As filed with the Securities and Exchange Commission on May 6, 1997
Registration No. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
Borg-Warner Security
Corporation
(Exact name of registrant as specified in its charter)
Delaware 7381 13-3408028
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation Classification
or organization) Code Number)
200 South Michigan Avenue
Chicago, Illinois 60604
(312) 322-8500
(Address and telephone number of
registrant's principal executive offices)
Jeffrey P. Bilas, Esq.
Borg-Warner Security Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
(312) 322-8500
(Name, address and telephone number
of agent for service)
________________
Copies to:
Joseph P. Hadley, Esq.
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
(212) 450-4000
________________
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
________________
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box:[ ]
________________
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CALCULATION OF REGISTRATION FEE
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Proposed
Maximum
Offering Proposed
Price Maximum
Titles of Each Class of Amount to be Per Aggregate Amount of
Securities to be Registered Registered Note(1) Offering Price(1) Registration Fee(2)
___________________________ ____________ ______________ _________________ ___________________
<S> <C> <C> <C> <C>
9 5/8% Series B Senior
Subordinated Notes
due 2007....................... $125,000,000 100% $125,000,000 $37,878.79
==================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457(f).
</TABLE>
________________
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
==============================================================================
FORM S-4
REGISTRATION STATEMENT
Cross-Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
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Item Number and Caption Caption in Prospectus
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus..................................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................................... Additional Information; Inside Front Cover
Page; Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information............................................ Outside Front Cover Page; Prospectus
Summary; The Company; Risk Factors;
Selected Financial Data
4. Terms of the Transaction..................................... Prospectus Summary; Exchange Offer
5. Pro Forma Financial Information.............................. Unaudited Pro Forma Condensed
Consolidated Financial Data
6. Material Contacts with the Company Being Acquired............ Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters................ Not Applicable
8. Interests of Named Experts and Counsel....................... Legal Matters
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities................................... Not Applicable
10. Information with Respect to S-3 Registrants.................. Prospectus Summary; Selected Financial
Data; Business; Financial Statements
11. Incorporation of Certain Information by Reference............ Incorporation of Certain Documents by
Reference
12. Information With Respect to S-2 or S-3 Registrants........... Not Applicable
13. Incorporation of Certain Information by Reference............ Not Applicable
14. Information With Respect to Registrants Other than S-3 or
S-2 Registrants.............................................. Not Applicable
15. Information With Respect to S-3 Companies.................... Not Applicable
16. Information With Respect to S-2 or S-3 Companies............. Not Applicable
17. Information With Respect to Companies Other Than S-2 or
S-3 Companies................................................ Not Applicable
18. Information if Proxies, Consents or Authorizations Are to
be Solicited................................................. Not Applicable
19. Information if Proxies, Consents or Authorizations Are Not
to be Solicited, or in an Exchange Offer..................... Incorporation of Certain Documents by
Reference
</TABLE>
EXPLANATORY NOTE
This Registration Statement contains a prospectus (the
"Prospectus") relating to the offer (the "Exchange Offer") for all
outstanding 9 5/8% Senior Subordinated Notes Due 2007 (the "Old Notes") of
Borg-Warner Security Corporation (the "Company") in exchange for the
Company's 9 5/8% Series B Senior Subordinated Notes Due 2007 (the "Exchange
Notes"). In addition, this Registration Statement contains a Prospectus
(the "Market-Making Prospectus") relating to certain market-making
activities with respect to the Exchange Notes which may, from time to time,
be carried out by Merrill Lynch, Pierce Fenner & Smith Incorporated
("MLPF&S"). The two prospectuses will be identical in all material
respects except for the front cover page and the Plan of Distribution and
except for the fact that the Market-Making Prospectus will not contain (i)
the information in the Prospectus Summary relating to the Exchange Offer
and the Consequences of Exchanging Old Notes Pursuant to the Exchange
Offer, (ii) the information in the Risk Factors section relating to the
Consequences of Failure to Exchange and Exchange Offer Procedures, (iii)
the information under the caption "Exchange Offer" will be deleted and (iv)
certain conforming changes will be made to delete references to the
Exchange Offer. The Prospectus for the Exchange Offer follows immediately
after this Explanatory Note. Following such Prospectus are the form of
alternative cover page and Plan of Distribution section for the Market-
Making Prospectus and alternative pages covering conforming changes.
PROSPECTUS
$125,000,000
Offer to Exchange
9 5/8% Senior Subordinated Notes Due 2007
For Any And All of The Outstanding
9 5/8% Senior Subordinated Notes Due 2007
of
Borg-Warner Security Corporation
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
__________, 1997, UNLESS EXTENDED.
Borg-Warner Security Corporation, a Delaware corporation (the
"Company"), hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the
"Letter of Transmittal"), to exchange an aggregate of up to $125,000,000
principal amount of its 9 5/8% Senior Subordinated Notes due 2007 (the
"Exchange Notes") which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to a registration statement of
which this Prospectus forms a part, for an identical face amount of the issued
and outstanding 9 5/8% Senior Subordinated Notes due 2007 (the "Old Notes"
and, together with the Exchange Notes, the "Notes") of the Company from the
Holders (as defined herein) thereof in integral multiples of $1,000 (the
"Exchange Offer"). As of the date of this Prospectus, there are $125,000,000
aggregate principal amount of the Old Notes outstanding. The terms of the
Exchange Notes are identical in all respects to the Old Notes, except that the
Exchange Notes have been registered under the Securities Act, and therefore
will not bear legends restricting their transfer and will not contain certain
provisions providing for an increase in the interest rate payable on the Old
Notes under certain circumstances if the Company defaults with respect to its
registration requirements under the Registration Rights Agreement (as defined
herein), which provisions will terminate as to all of the Notes upon the
consummation of the Exchange Offer. The Exchange Notes will be obligations of
the Company evidencing the same indebtedness as the Old Notes, and will be
entitled to the benefits of the same indenture. See "The Exchange Offer."
Interest on the Exchange Notes is payable semi-annually on
March 15 and September 15 of each year, beginning on September 15, 1997. The
Exchange Notes will bear interest from March 24, 1997. Holders of Old Notes
whose Old Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on such Old Notes accrued
from March 24, 1997 to the date of issuance of the Exchange Notes. The
Exchange Notes will mature on March 15, 2007 and may be redeemed at the option
of the Company, in whole or in part, at any time on or after March 15, 2002,
at the redemption prices set forth herein, and, subject to certain limitations
described herein, up to 30% of the original aggregate principal amount of the
Notes may be redeemed at the option of the Company with the net cash proceeds
of one or more Public Equity Offerings (as defined herein), provided that not
less than $87.5 million aggregate principal amount of the Notes remains
outstanding immediately after giving effect to such redemption, at any time
prior to March 15, 2000, at the redemption price of 109.625% of the principal
amount thereof, in each case together with accrued and unpaid interest, if
any, to the date of redemption. Upon a Change of Control (as defined herein),
subject to certain conditions, each holder of the Exchange Notes may require
the Company to purchase such holder's Exchange Notes at 101% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the date
of purchase. See "Description of the Notes."
