<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended June 30, 1996
Commission file number: 1-5529
BORG-WARNER SECURITY CORPORATION
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3408028
- ----------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
200 South Michigan Avenue, Chicago, Illinois 60604
- -------------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312)322-8500
-------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- -----
On July 31, 1996 the registrant had 22,110,542 shares of Common Stock and
1,149,600 shares of Series I Non-Voting Common Stock outstanding.
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BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
THREE MONTHS ENDED JUNE 30, 1996
INDEX
Page No.
--------
PART I. Financial Information
---------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheet
at June 30, 1996 and December 31, 1995 . . . . . . . . . 2
Consolidated Statement of Earnings for
the three months ended June 30, 1996 and 1995 . . . . . 3
Consolidated Statement of Earnings for
the six months ended June 30, 1996 and 1995 . . . . . . 4
Condensed Consolidated Statement of Cash Flows for
the six months ended June 30, 1996 and 1995 . . . . . . 5
Notes to the Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . 11
PART II. Other Information
-----------------
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . 15
Item 2. Changes in Securities . . . . . . . . . . . . . . 15
Item 3. Defaults Upon Senior Securities . . . . . . . . . 15
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 15
Item 5. Other Information . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 17
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Part I. Financial Information
Item 1. Financial Statements
--------------------
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 15.7 $ 21.1
Receivables, net 97.8 102.7
Inventories 13.6 12.5
Other current assets 64.5 59.5
------- -------
Total current assets 191.6 195.8
------- -------
Property, plant and equipment, at cost 478.9 500.7
Less accumulated depreciation 248.1 249.8
------- -------
Net property, plant and equipment 230.8 250.9
------- -------
Net excess purchase price
over net assets acquired 265.9 273.0
Deferred tax asset 52.9 52.8
Other assets 87.1 78.9
------- -------
$ 828.3 $ 851.4
Total assets ======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
Notes payable $ 5.0 $ 7.0
Accounts payable and accrued expenses 180.9 193.9
------- -------
Total current liabilities 185.9 200.9
------- -------
Long-term debt 478.7 482.1
Other long-term liabilities 111.6 118.7
Capital stock:
Common stock 0.2 0.2
Series I non-voting common stock - -
Other stockholders' equity 51.9 49.5
------- -------
Total stockholders' equity 52.1 49.7
------- -------
Total liabilities & stockholders'
equity $ 828.3 $ 851.4
======= =======
</TABLE>
(The accompanying notes are an integral part of these financial
statements)
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BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------
1996 1995
-------- --------
<S> <C> <C>
Net service revenues $ 454.6 $ 467.3
Cost of services 366.2 377.0
Selling, general and
administrative expenses 54.2 57.0
Depreciation 12.9 14.3
Amortization of excess purchase
price over net assets acquired 3.6 3.6
Interest expense and finance charges 14.6 14.4
-------- --------
Earnings before income taxes 3.1 1.0
Provision for income taxes 1.2 0.4
-------- --------
Net earnings $ 1.9 $ 0.6
======== ========
Net earnings per share $ 0.08 $ 0.03
======== ========
</TABLE>
(The accompanying notes are an integral part of these financial
statements)
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BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------
1996 1995
-------- --------
<S> <C> <C>
Net service revenues $ 904.6 $ 929.7
Cost of services 729.4 748.2
Selling, general and
administrative expenses 109.0 115.9
Depreciation 26.1 29.2
Amortization of excess purchase
price over net assets acquired 7.2 7.4
Interest expense and finance charges 29.6 28.2
-------- --------
Earnings before income taxes 3.3 0.8
Provision for income taxes 0.9 0.1
-------- --------
Net earnings $ 2.4 $ 0.7
======== ========
Net earnings per share $ 0.10 $ 0.03
======== ========
</TABLE>
(The accompanying notes are an integral part of these financial
statements)
<PAGE>
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BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
------- ------
<S> <C> <C>
OPERATING:
Net earnings $ 2.4 $ 0.7
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Non-cash charges to earnings:
Depreciation and amortization 33.3 36.6
Provision for losses on receivables 2.2 2.1
Amortization of debt discounts 0.6 1.0
Changes in assets and liabilities:
Decrease in receivables 2.6 7.4
Increase in other current assets (5.8) (4.4)
Decrease in accounts payable and
accrued expenses (13.0) (6.4)
Net change in other long-term assets and liabilities 2.5 (5.7)
Other (5.0) (2.0)
------- ------
Net cash provided by operating activities 19.8 29.3
------- ------
INVESTING:
Capital expenditures and investments in sales-type
leases (21.9) (27.6)
Other, net 1.0 0.4
------- ------
Net cash used in investing activities (20.9) (27.2)
------- ------
FINANCING:
Net decrease in notes payable (2.0) (5.7)
Increase (decrease) in debt outstanding under revolving
credit facility (2.1) 18.6
Increases in long-term debt 100.0 -
Reductions in long-term debt (100.0) -
Net decrease in receivables sold (0.3) (18.0)
Sales of treasury common stock 0.1 0.5
------- ------
Net cash used in financing activities (4.3) (4.6)
------- ------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5.4) (2.5)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 21.1 15.8
------- ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15.7 $ 13.3
======= ======
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The financial statements of Borg-Warner Security Corporation and
Consolidated Subsidiaries ("Company") have been prepared in accordance with
the instructions to Form 10-Q. The statements are unaudited, but include all
adjustments, consisting of normal recurring items, which the Company considers
necessary for a fair presentation of the information set forth herein. The
results of operations for the three and six month periods ended June 30, 1996
are not necessarily indicative of the results to be expected for the entire
year. Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
(2) The allowance for doubtful accounts was $7.0 million at June 30, 1996 and
$7.3 million at December 31, 1995. The accumulated amortization on excess
purchase price over net assets acquired was $90.4 million at June 30, 1996 and
$93.0 million at December 31, 1995.
In November 1995, the Company entered into a three-year agreement to sell a
$120 million undivided interest in a revolving pool of customer receivables.
This sold interest was reflected as a reduction of "Receivables" in the
accompanying Condensed Consolidated Balance Sheet at June 30, 1996 and
December 31, 1995. The Company retains, on a subordinated basis, an undivided
interest in the pool of receivables. The Company's retained interest of $11.2
million and $17.0 million at June 30, 1996 and December 31, 1995,
respectively, is included with "Receivables, net" on the balance sheet. "Other
current assets" at June 30, 1996 and December 31, 1995 included interest-
bearing cash deposits of $31.4 million and $31.1 million, respectively, held
in trust under the terms of the accounts receivable facility. These deposits
represent collections held back by the trustee based on the amount of eligible
receivables in the revolving receivables pool. The Company's retained interest
in the receivables and cash deposits is generally restricted. 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 discount related to the sale of receivables is included with
"Interest expense and finance charges" in the Consolidated Statement of
Operations.
Net cash payments for interest and income taxes were as follows (in millions
of dollars):
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------
1996 1995
------ ------
<S> <C> <C>
Interest paid $29.7 $28.4
Income taxes paid (refunded) 1.5 (0.6)
</TABLE>
(3) The Company's provisions for income taxes for the three and six month
periods ended June 30, 1996 and 1995 reflect estimated annual tax rates for
the year applied to federal, state and foreign income.
<PAGE>
-7-
(4) The following tables summarize the capitalization of the Company at June
30, 1996 and December 31, 1995 (in millions of dollars):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
----------------- -----------------
DEBT Current Long-Term Current Long-Term
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Bank term loan due 1998 (at
an average rate of 8.8%
in 1996 and 9.5% in 1995;
and 8.7% at June 30, 1996) $ - $200.0 $ - $100.0
Bank revolving commitment
loan due through 1999 (at
an average rate of 8.5% in
1996 and 7.3% in 1995; and
8.4% at June 30, 1996) - 122.5 - 124.6
8% notes (face amount of
$100 million due 1996) - - - 99.5
Unsecured notes (at an average
rate of 7.2% in 1996 and 7.0%
in 1995; and 7.3% at June 30,
1996) 0.2 0.4 0.4 0.6
Capital lease liability (at an
average rate of 8.3% in 1996
and 8.4% in 1995; and 8.4% at
June 30, 1996) 4.8 6.6 6.6 8.3
9-1/8% senior subordinated
notes (face amount of
$150 million due 2003) - 149.2 - 149.1
----- ------ ------ ------
Total notes payable and
long-term debt $ 5.0 $478.7 $ 7.0 $482.1
===== ====== ====== ======
</TABLE>
<PAGE>
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<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY June 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Common stock:
Common stock $ 0.2 $ 0.2
Series I non-voting common stock - -
Preferred stock - -
Capital in excess of par value 28.3 28.1
Notes receivable - management
stock purchase (0.3) (0.3)
Retained earnings 33.5 31.2
Cumulative translation adjustment (0.6) (0.4)
---------- ----------
61.1 58.8
Less treasury common stock,
1,905,958 shares in 1996 and
1,928,861 shares in 1995, at cost (9.0) (9.1)
---------- ----------
Total stockholders' equity $ 52.1 $ 49.7
========== ==========
</TABLE>
<TABLE>
<CAPTION>
CAPITAL STOCK - NUMBER OF SHARES June 30, December 31,
(Thousands of shares) 1996 1995
--------- ------------
<S> <C> <C>
Common Stock, $.01 par value:
Authorized 50,000.0 50,000.0
Issued 22,446.1 22,446.1
Outstanding 22,110.5 22,087.6
Series I non-voting common stock,
$.01 par value:
Authorized 25,000.0 25,000.0
Issued 2,720.0 2,720.0
Outstanding 1,149.6 1,149.6
Preferred stock, $.01 par value:
Authorized 5,000.0 5,000.0
Issued and outstanding - -
</TABLE>
<PAGE>
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(5) Earnings per common share are based on average outstanding common shares
and common share equivalents. Common share equivalents recognize the dilutive
effects of common shares which may be issued in the future upon exercise of
certain stock options. The number of shares used in the computation of
earnings per share were as follows (in thousands of shares):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average common shares
outstanding 23,258 23,101 23,251 23,027
Common share equivalents 294 195 284 203
------ ------ ------ ------
Total used for computation
of per share earnings 23,552 23,296 23,535 23,230
====== ====== ====== ======
</TABLE>
(6) The Company's discontinued property and casualty insurance subsidiary
("Centaur") ceased writing insurance in 1984 and has been operating under
rehabilitation since September 1987. Rehabilitation is a process supervised
by the Illinois Director of Insurance to attempt to compromise claim
liabilities at an aggregate level that is not in excess of Centaur's assets.
