest. The Holders of not less than a majority in aggregate
principal amount of the Notes then outstanding by notice to the Trustee may on
behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences under the Indenture except a continuing Default or
Event of Default in the payment of the principal, Redemption Price or Purchase
Price of, or interest, or Liquidated Damages, if any, on, the Notes (which may
be waived only by Holders of all of the Notes then outstanding). The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. Subject to certain limitations, the
Trustee under the Indenture, in its individual or any other capacity, may become
owner or pledgee of Notes and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
15. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator or stockholder of the Company or of any
Guarantor, as such, shall have any liability for any obligations of the Company
under the Notes or the Indenture or of a Guarantor under the Subsidiary
Guarantee or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. DISCHARGE PRIOR TO MATURITY. If the Company deposits with the Trustee
or Paying Agent cash or U.S. Government Securities sufficient to pay the
principal or Redemption Price of, and interest and Liquidated Damages, if any,
on, the Notes to maturity or a specified Redemption Date and satisfies certain
conditions specified in the Indenture, the Company will be discharged from the
Indenture, except for certain Sections thereof. If the Company makes such
deposit and satisfies certain other conditions, the Company will be released
from certain covenants and related Events of Default.
A-3-7
<PAGE>
19. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement.
20. SUBSIDIARY GUARANTEES. This Note is entitled to the benefits of the
guarantee of each of the Guarantors made for the benefit of the Holders. Upon
the terms and subject to the conditions set forth in Article XI of the
Indenture, the Guarantors have unconditionally agreed that the principal,
Redemption Price and Purchase Price of, and interest and Liquidated Damages, if
any, on the Notes shall be promptly paid in full when due, whether at maturity,
by acceleration, redemption, repurchase or otherwise, and (to the extent
permitted by law) interest on overdue principal, Redemption Price and Purchase
Price of, and interest and Liquidated Damages, if any, on the Notes and all
other obligations of the Company to the Holders or the Trustee under the Notes
or the Indenture shall be promptly paid in full or performed.
21. GOVERNING LAW. The Indenture, any Supplemental Indenture and this Note
shall be governed by and construed in accordance with the laws of the State of
New York, including Section 5-1401 of the General Obligation Law, but otherwise
without regard to conflict of law rules. Each of the Company and each Guarantor
hereby irrevocably submits to the jurisdiction of any New York state court
sitting in the Borough of Manhattan in the City of New York or any Federal court
sitting in the Borough of Manhattan in the City of New York in respect of any
suit, action or proceeding arising out of or relating to the Indenture and the
Notes, and irrevocably accept for itself and in respect of its property,
generally and unconditionally, jurisdiction of the aforesaid courts. Each of the
Company and each Guarantor irrevocably waives, to the fullest extent that it may
effectively do so under applicable law, trial by jury and any objection which it
may now or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of the Trustee or any Holder of the Notes
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company or any Guarantor in any
other jurisdiction.
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the correctness or accuracy of such numbers either as printed on the Notes
or as contained in any notice of redemption or repurchase and reliance may be
placed only on the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
Loomis, Fargo & Co.
16225 Park Ten Place
Houston, Texas 77084
Attention: Secretary
A-3-8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for him.
Date:
Your Signature:_______________________________
(Sign exactly as your name appears on the face
of this Note)
Signature Guarantee:_______________________________________________________
(Participant in recognized signature guarantee
medallion program)
A-3-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to elect to have all or any portion of this Note purchased by
the Company pursuant to Section 4.10 ("Asset Sale Offer") or Section 4.15
("Change of Control Offer") of the Indenture, check the applicable boxes:
[_] Asset Sale Offer: [_] Change of Control Offer:
in whole [_] in whole [_]
in part [_] in part [_]
Amount to be Amount to be
purchased: $______ purchased: $______
Dated:_____________ Signature: __________________________________
(Sign exactly as your name appears
on the other side of this Note)
Signature
Guarantee:______________________________________________________________________
(Participant in recognized signature guarantee medallion program)
Social Security Number or
Taxpayer Identification Number:_________________________________________________
A-3-10
<PAGE>
SCHEDULE OF EXCHANGES FOR CERTIFICATED NOTE
OR ANOTHER GLOBAL NOTE/2/
The following exchanges of a part of this Global Note for Certificated
Notes or another Global Note have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized officer of
Principal Amount of Principal Amount of following such Trustee or Note
Date of Exchange this Global Note this Global Note decrease (or increase) Custodian
- -------------------- ----------------------- ----------------------- ------------------------ -----------------------
<S> <C> <C> <C> <C>
</TABLE>
___________________
/2/ This should be included only if the Note is issued in global form.
A-3-11
<PAGE>
EXHIBIT B-1
FORM OF CERTIFICATE FOR REGISTRATION OF TRANSFER
FROM RESTRICTED GLOBAL NOTE TO REGULATION S GLOBAL NOTE
(Pursuant to Section 2.6(a)(i) of the Indenture)
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Administration
Re: 10% Senior Subordinated Notes due 2004 of Loomis, Fargo & Co.
Reference is hereby made to the Indenture, dated as of January 24, 1997
(the "Indenture"), among Loomis, Fargo & Co., as issuer (the "Company"), Loomis
Holding Corporation, Loomis Armored Inc., Wells Fargo Armored Service
Corporation of Texas and Wells Fargo Armored Service Corporation of Puerto Rico,
as Guarantors, and Marine Midland Bank, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $________ principal amount of Notes which are
evidenced by one or more Restricted Global Notes (CUSIP No. ____________) and
held with the Depositary in the name of ________________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Notes to
a Person who will take delivery thereof in the form of an equal principal amount
of Notes evidenced by one or more Regulation S Global Notes (CUSIP No.
______________).
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that such transfer has been effected in compliance
with the transfer restrictions applicable to the Global Notes and pursuant to
and in accordance with Rule 903 or Rule 904 under the United States Securities
Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor
hereby further certifies that:
1. The offer of the Notes was not made to a person in the United
States;
2. at the time the buy order was originated, the transferee was
outside the United States or the Transferor and any person acting on its
behalf reasonably believed and believes that the transferee was outside the
United States;
3. no directed selling efforts have been made in contravention of
the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;
4. the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
B-1-1
<PAGE>
5. if the transaction is completed prior to the expiration of the
Restricted Period, the beneficial interest being transferred as described
above is to be held with the Depositary through Euroclear or Cedel Bank or
both (Common Code _________).
Upon giving effect to this request to exchange a beneficial interest in a
Restricted Global Note for a beneficial interest in a Regulation S Global Note,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Regulation S Global Notes pursuant to the Indenture and
the Securities Act and, if such transfer occurs prior to the end of the
Restricted Period associated with the initial offering of Notes, the additional
restrictions applicable to transfers of interest in the Regulation S Temporary
Global Note.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Lehman Brothers Inc. and NationsBanc
Capital Markets, Inc. (c/o Lehman Brothers Inc., 3 World Financial Center, New
York, New York 10285), the initial purchasers of such Notes being transferred.
Terms used in this certificate and not otherwise defined in the Indenture have
the meanings set forth in Regulation S under the Securities Act.
[Insert Name of Transferor]
By: ______________________
Name:
Title:
Dated: __________, _____
cc: Loomis, Fargo & Co.
Lehman Brothers Inc.
NationsBanc Capital Markets, Inc.
B-1-2
<PAGE>
EXHIBIT B-2
FORM OF CERTIFICATE FOR REGISTRATION OF TRANSFER
FROM REGULATION S GLOBAL NOTE TO RESTRICTED GLOBAL NOTE
(Pursuant to Section 2.6(a)(ii) of the Indenture)
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Administration
Re: 10% Senior Subordinated Notes due 2004 of Loomis, Fargo & Co.
Reference is hereby made to the Indenture, dated as of January 24, 1997
(the "Indenture"), among Loomis, Fargo & Co., as issuer (the "Company"), Loomis
Holding Corporation, Loomis Armored Inc., Wells Fargo Armored Service
Corporation of Texas and Wells Fargo Armored Service Corporation of Puerto Rico,
as Guarantors, and Marine Midland Bank, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $________ principal amount of Notes which are
evidenced by one or more Regulation S Global Notes (CUSIP No. ____________) and
held with the Depositary or through [Euroclear] [Cedel Bank] (Common Code
_________) in the name of __________ (the "Transferor"). The Transferor has
requested a transfer of such beneficial interest in the Notes to a Person who
will take delivery thereof in the form of an equal principal amount of Notes
evidenced by one or more Restricted Global Notes (CUSIP No. ______________), to
be held with the Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that:
[CHECK ONE]
[_] such transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, the Transferor hereby
further certifies that the Notes are being transferred to a Person
that the Transferor reasonably believes is purchasing the Notes for
its own account, or for one or more accounts with respect to which
such Person exercises sole investment discretion, and such Person and
each such account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule
144A; or
[_] such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act; or
B-2-1
<PAGE>
[_] such transfer is being effected pursuant to an effective registration
statement under the Securities Act; or
[_] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Global Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the Transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form and substance reasonably acceptable to the
Company, to the effect that such transfer is in compliance with the
Securities Act;
and such Notes are being transferred in compliance with any applicable blue sky
securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest in
Regulation S Global Notes for a beneficial interest in Restricted Global Notes,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to Restricted Global Notes pursuant to the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Lehman Brothers Inc. and NationsBanc
Capital Markets, Inc. (c/o Lehman Brothers Inc., 3 World Financial Center, New
York, New York 10285), the initial purchasers of such Notes being transferred.
[Insert Name of Transferor]
By: ______________________
Name:
Title:
Dated: __________, _____
cc: Loomis, Fargo & Co.
Lehman Brothers Inc.
NationsBanc Capital Markets, Inc.
B-2-2
<PAGE>
EXHIBIT B-3
FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER
OF CERTIFICATED NOTES
(Pursuant to Section 2.6(b) of the Indenture)
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Administration
Re: 10% Senior Subordinated Notes due 2004 of Loomis, Fargo & Co.
Reference is hereby made to the Indenture, dated as of January 24, 1997
(the "Indenture"), among Loomis, Fargo & Co., as issuer (the "Company"), Loomis
Holding Corporation, Loomis Armored Inc., Wells Fargo Armored Service
Corporation of Texas and Wells Fargo Armored Service Corporation of Puerto Rico,
as Guarantors, and Marine Midland Bank, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $________ principal amount of Notes which are
evidenced by one or more Certificated Notes (CUSIP No. ____________) in the name
of ________________ (the "Transferor"). The Transferor has requested an exchange
or transfer of such Certificated Note(s) in the form of an equal principal
amount of Notes evidenced by one or more Certificated Notes (CUSIP No.
______________), to be delivered to the Transferor or, in the case of a transfer
of such Notes, to such Person as the Transferor instructs the Trustee.
In connection with such request and in respect of the Notes surrendered to
the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such
Surrendered Notes hereby certifies that:
[CHECK ONE]
[_] the Surrendered Notes are being acquired for the Transferor's own
account, without transfer; or
[_] the Surrendered Notes are being transferred to the Company; or
[_] the Surrendered Notes are being transferred pursuant to and in
accordance with Rule 144A under the United States Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the Surrendered Notes are
being transferred to a Person that the Transferor reasonably believes
is purchasing the Surrendered Notes for its own account, or for one or
more accounts with respect to which such Person exercises sole
investment discretion, and such
B-3-1
<PAGE>
Person and each such account is a "qualified institutional buyer"
within the meaning of Rule 144A, in each case in a transaction meeting
the requirements of Rule 144A; or
[_] the Surrendered Notes are being transferred in a transaction permitted
by Rule 144 under the Securities Act; or
[_] the Surrendered Notes are being transferred pursuant to an effective
registration statement under the Securities Act; or
[_] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A
or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer
restrictions applicable to the Notes and in accordance with the
requirements of the exemption claimed, which certification is
supported by an Opinion of Counsel, provided by the Transferor or the
transferee (a copy of which the Transferor has attached to this
certification) in form and substance reasonably acceptable to the
Company, to the effect that such transfer is in compliance with the
Securities Act;
and the Surrendered Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Lehman Brothers Inc. and NationsBanc
Capital Markets, Inc. (c/o Lehman Brothers Inc., 3 World Financial Center, New
York, New York 10285), the initial purchasers of such Notes being transferred.
[Insert Name of Transferor]
By: ______________________
Name:
Title:
Dated: __________, _____
cc: Loomis, Fargo & Co.
Lehman Brothers Inc.
NationsBanc Capital Markets, Inc. B-4-2
B-3-2
<PAGE>
EXHIBIT B-4
FORM OF CERTIFICATE FOR EXCHANGE
OF RESTRICTED GLOBAL NOTE OR REGULATION S
PERMANENT GLOBAL NOTE TO CERTIFICATED NOTE
(Pursuant to Section 2.6(c) of the Indenture)
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Administration
Re: 10% Senior Subordinated Notes due 2004 of Loomis, Fargo & Co.
Reference is hereby made to the Indenture, dated as of January 24, 1997
(the "Indenture"), among Loomis, Fargo & Co., as issuer (the "Company"), Loomis
Holding Corporation, Loomis Armored Inc., Wells Fargo Armored Service
Corporation of Texas and Wells Fargo Armored Service Corporation of Puerto Rico,
as Guarantors, and Marine Midland Bank, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $________ principal amount of Notes which are
evidenced by a beneficial interest in one or more Restricted Global Notes or
Regulation S Permanent Global Notes (CUSIP Nos. ____________ and ______________)
in the name of ________________ (the "Transferor"). The Transferor has requested
an exchange of such beneficial interest in the form of an equal principal amount
of Notes evidenced by one or more Certificated Notes (CUSIP No. ______________),
to be delivered to the Transferor.
In connection with such request and in respect of the Notes surrendered to
the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such
Surrendered Notes hereby certifies that the Surrendered Notes are being
transferred to the beneficial owner of such Notes.
B-4-1
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Lehman Brothers Inc. and NationsBanc
Capital Markets, Inc. (c/o Lehman Brothers Inc., 3 World Financial Center, New
York, New York 10285), the initial purchasers of such Notes being transferred.
[Insert Name of Transferor]
By: ______________________
Name:
Title:
Dated: __________, _____
cc: Loomis, Fargo & Co.
Lehman Brothers Inc.
NationsBanc Capital Markets, Inc.
B-4-2
<PAGE>
EXHIBIT B-5
FORM OF CERTIFICATE FOR REGISTRATION OF TRANSFER
FROM ACCREDITED RESTRICTED NOTE TO QIB RESTRICTED NOTE
(Pursuant to Section 2.6(a)(iii) of the Indenture)
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Administration
Re: 10% Senior Subordinated Notes due 2004 of Loomis, Fargo & Co.
Reference is hereby made to the Indenture, dated as of January 24, 1997
(the "Indenture"), among Loomis, Fargo & Co., as issuer (the "Company"), Loomis
Holding Corporation, Loomis Armored Inc., Wells Fargo Armored Service
Corporation of Texas and Wells Fargo Armored Service Corporation of Puerto Rico,
as guarantors, and Marine Midland Bank, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $________ principal amount of Notes which are
evidenced by one or more Accredited Restricted Notes (CUSIP No. ___________) and
held with the Depositary in the name of __________ (the "Transferor"). The
Transferor has requested a transfer of such beneficial interest in the Notes to
a Person who will take delivery thereof in the form of an equal principal amount
of Notes evidenced by one or more QIB Restricted Notes (CUSIP No. ________), to
be held with the Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that such transfer is being effected pursuant to and
in accordance with Rule 144A under the United States Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, the Transferor hereby further
certifies that the Notes are being transferred to a Person that the Transferor
reasonably believes is purchasing the Notes for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A and such Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest in
Accredited Restricted Notes for a beneficial interest in QIB Restricted Notes,
the resulting beneficial interest shall be subject to the restrictions on
transfer applicable to QIB Restricted Notes pursuant to the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Lehman Brothers Inc. and NationsBanc
Capital Markets, Inc. (c/o
B-5-1
<PAGE>
Lehman Brothers Inc., 3 World Financial Center, New York, New York 10285), the
initial purchasers of such Notes being transferred.
[Insert Name of Transferor]
By: ______________________
Name:
Title:
Dated: __________, _____
cc: Loomis, Fargo & Co.
Lehman Brothers Inc.
NationsBanc Capital Markets, Inc.
B-5-2
<PAGE>
EXHIBIT B-6
FORM OF CERTIFICATE FOR REGISTRATION OF TRANSFER
FROM QIB RESTRICTED NOTE TO ACCREDITED RESTRICTED NOTE
(Pursuant to Section 2.6(a)(iv) of the Indenture)
Marine Midland Bank
140 Broadway, 12th Floor
New York, New York 10005-1180
Attention: Corporate Trust Administration
Re: 10% Senior Subordinated Notes due 2004 of Loomis, Fargo & Co.
Reference is hereby made to the Indenture, dated as of January 24, 1997
(the "Indenture"), among Loomis, Fargo & Co., as issuer (the "Company"), Loomis
Holding Corporation, Loomis Armored Inc., Wells Fargo Armored Service
Corporation of Texas and Wells Fargo Armored Service Corporation of Puerto Rico,
as guarantors, and Marine Midland Bank, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
This letter relates to $________ principal amount of Notes which are
evidenced by one or more QIB Restricted Notes (CUSIP No. ___________) and held
with the Depositary in the name of __________ (the "Transferor"). The Transferor
has requested a transfer of such beneficial interest in the Notes to a Person
who will take delivery thereof in the form of an equal principal amount of Notes
evidenced by one or more Accredited Restricted Notes (CUSIP No. ______), to be
held with the Depositary.
In connection with such request and in respect of such Notes, the
Transferor hereby certifies that such transfer is being effected pursuant to an
exemption from the registration requirements of the Securities Act other than
Rule 144A or Rule 144, and the Transferor hereby further certifies that the
Notes are being transferred in compliance with the transfer restrictions
applicable to the Global Notes and in accordance with the requirements of the
exemption claimed, which certification is supported by an Opinion of Counsel,
provided by the Transferor or the transferee (a copy of which the Transferor has
attached to this certification) in form and substance reasonably acceptable to
the Company, to the effect that such transfer is in compliance with the
Securities Act and the Notes are being transferred in compliance with any
applicable blue sky securities laws of any state of the United States.
Upon giving effect to this request to exchange a beneficial interest in QIB
Restricted Notes for a beneficial interest in Accredited Restricted Notes, the
resulting beneficial interest shall be subject to the restrictions on transfer
applicable to Accredited Restricted Notes pursuant to the Indenture and the
Securities Act.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and Lehman Brothers Inc. and NationsBanc
Capital Markets, Inc. (c/o
B-6-1
<PAGE>
Lehman Brothers Inc., 3 World Financial Center, New York, New York 10285), the
initial purchasers of such Notes being transferred.
[Insert Name of Transferor]
By: ______________________
Name:
Title:
Dated: __________, _____
cc: Loomis, Fargo & Co.
Lehman Brothers Inc.
NationsBanc Capital Markets, Inc.
B-6-2
<PAGE>
EXHIBIT C
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
_____________________, among ___________________ (the "Guarantor"), a direct or
indirect subsidiary of Loomis Fargo & Co. (or its successor), Loomis, Fargo &
Co., a Delaware corporation (the "Company"), and Marine Midland Bank, trustee
under the indenture referred to below (the "Trustee").
WITNESSETH
WHEREAS, the Company, Loomis Holding Corporation, Loomis Armored Inc.,
Wells Fargo Armored Service Corporation of Texas and Wells Fargo Armored Service
Corporation of Puerto Rico have heretofore executed and delivered to the Trustee
an indenture (the "Indenture"), dated as of January 24, 1997, providing for the
issuance of an aggregate principal amount of 85,000,000 of 10% Senior
Subordinated Notes due 2004 (the "Notes); and
WHEREAS, Section 4.20 of the Indenture provides that under certain
circumstances the Company is required to cause the Guarantor to execute and
deliver to the Trustee a Supplemental Indenture pursuant to which the Guarantor
shall unconditionally guarantee all of the Company's obligations under the Notes
pursuant to a Subsidiary Guarantee on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. AGREEMENT TO GUARANTEE. The Guarantor hereby agrees, jointly and
severally with all other Guarantors under the Indenture, (i) that it is a
Guarantor as defined in the Indenture, (ii) to guarantee the Company's
obligations under the Notes on the terms and subject to the conditions set forth
in Section 4.20 and Article XI of the Indenture, and (iii) to be bound by all
other applicable provisions of the Indenture.
3. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of the Guarantor, as such, shall have any liability
for any obligations of the Company or any Guarantor under the Notes, any
Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
C-1
<PAGE>
4. EFFECTIVENESS. This Supplemental Indenture shall be effective
upon execution by the parties hereto.
5. RECITALS. The recitals contained herein shall be taken as the
statements of the Company and the Guarantor and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity of this Supplemental Indenture.
6. NEW YORK LAW TO GOVERN. THE INTERNAL LAWS OF THE STATE OF NEW
YORK, INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW, BUT OTHERWISE
WITHOUT REGARD TO CONFLICT OF LAW RULES, SHALL GOVERN AND BE USED TO CONSTRUE
THIS SUPPLEMENTAL INDENTURE.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction hereof.
LOOMIS, FARGO & CO.
By:_______________________________
Name:
Title:
[GUARANTOR]
By:________________________________
Name:
Title:
MARINE MIDLAND BANK
By:________________________________
Name:
Title:
C-2
<PAGE>
EXHIBIT 4.4
EXECUTION COPY
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of January 24, 1997
by and among
LOOMIS, FARGO & CO.,
LOOMIS HOLDING CORPORATION,
LOOMIS ARMORED INC.,
WELLS FARGO ARMORED SERVICE CORPORATION OF TEXAS
WELLS FARGO ARMORED SERVICE CORPORATION OF PUERTO RICO
and
LEHMAN BROTHERS INC.
and
NATIONSBANC CAPITAL MARKETS, INC.
- --------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of January 24, 1997 by and among Loomis, Fargo & Co., a Delaware
corporation (the "Issuer"), Loomis Holding Corporation ("LFC"), a Delaware
corporation (to be renamed LFC Holding Corporation), Loomis Armored Inc. (the
"Operating Subsidiary"), a Texas corporation (to be renamed Loomis, Fargo &
Co.), Wells Fargo Armored Service Corporation of Texas ("WFT"), a Texas
corporation (to be renamed LFC Armored of Texas Inc.), and Wells Fargo Armored
Service Corporation of Puerto Rico ("WFP"), a Tennessee corporation (to be
renamed Loomis, Fargo & Co. of Puerto Rico), and together with LFC, the
Operating Subsidiary WFT and any other entity that delivers a Subsidiary
Guarantee pursuant to the terms of the Indenture, the "Guarantors"), and Lehman
Brothers Inc. and NationsBanc Capital Markets, Inc. (collectively the "Initial
Purchasers"), which have agreed to purchase the Issuer's 10% Senior Subordinated
Notes due 2004 (the "Senior Subordinated Notes") pursuant to the Purchase
Agreement.
This Agreement is made pursuant to the Purchase Agreement, dated
January 17, 1997 (the "Purchase Agreement"), by and among the Issuer, LFC and
the Operating Subsidiary and the Initial Purchasers. In order to induce the
Initial Purchasers to purchase the Senior Subordinated Notes, the Issuer and the
Guarantors have agreed to provide to the Initial Purchasers and their respective
direct and indirect transferees the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 4 of the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following
capitalized terms shall have the following meanings:
Broker-Dealer: Any broker or dealer registered under the
-------------
Exchange Act.
Closing Date: The date of this Agreement.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: A registered Exchange Offer shall be deemed
----------
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Securities Act of the Exchange Offer
Registration Statement relating to the New Senior Subordinated Notes to be
issued in the Exchange Offer, (ii) the maintenance of such Registration
Statement continuously effective and the keeping of the Exchange Offer open
for a period not less than the minimum period required pursuant to Section
3(b) hereof, and (iii) the delivery by the Issuer to the Registrar under
the Indenture of New Senior Subordinated Notes, with Subsidiary Guarantees
thereon duly executed and delivered by the Guarantors, in the same
aggregate principal amount as the aggregate principal amount of Senior
Subordinated Notes that were tendered by Holders thereof pursuant to the
Exchange Offer.
<PAGE>
Damages Payment Date: Each Interest Payment Date and, with
--------------------
respect to any Note being repurchased by the Company pursuant to Section
3.8 or 3.9 of the Indenture, the related Purchase Date.
Effectiveness Target Date: As defined in Section 5 hereof.
-------------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Offer: The registration by the Issuer under the
--------------
Securities Act of the New Senior Subordinated Notes pursuant to a
Registration Statement pursuant to which the Issuer offers each of the
Holders of all outstanding Transfer Restricted Securities the opportunity
to exchange each such outstanding Transfer Restricted Security held by any
such Holder for New Senior Subordinated Notes, with Subsidiary Guarantees
thereon duly executed and delivered by the Guarantors, in the principal
amount equal to the principal amount of the Transfer Restricted Security
tendered by such Holder.
Exchange Offer Registration Statement: The Registration
-------------------------------------
Statement relating to the Exchange Offer, including the Prospectus which
forms a part thereof.
Holders: As defined in Section 2(b) hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
Indenture: The Indenture, dated as of January 24, 1997, among
---------
the Issuer, the Guarantors party thereto and Marine Midland Bank, as
trustee (the "Trustee"), pursuant to which the Notes are to be issued, as
such Indenture is amended or supplemented from time to time in accordance
with the terms thereof.
Initial Purchasers: As defined in the preamble hereto.
------------------
Interest Payment Date: As defined in the Indenture and the
---------------------
Notes.
NASD: National Association of Securities Dealers, Inc.
----
New Senior Subordinated Notes: The Issuer's 10% Senior
-----------------------------
Subordinated Notes due 2004 to be issued pursuant to the Indenture in the
Exchange Offer.
Notes: The Senior Subordinated Notes and the New Senior
-----
Subordinated Notes.
Person: An individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agency or political
subdivision thereof.
Prospectus: The prospectus included in a Registration Statement,
----------
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
2
<PAGE>
Purchase Date: As defined in the Indenture.
-------------
Record Holder: With respect to any Damages Payment Date relating
-------------
to Notes, each Person who is a Holder of Transfer Restricted Securities on
the record date with respect to the Interest Payment Date on which such
Damages Payment Date shall occur.
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Issuer
----------------------
relating to (a) an offering of New Senior Subordinated Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, which is filed
pursuant to the provisions of this Agreement, in each case, including the
Prospectus included therein, all amendments and supplements thereto
(including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Securities Act: The Securities Act of 1933, as amended.
--------------
Senior Subordinated Notes: As defined in the preamble hereto.
-------------------------
Shelf Filing Deadline: As defined in Section 4 hereof.
---------------------
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
Subsidiary Guarantees: As defined in the Indenture.
---------------------
TIA: The Trust Indenture Act of 1939, as amended, and the rules
---
and regulations of the Commission promulgated thereunder.
Transfer Restricted Securities: Each Senior Subordinated Note,
------------------------------
until the earliest to occur of (a) the date on which such Senior
Subordinated Note is exchanged in the Exchange Offer and entitled to be
resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Securities Act, (b) the date on
which such Senior Subordinated Note has been effectively registered under
the Securities Act and disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such Senior Subordinated Note is
distributed to the public pursuant to Rule 144 under the Securities Act by
a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein on or prior to such sale).
Underwritten Registration or Underwritten Offering: A
------------------------- ---------------------
registration in which securities of the Issuer are sold to one or more
investment banking firms, acting as underwriters, for reoffering to the
public.
3
<PAGE>
2. Securities Subject to This Agreement.
(a) Transfer Restricted Securities. The securities entitled
------------------------------
to the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is
-----------------------------------------
deemed to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities.
3. Registered Exchange Offer.
(a) Unless the Exchange Offer shall not be permissible under
applicable law, or Commission policy (after the procedures set forth in
Section 6(a) below have been complied with), the Company and the Guarantors
shall (i) cause to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 75 days after the
Closing Date, a Registration Statement under the Securities Act relating to
the New Senior Subordinated Notes and the Exchange Offer, (ii) use their
reasonable best efforts to cause such Registration Statement to become
effective no later than 150 days after the Closing Date, (iii) in
connection with the foregoing, file (A) all pre-effective amendments to
such Registration Statement as may be necessary in order to cause such
Registration Statement to become effective, (B) if applicable, a Prospectus
pursuant to Rule 430A under the Securities Act and (C) cause all necessary
filings in connection with the registration and qualification of the New
Senior Subordinated Notes to be made under the Blue Sky laws of such
jurisdictions as are reasonably requested by the Initial Purchasers and
necessary to permit the Exchange Offer to be Consummated, and (iv) upon the
effectiveness of such Registration Statement, commence the Exchange Offer.
The Exchange Offer shall be on the appropriate form permitting registration
of the New Senior Subordinated Notes to be offered in exchange for the
Transfer Restricted Securities and to permit resales of New Senior
Subordinated Notes held by Broker-Dealers as contemplated by Section 3(c)
below.
(b) The Issuer and each of the Guarantors shall cause the
Exchange Offer Registration Statement to be effective continuously and
shall keep the Exchange Offer open for a period of not less than the
minimum period required under applicable federal and state securities laws
to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 business days after the date notice of the
Exchange Offer is mailed to the Holders. The Issuer and each of the
Guarantors shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Notes shall
be included in the Exchange Offer Registration Statement. The Issuer and
each of the Guarantors shall use their reasonable best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter (the "Consummation Deadline").
(c) The Issuer shall indicate in a "Plan of Distribution"
section to be contained in the Prospectus which shall form a part of the
Exchange Offer Registration
4
<PAGE>
Statement that any Broker-Dealer who holds Senior Subordinated Notes that
are Transfer Restricted Securities and that were acquired for its own
account as a result of market-making activities or other trading activities
(other than Transfer Restricted Securities acquired directly from the
Issuer), may exchange such Senior Subordinated Notes pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of the New Senior Subordinated Notes received
by such Broker-Dealer in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of the
Prospectus contained in the Exchange Offer Registration Statement. Such
"Plan of Distribution" section shall also contain all other information
with respect to such resales by Broker-Dealers that the Commission may
require in order to permit such resales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount
of New Senior Subordinated Notes held by any such Broker-Dealer except to
the extent required by the Commission as a result of a change in policy
announced after the date of this Agreement.
The Issuer and each of the Guarantors shall use their reasonable best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) below to the extent necessary to ensure that it is available for resales of
New Senior Subordinated Notes acquired by Broker-Dealers for their own accounts
as a result of market-making activities or other trading activities, and to
ensure that it conforms with the requirements of this Agreement, the Securities
Act and the policies, rules and regulations of the Commission as announced from
time to time, for a period of one year from the date on which the Exchange Offer
Registration Statement is declared effective.
The Issuer shall provide sufficient copies of the latest version of
such Prospectus to Broker-Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
4. Shelf Registration.
(a) Shelf Registration. If (i) the Issuer is not required to
------------------
file an Exchange Offer Registration Statement or to consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), or (ii) any Holder of Transfer Restricted
Securities that is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) or an "accredited investor" (as defined in
Rule 501(A)(1), (2), (3) or (7) under the Securities Act) shall notify the
Issuer within 20 business days following the Consummation of the Exchange
Offer (A) that such Holder is prohibited by applicable law or Commission
policy from participating in the Exchange Offer, or (B) that such Holder
may not resell the New Senior Subordinated Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) that such
Holder is a Broker-Dealer and holds Senior
5
<PAGE>
Subordinated Notes acquired directly from the Issuer or one of its
affiliates, then the Issuer and each of the Guarantors shall use their
reasonable best efforts to:
(x) cause to be filed a shelf registration
statement pursuant to Rule 415 under the Securities Act,
which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf
Registration Statement") on or prior to the earliest to
occur of (1) the 30th day after the date on which the
Issuer determines that it is not required to file the
Exchange Offer Registration Statement, (2) the 30th day
after the date on which the Issuer receives notice from
a Holder of Transfer Restricted Securities, including
without limitation from any Initial Purchaser, as
contemplated by clause (ii) above, or (3) the
Consummation Deadline if the Exchange Offer has not been
consummated, (such earliest date being the "Shelf Filing
Deadline"), which Shelf Registration Statement shall
provide for resales of all Transfer Restricted
Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof;
and
(y) cause such Shelf Registration Statement to be
declared effective by the Commission on or before the 60th
day after the Shelf Filing Deadline.
The Issuer and the Guarantors shall use their reasonable best efforts to
keep such Shelf Registration Statement continuously effective, supplemented
and amended as required by the provisions of Sections 6(b) and (c) hereof
to the extent necessary to ensure that it is available for resales of Notes
by the Holders of Transfer Restricted Securities entitled to the benefit of
this Section 4(a), and to ensure that it conforms with the requirements of
this Agreement, the Securities Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of at least
three years following the Closing Date or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement shall have been sold.
(b) Provision by Holders of Certain Information in Connection
---------------------------------------------------------
with the Shelf Registration Statement. No Holder of Transfer Restricted
-------------------------------------
Securities may include any of its Transfer Restricted Securities in any
Shelf Registration Statement pursuant to this Agreement unless and until
(i) such Holder furnishes to the Issuer in writing, within 15 days after
receipt of a request therefor, such information as the Issuer may
reasonably request for use in connection with any Shelf Registration
Statement or Prospectus or preliminary Prospectus included therein. No
Holder of Transfer Restricted Securities shall be entitled to liquidated
damages pursuant to Section 5 hereof unless and until such Holder shall
have used its reasonable best efforts to provide all such reasonably
requested information. Each Holder as to which any Shelf Registration
Statement is being effected agrees to furnish promptly to the Issuer all
information required to be disclosed in order to
6
<PAGE>
make the information previously furnished to the Issuer by such Holder not
materially misleading.
5. Liquidated Damages.
If (a) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (b) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded within two business days
by a post-effective amendment to such Registration Statement that cures such
failure and that is itself immediately declared effective (each such event
referred to in clauses (a) through (d), a "Registration Default"), the Issuer
and the Guarantors hereby jointly and severally agree to pay liquidated damages
to each Holder of Transfer Restricted Securities with respect to the first 90-
day period immediately following the occurrence of such Registration Default, in
an amount equal to $.05 per week per $1,000 principal amount of Transfer
Restricted Securities held by such Holder for each week or portion thereof that
the Registration Default continues. The amount of the liquidated damages
payable to any Holder of Transfer Restricted Securities shall increase by an
additional $.05 per week per $1,000 in principal amount of Transfer Restricted
Securities held by such Holder with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.25 per week per $1,000 principal amount of Transfer
Restricted Securities. All accrued liquidated damages shall be paid to Record
Holders by wire transfer of immediately available funds or by federal funds
check on each Damages Payment Date, as provided in the Indenture. Following the
cure of all Registration Defaults relating to any particular Transfer Restricted
Securities, the accrual of liquidated damages with respect to such Transfer
Restricted Securities will cease.
All obligations of the Issuer and the Guarantors in the preceding
paragraph to pay liquidated damages, together with interest on any overdue
liquidated damages as provided in the Indenture, that are outstanding with
respect to any Transfer Restricted Security at the time such security ceases to
be a Transfer Restricted Security shall survive until such time as all such
obligations with respect to such Transfer Restricted Security shall have been
satisfied in full.
6. Registration Procedures.
(a) Exchange Offer Registration Statement. In connection with
-------------------------------------
the Exchange Offer, the Issuer and each of the Guarantors shall comply with
all of the provisions of Section 6(c) below, shall use their reasonable
best efforts to effect such exchange to permit the sale of Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
7
<PAGE>
(i) If in the reasonable opinion of counsel to the
Issuer there is a question as to whether the Exchange Offer is
permitted by applicable law, the Issuer and each of the Guarantors
hereby agree to seek a no-action letter or other favorable decision
from the Commission allowing the Issuer and the Guarantors to
Consummate an Exchange Offer for such Senior Subordinated Notes. The
Issuer and each of the Guarantors hereby agree to pursue the issuance
of such a decision to the Commission staff level but shall not be
required to take commercially unreasonable action to effect a change
of Commission policy. The Issuer and each of the Guarantors hereby
agree, however, to (A) participate in telephonic conferences with the
Commission, (B) deliver to the Commission staff an analysis prepared
by counsel to the Issuer and the Guarantors setting forth the legal
bases, if any, upon which such counsel has concluded that such an
Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of
such submission.