The Exchange Notes will be unsecured obligations of the
Company subordinated in right of payment and upon liquidation to all
existing and future Senior Indebtedness (as defined herein) of the Company,
including indebtedness under the New Credit Facility (as defined herein),
which is secured by pledges of stock of certain of the Company's
subsidiaries. The Company is a holding company and, accordingly, the
Exchange Notes will be effectively subordinated to all existing and future
indebtedness of the Company's subsidiaries. Subject to certain
restrictions contained in the Company's debt instruments, the Company may
incur additional Senior Indebtedness and the Company's subsidiaries may
incur additional indebtedness in the future. As of December 31, 1996,
after giving pro forma effect to the Loomis Fargo Combination (as defined
herein) and the Refinancing (as defined herein), the aggregate outstanding
principal amount of Senior Indebtedness (exclusive of undrawn letters of
credit of approximately $128.8 million) of the Company would have been
approximately $75.1 million and the aggregate outstanding principal amount
of indebtedness (exclusive of obligations in respect of undrawn letters of
credit of approximately $128.8 million) of the Company's subsidiaries
(including guarantees by certain of the Company's subsidiaries of the
Company's obligations under the New Credit Facility) would have been
approximately $83.3 million. As of December 31, 1996, there were also $150
million aggregate principal amount of the Company's 9 1/8% Notes (as
defined herein) outstanding which will rank pari passu in right of payment
and upon liquidation with the Notes. In addition, the Company has a non-
recourse receivables-backed facility. See "Description of Certain
Indebtedness--Securitization of Receivables."
(Continued on next page)
________________
See "Risk Factors" for a discussion of certain factors that
should be considered in connection with the Exchange Offer or an investment in
the Exchange Notes.
________________
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is __________, 1997
(Continued from previous page)
The Company will not receive any proceeds from the Exchange
Offer. The Company will pay all the expenses incident to the Exchange Offer.
The Exchange Notes are being offered hereunder in order to
satisfy certain obligations of the Company under the Registration Rights
Agreement, dated March 24, 1997, among the Company and the other
signatories thereto (the "Registration Rights Agreement"). The Company has
not requested, and does not intend to request, an interpretation by the
staff of the Commission with respect to whether the Exchange Notes issued
pursuant to the Exchange Offer in exchange for the Old Notes may be offered
for sale, resold or otherwise transferred by any holder without compliance
with the registration and prospectus delivery provisions of the Securities
Act. Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old
Notes may be offered for resale, resold and otherwise transferred by any
holder of such Exchange Notes, other than broker-dealers which must sell in
accordance with the provisions set forth below and other than any holder
that is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act, without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. Any holder who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes or who is an affiliate of the Company
may not rely on such interpretations by the staff of the Commission and
must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any secondary resale transaction.
Each broker-dealer (whether or not it is also an "affiliate" of the
Company) that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes. The Company has agreed that it will make this
Prospectus, as amended or supplemented, available to any such broker-dealer
for use in connection with any such resale, and such broker-dealer shall be
required to deliver this Prospectus for a period not exceeding 180 days
after the Expiration Date (as defined herein). See "Plan of Distribution."
By executing the Letter of Transmittal, each holder of Old Notes will
represent to the Company that, among other things, (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or
not such person is such holder, (ii) neither the holder of Old Notes nor
any such other person has an arrangement or understanding with any person
to participate in the distribution of such Exchange Notes, (iii) if the
holder is not a broker-dealer, or is a broker-dealer but will not receive
Exchange Notes for its own account in exchange for Old Notes, neither the
holder nor any such other person is engaged in or intends to participate in
the distribution of such Exchange Notes and (iv) neither the holder nor any
such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act or, if such Holder is an "affiliate,"
that such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the
tendering Holder is a broker-dealer (whether or not it is also an
"affiliate") that will receive Exchange Notes for its own account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it will be required to acknowledge
that it will deliver a prospectus in connection with any resale of such
Exchange Notes.
Following the consummation of the Exchange Offer, holders of
Old Notes not tendered will not have any further registration rights and
the Old Notes will continue to be subject to certain restrictions on
transfer.
Tenders of Old Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date. In the event the
Company terminates the Exchange Offer and does not accept for exchange any
Old Notes, the Company will promptly return tendered Old Notes to the
Holders thereof. See "Exchange Offer."
Prior to this Exchange Offer, there has been no public
market for the Exchange Notes. The Company intends to apply for listing of
the Exchange Notes on the New York Stock Exchange. However, there can be
no assurance that an active public market for the Exchange Notes will
develop.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
AVAILABLE INFORMATION
The Company is currently subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and information may be inspected and copied at the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the regional offices of the Commission at 7
World Trade Center (13th Floor), New York, New York 10048; and at Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains an internet "website" at http://www.sec.gov that
contains reports and other information. In addition, such reports, proxy
statements and other information concerning the Company may be inspected at
the offices of the New York Stock Exchange, at 20 Broad Street, New York, New
York 10005.
This Prospectus constitutes a part of a registration statement
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained
in the Registration Statement and the exhibits and schedules thereto and
reference is hereby made to the Registration Statement and the exhibits and
schedules thereto for further information with respect to the Company and the
securities offered hereby. Statements contained herein concerning the
provisions of any documents filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and in
each instance reference is made to the copy of such document so filed. Each
such statement is qualified in its entirety by such reference. Copies of the
Registration Statement may be examined without charge at the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the web site (http://www.sec.gov.) maintained by the Commission
and at the Commission's Regional Offices located at Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of
the Registration Statement can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM BORG-WARNER SECURITY
CORPORATION, 200 SOUTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60604, TELEPHONE
NUMBER (312) 322-8500. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY ___________, 1997.
The following documents filed with the Commission (File No.
1-5529) are incorporated herein by reference: (1) the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, and (2) the Company's
Current Reports on Form 8-K dated February 7, 1997 and Form 8-K/A dated
February 13, 1997.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Exchange Offer shall be deemed
to be incorporated by reference into this Prospectus and to be a part hereof
from the date of filing of such documents. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modified or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, upon written or
oral request of any such person, a copy of any and all of the documents
referred to above which have been or may be incorporated in this Prospectus by
reference, other than exhibits to such documents which are not specifically
incorporated by reference to such documents. Requests for such copies should
be directed to Borg-Warner Security Corporation, 200 South Michigan Avenue,
Chicago, Illinois 60604, telephone number (312) 322-8500.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER
"PROSPECTUS SUMMARY", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS", IN ADDITION TO CERTAIN
STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS, ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND ARE THUS PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS, UNCERTAINTIES
AND OTHER FACTORS ARE DISCUSSED UNDER THE HEADING "RISK FACTORS", IN THIS
PROSPECTUS, AND HOLDERS OF THE OLD NOTES AND PROSPECTIVE INVESTORS IN THE
EXCHANGE NOTES ARE URGED TO CAREFULLY CONSIDER SUCH FACTORS.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements appearing elsewhere in this
Prospectus or incorporated herein by reference. The pro forma financial
information for 1996 included in this Prospectus gives effect to the Loomis
Fargo Combination and the Refinancing as if they had occurred on January 1,
1996 (in the case of income statement data) or on December 31, 1996 (in the
case of balance sheet data). As used herein, the "Refinancing" means the
completion of the offering of the Old Notes and the establishment of the New
Credit Facility, including application of the proceeds therefrom. See
"Description of Certain Indebtedness--New Credit Facility."