In rehabilitation, Centaur's assets are currently being used to satisfy claim
liabilities under direct insurance policies written by Centaur. Any remaining
assets will be applied to Centaur's obligations to other insurance companies
under reinsurance contracts. If all of Centaur's obligations are not
satisfied through rehabilitation, it is possible that satisfaction could be
sought from the Company for Centaur's liabilities.
The foregoing has resulted in one pending lawsuit against the Company, certain
of its current and former subsidiaries, and directors and officers of certain
current and former subsidiaries for recovery of alleged damages incurred
because of Centaur's failure to satisfy its reinsurance obligations. The
lawsuit seeks in excess of $100 million for current losses, future losses and
other damages and also seeks punitive damages. The Company believes that any
damages for failure to satisfy reinsurance obligations are solely the
responsibility of Centaur and that the resolution of the lawsuit relating to
Centaur, including the Company's indemnification obligations to certain former
officers and directors, will not have a material adverse effect on its
financial position or future operating results; however, no assurance can be
given as to the ultimate outcome with respect to such lawsuit.
The Company and certain of its current and former subsidiaries have been
identified by the U.S. Environmental Protection Agency and certain state
environmental agencies as potentially responsible parties ("PRPs") at several
hazardous waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund") and equivalent state laws and, as
such, may be liable for the cost of cleanup and other remedial activities at
these sites. Responsibility for cleanup and other remedial activities at a
Superfund site is typically shared among PRPs based on an allocation formula.
The Company believes that none of these matters individually
<PAGE>
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or in the aggregate will have a material adverse effect on its financial
position or future operating results, generally either because the maximum
potential liability at a site is not large or because liability will be shared
with other PRPs, although no assurance can be given with respect to the
ultimate outcome of any such liability. Based on its estimate of allocations
of liability among PRPs, the probability that other PRPs, many of whom are
large, solvent public companies, will fully pay the costs allocated to them,
currently available information concerning the scope of contamination at such
sites, estimated remediation costs at such sites, estimated legal fees and
other factors, the Company has made provisions for indicated environmental
liabilities in the aggregate amount of approximately $9 million (relating to
environmental matters with respect to discontinued operations of the Company).
If any environmental liability claim relating to the Company's former chemical
and plastics business is made, the Company is indemnified by the purchaser of
such business, General Electric Company. Since the disposition, the Company
has notified General Electric Company of various claims made with respect to
the Company's former chemical and plastic business, and General Electric
Company has assumed all of such claims and has not contested its
indemnification obligations. There is no dollar limitation on the General
Electric Company's indemnification obligations and there are no other material
limitations or exclusions with respect thereto. If any environmental
liability claim relating to the operations of the Company's discontinued
automotive subsidiary is made, the Company will be indemnified by such former
subsidiary.
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.
<PAGE>
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
RESULTS OF OPERATIONS
---------------------
Consolidated net service revenue for the three and six month periods ended
June 30, 1996 declined 2.7% from the comparable 1995 periods. Despite reduced
revenue, operating profit, which is pretax earnings before interest expense
and unallocated corporate expenses, increased 13.4% and 11.2% for the second
quarter and first six months of 1996, respectively. The Guard and Alarm units
improved margins through a combination of profitability improvement programs
and cost reduction efforts. Lower margins at the Armored and Courier units
offset some of the improvement.
The revenue contributed by each of the Company's units was as follows (in
millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Guard $297.7 $307.7 $593.9 $609.7
Alarm 59.9 63.1 118.8 128.3
Armored 60.7 56.8 119.7 113.4
Courier 36.3 39.7 72.2 78.3
------ ------ ------ ------
Total $454.6 $467.3 $904.6 $929.7
====== ====== ====== ======
</TABLE>
Guard revenue declined 3% in the second quarter and the first six months of
1996 compared to 1995. Volume, as measured by average guard hours-in-force,
declined 5.3% year-to-date, as reductions, cancellations, and terminations
exceeded new sales. The unit's program to reduce underperforming contracts
contributed to improved margins as operating profit increased 19.7% in the
second quarter and 22.8% in the first half of this year. Field cost
reduction and streamlining programs along with reduced amounts of unbilled
overtime also contributed to the improvement.
Alarm revenue decreased 5.2% in the second quarter and 7.4% in the first six
months of 1996 compared to 1995. In 1995, Alarm began recognizing
installation contracts as sales-type leases rather than operating leases.
Such recognition resulted in increased reported revenue in 1995 which is and
will be offset by reduced rental revenue from equipment under operating
leases. There is no significant impact on operating income since the
<PAGE>
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rental revenue is substantially offset by finance income earned on sales-type
leases and lower depreciation expense on remaining operating leases. Alarm's
1996 operating profit increased significantly primarily due to improved
investment control performance and lower operating costs.
Armored revenue increased 7.1% in the second quarter and 5.6% in the first six
months of 1996 compared to 1995. The increases resulted primarily from higher
volume in the ATM operations. Revenue for the armored transport and cash
services operations were comparable to 1995. Operating profit declined 25.8%
and 21.3% for the second quarter and the first half of 1996, respectively, due
to higher labor and vehicle costs, higher cargo losses, and the absence of a
pricing surcharge implemented in the first quarter of 1995.
Courier revenue decreased 8.6% in the second quarter and 7.8% in the first six
months of 1996 compared to 1995. The lower revenue reflects the reduced
volume of traditional financial document shipments, customer cost reduction
efforts and the unit's efforts to improve margins by reducing underperforming
business. Operating profit declined due to reduced revenues and a fixed cost
base in established route structures. The unit is reviewing its route
structure and branch organization in light of the reduced volume of business.
The United States Congress has recently passed legislation that is expected to
be enacted that will increase the minimum wage payable to employees. The
Company believes that it will be able to adjust its billing rates in response
to any such increase and that there would not be a material effect on
operating income from any increase in the minimum wage.
Interest expense and finance charges increased 1.4% in the second quarter and
5.0% for the first six months of 1996 compared to 1995. This is primarily due
to higher interest rates associated with refinancing activities in late 1995,
offset by slightly lower average debt balances.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
In November 1995 the Company entered into a three-year agreement to sell a
$120 million undivided interest in a revolving pool of customer receivables.
Other current assets at June 30, 1996 and December 31, 1995 included interest-
bearing cash deposits of $31.4 million and $31.1 million, respectively, held
in trust under the terms of the accounts receivable facility. These deposits
represent collections held back based on the amount of eligible receivables in
the revolving receivables pool. The levels of receivables and current
liabilities are influenced by the timing of billings, collections and
payrolls. The Company's policy is to keep working capital as low as is
operationally feasible to minimize related carrying costs.
<PAGE>
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Net cash provided by operating activities was $19.8 million and $29.3
million in the first six months of 1996 and 1995, respectively. The decline
in cash provided by operating activities was primarily due to changes in
working capital requirements. Cash used for investing activities declined by
$6.3 million due primarily to controlled Alarm investment and lower capital
expenditures. Total funding, including debt and off-balance sheet facilities,
declined to $570.4 million at March 31, 1996 from $576.3 million at December
31, 1995. The Company expects that continuing operations, together with
existing credit facilities and replacements thereof, will generate sufficient
cash to fund current operating requirements and capital expenditures.
On October 17, 1995, the Company entered into a credit agreement with a
syndicate of banks, providing for a $200 million term loan due December 31,
1998. On such date the Company also amended its existing revolving credit and
letter of credit facilities, principally to permit the term loan, change
pricing, amend covenants relating to interest coverage, leverage, net
worth and earnings, extend the maturity of the letter of credit facility to
December 31, 1998 and reduce the level of commitments under the letter of
credit facility to $155 million.
The Company used the initial $100 million of proceeds from the term loan
to prepay an existing $50 million term loan and for general corporate
purposes. The remaining $100 million of term loan proceeds was used to repay
the $100 million principal amount of its 8% notes, which matured on April 1,
1996.
The Company is required to prepay the term loan with the proceeds from certain
asset sales, certain reversions of surplus pension plan assets, issuance of
debt or equity securities and excess cash flow. In the event that, as of the
end of each quarter beginning with the quarter ended March 31, 1997, the
Company has not achieved required covenants for the four consecutive quarters
ending on such date, the Company is required to prepay $150 million of the
term loan not later than 120 days after the end of such quarter. If the
Company is required to make such payment, it expects to fund such amount
through some combination of transactions that may include the issuance of debt
or equity securities, the sale of assets or other financing alternatives.
In March 1996, the Company entered into an agreement that provides for the
purchase of the installation and equipment lease payments due under certain
alarm unit customer leased installations.
The Company has entered into a letter of intent to combine the business
conducted by its armored unit with Loomis Armored, Inc. The Company and
existing shareholders of Loomis will each own 50% of the to-be-named company.
Loomis is controlled by Wingate Partners, a private equity investment
partnership. The new company will provide a full range of armored
transportation, cash services and automated teller machine services
nationwide. The Company expects to receive approximately $95 million from the
transaction, which will be applied to reduce existing debt. The transaction is
subject to a number of conditions, but the Company expects that it will be
completed in 1996.