(ii) As a condition to its participation in the Exchange
Offer pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Issuer or
a Guarantor, prior to the date on which the Exchange Offer is
consummated, a written representation to the Issuer and the Guarantors
(which may be contained in the letter of transmittal contemplated by
the Exchange Offer Registration Statement) to the effect that (A) it
is not an affiliate of the Issuer, (B) it is not engaged in, and does
not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the New Senior
Subordinated Notes to be issued in the Exchange Offer and (C) it is
acquiring the New Senior Subordinated Notes in its ordinary course of
business. In addition, all such Holders of Transfer Restricted
Securities shall otherwise cooperate in the Issuer's and the
Guarantors' preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees that any Broker-Dealer and any such Holder
using the Exchange Offer to participate in a distribution of the
securities to be acquired in the Exchange Offer (1) could not under
Commission policy as in effect on the date of this Agreement rely on
the position of the Commission enunciated in Morgan Stanley and Co.,
-----------------------
Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation
---- ----------------------------------
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including any no-action letter obtained pursuant to clause (i)
above), and (2) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction and that such a secondary resale
transaction should be covered by an effective registration statement
containing the selling security holder information required by Item
507 or 508, as applicable, of Regulation S-K if the resales are of New
Senior Subordinated Notes obtained by such Holder in exchange for
Senior Subordinated Notes acquired by such Holder directly from the
Issuer.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Issuer and the Guarantors shall provide a
supplemental letter to the
8
<PAGE>
Commission (A) stating that the Issuer and the Guarantors are
registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available
----------------------------------
May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991)
----------------------------
and, if applicable, any no-action letter obtained pursuant to clause
(i) above and (B) including a representation that the Issuer and the
Guarantors have not entered into any arrangement or understanding with
any Person to distribute the New Senior Subordinated Notes to be
received in the Exchange Offer and that, to the best of the Issuer's
and the Guarantors' information and belief, each Holder participating
in the Exchange Offer is acquiring the New Senior Subordinated Notes
in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of
the New Senior Subordinated Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Issuer and each of the Guarantors shall comply
with all the provisions of Section 6(c) below and shall use their
reasonable best efforts to effect such registration to permit the sale of
the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof, and pursuant thereto
the Issuer and each of the Guarantors will as expeditiously as possible
prepare and file with the Commission a Registration Statement relating to
the registration on any appropriate form under the Securities Act, which
form shall be available for the sale of the Transfer Restricted Securities
in accordance with the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration
------------------
Statement and any Prospectus required by this Agreement to permit the sale
or resale of Transfer Restricted Securities (including, without limitation,
any Registration Statement and the related Prospectus required to permit
resales of Notes by Broker-Dealers), the Issuer and the Guarantors shall:
(i) use their reasonable best efforts to keep such
Registration Statement continuously effective and provide all
requisite financial statements (including, if required by the
Securities Act or any regulation thereunder, financial statements of
the Guarantors) for the period specified in Section 3 or 4 of this
Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Issuer
and the Guarantors shall file promptly an appropriate amendment to
such Registration Statement, in the case of clause (A), correcting any
such misstatement or omission, and, in the case of either clause (A)
or (B), use their reasonable best efforts to cause such amendment to
be declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter;
9
<PAGE>
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement
as may be necessary to keep the Registration Statement effective for
the applicable period set forth in Section 3 or 4 hereof, as
applicable, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been
sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and to comply fully with the
applicable provisions of Rules 424 and 430A under the Securities Act
in a timely manner; and comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders promptly and, if requested by such Persons, to confirm such
advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to any Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments
or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement under
the Securities Act or of the suspension by any state securities
commission of the qualification of the Transfer Restricted Securities
for offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, (D) of the existence of
any fact or the happening of any event that makes any statement of a
material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto, or any document incorporated by
reference therein untrue, or that requires the making of any additions
to or changes in the Registration Statement or the Prospectus in order
to make the statements therein not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or
other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the
Issuer and each of the Guarantors shall use their reasonable best
efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) furnish to each of the selling Holders and each of
the underwriter(s), if any, before filing with the Commission, copies
of any Registration Statement or any Prospectus included therein or
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after
the initial filing of such Registration Statement), which documents
will be subject to the review of such Holders and underwriter(s), if
any, for a period of at least five business days, and the Issuer and
10
<PAGE>
the Guarantors will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which a selling Holder of Transfer Restricted Securities
covered by such Registration Statement or the underwriter(s), if any,
shall reasonably object within five business days after the receipt
thereof. A selling Holder or underwriter, if any, shall be deemed to
have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission;
(v) promptly prior to the filing of any document that
is to be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to the selling Holders and
to the underwriter(s), if any, make representatives of the Issuer and
the Guarantors available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection
by the selling Holders, any underwriter participating in any
disposition pursuant to such Registration Statement, and any attorney
or accountant retained by such selling Holders or any of the
underwriter(s), all financial and other records, pertinent corporate
documents and properties of the Issuer and the Guarantors and cause
the officers, directors, managers and employees of the Issuer and the
Guarantors to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with such
Registration Statement subsequent to the filing thereof and prior to
its effectiveness;
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly to incorporate in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and
underwriter(s), if any, may reasonably request to have included
therein including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities,
information with respect to the principal amount of Transfer
Restricted Securities being sold to such underwriter(s), the purchase
price being paid therefor and any other terms of the offering of the
Transfer Restricted Securities to be sold in such offering; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Issuer or the Guarantors is
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by
the Registration Statement to be rated with the appropriate rating
agencies, if so requested by the Holders of a majority in aggregate
principal amount of Notes covered thereby or the underwriter(s), if
any;
11
<PAGE>
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of
each amendment thereto, including all documents incorporated by
reference therein and all exhibits (including exhibits incorporated
therein by reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as such Persons reasonably may request; the
Issuer and the Guarantors hereby consent to the use of the Prospectus
and any amendment or supplement thereto by each of the selling Holders
and each of the underwriter(s), if any, in connection with the
offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;
(xi) enter into such agreements (including an
underwriting agreement), and make such representations and warranties,
and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any Registration Statement contemplated by this
Agreement, all to such extent as may be reasonably requested by the
Initial Purchasers or by any Holder of Transfer Restricted Securities
or underwriter in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement; and whether or
not an underwriting agreement is entered into and whether or not the
registration is an Underwritten Registration, the Issuer and the
Guarantors shall:
(A) upon written request, furnish to each selling
Holder and each underwriter, if any, in such substance and scope
as they may request and as are customarily made by the Issuer and
the Guarantors to underwriters in primary underwritten offerings,
upon the date of the Consummation of the Exchange Offer and, if
applicable, the effectiveness of the Shelf Registration
Statement:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the
case may be, signed by (y) the Chairman of the Board or the
President and (z) the Chief Financial Officer of each of the
Issuer and the Guarantors, confirming, as of the date
thereof, the matters set forth in paragraph (s) of Section 7
of the Purchase Agreement;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as the
case may be, of counsel for the Issuer and the Guarantors,
covering the matters set forth in paragraph (e) of Section 7
of the Purchase Agreement and such
12
<PAGE>
other matters as such parties may reasonably request, and in
any event including a statement to the effect that such
counsel has participated in conferences with officers and
other representatives of the Issuer and the Guarantors,
representatives of the independent public accountants for
the Issuer and the Guarantors, representatives of the
underwriters, if any, and the counsel for the and
underwriters, if any, in connection with the preparation of
such Registration Statement and the related Prospectus and
have considered the matters required to be stated therein
and the statements contained therein, although such counsel
has not independently verified the accuracy, completeness or
fairness of such statements; and that such counsel advises
that, on the basis of the foregoing (relying as to
materiality to a large extent upon facts provided to such
counsel by officers and other representatives of the Issuer
and the Guarantors and without independent check or
verification), no facts came to such counsel's attention
that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became
effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation,
contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement
as of its date and, in the case of the opinion dated the
date of Consummation of the Exchange Offer, as of the date
of Consummation, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order
to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state
further that such counsel assumes no responsibility for, and
has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial and accounting data included in any
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of
the date of Consummation of the Exchange Offer or the date
of effectiveness of the Shelf Registration Statement, as the
case may be, from the Issuer's independent accountants, in
the customary form and covering matters of the type
customarily covered in comfort letters received by
underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to paragraph (j) of
Section 7 of the Purchase Agreement, without exception;
13
<PAGE>
(B) set forth in full or incorporate by reference
in the underwriting agreement, if any, the indemnification
provisions and procedures of Section 8 hereof with respect to all
parties to be indemnified pursuant to said Section; and
(C) deliver such other documents and certificates
as may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Issuer or the Guarantors pursuant
to this clause (xi), if any.
If at any time the representations and warranties of the
Issuer and the Guarantors contemplated in clause (A)(1) above cease to
be true and correct in any material respect, the Issuer or the
Guarantors, as the case may be, shall so advise the Initial Purchasers
and the underwriter(s), if any, and each selling Holder promptly and,
if requested by such Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriter(s) may reasonably request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the Shelf Registration Statement; provided, however, that neither the
Issuer nor any of the Guarantors shall be required to register or
qualify as a foreign corporation where it is not now so qualified or
to take any action that would subject it to the service of process in
suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it
is not now so subject;
(xiii) issue, upon the request of any Holder of Senior
Subordinated Notes covered by the Shelf Registration Statement, New
Senior Subordinated Notes, having an aggregate principal amount equal
to the aggregate principal amount of Senior Subordinated Notes
surrendered to the Issuer by such Holder in exchange therefor or being
sold by such Holder; such New Senior Subordinated Notes to be
registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Senior
Subordinated Notes held by such Holder shall be surrendered to the
Issuer for cancellation;
(xiv) cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities
to be sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any,
may request
14
<PAGE>
at least two business days prior to any sale of Transfer Restricted
Securities made by such underwriter(s);
(xv) use their reasonable best efforts to cause the
Transfer Restricted Securities covered by the Registration Statement
to be registered with or approved by such other governmental agencies
or authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition
of such Transfer Restricted Securities, subject to the proviso
contained in clause (xii) above;
(xvi) if any fact or event contemplated by clause
(c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
Initial Purchasers or any other Holder of Transfer Restricted
Securities, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement and provide the Trustee under the Indenture with printed
certificates for the Transfer Restricted Securities which are in a
form eligible for deposit with the Depository Trust Company;
(xviii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD, and use their reasonable best
efforts to cause such Registration Statement to become effective and
approved by such governmental agencies or authorities as may be
necessary to enable the Holders selling Transfer Restricted Securities
to consummate the disposition of such Transfer Restricted Securities;
(xix) otherwise use their best efforts to comply with all
applicable rules and regulations of the Commission, and, in the case
of the Issuer to make generally available to its security holders, as
soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) for the twelve-
month period (A) commencing at the end of any fiscal quarter in which
Transfer Restricted Securities are sold to underwriters in a firm or
best efforts Underwritten Offering or (B) if not sold to underwriters
in such an offering, beginning with the first month of the Issuer's
first fiscal quarter commencing after the effective date of the
Registration Statement;
(xx) cause the Indenture to be qualified under the TIA
not later than the effective date of the first Registration Statement
required by this
15
<PAGE>
Agreement, and, in connection therewith, cooperate with the Trustee
and the Holders of Notes to effect such changes to the Indenture as
may be required for such Indenture to be so qualified in accordance
with the terms of the TIA; and execute and use their reasonable best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to
be so qualified in a timely manner; and
(xxi) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 and Section 15 of the Exchange Act.
Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Issuer of the existence
of any fact of the kind described in Section 6(c)(iii)(D) hereof, such
Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing
(the "Advice") by the Issuer that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus. If so directed by the Issuer,
each Holder will deliver to the Issuer (at the Issuer's expense) all
copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Transfer Restricted Securities that was
current at the time of receipt of such notice. In the event the Issuer
shall give any such notice, the time period regarding the effectiveness of
such Registration Statement set forth in Section 3 or 4 hereof, as
applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder
covered by such Registration Statement shall have received the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi)
hereof or shall have received the Advice.
7. Registration Expenses.
(a) All expenses incident to the Issuer's and the Guarantors'
performance of or compliance with this Agreement will be borne by the
Issuer and the Guarantors, regardless of whether a Registration Statement
becomes effective, including without limitation: (i) all registration and
filing fees and expenses (including filings made by any Initial Purchaser
or Holder with the NASD (and, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel that may be required by
the rules and regulations of the NASD)); (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws;
(iii) all expenses of printing (including printing certificates for the New
Senior Subordinated Notes to be issued in the Exchange Offer and printing
of Prospectuses), messenger and delivery services and telephone; (iv) all
fees and disbursements of counsel for the Issuer and the Guarantors and,
subject to Section 7(b) below, the Holders of Transfer Restricted
Securities; and (v) all fees and disbursements of independent certified
public accountants of the Issuer and the
16
<PAGE>
Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Issuer and the Guarantors will, in any event, bear their
respective internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expenses of any annual audit and the fees and expenses of any
Person, including special experts, retained by the Issuer or the
Guarantors.
(b) In connection with any Registration Statement required by
this Agreement (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement), the Issuer
and the Guarantors will reimburse the Initial Purchasers and the Holders of
Transfer Restricted Securities being tendered in the Exchange Offer and/or
resold pursuant to the "Plan of Distribution" contained in the Exchange
Offer Registration Statement or registered pursuant to the Shelf
Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Willkie Farr &
Gallagher or such other counsel as may be chosen by the Holders of a
majority in principal amount of the Transfer Restricted Securities for
whose benefit such Registration Statement is being prepared.
8. Indemnification and Contribution.
(a) Each of the Issuer and each of the Guarantors, jointly and
severally, agrees to indemnify and hold harmless (i) each Holder and (ii)
each person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) any Holder (any of the
Persons referred to in this clause (ii) being referred to as a "controlling
person") and (iii) the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (any
person referred to in clause (i), (ii), or (iii) may hereinafter be
referred to as an "Indemnified Holders"), from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof to
which such Indemnified Holder may become subject, under the Securities Act
or otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus or in any amendment or supplement thereto or (ii) the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
shall reimburse each Indemnified Holder promptly upon demand for any legal
or other expenses reasonably incurred by such Indemnified Holder in
connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred; provided, however, that the Issuer and the Guarantors shall not
be liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue statement
or alleged untrue statement or omission or alleged omission made in any
Registration Statement or Prospectus or in any amendment or supplement
thereto in reliance upon and in conformity with written information
furnished to the Issuer through the Holders by or on behalf of any Holder
(or its related Indemnified Holder) specifically for inclusion therein. The
foregoing
17
<PAGE>
indemnity agreement is in addition to any liability which the Issuer and
the Guarantors may otherwise have to any Indemnified Holder.
(b) Each Holder, severally and not jointly, shall indemnify and
hold harmless each of the Issuer, the Guarantors, their respective
directors and officers and each person, if any, who controls the Issuer or
any of the Guarantors within the meaning of the Securities Act or the
Exchange Act, from and against any loss, claim, damage or liability, joint
or several, or any action in respect thereof, to which the Issuer, any
Guarantor or any such director, officer or controlling person may become
subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or the Prospectus, or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Issuer through the Holders by or on behalf of
any Holder or its related Indemnified Holder specifically for inclusion
therein, and shall reimburse the Issuer or any Guarantor or their
respective director, officer or controlling person, as the case may be, for
any legal or other expenses reasonably incurred by the Issuer, such
Guarantor, director, officer or controlling person, as the case may be, in
connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Holder may otherwise have to the Issuer, the Guarantors or any
such director, officer or controlling person. In no event shall the
liability of any selling Holder hereunder be greater in amount than the
dollar amount of the proceeds received by such Holder upon the sale of
Transfer Restricted Securities giving rise to such indemnification
obligation.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 8 except to the extent it has been materially prejudiced by such
failure and, provided further, that the failure to notify the indemnifying
party pursuant to this Section 8 shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section
8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 8 for any legal or other expenses subsequently incurred
by the indemnified party in connection with the defense thereof other than
18
<PAGE>
reasonable costs of investigation; provided, however, that any indemnified
party shall have the right to employ separate counsel in any such action
and to participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
employment thereof has been specifically authorized by the indemnifying
party in writing, (ii) such indemnified party shall have been advised by
such counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel or (iii)
the indemnifying party has failed to assume the defense of such action and
employ counsel reasonably satisfactory to the indemnified party, in which
case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party, it
being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (and local counsel) at
any time for all such indemnified parties, which firm shall be designated
in writing by the Holders of a majority in principal amount of Notes
entitled to such indemnification, if the indemnified parties under this
Section 8 consist of any Holder or any of their related Indemnified
Holders, or by the Issuer, if the indemnified parties under this Section 8
consist of any of the Issuer or any Guarantor or any of their respective
directors, officers or controlling persons. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 8(a) and 8(b),
shall use its best efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No indemnifying party shall be liable
for any settlement of any such action effected without its written consent
(which consent shall not be unreasonably withheld), but if settled with its
written consent or if there be a final judgment of the plaintiff in any
such action, the indemnifying party agrees to indemnify and hold harmless
any indemnified party from and against any loss or liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate
to reflect the relative benefits received by the Issuer and the Guarantors
on the one hand and any Holder on the other from such Holder's sale of
Transfer Restricted Securities or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect the relative fault of the Issuer and the Guarantors
on the one hand and such Holder on the other with respect to the statements
or omissions which resulted in such loss, claim, damage or liability, or
action in respect thereof, as well as any other relevant equitable
considerations. The relative fault of the Issuer and the Guarantors on the
one
19
<PAGE>
hand and of such Holder on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact
relates to information supplied by the Issuer and the Guarantors, on the
one hand, or such Holder, on the other hand, the intent of the parties and
their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission. The Issuer, each Guarantor and each
Holder of Transfer Restricted Securities agree that it would not be just
and equitable if contributions pursuant to this Section 8(d) were to be
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above
in this Section 8(d) shall be deemed to include, for purposes of this
Section 8(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8(d), none
of the Holders (or any of their related Indemnified Holders) shall be
required to contribute any amount in excess of the amount by which the
proceeds received by such Holder with respect to the Notes exceeds the
amount of any damages which such Holder has otherwise paid or become liable
to pay by reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11 of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute as provided in
this Section 8(d) are several in proportion to the respective principal
amount of Notes held by each of the Holders hereunder and not joint.
9. Rule 144A.
Each of the Issuer and the Guarantors hereby agrees with each Holder,
for so long as any Transfer Restricted Securities remain outstanding, to make
available to any Holder or beneficial owner of Transfer Restricted Securities in
connection with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Securities Act in order to permit resales
of such Transfer Restricted Securities pursuant to Rule 144A.
10. Participation in Underwritten Registrations.
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
20
<PAGE>
11. Selection of Underwriters.
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Issuer.
12. Miscellaneous.
(a) Remedies. The Issuer and each Guarantor agree that
--------
monetary damages (including the liquidated damages contemplated hereby)
would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agree to waive
the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. Each of the Issuer and the
--------------------------
Guarantors will not on or after the date of this Agreement enter into any
agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. Except pursuant to the Stockholders Agreement (as
defined in the Purchase Agreement), neither the Issuer nor any Guarantor
has previously entered into any agreement granting any registration rights
with respect to its securities to any Person. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent
with the rights granted to the holders of the Issuer's securities under any
agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. The Issuer and each
-------------------------------
Guarantor will not take any action, or permit any change within its control
to occur, with respect to the Notes that would materially and adversely
affect the ability of the Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement
----------------------
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Issuer
and the Guarantors have obtained the written consent of Holders of a
majority of the outstanding principal amount of Transfer Restricted
Securities. Notwithstanding the foregoing, a waiver or consent to departure
from the provisions hereof that relates exclusively to the rights of
Holders whose securities are being tendered pursuant to the Exchange Offer
and that does not affect directly or indirectly the rights of other Holders
whose securities are not being tendered pursuant to such Exchange Offer may
be given by the Holders of a majority of the outstanding principal amount
of Transfer Restricted Securities being tendered or registered.
21
<PAGE>
(e) Notices. All notices and other communications provided
-------
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested),
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
(ii) if to the Issuer or any Guarantor:
Loomis, Fargo & Co.
16225 Park Ten Place
Houston, Texas 77084
Telecopier No.: (713) 647-5697
Attention: Chief Financial Officer
With a copy to:
Weil, Gotshal & Manges, LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopier No.: (214) 746-7777
Attention: Mary R. Korby
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if
mailed; when responded to, if telexed; when receipt acknowledged, if
telecopied; and on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall
be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be
binding upon a successor or assign of a Holder unless and to the extent
such successor or assign acquired Transfer Restricted Securities from such
Holder.
(g) Counterparts. This Agreement may be executed in any number
------------
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
22
<PAGE>
(h) Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York, without
regard to the Conflict of Laws rules thereof.
(j) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the validity,
legality and enforceability of any such provision in every other respect
and of the remaining provisions contained herein shall not be affected or
impaired thereby.
13. Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Issuer and the Guarantors
with respect to the Transfer Restricted Securities. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
LOOMIS, FARGO & CO., a Delaware corporation
By: /s/ James K. Jennings, Jr.
---------------------------------------
Name:
Title:
LOOMIS HOLDING CORPORATION, a Delaware corporation
By: /s/ James K. Jennings, Jr.
---------------------------------------
Name:
Title:
LOOMIS ARMORED INC., a Texas corporation
By: /s/ James K. Jennings, Jr.
---------------------------------------
Name:
Title:
WELLS FARGO ARMORED SERVICE CORPORATION OF TEXAS,
a Texas corporation
By: /s/ Timothy M. Wood
---------------------------------------
Name:
Title:
24
<PAGE>
WELLS FARGO ARMORED SERVICE CORPORATION OF PUERTO
RICO, a Tennessee corporation
By: /s/ Timothy M. Wood
---------------------------------------
Name:
Title:
LEHMAN BROTHERS INC.
By: /s/ Robert D. Redmond
---------------------------------------
Name: Robert D. Redmond
Title: Managing Director
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ Jan A. Schipper
---------------------------------------
Name: Jan A. Schipper
Title: Associate
25
<PAGE>
EXHIBIT 4.5
EXECUTION COPY
$85,000,000
LOOMIS, FARGO & CO.
10% SENIOR SUBORDINATED NOTES DUE 2004
PURCHASE AGREEMENT
------------------
January 17, 1997
LEHMAN BROTHERS INC.
NATIONSBANC CAPITAL MARKETS, INC.
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Ladies and Gentlemen:
Loomis, Fargo & Co., a Delaware corporation (the "Company"), proposes
to issue and sell to Lehman Brothers Inc. and NationsBanc Capital Markets, Inc.
(the "Initial Purchasers") $85,000,000 in aggregate principal amount of the
Company's 10% Senior Subordinated Notes due 2004 (the "Senior Subordinated
Notes"). The payment of principal, premium, interest and liquidated damages on
the Senior Subordinated Notes and the Company's 10% Senior Subordinated Notes
due 2004 to be issued in the Exchange Offer (the "New Senior Subordinated Notes"
and, together with the Senior Subordinated Notes, the "Notes") will be
unconditionally guaranteed on a senior subordinated basis by each of (i) Loomis
Holding Corporation (to be renamed LFC Holding Corporation), a Delaware
corporation ("LFC"), (ii) Loomis Armored Inc. (to be renamed Loomis, Fargo &
Co.), a Texas corporation and a wholly-owned subsidiary of LFC (the "Operating
Subsidiary"), (iii) Wells Fargo Armored Service Corporation of Texas (to be
renamed LFC Armored of Texas Inc.), a Texas corporation ("Wells Fargo of
Texas"), (iv) Wells Fargo Armored Service Corporation of Puerto Rico (to be
renamed Loomis, Fargo & Co. of Puerto Rico), a Tennessee corporation ("Wells
Fargo of Puerto Rico"), and (v) any other subsidiary formed or acquired after
the Closing Date (as defined below) that either (x) guarantees any Senior Debt
of the Company or any Indebtedness of the Company that is pari passu in right of
payment with the Notes or (y) is or becomes a Significant Subsidiary (whether as
a result of creation, acquisition, additional investment, internal growth, or
otherwise), and their respective successors and assigns (collectively, the
"Guarantors") pursuant to their guarantees (the "Subsidiary Guarantees"). The
Senior Subordinated Notes are to be issued pursuant to an indenture to be dated
as of January 24, 1997 (the "Indenture") among the Company, the Guarantors party
thereto and Marine Midland Bank, as trustee (the "Trustee"), substantially in
the form attached hereto as Exhibit A.
<PAGE>
Upon original issuance thereof, and until such time as is no longer
required under the applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), the Senior Subordinated Notes (and all
securities issued in exchange therefor or in substitution thereof) shall bear
the following legend:
"THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
SECURITY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT IN CONNECTION WITH THE SALE
HEREOF, AND SUCH PURCHASER REPRESENTS, ACKNOWLEDGES AND AGREES FOR THE BENEFIT
OF THE COMPANY THAT: (I) IT HAS ACQUIRED A "RESTRICTED" SECURITY WHICH HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT; (II) IT WILL NOT OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY PRIOR TO THE LATER OF THE DATE WHICH IS THREE
YEARS AFTER THE DATE OF ORIGINAL ISSUANCE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF SUCH RESTRICTED
SECURITIES (OR ANY PREDECESSOR) EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (D) OUTSIDE THE UNITED STATES
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT,
OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY APPLICABLE
JURISDICTION; AND (III) IT WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THIS SECURITY OF THE RESALE RESTRICTIONS SET
FORTH IN (II) ABOVE; ANY OFFER, SALE OR OTHER DISPOSITION PURSUANT TO THE
FOREGOING CLAUSES (II)(D) AND (E) IS SUBJECT TO THE RIGHT OF THE ISSUER OF THIS
SECURITY AND THE TRUSTEE FOR SUCH SECURITIES TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS OR OTHER INFORMATION ACCEPTABLE TO THEM IN
FORM AND SUBSTANCE."
A HOLDER OF THIS NOTE SHALL HAVE ALL THE RIGHTS SET FORTH IN THE
REGISTRATION RIGHTS AGREEMENT.
The Senior Subordinated Notes will be offered and sold to the Initial
Purchasers without being registered under the Securities Act in reliance on an
exemption from such registration requirements. The Company has prepared a
preliminary offering memorandum, dated
2
<PAGE>
December 23, 1996 (the "Preliminary Offering Memorandum"), and will prepare a
final offering memorandum to be dated the date hereof (the "Final Offering
Memorandum" and, together with the Preliminary Offering Memorandum, the
"Offering Memorandum"), setting forth or including a description of the terms of
the Senior Subordinated Notes, the terms of the offering and the Transactions
(as defined below), a description of the Company, LFC, the Operating Subsidiary
and Wells Fargo Armored Service Corporation ("Wells Fargo") and any material
developments relating to the Company, LFC, the Operating Subsidiary and Wells
Fargo (collectively, the "Operative Entities") occurring after December 23,
1996. Copies of the Preliminary Offering Memorandum have been, and copies of the
Final Offering Memorandum will be, delivered by the Company to the Initial
Purchasers pursuant to the terms of this Agreement. Any references herein to the
Preliminary Offering Memorandum, the Final Offering Memorandum and the Offering
Memorandum shall be deemed to include all amendments and supplements thereto.
The Company hereby confirms that it has authorized the use of the Offering
Memorandum in connection with the offering and resale of the Senior Subordinated
Notes by the Initial Purchasers in accordance with Section 3 hereof.
It is understood by the parties hereto that simultaneous with the
closing of the transactions contemplated under this Agreement (i) pursuant to a
contribution agreement (the "Contribution Agreement") dated as of November 28,
1996 among the Company, Borg-Warner Security Corporation, Wells Fargo, LFC, the
Operating Subsidiary and the Loomis Stockholders Trust, a Delaware business
trust (the "Business Trust"), the Company will (A) acquire all right, title and
interest in all outstanding equity securities of LFC, (B) acquire all right,
title and interest in substantially all of the assets of Wells Fargo and (C)
take such other actions as shall be contemplated thereunder and (ii) the
Business Trust and Wells Fargo will become the sole stockholders of the Company
and will enter into a stockholders agreement, dated the Closing Date, with the
Company and Wingate Partners, L.P., a Delaware limited partnership (the
"Stockholders Agreement") (the transactions described in clauses (i) and (ii)
herein referred to as the "Transactions"). It is further understood by the
parties hereto that the Company, LFC and the Operating Subsidiary will enter
into a credit facility (the "New Credit Facility") with Lehman Commercial Paper,
Inc. and NationsBank of Texas, N.A., as agents for themselves and other
potential lenders, providing for revolving credit borrowings in an amount not to
exceed $115 million, of which $32.4 million shall be available to be drawn upon
by the Company on the Closing Date.
The Initial Purchasers and their direct and indirect transferees will
be entitled to the benefits of the Registration Rights Agreement (the
"Registration Rights Agreement"), substantially in the form attached hereto as
Exhibit B, pursuant to which the Company and the Guarantors will agree to use
their reasonable best efforts to commence an offer to exchange the Senior
Subordinated Notes for New Senior Subordinated Notes that have been registered
under the Securities Act, and that otherwise are identical in all respects to
the Senior Subordinated Notes, or to cause a shelf registration statement to
become effective under the Securities Act and to remain effective for the period
designated in the Registration Rights Agreement.
Capitalized terms used herein and not otherwise defined are used as
defined in the Offering Memorandum.
3
<PAGE>
1. Representations, Warranties and Agreements of the Company, LFC
and the Operating Subsidiary. Each of the Company, LFC and the Operating
Subsidiary hereby represents, warrants and agrees that:
(a) Each of the Preliminary Offering Memorandum and the Final
Offering Memorandum as of its date did not, and the Final Offering
Memorandum as of the Closing Date will not, contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the Company, LFC and the
-------- -------
Operating Subsidiary make no representation or warranty as to information
contained in or omitted from the Preliminary Offering Memorandum or the
Final Offering Memorandum, as amended or supplemented, in reliance upon and
in conformity with written information furnished to the Company by or on
behalf of the Initial Purchasers specifically for inclusion in the
Preliminary Offering Memorandum or the Final Offering Memorandum.
(b) Each of the Company, LFC and the Operating Subsidiary has
been duly organized and is validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and, as of the date
hereof LFC is, and, as of the Closing Date, the Company will be, duly
qualified to do business and is in good standing as a foreign corporation
in the State of Texas (except where the failure to be so qualified and in
good standing, whether singly or in the aggregate, would not (i) have a
material adverse effect on the earnings, business, management, properties,
assets, rights, operations, condition (financial or otherwise), or
prospects of the Company, LFC and the Operating Subsidiary, taken as a
whole or (ii) have a material adverse effect on the ability of the Company,
LFC and the Operating Subsidiary to consummate the transactions
contemplated under this Agreement, the Indenture, the Registration Rights
Agreement, the New Credit Facility, the Senior Guarantees (as defined
below), the Contribution Agreement and the Stockholders Agreement
(collectively, the "Operative Agreements") (any of the events set forth in
clause (i) or (ii), a "Material Adverse Effect"), and has all power and
authority necessary to own or hold its respective properties and to conduct
the business in which it is engaged, in each case as of the date hereof and
after giving effect to the Transactions. On the Closing Date, (x) LFC will
be a direct, wholly owned subsidiary of the Company, (y) the Operating
Subsidiary, Wells Fargo of Texas and Wells Fargo of Puerto Rico will be
indirect, wholly owned subsidiaries of the Company and (z) the Company will
have no other subsidiaries.
(c) Assuming the Senior Subordinated Notes are issued, sold and
delivered under the circumstances contemplated by the Offering Memorandum
and this Agreement, that the representations and warranties and covenants
of the Initial Purchasers contained in Section 3 hereof are true, correct
and complete, and the Initial Purchasers comply with their covenants in
Section 3 hereof, (i) registration under the Securities Act of the Senior
Subordinated Notes or qualification of the Indenture in respect of the
Senior Subordinated Notes under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), is not required in connection with the offer
and sale of the Senior Subordinated Notes to the Initial Purchasers in the
manner contemplated by the Offering
4
<PAGE>
Memorandum or this Agreement and (ii) initial resales of the Senior
Subordinated Notes by the Initial Purchasers on the terms and in the manner
set forth in the Offering Memorandum and Section 3 hereof are exempt from
the registration requirements of the Securities Act.
(d) The Company has an authorized capitalization as set forth in
the Offering Memorandum. On each of (i) the date hereof and (ii) the
Closing Date after giving effect to the Transactions, all of the capital
stock or other ownership interests of the Company are and will have been
duly and validly authorized and issued, fully paid and nonassessable.
(e) This Agreement has been duly authorized, executed and
delivered by each of the Company, LFC and the Operating Subsidiary and
(assuming the due execution and delivery thereof by the Initial Purchasers)
is a legally valid and binding agreement of each of the Company, LFC and
the Operating Subsidiary, enforceable against each of them in accordance
with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and to general
equitable principles (whether considered in a proceeding in equity or at
law).
(f) The Indenture has been duly authorized by the Company and,
as of the Closing Date, will have been duly authorized by the Guarantors
party thereto, and when duly executed and delivered by the Company and the
Guarantors party thereto (assuming the due execution and delivery thereof
by the Trustee) will be a legally valid and binding agreement of each of
the Company and the Guarantors party thereto, enforceable against each of
them in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity
or at law).
(g) The Senior Subordinated Notes have been duly authorized,
and, when duly executed, authenticated, issued and delivered upon payment
therefor as provided herein, will be validly issued and outstanding, and
will constitute the legally valid and binding obligations of the Company,
entitled to the benefits of the Indenture and enforceable against the
Company in accordance with their terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally
and to general equitable principles (whether considered in a proceeding in
equity or at law).
(h) As of the Closing Date, the New Senior Subordinated Notes
will have been duly authorized, and, when duly executed, authenticated,
issued and delivered in exchange for the Senior Subordinated Notes, will be
validly issued and outstanding, and will constitute the legally valid and
binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights
5
<PAGE>
generally and to general equitable principles (whether considered in a
proceeding in equity or at law).
(i) Upon consummation of the Transactions, the Company will own
100% of the outstanding capital stock of LFC and there will be no
outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, the capital stock of LFC. As of the
Closing Date, all of the shares of capital stock of LFC will be owned by
the Company free and clear of any security interest, claim, lien or
encumbrance (except for liens arising from the New Credit Facility).
(j) On each of (i) the date hereof and (ii) the Closing Date
after giving effect to the Transactions, LFC will own 100% of the
outstanding capital stock of the Operating Subsidiary and there will be no
outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, the capital stock of the Operating
Subsidiary. As of the Closing Date, all of the shares of capital stock of
the Operating Subsidiary will be owned by LFC free and clear of any
security interest, claim, lien or encumbrance (except for liens arising
from the New Credit Facility).
(k) The Registration Rights Agreement has been duly authorized
by the Company and, as of the Closing Date, will have been duly authorized
by the Guarantors, and when duly executed and delivered by the Company and
the Guarantors (assuming the due execution and delivery by the Initial
Purchasers) will be a legally valid and binding agreement of the Company
and the Guarantors, enforceable against each of them in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally and to general equitable
principles (whether considered in a proceeding in equity or at law).
(l) As of the Closing Date, the New Credit Facility will have
been duly authorized, executed and delivered by the Company and (assuming
the due execution and delivery by the parties thereto other than the
Company) is a legally valid and binding agreement of the Company,
enforceable against it in accordance with its terms, subject to the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally and to general equitable principles (whether considered in
a proceeding in equity or at law).
(m) As of the Closing Date, the guarantees of the New Credit
Facility (the "Senior Guarantees") will have been duly authorized, executed
and delivered by each of the Guarantors and (assuming the due execution and
delivery by the parties thereto other than the Guarantors) are legally
valid and binding agreements of each of the Guarantors, enforceable against
each of them in accordance with their terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors' rights generally
and to general equitable principles (whether considered in a proceeding in
equity or at law).
6
<PAGE>
(n) The Contribution Agreement has been duly authorized,
executed and delivered by each of the Operative Entities which is a party
thereto and (assuming the due execution and delivery by the parties thereto
other than such Operative Entities) is a legally valid and binding
agreement of the Operative Entities party thereto, enforceable against each
of them in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally and to
general equitable principles (whether considered in a proceeding in equity
or at law).
(o) The Stockholders Agreement has been duly authorized by each
of the Operative Entities contemplated to be a party thereto and when
executed by each of such Operative Entities and (assuming the due execution
and delivery by the parties thereto other than the Operative Entities party
thereto) will be a legally valid and binding agreement of such Operative
Entities, enforceable against each of them in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and to general equitable principles (whether
considered in a proceeding in equity or at law).
(p) (i) The execution, delivery and performance of the Operative
Agreements by the Operative Entities party thereto and the consummation of
the transactions contemplated hereby and thereby (including, without
limitation, the Transactions), (ii) the issuance and sale of the Notes and
the Subsidiary Guarantees by the Company and the Guarantors, as applicable,
and (iii) the use of the proceeds from the sale of the Notes as described
in the Offering Memorandum, will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which any of the Operative Entities is a party
or by which any of the Operative Entities is bound or to which any of the
property or assets of any of the Operative Entities is subject, nor will
such actions result in any violation of the provisions of the charter, by-
laws, operating agreement or other organizational documents of any of the
Operative Entities or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over any of the
Operative Entities or any of their properties or assets (except to the
extent any such conflict, breach, violation or default would not, whether
singly or in the aggregate, have a Material Adverse Effect); and except
such consents, approvals, authorizations, registrations or qualifications
as may be required under the applicable state securities laws in connection
with the purchase and distribution of the Notes by the Initial Purchasers
or as set forth in the Registration Rights Agreement, no consent, approval,
authorization or order of, or filing or registration with, any such court
or governmental agency or body is required for the execution, delivery and
performance of the Operative Agreements by the Operative Entities party
thereto and the consummation of the transactions contemplated hereby and
thereby, and the issuance and sale of the Notes and the Subsidiary
Guarantees by the Company and the Guarantors, as applicable (except to the
extent the failure to obtain any such consent, approval, authorization or
order or to make any such filing or registration would not, whether singly
or in the aggregate, have a Material Adverse Effect).
7
<PAGE>
(q) None of the Operative Entities is in breach or violation of
any of the terms or provisions of any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which it is a party or
by which it is bound or to which any of the property or assets (and with
respect to Wells Fargo, the property or assets subject to transfer in
accordance with the Contribution Agreement) of any of the Operative
Entities is subject, nor is any of the Operative Entities in violation of
the provisions of its respective charter, by-laws, operating agreement or
other organizational documents or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over any of the Operative Entities or any of their respective properties or
assets (and with respect to Wells Fargo, the property or assets subject to
transfer in accordance with the Contribution Agreement) (except to the
extent any such conflict, breach, violation or default does not have,
whether singly or in the aggregate, a Material Adverse Effect).
(r) The Notes, the Indenture, the Subsidiary Guarantees, the
Registration Rights Agreement, the New Credit Facility, the Senior
Guarantees, the Contribution Agreement and the Stockholders Agreement
conform in all material respects to the descriptions thereof contained in
the Offering Memorandum.
(s) There are no legal or governmental proceedings pending to
which any of the Operative Entities is a party or of which any property or
assets (and with respect to Wells Fargo, the property or assets subject to
transfer in accordance with the Contribution Agreement) of any of the
Operative Entities is the subject which, if determined adversely to such
Operative Entity, could reasonably be expected to have, whether singly or
in the aggregate, a Material Adverse Effect, otherwise than as set forth or
contemplated in the Offering Memorandum; and to the best knowledge of the
Company, LFC and the Operating Subsidiary, except as set forth or
contemplated in the Offering Memorandum, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others.
(t) Except as set forth in the Registration Rights Agreement and
the Stockholders Agreement, there are no contracts, agreements or
understandings between the Company and any person granting such person the
right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities
in any securities being registered pursuant to any registration statement
filed by the Company under the Securities Act.
(u) None of the Operative Entities has sustained, since the date
of the latest audited financial statements included in the Offering
Memorandum, any material losses or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Offering
Memorandum; and, since such date, there have not been any material changes
in the capital stock or long-term debt of any of the Operative Entities, or
any material adverse changes, or any developments involving any of the
Operative Entities that would
8
<PAGE>
reasonably be expected to involve a prospective material adverse change, in
or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company, LFC and the
Operating Subsidiary, taken as a whole after giving effect to the
Transactions, otherwise than as set forth or contemplated in the Offering
Memorandum.
(v) The financial statements (including the related notes and
supporting schedules) of the Operative Entities which appear in the
Offering Memorandum comply as to form in all material respects with the
requirements of the Securities Act, present fairly the financial condition
and results of operations of such entities purported to be shown thereby,
at the dates and for the periods indicated, and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved except as set forth
therein; the pro forma information, together with related notes forming
part of the Offering Memorandum, have been prepared on a basis consistent
with the historical statements, except for the pro forma adjustments
specified therein, and give effect to assumptions made on a reasonable
basis and present fairly the historical and proposed transactions
contemplated by the Contribution Agreement, the Offering Memorandum and
this Agreement; the other historical, financial and statistical information
and data set forth in the Offering Memorandum is, in all material respects,
fairly presented and prepared on a basis consistent with such financial
statements and the books and records of the entities covered thereby.
(w) Ernst & Young LLP and Deloitte & Touche LLP, who have
certified certain financial statements contained in the Offering
Memorandum, whose reports appear in the Offering Memorandum, and who have
delivered the initial letters referred to in Section 7(g) hereof, are
independent public accountants, in the case of Ernst & Young LLP with
respect to the Company, LFC and the Operating Subsidiary and in the case of
Deloitte & Touche LLP with respect to Wells Fargo, under Rule 101 of the
American Institute of Certified Public Accountants' ("AICPA") Code of
Professional Conduct and its interpretations and rulings during the periods
covered by the financial statements on which they reported contained in the
Offering Memorandum.
(x) After giving effect to the Transactions, (i) the Company,
LFC and the Operating Subsidiary will have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by each of them, including such property as shall be
transferred to the Company, LFC or the Operating Subsidiary pursuant to the
terms of the Contribution Agreement, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Offering Memorandum, or such as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to
be made of such property by the Company, LFC or the Operating Subsidiary
after consummation of the Transactions; and (ii) except as set forth in the
Offering Memorandum, all real property, trucks, buildings and other
property held under lease, including leases relating to such real property,
trucks, buildings and other property as shall be transferred to the
Company, LFC or the Operating Subsidiary pursuant to the terms of the
Contribution Agreement, will be held by the Company, LFC and the Operating
Subsidiary under valid, subsisting and enforceable
9
<PAGE>
leases, with such exceptions as are not material and do not interfere with
the use made and proposed to be made of such real property, trucks,
buildings and other property by the Company, LFC and the Operating
Subsidiary after consummation of the Transactions. You have been provided
with true, correct and complete information regarding the amount of title
insurance (if any) previously issued with respect to real property owned or
leased by the Operative Entities on the date hereof and to be owned or
leased by the Company, LFC and the Operating Subsidiary after giving effect
to the Transactions. The Operative Entities enjoy peaceful and undisturbed
possession under all leases to which each of them is a party as lessee,
except for such leases that, in the aggregate will not be material to the
business of the Company, LFC and the Operating Subsidiary taken as a whole
after giving effect to the Transactions. No consent need be obtained from
any person with respect to any such lease or agreement in connection with
the transactions contemplated hereby, pursuant to the Contribution
Agreement and in the Offering Memorandum (except as set forth in the
Offering Memorandum or except to the extent that the failure to obtain any
such consent, whether singly or in the aggregate, would not have a Material
Adverse Effect). None of the properties or assets, the value of which is
reflected in the balance sheets referred to in Section 1(v) hereof, is held
under any lease (except for properties or assets held under capital leases
and leasehold improvements held under both capital leases and operating
leases) or as conditional vendee under any conditional sale or other title
retention agreement. Except for such assets, trucks, plants and facilities
as are not material in the aggregate to the business of the Company, LFC
and the Operating Subsidiary taken as a whole after giving effect to the
Transactions, all tangible assets, trucks, plants and facilities of the
Operative Entities are in good condition and repair (ordinary wear and tear
excepted) and are adequate, in the reasonable opinion of the Company, LFC
and the Operating Subsidiary, for the uses to which they are being put or
are expected to be put in the ordinary course of business.