The Company
Borg-Warner Security Corporation ("Borg-Warner" or the
"Company") is the nation's largest provider of security services. The Company
is the nation's largest supplier of contract guard services and is a leading
provider of electronic security services. As a result of its significant
market presence and breadth of product offerings, the Company is well
positioned to service local, multi-location and national accounts and to
provide "Total Security Solutions" to its customers. In 1996, Borg-Warner had
pro forma revenues and EBITDA (as defined herein) of approximately $1.46
billion and $119 million, respectively.
The Company provides guard services, as well as background
screening, contract employment and investigative services, to approximately
14,000 clients in the United States, Canada, the United Kingdom and South
America. The Company services these clients with approximately 73,000
employees in approximately 280 offices under the Wells Fargo[Registered],
Burns[Registered], Globe[Registered] and other service marks. In 1996, the
physical security services unit had revenues of approximately $1.22 billion.
The Company provides integrated electronic security systems,
including intrusion and fire detection, sprinkler and critical industrial
process monitoring, closed circuit television and access control. From its
nationwide system of 12 monitoring centers and 40 service offices, the Company
designs, installs, monitors and services electronic security systems located
on the premises of approximately 83,000 commercial and 43,000 residential
customers in the United States and Canada under the Wells Fargo[Registered]
and Pony Express[Registered] service marks. The Company provides, under the
Bel-Air Patrol trade name, an integrated guard, patrol and alarm service to
approximately 12,000 customers in Bel Air, Beverly Hills and other Los Angeles
communities. In 1996, the electronic security services unit had revenues of
approximately $241 million.
In addition to its core physical and electronic security
service businesses conducted through wholly owned subsidiaries, the Company
has a 49% equity interest in Loomis, Fargo & Co. ("Loomis Fargo"), resulting
from the January 1997 combination of the Company's former subsidiary Wells
Fargo Armored Service Corporation ("Wells Fargo Armored") with Loomis Armored
Inc. (the "Loomis Fargo Combination" ). Loomis Fargo is one of the leading
armored transport companies nationwide and is the largest provider of ATM
services with over 150 branches, approximately 8,700 employees and 2,700
armored vehicles. Loomis Fargo serves all 50 states and Puerto Rico, and is
one of only two armored transport companies in the United States that provides
these services on a nationwide basis.
Business Strategy
The Company's business strategy is to maintain and enhance its position
as the nation's largest provider of security services. The key elements of
this strategy are as follows:
Market Segment Focus. The Company has targeted selected market
segments for increased penetration and development. These markets are
characterized by their growing needs for quality, highly reliable security
services and a willingness to recognize value added service and single point
responsibility for a full range of protective services. Inherent in the
Company's marketing strategy is pricing based on risk-adjusted rates of return
and targeted at improving the Company's overall profitability.
Total Security Solutions. In response to customer demand for
integrated security services with single point responsibility and the trend
toward outsourcing of security management needs, the Company has focused on
providing Total Security Solutions. The Company believes it is well positioned
to effectively and profitably provide Total Security Solutions to
multi-location and national accounts due to its nationwide network of offices
and support facilities. Management believes that the combination of the
Company's electronic and physical security services coupled with its equity
interest in Loomis Fargo provides a significant competitive advantage.
Customer and Employee Retention. Customer and employee
retention are the foundation for the Company's growth and profit
improvement strategies. The Company believes that customer retention is
related to employee retention. Based on extensive customer and employee
needs analysis, the Company has implemented a number of retention
improvement programs. In the physical security services unit, the Company
is establishing regional administrative service centers to improve both
quality and efficiency by standardizing best practices with appropriate
systems support. These improvements include the ability to recruit and
staff jobs promptly, to confirm on-time guard presence as well as adherence
to post requirements, and to communicate incidents to clients in a timely
and effective manner. The Company's electronic security services unit has
implemented programs to upgrade customer installation technology, to
provide enhanced monitoring technology at reduced cost, and to provide
incentives for its sales force to maximize contract renewals. Employee
programs start with recruiting where applicants are not only screened but
also profiled for optimal job assignments. Security officer training
focuses on client orientation, safety, job standards and communication.
The Company also conducts management training programs that emphasize
communication, employee relations and negotiating skills. To support these
efforts, employment "centers of excellence" are being opened to provide
recruiting and training programs. These efforts are reinforced by reward
incentives that recognize exemplary and continuing service to the customer.
Risk Management. The Company believes that significant
improvement in operating results of the business can be attained through its
risk management program. An effective program has been implemented at
national, regional and local levels to reduce workers' compensation costs. The
Company has also established similar programs focused on training and safety
awareness to mitigate employee and general liability claims. Of equal
importance is the Company's policy of pricing business in a manner that is
commensurate with the underlying risks.
Capitalize on Industry Consolidation. The protective services
industry is highly fragmented, consisting of a few national companies and
numerous small and regional companies. The Company believes that customer
demand for full service, financially stable security providers will drive the
protective services industry toward consolidation. The Company believes that
its management is skilled at identifying attractive acquisition candidates and
integrating acquisitions quickly and efficiently. Generally, the Company
acquires the customer base and operations employees of the acquired entity and
integrates the acquired company's operations into the Company's operations.
The Company typically experiences cost savings and productivity gains through
economies of scale and the leverage of the Company's operating systems.
Recent Developments
The Company combined its armored transport business with Loomis
Armored Inc. in January 1997. As consideration for the contribution of
substantially all the assets of Wells Fargo Armored, the Company received a
49% equity interest in Loomis Fargo, and approximately $105 million in cash
(net of transaction expenses, but subject to certain adjustments), and
retained casualty and employee liabilities of Wells Fargo Armored incurred
prior to closing. The Company accounts for its investment in Loomis Fargo
under the equity method. The Loomis Fargo Combination created a leading
armored transportation and ATM services company with broad geographic
coverage. Management of Loomis Fargo believes that upon successful
completion of its consolidation plan, the combined company will realize
cost savings.
In the third quarter of 1996, the Company elected to treat its
Pony Express Courier business as a discontinued operation. As a result of this
decision, a non-cash charge of $25 million was incurred to provide for
anticipated future losses and liabilities.
In addition, on March 24, 1997, the Company completed the
Refinancing pursuant to which it offered and sold $125,000,000 aggregate
principal amount of its Old Notes (the "Old Note Offering") and replaced the
credit facility (the "Old Credit Facility") which then consisted of the $225
million revolving credit facility (the "Old Revolving Loan"), the $155 million
letter of credit facility (the "Old LC facility") and the $200 million term
loan maturing in 1998 (the "Old Term Loan") with a new credit facility (the
"New Credit Facility") consisting of up to a $155 million revolving facility
(the "New Revolving Facility"), and up to a $155 million letter of credit
facility subject to an overall limit on the aggregate amount at any time
outstanding under both facilities of $285 million (the "New Credit Facility").