<PAGE>
-14-
As discussed more fully in Note 6 of the Notes to Consolidated Financial
Statements, various complaints seeking substantial dollar amounts have been
filed against the Company. The Company believes that it has established
adequate provisions for litigation liabilities in its financial statements in
accordance with generally accepted accounting principles. The Company
believes that none of these matters individually or in the aggregate will have
a material adverse effect on its financial position or future operating
results, although no assurance can be given with respect to the ultimate
outcome of any such proceeding.
<PAGE>
-15-
Part II. Other Information
Item 1. Legal Proceedings
-----------------
As previously reported in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995, Centaur Insurance Company ("Centaur"), the
Company's discontinued property and casualty insurance subsidiary, has been
operating under rehabilitation since September 1987. Rehabilitation is a
process supervised by the Illinois Director of Insurance to attempt to
compromise Centaur's liabilities at an aggregate level that is not in excess
of its assets. The foregoing has resulted in one pending lawsuit against the
Company for recovery of alleged damages incurred as a result of Centaur's
failure to satisfy its reinsurance obligations. The liability phase of such
lawsuit has begun and the Company intends to defend this lawsuit vigorously.
Item 2. Changes in Securities
---------------------
Inapplicable
Item 3. Defaults Upon Senior Securities
-------------------------------
Inapplicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On April 16, 1996, the Company held its annual meeting of
stockholders. At such meeting, Arthur F. Golden and Andrew
McNally IV were elected as directors to serve for a term expiring
in 1997 and Robert A. McCabe, Alexis P. Michas and Donald C.
Trauscht were elected as directors to serve for a term expiring
in 1999. Each of J. Joe Adorjan, James J. Burke, Jr., Albert J.
Fitzgibbons, III, Dale W. Lang, Jr. and H. Norman Schwarzkopf
continued to serve as directors following the meeting. At such
meeting, the following votes were cast in the election of
directors:
For Withheld
--- --------
A.F. Golden 17,628,578 1,080,729
A. McNally 17,631,658 1,077,649
R.A. McCabe 17,631,658 1,077,649
A.P. Michas 17,617,957 1,091,350
D.C. Trauscht 17,579,264 1,130,043
At such meeting, the proposal to amend the Company's 1993
Stock Incentive Plan was approved by the following votes:
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
14,581,374 1,381,901 57,501 2,688,531
At such meeting, the proposal to adopt the Company's
Performance Share Plan was approved by the following votes:
For Against Abstain Broker Non-Votes
--- ------- ------- ----------------
15,528,296 308,353 184,127 2,688,531
<PAGE>
-16-
At such meeting, the selection of Deloitte & Touche LLP as auditors
was approved by the following votes:
For Against Abstain
--- ------- -------
18,652,646 25,007 31,653
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
4.1 First Amendment to Credit Agreement and Consent, dated as
of March 14, 1996, among the Company, various lenders and
Bankers Trust Company, as Agent.
4.2 Fourth Amendment to Credit Agreement and Consent, dated
as of March 14, 1996, among the Company, various lenders,
the lead managers and co-agents named therein and Bankers
Trust Company, as Administrative Agent.
4.3 Amendment No. 8 to Credit Agreement and Consent, dated as
of March 14, 1996, among the Company, the banks party
thereto and The Long-Term Credit Bank of Japan, LTD., as
Agent.
27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
<PAGE>
-17-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Borg-Warner Security Corporation
--------------------------------
(Registrant)
By /s/ Timothy M. Wood
------------------------
(Signature)
Timothy M. Wood
Vice President, Finance
(Principal Financial and Accounting Officer)
Date: August 14, 1996
<PAGE>
EXHIBIT 4.1
BORG-WARNER SECURITY CORPORATION
FIRST AMENDMENT TO CREDIT AGREEMENT AND CONSENT
This FIRST AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this "AMENDMENT")
is dated as of March 14, 1996 and entered into by and among BORG-WARNER SECURITY
CORPORATION, a Delaware corporation ("COMPANY"), the financial institutions
listed on the signature pages hereof ("LENDERS"), NATIONSBANK, N.A., as
Documentation Agent ("DOCUMENTATION AGENT"), and BANKERS TRUST COMPANY, as Agent
for Lenders (in such capacity, "AGENT"), and, for purposes of Section 5 hereof,
the Credit Support Parties (as defined in Section 5 hereof) listed on the
signature pages hereof, and is made with reference to that certain Credit
Agreement dated as of October 16, 1995 by and among Company, Lenders,
Documentation Agent and Agent (the "CREDIT AGREEMENT"). Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement by
(i) amending the mandatory prepayment provisions thereof, (ii) amending certain
of the financial covenants contained therein and (iii) making certain other
amendments as set forth below;
WHEREAS, Company has requested that Lenders consent to the terms and
conditions of the Alarm Services Contract Securitization Facility; and
WHEREAS, subject to the terms and conditions of this Amendment, Lenders
are willing to agree to such amendments and to consent to such terms and
conditions;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: DEFINITIONS.
------------------------------------
A. Subsection 1.1 of the Credit Agreement is hereby amended by adding
thereto the following definitions, which shall be inserted in proper
alphabetical order:
"'CALCULATION PERIOD' means the three month period commencing on each
March 26, June 26, September 26 and December 26 and concluding on
1
<PAGE>
the succeeding June 25, September 25, December 25 and March 25,
respectively; provided however, that the initial Calculation Period shall
commence on the date following the date of receipt by Company or any of its
Subsidiaries of the Initial Alarm Receivables Net Cash Proceeds and shall
conclude on the succeeding June 25, September 25, December 25 or March 25,
as the case may be.
'FIRST AMENDMENT' means that certain First Amendment to Credit
Agreement and Consent dated as of March 14, 1996 by and among Company,
Lenders, Documentation Agent and Agent.
'INITIAL ALARM RECEIVABLES NET CASH PROCEEDS' means the Net Cash
Proceeds received by Company or any of its Subsidiaries pursuant to the
Alarm Services Contract Securitization Facility on the date upon which the
Alarm Services Contract Securitization Facility becomes effective and the
initial purchase of receivables, contracts and/or leases is made thereunder.
'NET INCREMENTAL ALARM RECEIVABLES PROCEEDS' means, for any Calculation
Period, the sum of (i) the Purchase Amounts for Equipment Payment Rights
under Equipment Leases paid to Wells Fargo Alarm Services, Inc. ("Alarm") by
the purchaser thereof during such Calculation Period less (ii) any
Repurchase or Recourse Amounts paid by Alarm to the purchaser thereof during
such Calculation Period less (iii) payments received by such purchaser
during such Calculation Period with respect to all Equipment Payment Rights
sold to such purchaser since the date of commencement of the Alarm Services
Contract Securitization Facility, all as determined by reference to, and as
such capitalized terms are defined in, the Alarm Services Contract
Securitization Facility.
'PRO RATA BASIS' means, with respect to this Agreement, the percentage
which the Loan Exposure of all Lenders under this Agreement represents of
the sum of (i) the Loan Exposure of all Lenders under this Agreement plus
(ii) the commitments of all lenders under the Existing Revolving Credit
Agreement, and with respect to the Existing Revolving Credit Agreement, the
percentage which the commitments of all lenders under the Existing Revolving
Credit Agreement represents of the sum of (i) the Loan Exposure of all
Lenders under this Agreement plus (ii) the commitments of all lenders under
the Existing Revolving Credit Agreement."
B. Subsection 1.1 of the Credit Agreement is hereby further amended
by deleting clause (ii) of the definition of "Consolidated Excess Cash Flow" in
its entirety and by substituting the following therefor:
"(ii) to the extent such amounts have been included in the foregoing
clauses (x) and (y), amounts equal to the sum of (1) Net Cash Proceeds of
2
<PAGE>
Asset Sales applied to the prepayment of Loans pursuant to subsection
2.4B(ii)(a)(I) of this Agreement or to the prepayment of loans pursuant to
subsection 2.4A(ii)(a)(I) of the Existing Revolving Credit Agreement, (2)
Net Cash Proceeds of Asset Sales pursuant to the Alarm Services Contract
Securitization Facility whether or not applied to the prepayment of Loans
pursuant to subsection 2.4B(ii)(a)(II) of this Agreement or to the
prepayment of loans pursuant to subsection 2.4A(ii)(a)(II) of the Existing
Revolving Credit Agreement and (3) Net Reversion Amounts applied to the
prepayment of Loans pursuant to subsection 2.4B(ii)(b) of this Agreement or
to the prepayment of loans pursuant to subsection 2.4A(ii)(c) of the
Existing Revolving Credit Agreement."
1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND
-------------------------------------------------------------
LOANS.
- -----
A. MANDATORY PREPAYMENTS.
(1) Subsection 2.4B(ii)(a) of the Credit Agreement is hereby amended
by deleting it in its entirety and substituting the following therefor:
"(ii) Mandatory Prepayments.
---------------------
(a) (I) Prepayments from Asset Sales. No later than the second
Business Day following the date of receipt by Company or any of its
Subsidiaries of Cash Proceeds of any Asset Sale other than any Cash
Proceeds arising as a result of Asset Sales pursuant to the Alarm
Services Contract Securitization Facility, as to which subsection (II)
below applies, Company shall prepay the Loans in an amount equal to the
Net Cash Proceeds of such Asset Sale; provided however, that so long as
no Event of Default or Potential Event of Default shall have occurred
and be continuing, Company and its Subsidiaries shall not be required
to apply the Net Cash Proceeds of any Asset Sale to the mandatory
prepayment of the Loans pursuant to this subsection 2.4B(ii)(a)(I) to
the extent that (A) such Net Cash Proceeds have been or will be
reinvested in like assets or in other assets used in the business of
Company and its Consolidated Subsidiaries within six months of such
sale; provided that the aggregate amount of Net Cash Proceeds excluded
from application to the mandatory prepayment of the Loans pursuant to
this clause (A) does not exceed $5,000,000 in the aggregate, or (B)
such Net Cash Proceeds are less than $1,000,000 or are proceeds from
the sale of non-earning assets; provided that the aggregate amount of
Net Cash Proceeds excluded from application to the mandatory prepayment
of the Loans pursuant to this clause (B) does not exceed $5,000,000 in
the aggregate. Concurrently with any prepayment of the Loans pursuant
to this subsection 2.4B(ii)(a)(I),
3
<PAGE>
Company shall deliver to Agent an Officers' Certificate demonstrating
the derivation of the Net Cash Proceeds of the correlative Asset Sale
from the gross sales price thereof. Any such mandatory prepayments
shall be applied as specified in subsection 2.4B(iii)."