(y) After giving effect to the Transactions, the Company, LFC
and the Operating Subsidiary will maintain with reputable insurers such
insurance as may be required by law and is reasonably adequate in respect
of the Company's business, in accordance with industry standards and the
requirements of any documents to which the Company, LFC or the Operating
Subsidiary respectively is a party.
(z) The Operative Entities own or possess, and after giving
effect to the Transactions, the Company, LFC and the Operating Subsidiary
will own or possess, adequate rights to use all material patents, patent
applications, trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights and licenses
necessary for the conduct of their respective businesses and the Company,
LFC and the Operating Subsidiary have no reasonable basis to believe that
the conduct of such businesses will conflict with, and have not received
any notice of any claim of conflict with, any such rights of others.
(aa) No relationship, direct or indirect, exists on the date
hereof or will exist on the Closing Date and after giving effect to the
Transactions between or among the Company, LFC or the Operating Subsidiary
on the one hand, and the directors, officers, stockholders, customers or
suppliers of the Company, LFC or the Operating Subsidiary on
10
<PAGE>
the other hand, which is required to be described in the Offering
Memorandum which is not so described pursuant to Regulation S-K of the
Securities and Exchange Commission (the "Commission") (assuming Regulation
S-K is applicable to the Offering Memorandum).
(bb) The Company has complied with all of the provisions of
Florida H.B. 1771, codified as Section 517.075 of the Florida statutes, and
all regulations promulgated thereunder relating to issuers doing business
with the Government of Cuba or with any person or any affiliate located in
Cuba.
(cc) After giving effect to the Transactions, the fair saleable
value of the assets of the Company, LFC and the Operating Subsidiary
exceeds the amount that will be required to be paid on or in respect of
their respective debts and other liabilities (including, without
limitation, contingent liabilities) as they become absolute and matured.
The assets of the Company, LFC and the Operating Subsidiary after giving
effect to the Transactions do not constitute unreasonably small capital to
carry out their businesses as conducted or as proposed to be conducted. The
Company, LFC and the Operating Subsidiary do not intend to, nor do they
believe that they will, incur debts beyond their ability to pay such debts
as they mature. Upon the issuance of the Notes and the Subsidiary
Guarantees and after giving effect to the New Credit Facility and the
Transactions, the present fair saleable value of the assets of the Company,
LFC and the Operating Subsidiary, as the case may be, will exceed the
respective amounts that will be required to be paid on or in respect of
their respective existing debts and other liabilities (including, without
limitation, contingent liabilities) as they become absolute and matured.
The assets of the Company, LFC and the Operating Subsidiary, upon issuance
of the Notes and the Subsidiary Guarantees and after giving effect to the
New Credit Facility and the Transactions, will not constitute unreasonably
small capital to carry out their respective businesses as now conducted,
including, without limitation, their respective capital needs, taking into
account their respective capital requirements and capital availability.
(dd) Except as set forth in the Offering Memorandum, none of the
Operative Entities (i) has violated any federal, state, local or foreign
environmental safety or similar law or regulation applicable to its
business relating to the protection of human health and safety or the
environment or imposing liability or standards of conduct concerning any
Hazardous Materials ("Environmental Laws"), (ii) lacks any permits,
licenses or other approvals required of it under applicable Environmental
Laws to own, lease and operate its respective properties and to conduct its
business as described in the Offering Memorandum, (iii) is violating any
terms and conditions of any such permit, license or approval or (iv) has
permitted to occur any event that allows, or after notice or lapse of time
would allow, the revocation or termination of any such permit, license or
approval or that results in any impairment of their rights thereunder that
, with respect to any matter specified in clause (i), (ii), (iii) or (iv)
above, could reasonably be expected to have, singly or in the aggregate, a
Material Adverse Effect. The term "Hazardous Material" means (a) any
"hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, (b) any
"hazardous waste" as defined by the Resource Conservation and Recovery Act,
as
11
<PAGE>
amended, (c) any petroleum or petroleum product, (d) any polychlorinated
biphenyl and (e) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material, waste or substance regulated under or within the
meaning of any other Environmental Law.
(ee) (i) Except as set forth in the Offering Memorandum, each of
the Operative Entities has, and each of the Company, LFC and the Operating
Subsidiary will have after giving effect to the Transactions, all
certificates, consents, exemptions, orders, permits, franchises, licenses,
authorizations, or other approvals (each an "Authorization") of and from,
and has made all declarations and filings with and notices to, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, necessary or required to
own, lease, license, operate and use its properties and assets and to
conduct its business in the manner described in the Offering Memorandum,
except to the extent that the failure so to obtain or file would not,
singly or in the aggregate, have a Material Adverse Effect, (ii) all such
Authorizations are or will be valid and in full force and effect except to
the extent that the failure to be valid and in full force and effect would
not, whether singly or in the aggregate, have a Material Adverse Effect and
(iii) the Operative Entities are in compliance with the terms and
conditions of all such Authorizations and with the rules and regulations of
the regulatory authorities and governing bodies having jurisdiction with
respect thereto except to the extent that such failure to comply would not,
singly or in the aggregate, have a Material Adverse Effect.
(ff) Each of the Company, LFC and the Operating Subsidiary is in
compliance in all material respects with all presently applicable
provisions of the Employee Retirement Income Security Act of 1974, as
amended, including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has occurred with
respect to any "pension plan" (as defined in ERISA) for which the Company,
LFC or the Operating Subsidiary would have any liability; none of the
Company, LFC or the Operating Subsidiary has incurred nor does it expect to
incur liability, whether as a result of the Transactions or otherwise,
under (i) Title IV of ERISA with respect to termination of, or withdrawal
from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "Code"); and each "pension plan" for which
the Company, LFC or the Operating Subsidiary would have any liability,
whether as a result of the Transactions or otherwise, that is intended to
be qualified under Section 401(a) of the Code is so qualified in all
material respects and, to the knowledge of the Company, LFC or the
Operating Subsidiary, nothing has occurred, whether by action or by failure
to act, which would cause the loss of such qualification.
(gg) No organized labor disturbance by the employees of the
Operative Entities exists or, to the knowledge of the Company, LFC or the
Operating Subsidiary, is imminent which could reasonably be expected to
have a Material Adverse Effect.
(hh) Each of the Operative Entities has filed all federal, state
and local income and franchise tax returns required to be filed through the
date hereof and have paid, or made adequate reserve or provision for the
payment of, all taxes due thereon, and
12
<PAGE>
no tax deficiency has been determined adversely to any of the Operative
Entities which has had (nor does the Company, LFC or the Operating
Subsidiary have any knowledge of any tax deficiency which, if determined
adversely to any of the Operative Entities, might have) a Material Adverse
Effect, except as set forth or contemplated in the Preliminary Offering
Memorandum, as of its date, or the Offering Memorandum.
(ii) Each of the Operative Entities (i) makes and keeps accurate
books and records and (ii) maintains internal accounting controls which
provide reasonable assurance that (A) transactions are executed in
accordance with management's authorization, (B) transactions are recorded
as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D) the
reported accountability for their assets is compared with existing assets
at reasonable intervals.
(jj) None of the Company, LFC or the Operating Subsidiary, nor,
to the knowledge of the Company, LFC or the Operating Subsidiary, any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company, LFC or the Operating Subsidiary, has used
any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any provision
of the Foreign Corrupt Practices Act of 1977; or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment.
(kk) None of the Company, LFC or the Operating Subsidiary is, or
will be upon the issuance and sale of the Notes and the application of net
proceeds therefrom as described in the Offering Memorandum, an "investment
company" within the meaning of such term under the Investment Company Act
of 1940 and the rules and regulations of the Commission thereunder.
(ll) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Senior Subordinated Notes are
listed on any national securities exchange registered under Section 6 of
the Exchange Act or quoted on an automated inter-dealer quotation system.
(mm) None of the Company, its affiliates (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")) or any
person acting on its or their behalf, has, directly or through any agent
(provided that no representation is made as to the Initial Purchasers or
any person acting on their behalf), (i) sold, offered for sale, solicited
offers to buy or otherwise negotiated in respect of, any security (as
defined in the Securities Act) that is or will be integrated with the
offering and sale of the Senior Subordinated Notes in a manner that would
require the registration of the Senior Subordinated Notes under the
Securities Act or (ii) engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with
the offering of the Senior Subordinated Notes.
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<PAGE>
(nn) None of the Company, its affiliates or any person acting on
their behalf, has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act ("Regulation S")) with
respect to the Notes and the Company and its affiliates and any person
acting on its or their behalf have complied with the offering restrictions
requirement of Regulation S provided that no representation is made as to
the Initial Purchasers or any person acting on their behalf.
(oo) Neither the Company nor any of its affiliates has taken, nor
will take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in stabilization or manipulation
of the price of the Senior Subordinated Notes.
(pp) Each of the Preliminary Offering Memorandum, together with
any amendment or supplement thereto, and the Final Offering Memorandum,
together with any amendment or supplement thereto, as of their respective
dates, contain the information specified in, and meet the requirements of,
Rule 144A(d)(4) under the Act.
(qq) None of the Company, LFC or the Operating Subsidiary has
taken, and none of them will take, any action that might cause this
Agreement or the issuance or sale of the Notes or the Subsidiary Guarantees
to violate Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System or analogous foreign laws and regulations.
2. Purchase of the Senior Subordinated Notes by the Initial
Purchasers.
On the basis of the representations and warranties contained in, and
subject to the terms and conditions of, this Agreement, the Company agrees to
sell to the Initial Purchasers and each of the Initial Purchasers severally and
not jointly agrees to purchase from the Company, the principal amount of Senior
Subordinated Notes as set forth opposite each Initial Purchaser's name on
Schedule I hereto, at a purchase price equal to 97% of the principal amount
thereof.
The Company shall not be obligated to deliver any of the Senior
Subordinated Notes to be delivered except upon payment for all the Senior
Subordinated Notes to be purchased as provided herein or in the Offering
Memorandum.
3. Sale and Resale of the Senior Subordinated Notes by the Initial
Purchasers.
Each of the Initial Purchasers represents and warrants to the Company
that it will offer the Senior Subordinated Notes for resale only upon the terms
and conditions set forth in this Agreement and in the Offering Memorandum. Each
of the Initial Purchasers hereby represents and warrants to, and agrees with,
the Company that such Initial Purchaser (i) is an institutional Accredited
Investor within the meaning of Rule 501 under the Securities Act, (ii) is
purchasing the Senior Subordinated Notes pursuant to a private sale exempt from
registration under the Securities Act, (iii) will not solicit offers for, or
offer or sell, the Senior Subordinated Notes by means of any form of general
solicitation or general advertising or in any manner involving a
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<PAGE>
public offering within the meaning of Section 4(2) of the Securities Act, and
(iv) will solicit offers for the Senior Subordinated Notes only from, and will
offer, sell or deliver the Senior Subordinated Notes, as part of their initial
offering, only to (A) persons in the United States whom the Initial Purchaser
reasonably believes to be qualified institutional buyers ("Qualified
Institutional Buyers") as defined in Rule 144A under the Securities Act, as such
rule may be amended from time to time ("Rule 144A") or, if any such person is
buying for one or more institutional accounts for which such person is acting as
fiduciary or agent, only when such person has represented to the Initial
Purchaser that each such account is a Qualified Institutional Buyer, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A, (B) to a limited number of other institutional accredited investors
("Accredited Investors") as defined in Rule 501(a)(1)(2), (3) or (7), in the
case of (A) and (B), in transactions under Rule 144A or Regulation D in private
sales exempt from registration under the Securities Act and (C) outside the
United States to persons other than U.S. persons (as defined in Regulation S) in
reliance on Regulation S.
4. Delivery of and Payment for the Senior Subordinated Notes.
Delivery of and payment for the Senior Subordinated Notes shall be
made at the office of Willkie Farr & Gallagher, Citicorp Center, 153 E. 53rd
Street, New York, NY 10022, at 10:00 A.M., New York City time, on January 24,
1997 or at such other date or place as shall be determined by agreement between
the Initial Purchasers and the Company. This date and time are sometimes
referred to as the "Closing Date." On the Closing Date, the Company shall
deliver or cause to be delivered the Senior Subordinated Notes to the Initial
Purchasers for the account of the Initial Purchasers against payment to or upon
the order of the Company of the purchase price by wire transfer in federal
(same-day) funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of the Initial Purchasers hereunder. Upon delivery, except for the
Temporary Regulation S Global Note, which shall be in temporary form, the Senior
Subordinated Notes shall be in definitive fully registered form and registered
in such names and in such denominations as the Initial Purchasers shall request
in writing not less than two full business days prior to the Closing Date. For
the purpose of expediting the checking and packaging of the Senior Subordinated
Notes, the Company shall make the Senior Subordinated Notes available for
inspection by the Initial Purchasers in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the Closing Date.
5. Further Agreements of the Company. The Company agrees:
(a) To furnish to the Initial Purchasers, without charge, as
many copies of the Preliminary Offering Memorandum and the Final Offering
Memorandum and any supplements and amendments thereto as they may
reasonably request.
(b) Prior to making any amendment or supplement to the Offering
Memorandum, the Company shall furnish a copy thereof to the Initial
Purchasers and counsel to the Initial Purchasers and will not effect any
such amendment or supplement to which the Initial Purchasers shall
reasonably object by notice to the Company after a reasonable period to
review.
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(c) If, at any time prior to completion of the distribution of
the Senior Subordinated Notes by the Initial Purchasers to purchasers, any
event shall occur or condition exist as a result of which it is necessary,
in the opinion of counsel for the Initial Purchasers or counsel for the
Company, to amend or supplement the Offering Memorandum in order that the
Offering Memorandum will not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein not misleading in light of the circumstances existing at the time
it is delivered to a purchaser, or if it is necessary to amend or
supplement the Offering Memorandum to comply with applicable law, to
promptly prepare such amendment or supplement as may be necessary to
correct such untrue statement or omission or so that the Offering
Memorandum, as so amended or supplemented, will comply with applicable law
and to furnish to the Initial Purchasers such number of copies as they may
reasonably request.
(d) So long as any Senior Subordinated Notes are outstanding and
are "Restricted Securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to furnish to holders of the Senior Subordinated Notes and
prospective purchasers of Senior Subordinated Notes designated by such
holders, upon request of such holders or such prospective purchasers, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
(e) For a period of five years following the Closing Date, to
furnish to the Initial Purchasers copies of any annual reports, quarterly
reports and current reports filed with the Commission on Forms 10-K, 10-Q
and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports and information as shall be
furnished by the Company to the Trustee or to the holders of the Notes
pursuant to the Indenture.
(f) To use its reasonable best efforts to qualify the Notes for
sale under the securities or Blue Sky laws of such jurisdictions as the
Initial Purchasers reasonably designate and to continue such qualifications
in effect so long as required for the distribution of the Notes. The
Company will also arrange for the determination of the eligibility for
investment of the Notes under the laws of such jurisdictions as the Initial
Purchasers reasonably request. Notwithstanding the foregoing, the Company
shall not be obligated to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to file a general consent
to service of process in any jurisdiction.
(g) To use its reasonable best efforts to permit the Senior
Subordinated Notes to be designated Private Offerings, Resales and Trading
through Automated Linkages Market ("PORTAL") securities in accordance with
the rules and regulations adopted by the National Association of Securities
Dealers, Inc. relating to trading in the PORTAL market and to permit the
Senior Subordinated Notes to be eligible for clearance and settlement
through The Depository Trust Company ("DTC").
(h) Not to, and will cause its affiliates not to, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the
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Securities Act) in a transaction that could be integrated with the sale of
the Senior Subordinated Notes in a manner which would require the
registration under the Securities Act of the Senior Subordinated Notes.
(i) Except following the effectiveness of any Registration
Statement (as defined in the Registration Rights Agreement) and except for
such offers as may be made as a result of, or subsequent to, filing such
Registration Statement or amendments thereto prior to the effectiveness
thereof, not to, and will cause its affiliates not to, solicit any offer to
buy or offer to sell the Senior Subordinated Notes by means of any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
(j) To apply the net proceeds from the sale of the Senior
Subordinated Notes as set forth in the Offering Memorandum.
(k) To take such steps as shall be necessary to ensure that
neither the Company nor any Subsidiary shall become an "investment company"
within the meaning of such term under the Investment Company Act and the
rules and regulations of the Commission thereunder.
(l) To do all things necessary to satisfy the closing conditions
set forth in Section 7 hereof.
(m) As promptly as practicable following the Closing Date to
take such action as shall be necessary to duly qualify each of the Company
and its subsidiaries to do business and to be in good standing as a foreign
corporation in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such qualification.
6. Expenses. The Company agrees to pay (a) the costs incident to
the authorization, issuance, sale and delivery of the Notes and any duties and
taxes payable in that connection; (b) the costs incident to the preparation and
printing of the Preliminary Offering Memorandum and the Offering Memorandum and
any amendments and exhibits thereto; (c) the costs of distributing the
Preliminary Offering Memorandum and the Final Offering Memorandum and any
amendment or supplement thereto or any document incorporated by reference
therein; (d) the costs of reproducing and distributing the Operative Agreements;
(e) the fees and expenses of qualifying the Notes under the securities laws of
the several jurisdictions as provided in Section 5(f) and of preparing, printing
and distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Initial Purchasers); (f) the costs incident to the preparation,
printing and delivery of the certificates representing the Notes; (g) the fees
and disbursements of the Company's counsel and accountants; (h) the fees and
expenses of the Trustee and any agent of the Trustee and the fees and
disbursements of any counsel for the Trustee in connection with the Notes, the
Indenture and any other Operative Agreements to which the Trustee is a party;
(i) the fees paid to rating agencies in connection with the rating of the Notes;
(j) the costs and expenses of DTC and its nominee, including its book-entry
system, (k) all expenses and listing fees incurred
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<PAGE>
in connection with the application for quotation of the Senior Subordinated
Notes on the PORTAL market; and (l) all other costs and expenses incident to the
performance of the obligations of the Company under this Agreement provided
that, except as provided in this Section 6(e) and in Section 10, the Initial
Purchasers shall pay their own costs and expenses, including the costs and
expenses of their counsel.
7. Conditions of Initial Purchasers' Obligations.
The respective obligations of the Initial Purchasers hereunder are
subject to the following terms and conditions:
(a) No Initial Purchaser shall have discovered and disclosed to
the Company on or prior to the Closing Date that the Offering Memorandum,
or any amendment or supplement thereto, contains an untrue statement of a
fact which, in the opinion of Willkie Farr & Gallagher, counsel for the
Initial Purchasers, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated therein
or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) All of the representations and warranties of the Company,
LFC and the Operating Subsidiary contained in this Agreement shall be true
and correct on the date hereof and on the Closing Date with the same force
and effect as if made on and as of the date hereof and the Closing Date,
respectively. The Company, LFC and the Operating Subsidiary shall have
performed or complied in all material respects with all of the agreements
herein contained and required to be performed or complied with by them at
or prior to the Closing Date.
(c) The Final Offering Memorandum shall have been printed and
copies distributed to the Initial Purchasers not later than 10:00 a.m., New
York City time, on the business day following the date of this Agreement or
at such later date and time as to which the Initial Purchasers may agree,
and no stop order suspending the qualification or exemption from
qualification of the Senior Subordinated Notes in any jurisdiction referred
to in Section 5(f) shall have been issued and no proceeding for that
purpose shall have been commenced or shall be pending or threatened.
(d) All corporate proceedings and other legal matters incident
to the authorization, form and validity of all of the Operative Agreements,
the Notes, the Offering Memorandum and all other legal matters relating to
this Agreement and the transactions contemplated hereby shall be
satisfactory in all material respects to counsel for the Initial
Purchasers, and the Company, LFC and the Operating Subsidiary shall have
furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(e) Weil, Gotshal & Manges LLP, counsel for the Company, LFC and
the Operating Subsidiary, shall have furnished to the Initial Purchasers
its written opinion, as counsel to the Company, LFC and the Operating
Subsidiary, addressed to the Initial
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<PAGE>
Purchasers and dated the Closing Date, substantially in the form set forth
in Schedule II hereto.
(f) You shall have received on the Closing Date a letter from
Davis Polk & Wardwell granting permission to the Initial Purchasers to rely
on opinion delivered pursuant to Section 9.2(c) of the Contribution
Agreement.
(g) You shall have received on the Closing Date a letter from
the General Counsel of Borg-Warner Corporation granting permission to the
Initial Purchasers to rely on opinions delivered pursuant to Section 9.2(d)
of the Contribution Agreement.
(h) You shall have received on the Closing Date a letter from
Prickett, Jones, Elliott, Kristol and Schnee granting permission to the
Initial Purchasers to rely on opinions delivered pursuant to Section 9.3(d)
of the Contribution Agreement.
(i) You shall have received on the Closing Date an opinion of
Willkie Farr & Gallagher, counsel for the Initial Purchasers, dated the
Closing Date and addressed to you, in form and substance reasonably
satisfactory to you.
(j) You shall have received on the Closing Date letters from
Weil, Gotshal & Manges LLP granting permission to the Initial Purchasers to
rely on opinions delivered pursuant to Section 5.1 of the Credit Agreement,
dated as of January 1997, among the Company, Lehman Commercial Paper Inc.,
NationsBanc Capital Markets, Inc. and Nationsbank of Texas, N.A.
(k) [Reserved.]
(l) With respect to the letters of Ernst & Young LLP and
Deloitte & Touche LLP delivered to the Initial Purchasers concurrently with
the execution of this Agreement (the "initial letter"), the Company shall
have furnished to the Initial Purchasers a letter (as used in this
paragraph, the "bring-down letter") of each of such accountants, addressed
to the Initial Purchasers and dated the Closing Date (i) confirming that
they are independent public accountants under the guidelines of the AICPA,
(ii) stating, as of the date of the bring-down letter, the conclusions and
findings of such firm with respect to the financial information and other
matters covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.
(m) The Company, the Guarantors party thereto and the Trustee
shall have entered into the Indenture and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
(n) [Reserved.]
(o) The Company, the Guarantors and the Initial Purchasers shall
have entered into the Registration Rights Agreement and the Initial
Purchasers shall have received counterparts, conformed as executed,
thereof.
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(p) The Company, the Guarantors and each other party thereto
shall have entered into the New Credit Facility and the Initial Purchasers
shall have received counterparts, conformed as executed, thereof and of all
other documents and agreements entered into in connection therewith,
including without limitation, the Senior Guarantees and at least $32.4
million shall be available for borrowing under the New Credit Facility.
(q) The Company, LFC, the Operating Subsidiary and each other
party thereto shall have entered into the Contribution Agreement and the
Initial Purchasers shall have received counterparts, conformed as executed,
thereof and of all other documents and agreements entered into in
connection therewith, including without limitation, the Stockholders
Agreement.
(r) The Company and the Operating Subsidiary shall have obtained
such cargo, automobile and general liability insurance as described in the
Offering Memorandum and such insurance shall be in full force and effect on
the Closing Date.
(s) All material conditions set forth in Article IX of the
Contribution Agreement shall have been satisfied.
(t) The consummation of the Transactions shall have occurred
concurrently with the purchase and sale hereunder.
(u) The Federal Reserve Bank of New York shall have informed the
Company that there shall be no interruption in the business of the Company
or its subsidiaries as a result of the Transactions.
(v) The Company, LFC and the Operating Subsidiary shall have
each furnished to the Initial Purchasers a certificate, dated the Closing
Date, of its Chairman of the Board or President and its Chief Financial
Officer stating that:
(i) the representations and warranties of the Company,
LFC and the Operating Subsidiary, as applicable, in Section 1 are true
and correct on the Closing Date with the same force and effect as if
made on the Closing Date; the Company, LFC and the Operating
Subsidiary, as applicable, have performed or complied in all material
respects with all their respective agreements contained herein; and
the conditions set forth in Section 7 have been fulfilled in all
material respects; and
(ii) the has reviewed the Offering Memorandum and, in his
opinion (A) as of the Closing Date, the Offering Memorandum did not
include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and (B) since the date of the Offering
Memorandum no event has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum and was not so set
forth.
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(w) (i) None of the Operative Entities shall have sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Offering Memorandum losses or
interferences with their businesses from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any organized labor
dispute or court or governmental action, order or decree, otherwise than as
set forth or contemplated in the Offering Memorandum or (ii) since such
date there shall not have been any change in the capital stock or long-term
debt of the Operative Entities or any change, or any development involving
a prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Operative Entities, taken as a whole, otherwise than as set forth or
contemplated in the Offering Memorandum, the effect of which, in any such
case described in clause (i) or (ii), is, in the reasonable judgment of the
Initial Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Senior
Subordinated Notes being delivered on the Closing Date on the terms and in
the manner contemplated herein or in the Offering Memorandum.
(x) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, have a Material
Adverse Effect; no action, suit or proceeding shall have been commenced and
be pending against or affecting or, to the best knowledge of the Company,
threatened against, the Company, LFC or the Operating Subsidiary or any of
the assets or operations to be acquired in the Transactions before any
court or arbitrator or any governmental body, agency or official that, if
adversely determined, could reasonably be expected to result in a Material
Adverse Effect; and no stop order shall have been issued by the Commission
or any governmental agency of any jurisdiction referred to in Section 5(f)
preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or which could reasonably be expected to have a
Material Adverse Effect.
(y) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American Stock
Exchange or in the over-the-counter market shall have been suspended or
materially limited, or minimum prices shall have been established on such
exchange by the Commission, or by such exchange or by any other regulatory
body or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by Federal or state authorities, (iii)
the United States shall have become engaged in hostilities, there shall
have been an escalation in hostilities involving the United States or there
shall have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse change in
general economic, political or financial conditions (or the effect of
international conditions on the financial markets in the United States
shall be such) as to make it, in the reasonable judgment of the Initial
Purchasers, impracticable or inadvisable to proceed with the offering or
delivery of the Senior Subordinated Notes being delivered on the Closing
Date on the terms and in the manner contemplated in the Offering
Memorandum.
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(z) Subsequent to the execution and delivery of this Agreement,
(i) no downgrading shall have occurred in the rating accorded the Senior
Subordinated Notes by a nationally recognized statistical rating
organization, as that term is defined by the Commission for purposes of
Rule 436(g)(2) of the rules and regulations of the Commission (the "Rules
and Regulations"), and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible negative
implications, its rating of any of the Senior Subordinated Notes.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
8. Indemnification and Contribution.
(a) The Company, LFC and the Operating Subsidiary, jointly and
severally, agree to indemnify and hold harmless each Initial Purchaser and
each person, if any, who controls any Initial Purchaser within the meaning
of the Securities Act or the Securities Exchange Act of 1934 (the "Exchange
Act"), from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to,
any loss, claim, damage, liability or action relating to purchases and
sales of Senior Subordinated Notes), to which such Initial Purchaser or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises
out of, or is based upon, (i) any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Offering
Memorandum or Final Offering Memorandum or in any amendment or supplement
thereto, (ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading or (iii) any act or failure to act or any alleged act or failure
to act by any Initial Purchaser in connection with, or relating in any
manner to, the Notes or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon matters covered by clause (i) or (ii)
above (provided that the Company, LFC and the Operating Subsidiary shall
not be liable under this clause (iii) to the extent that it is determined
in a final judgment by a court of competent jurisdiction that such loss,
claim, damage, liability or action resulted directly from any such acts or
failures to act undertaken or omitted to be taken by such Initial Purchaser
through its gross negligence or willful misconduct), and shall reimburse
each Initial Purchaser and each such controlling person promptly upon
demand for any legal or other expenses reasonably incurred by that Initial
Purchaser or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that
the Company, LFC and the Operating Subsidiary shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Offering Memorandum or Final Offering Memorandum or in any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company, LFC
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<PAGE>
and the Operating Subsidiary by or on behalf of any Initial Purchaser
specifically for inclusion therein. The foregoing indemnity agreement is in
addition to any liability which the Company, LFC and the Operating
Subsidiary may otherwise have to any Initial Purchaser or to any
controlling person of such Initial Purchaser.
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless each of the Company, LFC and the Operating
Subsidiary, each of their respective directors, each of their respective
officers and each person, if any, who controls either the Company, LFC or
the Operating Subsidiary within the meaning of the Securities Act or the
Exchange Act, from and against any loss, claim, damage or liability, joint
or several, or any action in respect thereof, to which either the Company,
LFC, the Operating Subsidiary or any such director, officer or controlling
person may become subject, under the Securities Act or otherwise, insofar
as such loss, claim, damage, liability or action arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Final Offering
Memorandum, or in any amendment or supplement thereto or (ii) the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, but in each case
only to the extent that the untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company, LFC and the Operating
Subsidiary by or on behalf of that Initial Purchaser specifically for
inclusion therein, and shall reimburse the Company, LFC and the Operating
Subsidiary and any such director, officer or controlling person for any
legal or other expenses reasonably incurred by the Company, LFC and the
Operating Subsidiary or any such director, officer or controlling person in
connection with investigating or defending or preparing to defend against
any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which any Initial Purchaser may otherwise have to the Company, LFC and the
Operating Subsidiary or any such director, officer or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 8 except to the extent it has been materially prejudiced by such
failure and, provided further, that the failure to notify the indemnifying
party pursuant to this Section 8 shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section
8. If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to
assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the
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indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided,
however, that any indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof but
the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment thereof has been specifically
authorized by the indemnifying party in writing, (ii) such indemnified
party shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional to
those available to the indemnifying party and in the reasonable judgment of
such counsel it is advisable for such indemnified party to employ separate
counsel or (iii) the indemnifying party has failed to assume the defense of
such action and employ counsel reasonably satisfactory to the indemnified
party, in which case, if such indemnified party notifies the indemnifying
party in writing that it elects to employ separate counsel at the expense
of the indemnifying party, the indemnifying party shall not have the right
to assume the defense of such action on behalf of such indemnified party,
it being understood, however, that the indemnifying party shall not, in
connection with any one such action or separate but substantially similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (and local counsel) at
any time for all such indemnified parties, which firm shall be designated
in writing by the Initial Purchasers, if the indemnified parties under this
Section 8 consist of the Initial Purchasers or any of their controlling
persons, or by the Company, if the indemnified parties under this Section 8
consist of the Company, LFC, the Operating Subsidiary or any of their
respective directors, officers or controlling persons. Each indemnified
party, as a condition of the indemnity agreements contained in Sections
8(a) and 8(b), shall use its best efforts to cooperate with the
indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there
be a final judgment of the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss, claim,
damage or liability, or any action in respect thereof, referred to therein,
then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate
to reflect the relative benefits received by the Company, LFC and the
Operating Subsidiary on the one hand and the Initial Purchasers on the
other from the offering of the Senior Subordinated Notes or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company, LFC and the Operating Subsidiary on the
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<PAGE>
one hand and the Initial Purchasers on the other with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company,
LFC and the Operating Subsidiary on the one hand and the Initial Purchasers
on the other with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the Senior
Subordinated Notes purchased under this Agreement (before deducting
expenses) received by the Company, on the one hand, and the total
underwriting discounts and commissions received by the Initial Purchasers
with respect to the Senior Subordinated Notes purchased under this
Agreement, on the other hand, bear to the total gross proceeds from the
offering of the Senior Subordinated Notes under this Agreement, in each
case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault shall be determined by reference to whether
the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied
by the Company, LFC and the Operating Subsidiary or the Initial Purchasers,
the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The Company, LFC, the Operating Subsidiary and the Initial
Purchasers agree that it would not be just and equitable if contributions
pursuant to this Section 8(d) were to be determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, damage or liability,
or action in respect thereof, referred to above in this Section 8(d) shall
be deemed to include, for purposes of this Section 8(d), any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at
which the Senior Subordinated Notes purchased by it and sold to investors
in exempt resales exceeds the amount of any damages which such Initial
Purchaser has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11 of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(e) The parties hereto confirm and agree that the statements
with respect to the offering of the Senior Subordinated Notes set forth in
the last paragraph on the cover page, the stabilization legend on the
inside cover page and under the caption "Plan of Distribution" in the
Offering Memorandum constitute the only information furnished in writing to
the Company by or on behalf of the Initial Purchasers specifically for
inclusion in the Offering Memorandum.
9. Termination.
(a) The obligations of the Initial Purchasers hereunder may be
terminated by the Initial Purchasers by notice given to and received by the
Company prior to delivery of and payment for the Senior Subordinated Notes
if, prior to that time, any of the events described in Sections 7(w) and
7(y) shall have occurred or if the Initial
25
<PAGE>
Purchasers shall decline to purchase the Senior Subordinated Notes for any
reason permitted under this Agreement.
(b) If, on the Closing Date, the Initial Purchasers shall
default in the performance of their obligations under this Agreement, this
Agreement shall terminate without liability on the part of the Company, LFC
and the Operating Subsidiary, except that the Company will continue to be
liable for the payment of expenses to the extent set forth in Section 6 and
except that the provisions of Section 8 shall not terminate and shall
remain in full force and effect.
10. Reimbursement of Initial Purchasers' Expenses. If (a) the
Company, LFC or the Operating Subsidiary shall fail or refuse to comply with the
terms or to fulfill any of the conditions of this Agreement or (b) the Initial
Purchasers shall decline to purchase the Senior Subordinated Notes for any
reason permitted under this Agreement (other than termination of this Agreement
pursuant to Section 7(w) or 7(y)), the Company shall reimburse the Initial
Purchasers for the reasonable fees and expenses of its counsel and for such
other out-of-pocket expenses as shall have been incurred by them in connection
with this Agreement and the proposed purchase of the Senior Subordinated Notes,
and upon demand the Company shall pay the full amount thereof to the Initial
Purchasers.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchasers, shall be delivered or sent by
mail, telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate Department
(Fax: 212-528-8822), with a copy to Willkie Farr & Gallagher, 153 East 53rd
Street, New York, New York 10022, Attention: John S. D'Alimonte (Fax: 212-
821-8111);
(b) if to the Company, LFC or the Operating Subsidiary, shall be
delivered or sent by mail, telex or facsimile transmission to the address
of the Company set forth in the Offering Memorandum, Attention: Chief
Financial Officer (Fax: 713-647-5697) with a copy to Weil Gotshal and
Manges LLP, 100 Crescent Court, Suite 1300, Dallas, Texas 75201, Attention:
Mary R. Korby (Fax 214-746-7777);
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof. The Company shall be entitled to act and rely upon any
request, consent, notice or agreement given or made on behalf of the Initial
Purchasers.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchasers, the Company,
LFC and the Operating Subsidiary and their respective successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except that (A) the representations, warranties, indemnities and
agreements of the Company, LFC and the Operating Subsidiary contained in this
Agreement shall also be deemed to be for the benefit of the person or persons,
if any, who control any Initial Purchasers within the meaning of Section 15 of
the Securities Act or Section 20 of the
26
<PAGE>
Exchange Act and (B) the indemnity agreement of the Initial Purchasers contained
in Section 8(b) of this Agreement shall be deemed to be for the benefit of
directors of each of the Company, LFC and the Operating Subsidiary, officers of
each of the Company, LFC and the Operating Subsidiary and any person controlling
the Company, LFC or the Operating Subsidiary within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act. Nothing in this Agreement
is intended or shall be construed to give any person, other than the persons
referred to in this Section 12, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
13. Survival. The respective indemnities, representations,
warranties and agreements of the Company, LFC and the Operating Subsidiary and
the Initial Purchasers contained in this Agreement or made by or on behalf on
them, respectively, pursuant to this Agreement, shall survive the delivery of
and payment for the Senior Subordinated Notes and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of them or
any person controlling any of them.
14. Definition of the Terms "Business Day" and "Subsidiary." For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
27
<PAGE>
If the foregoing correctly sets forth the agreement between the
Company and the Initial Purchasers, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours.
LOOMIS, FARGO & CO.
By: /s/ James K. Jennings, Jr.
-----------------------------------
Name: James K. Jennings, Jr.
Title: Vice President
LOOMIS HOLDING CORPORATION
By: /s/ James K. Jennings, Jr.
-----------------------------------
Name: James K. Jennings, Jr.
Title: Vice President
LOOMIS ARMORED INC.
By: /s/ James K. Jennings, Jr.
-----------------------------------
Name: James K. Jennings, Jr.
Title: Vice President
Accepted:
LEHMAN BROTHERS INC.
By: /s/ Mark W. Filipski
------------------------------
Name: Mark W. Filipski
Title: Managing Director
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ William A. Bowen Jr.
-----------------------------
Name: William A. Bowen Jr.
Title: Senior V.P and Director
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION> Principal Amount of
Initial Purchaser Notes to be Purchased
- ----------------- ----------------------
<S> <C>
Lehman Brothers Inc. $ 72,250,000
NationsBanc Capital Markets, Inc. 12,750,000
----------------------
$ 85,000,000
======================
</TABLE>
29
<PAGE>
SCHEDULE II
Form of Opinion of Weil, Gotshal & Manges LLP
January 24, 1997
Lehman Brothers Inc.
NationsBanc Capital Markets, Inc.
c/o Lehman Brothers Inc.
Three Word Financial Center
New York, New York 10285
Ladies and Gentlemen:
We have acted as counsel to Loomis, Fargo & Co., a Delaware
corporation (the "Company"), Loomis Holding Corporation (to be renamed LFC
Holding Corporation), a Delaware corporation ("LFC"), and Loomis Armored Inc.
(to be renamed Loomis, Fargo & Co.), a Texas corporation (the "Operating
Subsidiary"), in connection with the preparation, authorization, execution and
delivery of the Purchase Agreement (the "Purchase Agreement"), dated January 17,
1997, entered into among the Company, LFC, and the Operating Subsidiary, and
Lehman Brothers Inc. and NationsBanc Capital Markets, Inc. (together, the
"Initial Purchasers"), and the consummation of the transactions contemplated
thereby, including the issuance and sale by the Company to the Initial
Purchasers of $85,000,000 aggregate principal amount of 10% Senior Subordinated
Notes due 2004 (the "Notes"). Capitalized terms defined in the Purchase
Agreement and used but not otherwise defined herein are used herein as so
defined in the Purchase Agreement.
In so acting, we have examined executed copies of the following:
(a) the Purchase Agreement;
(b) the Notes delivered on the Closing Date;
<PAGE>
(c) the Indenture (the "Indenture"), dated as of January 24, 1997,
among the Company, LFC, the Operating Subsidiary, Wells Fargo
Armored Service Corporation of Texas (to be renamed LFC Armored
of Texas Inc.), a Texas corporation ("LFC of Texas"), and Wells
Fargo Armored Service Corporation of Puerto Rico (to be renamed
Loomis, Fargo & Co. of Puerto Rico), a Tennessee corporation
("LFC of Puerto Rico"), and Marine Midland Bank, as trustee (the
"Trustee");
(d) the Registration Rights Agreement (the "Registration Rights
Agreement"), dated as of January 24, 1997, among the Company,
LFC, the Operating Subsidiary, LFC of Texas, LFC of Puerto Rico
and the Initial Purchasers;
(e) the Contribution Agreement (the "Contribution Agreement"), dated
as of November 28, 1996, among the Company, LFC, the Operating
Subsidiary, Wells Fargo Armored Service Corporation ("Wells Fargo
Armored"), Borg-Warner Security Corporation and the Loomis
Stockholders Trust;
(f) the Stockholders Agreement (the "Stockholders Agreement"), dated
as of January 24, 1997, among the Company, the Loomis
Stockholders Trust, Wells Fargo Armored and Wingate Partners,
L.P.; and
(g) the Credit Agreement (the "New Credit Facility"), dated as of
January 24, 1997, among the Company, the banks lenders thereto,
and Lehman Commercial Paper, Inc., NationsBanc Capital Markets,
Inc. and NationsBanc of Texas, N.A., as agents.