The net proceeds from the Old Note Offering were approximately $120.4 million.
See "Description of Certain Indebtedness--New Credit Facility;--Old Notes."
The Old Note Offering
Old Notes............................ The Old Notes were offered
and sold by the Company in the Old
Note Offering on March 24, 1997, and
were subsequently resold to Qualified
Institutional Buyers (as defined in
Rule 144A under the Securities Act)
pursuant to Rule 144A under the
Securities Act, to a limited number of
institutional investors that are
Accredited Investors (as defined in
Rule 501(a)(1), (2), (3) or (7) under
the Securities Act) and in offshore
transactions complying with Rule 903
or Rule 904 of Regulation S under the
Securities Act.
Exchange Offer
Exchange Notes....................... Up to $125,000,000 aggregate
principal amount of 9 5/8% Series B
Senior Subordinated Notes due 2007
(the "Exchange Notes") of the
Company. The terms of the Exchange
Notes and the Old Notes are
identical in all respects, except
that the offer of the Exchange
Notes will have been registered
under the Securities Act and
therefore, the Exchange Notes will
not be subject to certain transfer
restrictions and registration
rights and related provisions for
an increase in the interest rate
payable on the Old Notes under
certain circumstances if the
Company defaults with respect to
its registration requirements under
the Registration Rights Agreement
applicable to the Old Notes.
Exchange Offer....................... The Company is offering,
upon the terms and subject to the
conditions of the Exchange Offer, to
exchange $1,000 principal amount of
Exchange Notes for each $1,000
principal amount of Old Notes. See
"The Exchange Offer" for a description
of the procedures for tendering Old
Notes. In connection with the Old
Note Offering, the Company entered
into the Registration Rights Agreement
(the "Registration Rights Agreement")
dated as of March 24, 1997 among the
Company and the Initial Purchasers (as
defined herein), which grants holders
of the Old Notes certain exchange and
registration rights. The Exchange
Offer is intended to satisfy
obligations of the Company under the
Registration Rights Agreement. The
date of acceptance for exchange of the
Exchange Notes will be the first
business day following the Expiration
Date.
Tenders, Expiration Date;
Withdrawal.......................... The Exchange Offer will expire at
5:00 p.m., New York City time, on
_________, 1997, or such later date
and time to which it is extended.
The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn
at any time prior to the Expiration
Date. Any Old Notes not accepted
for exchange for any reasons will
be returned without expense to the
tendering Holder thereof as
promptly as practicable after the
expiration or termination of the
Exchange Offer.
Federal income Tax
Consequences........................ The exchange pursuant to the
Exchange Offer will not result in any
income, gain or loss to the Holders
of the Notes or the Company for
federal income tax purposes. See
"Exchange Offer--United States
Federal Income Tax Consequences of
the Exchange Offer."
Use of Proceeds...................... There will be no proceeds to
the Company from the issuance of
the Exchange Notes pursuant to the
Exchange Offer.
Exchange Agent....................... The Bank of New York is serving as
Exchange Agent in connection with
the Exchange Offer.
Consequences of Exchanging Old Notes Pursuant to the Exchange Offer
The Company has not requested, and does not intend to
request, an interpretation by the staff of the Commission with respect to
whether the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Old Notes may be offered for sale, resold or otherwise
transferred by any holder without compliance with the registration and
prospectus delivery provisions of the Securities Act. Based on
interpretations by the staff of the Commission set forth in no-action
letters issued to third parties, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder of such
Exchange Notes, other than broker-dealers which must sell in accordance
with the provisions set forth below and other than any holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. Any holder who
tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes or who is an affiliate of the Company
may not rely on such interpretations by the staff of the Commission and
must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any secondary resale transaction.
Each broker-dealer (whether or not it is also an "affiliate" of the
Company) that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes. See "Plan of Distribution."
By executing the Letter of Transmittal, each holder of Old
Notes will represent to the Company that, among other things, (i) the Exchange
Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is such holder, (ii) neither the holder of Old
Notes nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes, (iii) if the
holder is not a broker-dealer, or is a broker-dealer but will not receive
Exchange Notes for its own account in exchange for Old Notes, neither the
holder nor any such other person is engaged in or intends to participate in
the distribution of such Exchange Notes and (iv) neither the holder nor any
such other person is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act or, if such Holder is an "affiliate," that such
Holder will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable. If the tendering Holder is a
broker-dealer (whether or not it is also an "affiliate") that will receive
Exchange Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities,
it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. See "Plan of
Distribution". To comply with the securities laws of certain jurisdictions,
it may be necessary to qualify for sale or register the Exchange Notes prior
to offering or selling such Exchange Notes. The Company does not currently
intend to take any action to register or qualify the Exchange Notes for resale
in any such jurisdictions.
Following the consummation of the Exchange Offer, holders of
Old Notes not tendered will not have any further registration rights and the
Old Notes will continue to be subject to certain restrictions on transfer. In
general, the Old Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. Failure
to comply with such requirements in such instance may result in such Holder
incurring liability under the Securities Act for which such Holder is not
indemnified by the Company. See "Exchange Offer--Consequences of Failure to
Exchange."
Summary Description of the Notes
The terms of the Exchange Notes and the Old Notes are identical
in all respects, except that the offer of the Exchange Notes is registered
under the Securities Act and, therefore, the Exchange Notes will not be
subject to certain transfer restrictions, registration rights and related
provisions requiring an increase in the interest rate on the Old Notes under
certain circumstances if the Company defaults with respect to its registration
requirements under the Registration Rights Agreement applicable to the Old
Notes.
Exchange Notes Offered............... Up to $125,000,000 aggregate
principal amount of Exchange Notes of
the Company.
Maturity Date........................ March 15, 2007.
Interest Payment Dates............... March 15 and September 15,
beginning September 15, 1997. The
Exchange Notes will bear interest from
March 24, 1997. Holders of Old Notes
whose Old Notes are accepted for
exchange will be deemed to have waived
the right to receive any payment in
respect of interest on such Old Notes
accrued from March 24, 1997 to the
date of the issuance of the Exchange
Notes. Consequently, holders who
exchange their Old Notes for Exchange
Notes will receive the same interest
payment on September 15, 1997 (the
first interest payment date with
respect to the Old Notes and the
Exchange Notes) that they would have
received had they not accepted the
Exchange Offer.
Optional Redemption.................. The Notes may be redeemed at
the option of the Company, in whole or
in part, at any time on or after March
15, 2002, at the redemption prices set
forth herein together with accrued and
unpaid interest, if any, to the date
of redemption. In addition, at any
time prior to March 15, 2000, the
Company may redeem up to 30% of the
original aggregate principal amount of
the Notes at a redemption price of
109.625% of the principal amount
thereof (together with accrued and
unpaid interest, if any, to the date
of redemption) with the net cash
proceeds of one or more Public Equity
Offerings (as defined herein);
provided that not less than $87.5
million aggregate principal amount of
the Notes remains outstanding
immediately after giving effect to
such redemption. See "Description of
the Notes--Optional Redemption."