(II) Prepayments from Asset Sales pursuant to the Alarm
Services Contract Securitization Facility. No later than the second
Business Day following the date of receipt by Company or any of its
Subsidiaries of the Initial Alarm Receivables Net Cash Proceeds,
Company shall prepay the Loans and the loans outstanding under the
Existing Revolving Credit Agreement on a Pro Rata Basis in an aggregate
amount equal to such Net Cash Proceeds; and no later than each April
20, July 20, October 20 and January 20 thereafter, Company shall
prepay the Loans and the commitments under the Existing Revolving
Credit Agreement shall be permanently reduced on a Pro Rata Basis in an
aggregate amount equal to the Net Incremental Alarm Receivables
Proceeds, if such amount is a positive number, for the Calculation
Period ended as of the preceding March 25, June 25, September 25 and
December 25, as the case may be. Concurrently with any prepayment of
the Loans pursuant to this subsection 2.4B(ii)(a)(II), Company shall
deliver to Agent a Notice of Prepayment and Commitment Reduction
substantially in the form of Exhibit XIII annexed hereto. Any such
mandatory prepayments shall be applied as specified in subsection
2.4B(iii)."
(2) Subsection 2.4B(ii)(f) of the Credit Agreement is hereby amended
by (i) deleting the reference to "2.5" contained therein and substituting "2.45"
therefor and (ii) deleting the reference to "$160,000,000" contained therein and
substituting "$149,000,000" therefor.
1.3 AMENDMENTS TO SECTION 6: COMPANY'S NEGATIVE COVENANTS.
------------------------------------------------------
A. CONTINGENT OBLIGATIONS. Subsection 6.4(xi) of the Credit
Agreement is hereby amended by adding at the end thereof the following:
"Contingent Obligations of Company's Consolidated Subsidiaries
with respect to the Alarm Services Contract Securitization Facility;
and"
B. INTEREST COVERAGE RATIO. Subsection 6.6A of the Credit Agreement
is hereby amended by deleting the table set forth therein in its entirety and
substituting the following therefor:
4
<PAGE>
<TABLE>
<CAPTION>
MINIMUM
"FISCAL QUARTER ENDED INTEREST COVERAGE RATIO
--------------------- -----------------------
<S> <C>
September 30, 1995 2.25:1.00
December 31, 1995 2.20:1.00
March 31, 1996 2.15:1.00
June 30, 1996 2.15:1.00
September 30, 1996 2.15:1.00
December 31, 1996 2.15:1.00
March 31, 1997 2.20:1.00
June 30, 1997 2.25:1.00
September 30, 1997 2.30:1.00
December 31, 1997 2.35:1.00
March 31, 1998 2.40:1.00
June 30, 1998 2.50:1.00
September 30, 1998 2.55:1.00
December 31, 1998 2.65:1.00"
C. LEVERAGE RATIO. Subsection 6.6B of the Credit Agreement is hereby
amended by deleting the table set forth therein in its entirety and substituting
the following therefor:
"FISCAL QUARTER ENDED MAXIMUM LEVERAGE RATIO
--------------------- ----------------------
September 30, 1995 3.75:1.00
December 31, 1995 4.20:1.00
March 31, 1996 4.05:1.00
June 30, 1996 3.85:1.00
September 30, 1996 3.75:1.00
December 31, 1996 3.60:1.00
March 31, 1997 3.45:1.00
June 30, 1997 3.30:1.00
September 30, 1997 3.15:1.00
December 31, 1997 3.05:1.00
March 31, 1998 2.90:1.00
June 30, 1998 2.75:1.00
September 30, 1998 2.65:1.00
December 31, 1998 2.45:1.00"
</TABLE>
D. CONSOLIDATED EBITDA. Subsection 6.6D of the Credit Agreement is
hereby amended by deleting the table set forth therein in its entirety and
substituting the following therefor:
5
<PAGE>
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED
"FISCAL QUARTER ENDED EBITDA
--------------------- --------------------
<S> <C>
September 30, 1995 125,000,000
December 31, 1995 125,000,000
March 31, 1996 126,500,000
June 30, 1996 128,000,000
September 30, 1996 128,000,000
December 31, 1996 129,700,000
March 31, 1997 133,000,000
June 30, 1997 135,300,000
September 30, 1997 137,600,000
December 31, 1997 138,900,000
March 31, 1998 139,300,000
June 30, 1998 142,700,000
September 30, 1998 144,000,000
December 31, 1998 147,400,000"
</TABLE>
E. RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND
ACQUISITIONS. Subsection 6.7(iii) of the Credit Agreement is hereby amended by
deleting clause (a) contained in the first proviso thereof in its entirety and
substituting the following therefor: "(a) (1) such Asset Sale is pursuant to the
Alarm Services Contract Securitization Facility or (2) such Asset Sale is made
for the fair market value of such assets and for at least eighty-five percent
(85%) cash, and"
1.4 AMENDMENTS TO SECTION 7: EVENTS OF DEFAULT.
-------------------------------------------
A. RECEIVABLES FACILITIES. Subsection 7.14 of the Credit Agreement
shall be amended by (1) deleting the word "or" at the end of clause (iv) thereof
and (2) by adding a new clause (vi) at the end thereof as follows:
"(vi) any condition or event shall occur which constitutes a Lessee
Notice Event (as defined in the Alarm Services Contract Securitization
Facility) under clause (iv) of Section 20.1 of the Alarm Services Contract
Securitization Facility involving an amount in excess of $2,500,000; or any
condition or event shall occur which constitutes an Event of Seller Default
involving an amount in excess of $2,500,000 (as defined in the Security
Agreement executed in connection with the Alarm Services Contract
Securitization Facility)."
1.5 AMENDMENT OF EXHIBITS.
---------------------
A. EXHIBIT IV: FORM OF COMPLIANCE CERTIFICATE. Exhibit IV to the
Credit Agreement is hereby amended by:
6
<PAGE>
(1) deleting each reference to "Attachment No. 1" contained therein and
substituting "Attachments Nos. 1 and 2" therefor; and
(2) adding thereto a new Attachment No. 2 in the form of Annex A to
this Amendment.
1.6 ADDITION OF EXHIBITS.
--------------------
A. EXHIBIT XIII: FORM OF NOTICE OF COMMITMENT REDUCTION AND
PREPAYMENT. The Credit Agreement is hereby amended by adding thereto a new
Exhibit XIII in the form of Annex B to this Amendment.
SECTION 2. CONSENT
A. ALARM SERVICES CONTRACT SECURITIZATION FACILITY. Each Lender
executing this Amendment hereby consents to the terms and conditions of the
Alarm Services Contract Securitization Facility substantially in the form
annexed hereto as Annex C.
B. AMENDMENT OF L/C AGREEMENT. Each Lender executing this Amendment
hereby consents to the amendment of the L/C Agreement substantially in the form
annexed hereto as Annex D.
C. AMENDMENT OF EXISTING REVOLVING CREDIT FACILITY. Each Lender
executing this Amendment hereby consents to the amendment of the Existing
Revolving Credit Agreement substantially in the form annexed hereto as Annex E.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Section 1 and Section 2 of this Amendment shall become effective only
upon the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FIRST AMENDMENT
EFFECTIVE DATE"):
A. COMPANY DOCUMENTS. On or before the First Amendment Effective
Date, Company shall deliver to Lenders (or to Agent for Lenders with sufficient
originally executed copies, where appropriate, for each Lender) the following,
each, unless otherwise noted, dated the First Amendment Effective Date:
(i) Signature and incumbency certificates of its officers executing
this Amendment; and
7
<PAGE>
(ii) Copies of this Amendment, executed by Company and each of the
Credit Support Parties.
B. REQUISITE LENDER EXECUTION. On or before the First Amendment
Effective Date, Requisite Lenders shall have delivered to Agent originally
executed copies of this Amendment; provided however, that unless Lenders having
or holding 90% of the sum of the aggregate Loan Exposure of all Lenders shall
have delivered to Agent originally executed copies of this Amendment, Section
1.2A(2) of this Amendment shall not become effective.
C. EXISTING L/C AGREEMENT. On or before the First Amendment
Effective Date, corresponding consents and amendments shall have been obtained
or made with respect to the Existing L/C Agreement. Such amendment shall be
satisfactory in form and substance to Agent and Requisite Lenders.
D. EXISTING REVOLVING CREDIT AGREEMENT. On or before the First
Amendment Effective Date, corresponding consents and amendments shall have been
obtained or made with respect to the Existing Revolving Credit Agreement. Such
amendment shall be satisfactory in form and substance to Agent and Requisite
Lenders.
E. COMPLETION OF PROCEEDINGS. On or before the First Amendment
Effective Date, all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents
incidental thereto not previously found acceptable by Agent, acting on behalf of
Lenders, and its counsel shall be satisfactory in form and substance to Agent
and such counsel, and Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Agent may
reasonably request.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. ACCOUNTING METHOD. The materials provided to Agent and Lenders in
connection with this Amendment were prepared using accounting methods consistent
with the accounting methods used to prepare Company's financial statements for
its fiscal year ended December 31, 1995.
8
<PAGE>
C. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of Company.
D. NO CONFLICT. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Company or any of its Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Collateral Agent on behalf of Lenders), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
E. GOVERNMENTAL CONSENTS. The execution and delivery by Company of
this Amendment and the performance by Company of the Amended Agreement do not
and will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other governmental
authority or regulatory body.