We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such corporate records, agreements, documents
and other instruments, and such certificates or comparable documents of public
officials and of officers and representatives of each of the Company, LFC and
the Operating Subsidiary and have made such inquiries of such officers and
representatives as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. As to all questions
of fact material to this opinion that have not been
2
<PAGE>
independently established, we have relied upon certificates or comparable
documents of officers and representatives of each of the Company, LFC and the
Operating Subsidiary and upon the representations and warranties of the Company
contained in the Purchase Agreement. As used herein "to our knowledge" or "of
which we are aware" means the conscious awareness of facts or other information
by any lawyer in our firm actively involved in negotiating the transactions
contemplated by the Operative Agreements.
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as described in the Final Offering Memorandum.
2. The authorized capital stock of the Company consists of
20,000,000 shares of common stock, $0.01 par value per share, and 1,000,000
shares of preferred stock, $0.01 par value per share. Upon consummation of the
Transactions, there will be 10,000,000 shares of common stock issued and
outstanding, and all of such outstanding shares of the Company's capital stock
will have been duly authorized and validly issued, and will be fully paid and
nonassessable.
3. Each of LFC and the Operating Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and the State of Texas, respectively, and each of LFC and the
Operating Subsidiary has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as described in
the Final Offering Memorandum. Upon consummation of the Transactions, all of the
outstanding shares of capital stock of LFC will be owned of record by the
Company, and all of the outstanding shares of capital stock of the Operating
Subsidiary will be owned of record by LFC, in each case free and clear, to our
knowledge, of all liens, claims, limitations on voting rights, options, security
interests and other encumbrances other than those arising from the New Credit
Facility and will have been duly authorized and validly issued, and will be
fully paid and nonassessable. To our knowledge, there are no outstanding or
authorized options, warrants, calls, subscriptions, rights, commitments or any
other agreements of any character obligating LFC or the Operating Subsidiary to
issue any shares of capital stock of LFC or the Operating Subsidiary or any
securities convertible into, exchangeable for or evidencing the right to
purchase or subscribe for any shares of such stock.
3
<PAGE>
4. To our knowledge and other than as set forth in the Final
Offering Memorandum, there is no litigation, proceeding or governmental
investigation pending or overtly threatened against the Company, LFC or the
Operating Subsidiary that, if determined adversely to the Company, LFC or the
Operating Subsidiary, would have a material adverse effect on the business,
operations or financial condition of the Company, LFC and the Operating
Subsidiary considered as a whole.
5. Each of the Company, LFC and the Operating Subsidiary has all
requisite corporate power and authority to execute and deliver the Purchase
Agreement and to perform its obligations thereunder. The execution, delivery and
performance of the Purchase Agreement by each of the Company, LFC and the
Operating Subsidiary and the consummation by each of the Company, LFC and the
Operating Subsidiary of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of each of the Company,
LFC and the Operating Subsidiary. The Purchase Agreement has been duly and
validly executed and delivered by each of the Company, LFC and the Operating
Subsidiary and (assuming the due authorization, execution and delivery thereof
by the Initial Purchasers) constitutes the legal, valid and binding obligation
of each of the Company, LFC and the Operating Subsidiary, enforceable against
each of them in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except that
rights to indemnification and contribution thereunder may be limited by federal
or state securities laws or public policy relating thereto.
6. Each of the Company, LFC and the Operating Subsidiary has all
requisite corporate power and authority to execute and deliver the Indenture and
to perform its obligations thereunder. The execution, delivery and performance
of the Indenture by each of the Company, LFC and the Operating Subsidiary and
the consummation by each of the Company, LFC and the Operating Subsidiary of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action on the part of each of the Company, LFC and the Operating
Subsidiary. The Indenture has been duly and validly executed and delivered by
each of the Company, LFC and the Operating Subsidiary and (assuming the due
authorization, execution and delivery thereof by the Trustee) constitutes the
legal, valid and binding obligation of each of the Company, LFC and the
Operation Subsidiary, enforceable against each of them in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general
4
<PAGE>
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
7. The Notes and the New Senior Subordinated Notes have been duly
authorized by the Company. The Notes, when executed by the Company and
authenticated by the Trustee in accordance with the terms of the Indenture and
delivered against receipt of payment therefor in accordance with the terms of
the Purchase Agreement, will be legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and
subject to the qualification that we express no opinion as to the effect on the
Notes of the laws of any jurisdiction other than federal law and the laws of the
States of New York and Texas wherein any purchaser of the Notes may be located
or wherein enforcement may be sought which limits the rate of interest legally
chargeable or collectible. Assuming that (i) authorization of the New Senior
Subordinated Notes had not been withdrawn and there had been no change in the
Certificate of Incorporation or Bylaws of the Company, (ii) the New Senior
Subordinated Notes were issued in the form attached to the Indenture as Exhibit
-------
A-3 on the date hereof, with no change in the form or content of the Indenture,
- ---
(iii) the Exchange Offer (as defined in, and contemplated by, the Registration
Rights Agreement) were completed on the date hereof in accordance with the
provisions and requirements of the Securities Act and the rules and regulations
promulgated thereunder and applicable interpretations thereof by the Securities
and Exchange Commission, (iv) the New Senior Subordinated Notes were duly
executed by the Company and authenticated by the Trustee, and (v) the New Senior
Subordinated Notes were duly delivered on the date hereof against receipt of
Notes surrendered in exchange therefor, the New Senior Subordinated Notes would
be legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and subject to the
qualification that we express no opinion as to the effect on the New Senior
Subordinated Notes of the laws of any jurisdiction other than federal law and
the laws of the States of New York and Texas wherein any purchaser of the Notes
may be located or wherein enforcement may be sought which limits the rate of
interest legally chargeable or collectible.
5
<PAGE>
8. Each of the Company, LFC and the Operating Subsidiary has all
requisite corporate power and authority to execute and deliver the Registration
Rights Agreement and to perform its respective obligations thereunder. The
execution, delivery and performance of the Registration Rights Agreement by each
of the Company, LFC and the Operating Subsidiary and the consummation by each of
the Company, LFC and the Operating Subsidiary of the transactions contemplated
thereby have been duly authorized by all necessary corporate action on the part
of each of the Company, LFC and the Operating Subsidiary. The Registration
Rights Agreement has been duly and validly executed and delivered by each of the
Company, LFC and the Operating Subsidiary and (assuming the due authorization,
execution and delivery thereof by the Initial Purchasers) constitutes the legal,
valid and binding obligations of each of the Company, LFC and the Operating
Subsidiary, enforceable against each of them in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except that rights to indemnification and contribution thereunder
may be limited by federal or state securities laws or public policy relating
thereto.
9. Each of the Company, LFC and the Operation Subsidiary has all
requisite corporate power and authority to execute and deliver the Contribution
Agreement and to perform its respective obligations thereunder. The execution,
delivery and performance of the Contribution Agreement by each of the Company,
LFC and the Operation Subsidiary and the consummation by each of the Company,
LFC and the Operating Subsidiary of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of each of
the Company, LFC and the Operation Subsidiary. The Contribution Agreement has
been duly and validly executed and delivered by each of the Company, LFC and the
Operating Subsidiary and (assuming the due authorization, execution and delivery
thereof by each of the other parties thereto) constitutes the legal, valid and
binding obligations of each of the Company, LFC and the Operating Subsidiary,
enforceable against each of them in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
10. The Company has all requisite corporate power and authority to
execute and deliver the Stockholders Agreement and to perform its obligations
thereunder. The execution, delivery and performance of the Stockholders
Agreement by the Company and the
6
<PAGE>
consummation by the Company of the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of the Company.
The Stockholders Agreement has been duly and validly executed and delivered by
the Company and (assuming the due authorization, execution and delivery thereof
by each of the other parties thereto) constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity)
11. The Notes, the Indenture, the Subsidiary Guarantees, the
Registration Rights Agreement, the New Credit Facility, the Contribution
Agreement and the Stockholders Agreement conform in all material respects as to
legal matters to the descriptions thereof contained in the Final Offering
Memorandum.
12. The execution and delivery of the Purchase Agreement, the
Indenture, the Notes, the Subsidiary Guarantees, the Registration Rights
Agreement, the Contribution Agreement and the Stockholders Agreement, the
consummation of the transactions contemplated thereby and compliance by each of
the Company, LFC and the Operating Subsidiary with any of the provisions thereof
will not conflict with, result in a breach of, constitute a default under or
violate (i) any of the terms, conditions or provisions of the charter or bylaws
of the Company, LFC or the Operating Subsidiary, (ii) any of the terms,
conditions or provisions of any material document, agreement or other material
instrument to which the Company, LFC or the Operating Subsidiary is a party or
by which the Company, LFC or the Operating Subsidiary is bound of which we are
aware, (iii) any New York, Texas, Delaware corporate or federal law or
regulation (other than federal securities laws or regulations, as to which we
express no opinion in this paragraph 12, or state securities or blue sky laws or
regulations, federal antitrust laws, state and local regulation of armored car
transport services, firearms or guard services, or the Federal Motor Carrier
Act, as to which we express no opinion) or (iv) any judgment, writ, injunction,
decree, order or ruling of any court or governmental authority binding on the
Company, LFC or the Operating Subsidiary of which we are aware.
13. No consent, approval, waiver, license or authorization or other
action by or filing with any New York, Texas, Delaware corporate or federal
governmental authority is required in connection with the execution and delivery
by the Company, LFC or the Operating Subsidiary of the Purchase Agreement, the
Indenture, the Subsidiary Guarantees, the Registration Rights Agreement and the
Stockholders Agreement or the consummation by each of the Company, LFC and the
Operating Subsidiary of the
7
<PAGE>
transactions contemplated thereby, except (i) those already obtained or made,
(ii) those required by federal securities laws or regulations, as to which we
express no opinion in this paragraph 13, and (iii) those required by state
securities or blue sky laws or regulations, state and local regulation of
armored car transport services, firearms or guard services, or the Federal Motor
Carrier Act, as to which we express no opinion.
14. Assuming the representations of the Initial Purchasers contained
in the Purchase Agreement are true, correct and complete and assuming compliance
by the Initial Purchasers with their covenants set forth in the Purchase
Agreement, it is not necessary in connection with the offer, sale and delivery
of the Notes to the Initial Purchasers pursuant to the Purchase Agreement or the
resales of the Notes by the Initial Purchasers in the manner contemplated by the
Purchase Agreement to register the Notes under the Securities Act, or to qualify
the Indenture under the Trust Indenture Act.
15. Each of the Company, LFC and the Operating Subsidiary is not and,
after giving effect to the issuance and sale of the Notes in accordance with the
terms of the Purchase Agreement and the application of the net proceeds
therefrom on substantially the terms described in the Final Offering Memorandum
under the caption "Use of Proceeds," will not be an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
We have participated in conferences with directors, officers and other
representatives of the Company, representatives of the independent public
accountants for the Company, representatives of the Initial Purchasers and
representatives of counsel for the Initial Purchasers, at which conferences the
contents of the Final Offering Memorandum and related matters were discussed,
and, although we have not independently verified and are not passing upon and
assume no responsibility for the accuracy, completeness or fairness of the
statements contained in the Final Offering Memorandum (except as specifically
set forth in paragraph 11 above), no facts have come to our attention that lead
us to believe that the Final Offering Memorandum, on the date thereof or on the
date hereof, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (it being understood
that we express no view with respect to the financial statements and related
notes, and the other financial, statistical and accounting data included in the
Final Offering Memorandum).
The opinions expressed herein are limited to the laws of the States of
New York and Texas, the corporate laws of the State of Delaware and the federal
laws of the United States, and we express no opinion as to the effect on
the matters covered by this letter of the laws of any other jurisdiction.
8
<PAGE>
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. Those opinions may not be
used or relied upon by any other person, nor may this letter or any copies
thereof be furnished to a third party, filed with a governmental agency, quoted,
cited or otherwise referred to without our prior written consent; provided,
--------
however, that the opinions expressed herein may be relied upon by Marine Midland
- -------
Bank, as Trustee under the Indenture, as if they were addressed and delivered to
them.
Very truly yours,
9
<PAGE>
EXHIBIT 10.3
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is entered into and
effective as of January 24, 1997, by and among Loomis, Fargo & Co., a Delaware
corporation (the "Company"), Wells Fargo Armored Service Corporation, a Delaware
corporation ("Wells Fargo"), Loomis Stockholders Trust, a Delaware business
trust (the "Loomis Stockholders Trust"), Wingate Partners, L.P., a Delaware
limited partnership ("Wingate"), and any other Person who may become a party
hereto in the future by means of an Instrument of Accession substantially in the
form of Exhibit A attached hereto.
---------
SECTION 1. Definitions.
-----------
(a) In addition to the terms defined elsewhere in this Agreement, for
purposes of this Agreement, except as otherwise set forth herein, the following
terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with that Person; provided, however, that for purposes hereof the term
-------- -------
"Affiliate" shall not include any limited partner of Wingate Partners, L.P., a
Delaware limited partnership, or United Stationers Inc., a Delaware corporation
("United Stationers"), or any of their respective Subsidiaries.
"Change of Control" means, with respect to any Person, the occurrence of
any of the following events:
(i) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all of the
assets of any Person and its Subsidiaries to any other Person or group of
related Persons for purposes of Section 13(d) of the Exchange Act (a
"Group"), other than to Merrill Lynch & Co., Inc. or any of its Affiliates;
(ii) a majority of the board of directors of such Person shall
consist of Persons who are not Continuing Directors of such Person; or
(iii) the acquisition by any Person or Group, other than Merrill
Lynch & Co., Inc. or any of its Affiliates, of the power, directly or
indirectly,
<PAGE>
to vote or direct the voting of securities having more than 50% of the
ordinary voting power for the election of directors of such Person.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company, and any other class or series of capital stock issued by the Company
which has the unlimited right to participate in dividends and distributions upon
liquidation of the Company, and any voting security into which the then
outstanding Common Stock as a whole is hereafter converted or exchanged, whether
by way of reclassification, recapitalization, exchange for consideration or
otherwise.
"Common Stock Equivalents" means, without duplication, any rights, warrants
or options issued by the Company to purchase, or securities issued by the
Company convertible or exchangeable for, Common Stock or any security of the
Company exercisable for, or convertible or exchangeable into Common Stock,
whether at the time of issuance or upon the passage of time or the occurrence of
some future event.
"Continuing Director" means, as of the date of determination, any Person
who (i) was a member of the board of directors of such Person on the date of
this Agreement, or (ii) was nominated for election or elected to the board of
directors of such Person with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Fully-Diluted Common Stock" means, at any time, the then outstanding
Common Stock plus (without duplication) all shares of Common Stock issuable,
whether at such time or upon the passage of time or the occurrence of future
events, upon the exercise, conversion or exchange of all then outstanding Common
Stock Equivalents.
"Holders" means Wells Fargo, the Loomis Stockholders Trust and each other
Person that hereafter becomes a party to this Agreement other than the Company.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization, or other entity.
2
<PAGE>
"Registrable Shares" means at any time the Common Stock owned by the
Holders, whether owned on the date hereof or acquired hereafter; provided,
--------
however, that Registrable Shares shall not include any shares (i) the sale of
- -------
which has been registered pursuant to the Securities Act and which shares have
been sold pursuant to such registration, or (ii) which have been sold to the
public pursuant to Rule 144 (or a successor rule or regulation) or which have
been sold under Rule 144A (or a successor rule or regulation), in each case as
promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, any other Person at least a
majority of whose outstanding shares of stock or other equity interests having
ordinary voting power for the election of directors or comparable managers of
such other Person are owned, directly or indirectly, by that Person.
"Units" means the units of beneficial ownership of the Loomis Stockholders
Trust or any other security or interest representing the right to participate in
distributions upon liquidation of the Loomis Stockholders Trust.
(b) Capitalized terms used herein but not otherwise defined herein shall
have the meanings ascribed to such terms in that certain Contribution Agreement,
dated as of November 28, 1996, among Borg-Warner Security Corporation, a
Delaware corporation ("Borg-Warner"), Wells Fargo, the Company, Loomis Holding
Corporation, a Delaware corporation, Loomis Armored Inc., a Texas corporation,
and the Loomis Stockholders Trust.
SECTION 2. Board of Directors; Officers.
----------------------------
(a) Composition. The Holders and the Company shall take all action within
-----------
their respective power, including, but not limited to, the voting of capital
stock of the Company and each Subsidiary of the Company, required to cause the
Board of Directors of the Company and each of its Subsidiaries to at all times
consist of seven individuals, of whom three individuals shall be designated by
Wells Fargo, three individuals shall be designated by the Loomis Stockholders
Trust (or Wingate, if the Loomis Stockholders Trust has earlier terminated or
otherwise dissolved pursuant to a judgment or order of any court or governmental
authority having jurisdiction over it
3
<PAGE>
and shares of Common Stock have been distributed to the holders of Units
thereof), and one of whom shall be the chief executive officer of the Company;
provided, however, that the right to designate directors pursuant to this
- -------- -------
Section 2(a) shall be adjusted as to Wells Fargo, on the one hand, or the Loomis
Stockholders Trust or Wingate (as the case may be), on the other hand (each, a
"Designating Party"), as the case may be, as follows: (i) if a Designating Party
shall own beneficially (as determined pursuant to Rule 13d-3 promulgated under
the Exchange Act or any successor rule or regulation) less than 35% but at least
15% of the Fully-Diluted Common Stock, such Designating Party shall be entitled
to designate only two directors pursuant to this Section 2(a), (ii) if a
Designating Party shall own beneficially less than 15% but at least 10% of the
Fully-Diluted Common Stock, such Designating Party shall be entitled to
designate only one director pursuant to this Section 2(a) and (iii) if a
Designating Party shall cease to own beneficially at least 10% of the Fully-
Diluted Common Stock, the right of such Designating Party to designate directors
pursuant to this Section 2(a) shall terminate.
(b) Board of Directors. The initial Board of Directors shall be
------------------
constituted as follows:
(i) The initial Wells Fargo designated directors shall be J. Joe
Adorjan, John D. O'Brien, and Timothy M. Wood.
(ii) The initial Loomis Stockholders Trust designated directors
shall be Frederick B. Hegi, Jr., James T. Callier, Jr. and Thomas W.
Sturgess.
(iii) The initial director who shall serve as the chief executive
officer of the Company shall be James B. Mattly.
(c) Inability of Directors to Serve. In the event that any director (a
-------------------------------
"Withdrawing Director") designated in the manner set forth in Section 2(a) is
unable to serve, or once having commenced to serve, is removed or withdraws from
the Board of Directors of the Company, such Withdrawing Director's replacement
on the Board of Directors (and, if applicable, any executive or similar
committee thereof) shall be designated by the Designating Party that originally
designated such Withdrawing Director in accordance with Section 2(a).
(d) Failure to Designate a Director. In the event Wells Fargo or the
-------------------------------
Loomis Stockholders Trust chooses not to designate any director pursuant to
Section 2(a), such directorship shall remain vacant unless such vacancy results
in
4
<PAGE>
there not being a quorum for the transacting of business, in which case such
vacancy shall be filled by an individual elected by a majority of the directors
then serving. Such individual shall serve as a director of the Company until the
applicable Designating Party designates a director to fill such vacancy in
accordance with Section 2(a).
(e) Voting of Capital Stock. (i) Each of the Holders agrees that, to the
-----------------------
extent he or it holds any voting stock of the Company (or any stock that is
entitled to vote upon any particular matter, whether or not such stock is
generally entitled to voting rights), he or it will at all times vote such stock
in such a manner as to ensure that the terms and intention of this Agreement are
carried out and observed and to ensure that the certificate of incorporation and
bylaws of the Company do not, at any time hereafter, conflict in any respect
with the provisions of this Agreement. In addition, each of the Holders agrees
that it or he will not vote any voting capital stock of the Company to cause the
removal from the Board of Directors of the Company or any of its Subsidiaries of
any directors designated by a Designating Party pursuant to Section 2(a) except
with the written consent (or upon the written direction) of such Designating
Party.
(ii) If a Person who has designated a director pursuant to Section
2(a) hereof requests that such director be removed by written notice thereof to
the Company, then each of the Holders shall vote all its or his voting capital
stock in favor of such removal upon such request.
(f) Exercise of Rights. Except as expressly provided herein, nothing in
------------------
this Agreement shall limit the ability of any Holder to exercise his or its
rights under this Agreement or as a stockholder of the Company in accordance
with his or its own best judgment and applicable law. Nothing in this Agreement,
express or implied, shall relieve any officer or director, as such, of the
Company or any of its Subsidiaries of any fiduciary duties he may have to the
stockholders of the Company or such Subsidiaries.
5
<PAGE>
(g) Officers. The parties hereto agree that initial executive officers of
--------
the Company shall be:
James B. Mattly President and Chief Executive Officer
Edward H. Hamlett Executive Vice President -- Sales and
Marketing
James K. Jennings, Jr. Executive Vice President, Chief Financial
Officer and Secretary
Officers of the Company shall serve at the pleasure of the Board of Directors of
the Company until their respective successors are elected and qualified.
SECTION 3. Transactions Requiring Supermajority Vote of the Board of
---------------------------------------------------------
Directors. Without (A) the affirmative vote of at least five members of the
- ---------
Board of Directors, or (B) to the extent permitted by Delaware law, the
unanimous vote or consent of the Executive Committee of the Board of Directors,
such committee to be comprised of the Chief Executive Officer of the Company,
one director designated by Wells Fargo and one director designated by the Loomis
Stockholders Trust, the Company shall not, and shall not permit any of its
Subsidiaries to:
(i) amend its charter, bylaws or other organizational documents;
(ii) merge or consolidate with any other Person other than a wholly-
owned Subsidiary of the Company;
(iii) sell, convey, transfer or otherwise dispose of all or
substantially all of its assets;
(iv) undertake or consummate or participate with any other Person in
undertaking or consummating a public offering of Common Stock for cash;
(v) acquire or dispose of any assets or businesses in a single
transaction or a series of related transactions having an aggregate value
in excess of $5,000,000;
6
<PAGE>
(vi) incur, guarantee, refinance or amend the material terms of any
agreement relating, to any indebtedness exceeding $5,000,000;
(vii) repurchase or optionally redeem any Common Stock, Common Stock
Equivalents or other securities of the Company; provided, however, that the
Company shall not be prohibited from repurchasing or redeeming Common
Stock, Common Stock Equivalents or other equity securities from former
employees of the Company upon the termination of employment of any such
employee or from purchasing fractional shares following a stock split,
reverse stock split or similar recapitalization;
(viii) submit to its stockholders any resolution proposing the
commencement of bankruptcy or similar proceedings or the dissolution or
liquidation of the Company;
(ix) issue any security of the Company other than (A) upon the
exercise of Common Stock Equivalents in accordance with the terms of such
Common Stock Equivalents and the plan or agreement, if any, under which
such Common Stock Equivalents were issued, or (B) the issuance of such
security in connection with employee or other stock option plans previously
approved in accordance with Section 3(xviii) herein;
(x) remove the Chief Executive Officer of the Company or appoint a
successor to the office of Chief Executive Officer of the Company, other
than the initial appointment of James B. Mattly to such office;
(xi) materially alter the long-term business strategy or scope of
business of the Company or any Subsidiary;
(xii) authorize, issue or declare any dividends or distributions
with respect to the capital stock of the Company;
(xiii) enter into, amend or terminate any agreement providing for or
reasonably expected to result in payment by or to the Company or any
Subsidiary in excess of $5,000,000;
(xiv) enter into any transaction with any executive officer,
director, or stockholder of the Company or any Affiliate (including for
purposes of this clause (xiv), United Stationers and its Subsidiaries) of
any executive officer,
7
<PAGE>
director or stockholder of the Company involving the payment of cash or
other consideration, or the assumption of liabilities, other than payments
involving compensation for services rendered to the Company pursuant to
employment agreements or other arrangements approved by the Board of
Directors in accordance with this Section 3 or, in the case of United
Stationers and its Subsidiaries, in the ordinary course of business on
commercially reasonable terms;
(xv) hire or terminate any executive officer of the Company or
enter into, amend or terminate the employment or compensation agreement of
any such person;
(xvi) change, appoint or remove the Company's independent auditors;
(xvii) materially alter the accounting or tax reporting methods or
principles of the Company except as required by law or changes in
applicable accounting methods or principles under generally accepted
accounting principles;
(xviii) approve or amend (A) any equity compensation, incentive or
other benefit plan or arrangement or (B) any compensation, incentive or
other benefit plan or arrangement not applicable to the employees of the
Company generally;
(xix) make any capital expenditure in excess of $1,000,000, which is
not specifically contemplated by the annual business plan of the Company or
any Subsidiary; or
(xx) approve the annual business plan, budget or long-term
strategic plan of the Company or any Subsidiary.
8
<PAGE>
SECTION 4. Preemptive Rights.
-----------------
(a) Right to Participate in Future Sales. In case the Company proposes
------------------------------------
after the date hereof to issue or sell any Common Stock or Common Stock
Equivalents (the "Offered Securities"), the Company shall, no later than 20 days
prior to the consummation of such transaction (a "Preemptive Rights
Transaction"), give notice in writing (the "Offer Notice") to each record Holder
of such Preemptive Rights Transaction. The Offer Notice shall describe the
proposed Preemptive Rights Transaction, identify the proposed purchaser, and
contain an offer (the "Preemptive Rights Offer") to sell to each record Holder,
at the same price and for the same consideration to be paid by the proposed
purchaser, all or any part of such Holder's pro rata portion of the Offered
Securities (which shall be such Holder's percentage of record ownership of the
Fully-Diluted Common Stock); provided, however, that the Company shall not be
-------- -------
required to make such a Preemptive Rights Offer to any Holder who is not an
"Accredited Investor" as such term is defined in Rule 501 promulgated under the
Securities Act unless the Offered Securities are already being offered to
proposed purchasers who are not Accredited Investors. If any Holder fails to
accept (a "Non-Responding Holder") in writing the Preemptive Rights Offer by the
fifteenth day after its receipt of the Offer Notice, the Company may proceed
with the proposed Preemptive Rights Transaction, free of any right on the part
of any Non-Responding Holders under this Section 4(a) in respect thereof.
(b) Exceptions to Preemptive Rights. Section 4(a) shall not apply to (i)
-------------------------------
issuances or sales of Common Stock or Common Stock Equivalents upon exercise or
conversion of any Common Stock Equivalent which, when issued, was subject to or
exempt from the preemptive rights provided under this Section 4, (ii) securities
distributed or set aside ratably to all holders of Common Stock on a per share
equivalent basis, (iii) issuances or sales of Common Stock or Common Stock
Equivalents pursuant to a merger of the Company or a Subsidiary of the Company
into or with another entity or pursuant to an acquisition by the Company or a
Subsidiary of the Company of the capital stock or assets of another business,
(iv) issuances of options or equity rights pursuant to a stock option or equity
plan for the benefit of employees of the Company and its Subsidiaries that has
been approved by a majority of the whole Board of Directors, or (v) issuances of
Common Stock or Common Stock Equivalents to lenders if such issuance has been
approved pursuant to Section 3 hereof.
9
<PAGE>
SECTION 5. Right of First Refusal; Co-Sale Rights.
--------------------------------------
(a) Right of First Refusal. Except in the case of a transfer by the Loomis
----------------------
Stockholders Trust to the Company of any shares of Common Stock pursuant to the
terms of the Stock Contribution Agreement dated as of January 24, 1997 between
the Company and the Loomis Stockholders Trust (the "Stock Contribution
Agreement"), if, at any time after the date three years following the date
hereof, a Holder (a "Transferor") has received a bona fide offer to purchase any
or all of the shares of Common Stock and/or Common Stock Equivalents
beneficially owned by the Holder and such Holder desires to accept such offer to
purchase, or if a Holder otherwise proposes to transfer for value any shares of
Common Stock and/or Common Stock Equivalents (for purposes of this Section 5,
"shares") to any Person, the Transferor shall, not less than 30 days prior to
the anticipated closing of such sale or transfer, give written notice (the
"Transferor's Notice") to the Company and the other record Holders of such
proposed sale or transfer. The Transferor's Notice shall (i) specify the
proposed transferee thereof, the number of shares to be transferred, the amount
and type of consideration to be received therefor, and the other material terms
on which the Transferor proposes to transfer the Common Stock or Common Stock
Equivalents, (ii) contain an undertaking by the proposed transferee to honor any
Participation Offer (as defined in paragraph (b) below), which is made in
accordance with the terms hereof, and (iii) contain the following offer:
The Transferor shall offer to sell (the "First Option") all such
shares to the Company at the same price per share and for consideration
consisting of (x) cash equal to the amount of cash proposed to be paid by
the proposed transferee and (y) cash or non-cash consideration, if any,
having an equivalent value with the non-cash consideration proposed to be
paid by the proposed transferee. The determination of equivalent value
required by the preceding sentence, as well as the decision whether or not
the Company will accept the First Option, in any particular instance shall
be made by a committee of the Board of Directors, excluding therefrom any
directors designated by the Transferor or proposed transferee (or any
Affiliate thereof) utilizing any method and/or advisory assistance it deems
appropriate, and the Company shall give the Transferor and the other record
Holders written notice of such determination within 15 days after receipt
of the Transferor's Notice. Notwithstanding the foregoing, in the event the
Transferor disputes the determination of equivalent value made pursuant to
the immediately preceding sentence, the Company shall engage a nationally
recognized investment banking firm to recompute the equivalent value of the
non-cash consideration
10
<PAGE>
offered by the Company pursuant to the First Option, it being understood
that the fees and expenses of such investment banking firm shall be paid
one-half by the Company and one-half by the Transferor, unless the
investment banking firm shall determine that the equivalent value of the
non-cash consideration proposed to be paid by the transferee is greater by
15% or more than the value ascribed thereto by the Board of Directors, in
which case 100% of the fees and expenses of such investment banking firm
shall be paid by the Company and the investment banking firm's method of
calculation of equivalent value shall be used in determining the amount of
non-cash consideration permitted to be paid by the Company pursuant to the
First Option or by the Option Holders pursuant to the Second Option (in
each case, as defined below). If the Company (A) fails to notify the
Transferor in writing within 15 days after receipt of the Transferor's
Notice that it elects to accept the First Option or (B) by written notice
within such 15-day period rejects the First Option in whole or in part, the
Transferor shall offer to sell (the "Second Option") the shares not to be
so purchased to the other record Holders (the "Option Holders") at the same
price per share and for consideration consisting of (x) cash in an amount
equal to the amount of cash proposed to be paid by the proposed transferee
and (y) cash or non-cash consideration, if any, having an equivalent value
(determined as provided above) with the non-cash consideration proposed to
be paid by the proposed transferee; provided, however, that the Transferor
shall not be obligated to offer such shares to any record Holder who is not
an Accredited Investor. The Option Holders may purchase the shares so
offered in the proportions upon which they mutually agree, or, if they are
unable to agree upon an allocation of such shares among themselves, then in
proportion to the number of shares of Fully-Diluted Common Stock owned by
each such Option Holder who wishes to participate in the purchase of such
shares pursuant to the Second Option. The Second Option may be accepted by
one or more of such Option Holders by written notice delivered to the
Transferor within 30 days after receipt of the Transferor's Notice. Unless,
through exercise of the First Option and/or the Second Option, all the
securities proposed to be transferred in the Transferor's Notice are to be
acquired by the Company and/or the Option Holders, the Transferor may
transfer, subject to paragraph (b) below, all shares covered by the
Transferor's Notice to the proposed transferee in accordance with the terms
of such transfer set forth in the Transferor's Notice; provided, however,
-------- -------
that such transfer must occur no later than 75 days after the date the
Transferor's Notice was received by the Company or five days after the
expiration or termination of any waiting period applicable to such transfer
11
<PAGE>
pursuant to the HSR Act, whichever is later. If the First Option and/or the
Second Option, as the case may be, is accepted in a manner such that all
shares covered by the Transferor's Notice are to be purchased, the
Transferor shall transfer all such shares (free of all liens and
encumbrances except this Agreement, all as reasonably determined by the
Company) to the respective purchasers thereof within 20 days after the date
such offer is accepted by the Company and/or Option Holders, whichever is
later, against delivery by the purchaser of the consideration payable to
the Transferor as set forth in the Transferor's Notice; provided that, if
--------
the HSR Act is applicable to the First Option or the Second Option, such
date shall be extended to the date which is five days after the date the
applicable waiting period expires or is terminated.
(b) Co-Sale Rights. The Transferor's Notice delivered pursuant to
--------------
paragraph (a) above shall also state (the "Participation Offer") that, in lieu
of exercising the Second Option, or if less than all the shares proposed to be
sold by the Transferor are to be purchased as a result of the exercise of the
First Option and/or the Second Option, each Option Holder may request to have
included in the proposed transfer a portion of its Common Stock and (if Common
Stock Equivalents are proposed to be transferred by the Transferor or if the
proposed transferee otherwise consents) Common Stock Equivalents (on an as-
converted or as-exercised basis) which represent the same percentage of such
Holder's Fully-Diluted Common Stock as the securities proposed to be transferred
by the Transferor represents of its Fully-Diluted Common Stock; provided, that,
--------
if the proposed consideration for such shares includes securities and such
transaction is to be effected by a private placement to Accredited Investors, no
Option Holder who is not an Accredited Investor shall have the right to be
included in such proposed transfer. The Participation Offer shall be conditioned
upon the execution and delivery by each Option Holder that accepts the
Participation Offer of all agreements and other documents as the Transferor is
required to execute and deliver in connection with such proposed transfer. If
the First Option and/or Second Option is not exercised with respect to all the
securities proposed to be transferred by the Transferor and any Option Holder
shall accept the Participation Offer, the Transferor shall reduce, to the extent
necessary, the number of shares of Common Stock or Common Stock Equivalents it
otherwise would have sold in the proposed transfer so as to permit those Option
Holders who have accepted the Participation Offer to sell the number of shares
of Common Stock and/or Common Stock Equivalents, if applicable, that they are
entitled to sell under this Section 5(b), and the Transferor and such Option
Holders shall transfer the number of shares of Common Stock and/or, if
applicable, Common Stock Equivalents specified in the Participation Offer to the
proposed transferee in accordance with the terms of such
12
<PAGE>
Participation Offer. Notwithstanding the foregoing, if the transferee refuses to
purchase any Common Stock and/or Common Stock Equivalents, if applicable,
proposed to be sold by each Option Holder that accepts the Participation Offer,
the Transferor shall be prohibited from consummating the transfer in respect of
which the Participation Offer was made.
SECTION 6. Exceptions. In no event shall any exchange, reclassification,
----------
or other conversion of shares of Common Stock or Common Stock Equivalents into
any cash, securities, or other property pursuant to a recapitalization or a
merger or consolidation of the Company or any Subsidiary of the Company with, or
any sale or transfer by the Company or any Subsidiary of the Company of all or
substantially all its assets to, any Person (a "Corporate Transaction")
constitute a transfer of shares of Common Stock or Common Stock Equivalents for
purposes of Sections 4 and 5. In addition, Sections 4 and 5 hereof shall not
apply to (i) any sale, transfer, exchange, or other disposition of shares of
Common Stock or Common Stock Equivalents by Wells Fargo or the Loomis
Stockholders Trust to or between their respective direct or indirect
Subsidiaries, trust beneficiaries, limited partners or any Affiliate; (ii) any
transfer or other disposition of Common Stock or Common Stock Equivalents by a
Holder who is an individual to his spouse or direct descendants, to a trust for
the benefit thereof, or to any 401(K) or other self-directed plan subject to the
Internal Revenue Code of 1986, as amended, or successor statutes, for the
benefit of such individual; or (iii) any sale or other disposition pursuant to
an offering registered under the Securities Act.
SECTION 7. Registration Rights.
-------------------
(a) Right to Piggyback. Each time the Company proposes to register any of
------------------
its Common Stock under the Securities Act for cash sale through an underwriter
or underwriters (other than through a holder of Common Stock who may be deemed a
statutory underwriter) and the registration form to be used may be used for the
registration of Registrable Shares, the Company shall give prompt written notice
to the record Holders of Registrable Shares of its intention to effect such a
registration (which notice shall be given not less than 20 days prior to the
date the registration statement is first filed) and such notice shall offer such
record Holders (the "Entitled Holders") the opportunity to have any or all of
the Registrable Shares included in such registration statement, subject to the
limitations contained in Section 7(b). The Entitled Holders desiring to have
their Registrable Shares registered under this Section 7 will so advise the
Company in writing within 10 days after the date of receipt of such notice from
the Company. Subject to Section 7(b) below, the
13
<PAGE>
Company shall include in such registration statement all such Registrable Shares
so requested to be included therein; provided, however, that the Company may at
-------- -------
any time withdraw or cease proceeding with any such registration if it shall at
the same time withdraw or cease proceeding with the registration of all other
shares of Common Stock originally proposed to be registered; provided, further,
-------- -------
that until the earliest to occur of the events specified in Section 11, each of
Wells Fargo and the Loomis Stockholders Trust must consent in writing to the
number of shares of Common Stock to be included in such registration by each
Holder.
(b) Priority on Registrations. If the managing underwriter advises the
-------------------------
Company in writing that the number of shares of Common Stock requested to be
included in the registration by all Persons (including the Company) exceeds the
number of shares of Common Stock which can be sold in such offering without
having an adverse effect on such offering, including without limitation, the
price at which such shares can be sold (the "Maximum Offering Size"), the
Company will be obligated to include in such registration only (i) first, any
-----
and all shares of Common Stock for sale by the Company, (ii) second, to the
------
extent the Maximum Offering Size exceeds the number of shares to be offered by
the Company, each of Wells Fargo, on the one hand, and the Loomis Stockholders
Trust (or beneficiaries thereof), on the other hand, shall be entitled to
include one-half of such available shares in the registration and (iii) third,
-----
to the extent of any remaining shares which may be sold in such offering, pro
rata among any other shares of Common Stock requested to be included pursuant to
any other registration rights that may have been, or may hereafter be, granted
by the Company (on the basis of the total number of shares of Common Stock that
each holder has requested to be registered). No Person may participate in any
registration hereunder unless such Person (x) agrees to sell such Person's
Registrable Shares on the basis provided in any underwriting arrangements
approved by the Company and (y) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, and other documents
required under the terms of such underwriting arrangements.
(c) Holdback Agreement. Unless the managing underwriter otherwise
------------------
consents, each of the Entitled Holders agrees not to effect any public sale or
private offer or distribution of any Common Stock or Common Stock Equivalents
during the ten business days prior to any underwritten registration and during
such time period after any underwritten registration (not to exceed 180 days)
(except, if applicable, as part of such underwritten registration) as the
Company and the managing underwriter may agree.
14
<PAGE>
(d) Registration Procedures. Whenever the Entitled Holders have requested
-----------------------
that any Registrable Shares be registered pursuant to this Agreement, the
Company will use its commercially reasonable efforts to effect the registration
and the sale of such Registrable Shares in accordance with the intended method
of disposition thereof, and pursuant thereto the Company will as expeditiously
as possible:
(i) prepare and file with the SEC a registration statement on any
appropriate form under the Securities Act with respect to such Registrable
Shares and use its commercially reasonable efforts to cause such
registration statement to become effective;
(ii) prepare and file with the SEC such amendments, post-effective
amendments, and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than 180 days (or
such lesser period as is necessary for the underwriters in an underwritten
offering to sell unsold allotments) and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement during such period in accordance with the
intended methods of disposition by the sellers thereof set forth in such
registration statement;
(iii) modify, at the request of any seller of Registrable Shares, any
information contained in such registration statement, amendment and
supplement thereto pertaining to such seller if such modification would be
required in order that the prospectus not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(iv) furnish to each seller of Registrable Shares and the
underwriters of the securities being registered such number of copies of
such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus), and such other documents as such seller or
underwriters may reasonably request in order to facilitate the disposition
of the Registrable Shares owned by such seller or the sale of such
securities by such underwriters;
(v) use its commercially reasonable efforts to register or qualify
such Registrable Shares under such other securities or blue sky laws of
such jurisdictions as the managing underwriter reasonably requests and do
any and
15
<PAGE>
all other acts and things which may be reasonably necessary or advisable to
enable such seller to consummate the disposition of the Registrable Shares
owned by such seller in such jurisdictions (provided, however, that the
-------- -------
Company will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph or (B) consent to general service of process or taxation
in any such jurisdiction);
(vi) notify each seller of Registrable Shares promptly after it
shall receive notice thereof, of the time when such registration statement
has become effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(vii) notify each seller of Registrable Shares promptly of any
request by the SEC for the amending or supplementing of such registration
statement or prospectus or for additional information or, at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, of the occurrence of any other event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Shares, such
prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading;
(viii) prepare and file with the SEC promptly any amendments or
supplements to such registration statement or prospectus which, in the
opinion of counsel for the Company or the managing underwriter, is required
in connection with the distribution of the Registrable Shares;
(ix) enter into such agreements (including underwriting agreements
in the managing underwriter's customary form) as are customary in
connection with an underwritten registration; and
(x) advise each seller of such Registrable Shares, promptly after
it shall receive notice or obtain knowledge thereof, of the issuance of any
stop order by the SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for such
purpose and promptly use its best efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued.