Change of Control.................... Upon a Change of Control, subject to
certain conditions, each holder of
the Notes may require the Company
to purchase such holder's Notes at
101% of the principal amount
thereof, together with accrued and
unpaid interest, if any, to the
date of purchase. There can be no
assurance that the Company would
have sufficient cash to purchase
the Notes in the event a Change of
Control occurs. See "Description
of the Exchange Notes--Purchase of
Notes Upon Change of Control."
Ranking.............................. The Exchange Notes will be, and the
Old Notes are, unsecured
obligations of the Company
subordinated in right of payment
and upon liquidation to all
existing and future Senior
Indebtedness of the Company,
including indebtedness under the
New Credit Facility. The Company
is a holding company and,
accordingly, the Exchange Notes
will be, and the Old Notes are,
effectively subordinated to all
existing and future indebtedness of
the Company's subsidiaries.
Subject to certain restrictions
contained in the terms of the
Company's indebtedness, the Company
may incur additional Senior
Indebtedness and the Company's
subsidiaries may incur additional
indebtedness in the future. As of
December 31, 1996, after giving pro
forma effect to the Loomis Fargo
Combination and the Refinancing,
the aggregate outstanding principal
amount of Senior Indebtedness
(exclusive of undrawn letters of
credit of approximately $128.8
million) of the Company would have
been approximately $75.1 million
and the aggregate outstanding
principal amount of indebtedness
(exclusive of obligations in
respect of undrawn letters of
credit of approximately $128.8
million) of the Company's
subsidiaries (including guarantees
by certain of the Company's
subsidiaries of the Company's
obligations under the New Credit
Facility) would have been
approximately $83.3 million. In
addition, the Company has a $120
million non-recourse receivables-
backed facility available on a
revolving basis. As of December
31, 1996, there were also $150
million aggregate principal amount
of the Company's 9 1/8% Notes
outstanding which rank pari passu
in right of payment and upon
liquidation with the Old Notes and
will rank pari passu in right of
payment and upon liquidation with
the Exchange Notes. See "Risk
Factors--Subordination of Notes;--
Holding Company Structure,"
"Description of Certain
Indebtedness --Securitization of
Receivables" and "Description of
the Notes--Subordination."
Certain Covenants.................... The indenture governing the
Exchange Notes (the "Indenture")
contains certain restrictive covenants
that, among other things, limit the
ability of the Company and its
subsidiaries to: (i) incur additional
indebtedness; (ii) create certain
liens; (iii) pay dividends or make
investments or certain other
restricted payments; (iv) engage in
mergers, consolidations or sales of
all or substantially all assets; (v)
engage in certain transactions with
affiliates; (vi) issue or sell
preferred stock of any subsidiary of
the Company; and (vii) create
restrictions on the ability of any
subsidiary of the Company to pay
dividends or make certain other
payments to the Company. All of these
limitations are subject to a number
of important qualifications. See
"Description of the Notes--Certain
Covenants."
Exchange Offer;
Registration Rights................. In the event that applicable law
or interpretations of the staff of
the Securities and Exchange Commission
(the "Commission") do not permit the
Company to effect this Exchange Offer
or if certain holders of the Old Notes
notify the Company that they are not
permitted to participate in, or would
not receive freely transferable
Exchange Notes pursuant to, the
Exchange Offer, or upon the request of
an Initial Purchaser (as defined
herein) under certain circumstances,
the Company will use its best efforts
to cause to become effective by the
135th day after the date of original
issuance of the Old Notes (the
"Original Issue Date") a registration
statement (the "Shelf Registration
Statement") with respect to the resale
of the Old Notes and to keep the Shelf
Registration Statement effective until
two years after its effective date (or
until one year after such effective
date if such Shelf Registration
Statement is filed at the request of
such Initial Purchaser). The interest
rate on the Old Notes is subject to
increase under certain circumstances
if the Company defaults with respect
to its registration obligations under
the Registration Rights Agreement.
See "Exchange Offer."
Lack of Prior Market for
the Exchange Notes.................. The Exchange Notes are being
offered to holders of the Old Notes.
The Old Notes were resold by the
Initial Purchasers to qualified
institutional buyers as defined in
Rule 144A of the Securities Act and to
a limited number of institutional
accredited investors within the
meaning of Rule 501(a)(1), (2), (3) or
(7) of the Securities Act, and are
eligible for trading in the Private
Offering, Resale and Trading through
the Automated Linkages (PORTAL)
Market. The Exchange Notes will be
new securities for which there is
currently no established trading
market, and none may develop. Although
the Initial Purchasers are making a
market in the Old Notes and have
indicated to the Company that they
currently intend to make a market in
the Exchange Notes, as permitted by
applicable laws and regulations,
they are under no obligation to do
so; and such market-making could be
discontinued at any time without
notice, at the sole discretion of
the Initial Purchasers. In
addition, such market making
activities may be limited during
the Exchange Offer and the pendency
of a Shelf Registration Statement.
Accordingly, no assurance can be
given that an active trading market
for the Exchange Notes will develop
or, if such a market develops, as
to the liquidity of such market.
The Company intends to apply for
listing of the Exchange Notes on
the New York Stock Exchange. If
the Exchange Notes, are traded
after their initial issuance, they
may trade at a discount from their
initial offering price, depending
upon prevailing interest rates, the
market for similar securities, the
performance of the Company and
certain other factors.
Risk Factors
See "Risk Factors" for a discussion of certain factors which
should be considered in connection with the Exchange Offer or an investment in
the Exchange Notes.
SUMMARY CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL INFORMATION
The following summary Consolidated Financial Information for
the Company for the five years ended December 31, 1996 has been derived from
the Consolidated Financial Statements of the Company for such periods which
have been audited. Such information treats as discontinued operations for all
periods presented Borg-Warner Automotive, Inc. ("BW Automotive"), which was
spun-off in January 1993, and the Company's courier unit, which has been
treated as a discontinued operation since September 1996. The summary
Consolidated Financial Information should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto
included elsewhere in this Prospectus.
The pro forma financial information for 1996 has been derived
from the unaudited Pro Forma Financial Data and the related notes thereto
included elsewhere in this Prospectus and gives effect to the Loomis Fargo
Combination and the Refinancing, as if they had occurred on January 1, 1996
(in the case of income statement data) or as of December 31, 1996 (in the case
of balance sheet data).