F. BINDING OBLIGATION. This Amendment and the Amended Agreement have
been duly executed and delivered by Company and are the legally valid and
binding obligations of Company, enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
G. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 4 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
H. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
9
<PAGE>
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Pledge Agreement, as amended through
the First Amendment Effective Date, pursuant to which Company has pledged
certain Collateral to Collateral Agent to secure the Obligations. Each of the
Borg-Warner Pledged Subsidiaries is a party to the Borg-Warner Subsidiary Pledge
Agreement, as amended through the First Amendment Effective Date, pursuant to
which each such Borg-Warner Pledged Subsidiary has pledged certain Collateral to
Collateral Agent to secure the Obligations. Each of the Borg-Warner Guarantor
Subsidiaries is a party to the Borg-Warner Subsidiary Guaranty, as amended
through the First Amendment Effective Date, pursuant to which each such Borg-
Warner Guarantor Subsidiary has guarantied the Obligations. Company, Borg-
Warner Pledged Subsidiaries and Borg-Warner Guarantor Subsidiaries are
collectively referred to herein as the "CREDIT SUPPORT PARTIES," and the Company
Pledge Agreement, the Borg-Warner Subsidiary Pledge Agreement and Borg-Warner
Subsidiary Guaranty are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS."
Each Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Amendment and consents to
the amendment of the Credit Agreement effected pursuant to this Amendment. Each
Credit Support Party hereby confirms that each Credit Support Document to which
it is a party or otherwise bound and all Collateral encumbered thereby will
continue to guaranty or secure, as the case may be, to the fullest extent
possible the payment and performance of all "Obligations," "Guarantied
Obligations" and "Secured Obligations," as the case may be (in each case as such
terms are defined in the applicable Credit Support Document), including without
limitation the payment and performance of all such "Obligations," "Guarantied
Obligations" or "Secured Obligations," as the case may be, in respect of the
Obligations of Company now or hereafter existing under or in respect of the
Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the First Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
10
<PAGE>
Each Credit Support Party (other than Company) acknowledges and agrees
that (i) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (ii) nothing in the Credit
Agreement, this Amendment or any other Loan Document shall be deemed to require
the consent of such Credit Support Party to any future amendments to the Credit
Agreement.
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(1) On and after the First Amendment Effective Date, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each reference
in the other Loan Documents to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement shall
mean and be a reference to the Amended Agreement.
(2) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.
(3) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of Agent
or any Lender under, the Credit Agreement or any of the other Loan
Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees and
expenses as described in subsection 9.2 of the Credit Agreement incurred by
Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Company.
C. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
11
<PAGE>
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment (other than the provisions of Section 1 and
Section 2 hereof, the effectiveness of which is governed by Section 3 hereof)
shall become effective upon the execution of a counterpart hereof by Company,
Requisite Lenders and each of the Credit Support Parties and receipt by Company
and Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
[Remainder of page intentionally left blank]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORG-WARNER SECURITY CORPORATION
By:
----------------------------------
Title:
--------------------------------
WELLS FARGO ALARM SERVICES, INC.
(for purposes of Section 5 only) as a
Credit Support Party
By:
----------------------------------
Title:
--------------------------------
WELLS FARGO ARMORED SERVICE
CORPORATION (for purposes of Section 5
only) as a Credit Support Party
By:
----------------------------------
Title:
--------------------------------
BW-CANADIAN GUARD CORPORATION
(for purposes of Section 5 only) as a
Credit Support Party
By:
----------------------------------
Title:
--------------------------------
S-1
<PAGE>
BORG-WARNER PROTECTIVE
SERVICES CORPORATION (for purposes
of Section 5 only) as a Credit Support
Party
By:
-----------------------------------
Title:
--------------------------------
PONY EXPRESS COURIER CORP. (for
purposes of Section 5 only) as a Credit
Support Party
By:
-----------------------------------
Title:
--------------------------------
S-2
<PAGE>
BANKERS TRUST COMPANY,
INDIVIDUALLY AND AS AGENT
By:
-------------------------------
Title:
----------------------------
S-3
<PAGE>
NATIONSBANK, N.A.,
INDIVIDUALLY AND AS DOCUMENTATION AGENT
By:
------------------------------------
Title:
---------------------------------
S-4
<PAGE>
CIBC INC.
By:
------------------------------------
Title:
---------------------------------
S-5
<PAGE>
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By:
------------------------------------
Title:
---------------------------------
S-6
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By:
------------------------------------
Title:
---------------------------------
S-7
<PAGE>
CAISSE NATIONALE DE CREDIT AGRICOLE
By:
------------------------------------
Title:
---------------------------------
S-8
<PAGE>
THE FUJI BANK, LIMITED
By:
------------------------------------
Title:
---------------------------------
S-9
<PAGE>
BANK OF HAWAII
By:
------------------------------------
Title:
---------------------------------
S-10
<PAGE>
PRIME INCOME TRUST
By:
------------------------------------
Title:
---------------------------------
S-11
<PAGE>
EXHIBIT 4.2
BORG-WARNER SECURITY CORPORATION
FOURTH AMENDMENT TO CREDIT AGREEMENT AND CONSENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT AND CONSENT (this
"AMENDMENT") is dated as of March 14, 1996 and entered into by and among BORG-
WARNER SECURITY CORPORATION, a Delaware corporation ("COMPANY"), the financial
institutions listed on the signature pages hereof ("LENDERS"), BANK OF AMERICA
ILLINOIS, THE BANK OF NEW YORK and THE BANK OF NOVA SCOTIA, as Lead Managers,
BANKERS TRUST COMPANY, CIBC INC. and NATIONSBANK, N.A., as Co-Agents, and
BANKERS TRUST COMPANY, as Administrative Agent for Lenders (in such capacity,
"ADMINISTRATIVE AGENT"), and, for purposes of Section 5 hereof, the Credit
Support Parties (as defined in Section 5 hereof) listed on the signature pages
hereof, and is made with reference to that certain Credit Agreement dated as of
January 27, 1993 by and among Company, Lenders, Lead Managers, Co-Agent and
Administrative Agent, as amended to the date hereof (as so amended, the "CREDIT
AGREEMENT"). Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement by
(i) amending the mandatory prepayment provisions thereof, (ii) amending certain
of the financial covenants contained therein and (iii) making certain other
amendments as set forth below;
WHEREAS, Company has requested that Lenders consent to the terms and
conditions of the Alarm Services Contract Securitization Facility; and
WHEREAS, subject to the terms and conditions of this Amendment, Lenders
are willing to agree to such amendments and to consent to such terms and
conditions;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: DEFINITIONS.
------------------------------------
A. Subsection 1.1 of the Credit Agreement is hereby amended by adding
thereto the following definitions, which shall be inserted in proper
alphabetical order:
1
<PAGE>
"'CALCULATION PERIOD' means the three month period commencing on each
March 26, June 26, September 26 and December 26 and concluding on the
succeeding June 25, September 25, December 25 and March 25, respectively;
provided however, that the initial Calculation Period shall commence on the
date following the date of receipt by Company or any of its Subsidiaries of
the Initial Alarm Receivables Net Cash Proceeds and shall conclude on the
succeeding June 25, September 25, December 25 or March 25, as the case may
be.
'FOURTH AMENDMENT' means that certain Fourth Amendment to Credit
Agreement and Consent dated as of March 14, 1996 by and among Company,
Lenders, Lead Managers, Co-Agent and Administrative Agent.
'INITIAL ALARM RECEIVABLES NET CASH PROCEEDS' means the Net Cash
Proceeds received by Company or any of its Subsidiaries pursuant to the
Alarm Services Contract Securitization Facility on the date upon which the
Alarm Services Contract Securitization Facility becomes effective and the
initial purchase of receivables, contracts and/or leases is made thereunder.
'NET INCREMENTAL ALARM RECEIVABLES PROCEEDS' means, for any Calculation
Period, the sum of (i) the Purchase Amounts for Equipment Payment Rights
under Equipment Leases paid to Wells Fargo Alarm Services, Inc. ("Alarm") by
the purchaser thereof during such Calculation Period less (ii) any
Repurchase or Recourse Amounts paid by Alarm to the purchaser thereof during
such Calculation Period less (iii) payments received by such purchaser
during such Calculation Period with respect to all Equipment Payment Rights
sold to such purchaser since the date of commencement of the Alarm Services
Contract Securitization Facility, all as determined by reference to, and as
such capitalized terms are defined in, the Alarm Services Contract
Securitization Facility.
'PRO RATA BASIS' means, with respect to the Term Loan Facility, the
percentage which the loan exposure of all lenders under the Term Loan
Facility represents of the sum of (i) the loan exposure of all lenders under
the Term Loan Facility plus (ii) the Commitments of all Lenders under this
Agreement, and with respect to this Agreement, the percentage which the
Commitments of all Lenders under this Agreement represents of the sum of (i)
the loan exposure of all lenders under the Term Loan Facility plus (ii) the
Commitments of all Lenders under this Agreement."
B. Subsection 1.1 of the Credit Agreement is hereby further amended
by deleting clause (iii) of the definition of "Consolidated Excess Cash Flow" in
its entirety and by substituting the following therefor:
2
<PAGE>
"(iii) to the extent such amounts have been included in the foregoing
clauses (x) and (y), amounts equal to the sum of (1) Net Cash Proceeds of
Asset Sales applied to the prepayment of loans pursuant to subsection
2.4B(ii)(a)(I) of the Term Loan Facility or to the prepayment of Loans
pursuant to subsection 2.4A(ii)(a)(I) of this Agreement, (2) Net Cash
Proceeds of Asset Sales pursuant to the Alarm Services Contract
Securitization Facility whether or not applied to the prepayment of loans
pursuant to subsection 2.4B(ii)(a)(II) of the Term Loan Facility or to the
prepayment of Loans pursuant to subsection 2.4A(ii)(a)(II) of this Agreement
and (3) Net Reversion Amounts applied to the prepayment of loans pursuant to
subsection 2.4B(ii)(b) of the Term Loan Facility or to the prepayment of
Loans pursuant to subsection 2.4A(ii)(c) of this Agreement."