16
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(e) Suspension of Dispositions. Each Entitled Holder agrees by acquisition
--------------------------
of any Registrable Shares that, upon receipt of any notice (a "Suspension
Notice") from the Company of the happening of any event of the kind which, in
the opinion of the Company, requires the amendment or supplement of any
prospectus, such Entitled Holder will forthwith discontinue disposition of
Registrable Shares until such Entitled Holder's receipt of the copies of the
supplemented or amended prospectus, or until it is advised in writing (the
"Advice") by the Company that the use of the prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the prospectus, and, if so directed by the Company, such
Entitled Holder will deliver to the Company all copies, other than permanent
file copies then in such Entitled Holder's possession, of the prospectus
covering such Registrable Shares current at the time of receipt of such notice.
In the event the Company shall give any such notice, the time period regarding
the effectiveness of registration statements set forth in Section 7(d)(ii)
hereof shall be extended by the number of days during the period from and
including the date of the giving of the Suspension Notice to and including the
date when each seller of Registrable Shares covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus or the Advice.
(f) Registration Expenses. All expenses incident to the Company's
---------------------
performance of or compliance with this Section 7 including, without limitation,
all registration and filing fees, all fees and expenses associated with filings
required to be made with the National Association of Securities Dealers, Inc.
("NASD") (including, if applicable, the fees and expenses of any "qualified
independent underwriter" as such term is defined in Schedule E of the By-Laws of
the NASD, and of its counsel), as may be required by the rules and regulations
of the NASD, fees and expenses of compliance with securities or "blue sky" laws
(including reasonable fees and disbursements of counsel in connection with "blue
sky" qualifications of the Registrable Shares), internal expenses of the
Company, rating agency fees, printing expenses (including expenses of printing
certificates for the Registrable Shares in a form eligible for deposit with
Depositary Trust Company and of printing prospectuses if the printing of
prospectuses is requested by a holder of Registrable Shares), messenger and
delivery expenses, fees and expenses of counsel for the Company and its
independent certified public accountants (including the expenses of any special
audit or "cold comfort" letters required by or incident to such performance),
securities acts liability insurance (if the Company elects to obtain such
insurance), the fees and expenses of any special experts retained by the Company
in connection with such registration, reasonable fees and expenses of up to one
counsel for the Entitled Holders participating in the offering, and fees and
expenses of other Persons retained
17
<PAGE>
by the Company (all such expenses being herein called "Registration Expenses")
will be borne by the Company whether or not any registration statement becomes
effective; provided that in no event shall Registration Expenses include any
--------
underwriting discounts or commissions attributable to the sale of the
Registrable Shares or fees and expenses of any counsel (other than as permitted
above), accountants, or other persons retained or employed by the Entitled
Holders.
(g) Indemnification.
---------------
(i) The Company agrees to indemnify and reimburse, to the fullest
extent permitted by law, each seller of Registrable Shares, and each of its
employees, advisors, agents, representatives, partners, officers, and directors
and each Person who controls such seller (within the meaning of the Securities
Act or the Exchange Act) (collectively, the "Seller Affiliates") (A) against all
losses, claims, damages, liabilities and expenses, joint or several (including,
without limitation, attorneys' fees except as limited by subparagraph (iii)
below) arising out of or caused by any untrue or alleged untrue statement of a
material fact contained in any registration statement, prospectus, or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, (B) against any and all
loss, liability, claim, damage, and expense whatsoever, as incurred, to the
extent of the aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue statement or
omission, and (C) against any and all costs and expenses (including reasonable
fees and disbursements of legal counsel and other agents) as may be reasonably
incurred in investigating, preparing, or defending against any litigation, or
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, to the extent that any such expense or cost is not paid under
subparagraph (A) or (B) above; except insofar as the same are made in reliance
upon and in strict conformity with information furnished in writing to the
Company by such seller or any Seller Affiliate for use therein or by such seller
or any Seller Affiliate's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such seller or Seller Affiliate with a sufficient number
of copies of the same. The reimbursements required by this Section 7(g)(i) will
be made by periodic payments during the course of the investigation or defense,
as and when bills are received or expenses incurred.
18
<PAGE>
(ii) In connection with any registration statement in which a seller
of Registrable Shares is participating, each such seller will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the fullest extent permitted by law, each such seller will
indemnify the Company, its directors, and officers and each Person who controls
the Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities, and expenses (including, without limitation,
attorneys' fees except as limited by subparagraph (iii) below) resulting from
any untrue statement or alleged untrue statement of a material fact contained in
the registration statement, prospectus, or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
alleged untrue statement, or omission or alleged omission, is contained in any
information or affidavit so furnished in writing by such seller or any of its
Seller Affiliates; provided that the obligation to indemnify will be several,
--------
not joint and several, among such sellers of Registrable Shares, and the
liability of each such seller of Registrable Shares will be in proportion to,
and provided further that such liability will be limited to, the net amount
received by such seller from the sale of Registrable Shares pursuant to such
registration statement.
(iii) Any Person entitled to indemnification hereunder will (A) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give such notice
shall not limit the rights of such Person) and (B) unless in such indemnified
party's reasonable judgment a material conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with legal
counsel reasonably satisfactory to the indemnified party; provided, however,
-------- -------
that any Person entitled to indemnification hereunder shall have the right to
employ separate legal counsel and to participate in the defense of such claim,
but the fees and expenses of such legal counsel shall be at the expense of such
Person unless (X) the indemnifying party has agreed to pay such fees or
expenses, or (Y) the indemnifying party shall have failed to assume (or shall
not be permitted to assume such defense pursuant to clause (B) above) the
defense of such claim and employ legal counsel reasonably satisfactory to such
Person. If such defense is assumed, the indemnifying party will not be subject
to any liability for any settlement made by the indemnified party without its
consent (but such consent will not be unreasonably withheld). An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and
19
<PAGE>
expenses of more than one legal counsel for all parties indemnified by such
indemnifying party with respect to such claim (and one local counsel in each
jurisdiction where engagement of local counsel is necessary to defend such
claim), unless in the reasonable judgment of any indemnified party, a material
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(iv) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 7(g)(i) or Section 7(g)(ii)
are unavailable or insufficient (other than in accordance with the terms
thereof) to hold harmless an indemnified party in respect of any losses, claims,
damages, liabilities, or expenses (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
liabilities, or expenses (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7(g)(iv) were determined by pro rata allocation (even
if the Entitled Holders or any underwriters or all of them were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section
7(g)(iv). The amount paid or payable by an indemnified party as result of the
losses, claims, damages, liabilities, or expenses (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or, except as provided in Section 7(g)(iii), defending any such
action or claim. Notwithstanding the provisions of this Section 7(g)(iv), no
Entitled Holder shall be required to contribute an amount greater than the
dollar amount of the proceeds received by such Entitled Holder with respect to
the sale of any Registrable Shares. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Entitled Holders' obligations in this Section
7(g)(iv) to contribute shall be several in proportion to the amount of
Registrable Shares registered by them and not joint.
20
<PAGE>
(v) The indemnification and contribution provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director, or
controlling Person of such indemnified party and will survive the transfer of
securities. The Company also agrees to make such provisions as are reasonably
requested by any indemnified party for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
SECTION 8. Other Transfer Restrictions.
---------------------------
(a) Restrictions. Unless this section of this Agreement shall have been
------------
earlier terminated pursuant to Section 11 hereof, neither Wells Fargo nor the
Loomis Stockholders Trust shall sell or otherwise transfer or dispose of any
shares of Common Stock without the prior written consent of the other except (i)
for a period of three years following the date of this Agreement, pursuant to
Section 7 of this Agreement, or (ii) after such three year period, in accordance
with Sections 5 through 7 of this Agreement; provided, however, that nothing in
-------- -------
this Agreement shall prohibit Borg-Warner or Wells Fargo from pledging shares of
Common Stock as security for indebtedness of Borg-Warner or Wells Fargo for
borrowed money. In addition, other than (i) transfers to the public pursuant to
an effective registration statement under the Securities Act and (ii) sales
pursuant to Rule 144A and to the public pursuant to Rule 144 or any similar rule
under the Securities Act, each Holder, as a condition to the effectiveness of a
transfer of Common Stock or Common Stock Equivalents shall cause the proposed
transferee of such Common Stock or Common Stock Equivalents to agree, pursuant
to a written agreement reasonably satisfactory to the Company, to take and hold
such Common Stock or Common Stock Equivalents subject to the provisions and upon
the conditions specified in this Agreement.
(b) Legends. Each certificate evidencing shares of Common Stock or Common
-------
Stock Equivalents subject to this Agreement and each certificate issued to any
subsequent transferee of such shares of Common Stock or Common Stock
Equivalents, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE
SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE
21
<PAGE>
ASSIGNED, EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) PURSUANT TO RULES
144 OR 144A UNDER SUCH ACT, OR (iii) UPON THE FURNISHING TO THE COMPANY BY
THE HOLDER OF THIS CERTIFICATE OF AN OPINION OF COUNSEL (OR OTHER EVIDENCE)
SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION IS NOT REQUIRED TO BE
REGISTERED UNDER SUCH ACT OR ANY APPLICABLE "BLUE SKY" LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT DATED AS OF JANUARY 24, 1997, WHICH CONTAINS CERTAIN
PROVISIONS REGARDING THE VOTING OF THESE SECURITIES AND CERTAIN
RESTRICTIONS ON THE TRANSFER OF THESE SECURITIES, INCLUDING A RIGHT OF
FIRST REFUSAL. A COPY OF THE STOCKHOLDERS AGREEMENT MAY BE OBTAINED FROM
THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
(c) Termination of Certain Restrictions. The legend as to securities law
-----------------------------------
compliance required by Section 8(b) shall terminate (i) when and so long as such
shares of Common Stock or Common Stock Equivalents shall have been effectively
registered under the Securities Act and disposed of pursuant thereto or (ii) if
requested by the Company, when the Company shall have received an opinion of
counsel satisfactory to it that such securities may be transferred without
registration thereof under the Securities Act and that such legend may be
removed. The legend as to the applicable provisions of this Agreement required
by Section 8(b) shall terminate (A) upon the termination of this Agreement or
(B) upon the valid transfer of such securities to a transferee who is not
required to agree to take and hold such shares subject to the provisions of this
Agreement. Whenever the legend requirements of Section 8(b) shall terminate as
to any shares, the holder thereof shall be entitled to receive from the Company,
at the Company's expense, a new certificate evidencing such shares not bearing
the restrictive legend set forth in Section 8(b) hereof.
22
<PAGE>
(d) Nonconforming Transfers Void. Any purported transfer which is not
----------------------------
effected in compliance with the foregoing provisions of this Section 8 shall be
void ab initio and of no force or effect whatsoever.
---------
SECTION 9. Furnishing of Information; Access to Information. (a) The
------------------------------------------------
Company will furnish the information to each Holder, which is the holder of
record of 10% or greater of the Fully-Diluted Common Stock (a "Significant
Holder"):
(i) as soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, a
consolidated balance sheet of the Company and its Subsidiaries, if any, as
at the end of such fiscal year, and consolidated statements of income and
cash flows of the Company and its Subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and
certified by independent public accountants of recognized national standing
selected by the Company, and a Company prepared comparison to the Company's
budget for such year;
(ii) as soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and
in any event within forty-five (45) days thereafter, a consolidated balance
sheet of the Company and its Subsidiaries, if any, as of the end of each
such quarterly period, and consolidated statements of income and cash flows
of the Company and its Subsidiaries, if any, for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in comparative
form the figures for the corresponding periods of the previous fiscal year
and the Company's budget then in effect and approved by its Board of
Directors, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail and certified by the principal
financial or accounting officer of the Company, except that such financial
statements need not contain the notes required by generally accepted
accounting principles;
(iii) as soon as practicable after the end of each month and in any
event within thirty (30) days thereafter, a consolidated balance sheet of
the Company and its Subsidiaries, if any, as at the end of such month and
consolidated statements of income and cash flows of the Company and its
Subsidiaries, for each month and for the current fiscal year of the Company
to
23
<PAGE>
date, all subject to normal year-end audit adjustments, prepared in
accordance with generally accepted accounting principles consistently
applied and certified by the principal financial or accounting officer of
the Company, together with a comparison of such statements to the
corresponding periods of the prior fiscal year and to the Company's budget
then in effect and approved by its Board of Directors; and
(iv) annually (and in any event no later than ten (10) days after
adoption by the Board of Directors of the Company) the financial plan of
the Company, in such manner and form as approved by the Board of Directors
of the Company, which financial plan shall include at least a projection of
income and a projected cash flow statement for each fiscal quarter in such
fiscal year and a projected balance sheet as of the end of each fiscal
quarter in such fiscal year. Any material changes in such business plan
shall be delivered to each Significant Holder as promptly as practicable
after such changes have been approved by the Board of Directors of the
Company.
(b) The Company will permit any Significant Holder (or a representative of
any Significant Holder) to visit and inspect any of the properties of the
Company, including its books of account and other records (and make copies
thereof and take extracts therefrom), and to discuss its affairs, finances and
accounts with the Company's officers and its independent public accountants, all
at such reasonable times and as often as any such person may reasonably request;
provided, however, that the Company shall not be obligated to provide
- -------- -------
information which it deems in good faith to be proprietary.
SECTION 10. (a) Confidentiality. Each of Wells Fargo and the Loomis
----------------
Stockholders Trust hereby acknowledges that it has access to Confidential
Information (as defined in paragraph (b) below) of the Company and that Borg-
Warner, the parent company of Wells Fargo, is subject to the reporting and
disclosure requirements imposed by federal securities law and by the rules of
the self regulatory organizations governing the exchanges on which Borg-Warner's
securities are traded. Each of Wells Fargo and the Loomis Stockholders Trust
agrees that, without the Company's prior written consent it will not, and it
will cause its Subsidiaries and its and their respective officers, directors,
employees, agents and representatives not to, use, reveal, divulge, disclose or
otherwise communicate to any Person, in any manner whatsoever, other than its
Subsidiaries and Affiliates, any Confidential Information.
24
<PAGE>
(b) As used in Section 10(a), the term "Confidential Information" means
information of any kind, nature or description with respect to the Company, that
is known to Wells Fargo or the Loomis Stockholders Trust as a consequence of the
ownership of the Common Stock and which information is not generally known
within the industry in which the Company operates. Confidential information
includes, without limitation, information concerning products, product pricing,
sales and marketing methods or procedures, business methods or procedures,
financial affairs, agency relationships, customer relationships, regulatory
relationships, business plans and similar proprietary information relating to
the Company. Notwithstanding anything herein to the contrary, no information
shall be deemed to be Confidential Information if (i) such information is
generally known in the industry in which the Company operates, other than
through a violation of this Agreement, (ii) such information not previously
known to Wells Fargo or the Loomis Stockholders Trust, as the case may be,
becomes available to Wells Fargo or the Loomis Stockholders Trust, as the case
may be, after the date hereof on a non-confidential basis from a person that
Wells Fargo or the Loomis Stockholders Trust, as the case may be, does not have
reason to believe, after due inquiry, (x) is bound by a confidentiality
agreement with the Company or (y) is otherwise prohibited from transmitting the
information to Wells Fargo or the Loomis Stockholders Trust, as the case may be,
by a contractual, legal or fiduciary obligation. Nothing contained in this
Section 10 shall prohibit Borg-Warner, Wells Fargo or the Loomis Stockholders
Trust or their respective Subsidiaries from disclosing Confidential Information
(A) that is required by judicial or administrative process or other requirements
of law (including but not limited to the federal securities laws) or, in the
case of Borg-Warner, the rules of the self regulatory organizations governing
the exchanges on which Borg-Warner's securities are traded, (B) that is
reasonably requested to be disclosed by any court or governmental authority
having jurisdiction over any of them, provided that a party reasonably requested
--------
to disclose such information shall provide the Company with prompt written
notice in advance of such disclosure so that the Company may determine whether
to seek a protective order or other appropriate remedy and/or waive compliance
with the provisions of this Section 10, and (C) to their respective directors,
officers, employees, agents, counsel, investment advisers or representatives in
the normal course of the performance of their duties or to any financial
institution providing credit to Borg-Warner or Wells Fargo or any of their
Affiliates or to the Loomis Stockholders Trust, so long as such persons are
informed by such party of the confidential nature of such information and are
directed by such party to treat such information confidentially. In connection
with any such disclosure, each of Wells Fargo and the Loomis Stockholders Trust
agrees that, if so requested by the Company and at the Company's sole cost and
expense, it will use its reasonable efforts to obtain
25
<PAGE>
reasonable assurances that confidential treatment will be accorded the
Confidential Information.
SECTION 11. Termination. The provisions of this Agreement, other than
-----------
Sections 7, 9, 13(a) and 14 of this Agreement (which shall continue to remain in
full force and effect), shall terminate upon the earliest to occur of (i) the
consummation of an underwritten public offering or series of offerings pursuant
to an effective registration statement under the Securities Act for cash of
Common Stock producing aggregate gross proceeds to the Company and any Holders
selling shares of Common Stock thereunder of at least $100 million, (ii) the
sale of all or substantially all of the assets of the Company, or the merger or
consolidation of the Company with any Person as a result of which the Holders
hold less than 35% of the Common Stock, (iii) the date one year after the date
of a Change of Control of Borg-Warner, (iv) the foreclosure on or forced sale of
at least 50% of the Common Stock held by Wells Fargo on the date of this
Agreement by any lender of Borg-Warner or Wells Fargo, and (v) the date any
Holder and its Affiliates become the beneficial owners of all of the outstanding
Common Stock.
SECTION 12. Publicity. The Company will consult with Wells Fargo and the
---------
Loomis Stockholders Trust and will mutually agree (the agreement of each party
to be timely given and not to be unreasonably withheld) upon the content and
timing of any press release or other public statements with respect to the
Company, and shall not issue any such press release or make any such public
statement prior to such consultation and agreement, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
securities exchange or any securities exchange regulations, if any.
SECTION 13. Other Covenants.
---------------
(a) Directors & Officers Insurance. The Company hereby covenants and
------------------------------
agrees that it shall, as soon as practicable following the date of this
Agreement (but in any event no later than 30 days following the date hereof)
purchase and maintain insurance for the benefit of the directors and officers of
the Company in their capacity as such, on terms and in such amounts as
determined reasonably adequate by the Board of Directors of the Company.
(b) Transfer Restrictions on Wingate. Unless this Section 13(b) has
--------------------------------
earlier terminated pursuant to Section 11 hereof, Wingate hereby agrees that for
a period of
26
<PAGE>
three years following the date of this Agreement, Wingate will not sell,
transfer or otherwise dispose of its Units in the Loomis Stockholders Trust.
SECTION 14. Reserve.
-------
(a) The parties hereto acknowledge that, pursuant to the Stock
Contribution Agreement, the Excess Claims Assumption Agreement and this
Agreement (collectively, the "LST Indemnity Agreements"), the Loomis
Stockholders Trust has certain indemnity and other obligations (whether accrued,
contingent, absolute, determined, determinable or otherwise, collectively, the
"LST Obligations"; provided that the LST Obligations arising directly or
indirectly under Sections 12.1(a), 12.3(b) and 12.4(b) of the Contribution
Agreement shall be limited as provided in Sections 12.1(b), (c), (d) and (e);
12.4(c); 12.6(b) and 13.12 of the Contribution Agreement) owing to the Company
and other Persons. As used in this Section 14, the "LST Representative" shall be
Wingate.
(b) Except as otherwise provided in this Section 14, the Loomis
Stockholders Trust may not distribute, sell, pledge, transfer or otherwise
dispose of any of the shares of Common Stock held by it or any of its interest
in the Loomis Casualty and Employee Claims Trust or the Loomis Indemnity Trust
(collectively, the "Trust Interest") prior to full satisfaction, performance and
discharge of the LST Obligations. Notwithstanding the foregoing, but subject to
the other provisions of this Agreement, after the third anniversary of the date
hereof, the Loomis Stockholders Trust may distribute, sell, pledge, transfer or
otherwise dispose of the shares of Common Stock held by it and the Trust
Interest if adequate provision has been made for the full satisfaction,
performance and discharge of the LST Obligations, which such adequate provision
(the "Reserve") shall consist of cash, a letter of credit or similar instrument
or shares of Common Stock or any combination thereof.
(c) (i) If prior to the third anniversary of the date hereof, there is an
involuntary event giving rise to a Dissolution Triggering Date (as defined in
the Loomis Stockholder Trust Business Trust Agreement), as promptly as
practicable after receipt of notice of such event, the Company shall propose to
the LST Representative the Reserve to be established reasonably satisfactory to
the Company. If the LST Representative and the Company are unable to agree on
such Reserve, the LST Representative shall have the right to request that the
reasonableness of the Reserve to be established be resolved by arbitration
pursuant to paragraph (f) of this Section 14; provided, that the LST
Representative shall have the burden of proving that the Reserve proposed by the
Company to be established is not reasonable.
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<PAGE>
(ii) From and after the third anniversary of the date hereof, if the
Reserve has not theretofore been established and if the LST Representative so
requests, the Company and the LST Representative shall negotiate in good faith
to enter into a mutually acceptable arrangement pursuant to which the Reserve
will be established.
(d) The amount of the Reserve shall take into account all relevant factors
including, among other things, (i) the LST Obligations in respect of the
indemnity and financial obligations of the Loomis Stockholders Trust contained
in the Excess Claims Assumption Agreement and the corpus, if any, in the Loomis
Indemnity Trust and (ii) the number of Eligible Options (as defined in the Stock
Contribution Agreement) outstanding to acquire shares of Common Stock.
(e) For purposes of negotiations conducted pursuant to this Section 14,
(i) the Company shall be represented by a committee of members of the Board of
Directors of the Company that are not participants in, and have not been
designated by participants in, the Loomis Stockholders Trust (the "Company
Representative") and (ii) the Loomis Stockholders Trust shall be represented by
the LST Representative. Each of the Company Representative and the LST
Representative shall consult with such experts and advisors as such
representative shall deem appropriate.
(f) In the event that the Company Representative and the LST
Representative are unable to reach agreement on the amount of the Reserve within
90 days after the commencement of good faith negotiations thereon, either
representative may request that the resolution thereof be determined by
arbitration. Each of the Company Representative and the LST Representative shall
submit to the arbitrators its proposed amount of the Reserve; provided that the
--------
Company Representative and LST Representative may designate in writing to the
arbitrators any items as to which such representatives are in agreement, in
which case, the arbitrators shall only resolve those items which are in dispute.
The amount of the Reserve determined by the arbitrators shall not be more than
the amount proposed by the Company Representative nor less than the amount
proposed by the LST Representative. The arbitration shall be held in such place
as is determined by the arbitrators, pursuant to the Commercial Arbitration
Rules of the American Arbitration Association. The arbitration shall be heard
before three arbitrators, each experienced in the matters at issue, one selected
by the Company Representative, one selected by the LST Representative and the
third selected by the first two arbitrators. The arbitrators shall consult with
such experts and advisors as they shall deem appropriate. The parties
28
<PAGE>
agree that the decision of the arbitrators pursuant to this Section 14 shall be
final and nonappealable and may be enforced by either the Company or the Loomis
Stockholders Trust, as the case may be, in any court of record having
jurisdiction over the subject matter or over any of the parties to this
Agreement. The cost and expenses of each of the parties in connection with such
arbitration shall be borne (i) by the Company, if the difference between the
amount of the Reserve proposed by the Company Representative and the amount of
the Reserve as finally determined by the arbitrators is greater than or equal to
the difference between the amount of the Reserve proposed by the LST
Representative and the amount of the Reserve as finally determined by the
arbitrators and (ii) by the Loomis Stockholders Trust, if the second difference
is greater than the first difference.
(g) After the establishment of the Reserve (but not more than once in any
12-month period), at the request of the LST Representative, the amount of the
Reserve, and the property which constitutes adequate provision therefor, shall
be re-evaluated in good faith by the Company and the LST Representative applying
the provisions of Sections 14(d), to the extent applicable, (e) and (f) above in
order to arrive at a new determination of the Reserve.
(h) The parties hereto agree that they will, and agree to cause their
respective employees, experts and advisors to, cooperate with and assist the
arbitrators, including without limitation the making available to the extent
necessary of books, records, work papers and personnel.
(i) The Loomis Stockholders Trust hereby agrees not to take any actions
inconsistent with this Agreement, the LST Obligations and the provisions of the
LST Indemnity Agreements. The Loomis Stockholders Trust agrees that it will
provide 10 business days prior written notice to the Company and Borg-Warner of
any proposed amendment or modification of the Loomis Stockholders Trust.
(j) Wingate, in its capacity as a holder of interests in the Loomis
Stockholders Trust, hereby agrees not to take, and not to cause or permit the
Loomis Stockholders Trust to take, any actions inconsistent with this Agreement,
the LST Obligations and the provisions of the LST Indemnity Agreements and will
not vote its Units in the Loomis Stockholders Trust, or otherwise consent, to
terminate the Loomis Stockholders Trust prior to three years from the date
hereof.
29
<PAGE>
SECTION 15. Miscellaneous.
-------------
(a) Remedies. Any Person having rights under any provision of this
--------
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement, and
to exercise all other rights granted by law or otherwise available to such
Persons.
(b) Amendments and Waivers. The provisions of this Agreement may be
----------------------
amended or waived at any time by the written agreement of the Company, Wells
Fargo and the Loomis Stockholders Trust.
(c) Assignment; Successor and Assigns. No Person may assign any of its
---------------------------------
rights or obligations under this Agreement (except in connection with sales and
transfers of Common Stock which are subject to, and permitted by the provisions
of, this Agreement). This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors.
(d) Notices. All notices, requests, consents, or other communications
-------
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given or delivered by any party (i) when received by
such party if delivered by hand, (ii) upon confirmation when delivered by
telecopy, (iii) within one day after being sent by recognized overnight delivery
service, or (iv) within five business days after being mailed by first-class
mail, postage prepaid, and in each case addressed as follows:
(i) If to the Company:
Loomis, Fargo & Co.
16225 Park Ten Place
Houston, Texas 77084
Attention: James K. Jennings, Jr.
Telecopy No.: (281) 647-5699
30
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with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby
Telecopy No.: (214) 746-7777
(ii) If to Wells Fargo:
c/o Borg-Warner Security Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: J. Joe Adorjan
Telecopy No.: (312) 322-8629
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William Rosoff, Esq.
Telecopy No.: (212) 450-5954
(iii) If to the Loomis Stockholders Trust or Wingate:
c/o Wingate Partners, L.P.
750 N. St. Paul Street
Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Telecopy No.: (214) 871-8799
31
<PAGE>
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby
Telecopy No.: (214) 746-7777
(iv) If to any Holder other than Wells Fargo or the Loomis
Stockholders Trust at such Person's address set forth on such Holder's signature
pages hereto or, if not so set forth, as reflected in the Company's records.
Any party by written notice to the other parties pursuant to this Section
may change the address or the Persons to whom notices or copies thereof shall be
directed.
(e) Construction. This Agreement shall be construed and enforced in
------------
accordance with and governed by the internal substantive laws of the State of
New York, without regard to principles of conflict of laws.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall be deemed an
original, and all such counterparts together shall constitute one instrument.
(g) Severability. Whenever possible, each provision of this Agreement will
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
(h) Relationship of the Holders. Nothing herein contained shall be
---------------------------
construed to constitute any Holder as the agent or partner of the Company or of
any other Holder, and no Holder shall have the power or authority to assume or
create any obligation or responsibility whatsoever, express or implied, on
behalf of or in the name of the others, to bind the others in any manner, or to
make any representation, warranty or commitment on behalf of the other except as
expressly contemplated hereby.
32
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first set forth above.
LOOMIS, FARGO & CO.
By:/s/ James K. Jennings, Jr.
----------------------------------
James K. Jennings, Jr.
Executive Vice President
WELLS FARGO ARMORED SERVICE CORPORATION
By:/s/ T M Wood
----------------------------------
Timothy M. Wood
Vice President
LOOMIS STOCKHOLDERS TRUST
By:/s/ F.B. Hegi, Jr
----------------------------------
Frederick B. Hegi, Jr.,
Manager
WINGATE PARTNERS, L.P.
By: WINGATE MANAGEMENT COMPANY, L.P.,
its general partner
By:/s/ F.B. Hegi, Jr
-----------------------------
Frederick B. Hegi, Jr.
General Partner
33
<PAGE>
EXHIBIT A
---------
Instrument of Accession
-----------------------
Reference is made to that certain Stockholders Agreement, dated as of
January 24, 1997, a copy of which is attached hereto (as amended and in effect
from time to time, the "Stockholders Agreement"), among Loomis, Fargo & Co., a
----------------------
Delaware corporation (the "Company"), and the persons set forth therein.
-------
The undersigned, ________________________, in order to become the owner or
holder of ________ shares of _______________, $0.01 par value per share, of the
Company, hereby agrees that by the undersigned's execution hereof the
undersigned is a party to the Stockholders Agreement subject to all of the
restrictions, conditions and obligations applicable to stockholders set forth in
the Stockholders Agreement. This Instrument of Accession shall take effect and
shall become a part of said Stockholders Agreement immediately upon execution.
Executed as of the date set forth below under the laws of the State of New
York.
Signature:_____________________________
Address: ___________________________
___________________________
___________________________
Date:__________________________________
ACCEPTED:
LOOMIS, FARGO & CO.
By:__________________________
Name:________________________
Title:_______________________
Date:________________________
34
<PAGE>
EXHIBIT 10.4
LOOMIS INDEMNITY TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST, dated as of January 24, 1997 by
and among Loomis, Fargo & Co., a Delaware corporation ("Loomis Fargo"), the
Loomis Stockholders Trust, a Delaware business trust ("Loomis Stockholders
Trust"), and Frederick B. Hegi, Jr. (the "Original Trustee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Contribution Agreement (the "Contribution
Agreement") dated as of November 28, 1996, by and among Borg-Warner Security
Corporation, a Delaware corporation, Wells Fargo Armored Service Corporation, a
Delaware corporation and wholly-owned subsidiary of Borg-Warner ("Wells Fargo"),
Loomis Holding Corporation, a Delaware corporation ("Loomis"), Loomis Fargo
(formerly known as Loomis-Wells Corporation), Loomis Armored Inc., a Texas
corporation and wholly-owned subsidiary of Loomis ("Loomis Armored"), and the
Loomis Stockholders Trust, the armored transport businesses of Loomis Armored
and Wells Fargo are to be combined in a transaction intended to satisfy the
requirements of (S) 351 of the Code; and
WHEREAS, the Loomis Stockholders Trust may have certain liabilities
and/or expenses as a result of certain indemnification or payment obligations
under the Contribution Agreement (the "Indemnity Claims"); and
WHEREAS, the Contribution Agreement contemplates that Loomis Fargo
shall convey to the Trustee hereunder cash in the amount specified in the
Contribution Agreement to pay such of the Indemnity Claims as may become
ascertained, due and payable; and
WHEREAS, the Contribution Agreement contemplates that the Loomis
Stockholders Trust pay directly the Indemnity Claims which become due and
payable in excess of the Trust Fund (as hereinafter defined) and that the Loomis
Stockholders Trust will be entitled to receive the Trust Fund to the extent that
it exceeds the aggregate Indemnity Claims which have become due and payable and
have been paid;
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, and subject to the terms and provisions contained in this Trust
Agreement, it is hereby agreed as follows:
<PAGE>
ARTICLE I.
NAME AND DEFINITIONS
1.01 NAME. This trust shall be known as the Loomis Indemnity Trust.
1.02 TERMS DEFINED IN THE RECITALS. When used in this Trust
Agreement, terms defined in the recitals hereto have the meanings ascribed
therein.
1.03 TERMS DEFINED IN THE CONTRIBUTION AGREEMENT. When used in this
Trust Agreement (including the recitals hereto), terms defined in the
Contribution Agreement and not otherwise defined herein have the meanings
ascribed to such terms in the Contribution Agreement.
1.04 ADDITIONAL TERMS DEFINED. For purposes of this Trust Agreement
the following words and expressions shall have the following meanings and
usages:
(a) "Asserted Claims": those of the Indemnity Claims that
---------------
have been reported by the Loomis Stockholders Trust to the Trustee after the
Closing pursuant to Section 4.01, as claims requiring payment pursuant to this
Trust Agreement, and any fees, charges or expenses incurred by the Loomis
Stockholders Trust in determining the amount thereof, including litigation and
settlement costs, if any.
(b) "Beneficiaries": collectively, the Class I Beneficiary
-------------
and the Class II Beneficiary.
(c) "Class I Beneficiary": Loomis Fargo.
-------------------
(d) "Class II Beneficiary": Loomis Stockholders Trust.
--------------------
(e) "Closing": the closing of the Loomis Fargo Consolidation
-------
pursuant to Section 10.1 of the Contribution Agreement.
(f) "Code": the Internal Revenue Code of 1986, as amended
----
from time to time. Any reference to a section of the Code shall be deemed to
refer as well to any subsequent provision of law enacted in its place, and shall
be deemed to include all Treasury Regulations promulgated under the Code
interpreting or applying that section.
2
<PAGE>
(g) "Expense Reserve": at any given time, an amount of the
---------------
Trust Fund equal to the sum of (i) such amount as the Trustee shall then
reasonably deem necessary to satisfy all claims, expenses, charges, liabilities
and obligations of the Trust, including, without limitation, the Asserted
Claims, plus (ii) such amount as the Trustee would reasonably estimate to be
necessary to meet the expenses of terminating the Trust at such time. For
purposes of determining the Expense Reserve, necessary expenses of the Trust
shall not include any expenses resulting from the Trustee's own recklessness or
its own intentional or willful and wanton misconduct resulting in private gain.
(h) "Initial Contribution": the amount required to be
--------------------
delivered to the Trustee at the Closing pursuant to Section 2.01 of this Trust
Agreement.
(i) "Loomis Affiliates": Loomis Fargo, Loomis, Loomis Armored
-----------------
and any corporation or other entity successor to any one or more of them.
(j) "Loomis Excess Payment": $4.7 million.
---------------------
(k) "Loomis Fargo Consolidation": the transaction contemplated
--------------------------
by the Contribution Agreement.
(l) "Notice": the tangible expression of a communication
------
sent, an instruction or direction given, or an action taken, pursuant to this
Trust Agreement. A Notice shall be effective only if it conforms to the
requirements of Section 12.05.
(m) "Termination Date": the date upon which the Trust
----------------
terminates pursuant to Section 3.01.
(n) "Trust": the separate trust held under this Trust
-----
Agreement.
(o) "Trust Agreement": this Trust Agreement, as amended from
---------------
time to time.
(p) "Trust Fund": all property (principal plus accrued,
----------
accumulated and undistributed income) that, at any particular time, belongs to
the Trust.
(q) "Trust Term": the period from the date of the Closing
----------
though and including the Termination Date.
3
<PAGE>
(r) "Trustee": each Trustee and all Trustees (including the
-------
Original Trustee) serving under this Trust Agreement at any particular time.
1.05 GENDER AND NUMBER. Except where the context otherwise
requires, words importing the masculine gender include the feminine and the
neuter, if appropriate, words importing the singular number shall include the
plural number and vice versa and words importing persons shall include firms,
associations, corporations and other entities.
1.06 SUBDIVISION REFERENCES. Except as is otherwise specifically
provided, references herein to Sections and other subdivisions refer to the
corresponding Sections and other subdivisions of this Trust Agreement.
1.07 TITLES. The Article titles and Section headings in this Trust
Agreement are included solely for purposes of identification, and are not be
used to construe any provision contained in this Trust Agreement or for any
other purpose.
ARTICLE II.
INITIAL FUNDING AND UNDERTAKINGS OF THE TRUSTEE
2.01 INITIAL FUNDING. At the Closing, Loomis Fargo shall contribute
the Loomis Excess Payment to the capital of Loomis, and Loomis shall transfer,
assign and deliver to the Trustee, and the Trustee shall receive and accept,
cash in the amount of the Loomis Excess Payment, representing the Initial
Contribution to the Trust.
2.02 UNDERTAKINGS OF THE TRUSTEES. Upon receipt of the Initial
Contribution, (i) the Trustee shall hold such funds, and any additional property
received by the Trustee pursuant to the Contribution Agreement or this Trust
Agreement, in a separate trust in accordance with the provisions of this Trust
Agreement, and (ii) except as may be limited by applicable law, the Trustee, as
instructed by the manager of the Loomis Stockholders Trust pursuant to Section
4.01, shall make distributions to the Class I Beneficiary sufficient to pay
those claims, liabilities and obligations of the Loomis Affiliates with respect
to which an Indemnity Claim may be made against the Loomis Stockholders Trust
pursuant to the Contribution Agreement, including, without limitation, the
Asserted Claims.
2.03 OWNERSHIP AND CONTROL OF TRUST FUND. Except as expressly
provided hereunder, no Beneficiary (as defined in Section 1.04(b)) shall have
title or right to, or possession, management or control of the Trust Fund. The
whole title to all of the Trust
4
<PAGE>
Fund shall be vested in the Trustee and the sole interest of the Beneficiaries
shall be the rights and benefits given to it under this Trust Agreement.
ARTICLE III.
DURATION AND TERMINATION OF TRUST
3.01 DURATION. Subject to the overriding provisions of Section
3.02, the Trust shall terminate upon the earlier to occur of:
(a) July 24, 1999;
(b) subject to Section 4.04, the earliest time at which the
value of the assets in the Trust Fund does not exceed the amount of the
Expense Reserve.
3.02 RULE AGAINST PERPETUITIES. Notwithstanding any other provision
of this Trust Agreement, and particularly notwithstanding the provisions of
Section 3.01, the Trust shall terminate, if it shall not have previously
terminated, one (1) day before the twentieth (20th) anniversary of the Closing
Date.
3.03 TERMINATION BY BENEFICIARIES. The Trust may not be revoked or
terminated at any time prior to the Termination Date by the Beneficiaries and/or
the Trustee.
3.04 CONTINUANCE OF TRUST FOR WINDING UP. After the Termination
Date, and solely for the purpose of liquidating and winding up the affairs of
the Trust, the Trustee shall continue to act as such until its duties have been
fully performed. For purposes of winding up the Trust, the Trustee shall pay
out any Asserted Claims that were submitted prior to the Termination Date and
expenses that were incurred prior to liquidation of the Trust, to the extent
that assets in the Trust Fund are sufficient for such purpose (taking into
account any payments requested by the Trustee pursuant to Section 4.04).
5
<PAGE>
ARTICLE IV.
ADMINISTRATION OF THE TRUST FUND
4.01 NOTIFICATION OF CLAIMS. The Loomis Stockholders Trust shall
promptly notify the Trustee in writing of Asserted Claims which the Manager of
the Loomis Stockholders Trust determines to be valid.
4.02 PAYMENT OF CLAIMS, EXPENSES AND LIABILITIES. The Trustee shall
pay from the Trust Fund all claims, expenses, charges, liabilities and
obligations of the Trust, as contemplated by this Trust Agreement and as
required by law. The Trustee shall pay Asserted Claims, or portions thereof, in
accordance with the instructions of the Manager of the Loomis Stockholders
Trust, promptly but in any event within ten business days following receipt by
the Trustee of the notice required by Section 4.01.