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1996 Pro
1992 1993 1994 1995 1996 Forma
--------- --------- --------- --------- --------- --------
(millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Net service revenues................ $1,457.9 $1,592.1 $1,626.8 $1,708.5 $1,711.2 $1,464.9
Cost of services.................... 1,121.8 1,241.2 1,289.4 1,359.3 1,360.2 1,155.7
--------- --------- --------- --------- --------- --------
Gross profit........................ 336.1 350.9 337.4 349.2 351.0 309.2
Selling, general and administrative
expenses......................... 210.7 187.1 220.2 212.5 210.6 189.9
Depreciation........................ 46.7 50.5 52.8 52.1 47.0 39.9
Amortization of excess of
purchase price over
net assets acquired............... 20.2 15.2 14.8 13.4 13.4 11.9
Other income, net(1)................ (17.2) (3.1) (9.8) -- -- (3.8)
--------- --------- --------- --------- --------- --------
Operating income.................... 75.7 101.2 59.4 71.2 80.0 71.3
Non-recurring elimination of excess
purchase price over net assets
acquired(2)....................... -- 250.0 -- -- -- --
Interest expense and
finance charges................... 46.4 49.9 48.8 55.9 56.6 44.4
--------- --------- --------- --------- --------- --------
Earnings (loss) before taxes........ 29.3 (198.7) 10.6 15.3 23.4 26.9
Provision (benefit) for
income taxes...................... (23.6) 19.5 (3.2) 6.9 9.5 9.4
--------- --------- --------- --------- --------- --------
Earnings (loss) from continuing
operations........................ 52.9 (218.2) 13.8 8.4 13.9 17.5
Certain Financial Ratios and Other Data:
EBITDA(3)........................... 142.6 166.9 127.0 136.7 140.4 119.3
Capital expenditures and
investments in
sales-type leases................. 65.6 62.3 59.4 47.8 40.7 (4) 32.6 (4)
Ratio of EBITDA to
interest expense.................. 3.1x 3.3x 2.6x 2.4x 2.5x 2.7x
Ratio of earnings to
fixed charges(5).................. 1.6x 1.9x 1.2x 1.2x 1.4x 1.5x
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1996
----------------------------
Historical Pro Forma
---------- -------------
(millions of dollars)
<S> <C> <C>
Balance Sheet Data:
Working capital............................................................ $(11.0) $(19.5)
Total assets............................................................... 760.8 676.0
Total long-term debt, excluding current maturities(6)...................... 438.2 352.9
Stockholders' equity....................................................... 41.2 41.2
<FN>
- -----------------
(1) For the years ended December 31, 1992, 1993 and 1994 other income
consisted of interest income, gains on asset dispositions and royalty
income. For the pro forma year ended 1996, other income consisted of
the equity in earnings of Loomis Fargo.
(2) Following the spin-off of BW Automotive, $250 million of excess
purchase price over net assets acquired not directly attributed to the
protective services business was written off as a charge to earnings
in the first quarter of 1993.
(3) EBITDA consists of earnings (loss) before interest expense, minority
interests, income taxes, depreciation, amortization and equity in
earnings of unconsolidated subsidiaries. EBITDA is commonly used to
analyze companies on the basis of operating performance, leverage and
liquidity. While EBITDA should not be construed as a substitute for
operating income or a better measure of liquidity than cash flow from
operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to
provide additional information with respect to the ability of the
Company to meet future debt service, capital expenditures and working
capital requirements.
(4) Capital expenditures and investments in sales-type leases for the
historical and pro forma year ended December 31, 1996 includes sales-
type leases that were sold to a third party for $10.4 million.
(5) For the purposes of calculating the ratio of earnings to fixed
charges, earnings represent income (loss) before income taxes plus
fixed charges. Fixed charges consist of interest expense on all
indebtedness plus the interest portion of rental expense on
noncancelable leases, and amortization of debt issuance costs and debt
discount. The calculation for the year ended December 31, 1993
excludes the non-recurring elimination of excess purchase price over
net assets acquired.
(6) Total long-term debt does not include amounts available to be drawn
under issued and outstanding letters of credit, which as of December
31, 1996 were $136.3 million ($128.8 million pro forma), or amounts
outstanding under the Company's non-recourse receivables-backed
facility, which as of December 31, 1996 were $120 million.
</TABLE>
RISK FACTORS
In addition to other information set forth in this Prospectus,
prospective investors should carefully consider the risk factors set forth
below before accepting the Exchange Offer or investing in the Exchange Notes.
Indebtedness and Leverage of the Company
The Company has a significant amount of debt. As of December
31, 1996, on a pro forma basis, after giving effect to the Loomis Fargo
Combination and the Refinancing, the Company's total debt would have been
approximately $356.7 million (exclusive of approximately $128.8 million of
undrawn letters of credit) and the Company's stockholders' equity would have
been $41.2 million. Subject to certain restrictions contained in the Company's
debt instruments, the Company may issue additional indebtedness in the future.
See "Description of Certain Indebtedness" and "Description of the Notes."
The degree to which the Company is leveraged could have
important consequences on the Company's operations, including (i) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or
other purposes may be limited; (ii) a significant portion of the Company's
cash flow from operations must be dedicated to the payment of principal and
interest on its indebtedness, thereby reducing the funds available to the
Company for its operations; (iii) certain of the Company's borrowings are and
will continue to be at variable rates of interest, which could result in
higher interest expenses in the event of increases in interest rates; and (iv)
such indebtedness contains and will contain restrictive financial covenants,
the failure to comply with which may result in an event of default which, if
not cured or waived, could have a material adverse effect on the Company. See
"Description of Certain Indebtedness" and "Description of the Notes."
The Company's ability to make scheduled payments or to
refinance its obligations with respect to its indebtedness depends on its
financial and operating performance, which, in turn, is subject to prevailing
economic conditions and to financial, business and other factors beyond its
control. Although the Company's cash flow from its operations has been
sufficient to meet its debt service obligations, there can be no assurance
that the Company's operating results will continue to be sufficient for
payment of the Company's indebtedness. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Financial Position,
Capital Resources and Liquidity."
The New Credit Facility, the 9 1/8% Note Indenture and the
Indenture contain numerous financial and operating covenants that limit the
discretion of the Company's management with respect to certain business
matters. These covenants place significant restrictions on, among other
things, the ability of the Company to incur additional indebtedness, to
create liens or other encumbrances, to make capital expenditures,
acquisitions and investments, to make certain payments and to sell or
otherwise dispose of assets and merge or consolidate with other entities.
See "Description of Certain Indebtedness--New Credit Facility;--9 1/8%
Notes" and "Description of the Notes--Certain Covenants." The New Credit
Facility also requires the Company to meet certain financial ratios and
tests. A failure to comply with the covenants contained in the New Credit
Facility, the 9 1/8% Note Indenture or the Indenture could result in an
event of default under the New Credit Facility, the 9 1/8% Note Indenture
or the Indenture, respectively, which could permit acceleration of the
related debt and acceleration of debt under other instruments that may
contain cross-acceleration or cross-default provisions. See "Description
of Certain Indebtedness--New Credit Facility;--9 1/8% Notes" and
"Description of the Notes--Events of Default."
In addition, the Company finances accounts receivable pursuant
to a $120 million non-recourse receivables-backed facility available on a
revolving basis. The revolving period under this facility ends no later than
December 31, 1998 with final payment anticipated in April 1999. If the Company
were not able to extend or replace this facility at or prior to such time, it
might have to incur additional indebtedness to finance its operations. See
"Description of Certain Indebtedness--Securitization of Receivables."