1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND
-------------------------------------------------------------
LOANS.
- -----
A. MANDATORY PREPAYMENTS.
(1) Subsection 2.4A(ii)(a) of the Credit Agreement is hereby amended by
deleting it in its entirety and substituting the following therefor:
"(ii) Mandatory Prepayments.
---------------------
(a) (I) Prepayments from Asset Sales. Subject to subsection
(II) below, after the payment in full of the Term Loan Facility or in
the event that any prepayment otherwise payable to the lenders under
the Term Loan Facility is waived by the lenders under the Term Loan
Facility, no later than the second Business Day following the date of
receipt by Company or any of its Subsidiaries of the cash proceeds of
any Asset Sale other than any Cash Proceeds arising as a result of
Asset Sales pursuant to the Alarm Services Contract Securitization
Facility, as to which subsection (II) below applies, Company shall
prepay the Loans in an amount equal to the Net Cash Proceeds of such
Asset Sale; provided however, that so long as no Event of Default or
Potential Event of Default shall have occurred and be continuing,
Company and its Subsidiaries shall not be required to apply the Net
Cash Proceeds of any Asset Sale to the mandatory prepayment of the
Loans pursuant to this subsection 2.4A(ii)(a)(I) to the extent that (A)
such Net Cash Proceeds have been or will be reinvested in like assets
or in other assets used in the business of Company and its Consolidated
Subsidiaries within six months of such sale; provided that the
aggregate amount of Net Cash Proceeds excluded from application to the
mandatory prepayment of the Loans pursuant to this clause (A) does not
exceed $5,000,000 in the aggregate, or (B) such Net Cash Proceeds are
less than $1,000,000 or are proceeds from the sale of non-
3
<PAGE>
earning assets; provided that the aggregate amount of Net Cash Proceeds
excluded from application to the mandatory prepayment of the Loans
pursuant to this clause (B) does not exceed $5,000,000 in the
aggregate. Concurrently with any prepayment of the Loans pursuant to
this subsection 2.4A(ii)(a)(I), Company shall deliver to Administrative
Agent an Officers' Certificate demonstrating the derivation of the Net
Cash Proceeds of the correlative Asset Sale from the gross sales price
thereof. Any such mandatory prepayments shall be applied as specified
in subsection 2.4A(iii).
(II) Prepayments from Asset Sales pursuant to the Alarm
Services Contract Securitization Facility. (x) No later than the
second Business Day following the date of receipt by Company or any of
its Subsidiaries of the Initial Alarm Receivables Net Cash Proceeds,
Company shall prepay the Loans and the loans outstanding under the Term
Loan Facility on a Pro Rata Basis in an aggregate amount equal to such
Net Cash Proceeds; and (y) no later than the second Business Day
following the date of receipt by Company or any of its Subsidiaries of
Net Cash Proceeds arising as a result of subsequent Asset Sales
pursuant to the Alarm Services Contract Securitization Facility,
Company shall prepay the Loans in an amount equal to the Net Cash
Proceeds of such Asset Sales. Concurrently with any prepayment of the
Loans pursuant to the foregoing clause (x) and concurrently with any
Commitment reduction pursuant to subsection 2.4G(i)(b), Company shall
deliver to Administrative Agent a Notice of Prepayment and Commitment
Reduction substantially in the form of Exhibit XVI annexed hereto. Any
such mandatory prepayments shall be applied as specified in subsection
2.4A(iii)."
(2) Subsection 2.4A(ii)(d) of the Credit Agreement is hereby amended by
deleting the reference to "2.4G(ii) and (iii)" contained therein and
substituting "2.4G(i)(b), (ii) and (iii)" therefor.
(3) Subsection 2.4G of the Credit Agreement is hereby amended by
deleting clause (i) thereof in its entirety and substituting the following
therefor:
"(i)(a) on the date any prepayment of Loans is made or is required to
be made pursuant to subsections 2.4A(ii)(a)(I), 2.4A(ii)(a)(II)(x) and
2.4A(ii)(c) by an amount equal to the amount of such prepayment, and (b) on
each April 20, July 20, October 20 and January 20 by an amount equal to the
Lenders' Pro Rata Basis of the Net Incremental Alarm Receivables Proceeds,
if such amount is a positive number, for the Calculation Period ended as of
the preceding March 25, June 25, September 25 and December 25, as the case
may be."
4
<PAGE>
1.3 AMENDMENTS TO SECTION 6: COMPANY'S NEGATIVE COVENANTS.
------------------------------------------------------
A. CONTINGENT OBLIGATIONS. Subsection 6.4(xii) of the Credit
Agreement is hereby amended by deleting the period at the end thereof and
substituting the following therefor:
"; and Contingent Obligations of Company's Consolidated
Subsidiaries with respect to the Alarm Services Contract Securitization
Facility."
B. INTEREST COVERAGE RATIO. Subsection 6.6A of the Credit Agreement
is hereby amended by deleting the table set forth therein in its entirety and
substituting the following therefor:
<TABLE>
<CAPTION>
MINIMUM
"FISCAL QUARTER ENDED INTEREST COVERAGE RATIO
--------------------- -----------------------
<S> <C>
September 30, 1995 2.25:1.00
December 31, 1995 2.20:1.00
March 31, 1996 2.15:1.00
June 30, 1996 2.15:1.00
September 30, 1996 2.15:1.00
December 31, 1996 2.15:1.00
March 31, 1997 2.20:1.00
June 30, 1997 2.25:1.00
September 30, 1997 2.30:1.00
December 31, 1997 2.35:1.00
March 31, 1998 2.40:1.00
June 30, 1998 2.50:1.00
September 30, 1998 2.55:1.00
December 31, 1998 2.65:1.00
March 31, 1999 2.70:1.00
June 30, 1999 2.70:1.00"
</TABLE>
C. LEVERAGE RATIO. Subsection 6.6B of the Credit Agreement is
hereby amended by deleting the table set forth therein in its entirety and
substituting the following therefor:
5
<PAGE>
"FISCAL QUARTER ENDED MAXIMUM LEVERAGE RATIO
--------------------- ----------------------
September 30, 1995 3.75:1.00
December 31, 1995 4.20:1.00
March 31, 1996 4.05:1.00
June 30, 1996 3.85:1.00
September 30, 1996 3.75:1.00
December 31, 1996 3.60:1.00
March 31, 1997 3.45:1.00
June 30, 1997 3.30:1.00
September 30, 1997 3.15:1.00
December 31, 1997 3.05:1.00
March 31, 1998 2.90:1.00
June 30, 1998 2.75:1.00
September 30, 1998 2.65:1.00
December 31, 1998 2.45:1.00
March 31, 1999 2.35:1.00
June 30, 1999 2.25:1.00"
D. CONSOLIDATED EBITDA. Subsection 6.6D of the Credit Agreement is
hereby amended by deleting the table set forth therein in its entirety and
substituting the following therefor:
"FISCAL QUARTER ENDED MINIMUM CONSOLIDATED EBITDA
--------------------- ---------------------------
September 30, 1995 $125,000,000
December 31, 1995 125,000,000
March 31, 1996 126,500,000
June 30, 1996 128,000,000
September 30, 1996 128,000,000
December 31, 1996 129,700,000
March 31, 1997 133,000,000
June 30, 1997 135,300,000
September 30, 1997 137,600,000
December 31, 1997 138,900,000
March 31, 1998 139,300,000
June 30, 1998 142,700,000
September 30, 1998 144,000,000
December 31, 1998 147,400,000
March 31, 1999 152,000,000
June 30, 1999 154,000,000"
E. RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS.
Subsection 6.7(v) of the Credit Agreement is hereby amended by
6
<PAGE>
deleting clause (a) contained in the first proviso thereof in its entirety and
substituting the following therefor: "(a) (1) such Asset Sale is pursuant to the
Alarm Services Contract Securitization Facility or (2) such Asset Sale is made
for the fair market value of such assets and for at least eighty-five percent
(85%) cash, and"
1.4 AMENDMENTS TO SECTION 7: EVENTS OF DEFAULT.
-------------------------------------------
A. RECEIVABLES FACILITIES. Concurrently with the repayment in full
of the Senior Notes, subsection 7.14 of the Credit Agreement shall be amended by
(1) deleting the word "or" at the end of clause (iv) thereof and (2) by adding a
new clause (vi) at the end thereof as follows:
"(vi) any condition or event shall occur which constitutes a Lessee
Notice Event (as defined in the Alarm Services Contract Securitization
Facility) under clause (iv) of Section 20.1 of the Alarm Services Contract
Securitization Facility involving an amount in excess of $2,500,000; or any
condition or event shall occur which constitutes an Event of Seller Default
involving an amount in excess of $2,500,000 (as defined in the Security
Agreement executed in connection with the Alarm Services Contract
Securitization Facility)."
1.5 AMENDMENT OF EXHIBITS.
---------------------
A. EXHIBIT IV: FORM OF COMPLIANCE CERTIFICATE. Exhibit IV to the
Credit Agreement is hereby amended by:
(1) deleting each reference to "Attachment No. 1" contained therein
and substituting "Attachments Nos. 1 and 2" therefor; and
(2) adding thereto a new Attachment No. 2 in the form of Annex A to
this Amendment.
1.6 ADDITION OF EXHIBITS.
--------------------
A. EXHIBIT XVI: FORM OF NOTICE OF COMMITMENT REDUCTION AND
PREPAYMENT. The Credit Agreement is hereby amended by adding thereto a new
Exhibit XIII in the form of Annex B to this Amendment.
SECTION 2. CONSENT
A. ALARM SERVICES CONTRACT SECURITIZATION FACILITY. Each Lender
executing this Amendment hereby consents to the terms and conditions of the
Alarm Services Contract Securitization Facility substantially in the form
annexed hereto as Annex C.