4.03 ACCUMULATION OF NET INCOME. Except as provided below, the
Trustee shall accumulate all of the net income of the Trust Fund not utilized
for the payment of Trust liabilities and expenses pursuant to Section 4.02 and
shall add such accumulated income to the principal of the Trust Fund from time
to time. As promptly as practicable after the Trustee determines, pursuant to
Article V hereof, the taxable income allocable to a Beneficiary with respect to
a period, the Trustee shall distribute to such Beneficiary 40% of the taxable
income of the Trust allocable to such Beneficiary (a "Tax Distribution"). In
the event that there is a final determination pursuant to action by a tax
authority that such taxable income was properly taxable to another Beneficiary,
the Beneficiary which received the Tax Distribution shall promptly pay the Tax
Distribution for the applicable period to the other Beneficiary.
4.04 COLLECTION FOR EXPENSES. If at any time the amount of the then
Expense Reserve exceeds the value of the Trust Fund, the Class II Beneficiary
shall promptly pay to the Trustee as much or all of the excess as the Trustee
shall request.
4.05 FINAL DISTRIBUTION. Upon the Termination Date and after having
given effect to Section 3.04, (i) the Trustee shall distribute the balance of
the Trust Fund (if any) to the Class II Beneficiary, and (ii) the Class II
Beneficiary shall assume any and all liabilities and obligations of the Trustee
with respect to the Indemnity Claims.
6
<PAGE>
ARTICLE V.
TAX MATTERS
5.01 INCOME TAX STATUS. The Trust is intended to be treated as a
liquidating trust pursuant to Treasury Regulation (S) 301.7701-4(d) and as a
grantor trust subject to the provisions of Subchapter J, Subpart E of the
Internal Revenue Code owned by the Class I Beneficiary as grantor. Any items of
income, deduction, credit or loss of the Trust shall be allocated to the Class I
Beneficiary for federal income tax purposes. The Trustee is authorized to take
any action that may be necessary or appropriate to minimize any potential tax
liability of the Beneficiaries arising out of the operations of the Trust.
5.02 TAX RETURNS AND REPORTS. In accordance with (S) 1.671-4(a) of
the Treasury Regulations, the Trustee will file with the IRS annual information
tax returns (Form 1041), as provided in this Section. Items of income,
deduction and credit attributable to the Trust will not be reported on the Form
1041. Instead, the Trustee will attach to the Form 1041 a separate statement
showing the items of income, deduction and credit attributable to the Trust and
detailing the allocation of such items to the Class I Beneficiary. Within
thirty (30) days after the end of each calendar year, the Trustee shall cause to
be prepared and mailed to the Class I Beneficiary such information with respect
to the Trust as shall be necessary for the Class I Beneficiary to complete and
file its federal, state and local income and other tax returns.
5.03 WITHHOLDING. Notwithstanding the preceding provisions of this
Article V, the Trustee may withhold from any amount distributable from the Trust
at any time to any person such sum or sums as may be sufficient to pay any tax
or taxes or other charge or charges which have been or may be imposed on such
person or upon the Trust with respect to the amount distributable or to be
distributed under the income tax laws of the United States or of any state or
political subdivision or entity by reason of any distribution provided for in
this Trust Agreement, whenever such withholding is determined by the Trustee, in
the Trustee's sole discretion, to be required by any law, regulation, rule,
ruling, directive or other governmental requirement.
7
<PAGE>
ARTICLE VI.
POWERS OF AND LIMITATIONS ON THE TRUSTEE
6.01 LIMITATIONS ON TRUSTEE. The Trustee shall not at any time, on
behalf of the Trust or the Beneficiaries, enter into or engage in any trade or
business, and no part of the Trust Fund shall be used or disposed of by the
Trustee in furtherance of any trade or business. The Trustee shall be
restricted to receiving the Initial Contribution, collecting income from the
Trust Fund, discharging Asserted Claims, bringing suit or defending any suit
against the Trust or the Trustee on behalf of the Trust, and exercising such
other powers and duties as are specified elsewhere in this Trust Agreement,
including, without limitation, the duties specified in Section 6.03, for the
purposes of carrying out the terms of this Trust Agreement.
6.02 LIMITATIONS ON INVESTMENTS. The Trustee shall invest the
Initial Contribution and other funds received by it as Trustee or otherwise held
in the Trust Fund only in (a) short-term marketable direct obligations of, or
guaranteed as to principal and interest by, the United States government or any
agency thereof; (b) commercial paper of one or more corporations having a credit
rating of at least "A"; or (c) insured demand deposit accounts or interest-
bearing certificates of deposit or other similar obligations of domestic banks
or other financial institutions having a shareholders' equity or equivalent
capital of not less than One Billion Dollars ($1,000,000,000), at the then best
generally available rates of interest for like amounts and like periods;
provided, however, that the maturities of any of the foregoing shall not exceed
one (1) year from the date of such investment.
6.03 SPECIFIC POWERS OF TRUSTEE. Subject to the limitations
contained in this Trust Agreement, the Trustee shall have, in addition to any
powers conferred by any other provision of this Trust Agreement, the power to
take any and all actions as, in the sole discretion of the Trustee, are
necessary or advisable to effectuate the purpose of the Trust, including the
following specific powers:
(a) To retain all or any assets constituting part of the Trust
Fund, to hold legal title to property of the Trust in the name of the
Trust, to invest or reinvest funds of the Trust only as provided in Section
6.02 and to cause such investments of any part of the Trust Fund to be
registered and held in its name, as Trustee, or in the names of nominees.
8
<PAGE>
(b) To maintain appropriate books and records relating to the
Trust and the Trust Fund detailing the acts and transactions of the
Trustee.
(c) To initiate, prosecute, defend, supervise, direct,
compromise or settle any claim, demand, action or proceeding relating to
the Trust or this Trust Agreement, and in connection therewith, at the
Trustee's discretion, to retain and employ such agents, adjusters and
professionals (including professionals affiliated with the Trustee or any
retained by any Loomis Affiliate or the Beneficiaries) and to confer upon
them such authority as the Trustee may deem expedient to carry out its
duties hereunder, and to pay reasonable compensation therefor from the
Trust Fund.
(d) To perform any and all acts, exercise any and all rights,
enter into any and all proceedings, contracts and other instruments
(including, but not limited to, the preparation and filing of any and all
statements and papers, documents and instruments of any kind and nature
with any governmental body having jurisdiction over the Trust or the
Contribution Agreement) that are not inconsistent with the provisions of
this Trust Agreement and that the Trustee deems necessary and advisable in
its opinion for the exercise by the Trustee of all the rights and
privileges accorded to it hereunder, for the protection and safekeeping of
the Trust Fund and for the administration of the Trust in accordance with
the terms of this Trust Agreement and applicable law.
ARTICLE VII.
ACCOUNTS OF THE TRUSTEE
7.01 ACCOUNTS AND INSPECTION. The Trustee shall keep accurate and
detailed accounts of all investments, receipts and disbursements and other
transactions hereunder and all accounts, books and records relating thereto
shall be open at all reasonable times to inspection and audit by any person
designated by the Beneficiaries. The Trustee shall promptly deliver to such
designee any reports on the Trust Fund that are reasonably requested.
7.02 ACCOUNTING REPORTS. Within a reasonable time period following
the Termination Date, and within one hundred twenty (120) days, or such other
agreed-upon period, after removal or resignation of the Trustee, the Trustee
shall deliver to the
9
<PAGE>
Beneficiaries a certified written report, in a format acceptable to the
Beneficiaries, setting forth (i) all investments, receipts and disbursements,
and other transactions effected during the period from the date of this Trust
Agreement, or from the close of any preceding period covered by such a report to
the date of such removal, resignation or termination, (ii) all cash, securities
and other property held at the close of such period and the current value
thereof, and (iii) such other information as may be required of the Trustee
under any applicable law.
7.03 RIGHT TO JUDICIAL ACCOUNTING. Nothing contained in this
Article shall be construed as a limitation upon or prohibition against the
Trustee's right to have its accounting judicially settled.
7.04 PRESERVATION OF BOOKS AND RECORDS. All records and accounts
maintained by the Trustee with respect to the Trust shall be preserved for such
period as may be required under any applicable law. Upon the expiration of any
such required retention period, the Trustee shall have the right to destroy such
records and accounts after first notifying the Beneficiaries of its intention
and transferring to the Beneficiaries all records and accounts requested. The
Trustee shall have the right to preserve all records and accounts in original
form, or on microfilm, magnetic tape, or any other similar process.
ARTICLE VIII.
LIABILITIES AND INDEMNIFICATION OF THE TRUSTEE
8.01 GENERALLY. The Trustee accepts and undertakes to discharge the
trust created by this Trust Agreement upon the terms and conditions hereof. The
Trustee shall exercise such of the rights and powers vested in it by this Trust
Agreement, and use the same degree of care and skill in its exercise as a
prudent man would exercise or use under the circumstances in the conduct of its
own affairs. No provisions of this Trust Agreement shall be construed to
relieve the Trustee from liability for its own recklessness or its own
intentional or willful and wanton misconduct resulting in private gain, except
that:
(a) The Trustee shall not be liable for any action taken in
good faith in reliance upon the advice of professionals.
(b) The Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set forth in this
10
<PAGE>
Trust Agreement, and no implied covenants or obligations shall be read into
this Trust Agreement against the Trustee.
(c) The Trustee shall not be liable for any error of judgment
made in good faith.
8.02 REQUIREMENT OF ADEQUATE RESOURCES. Notwithstanding any other
provision of this Trust Agreement, and particularly notwithstanding the
provisions of Section 6.03, the Trustee shall not be required to take any action
with respect to any Asserted Claim or to enter into or maintain any other claim,
demand, action or proceeding relating to the Trust, unless the Trustee shall
have sufficient funds on hand for that purpose or unless the Trustee shall have
been indemnified to its satisfaction against all expenses and liabilities to
which it may, in its judgment, be subjected by any such action on its part.
8.03 RELIANCE BY TRUSTEE. Except as otherwise provided in Section
7.01:
(a) The Trustee may rely and shall be protected in acting upon
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order or other paper or document reasonably
believed by the Trustee to be genuine and to have been signed or presented
by the proper party or parties.
(b) The Trustee may consult with legal counsel to be selected
by it, and pay the cost of such consultation from the Trust Fund, and the
advice or opinion of such counsel shall be full and complete personal
protection to the Trustee and agents of the Trust in respect of any action
taken or suffered by it in good faith and in reliance on, or in accordance
with, such advice or opinion.
8.04 INDEMNIFICATION OF TRUSTEE. In addition to, and not in
limitation of, the provisions of Section 4.04, the Trustee shall be indemnified
by and receive reimbursement from the Class II Beneficiary against and from any
and all loss, liability, damage or expense that the Trustee may incur or
sustain, in good faith and without recklessness or its own intentional or
willful and wanton misconduct resulting in personal gain, in the exercise and
performance of any of the powers and duties of the Trustee under this Trust
Agreement. The Trustee may receive advance payments in connection with
indemnification under this Section, provided that prior to receiving any such
advance, the Trustee shall first have given a written undertaking to repay any
amount advanced to it and to reimburse the Trust in the event it is subsequently
determined that it is not entitled to such indemnification. The rights
11
<PAGE>
accruing to the Trustee by reason of the foregoing shall not be deemed to
exclude any other right to which it may legally be entitled, nor shall anything
else contained herein restrict the right of the Trustee to contribution under
applicable law.
8.05 BOND OF TRUSTEE. Neither the Original Trustee nor any
successor Trustee shall be obliged to file or furnish any bond or surety for the
performance of its duties, unless otherwise ordered by a Court, and if so
ordered, all costs and expenses of providing such bond or surety shall be paid
or reimbursed from the Trust Fund as an expense of administration.
8.06 LIABILITY TO THIRD PERSONS. The Beneficiaries shall not be
subject to any personal liability whatsoever, in tort, contract or otherwise, to
any person in connection with the Trust Fund or the affairs of the Trust during
the Trust Term, and no Trustee or agent of the Trust shall be subject to any
personal liability whatsoever, in tort, contract or otherwise, to any person in
connection with the Trust Fund or the affairs of this Trust, except for its own
recklessness or its own intentional or willful and wanton misconduct resulting
in personal gain; and all such persons shall look solely to the Trust Fund for
satisfaction of claims of any nature arising in connection with affairs of the
Trust.
8.07 NONLIABILITY OF TRUSTEE FOR ACTS OF PREDECESSORS. Any
successor Trustee may accept and rely upon any accounting made by or on behalf
of any predecessor Trustee hereunder, and any statement or representation made
as to the assets comprising the Trust Fund or as to any other fact bearing upon
the prior administration of the Trust. A Trustee shall not be liable for having
accepted and relied upon such accounting, statement or representation if it is
later proved to be incomplete, inaccurate or untrue. A Trustee or successor
Trustee shall not be liable for any act or omission of any predecessor Trustee,
nor have a duty to enforce any claims against any predecessor Trustee on account
of any such act or omission.
8.08 NONLIABILITY OF TRUSTEE FOR ACTS OF OTHERS. Nothing contained
in this Trust Agreement shall be deemed to be an assumption by the Trustee of
any of the liabilities, obligations or duties of any of the other parties
hereto, and shall not be deemed to be or contain a covenant or agreement by the
Trustee to assume or accept any such liability, obligation or duty.
12
<PAGE>
ARTICLE IX.
COMPENSATION OF TRUSTEES
9.01 TRUSTEE COMPENSATION. Each Trustee shall be entitled to such
compensation for services rendered as shall be mutually agreed upon by the
Trustee and the Class II Beneficiary prior to such Trustee's accession to
office, to be paid in such installments and at such intervals as shall have been
specified in such agreement.
9.02 PRIOR LIEN OF TRUSTEE. The Trustee shall have a prior lien
upon the Trust Assets to secure payment of any amounts payable to the Trustee or
to employees or agents of the Trust as compensation for services to the Trust or
for indemnification pursuant to Section 8.04 above.
ARTICLE X.
TRUSTEE AND SUCCESSOR TRUSTEES
10.01 GENERALLY. The Trustee may be a bank or trust company
authorized to act as a corporate fiduciary under the laws of the State of New
York. A Trustee that changes its name or reorganizes, reincorporates or merges
with or into or consolidates with any other entity shall be deemed to be a
continuing entity and shall continue to act as a Trustee hereunder.
10.02 RESIGNATION. The Trustee may resign as Trustee by delivering a
Notice of resignation to the Beneficiaries. Such resignation shall become
effective on the date specified in such Notice (which shall not be less than
thirty (30) days after delivery of such Notice) or upon the appointment of such
Trustee's successor and such successor's acceptance of such appointment,
whichever is later.
10.03 APPOINTMENT OF SUCCESSOR. In the event of the removal,
resignation, bankruptcy or insolvency of the Trustee, a vacancy shall be deemed
to exist and a successor shall be appointed by the Beneficiaries.
10.04 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR TRUSTEE. The removal,
resignation, bankruptcy or insolvency of the Trustee shall not operate to
terminate the Trust created by this Agreement or to revoke any existing agency
created pursuant to the terms of this Trust Agreement or invalidate any action
theretofore taken by the Trustee. Any
13
<PAGE>
successor Trustee appointed hereunder shall execute an instrument accepting its
appointment and shall deliver one counterpart thereof to each of the
Beneficiaries, and, in case of the Trustee's resignation, to the retiring
Trustee. Thereupon such successor shall, without any further act, become vested
with all the liabilities, duties, powers, rights, title, discretion and
privileges of its predecessor in the Trust with like effect as if originally
named Trustee. The retiring Trustee shall duly assign, transfer and deliver to
such successor all property and money held by such retiring Trustee hereunder
and shall, as reasonably requested by such successor, execute and deliver an
instrument or instruments conveying and transferring to such successor upon the
trust herein expressed, all the liabilities, duties, powers, rights, title,
discretion and privileges of such retiring Trustee.
ARTICLE XI.
AMENDMENTS
11.01 AMENDMENT AUTHORITY. Whenever necessary to carry out the
purpose of the Trust, this Trust Agreement may be amended by the Trustee with
the unanimous consent and approval of the Beneficiaries; provided, however,
-------- -------
that:
(a) no such amendment may be made that would have the effect
of (i) changing the beneficial interest of the Beneficiaries, or (ii)
reducing any responsibility of the Trustee with respect to Indemnity Claims
without the consent of Borg-Warner and Loomis Fargo; and
(b) no such amendment may be made under any circumstances that
would have the effect of (i) extending the Termination Date beyond the date
specified in Section 3.02, (ii) authorizing the Trustee to engage in a
trade or business, or (iii) expanding the amendment powers of the Trustee
under this Article.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
12.01 INTENTION OF PARTIES TO ESTABLISH TRUST. This Trust Agreement
is intended to create a trust without transferable certificated beneficial
interests (except as
14
<PAGE>
permitted by operation of law) and the Trust created hereunder shall be governed
and construed in all respects as a trust.
12.02 INSTRUMENTS OF FURTHER ASSURANCE. The Beneficiaries shall,
upon the reasonable request of the Trustee, execute, acknowledge and deliver
such further instruments and do such further acts as may be necessary or proper
to carry out effectively the purpose of this Trust Agreement.
12.03 GOVERNING LAW. This Trust Agreement shall be construed and
enforced, to the extent possible, according to the internal laws of the State of
New York, and all provisions hereof shall be administered according to the laws
of said State.
12.04 SEVERABILITY. In the event any provision of this Trust
Agreement or the application thereof to any person or circumstances shall be
finally determined by a court of proper jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Trust Agreement, or the
application of such provision to persons or circumstances or in jurisdictions
other than those as to or in which it is held invalid or unenforceable, shall
not be affected thereby, and each provision of this Trust Agreement shall be
valid and enforced to the fullest extent permitted by law.
12.05 NOTICES. (a) Any Notice or other communication required or
permitted to be made in accordance with this Trust Agreement shall be in writing
and shall be deemed to have been sufficiently given, for all purposes, if
delivered personally, or if delivered during regular business hours by facsimile
transmission, telex or other electronic or telegraphic means, or if delivered by
a recognized overnight or two-day delivery service or if mailed by first class
mail:
(i) if to the Trustee, at:
Wingate Partners, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Telecopy No.: (214) 871-8799
15
<PAGE>
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby
Telecopy No.: (214) 746-7777
(ii) if to the Class I Beneficiary, at:
Loomis, Fargo & Co.
16225 Park Ten Place, Suite 600
Houston, Texas 77084
Attention: James B. Mattly
Telecopy No.: (281) 647-5697
(iii) if to the Class II Beneficiary, at:
c/o Wingate Partners, L.P.
750 N. St. Paul Street
Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Telecopy No.: (214) 871-8799
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby, Esq.
Telecopy No.: (214) 746-7777
16
<PAGE>
(b) Any entity may change the address at which it is to receive
Notices under this Trust Agreement by furnishing written Notice thereof to the
Trustee as provided above.
12.06 COUNTERPARTS. This Trust Agreement may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
[The remainder of this page is intentionally left blank.]
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Trust
Agreement or caused this Trust Agreement to be duly executed by their respective
officers and the Trustee herein has executed this Trust Agreement, as Trustee,
effective as of the day and year first above written.
LOOMIS, FARGO & CO.
By: /s/ James K. Jennings, Jr.
-------------------------------
Name:
Title:
LOOMIS STOCKHOLDERS TRUST
By: /s/ F. B. Hegi, Jr.
-------------------------------
Frederick B. Hegi, Jr.,
Manager
FREDERICK B. HEGI, JR.
Trustee
By: /s/ F. B. Hegi, Jr.
-------------------------------
Frederick B. Hegi, Jr.,
as Trustee and not individually
18
<PAGE>
EXHIBIT 10.5
EXCESS CLAIMS ASSUMPTION AGREEMENT
----------------------------------
THIS EXCESS CLAIMS ASSUMPTION AGREEMENT (this "Agreement") is made and
entered into this 24th day of January, 1997, by and among Loomis, Fargo & Co., a
Delaware corporation ("Loomis Fargo"), Loomis Holding Corporation (to be renamed
LFC Holding Corporation), a Delaware corporation ("Loomis Holding"), Loomis
Armored Inc. (to be renamed Loomis, Fargo & Co.), a Texas corporation ("Loomis
Armored" and, together with Loomis Fargo and Loomis Holding, the "Newco
Parties"), and the Loomis Stockholders Trust, a Delaware business trust (the
"Business Trust"). Capitalized terms used herein and not otherwise defined shall
have the meanings given them in the Contribution Agreement (as hereinafter
defined).
RECITALS
--------
WHEREAS, the Newco Parties, Borg-Warner Security Corporation, a
Delaware corporation ("Borg-Warner"), Wells Fargo Armored Service Corporation, a
wholly owned subsidiary of Borg-Warner, and the Business Trust have executed and
delivered that certain Contribution Agreement; pursuant to which the Business
Trust, among other things, (i) has agreed to assume the liabilities and
obligations of the Newco Parties with respect to the Loomis Casualty and
Employee Claims and (ii) has certain indemnity and other payment obligations
pursuant to Articles III and XII (the "LST Obligations"), in the case of clause
(ii), on the terms and conditions set forth in the Contribution Agreement;
WHEREAS, the Business Trust has arranged for the provision of certain
insurance coverage to make payments in respect of certain Casualty and
Employment Claims pursuant to an Early Program Close-Out Agreement (the
"Close-Out Agreement") dated as of January 24, 1997 between Loomis Armored and
the insurance companies named therein; and
WHEREAS, the Loomis Indemnity Claims Trust, a New York grantor trust
(the "Indemnity Trust"), was formed pursuant to the Contribution Agreement to
make payments in respect of the LST Obligations and the Loomis Casualty and
Employee Claims not otherwise covered by the Close-Out Agreement, together with
the costs of administration thereof, to the extent of the corpus of the
Indemnity Trust.
NOW, THEREFORE, in consideration of the premises and the consideration
set forth in the Contribution Agreement, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto do hereby agree as follows:
<PAGE>
1. The Business Trust hereby assumes the Loomis Casualty and
Employee Claims and agrees to indemnify and hold harmless the Newco Parties from
and against (i) the Loomis Casualty and Employee Claims and any Indemnifiable
Losses (as defined in the Contribution Agreement) to the extent relating to,
resulting from or arising out of the Loomis Casualty and Employee Claims and
(ii) the LST Obligations; provided, that, to the extent that any Loomis Casualty
--------
and Employee Claim (or portion thereof) or any such Indemnifiable Loss (or
portion thereof) or any LST Obligation (or portion thereof) is paid to, or to a
third party on behalf of, the Newco Parties (x) pursuant to the Close-Out
Agreement or (y) from the corpus of the Indemnity Claims Trust, such payment
shall satisfy the Business Trust's obligation to the Newco Parties hereunder
with respect to such Loomis Casualty and Employee Claim (or such portion
thereof), such Indemnifiable Loss (or such portion thereof) or such LST
Obligation (or portion thereof).
2. Nothing in this Agreement, express or implied, is intended or
shall be construed to confer upon, or to give to, any person, firm, or
corporation, other than the parties hereto and their respective successors and
assigns, any right or remedy under or by reason of this Agreement or any term,
covenant, or condition hereof, and all of the terms, covenants, conditions,
promises and agreements contained in this Agreement shall be for the sole and
exclusive benefit of the parties hereto and their respective successors and
assigns.
3. This Agreement is executed and delivered pursuant to the
Contribution Agreement and may be executed in any number of counterparts, and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts together shall constitute but one and the same
instrument.
4. This Agreement, including, without limitation, the
interpretation, construction, validity and enforceability thereof, shall be
governed by the laws (other than the conflict of laws rules) of the State of New
York.
5. This Agreement may be modified or amended by a written instrument
signed by each of the parties hereto, but only with the prior written consent of
Borg-Warner.
2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date first above written.
LOOMIS, FARGO & CO.
By: James K. Jennings, Jr.
-----------------------
Name:
---------------------
Title:
--------------------
LOOMIS HOLDING CORPORATION
By: James K. Jennings, Jr.
-----------------------
Name:
---------------------
Title:
--------------------
LOOMIS ARMORED INC.
By: James K. Jennings, Jr.
-----------------------
Name:
---------------------
Title:
--------------------
LOOMIS STOCKHOLDERS TRUST
By:/s/ Frederick B. Hegi, Jr.
--------------------------
Frederick B. Hegi, Jr.
Manager
<PAGE>
EXHIBIT 10.6
LOOMIS, FARGO & CO.
UNITHOLDERS OPTION PLAN AND AGREEMENT
This Unitholders Option Plan and Agreement (the "Unitholders Plan"),
entered into this 24th day of January, 1997, by and among Loomis, Fargo & Co., a
Delaware corporation (the "Company"), Loomis Holding Corporation, a Delaware
corporation ("Holding"), and the persons who are signatories hereto as
Unitholders and whose names are set forth on Exhibit A hereto (the
---------
"Unitholders").
WHEREAS, in 1995, Holding adopted a Management Equity Growth and
Appreciation Plan (the "MEGA Plan"), to be effective as of May 5, 1991, pursuant
to which Holding granted to certain of its key employees and certain key
employees of Loomis Armored Inc. ("Loomis Armored"), its wholly-owned
subsidiary, the potential right to receive certain deferred compensation at a
future date, subject to the terms and conditions of the MEGA Plan (each such
right, a "Unit"); and
WHEREAS, each of the Unitholders owns one or more Units issued under the
MEGA Plan; and
WHEREAS, the Company, Holding, Loomis Armored, Borg-Warner Security
Corporation, Wells Fargo Armored Service Corporation ("Wells Fargo Armored"),
and the Loomis Stockholders Trust, a Delaware business trust (the "Business
Trust") have entered into a Contribution Agreement, dated as of November 28,
1996 (as it may be amended and in effect from time to time, the "Contribution
Agreement"), pursuant to which, among other things, the businesses of Loomis
Armored and Wells Fargo Armored will be combined and Holding will become a
wholly-owned subsidiary of the Company (the transactions contemplated by the
Contribution Agreement being referred to herein collectively as the
"Transactions"); and
WHEREAS, no "Payment Event" has occurred under the MEGA Plan; and
WHEREAS, in connection with the Transactions, each of the Company and
Holding has determined that, following the consummation of the Transactions, the
interests of the Company and the Unitholders would be better served by allowing
the Unitholders to participate in the growth of the Company and its subsidiaries
through options (the "Options") to purchase the common stock, $0.01 par value
(the "Common Stock"), of the Company rather than Units; and
<PAGE>
WHEREAS, the Company and the Business Trust are parties to that certain
Stock Contribution Agreement, dated as of the date hereof, whereby the Business
Trust has agreed that, to the extent Options are exercised pursuant to this
Unitholders Plan, the Business Trust shall contribute that number of shares of
Common Stock necessary to satisfy the exercise of such Option upon the receipt
by the Business Trust of cash equal to the aggregate Exercise Price (as
hereinafter defined) received by the Company in connection with the exercise of
such Option.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Issuance of Options. Upon the execution hereof by a
-------------------
Unitholder and subject only to the consummation of the Transactions, (a) the
Company shall grant to such Unitholder an Option to purchase the number of
shares of Common Stock (the "Option Shares") indicated next to his or her name
on Exhibit A in exchange for the number of Units there indicated and (b) all of
---------
the Units owned by such Unitholder shall be cancelled and of no further force
and effect.
The Options are not intended to be "incentive stock options" under Section
422 of the Internal Revenue Code of 1986 (as amended, the "Code").
Except as set forth on Exhibit A, no Options shall be issuable to any
---------
person under this Unitholders Plan. If and to the extent that Options granted
hereunder expire or terminate without having been exercised, the Option Shares
covered by such expired or terminated Options may not again be subject to an
Option under this Unitholders Plan.
Section 2. Administration of the Plan. This Unitholders Plan
--------------------------
shall be administered by the Board of Directors (the "Board") of the Company (or
the Board of Directors of any entity succeeding to all or substantially all of
the business of the Company, whether by merger, consolidation, transfer of
assets or otherwise, (a "Successor Entity")). The Board shall have the
authority, in its sole discretion, to construe the Unitholders Plan and the
Options granted hereunder, and to make all other determinations necessary or
advisable for administering the Unitholders Plan. In carrying out such duties,
the Board shall have the maximum discretion possible, subject only to a
requirement that it not be arbitrary and capricious. The Board may delegate the
responsibility for administering the Unitholders Plan to the compensation
committee or any other committee of the Board consisting of no fewer than two
(2) members of the Board.
2
<PAGE>
Section 3. Exercise Price. The price for which each Option Share
-------------
may be purchased under any Option granted hereunder (the "Exercise Price") shall
be $1.9645675 (the aggregate Exercise Price to be paid at any one time to be
rounded to the nearest cent), subject to adjustment as described below and/or in
Section 9 hereof.
In connection with the Transactions and pursuant to the Contribution
Agreement and related documents, the Business Trust may be entitled to certain
cash distributions from the Company (including without limitation, payments
received by the Business Trust on the NOL Note (as defined in the Contribution
Agreement)) and has certain indemnity obligations to the Company and Holding.
As of the date of a Triggering Event (as hereinafter defined), the Exercise
Price per Option Share shall be adjusted downward or upward, as appropriate, if
and to the extent that holders of trust units in the Business Trust (the
"Business Trust Participants") have (i) received cash distributions in respect
of such trust units, and/or (ii) contributed cash capital to the Business Trust
in order to satisfy indemnity payments and related expenses and any other
obligations of the Business Trust, pursuant to the following formula:
First, in the event that the Business Trust Participants have received any
cash distribution in respect of their respective trust units, the Exercise Price
per Option Share shall be adjusted downward in the amount equal to (A) the
aggregate amount of all cash received by the Business Trust Participants as of
the Triggering Date, divided by (B) 5,100,000 minus the number of Option Shares
----------
for which Options have been granted hereunder that have expired or terminated
and are no longer exercisable; and
Second, in the event that the Business Trust Participants have paid any
cash as capital contributions to the Business Trust, the Exercise Price per
Option Share shall then be adjusted upward in the amount equal to (A) the
aggregate amount of all cash paid out by the Business Trust Participants as of
the Triggering Date, divided by (B) 5,100,000 minus the number of Option Shares
----------
for which Options have been granted hereunder that have expired or terminated
and are no longer exercisable.
Notwithstanding anything in this Section 3 to the contrary, the Exercise
Price per Option Share shall never be less than $0.01 per Option Share.
Section 4. Exercisability of Options. No Option granted hereunder
-------------------------
shall be exercisable prior to the occurrence of
3
<PAGE>
a Triggering Event. Upon the occurrence of a Triggering Event, an Option issued
to any Unitholder hereunder shall become exercisable only to the extent vested;
provided, that Options held by any Unitholder who is an employee of the Company
- --------
or its subsidiaries on the date of such Triggering Event shall automatically
become fully vested and immediately exercisable. Option Shares shall vest on
the date set forth on Exhibit A hereto opposite that number of Option Shares,
---------
provided, that any unvested Option Shares shall terminate and lapse on the date
- --------
that a Unitholder is not an employee of the Company or its subsidiaries on such
date; provided, further, that in the event that Option Shares are fully vested
-------- -------
on the date hereof, Exhibit A shall indicate that such Option Shares are fully
---------
vested opposite that number of Option Shares. No Option shall be exercisable
after January __, 2007, or such earlier date as the Board may determine, in its
sole discretion, in connection with a Triggering Event. To the extent that an
Option is not exercised within its period of exercisability, it shall expire as
to the then unexercised part.
The Board shall have the right to accelerate, in whole or in part,
from time to time, conditionally or unconditionally, rights to exercise any
Option granted hereunder.
For purposes of this Unitholders Plan, a "Triggering Event" shall mean
the first to occur of any of the following:
(a) any sale, disposition, exchange, consolidation, merger or other
transaction, as a result of which Wingate Partners, L.P. ("Wingate"),
either directly or indirectly through its ownership interest through the
Business Trust or otherwise, sells, transfers or otherwise disposes of for
value, in the aggregate through one or more transactions, more than
1,250,000 shares of Common Stock to any other person or entity that is not
an affiliate of the Company, a Successor Entity or Wingate. For purposes
of this paragraph (a), the number of shares of Common Stock to be disposed
of or deemed disposed of by Wingate shall be adjusted appropriately to
reflect any stock dividends, splits, reclassification or recapitalization
of Common Stock following the date hereof, as determined by the Board in
good faith; or
(b) any sale, exchange or other disposition either directly or
indirectly, of all or substantially all of the assets of the Company or a
Successor Entity (in a single transaction or a series of related
transactions) to a person
4
<PAGE>
or entity which is not an affiliate of the Company, a Successor Entity or
Wingate; or
(c) a merger or consolidation of the Company or a Successor Entity
with or into another entity which is not an affiliate of the Company, a
Successor Entity or Wingate (whether or not the Company or such Successor
Entity is the survivor) with respect of which more than 50% of the fully
diluted Common Stock or common stock of such Successor Entity, as the case
may be, is converted into cash or other property; or
(d) the consummation of an underwritten public offering or series of
offerings of Common Stock by the Company or a Successor Entity pursuant to
a registration statement filed under the Securities Act of 1933, as amended
(the "Securities Act") producing aggregate gross proceeds to the Company or
any Successor Entity and any selling stockholders of at least $100 million.
Notwithstanding anything in this Agreement to the contrary, the events in
paragraphs (a) through (d) of this Section 4 shall not be deemed to be a
---
"Triggering Event" for any purpose under this Agreement (other than to
accelerate full vesting of the Option Shares held by Unitholders who are
employees of the Company or its subsidiaries on the date such event occurs), if
the Board determines in good faith that pursuant to the Contribution Agreement
and related agreements in connection with the Transactions, the Business Trust
Participants may potentially have the right to receive future cash distributions
in respect of their trust units in the Business Trust (but only with respect to
the right to receive cash distributions directly related to the Contribution
Agreement, related agreements and the Transactions, and not solely by virtue of
holding trust units in the Business Trust), or may have future obligations to
contribute cash capital to the Business Trust in order for the Business Trust to
satisfy certain expenses or indemnity claims. In the event the Board makes such
a determination prior to or in connection with a Triggering Event, then the
Board shall set forth such determination in resolutions of the Board and set
forth a date in the future, if then determinable, upon which a Triggering Event
shall be deemed to have occurred. In the event that the Board does not set
forth a date on which the Triggering Event shall be deemed to have occurred, a
Triggering Event shall be deemed to have occurred on the date two years
following the date of such event set forth in paragraphs (a) through (d) above.
5
<PAGE>
Section 5. Exercise of Options. Subject to the limitations on exercise
-------------------
referred to in Section 4 hereof, Options granted under this Unitholders Plan may
be exercised by a Unitholder as to all or part of the Option Shares covered
thereby by giving written notice of exercise to the Company's corporate
secretary at the principal business office of the Company, specifying the number
of Option Shares to be purchased and specifying a business day not more than ten
(10) days from the date such notice is given for the payment of the Exercise
Price against delivery of the Option Shares being purchased. In no event shall
an Option granted hereunder be exercised for a fraction of a Option Share or for
less than one hundred (100) Option Shares unless such exercise represents the
total balance of Option Shares for which the Option is then exercisable.
Section 6. Grant of Proxy. So long as that certain Stockholders
--------------
Agreement (the "Stockholders Agreement"), to be entered into among the Company,
the Business Trust, Wells Fargo Armored and Wingate pursuant to the Contribution
Agreement, remains in full force and effect, each Unitholder hereby constitutes
and appoints Frederick B. Hegi, Jr. (so long as he is a director of the Company,
or, in the event that Frederick B. Hegi, Jr. is no longer a director of the
Company, Wingate), with full power of substitution, as his or her true and
lawful proxy and attorney-in-fact to vote any and all Option Shares received by
such Unitholder upon the exercise of an Option. Each Unitholder acknowledges
that the proxy granted hereby is irrevocable, being coupled with an interest,
and that such proxy will continue until the termination of the Stockholders
Agreement in accordance with its terms.
Section 7. Termination of Employment. In the event of the termination
-------------------------
of employment of a Unitholder with the Company or any parent or subsidiary
thereof for any reason other than for "cause" (as defined below), an Option may
be exercised with respect to vested Option Shares by such Unitholder (or, in the
event of death or legal incapacity, by such Unitholder's legal representative or
by such person who acquired such Option by bequest or inheritance, upon
presentation of a certified copy of letters testamentary or equivalent proof of
the right of such legal representative or other person to exercise such Option)
until the later of one year after (a) a Triggering Event or (b) such termination
of employment; provided, that nothing in this paragraph shall be construed as
--------
limiting the Board's authority, in its sole discretion, to accelerate the period
of exercisability of such Option in connection with a Triggering Event.
6
<PAGE>
In the event that a Unitholder's employment with the Company or any
parent or subsidiary thereof is terminated for "cause," an Option held by such
Unitholder shall terminate and become null and void without any further action
by the Company upon such termination for cause.
For purposes of this Unitholders Plan, "cause" shall mean misconduct
(including the deliberate disregard of the Company rules, regulations and
procedures as made known to employees from time to time), theft, fraud,
embezzlement, misappropriation of customer or the Company funds or property,
negligence, breach of trust or confidentiality or any other behavior or acts
which bring disrepute upon the Company.
Notwithstanding anything to the contrary contained in this Unitholders
Plan, an Option shall terminate and become null and void if, in the reasonable
judgment of the Board, such Unitholder directly or indirectly:
(a) breaches any obligation to the Company or any parent or subsidiary
corporation under any agreement relating to assignment of inventions,
disclosure or information or data, or similar matters; or
(b) within a two (2) year period following termination of employment,
competes with the Company, or renders services (as a director, officer,
employee, consultant or otherwise) to, or owns more than a 5% equity
interest in, any person or entity that competes with the Company; or
(c) solicits, diverts, hires or takes away any person who is an
employee of the Company or advises or induces any employee to terminate his
or her employment with the Company; or
(d) solicits, diverts or takes away any person or entity that is a
customer of the Company, or advises or induces any customer or potential
customer not to do business with the Company; or
(e) discloses to any person or entity other than the Company, or makes
any use of, any information relating to the technology, know how, products,
services, business or data of the Company or its subsidiaries, suppliers,
licensors or customers, including but not limited to the names, addresses
and special requirements of the customers of the Company; or
7
<PAGE>
(f) takes any action that impairs or is intended to impair the
goodwill of the Company; or
(g) files any lawsuit against the Company with respect to any
transaction constituting a Triggering Event.
Section 8. Non-Transferability of Options. An Option granted hereunder
------------------------------
shall not be transferable, whether by operation of law or otherwise, other than
by will or the laws of descent and distribution, and shall be exercisable during
the lifetime of the Unitholder, only by such Unitholder or, in the event of such
Unitholder's disability that results in the appointment of a legal
representative on behalf of such Unitholder, such legal representative. In
addition, an Option may not be assigned, pledged, hypothecated or disposed of in
any way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process.
Unless otherwise advised by counsel to the Company, a Unitholder may
not sell or otherwise dispose of any Option or any Option Shares for a period of
six (6) months from the date of this Unitholders Plan.
Section 9. Effect of Certain Transactions. In the event of any change
------------------------------
in the shares subject to the Unitholders Plan or to any Option granted hereunder
(through merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, split-up, split-off, spin-off, combination of shares,
exchange of shares, or other like change in the capital structure of the
Company, but specifically excluding any change in the shares as a result of any
proceeding in bankruptcy involving the Company), an adjustment shall be made to
each outstanding Option such that each such Option shall thereafter be
exercisable for such securities, cash and/or other property as would have been
received in respect of the Option Shares subject to such Option had such Option
been exercised in full immediately prior to such change, and such an adjustment
shall be made successively each time any such change shall occur. The term
"Option Shares" after any such change shall refer to the securities, cash and/or
property then receivable upon exercise of an Option.