Subordination of Notes
The Exchange Notes will be and the Old Notes are unsecured
obligations of the Company subordinated in right of payment and upon
liquidation to all existing and future Senior Indebtedness of the Company,
including indebtedness under the New Credit Facility. Subject to certain
restrictions contained in the terms of the Company's indebtedness, the Company
may incur additional Senior Indebtedness in the future. As of December 31,
1996, after giving pro forma effect to the Loomis Fargo Combination and the
Refinancing, the aggregate outstanding principal amount of Senior Indebtedness
(exclusive of undrawn letters of credit of approximately $128.8 million) of
the Company would have been approximately $75.1 million. As of December 31,
1996, there were also $150 million aggregate principal amount of the Company's
9 1/8% Notes outstanding which rank pari passu in right of payment and upon
liquidation with the Old Notes and will rank pari passu in right of payment
and upon liquidation with the Exchange Notes. See "--Holding Company
Structure" and "Description of the Notes--Subordination."
In the event of the liquidation, dissolution, reorganization or
any similar proceeding regarding the Company, the assets of the Company will
be available to pay obligations on the Notes only after the Senior
Indebtedness of the Company has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on all or any of the Notes. The
Old Notes rank and the Exchange Notes will rank pari passu with the Company's
obligations under the 9 1/8% Notes upon the liquidation, dissolution,
reorganization or any similar proceeding regarding the Company. In addition,
the Company may not pay principal of, premium, if any, or interest on the
Notes or purchase, redeem or otherwise retire the Notes, if any principal,
premium, if any, or interest on any Specified Senior Indebtedness (as defined
herein) is not paid when due (whether at final maturity, upon scheduled
installment, acceleration or otherwise) unless such default has been cured or
waived or such Specified Senior Indebtedness has been repaid in full. In
addition, under certain circumstances, if any non-payment default exists with
respect to Specified Senior Indebtedness pursuant to which the maturity
thereof may be accelerated, the Company may not be permitted to make any
payments on the Notes for a specified period of time, unless such default is
cured or waived or such Specified Senior Indebtedness has been repaid in full.
See "Description of the Notes--Subordination."
Holding Company Structure
The Company is a holding company that derives all of its
operating income and cash flow from its subsidiaries. Generally, claims of
creditors of a subsidiary, including trade creditors, secured creditors and
creditors holding indebtedness and guarantees issued by such subsidiary, and
claims of preferred stockholders (if any) of such subsidiary will have
priority with respect to the assets and earnings of such subsidiary over the
claims of creditors of its parent company, except to the extent the claims of
creditors of the parent company are guaranteed by such subsidiary. No
guarantees of the Notes are provided by any person in connection with the
offering of the Exchange Notes and, except to the limited extent provided for
in the Indenture, there will be no guarantees of the Notes in the future. The
Notes, therefore, will be effectively subordinated to creditors (including
trade creditors) and preferred stockholders (if any) of the direct and
indirect subsidiaries of the Company. At December 31, 1996, on a pro forma
basis after giving effect to the Loomis Fargo Combination and the Refinancing,
the aggregate outstanding principal amount of indebtedness (exclusive of
obligations in respect of undrawn letters of credit of approximately $128.8
million) of the Company's subsidiaries (including guarantees by certain of the
Company's subsidiaries of the Company's obligations under the New Credit
Facility) would have been approximately $83.3 million. Although the Indenture
and the Notes contain limitations on the amount of additional indebtedness
that the Company's subsidiaries may incur, under certain circumstances such
indebtedness could be substantial. Moreover, neither the Indenture nor the
Notes imposes any limitation on the incurrence by such subsidiaries of
liabilities that are not considered Indebtedness under the Indenture or the
Notes. See "Description of the Notes--Certain Covenants--Limitation on
Indebtedness."
As a holding company, the Company's operating cash flow and its
ability to service its indebtedness, including the Notes, is dependent upon
the operating cash flow of its subsidiaries and the payment of funds by such
subsidiaries to the Company in the form of loans, dividends or otherwise. The
Company's subsidiaries have no obligation, contingent or otherwise, to pay any
amounts due pursuant to the Notes or to make any funds available therefor.
Asset Encumbrances; Change of Control Offer
In addition to being subordinated to all existing and future
Senior Indebtedness of the Company, the Exchange Notes will not be secured by
any of the Company's assets. The obligations of the Company under the New
Credit Facility are secured by pledges of certain intercompany indebtedness,
all the outstanding stock of certain of the Company's U.S. subsidiaries, 65%
of the outstanding stock of certain of the Company's non-U.S. subsidiaries and
all of the stock of Loomis Fargo owned by the Company. If the Company becomes
insolvent or is liquidated, or if payment of obligations under the New Credit
Facility is accelerated, the lenders under the New Credit Facility would be
entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to such agreement. Accordingly, such lenders will
have a prior claim with respect to such assets. See "Description of Certain
Indebtedness--New Credit Facility."
Upon a Change of Control, the Company is required to offer to
purchase all outstanding Notes. The Company, in such a circumstance, would
also be required to offer to purchase the 9 1/8% Notes. In addition, such a
Change of Control would result in an event of default under the New Credit
Facility, which may result in the acceleration of the Company's obligations
thereunder. In the case of any offer to purchase the outstanding Notes upon a
Change of Control, there can be no assurance that the Company would be able to
repay amounts outstanding under the New Credit Facility or obtain waivers
necessary to consummate a purchase of the Notes. Any such requirement to offer
to purchase outstanding Notes may result in the Company having to refinance
the indebtedness then outstanding under the New Credit Facility and to obtain
the funds necessary to offer to purchase both the Notes and the 9 1/8% Notes.
There can be no assurance that the Company would be able to refinance such
indebtedness or obtain such funds or, if it were to do so, that such
refinancing or such funds would be available on terms favorable to the
Company. See "Description of Certain Indebtedness--New Credit Facility;--9
1/8% Notes" and "Description of the Notes--Purchase of Notes Upon Change of
Control."
Employee Retention and Labor Costs
The Company's business is labor intensive and, accordingly, is
affected by the availability of qualified personnel and the cost of labor.
Contraction of the labor market in the various regions of the United States
where the Company has its principal operations, whether caused by high
economic growth in such regions or any other factors, may increase the
Company's direct costs through higher wages and increased amounts of unbilled
overtime. Employee turnover can result in increased recruiting, screening and
training costs, and affect the quality of service performed by the Company.
In addition, while the Company's customer agreements typically adjust the
billing rate based on changes in any law, ruling or collective bargaining
agreement causing changes in wage rates or other costs, competitive pricing
conditions in the industry may constrain the Company's ability to adjust its
billing rates to reflect such increased costs. See "Business--Employees."
Liability Claims and Insurance Coverage
The nature of the Company's services potentially exposes it to
greater risks of liability for employee acts, injuries (including workers'
compensation claims) or omissions than may be posed by other service
businesses. The Company carries insurance of various types, including
workers' compensation, automobile and general liability coverage. These
policies include deductibles per occurrence for which the Company is
self-insured. While the Company seeks to maintain appropriate levels of
insurance, there can be no assurance that the Company will avoid significant
future catastrophic claims or adverse publicity related thereto. There can be
no assurance that the Company's insurance will be adequate to cover the
Company's liabilities or that such insurance coverage will remain available at
acceptable costs. A successful claim brought against the Company for which
coverage is denied or which is in excess of its insurance coverage could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Risk Management."