7
<PAGE>
B. AMENDMENT OF L/C AGREEMENT. Each Lender executing this Amendment
hereby consents to the amendment of the L/C Agreement substantially in the form
annexed hereto as Annex D.
C. AMENDMENT OF TERM LOAN FACILITY. Each Lender executing this
Amendment hereby consents to the amendment of the Term Loan Facility
substantially in the form annexed hereto as Annex E.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Section 1 and Section 2 of this Amendment shall become effective only
upon the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FOURTH
AMENDMENT EFFECTIVE DATE"):
A. COMPANY DOCUMENTS. On or before the Fourth Amendment Effective
Date, Company shall deliver to Lenders (or to Administrative Agent for Lenders
with sufficient originally executed copies, where appropriate, for each Lender)
the following, each, unless otherwise noted, dated the Fourth Amendment
Effective Date:
(i) Signature and incumbency certificates of its officers executing
this Amendment; and
(ii) Copies of this Amendment, executed by Company and each of the
Credit Support Parties.
B. REQUISITE LENDER EXECUTION. On or before the Fourth Amendment
Effective Date, Requisite Lenders shall have delivered to Administrative Agent
originally executed copies of this Amendment.
C. EXISTING L/C AGREEMENT. On or before the Fourth Amendment
Effective Date, corresponding consents and amendments shall have been obtained
or made with respect to the Existing L/C Agreement. Such amendment shall be
satisfactory in form and substance to Administrative Agent and Requisite
Lenders.
D. TERM LOAN FACILITY. On or before the Fourth Amendment Effective
Date, corresponding consents and amendments shall have been obtained or made
with respect to the Term Loan Facility. Such amendment shall be satisfactory in
form and substance to Administrative Agent and Requisite Lenders.
E. COMPLETION OF PROCEEDINGS. On or before the Fourth Amendment
Effective Date, all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents
incidental
8
<PAGE>
thereto not previously found acceptable by Administrative Agent, acting on
behalf of Lenders, and its counsel shall be satisfactory in form and substance
to Administrative Agent and such counsel, and Administrative Agent and such
counsel shall have received all such counterpart originals or certified copies
of such documents as Administrative Agent may reasonably request.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT").
B. ACCOUNTING METHOD. The materials provided to Administrative
Agent and Lenders in connection with this Amendment were prepared using
accounting methods consistent with the accounting methods used to prepare
Company's financial statements for its fiscal year ended December 31, 1995.
C. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of Company.
D. NO CONFLICT. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Company or any of its Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries (other than any Liens created under
any of the Loan Documents in favor of Collateral Agent on behalf of Lenders), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of Company or any of its Subsidiaries.
E. GOVERNMENTAL CONSENTS. The execution and delivery by Company of
this Amendment and the performance by Company of the Amended Agreement do not
and will not require any registration with, consent or approval of, or notice
to, or
9
<PAGE>
other action to, with or by, any federal, state or other governmental authority
or regulatory body.
F. BINDING OBLIGATION. This Amendment and the Amended Agreement
have been duly executed and delivered by Company and are the legally valid and
binding obligations of Company, enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
G. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 4 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Fourth Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
H. ABSENCE OF DEFAULT. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Pledge Agreement, as amended through
the Fourth Amendment Effective Date, pursuant to which Company has pledged
certain Collateral to Collateral Agent to secure the Obligations. Each of the
Borg-Warner Pledged Subsidiaries is a party to the Borg-Warner Subsidiary Pledge
Agreement, as amended through the Fourth Amendment Effective Date, pursuant to
which each such Borg-Warner Pledged Subsidiary has pledged certain Collateral to
Collateral Agent to secure the Obligations. Each of the Borg-Warner Guarantor
Subsidiaries is a party to the Borg-Warner Subsidiary Guaranty, as amended
through the Fourth Amendment Effective Date, pursuant to which each such Borg-
Warner Guarantor Subsidiary has guarantied the Obligations. Company, Borg-Warner
Pledged Subsidiaries and Borg-Warner Guarantor Subsidiaries are collectively
referred to herein as the "CREDIT SUPPORT PARTIES," and the Company Pledge
Agreement, the Borg-Warner Subsidiary Pledge Agreement and Borg-Warner
Subsidiary Guaranty are collectively referred to herein as the "CREDIT SUPPORT
DOCUMENTS."
Each Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Amendment and consents to
the amendment of the Credit Agreement effected pursuant to this Amendment. Each
10
<PAGE>
Credit Support Party hereby confirms that each Credit Support Document to which
it is a party or otherwise bound and all Collateral encumbered thereby will
continue to guaranty or secure, as the case may be, to the fullest extent
possible the payment and performance of all "Obligations," "Guarantied
Obligations" and "Secured Obligations," as the case may be (in each case as such
terms are defined in the applicable Credit Support Document), including without
limitation the payment and performance of all such "Obligations," "Guarantied
Obligations" or "Secured Obligations," as the case may be, in respect of the
Obligations of Company now or hereafter existing under or in respect of the
Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the Fourth Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party (other than Company) acknowledges and agrees
that (i) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (ii) nothing in the Credit
Agreement, this Amendment or any other Loan Document shall be deemed to require
the consent of such Credit Support Party to any future amendments to the Credit
Agreement.
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(1) On and after the Fourth Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement",
"thereunder", "thereof" or words of like import referring to the Credit
Agreement shall mean and be a reference to the Amended Agreement.
11
<PAGE>
(2) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(3) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees and
expenses as described in subsection 9.3 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment (other than the provisions of Section 1 and
Section 2 hereof, the effectiveness of which is governed by Section 3 hereof)
shall become effective upon the execution of a counterpart hereof by Company,
Requisite Lenders and each of the Credit Support Parties and receipt by Company
and Administrative Agent of written or telephonic notification of such execution
and authorization of delivery thereof.
[Remainder of page intentionally left blank]
12
<PAGE>
EXHIBIT 4.3
AMENDMENT NO. 8
This AMENDMENT NO. 8 (this "Amendment") is dated as of March 14, 1996 and
entered into by and among BORG-WARNER SECURITY CORPORATION, a Delaware
corporation (the "Company"), the financial institutions listed on the signature
pages hereof (the "Banks") and THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as
Agent for the Banks (the "Agent") and, for purposes of Section 5 hereof, the
Credit Support Parties (as defined in Section 5 hereof) listed on the signature
pages hereof, and is made with reference to that certain Credit Agreement dated
as of January 27, 1993, as amended as of November 2, 1993, January 24, 1994,
June 30, 1994, December 14, 1994, March 15, 1995, October 16, 1995 and December
18, 1995 (as so amended, the "Credit Agreement"), by and among the Company, the
Banks and the Agent. Capitalized terms used herein without definition shall
have the same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, the Company and the Banks wish to amend the Credit Agreement by
(i) amending certain of the financial covenants contained therein and (ii)
making certain other amendments as set forth below; and
WHEREAS, the Company has requested that the Banks consent to the terms and
conditions of the Alarm Services Contract Securitization Facility; and
WHEREAS, subject to the terms and conditions of this Amendment, the Banks
are willing to agree to such amendments and to consent to such terms and
conditions;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS
1.1 Amendments to Section 6: Company's Negative Covenants.
(a) Contingent Obligations. Section 6.4 (xii) of the Credit Agreement is
hereby amended by deleting the period at the end thereof and substituting the
following therefor:
<PAGE>
"; and Contingent Obligations of the Company's Consolidated
Subsidiaries with respect to the Alarm Services Contract
Securitization Facility."
(b) Interest Coverage Ratio. Section 6.6.a of the Credit Agreement is
hereby amended by deleting the table set forth therein in its entirety and
substituting the following therefor:
<TABLE>
<CAPTION>
Minimum
"Fiscal Quarter Ended Interest Coverage Ratio
-------------------- -----------------------
<S> <C>
September 30, 1995 2.25:1.00
December 31, 1995 2.20:1.00
March 31, 1996 2.15:1.00
June 30, 1996 2.15:1.00
September 30, 1996 2.15:1.00
December 31, 1996 2.15:1.00
March 31, 1997 2.20:1.00
June 30, 1997 2.25:1.00
September 30, 1997 2.30:1.00
December 31, 1997 2.35:1.00
March 31, 1998 2.40:1.00
June 30, 1998 2.50:1.00
September 30, 1998 2.55:1.00
December 31, 1998 2.65:1.00"
</TABLE>
(c) Leverage Ratio. Section 6.6.B of the Credit Agreement is hereby amended
by deleting the table set forth therein in its entirety and substituting the
following therefor:
<TABLE>
<CAPTION>
"Fiscal Quarter Ended Maximum Leverage Ratio
--------------------- ----------------------
<S> <C>
September 30, 1995 3.75:1.00
December 31, 1995 4.20:1.00
March 31, 1996 4.05:1.00
June 30, 1996 3.85:1.00
September 30, 1996 3.75:1.00
December 31, 1996 3.60:1.00
March 31, 1997 3.45:1.00
June 30, 1997 3.30:1.00
September 30, 1997 3.15:1.00
December 31, 1997 3.05:1.00
March 31, 1998 2.90:1.00
June 30, 1998 2.75:1.00
September 30, 1998 2.65:1.00
December 31, 1998 2.45:1.00"
</TABLE>
(d) Consolidated EBITDA. Section 6.6.D of the Credit Agreement is hereby
amended by deleting the table set forth therein in its entirety and substituting
the following therefor:
-2-
<PAGE>
<TABLE>
<CAPTION>
MAXIMUM CONSOLIDATED
"FISCAL QUARTER ENDED EBITDA
--------------------- --------------------
<S> <C>
September 30, 1995 $125,000,000
December 31, 1995 $125,000,000
March 31, 1996 $126,500,000
June 30, 1996 $128,000,000
September 30, 1996 $128,000,000
December 31, 1996 $129,700,000
March 31, 1997 $133,000,000
June 30, 1997 $135,300,000
September 30, 1997 $137,600,000
December 31, 1997 $138,900,000
March 31, 1998 $139,300,000
June 30, 1998 $142,700,000
September 30, 1998 $144,000,000
December 31, 1998 $147,400,000"
</TABLE>
(e) Restriction on Fundamental Changes; Asset Sales and Acquisitions.