Section 10. Purchase for Investment. Except as hereinafter provided,
-----------------------
the Board may require the holder of an Option granted hereunder, as a condition
of exercise of such Option in the event the Option Shares subject to such Option
are not registered pursuant to an effective registration statement under the
Securities Act and applicable state securities laws, to execute and deliver to
the Company a written statement in form
8
<PAGE>
satisfactory to the Board, in which such holder (i) represents and warrants that
such holder is purchasing or acquiring the Option Shares acquired thereunder for
such holder's own account, for investment only and not with a view to the resale
or distribution thereof in violation of any federal or state securities laws,
and (ii) agrees that any subsequent resale or distribution of any of such Option
Shares shall be made only pursuant to either (1) an effective registration
statement under the Securities Act covering such Option Shares and under
applicable state securities laws or (2) specific exemptions from the
registration requirements of the Securities Act and any applicable state
securities laws, based on a written opinion of counsel in form and substance
satisfactory to counsel for the Company, as to the application thereto of any
such exemptions. The Company may place all legends on the Option Shares issued
upon the exercise of Options deemed necessary by the Company upon advise from
its counsel, including legends relating to restrictions on transferability as a
result of the Securities Act and applicable state securities laws.
Nothing herein shall be construed as requiring the Company to register
Option Shares under the Securities Act or any state securities law and, to the
extent deemed necessary by the Company, Option Shares may contain a legend to
the effect that registration rights had not been granted with respect to such
shares.
Section 11. Termination of Unitholders Plan. This Unitholders Plan and
-------------------------------
all liabilities hereunder shall terminate upon the written agreement of the
Business Trust and the Company.
Section 12. Withholding Tax. The Company may require an employee
---------------
exercising an Option granted hereunder to reimburse the corporation which
employs such employee for any taxes required by any governmental regulatory
authority to be withheld or otherwise deducted and paid by such corporation in
respect of the issuance or disposition of such Option Shares. In lieu thereof,
the corporation which employs such employee shall have the right to withhold the
amount of such taxes from any other sums due or to become due from such
corporation to the employee upon such terms and conditions as the Board shall
prescribe. The corporation that employs such employee may, in its discretion,
hold any stock certificate to which such employee may be entitled upon the
exercise of an Option as security for the payment of such withholding tax
liability, until cash sufficient to pay that liability has been accumulated.
9
<PAGE>
Section 13. Nature of Employment Relationship. This Unitholders Plan
---------------------------------
does not constitute a contract of employment or any extension of any existing
contract of employment. Nothing in this Unitholders Plan shall add to, or
subtract from, the respective rights otherwise possessed by a Unitholder and the
Company with regard to the Unitholder's continued employment by the Company or
any parent or subsidiary corporation or the termination of his employment
without cause.
Section 14. Successors and Assigns. This Unitholders Plan shall be
----------------------
binding upon and shall inure to the benefit of the Company, any Successor
Entity, and, upon such Unitholder's death, his or her respective heirs, personal
representatives, assigns and successors in interest.
Section 15. Construction and Severability. In this Unitholders Plan,
-----------------------------
whenever the context so requires, the masculine gender shall include the
feminine or neuter, the singular number shall include the plural and the plural
shall include the singular. If any of the provisions of this Unitholders Plan
shall be unlawful, void or unenforceable in whole or in part for any reason,
such provision or such part thereof shall be deemed separable from and shall in
no way affect the validity or enforceability of the remaining provisions of this
Unitholders Plan.
Section 16. Exculpation and Indemnification. To the fullest extent
-------------------------------
permitted by applicable law in effect from time to time, no member of the Board
shall be liable for any action or omission of any other member's own part in
respect of this Unitholders Plan. The Company hereby agrees to pay all expenses
(including, without limitation, legal fees and expenses) incurred by, and
satisfy any judgment or lien rendered or levied against, a present or former
member of the Board as a result of any proceeding which arises in connection
with this Unitholders Plan or the administration thereof; provided, however,
-------- -------
that the Board first determines that such director was acting in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company. Payments authorized under this Unitholders Plan shall include,
without limitation, amounts paid and expenses incurred in settling any such
proceeding. Termination of any proceeding brought in respect of the settlement
or a plea of nolo contendere (or equivalent) will not, of itself, create a
presumption that the director did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Company.
10
<PAGE>
The right to indemnification hereunder shall be a contract right and
as such shall run to the benefit of any director who is elected and accepts the
position of director of the Company or elects to continue to serve as a director
of the Company while this Unitholders Plan is in effect. Any modification or
amendment of this Section 16 shall be prospective only and shall not limit the
rights of any such director or the obligations of the Company with respect to
any claim arising from or related to the services of such director in
administering this Unitholders Plan prior to any such modification or amendment.
Such right shall include the right to be paid by the Company expenses incurred
in investigating and defending any such proceeding in advance of its final
disposition to the maximum extent permitted under applicable law, as the same
exists or may hereafter be amended. If a claim for indemnification or
advancement of expenses hereunder is not paid in full by the Company within
sixty (60) days after a written claim has been received by such entity, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim, and if successful in whole or in part, the
claimant shall also be entitled to be paid the expenses of prosecuting such
claim. It shall be a defense to such action that such indemnification or
advancement of costs of defense are not permitted under applicable state law,
but the burden of proving such defenses shall be on the Company. In the event
of the death of any person having a right of indemnification under the foregoing
provisions, such right shall inure to the benefit of his heirs, executors,
administrators, and personal representatives. The rights conferred above shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, bylaw, resolution of stockholders or directors,
agreement, or otherwise. As used herein, the term "proceeding" shall mean any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, arbitrative, or investigative, any appeal in such an
action, suit or proceeding, and any inquiry or investigation that could lead to
such an action, suit, or proceeding.
For purposes of this Section 16, the term "director" shall include the
estate, executor, administrator, heirs, legatees and assigns of such person.
The provisions of this Section 16 are in addition to and shall not
limit any other rights which a director may have under any provision of the
charter or bylaws of the Company, any contract or applicable law.
11
<PAGE>
Section 17. Applicable Law. This Unitholders Plan, and the application
--------------
or interpretation thereof and all the schedules or exhibits incorporated herein
by reference, shall be governed exclusively by its terms and by the laws of the
State of Texas. Notwithstanding anything in this Unitholders Plan to the
contrary, the Company shall not be required to issue any Option Shares if such
action would, in the opinion of counsel to the Company, result in a violation of
any state or federal securities law, and the Company may require that a
Unitholder deliver any written representations, written covenants and other
documents as the Company or its counsel deems reasonably necessary, if any,
including, without limitation, an opinion of counsel reasonably satisfactory to
the Company to the effect that delivery of such Option Shares would not result
in a violation of any state or federal securities laws.
Section 18. Amendment of Plan. The Unitholders Plan may only be amended
-----------------
upon the written agreement of the Company and the Business Trust. No amendment,
modification, suspension or termination of the Unitholders Plan shall alter or
impair any Options previously granted under the Unitholders Plan without the
consent of the holder thereof.
Section 19. Entire Agreement. This Unitholders Plan, together with the
----------------
documents and exhibits referred to herein, constitutes the entire plan and
agreement among the parties and merges all prior discussions or communications
among them, and no party shall be bound by any definitions, conditions,
warranties, or representations other than as expressly stated in this
Unitholders Plan or as subsequently set forth in a writing signed by all of the
parties hereto.
Section 20. Termination of MEGA Plan and Units. Each of Holding and the
----------------------------------
Unitholders hereby expressly agree that, subject only to the consummation of the
Transactions, the MEGA Plan is hereby terminated and all Units granted
thereunder are hereby cancelled and shall be of no further force and effect.
[The remainder of this page is intentionally left blank.]
12
<PAGE>
IN WITNESS WHEREOF, this Unitholders Plan and Agreement has been executed,
effective as of the day and year first above written.
LOOMIS, FARGO & CO.
/s/ James B. Mattly
---------------------------
James B. Mattly, President
LOOMIS HOLDING CORPORATION
By: /s/ F. B. Hegi, Jr.
-------------------------
Frederick B. Hegi, Jr.
Chairman
UNITHOLDERS:
-----------
/s/ Daniel W. Belger, Jr
----------------------------
Daniel W. Belger, Jr.
/s/ James E. McHale
----------------------------
James E. McHale
/s/ Bruce J. Magelky
----------------------------
Bruce J. Magelky
/s/ Michael Tawney
----------------------------
Michael Tawney
/s/ Tommy E. Harden
----------------------------
Tommy E. Harden
<PAGE>
/s/ Michael C. Read
----------------------------
Michael C. Read
/s/ James K. Jennings, Jr.
----------------------------
James K. Jennings, Jr.
/s/ James F. Lonsbery
----------------------------
James F. Lonsbery
/s/ Ricky L. Miller
----------------------------
Ricky L. Miller
/s/ Larry E. Goswick
----------------------------
Larry E. Goswick
/s/ Curtis P. Balko
----------------------------
Curtis P. Balko
/s/ James B. Mattly
----------------------------
James B. Mattly
/s/ Timothy J. Simpson
----------------------------
Timothy J. Simpson
/s/ Ernest W. Fereday
----------------------------
Ernest W. Fereday
/s/ David S. Reed
----------------------------
David S. Teed
<PAGE>
/s/ Edward H. Hamlett
----------------------------
Edward H. Hamlett
/s/ Mark A. Clark
----------------------------
Mark A. Clark
/s/ D. Mark Shearer
----------------------------
D. Mark Shearer
<PAGE>
EXHIBIT 10.7
EXECUTION COPY
STOCK CONTRIBUTION AGREEMENT
This Stock Contribution Agreement (this "Agreement") is made and
---------
entered into as of January 24, 1997, by and between Loomis, Fargo & Co., a
Delaware corporation (the "Company"), and the Delaware business trust (the
-------
"Business Trust") created pursuant to that certain Business Trust Agreement
--------------
dated as of November 27, 1996 among Wingate Partners, L.P., Wingate Affiliates,
L.P., Wilmington Trust Company, as trustee, Frederick B. Hegi, Jr., as manager,
and the unitholders listed on the signature pages thereto (the "Business Trust
--------------
Agreement").
- ---------
WHEREAS, this Agreement is being executed concurrently with the
closing (the "Closing") of the business combination of Loomis Armored Inc.
-------
("Loomis Armored") and Wells Fargo Armored Service Corporation ("Wells Fargo")
-------------- -----------
pursuant to the Contribution Agreement (the "Contribution Agreement") dated as
----------------------
of November 28, 1996, among Borg-Warner Security Corporation, Wells Fargo,
Loomis Holding Corporation ("LHC"), Loomis Armored, the Company, and the
---
Business Trust;
WHEREAS, 5,100,000 shares of common stock, par value $.01 per share,
of the Company ("Common Stock") are being issued to the Business Trust in
------------
connection with the Closing;
WHEREAS, pursuant to the terms of the Business Trust, Frederick B.
Hegi, Jr., as manager, or his successor (the "Trust Manager") has sole voting
-------------
and dispositive power with respect to all of the shares of Common Stock issued
to the Business Trust;
WHEREAS, the Company has in place a Unitholders Option Plan and
Agreement (the "Unitholders Option Plan") pursuant to which certain employees of
-----------------------
the Company and/or LHC have been granted options to acquire 612,967 shares of
Common Stock (the "Unitholder Options") in accordance with the terms and subject
------------------
to the conditions set forth in the Unitholders Option Plan;
WHEREAS, the Unitholder Options have been granted upon the termination
of the LHC Management Equity Growth and Appreciation Plan (the "MEGA Plan") and
---------
in replacement of all units previously granted under the MEGA Plan;
WHEREAS, the Company has issued to Edward H. Hamlett, pursuant to an
option agreement of even date herewith (the "Hamlett Option Agreement"), an
------------------------
option to purchase 10,978 shares of Common Stock (the "Hamlett Option" and
--------------
together with the
<PAGE>
Unitholder Options, the "Eligible Options") in accordance with the terms and
----------------
subject to the conditions set forth in the Hamlett Option Agreement; and
WHEREAS, of the 5,100,000 shares of Common stock being issued to the
Business Trust, 623,945 shares have been reserved by the Business Trust for
contribution to the Company upon exercise of the Eligible Options by the holders
thereof.
NOW, THEREFORE, the parties hereto agree as follows:
1. Agreement to Contribute Shares to the Company. (a) Prior to the
---------------------------------------------
termination of this Agreement, upon the exercise of any Eligible Option in
accordance with the terms and subject to the restrictions contained in the
Unitholders Option Plan or the Hamlett Option Agreement, as the case may be, the
Company shall promptly notify the Business Trust of such event including the
name and mailing address of the exercising party, the number of shares of Common
Stock to be issued pursuant to the exercise, the exercise price as calculated in
good faith by the Company, and the date on which such issuance is expected
to take place (the "Exercise Notice"). The Exercise Notice shall be accompanied
---------------
by a Company check in the amount of the full exercise price of the Eligible
Options being exercised. Within ten business days after receipt of the Exercise
Notice and the accompanying exercise price, the Trust Manager shall, on behalf
of the Business Trust, deliver and contribute to the Company a certificate
representing at least that number of shares of Common Stock which are being
issued pursuant to the Exercise Notice, properly endorsed for transfer. In the
event the certificate or certificates which are delivered by the Trust Manager
to the Company pursuant to the immediately preceding sentence represent a number
of shares of Common Stock which exceeds the number of shares being issued as a
result of the exercise pursuant to the Exercise Notice, the Company shall
promptly issue and deliver a new certificate to the Business Trust for the
remainder of such shares.
(b) At all times prior to the termination of this Agreement, the
Trust Manager shall cause there to be reserved and set aside that number of
shares of Common Stock as may be necessary to satisfy any contribution
requirements pursuant to Section 1(a) with respect to any outstanding,
unexercised Eligible Options.
2. Amendment. This Agreement may not be modified or amended except by a
---------
writing signed by the Company and the Trust Manager on behalf of the Business
Trust. The Company will not amend, modify or waive any provision of any Eligible
Option or the Unitholders Option Plan without the written consent of the Trust
Manager.
2
<PAGE>
3. Termination. This Agreement shall terminate upon the earlier of the
-----------
written agreement of the Company and the Trust Manager on behalf of the Business
Trust and the termination of the Business Trust Agreement in accordance with the
terms thereof. Notwithstanding the foregoing, this Agreement shall not terminate
if there are any Eligible Options outstanding unless and until an arrangement
reasonably satisfactory to the Company shall have been entered into to provide
for the contribution to the Company of shares of Common Stock upon the
subsequent exercise of such outstanding Eligible Options, which such arrangement
may include the arrangement contemplated by Section 14 of the Stockholders
Agreement (the "Stockholders Agreement") dated as of January 24, 1997 among the
Company, Wells Fargo, the Business Trust and Wingate Partners, L.P.
4. Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision never had been contained herein.
5. Entire Agreement. Except as otherwise expressly set forth or referred
----------------
to herein, this document, the Contribution Agreement and the Stockholders
Agreement embody the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
6. Successors and Assigns. Except as otherwise provided herein, this
----------------------
Agreement will bind and inure to the benefit of and be enforceable by the
Company and the Business Trust and their respective successors and assigns.
7. Counterparts. This Agreement may be executed in separate counterparts
------------
each of which will be an original and all of which taken together will
constitute one and the same agreement.
8. Notices. Any notice provided for in this Agreement shall be in writing
-------
and shall be (i) personally delivered, (ii) mailed registered or certified
(postage and registration or certification fees prepaid) or (iii) sent by
facsimile or reputable overnight courier service (charges prepaid) as follows:
3
<PAGE>
(a) If to the Company:
Loomis, Fargo & Co.
16225 Park Ten Place
Suite 600
Houston, Texas 77084
Attention: James K. Jennings, Jr.
Facsimile No.: 281/647-5699
(b) If to the Business Trust:
Loomis Stockholders Trust
Frederick B. Hegi, Jr., Manager
c/o Wingate Partners, L.P.
750 North St. Paul
Suite 1200
Dallas, Texas 75201
Facsimile No.: 214/871-8799
Notices will be deemed to have been given hereunder when delivered personally,
three days after deposit in the U.S. mail, on the date of delivery by facsimile,
or one day after deposit with a reputable overnight courier service. Any party
from time to time may change its address for the purpose of notices to that
party by giving a similar notice specifying a new address, but no such notice
will be deemed to have been given until it is actually received by the party
sought to be charged with the contents thereof.
9. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York without regard to the
conflicts-of-laws rules thereof.
10. Descriptive Headings. The descriptive headings of this Agreement are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
LOOMIS, FARGO & CO.,
a Delaware corporation
By: /s/ James K. Jennings, Jr.
---------------------------------
James K. Jennings, Jr.
Executive Vice President
LOOMIS STOCKHOLDERS TRUST, a Delaware
business trust
By: /s/ F. B Hegi, Jr.
---------------------------------
Frederick B. Hegi, Jr.,
as Trust Manager but not individually
5
<PAGE>
EXHIBIT 10.8
NOL PROMISSORY NOTE
$6,000,000.00 January 24, 1997
FOR VALUE RECEIVED, the undersigned, LOOMIS, FARGO & CO., a Delaware
corporation ("Maker"), whose address is 16225 Park Ten Place, Suite 600,
-----
Houston, Texas 77084, hereby unconditionally promises to pay to the order of the
LOOMIS STOCKHOLDERS TRUST, a Delaware business trust ("Lender"), at Lender's
------
offices at c/o Wingate Partners, L.P., 750 North St. Paul, Suite 1200, Dallas,
Texas 75201, the principal sum of SIX MILLION AND NO/100 Dollars ($6,000,000.00)
in legal and lawful money of the United States of America.
No interest shall accrue on the principal balance hereof.
The principal balance of this NOL Promissory Note (this "Note") shall
----
be due and payable on the fifteenth (15th) anniversary of the date hereof;
provided, however, the outstanding principal balance shall be due and payable (a
"Mandatory Prepayment") to the extent of the Tax Savings (hereinafter defined)
--------------------
with respect to each Prepayment Event. Each Mandatory Prepayment shall be made
within thirty days after the occurrence of a Prepayment Event. A "Prepayment
----------
Event" shall mean (a) the filing of any federal tax return of or with respect to
- -----
Maker, Loomis Holding Corporation, Loomis Armored Inc. or any successor thereto
or affiliate thereof (each a "Loomis Fargo Entity") which reflects a Tax
-------------------
Savings with respect to any taxable period ending after the Combination Date (a
"Post-Combination Return") or (b) the receipt by any Loomis Fargo Entity of a
-----------------------
refund related to any federal carryback claim for any prior taxable period as to
which there is any Tax Savings (a "Carryback Claim"). The term "Combination
--------------- -----------
Date" means the closing date of the transactions contemplated by that certain
- ----
Contribution Agreement dated as of November 28, 1996, among Borg-Warner Security
Corporation, Wells Fargo Armored Service Corporation, Loomis Holding
Corporation, Loomis Armored Inc., Maker and Lender (the "Contribution
------------
Agreement"). The term "Tax Savings" means the product of forty percent (40%)
- --------- -----------
times any Loss Carryovers which are utilized with respect to a Post-Combination
Return or a Carryback Claim (or in the case of credit carryovers, the amount of
such credits which case of credit carryovers, the amount of such credits which
are utilized). The term "Loss Carryovers" means the federal net operating loss
---------------
carryovers, capital loss carryovers and credit carryovers of Loomis Holding
Corporation and Loomis
1
<PAGE>
Armored Inc. with respect to taxable periods ending on or before (or deemed to
end on) the Combination Date. With respect to any taxable period which begins
before and ends after the Combination Date, for purposes of this Note, such
taxable period shall be deemed to end on the Combination Date by closing the
books of Loomis Holding Corporation and Loomis Armored Inc. at the close of
business on the Combination Date, and any net operating loss or other similar
carryover for the deemed short period ending on the Combination Date shall be
treated as a Loss Carryover into the succeeding deemed short period and
subsequent taxable periods. For purposes of this Note, Loss Carryovers shall be
deemed to be utilized in the order in which such Loss Carryovers arose, with the
Loss Carryovers for any earlier period being deemed to be utilized before the
Loss Carryovers for a later period, and the Loss Carryovers shall be deemed to
be utilized prior to any net operating loss carryovers or other similar
carryovers which arise in taxable periods (or portions thereof) ending after the
Combination Date.
If an "event of default" (hereinafter defined) shall occur, the amount
of any Tax Savings realized pursuant to a Prepayment Event which shall not have
been paid to Lender as a Mandatory Prepayment prior to the time of such "event
of default" shall, at the sole and absolute option of Lender, become immediately
due and payable, without notice or demand, and Lender shall be entitled to
pursue any or all remedies to which Lender is entitled hereunder, at law or in
equity.
As used herein, an "event of default' shall mean the occurrence of any
one of the following events:
1. Maker fails to make any payment owing to Lender on the date the
same is due as provided herein.
2. There is a breach by Maker of any covenant, promise, agreement,
term or condition contained herein and such breach is not cured within 30 days
after Lender shall have notified Maker of such breach.
3. Maker ceases or threatens to cease carrying on its business,
commits an act of bankruptcy, files a bankruptcy petition or has any bankruptcy
petition filed against it, becomes insolvent, dissolves or liquidates, makes an
unauthorized assignment or bulk sale of its assets, admits in writing its
inability to pay its debts or purposes a compromise or arrangement to its
creditors.
2
<PAGE>
4. Any proceeding is commenced with respect to a compromise or
arrangement to have Maker declared bankrupt or dissolved, or to have a receiver
appointed for Maker or any of the assets of Maker.
In no event shall any delay or failure by Lender to exercise any right
or privilege or pursue any remedy to which Lender is entitled operate or be
construed as an election of remedies or a waiver thereof unless specifically
waived in writing and signed by an authorized representative of Lender, and no
such waiver shall preclude the further exercise by Lender of any such right,
privilege or remedy. The right of Lender to collect and enforce the payment of
this Note may be exercised by Lender prior to, simultaneously with, or
subsequent to any action taken hereunder.
If this Note is placed in the hands of an attorney for collection, or
suit is filed hereon, or proceedings are had in probate, bankruptcy,
receivership, reorganization, arrangement or other legal proceedings for
collection hereof, Maker agrees to pay Lender upon demand therefor, Lender's
collection costs, including court costs and a reasonable amount for attorneys'
fees.
Except to the extent expressly provided for herein, Maker hereby
expressly waives demand, presentment, protest, notice of protest and non-
payment, or any notice of default, notice of acceleration and intention to
accelerate and all other notice of any kind, bringing of suit and diligence in
taking any action to collect any sums owing herein; and Maker hereby consents to
and agrees to remain liable hereon regardless of any renewals, extensions for
any period or rearrangements hereof, or partial prepayments hereon, with or
without notice, from time to time, before or after maturity.
Any provision herein, or in any other agreement or commitment, whether
written or oral, expressed or implied, to the contrary notwithstanding, neither
Lender nor any holder hereof shall in any event be entitled to receive or
collect, nor shall or may amounts received hereunder be credited, so that Lender
or any holder hereof shall be paid, as interest, a sum greater than the maximum
amount permitted by applicable law to be charged to the person, partnership,
firm or corporation primarily obligated to pay this Note at the time in
question. If any construction of this Note or any and all other papers,
agreements or commitments indicated a different right given to Lender or any
holder hereof to ask for, demand or receive any larger sum as
3
<PAGE>
interest, such is a mistake in calculation or wording which this clause shall
override and control, it being the intention of Maker and Lender that this Note
conform strictly to applicable usury laws. In the event that the aggregate of
all consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this Note or otherwise in
connection with this Note shall ever exceed the maximum non-usurious interest
rate, if any, that at any time, or from time to time, may be contracted for,
taken, reserved, charged, or received on the indebtedness evidenced by the Note,
under the applicable law (the "Highest Lawful Rate"), any sum in excess thereof
-------------------
shall be applied to the reduction of the unpaid principal balance of this Note,
and if this Note is paid in full, any remaining excess shall be paid to Maker.
In determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Highest Lawful Rate, if any, Maker and Lender or any
holder hereof shall, to the maximum extent permitted under applicable law, (i)
characterize any nonprincipal amount as an expense or fee rather than as
interest, (ii) exclude voluntary prepayments and the effects thereof, or (iii)
"spread" the total amount of interest throughout the entire term of this Note so
that the interest rate is uniform throughout the entire term of this Note;
provided, however, that if this Note is paid and performed in full prior to the
end of the full contemplated term hereof, and if the interest received for the
actual period of existence thereof exceeds the Highest Lawful Rate, if any,
Lender or any holder hereof shall refund to Maker the amount of such excess, or
credit the amount of such excess against the aggregate unpaid principal balance
of all advances made by Lender or any holder hereof under this Note at the time
in question.
Service of any notice by Maker to Lender or by Lender to Maker, shall
be hand delivered or mailed, postage prepaid by certified United States mail,
return receipt requested, at the following address for such party:
(a) If to Lender, to:
Loomis Stockholders Trust
c/o Wingate Partners, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
4
<PAGE>
(b) If to Maker, to:
Loomis, Fargo & Co.
16225 Park Ten Place, Suite 600
Houston, Texas 77084
Attention: James K. Jennings, Jr.
or at such subsequent address provided to the other party hereto in the manner
set forth in this paragraph for all notices. Any such notice shall be deemed
given upon delivery by hand or three (3) days after being mailed in accordance
with this paragraph.
This note and all the covenants, promises and agreements contained
herein shall be binding upon and inure to the benefit of the respective
successors and assigns of Maker and Lender. If any provision of this Note shall
be determined by any court of competent jurisdiction to be illegal or
unenforceable, then that provision only shall be of no force and effect and
shall be deemed excised herefrom, and the remainder of the provisions of this
Note shall be enforced.
This Note may be prepaid in whole or in part without premium or
penalty at any time.
This Note is subordinate in right of payment, to the extent and in the
manner set forth in Exhibit A hereto, to the obligations of Maker to Lehman
Commercial Paper Inc., NationsBanc Capital Markets, Inc., NationsBank of Texas
N.A., and the Lenders a party to that certain Credit Agreement dated as of
January 24, 1997 (collectively, the "Senior Lenders"), but no provision of this
--------------
Note shall impair, as between Maker and Lender, the obligation of Maker, which
is unconditional and absolute to pay the principal of this Note in accordance
with its terms nor is any provision hereof intended to or shall affect the
relative rights of Lender and other creditors of the Maker other than the Senior
Lenders, nor shall anything herein prevent Lender from exercising all remedies
otherwise permitted by applicable law upon default hereunder subject to the
rights, if any, hereunder of the Senior Lenders.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS.
THIS NOTE AND THE CONTRIBUTION AGREEMENT TOGETHER CONSTITUTE THE FINAL
AGREEMENT BETWEEN MAKER AND LENDER WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
5
<PAGE>
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN AGREEMENTS
BETWEEN MAKER AND LENDER WITH RESPECT TO THE SUBJECT MATTER HEREOF.
MAKER:
LOOMIS, FARGO & CO., a Delaware
corporation
By: /s/ James K. Jennings, Jr.
-----------------------------------
James K. Jennings, Jr.
Executive Vice President
6
<PAGE>
EXHIBIT A
---------
SECTION 1. DEFINITIONS
-----------
1.1 Unless otherwise defined herein, terms defined in the Credit
Agreement and used herein shall have the meanings given to them in the Credit
Agreement.
1.2 The following terms shall have the following meanings:
"Credit Agreement": the Credit Agreement, dated as of January 24,
----------------
1997, among the Maker, the Lenders parties thereto, Lehman Commercial Paper
Inc. ("LCPI"), as documentation agent, LCPI and NationsBanc Capital
----
Markets, Inc., as syndication agents, LCPI and NationsBank, as arrangers,
as such Credit Agreement may be amended, modified or supplemented from time
to time.
"Senior Creditor": the collective reference to the Lenders and the
---------------
Agents (as such terms are defined in the Credit Agreement) as holders of
the Senior Obligations.
"Senior Obligations": the collective reference to the unpaid
------------------
principal of and interest on the Loans made, and Reimbursement Obligations
outstanding, under the Credit Agreement and all other obligations and
liabilities of the Maker to the Senior Creditors (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of the Loans and interest accruing at
the then applicable rate provided in the Credit Agreement after the filing
of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Maker, whether or not a
claim for post-filing or post-petition interest is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under,
out of, or in connection with, the Credit Agreement, the Credit Documents
or any other document made, delivered or given in connection therewith, in
each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise (including,
without limitation, all fees and disbursements of counsel to the Senior
Creditors that are required to be paid by the Maker pursuant to the terms
of the Credit Agreement or any other Credit
Exhibit A - Page 1
<PAGE>
Document), and in each case whether or not such obligations of the Maker
constitute legal, valid or enforceable obligations of the Maker and whether
or not any of such obligations would be subject to attack under any Federal
or State bankruptcy law or law relating to insolvency of debtors.
"Subordinated Creditor": the Lender (as defined in the NOL Promissory
---------------------
Note to which this Exhibit A is attached).
"Subordinated Obligations": the unpaid principal of and interest on
------------------------
the NOL Promissory Note to which this Exhibit A is attached.
1.3 The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Exhibit A shall refer to this Exhibit A as a whole and
not to any particular provision of this Exhibit A, and section and paragraph
references are to this Exhibit A unless otherwise specified.
1.4 The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. TERMS OF SUBORDINATION.
----------------------
2.1 Subordination.
-------------
(a) The Subordinated Creditor agrees, for itself and each future
holder of the Subordinated Obligations, that the Subordinated Obligations are
expressly subordinate in right of payment to all Senior Obligations.
(b) As used herein, "subordinate in right of payment" shall mean
that:
(i) In the event that any or all amounts owing under the Senior
Obligations have become, or have been declared to be, due and payable and
have not been paid in accordance with their terms (except in circumstances
when the succeeding paragraph (ii) shall be applicable), then and in any
such event, any payment or distribution of any kind or character, whether
in cash, property or securities, which, but for the subordination
provisions contained herein, would otherwise be payable or deliverable to
the Subordinated Creditor upon or in respect of the Subordinated
Obligations shall instead be paid over or delivered to
Exhibit A - Page 2
<PAGE>
the Administrative Agent for the benefit of the Senior Creditors, and the
Subordinated Creditor shall not receive any such payment or distribution or
any benefit therefrom unless and until the Senior Obligations shall have
been fully paid and satisfied.
(ii) In the event of any liquidation or other winding-up of the
Maker or in the event of any receivership, insolvency, reorganization,
composition, arrangement or bankruptcy proceedings, assignment for the
benefit of creditors or any proceeding by or against the Maker for any
relief under any bankruptcy, reorganization or insolvency law or laws,
federal or state, or any law, federal or state, relating to the relief of
debtors, readjustment of indebtedness, reorganization, composition or
extension of indebtedness, then, and in any such event, all Senior
Obligations shall first be paid in full before any payment or distribution
is made in respect of the Subordinated Obligations, and any payment or
distribution of any kind or character, whether in cash, property or
securities, which, but for the subordination provisions contained herein,
would otherwise be payable or deliverable to the Subordinated Creditor upon
or in respect of the Subordinated Obligations, shall instead be paid over
or delivered to the Administrative Agent for the benefit of the Senior
Creditors, and the Subordinated Creditor shall not receive any such payment
or distribution or any benefit therefrom unless and until the Senior
Obligations shall have been fully paid and satisfied.
(iii) During the continuance of any default in the payment of any
principal of, or interest on, any Senior Obligations (a "Senior Payment
--------------
Default") beyond any applicable grace period, no payment or distribution of
-------
any assets of the Maker of any kind or character may be made on account of
the NOL Promissory Note unless and until such Senior Payment Default has
been cured, waived or has ceased to exist or such Senior Obligations shall
have been discharged or paid in full or the right under this Exhibit A to
prevent any such payment has been waived by or on behalf of the Senior
Creditors (except that the holder of the NOL Promissory Note may receive
securities that are subordinated at least to the same extent as the NOL
Promissory Note to the Senior Obligations and any securities issued in
exchange for Senior Obligations).
Exhibit A - Page 3
<PAGE>
During the continuance of any Event of Default under the Credit
Agreement (other than a Senior Payment Default) (a "Senior Covenant
---------------
Default"), and the receipt by the Lender (as defined in the NOL Promissory
-------
Note) from the Administrative Agent or the Maker of a written notice of
such Senior Covenant Default (a "Payment Blockage Notice"), no payment or
-----------------------
distribution of any assets of the Maker of any kind or character may be
made by the Maker on account of NOL Promissory Note for the period
specified below (a "Payment Blockage Period") (except that the holder of
-----------------------
the NOL Promissory Note may receive securities that are subordinated at
least to the same extent as the NOL Promissory Note to the Senior
Obligations and any securities issued in exchange for Senior Obligations).
A Payment Blockage Period shall commence upon the receipt by the
Lender (as defined in the NOL Promissory Note) of notice from the
Administrative Agent of a Senior Covenant Default and shall end (subject to
any blockage of payment that may be in effect in respect of a Senior
Payment Default or insolvency) on the earliest of (A) 179 days after the
receipt of a Payment Blockage Notice, provided such Senior Obligations
shall not theretofore have been accelerated; (B) the date on which such
Senior Covenant Default is cured, waived or ceases to exist or such Senior
Obligations are discharged or paid in full; or (C) the date on which such
Payment Blockage Period shall have been terminated by written notice to the
Maker and the Lender (as defined in the NOL Promissory Note) from the
Administrative Agent, after which the Maker shall promptly resume making
any and all required payments in respect of the NOL Promissory Note,
including any missed payments. In no event will a Payment Blockage Period
extend beyond 179 days from the date of the receipt by the Lender (as
defined in the NOL Promissory Note) of the Payment Blockage Notice
initiating such Payment Blockage Period. Any number of notices of a Senior
Covenant Default may be given during a Payment Blockage Period, provided,
that no such notice shall extend such Payment Blockage Period. No new
period of payment blockage may be commenced unless and until (i) 360 days
have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (ii) all scheduled payments, if any, on the NOL
Promissory Note that have become due have been paid in full in cash or cash
equivalents. No Senior Covenant Default with respect to Senior Obligations
that existed or was continuing on the date of the commencement of any
Exhibit A - Page 4
<PAGE>
Payment Blockage Period will be, or can be, made the basis for the
commencement of a second Payment Blockage Period. The Maker shall deliver a
notice to the Lender (as defined in the NOL Promissory Note) promptly after
the date on which any Senior Covenant Default is cured or waived or ceases
to exist or on which the Senior Obligations related thereto is discharged
or paid in full in cash equivalents.
(c) The expressions "prior payment in full," "payment in full," "paid
in full," "fully paid and satisfied" and any other similar terms or phrases when
used in this Exhibit A with respect to the Senior Obligations shall mean the
indefeasible payment in full in cash, in immediately available funds, of all of
the Senior Obligations.
2.2 Power of Attorney; Agreement to Cooperate. The Subordinated
-----------------------------------------
Creditor irrevocably authorizes and empowers the Administrative Agent (or its
representatives), under the circumstances set forth in paragraph (ii) of
subsection 2.1(b), to demand, sue for, collect and receive every such payment or
distribution referred to in such paragraph to which the Subordinated Creditor is
entitled and given acquittance therefor, and to file claims and proofs of claim
in any statutory or non-statutory proceeding (copies of which shall be provided
to the Subordinated Creditor), to vote such claim in any such proceeding, and to
take such other actions, in its name as representative of the Senior Creditors,
or in the name of the Subordinated Creditor or otherwise, as the Administrative
Agent may deem necessary or advisable for the enforcement of the provisions of
this Exhibit A. The Subordinated Creditor hereby agrees, under the
circumstances set forth in paragraph (ii) of subsection 2.1(b), duly and
promptly to take such action as may be requested at any time and from time to
time by the Administrative Agent, to file appropriate proofs of claim in respect
of the Subordinated Obligations, and to execute and deliver such powers of
attorneys, assignments of proofs of claim or other instruments as may be
requested by the Administrative Agent, in order to enable the Senior Creditor to
enforce any and all claims upon or in respect of the Subordinated Obligations
and to collect and receive any and all payments or distributions which may be
payable or deliverable at any time upon or in respect of the Subordinated
Obligations. Should the Senior Creditors (or their representatives) fail to
take any of the actions referred to in this subsection 2.2 in a timely manner,
then the Subordinated Creditor may take any such action, subject
Exhibit A - Page 5
<PAGE>
to any consistent with the other provisions of this Exhibit A.
2.3 Payments Received by the Subordinated Creditor. Should any
----------------------------------------------
payment, distribution or security, or the proceeds of any thereof, be collected
or received by the Subordinated Creditor in respect of the Subordinated
Obligations, and such collection or receipt not be expressly permitted
hereunder, the Subordinated Creditor will forthwith turn over the same to the
Administrative Agent for the benefit of the Senior Creditors, in each case in
the form received (except for endorsement or the assignment of the Subordinated
Creditor when necessary) and, until so turned over, the same shall be held in
trust by the Subordinated Creditor as the property of the Senior Creditors and
the Lenders.
2.4 Subrogation.
-----------
(a) The Subordinated Creditor shall not be entitled to enforce its
rights of subrogation to receive payments or distributions of assets of the
Maker on the Senior Obligations until the Senior Obligations have been paid in
full.
(b) Subject to the payment in full of all Senior Obligations, the
Subordinated Creditor shall be subrogated to the rights of the holder(s) of the
Senior Obligations (to the extent of payments or distributions previously made
to such holders pursuant to the provisions of subsection 2.1(b)) to receive
payments or distributions of assets of the Maker applicable to the Senior
Obligations until all amounts owing on the Subordinated Obligations shall be
paid in full. No payments or distributions applicable to Senior Obligations
which the Subordinated Creditor receives by reason of being subrogated to the
rights of the holders of Senior Obligations pursuant to the provisions of this
subsection 2.4(b) shall, as among the Maker, its creditors other than the
holder(s) of Senior Obligations and the Subordinated Creditor, be deemed to be a
payment by the Maker, to or for the account of the Subordinated Obligations; and
for the purposes of such subrogation, no payments or distributions to the
holders of the Senior Obligations of any cash, property or securities to which
the Subordinated Creditor would be entitled to except for the provisions of the
Exhibit A, and no payment over pursuant to the provisions of this Exhibit A to
the holders of Senior Obligations by such Subordinated Creditor shall, as among
the Maker, its creditors other than the holders of Senior Obligations and the
Subordinated Obligations, be deemed to
Exhibit A - Page 6
<PAGE>
be a payment by the Maker to or for the account of the Senior Obligations, it
being understood that the provisions of this Exhibit A are intended solely for
the purpose of defining the relative rights of the Subordinated Creditor, on
the one hand, and the Senior Creditors, on the other hand, and nothing contained
in this subsection or elsewhere in this Exhibit A is intended to or shall
impair, as between the Maker, and its creditors other than the Senior Creditors
and the Subordinated Creditor, the obligation of the Maker, which is absolute
and unconditional, to pay to the Subordinated Creditor, subject to the rights of
the Senior Creditors, the amounts due and owing under the Subordinated
Obligations as and when the same shall become due and payable in accordance with
its terms, or is intended to or shall affect the relative rights of the
Subordinated Creditor and creditors of the Maker, other than the Senior
Creditors, nor shall anything herein or therein prevent the Subordinated
Creditor from exercising all remedies otherwise permitted by applicable law upon
failure of the Maker to make payment under the Subordinated Obligations, subject
to the rights of the Senior Creditors under this Exhibit A.
Exhibit A - Page 7
<PAGE>
EXHIBIT 10.9
Lease No. 48-6000
--------
FLEET LEASE AGREEMENT
(Open-End/Non-Maintenance)
THIS LEASE AGREEMENT is made as of December 2, 1996, by and between
ASSOCIATES LEASING, INC. (hereinafter called "Lessor"), and Indiana corporation
with a place of business located at 2312 East Trinity Mills Road, Carrollton,
Texas 75006, and Wells Fargo Armored Service Corporation (hereinafter called
"Lessee") a(n) Delaware corporation with its principal place of business located
at 6165 Barfield Road, Suite 200, Atlanta, GA, 30328.
IN CONSIDERATION of the mutual covenants hereinafter contained, Lessor
hereby leases to Lessee, and Lessee hereby leases from Lessor, one or more
vehicles as shall from time to time be described in Exhibits, Schedules, Vehicle
Purchase Orders or Delivery Receipts executed by Lessee and accepted by Lessor,
upon the terms and conditions set forth below;
1. THIS AGREEMENT is a contract of leasing and shall only consist of the
general terms and conditions stated herein, which shall be applicable to every
vehicle leased hereunder, any Exhibit A attached hereto or which may hereafter
be attached hereto describing certain vehicles individually and the specific
terms therefor, and Delivery receipts or other evidences of ordering or delivery
for each vehicle delivered to Lessee by Lessor. When an Exhibit A relating to
the lease of a specific Vehicle has been delivered to Lessee, it shall be deemed
to be true, correct, and a part of the Lease, and shall be conclusively binding
upon Lessee with respect to all matters contained therein, unless Lessee
notifies Lessor in writing of any discrepancy or exception within 15 days after
receipt thereof. Without limiting the generality of the above, it is agreed that
the terms hereof may be changed for specific vehicles by the Schedules relating
thereto. All of said Schedules, Delivery Receipts and evidences of ordering or
delivery are hereby incorporated by reference and made a part hereof. Whenever
used herein, the term "Vehicle" or "Vehicles" shall mean such passenger
automobile(s) and light and medium duty truck(s) and other motor vehicles as are
leased hereunder from time to time, together with all additional equipment and
accessories thereon. Vehicles shall at all times remain the property of and
shall be registered in the name of Lessor, but shall be under the full and
complete control of Lessee. During the term of this Lease renewal of
registration in the name of Lessor shall be the responsibility and expense of
Lessee, and Lessor will, upon Lessee's request, furnish to Lessee a power of
attorney to this end. Lessee recognizes that it has acquired no right, title,
option or interest in or to any of the Vehicles and agrees that it shall not
assert any claim in or to an interest in any Vehicle other than that of a
lessee. Lessee agrees to accept delivery of all Vehicles ordered by Lessor
pursuant to the request of Lessee. Lessee shall at all times, and at its sole
expense and cost, keep the Vehicle(s) free from all levies, attachments, liens
and encumbrances and other judicial process other than those arising solely from
acts of Lessor. Lessee shall give Lessor immediate written notice of any action
taken by a third party which may jeopardize Lessor's right in any Vehicle and
shall indemnify and hold Lessor harmless from any loss or damages caused
thereby.
2. LESSEE AGREES to pay as rental for each Vehicle for each and every
month during its term of lease the amount (hereinafter referred to as "Monthly
Rental") set forth in Exhibit A for such Vehicle attached hereto and made a part
hereof (or in such other exhibits hereto as may from time to time be agreed upon
by Lessor and Lessee). Monthly Rental, however, shall not be less than $5.00 per
month for any Vehicle. Lessee shall have the following rental rate options:
<TABLE>
<CAPTION>
Index Prime 30 Day Commercial Paper 2 Year Treasuries LIBOR
----- ----- ----------------------- ----------------- -----
<S> <C> <C> <C> <C>
Fixed Prime-0.25% CP + 2.75% Treasuries + 3.10% LIBOR + 2.75%
Float Prime-0.75% CP + 2.25% Treasuries + 2.60% LIBOR + 2.25%
</TABLE>
"Prime" shall mean the highest of the Prime Rates published in the Money
Rates section of the Wall Street Journal as the base rate on corporate loans.
"CP" shall mean the commercial paper rate for high-grade unsecured notes
sold through dealers by major corporations which mature in 30 days as set forth
in the Money Rates section of the Wall Street Journal.
"Treasuries" shall mean the rate of two year Treasury Bills as published in
the Federal Reserve Statistical Release H-15.
"LIBOR" shall mean the one month London Interbank Offered Rate (LIBOR) as
set forth in the Money Rates section of the Wall Street Journal.
In the event any of the foregoing indexes cease to exist or are no longer
published, Lessor will substitute a comparable index which is outside the
control of Lessor. In the event of an error in the publishing of the indexes,
the rate will be based upon the corrected index. With respect to floating rate
rentals, the rental shall be adjusted each month based on the rate that is
published on the first business day of the preceding month. Should Lessee desire
to change the rate for Vehicles that will be leased in the future, Lessee shall
provide Lessor with 30 days advance written notice of such change.
Page 1 of 5
<PAGE>
8. LESSEE SHALL RETURN each Vehicle to Lessor at Lessee's expense at the
earlier of (i) the termination of this Lease in relation to such Vehicle or (ii)
the expiration of the Maximum Lease Term of such Vehicle. Each Vehicle shall be
returned at the location where delivery was made or at such other location as is
mutually agreeable to Lessor and Lessee in the same working order, condition and
repair as when received by Lessee, excepting only reasonable wear and tear
caused by normal usage of such Vehicle, together with all license plates,
registration certificates, or other documents relating to such Vehicle. Unless
otherwise agreed by Lessor, Lessee shall give Lessor at least sixty, and not
more than ninety days notice of the return of any Vehicle. After said return,
Lessor shall cause such Vehicle to be sold at public or private sale, at
wholesale for the highest cash offer received and still open at the time of
sale. For the purposes of Sections 8 and 9 hereof, the "net sale proceeds" for
said Vehicle shall be an amount equal to (a) the greater of (i) the amount
received by Lessor at such sale or (ii) an amount equal to 20% of the
Capitalized Value for such Vehicle if the lease term for such Vehicle was equal
to or less than the respective Minimum Term, or (iii) 30% of the Depreciated
Value, as defined herein, for such Vehicle if the lease term for such Vehicle
was in excess of such Minimum Term, less (b) Lessor's reasonable expenses of
sale which shall include but not be limited to those expenses of retaking,
transporting, reconditioning, repairing and otherwise preparing such Vehicle for
sale and conducting such sale, and (c) a holding cost in an amount calculated as
follows in the order indicated: the Depreciated Value of the Vehicle x the
interest rate in effect for the Vehicle + 365 x the number of days the Vehicle
is held by Lessor before the sale, but in no event more than 45 days; provided,
however, such calculation shall not begin until the fifth day after the Vehicle
is returned to Lessor. The "Depreciated Value" for any Vehicle shall be an
amount equal to (a) the Capitalized Value of such Vehicle, less (b) the
Depreciation Reserve for such Vehicle multiplied by the number of months
(including any portion thereof) which comprised the lease term for such Vehicle.
9. FINAL ADJUSTMENT for each Vehicle will be made upon receipt of the net
sale proceeds therefor, and, unless any default shall have occurred and except
as provided below, Lessor shall, within ten (10) days after receipt of the net
sale proceeds, pay to Lessee the amount, if any, by which the sum of (a) the net
sale proceeds, (b) insurance recoveries, if any, on such Vehicle, and (c) an
amount equal to the product of the Depreciation Reserve for such Vehicle
multiplied by the number of months for which Monthly Rentals have been paid,
exceeds (d) the Capitalized Value for such Vehicle plus (e) if Final Adjustment
occurs at any time other than the scheduled expiration of the Maximum Lease Term
for such Vehicle, an early termination fee equal to the shortfall that exists
between the aggregate interest actually paid by Lessee and the aggregate
interest that would have been paid if the payments hereunder had been applied
first to interest and then to the Depreciation Reserve, an example of which is
set forth in the attached Exhibit B. If the sum of items (a), (b) and (c) is
---------
less than that of items (d) and (e), Lessee shall, within ten days after notice
thereof, pay the deficiency to Lessor as Adjusted Rental without abatement, off-
set or counterclaim arising out of any circumstance whatsoever, provided,
however, without limiting the foregoing, Lessee is not prohibited from pursuing
an independent cause of action against Lessor for any alleged wrongful actions
by Lessor under this Lease. Lessor shall promptly determine the aforesaid
amounts and shall render statements therefor to Lessee. Lessor may apply any
sums received as proceeds from any Vehicle which would otherwise be due to
Lessee hereunder against any other obligation of Lessee and Lessor may off-set
the amount of any such rental adjustment against any claim it may have against
Lessee. "Insurance recoveries" shall not include amounts received by Lessee or
applied to repair of the Vehicles.
10. LOSS OF OR DAMAGE TO EACH VEHICLE and loss of use thereof, from
whatsoever cause, are risks hereby assumed by Lessee from the date the Vehicle
is delivered to Lessee until such Vehicle is returned to Lessor. If any Vehicle
is lost, stolen or partially or totally destroyed, Lessee shall promptly notify
Lessor thereof. Lessor shall have no obligation to repair or replace any such
Vehicle. There shall be no abatement of rental otherwise due hereunder during
the period a Vehicle is stolen or missing or during the time required for any
repair, adjustment, servicing or replacement of a Vehicle, and notwithstanding
the terms of Section 4 hereof, Monthly Rentals shall continue to accrue and to
be due and payable until Final Adjustment is made for each Vehicle. Final
Adjustment in relation to lost, stolen or destroyed Vehicles shall be made as
provided in Section 9, promptly after sale of the salvage and/or receipt of
insurance proceeds, whichever is later, if both are applicable. In no event
shall Lessor be liable to Lessee, its employees or agents or to any other person
for business or other losses by reason of loss, theft, destruction, repair,
servicing or replacement of any Vehicle.
11.A.LESSEE'S INSURANCE: Liability and physical damage insurance for
bodily injury and property damage to others, and damage to or loss of Vehicles
by collision, fire, theft, or otherwise, from the time each Vehicle is delivered
to Lessee until the Vehicle is returned to Lessor, shall be purchased and
maintained by Lessee. Lessor shall not be required to order vehicles for
Lessee's use until binders disclosing insurance coverage as herein provided have
been delivered to Lessor. All insurance policies shall provide primary, rather
than excess or secondary coverage, shall name Lessor as additional insured and
loss payee, shall be with insurers having an A.M. Best rating of B+ or better,
and shall provide that no act or default of any person other than Lessee shall
affect Lessor's right to recovery under such policies. Lessee shall provide
Lessor with a minimum of 30 days prior written notice before cancellation or
material change for any reason. Minimum requirements shall be $500,000.00 for
bodily injury or death to any one person; $750,000.00 for any one accident;
$100,000.00 for property damage, and actual cash value for fire, theft,
comprehensive and collision; deductible amounts for fire, theft, comprehensive
and collision shall not be in excess of $250.00. Lessor may from time to time by
notice to Lessee request higher minimum requirements or additional risks to be
insured against. Lessee shall deliver certificates of insurance required
hereunder to Lessor, but Lessor shall be under no duty to examine such evidence
of insurance nor to advise Lessee in the event said insurance is not in
compliance with the Lease. Evidence of renewal of all expiring policies will be
delivered to Lessor at least 30 days prior to their respective expiration dates.
Notwithstanding anything else herein to the contrary, in the event that Lessee
fails to maintain insurance as above provided, Lessor may, but shall have no
obligation to, obtain such insurance at Lessor's expense and any amounts
expended therefor shall be due and payable immediately as Additional Rent.
11.B.LESSEE'S IDEMNTITY: Irrespective of any such insurance, Lessee shall
at all times and under all circumstances indemnify and save Lessor harmless
against any and all claims, suits and liabilities of whatsoever kind and nature
including those arising from strict liability in tort and/or relating to claims
of the Lessee or its employees or agents, and against all costs and expenses
thereof, including attorney's fees, relating to or arising out of the ownership,
possession, use or operation of the Vehicles from the date each Vehicle is
delivered to Lessee to the date such Vehicle is returned to Lessor. All of
Lessee's obligations and liabilities under this Section 11.B. shall survive the
expiration or termination of this Lease.
<PAGE>
the purposes of this Lease and to protect Lessor's interest in the Vehicles,
including, but not limited to, furnishing such financing statements and
related information as Lessor may request, and furnishing any and all
information necessary to enable Lessor or its insurer to defend itself in any
litigation arising in connection herewith. Lessee shall also provide, from time
to time upon request by Lessor, financial statements or other information
related to Lessee's financial condition. Lessee hereby authorizes Lessor to
insert serial numbers, delivery and Monthly Rental due dates, and other data on
the Schedules, Delivery Receipts or other documents relating hereto when such
numbers, dates and data become known to Lessor.
17. NOTICES, Exhibits A, or other documents required or permitted to be
delivered hereunder shall be given in writing by facsimile transmission, or by
delivery either personally or by registered or certified mail addressed to the
respective party at its address listed on page one hereof or, if such party has
previously given notice of a change of address, to the address specified in the
last such notice of change of address. A notice, Exhibit A, or other document
shall be deemed received when delivered if personally delivered or transmitted
by facsimile, or if mailed, two business days after deposit postage prepaid in
the United States mail. Lessor's and Lessee's copy of each faxed document
transmitted to the other shall be deemed to be true, correct, and conclusively
binding upon the parties, and shall be admissible in evidence as an original
document, unless the recipient notifies the sender in writing of an inaccuracy
or other deficiency within two business days of the transmission date.
18. SECURITY DEPOSITS AND ADVANCE MONTHLY RENTALS, if any, may be applied
by Lessor, as Lessor in its sole discretion deems desirable, to the satisfaction
of any of Lessee's obligations hereunder to the extent that Lessee defaults in
the payment or performance thereof. Unless the Lessee is or has been in default
hereunder the Security Deposit, if any, will be refunded upon return of the
Vehicle for which such Security Deposit was made; otherwise the Security Deposit
or any balance thereof will not be refunded until the end of the lease term of
all Vehicles. Advance Monthly Rentals, if any, will be applied by Lessor to the
last Monthly Rentals owing for the Vehicle for which such Advance Monthly
Rentals were made if Lessee is not in default hereunder, otherwise such amounts
shall be applied by Lessor in the same manner as Security Deposits. Lessee
agrees that Lessor shall not pay interest on Security Deposits or Advance
Monthly Rentals.
19. THIS LEASE will become effective only upon acceptance by Lessor and
shall be in all respects interpreted pursuant to the laws of the State of
Illinois. This form is intended for general use throughout the United States.
Any provision of this Lease which is prohibited or unenforceable in any
jurisdiction shall be ineffective in such jurisdiction to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties hereto that this contract constitute a lease for
tax and other purposes; however, if for purposes of perfection, this contract is
interpreted by any court as a lease intended as security, Lessee hereby grants
to Lessor a security interest in the Vehicles. This instrument represents the
entire agreement of the parties hereto and all negotiations by and on behalf of
the parties hereto whether oral or written are merged herein. This Lease and any
Schedules and other documents relating hereto may be modified only in a writing
signed by the party against whom enforcement is sought. No vehicle dealer nor
any employee or agent of any dealer or of any other person has authority to make
any representations on Lessor's behalf as to the performance or serviceability
of the Vehicles or any estimates as to the salvage value of the Vehicles or as
to any provision of this Lease.
WELLS FARGO ARMORED SERVICE CORPORATION,
LESSEE
Witness (or Attest) By: /s/ Timothy M. Wood
-------------------------------------
______________________________ Title: Vice President
----------------------------------
ASSOCIATES LEASING, INC., LESSOR
By: [SIGNATURE ILLEGIBLE]
-------------------------------------
Title: Senior Vice President
----------------------------------
<PAGE>
FLEET LEASE AGREEMENT ADDENDUM (OPEN-END)
Addendum to that certain Fleet Lease Agreement (Open-End/Non-Maintenance) dated
December 2, 1996 by and between Associates Leasing, Inc. as Lessor and Wells
Fargo Armored Service Corporation as Lessee, a copy of which is attached hereto
and specifically incorporated herein ("Lease").
Notwithstanding anything in Section 11.A of the Lease to the contrary,
including, without limitation the last sentence of Section 11.A:
1. Provided Lessee is not in default under the Lease, Lessee shall not be
obligated to obtain the insurance coverage for fire, theft, comprehensive
and collision risks otherwise required by Section 11 of the Lease provided
that:
A. In any Vehicle is lost, stolen, or is, in the opinion of Lessor,
damaged beyond repair, Final Adjustment shall be made for such Vehicle
pursuant to Sections 9 and 10 of the Lease. In the case of Vehicles
which are lost or stolen, such loss or theft shall constitute sale
thereof for purposes of Section 8 of the Lease, as of the date of loss
or theft, and the amount of net sale proceeds therefor shall be deemed
to be zero.
B. If, after incurring damage, a Vehicle is, in the opinion of Lessor,
still repairable, Lessee shall repair, at its own expense and to the
satisfaction of Lessor, all damage to such Vehicle within 30 days
from the date the damage is incurred. Failure to repair any Vehicle
within 30 days from the date of damage shall be an event of default
under the Lease.
C. Lessor may terminate this Addendum 10 days after Lessee receives
written notice of a payment default or a material event of default by
Lessee under the Lease if Lessee fails to cure such default during
such 10 day period. Upon such termination, Lessee shall immediately,
without further notice or demand by Lessor, procure and maintain
insurance as described in Section 11 of the Lease, and should Lessee
fail to obtain such insurance, Lessor may obtain such insurance on
Lessee's behalf pursuant to Section 11 of the Lease.
2. Except as expressly modified hereby, the Lease shall remain in full force
and effect.
Wells Fargo Armored Corporation, LESSEE
---------------------------------------------
BY: /s/ Timothy M. Wood
----------------------------------------
TITLE: Vice President
--------------------------------------
Accepted at Carrollton, Texas on ASSOCIATES LEASING, INC., LESSOR
January 7, 1997 BY: [SIGNATURE ILLEGIBLE]
- ------------------------------- -----------------------------------------
(Date)
TITLE: Senior Vice President
--------------------------------------
<PAGE>
LESSEE CERTIFICATION
With respect to that certain Fleet Lease Agreement entered into as of December
--------
2, 1996 (Date) by and between Associates Leasing, Inc. (Lessor) and Wells Fargo
- ------- -----------
Armored Service Corporation (Lessee), Lessee hereby certifies, under penalty of
- ---------------------------
perjury, that Lessee intends that more than 50 percent of the use of the
property subject to such Fleet Lease Agreement is to be in a trade or business
of the Lessee.
Lessee has been advised by Lessor, and acknowledges, that Lessee will not be
treated as the owner of the property subject to the Fleet Lease Agreement for
Federal income tax purposes.
LESSEE: Wells Fargo Armored Service Corporation
---------------------------------------
BY: /s/ Timothy M. Wood
---------------------------------------
TITLE: Vice President
---------------------------------------
DATE: 1/3/97
---------------------------------------
<PAGE>
I, Neil A. Reisman was present and witnessed Tim Wood's signature on Fleet Lease
Agreements dated December 2, 1996 between Associates Leasing, Inc. and:
Borg-Warner Security Corporation;
Wells Fargo Armored Service Corporation;
Wells Fargo Alarm Services, Inc;
Pony Express Courier Crop.; and
Borg-Warner Protective Services Corporation.
Neil A. Reisman
/s/ Neil A. Reisman
-------------------------
Title: Counsel
-------------------------
<PAGE>
EXHIBIT 10.10
TRANSFER AND ASSUMPTION AGREEMENT
This Transfer and Assumption Agreement dated as of January 2, 1997 is entered
into by and among Wells Fargo Armored Service Corporation, a Delaware
corporation ("Transferor"), Borg-Warner Security Corporation, a Delaware
corporation ("Borg-Warner"), Loomis, Fargo & Co., a Delaware corporation
("Transferee"), and Associates Leasing, Inc., an Indiana corporation ("Lessor").
WHEREAS, Transferor and Lessor entered into certain lease agreements dated
December 2, 1996, June 16, 1993, July 3, 1990 and July 18, 1979 (but only as the
1990 and 1979 agreements relate to vehicles leased to Transferor) (the
"Leases"); and
WHEREAS, Transferor and Transferee are parties to a Contribution Agreement,
dated as of November 28, 1996 (the "Contribution Agreement"), whereby
Transferor intends to transfer substantially all of its assets and certain
liabilities to Transferee;
WHEREAS, Transferor desires to transfer its interest in all vehicles leased
pursuant to the Leases as described in the attached Schedule A, which shall be
amended as provided in paragraph 1 herein ("Vehicles") to Transferee, but may
not do so without the prior written consent of Lessor; and
WHEREAS, Lessor will consent to such transfer only subject to the conditions
contained herein.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Transferor hereby assigns to Transferee all of Transferor's
rights, interest and obligations as lessee in and to the Vehicles, subject to
the following terms and conditions:
1. Transferee acknowledges that (i) as of the date hereof, Transferee has
inspected the Vehicles and found them to be in good working order and
otherwise in a condition which is acceptable to Transferee, and (ii) upon
closing of the transactions contemplated by the Contribution Agreement (the
"Closing"), Transferee shall lease the Vehicles from Lessor and shall,
without qualification or condition, perform all of Transferor's duties and
obligations under the Leases with regard to the Vehicles. Transferor,
Transferee and Lessor agree to prepare a revised Schedule A at or near
Closing which will be incorporated into this Agreement that will identify
all Vehicles.
<PAGE>
2. Transferee agrees that no warranties have been made as to the Vehicles by
Lessor, and that LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO THE QUALITY, WORKMANSHIP, DESIGN, MERCHANTABILITY,
SUITABILITY OR FITNESS OF THE VEHICLES FOR ANY PARTICULAR PURPOSE, OR ANY
OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, and that
Lessor shall not under any circumstances by liable for any loss or damage
whatsoever arising from the Vehicles, including, without limitation, loss
of anticipatory profits or consequential damages.
3. Following the Closing, Transferor and Transferee agrees to promptly cause
such actions to be taken as are required or permitted by statute or
regulation to accomplish the transfer of the Vehicles and to protect
Lessor's ownership thereof, including, without limitation, filing financing
statements, recording documents and obtaining Certificates of Title, Lessor
assuming no responsibility thereof
4. Effective at the Closing, Lessor hereby releases Transferor and Borg-Warner
from all obligations under the Leases and any liability related to the
Vehicles. Except as expressly provided herein, all Leases shall remain in
full force and effect for the remaining vehicles (if any) subject thereto.
5. Borg-Warner agrees to deliver to Lessor a letter of credit (the "L/C") in
the amount of $2,500,000 in a form reasonably similar to Exhibit A and
drawn on a bank reasonably satisfactory to Lessor. The L/C shall secure
Transferee's obligations under the Leases for the period beginning on the
Closing and ending on the second anniversary thereof. The L/C may contain
an "evergreen" provision providing for a term of one year to be renewed
automatically at the end of such term for an additional one year period
unless the bank issuing such L/C notifies Lessor in writing not less than
twenty (20) days prior to the end of the term of the L/C. In such event,
Borg-Warner shall provide a new L/C conforming to the terms of this
paragraph 5. If a new L/C is not delivered by Borg/Warner prior to the date
which is ten (10) days prior to the expiration of the initial period, then
Lessor shall have the right to drawn down on the L/C and hold the funds in
a segregated account until the earlier of (X) the delivery by Borg-Warner
of a new L/C conforming to the terms of this Paragraph 5 in which event
Lessor shall return to Borg-Warner the funds drawn down or (Y) Lessor's
right to otherwise drawn down the L/C pursuant to this paragraph 5 in which
event the funds may be released from the segregated account for the benefit
of the Lessor. The L/C shall provide that Lessor shall have the right to
call and draw down on it to the extent that and in the event that (i)
Transferee shall have failed to pay when due any part of the Adjusted
Rental after Final Adjustment (as such terms are defined in the Leases) or
equivalent payable under the Leases with respect to
2
<PAGE>
any Vehicle or (ii) in the event that Transferee owes monies under the
Leases with respect to any Vehicle, Transferee (A) commences a voluntary
case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or similar law, (B) is adjudicated bankrupt or
insolvent or (C) consents to an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization or
similar law (each, a "Bankruptcy Event").
6. Lessor's consent to the transfer will not be effective (i) until this
Agreement has been properly executed by authorized representatives of each
of the parties hereto, (ii) if there has been a material adverse change to
the financial position of Borg-Warner, Transferor or Transferee prior to
the Closing or (iii) if the Closing has not occurred on or prior to March
23, 1997.
7. Notwithstanding anything contained in the Leases to the contrary, after
Closing, the Vehicles listed on Schedule B hereto ("Schedule B Vehicles")
shall be leased for a term that expires on January 1, 2000 ("Schedule B
Expiration Date"). Transferee agrees to continue to pay rentals on each
Schedule B Vehicle in the amount of five dollars ($5.00) per vehicle per
month. Rentals shall be payable on the same date as the other rentals due
under the Leases. Transferee shall have the right to request Lessor to sell
any Schedule B Vehicle prior to the Schedule B Expiration Date to a third
party, provided that the net proceeds from such sale shall be paid directly
to Lessor and applied as prepayments to the oldest Leases first. All
reasonable expenses of such sales (including, without limitation, taxes,
registration fees, and third party commissions) shall be borne by the
Transferee. Except as modified above, the Schedule B Vehicles shall
continue to be governed by the applicable Leases.
8. This Agreement may be executed in any number of counterparts, each of which
shall, when so executed, be considered an original and all of which, taken
together, shall be considered on document.
9 This Agreement and any schedules referred to herein constitute the entire
agreement of the parties hereto. No oral agreement, guaranty, promise,
condition, representation or warranty shall be binding on Lessor. Each of
the parties executing this Agreement acknowledges receipt of a copy hereof.
3
<PAGE>
IN WITNESS WHEREOF, we have hereunto set out hands and seals as of the day and
year first above written.
TRANSFEROR: WELLS FARGO ARMORED SERVICE CORPORATION
BY: /s/ Timothy M. Wood
----------------------------------------
TITLE: Vice President
-------------------------------------
TRANSFEREE: LOOMIS, FARGO & CO.
BY: /s/ James K. Jennings, Jr.
----------------------------------------
TITLE: Executive Vice President
-------------------------------------
BORG-WARNER SECURITY CORPORATION
BY: /s/ Timothy M. Wood
----------------------------------------
TITLE: Vice President
-------------------------------------
Lessor hereby consents to the above transfer and assumption pursuant to the
terms and conditions of the above Agreement.
DATE: January 3, 1997
----------------
ASSOCIATES LEASING, INC.
BY: [SIGNATURE ILLEGIBLE]
----------------------------------------
TITLE: Senior Vice President
-------------------------------------
4
<PAGE>
EXHIBIT 10.11
TRANSITION SERVICES AGREEMENT
AGREEMENT dated as of January 24, 1997 between Loomis, Fargo & Co., a
Delware corporation (the "Company"), and Pony Express Courier Corp., a Delaware
corporation ("Provider").
W I T N E S S E T H:
WHEREAS, the Company, Borg-Warner Security Corporation, Wells Fargos
Armored Service Corporation, a Delaware corporation ("Wells Fargo"), Loomis
Holding Corporation, a Delaware corporation ("Loomis"), Loomis Armored Inc., a
Texas corporation and wholly-owned subsidiary of Loomis, and the Loomis
Stockholders Trust, a Delaware business trust, have entered into a Contribution
Agreement dated as of November 28, 1996 (the "Contribution Agreement");
WHEREAS, in order for the Company to operate its business following the
consummation of the transactions contemplated by the Contribution Agreement, the
Company desires to enter into certain transitional arrangements with Provider
with respect to the performance of certain services; and
WHEREAS, Provider is willing to enter into such transitional arrangements
on the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:
1. Services.
--------
(a) Services. Commencing on the date hereof and during the term of this
--------
Agreement, Provider shall provide, or shall cause to be provided, to the Company
the services, functions or responsibilities performed during the six month
period ending on the date hereof by employees in Provider's management
information systems and field support systems groups, including, but not limited
to, the services, functions or responsibilities identified on Exhibit 1 hereto
(the "Services").
(b) Term. The term of this Agreement shall commence on the date hereof and
----
shall continue until June 23, 1997 (the "Termination Date"); provided that, at
--------
any time prior to the Termination Date, the Company may terminate this Agreement
upon 30 days prior written notice to Provider. Notwithstanding any termination
of this Agreement, the provisions of Section 1(c), Section 2 (with respect to
amounts accrued prior to such termination) and Sections 3 and 4 shall remain in
full force and effect.
<PAGE>
(c) Limited Warranty. Provider will provide the Services hereunder in
----------------
good faith, in a manner consistent with past practices applicable to the
provision or performance of such services by Provider with respect to the
business. The Company hereby acknowledges that Provider does not regularly
provide to third parties services such as the Services as part of its business
and that, except as set forth in this subsection (c), Provider does not
otherwise warrant or assume any responsibility for its Services. The warranty
stated above is in lieu of and exclusive of all other representations and
warranties of any kind whatsoever. EXCEPT AS STATED ABOVE, THERE ARE NO
WARRANTIES RELATING TO THE SERVICES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
(d) Performance Remedy. In the event Provider fails to provide a Service
------------------
hereunder, or the quality of a Service is not in accordance with subsection (c)
above, the Company will give Provider prompt written notice thereof. Provider
will then have a reasonable period of time to cure the defective Service.
Provider will use commercially reasonable efforts, consistent with past
practices, to cure the defective Service. If after such period Provider has
failed to cure the defective Service, the Company may seek an alternative
provider for such Service and Provider shall discontinue performing such Service
at the request of the Company.
2. Payments by the Company.
-----------------------
(a) Fees. The Company shall pay to Provider a fee equal to the
----
percentage of the costs and expenses currently allocated to Wells Fargo in
respect of the Services multiplied by the costs and expenses of the Services, in
each case, consistent with past practices. In addition to the fee referred to
above, the Company shall pay or reimburse Provider for all incremental third
party costs or charges, if any, incurred in connection with the Services
rendered directly or indirectly to the Company and its subsidiaries pursuant to
this Agreement. Provider shall not be obligated to advance any funds on behalf
of the Company (other than in the ordinary course of business as agreed by the
parties) unless and until such funds have been received from the Company by
Provider. The Company will be responsible for and pay directly to Provider, or
reimburse Provider for, any and all data processing services or other similar
taxes, however levied, for which the Company would not have been liable if the
Company had provided the Services to itself.
(b) Payment of Charges. Provider shall invoice the Company for Services
------------------
performed at such appropriate intervals as may be determined by Provider.
Payments shall be due 10 business days from the date such invoice was received
by the Company. The Company shall have the right, during normal business hours
and with reasonable prior notice to Provider, to examine such books and records
of Provider as the Company may reasonably request in order to confirm and
verify the amount of any charges, and Provider shall cooperate in any reasonable
manner in such examination as the Company shall request.
-2-
<PAGE>
3. Indemnification; Limitation of Liability.
----------------------------------------
(a) Indemnification. The Company agrees to and does hereby indemnify and
---------------
hold Provider and its subsidiaries harmless from and against any and all damage,
loss, liability and expense (including without limitation reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, claim, suit or proceeding) ("Losses") by third parties to which Provider
or any of such subsidiaries may be subjected arising out of or attributable,
directly or indirectly, to the performance or nonperformance of any Services or
otherwise arising under this Agreement, except for any such Losses arising from
claims by such third parties arising out of or attributable to the gross
negligence or willful misconduct of Provider or its subsidiaries.
(b) Limitation of Liability. (i) Under no circumstances will Provider, its
-----------------------
Subsidiaries or any of their respective officers, directors, employees, agents
or attorneys-in-fact be liable (pursuant to any regulation, rule, law or
statute, including without limitations ERISA, in contract, tort or otherwise) to
the Company for any Losses suffered by the Company arising out of or
attributable, directly or indirectly, to the performance or nonperformance of
any Services or otherwise arising under this Agreement, and the Company waives
and releases any claim therefor, except for any such Losses arising out of or
attributable to the gross negligence or willful misconduct of Provider or its
subsidiaries.
(ii) Any liability of the parties to one another arising with
respect to any matters arising out of or attributable to this Agreement,
regardless of the form of the claim or cause of action (whether based in
contract, infringement, negligence, intended conduct, strict liability, other
tort or otherwise), shall be limited to actual damages. In no event shall either
party be liable to the other party for any indirect, consequential, incidental
or punitive damages, whether arising under contract, in tort, at law, or in
equity. "Consequential damages" shall include, but not be limited to, loss of
anticipated profits, loss of use, loss of revenue, loss of savings, cost of
capital and loss or damage of other property or equipment.
(c) The Company and Provider each acknowledge that the limitations and
exclusions contained in this paragraph 3 have been the subject of active and
complete negotiation between the parties and represent the parties' agreement
based upon the level of risk to the Company and Provider associated with their
respective obligations under this Agreement and the payments to be made to
Provider under this Agreement.
4. Miscellaneous.
(a) Notices. All notices, requests and other communications to either
-------
party hereunder shall be in writing (including facsimile transmission) and shall
be given,
<PAGE>
if to the Company, to:
Loomis, Fargo & Co.
16225 Park Ten Place, Suite 600
Houston, TX 77084
Tel: (281) 647-6700
Fax: (281) 647-5699
Attention: James K. Jennings, Jr.
if to Provider, to:
Pony Express Courier Corp.
200 South Michigan Avenue
Chicago, Illinois 60604
Tel: (312) 322-8500
Fax: (312) 322-8629
Attention: Timothy M. Wood
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
(b) Amendments and Waivers. Any provision of this Agreement may be
----------------------
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective. No
failure or delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
(c) Force Majeure. The parties shall be relieved of their obligations
-------------
hereunder (except for the payment of money), if and to the extent that any of
the following events hinder, limit or make commercially impracticable the
performance by either party of any of its obligations hereunder: act of God,
war, civil commotion, riot, acts of public enemies, blockade or embargo, fire,
explosion, lightning, casualty, accident, flood, sabotage, national defense
requirements, labor trouble, strike, lockout or injunction; governmental
requests, laws, regulations, orders or actions, whether valid or invalid
(including without limitation import or export prohibitions or priorities,
requisitions, allocations and price adjustment restrictions); breakage, failure
of or fluctuation in machinery, apparatus or equipment; or any other event,
whether or not of the class or kind enumerated herein, beyond the control of
either party such as cannot reasonably be circumvented through commercially
feasible alternate sources or means. The party claiming relief hereunder
4
<PAGE>
shall notify the other party in writing of the events causing delay or default
in performance. The party failing to fulfill its obligations shall, however,
take reasonable steps to remove or otherwise address the impediment to action.
(d) Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
--------
transfer any of its rights or obligations under this Agreement without the
consent of the other party hereto, except that Provider may, without the consent
of the Company, assign or delegate its rights or obligations under this
Agreement to one or more of Provider's subsidiaries.
(e) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the law of New York, without regard to the conflicts of law
rules of such jurisdiction.
(f) Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(g) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by either party hereto. Neither
this Agreement nor any provison hereof is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
(h) Independent Contractors. The parties hereto are independent
-----------------------
contractors. Nothing in this Agreement is intended or shall be deemed to
constitute a partnership, agency, franchise or joint venture relationship
between the parties. Neither party shall incur any debts or make any commitments
for the other, except to the extent, if at all, specifically provided herein.
(i) Severability. If any provision hereof is or becomes illegal, invalid,
------------
or unenforceable under the laws of a particular jurisdiction, such provision
shall be fully severable with respect to such laws; this Agreement shall be
construed and enforced in such jurisdiction as if such provision had never
comprised a part hereof; the remaining provisions hereof shall remain in full
force and effect in such jurisdiction and shall not be affected by such
provision or by its severance herefrom; and all of the provisions hereof shall
remain in full force and effect in all other jurisdictions and shall not be
affected by the severance of such provision under the laws of such jurisdiction.
Furthermore, in lieu of such provision there shall be added automatically for
purposes of such jurisdiction as part of this Agreement a provision as similar
in terms to such illegal, invalid, or unenforceable provision as may be possible
and be legal, valid and enforceable in such jurisdiction.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
PONY EXPRESS COURIER CORP.
By: /s/ Timothy M. Wood
--------------------------------
Name: Timothy M. Wood
Title: Vice President
LOOMIS, FARGO & CO
By: /s/ James K. Jennings, Jr.
--------------------------------
Name: James K. Jennings, Jr.
Title: Executive Vice President
6
<PAGE>
Exhibit 12.1
Statement Re: Computation of
Ratio of Earnings to Fixed Charges
of Loomis Holding Corporation
<TABLE>
<CAPTION>
Six
Years Ended Months Ended
June 30, December 31,
---------------------------------- ------------------------
1994 1995 1996 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating income $ 2,020 $ 3,124 $ 4,186 $ 1,855 $ 3,691
Interest portion of rental expense
on noncancelable leases 969 998 1,031 534 593
-------- -------- -------- -------- --------
Earnings $ 2,989 $ 4,122 $ 5,217 $ 2,389 $ 4,284
======== ======== ======== ======== ========
Interest expense 3,053 3,158 2,981 1,528 1,445
Interest portion of rental expense
on noncancelable leases 969 998 1,031 534 593
-------- -------- -------- -------- --------
Fixed charges $ 4,022 $ 4,156 $ 4,012 $ 2,062 $ 2,038
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 0.7 1.0 1.3 1.2 2.1
======== ======== ======== ======== ========
Insufficiency of earnings to cover
fixed charges $ 1.0
========
</TABLE>
<PAGE>
Exhibit 12.2
Statement Re: Computation of Pro Forma Ratio
of Earnings to Fixed Charges of Loomis, Fargo & Co.
Twelve Months Ended December 31, 1996
<TABLE>
<S> <C>
Operating income $ 23,799
Interest portion of rental expense
on noncancelable leases 4,350
--------
Earnings $ 28,149
========
Interest expense $ 15,847
Interest portion of rental expense
on noncancelable leases 4,350
--------
Fixed charges $ 20,197
========
Ratio of earnings to fixed charges 1.4
========
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF LOOMIS, FARGO & CO.
LFC Holding Corporation, a Delaware corporation
Loomis, Fargo & Co., a Texas corporation
LFC Armored of Texas Inc., a Texas corporation
Loomis, Fargo & Co. of Puerto Rico, a Tennessee corporation
SUBSIDIARIES OF LFC HOLDING CORPORATION
Loomis, Fargo & Co., a Texas corporation
LFC Armored of Texas Inc., a Texas corporation
Loomis, Fargo & Co. of Puerto Rico, a Tennessee corporation
SUBSIDIARIES OF LOOMIS, FARGO & CO. (TEXAS)
LFC Armored of Texas Inc., a Texas corporation
Loomis, Fargo & Co. of Puerto Rico, a Tennessee corporation
LFC Armored of Texas Inc. and Loomis, Fargo & Co. of Puerto Rico do not have
any subsidiaries.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 14, 1997, in the Registration Statement (Form
S-1 No. 33-00000) and related Prospectus of Loomis, Fargo & Co. for the
registration of $85,000,000 of Senior Subordinated Notes due 2004.
/s/ Ernst & Young LLP
Houston, Texas
April 4, 1997
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Loomis, Fargo & Co. on
Form S-1 of our report dated March 14, 1997, relating to the financial
statements of Wells Fargo Armored Service Corporation (a wholly owned subsidiary
of Borg-Warner Security Corporation), appearing in the Prospectus, which is part
of this Registration Statement.
We also consent to the reference to us under the headings "Selected Historical
Financial Information - Wells Fargo Armored" and "Experts," in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
April 4, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS OF LOOMIS HOLDING CORPORATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001037120
<NAME> LOOMIS, FARGO & CO. DE<F1>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> JUN-30-1996 DEC-31-1996<F2>
<PERIOD-START> JUL-01-1995 JUL-01-1996
<PERIOD-END> JUN-30-1996 DEC-31-1996
<CASH> 3,376 2,469
<SECURITIES> 0 0
<RECEIVABLES> 9,092 10,939
<ALLOWANCES> (247) (308)
<INVENTORY> 322 267
<CURRENT-ASSETS> 15,514 15,661
<PP&E> 38,577 40,868
<DEPRECIATION> 22,381 24,052
<TOTAL-ASSETS> 39,755 43,046
<CURRENT-LIABILITIES> 23,036 24,054
<BONDS> 23,414 23,491
3,500 3,500
0 0
<COMMON> 15 15
<OTHER-SE> (10,565) (8,369)
<TOTAL-LIABILITY-AND-EQUITY> 39,755 43,046
<SALES> 119,455 65,765
<TOTAL-REVENUES> 119,455 65,765
<CGS> 0 0
<TOTAL-COSTS> 115,269 62,074
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,981 1,445
<INCOME-PRETAX> 1,205 2,246
<INCOME-TAX> 78 50
<INCOME-CONTINUING> 1,127 2,196
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,127 2,196
<EPS-PRIMARY> 0.30 0.83
<EPS-DILUTED> 0.30 0.83
<FN>
<F1>FINANCIAL INFORMATION PRESENTED IS FOR LOOMIS HOLDING CORPORATION,
PREDECESSOR OF THE CO-REGISTRANT.
<F2>LOOMIS HOLDING CORPORATION CHANGED ITS FISCAL YEAR END EFFECTIVE JULY 1, 1996
</FN>
</TABLE>