Section 6.7(v) of the Credit Agreement is hereby amended by deleting clause (a)
contained in the first proviso thereof in its entirety and substituting the
following therefor: "(a)(1) such Asset Sale is pursuant to the Alarm Services
Contract Securitization Facility or (2) such Asset Sale is made for the fair
market value of such assets and for at least eighty-five percent (85%) cash,
and".
1.2 Amendments to Section 7: Events of Default.
(a) Receivables Facilities. Concurrently with the repayment in full of the
Senior Notes, Section 7.14 of the Credit Agreement shall be amended by (1)
deleting the word "or" at the end of clause (iv) thereof and (2) by adding a new
clause (vi) at the end thereof as follows:
"(vi) any condition or event shall occur which constitutes a Lessee
Notice Event (as defined in the Alarm Services Contract Securitization
Facility) under clause (iv) of Section 20.1 of the Alarm Services Contract
Securitization Facility involving an amount in excess of $2,500,000; or any
condition or event shall occur which constitutes an Event of Seller Default
involving an amount in excess of $2,500,000 (as defined in the Security
Agreement executed in connection with the Alarm Services Contract
Securitization Facility)."
SECTION 2. CONSENT
(a) Alarm Services Contract Securitization Facility. Each Bank executing
this Amendment hereby consents to the terms and
-3-
<PAGE>
conditions of the Alarm Services Contract Securitization Facility substantially
in the form annexed hereto as Annex A.
(b) Amendment of Term Loan Facility. Each Bank executing this Amendment
hereby consents to the amendment of the Term Loan Facility substantially in the
form annexed hereto as Annex B.
(c) Amendment of BT Credit Facility. Each Bank executing this Amendment
hereby consents to the Amendment of the BT Credit Agreement substantially in the
form annexed hereto as Annex C.
SECTION 3. CONDITIONS TO EFFECTIVENESS
Section 1 and Section 2 of this Amendment shall become effective only upon
the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Amendment
Effective Date"):
(a) Company Documents. On or before the Amendment Effective Date, the
Company shall deliver to the Banks (or to the Agent with sufficient originally
executed copies, where appropriate, for each Bank) the following, each, unless
otherwise noted, dated the Amendment Effective Date:
(1) Signature and incumbency certificates of its officers executing
this Amendment; and
(2) Copies of this Amendment, executed by the Company and each of the
Credit Support Parties.
(b) Banks Execution. On or before the Amendment Effective Date, the
Required Banks shall have delivered to the Agent originally executed copies of
this Amendment.
(c) Term Loan Facility. On or before the Amendment Effective Date,
corresponding consents and amendments shall have been obtained or made with
respect to the Term Loan Facility. Such amendment shall be satisfactory in form
and substance to the Agent and the Required Banks.
(d) BT Credit Agreement. On or before the Amendment Effective Date,
corresponding consents and amendments shall have been obtained or made with
respect to the BT Credit Agreement. Such amendment shall be satisfactory in
form and substance to the Agent and the Required Banks.
(e) Completion of Proceedings. On or before the Amendment Effective Date,
all corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incidental thereto not
previously found acceptable by the Agent, acting on behalf of the Banks, and its
-4-
<PAGE>
counsel shall be satisfactory in form and substance to the Agent and such
counsel, and the Agent and such counsel shall have received all such counterpart
originals or certified copies of such documents as the Agent may reasonably
request.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Banks to enter into this Amendment and
to amend the Credit Agreement in the manner provided herein, the Company
represents and warrants to the Agent and each Bank that the following statements
are true, correct and complete:
(a) Corporate Power and Authority. The Company has all requisite corporate
power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement").
(b) Accounting Method. The materials provided to the Agent and the Banks in
connection with this Amendment were prepared using accounting methods consistent
with the accounting methods used to prepare the Company's financial statements
for its fiscal year ended December 31, 1995.
(c) Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of the Company.
(d) No Conflict. The execution and delivery by the Company of this
Amendment and the performance by the Company of the Amended Agreement do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to the Company or any of its Subsidiaries, the Certificate
or Articles of Incorporation or Bylaws of the Company or any of its Subsidiaries
or any order, judgment or decree of any court or other agency of government
binding on the Company or any of its Subsidiaries, (ii) conflict with, result in
a breach of or constitute (with due notice or lapse of time or both) a default
under any Contractual Obligation of the Company or any of its Subsidiaries,
(iii) result in or require the creation or imposition of any Lien upon any of
the properties or assets of the Company or any of its Subsidiaries (other than
any Liens created under any of the Credit Documents in favor of the Collateral
Agent on behalf of the Banks), or (iv) require any approval of stockholders or
any approval or consent of any Person under any Contractual Obligation of the
Company or any of its Subsidiaries.
-5-
<PAGE>
(e) Governmental Consents. The execution and delivery by the Company of
this Amendment and the performance by the Company of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
(f) Binding Obligation. This Amendment and the Amended Agreement have been
duly executed and delivered by the Company and are the legally valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
(g) Incorporation of Representations and Warranties From Credit Agreement.
The representations and warranties contained in Article IV of the Credit
Agreement are and will be true, correct and complete in all material respects on
and as of the Amendment Effective Date to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
(h) Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute a Default or an Unmatured Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
The Company is a party to the Company Pledge Agreement, as amended through
the Amendment Effective Date, pursuant to which the Company has pledged certain
Collateral to the Collateral Agent to secure the Obligations. Each of the Borg-
Warner Pledged Subsidiaries is a party to the Borg-Warner Subsidiary Pledge
Agreement, as amended through the Amendment Effective Date, pursuant to which
each such Borg-Warner Pledged Subsidiary has pledged certain Collateral to the
Collateral Agent to secure the Obligations. Each of the Borg-Warner Guarantor
Subsidiaries is a party to the Borg-Warner Subsidiary Guaranty, as amended
through the Amendment Effective Date, pursuant to which each such Borg-Warner
Guarantor Subsidiary has guarantied the Obligations. The Company, the Borg-
Warner Pledged Subsidiaries and the Borg-Warner Guarantor Subsidiaries are
collectively referred to herein as the "Credit Support Parties", and the Company
Pledge Agreement, the Borg-Warner Subsidiary Pledge Agreement, and the Borg-
Warner Subsidiary Guaranty are
-6-
<PAGE>
collectively referred to herein as the "Credit Support Documents".
Each Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Amendment and consents to
the amendment of the Credit Agreement effected pursuant to this Amendment. Each
Credit Support Party hereby confirms that each Credit Support Document to which
it is a party or otherwise bound and all Collateral encumbered thereby will
continue to guaranty or secure, as the case may be, to the fullest extent
possible the payment and performance of all "Obligations", "Guarantied
Obligations" and "Secured Obligations", as the case may be (in each case as such
terms are defined in the applicable Credit Support Document), including without
limitation the payment and performance of all such "Obligations", "Guarantied
Obligations" or "Secured Obligations", as the case may be, in respect of the
Obligations of the Company now or hereafter existing under or in respect of the
Amended Agreement.
Each Credit Support Party acknowledges and agrees that any of the Credit
Support Documents to which it is party or otherwise bound shall continue in full
force and effect and that all of its obligations thereunder shall be valid and
enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Credit Support Party represents and
warrants that all representations and warranties contained in the Amended
Agreement and the Credit Support Documents to which it is a party or otherwise
bound are true, correct and complete in all material respects on and as of the
Amendment Effective Date to the same extent as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true, correct and complete in
all material respects on and as of such earlier date.
Each Credit Support Party (other than the Company) acknowledges and agrees
that (i) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms of the Credit
Agreement or any other Credit Document to consent to the amendments to the
Credit Agreement effected pursuant to this Amendment and (ii) nothing in the
Credit Agreement, this Amendment or any other Credit Document shall be deemed to
require the consent of such Credit Support Party to any future amendments to the
Credit Agreement.
-7-
<PAGE>
SECTION 6. MISCELLANEOUS
(a) Reference to and Effect on the Credit Agreement and the other Credit
Documents.
(1) On and after the Amendment Effective Date, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each reference
in the other Credit Documents to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement shall
mean and be a reference to the Amended Agreement.
(2) Except as specifically amended by this Amendment, the Credit
Agreement and the other Credit Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(3) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of the
Agent or any Bank under, the Credit Agreement or any of the other Credit
Documents.
(b) Fees and Expenses. The Company acknowledges that all costs, fees and
expenses as described in Section 9.9 of the Credit Agreement incurred by the
Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of the Company.
(c) Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
(d) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(e) Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment (other than the provisions of Section 1 and
-8-
<PAGE>
Section 2 hereof, the effectiveness of which is governed by Section 3 hereof)
shall become effective upon the execution of a counterpart hereof by the
Company, the Required Banks and each of the Credit Support Parties and receipt
by the Company and the Agent of written or telephonic notification of such
execution and authorization of delivery thereof.
[Signature pages follow]
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 105
<ALLOWANCES> 7
<INVENTORY> 14
<CURRENT-ASSETS> 192
<PP&E> 479
<DEPRECIATION> 248
<TOTAL-ASSETS> 828
<CURRENT-LIABILITIES> 186
<BONDS> 479
<COMMON> 0
0
0
<OTHER-SE> 52
<TOTAL-LIABILITY-AND-EQUITY> 828
<SALES> 0
<TOTAL-REVENUES> 905
<CGS> 0
<TOTAL-COSTS> 729
<OTHER-EXPENSES> 33
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 30
<INCOME-PRETAX> 3
<INCOME-TAX> 1
<INCOME-CONTINUING> 2
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