Competition in the Industry
The protective services industry generally is highly fragmented
and very competitive. The Company's physical security services unit competes
in a business environment with low barriers to entry, while the electronic
security services unit competes in a business environment characterized by
relatively high capital investment due to the equipment and technology
required. Consequently, the Company's business is subject to additional
competition and the introduction of new technology or enhancements to existing
technology. Some of the Company's competitors are materially larger than the
Company and have greater access to financial and other resources available to
them. Given the Company's high degree of leverage and the restrictions on
capital spending contained in the New Credit Facility, there can be no
assurance that the Company will be able to maintain levels of spending
required to provide customers with advanced technological equipment. See
"Business--Competition" and "Description of Certain Indebtedness--New Credit
Facility."
Governmental Regulation
Due to the nature of the Company's security services business,
its operations are subject to a variety of federal, state, county and
municipal laws, regulations and licensing requirements. Changes in such laws,
regulations and licensing requirements may constrain the Company's ability to
provide services to customers or increase the costs of such services.
Competitive pricing conditions in the industry may constrain the Company's
ability to adjust its billing rates to reflect such increased costs. See
"Business--Regulation."
Certain Liabilities for Discontinued Operations
The Company and certain of its current and former subsidiaries
have been identified as potentially responsible parties for environmental
cleanups at previously owned or operated sites and at third party hazardous
waste disposal sites and, as such, may be liable for the costs of cleanup and
other remedial activities at these sites or for claims for natural resource or
property damage or injury to human health caused by contamination at such
sites. The Company has discontinued or disposed of a number of businesses in
prior years, including the Company's industrial products business and BWAC
Inc. subsidiary disposed of in 1987, the Company's chemicals and plastics
business disposed of in 1988, the Company's information services segment
disposed of in 1989, the operations of BW Automotive spun-off in 1993 and the
Wells Fargo Armored business contributed to Loomis Fargo in 1997. Pursuant to
the various transaction agreements, certain of the environmental and other
liabilities relating to discontinued or disposed of businesses of the Company
are the responsibility of the Company and others are the responsibility of
other parties to the transactions. The Company has made provisions in its
financial statements for liabilities relating to environmental matters with
respect to discontinued or disposed of operations in the aggregate amount of
approximately $9 million. See "Business--Legal Proceedings."
In addition, in the third quarter of 1996, the Company elected
to treat its courier services unit as a discontinued operation and incurred a
non-cash charge of $25 million to provide for future losses and liabilities.
No assurance can be given that the Company will not incur losses or
liabilities related to its courier services unit in excess of such reserve.
See "Business--Discontinued Operations."
Additionally, Centaur Insurance Company ("Centaur"), a
discontinued property and casualty insurance subsidiary, has been operating
under rehabilitation since September 1987, a process which has resulted in one
pending lawsuit against the Company seeking substantial amounts for recovery
of alleged damages from the failure of Centaur to satisfy its reinsurance
obligations. See "Business--Legal Proceedings."
Although the Company believes that none of these matters will
have a material adverse effect on its financial position or future operating
results, no assurance can be given as to the ultimate outcome with respect to
such liabilities. See "Business--Legal Proceedings."
Control of the Company
Certain affiliates (the "ML Entities") of Merrill Lynch & Co.,
a Delaware corporation ("Merrill Lynch"), control approximately 46% of the
voting power of the Company. See "Principal Shareholders." Accordingly, in the
event the ML Entities vote in concert in connection with matters submitted to
a stockholder vote, such as the election of the Company's Board of Directors,
they may be able to determine the outcome of such matters and control the
direction and future operations of the Company.
A "change of control," as defined in various agreements,
including the New Credit Facility, the 9 1/8% Note Indenture and the
Indenture, would impose substantial financial obligations on the Company and
would require the Company to refinance substantial amounts of its
indebtedness. A "change of control", as defined in the New Credit Facility,
would be an event of default thereunder, permitting the lenders under the New
Credit Facility to accelerate the Company's payment obligations thereunder,
and a "change of control", as defined in the 9 1/8% Note Indenture and the
Indenture, would require the Company to make an offer to purchase all of the
outstanding 9 1/8% Notes and the Notes. See "--Asset Encumbrances; Change of
Control Offer", "Description of Certain Indebtedness--New Credit Facility;--9
1/8% Notes" and "Description of the Notes--Purchase of Notes Upon Change of
Control."
Lack of Prior Market for the Exchange Notes
The Exchange Notes are being offered to the Holders of the Old
Notes. The Old Notes were offered and sold in March 1997 to "Qualified
Institutional Buyers" and to a limited number of other institutional
"Accredited Investors" (as defined in Rule 144A and Rule 501(a) (1), (2), (3)
or (7) under the Securities Act, respectively) and in offshore transactions
complying with Rule 903 or Rule 904 of Regulation S under the Securities Act
and are eligible for trading in the Private Offerings, Resale and Trading
through Automated Linkages ("PORTAL") Market.
The Exchange Notes will be new securities for which there is
currently no established trading market, and none may develop. Although the
Initial Purchasers are making a market in the Old Notes and have indicated to
the Company that they currently intend to make a market in the Exchange Notes,
as permitted by applicable laws and regulations, they are under no obligation
to do so; and such market-making could be discontinued at any time, without
notice, at the sole discretion of the Initial Purchasers. In addition, such
market making activities may be limited during the Exchange Offer and the
pendency of the Shelf Registration Statement. Moreover, if Merrill Lynch,
Pierce, Fenner & Smith Incorporated conducts any market making activities in
respect of the Exchange Notes, it may be required to deliver a "market-making
prospectus" when effecting offers and sales in the Exchange Notes because of
the equity ownership of affiliates of Merrill Lynch (in the aggregate, the ML
Entities control approximately 46% of the voting power of the Company). For
so long as a market-making prospectus is required to be delivered, the ability
of Merrill Lynch, Pierce, Fenner & Smith Incorporated to make a market in the
Exchange Notes may in part be dependent on the ability of the Company to
maintain a current market-making prospectus. Accordingly, no assurance can be
given that an active trading market for the Exchange Notes will develop or, if
such a market develops, as to the liquidity of such market. The Company
intends to apply for listing of the Exchange Notes on the New York Stock
Exchange. If the Exchange Notes, are traded after their initial issuance, they
may trade at a discount from their initial offering price, depending upon
prevailing interest rates, the market for similar securities, the performance
of the Company and certain other factors.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject
to the restrictions on transfer of such Old Notes as set forth in the
legend thereon. In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to the Securities Act and applicable
state securities laws. The Company does not intend to register the Old
Notes under the Securities Act. The Company believes that, based upon
interpretations contained in letters issued to third parties by the staff
of the SEC, Exchange Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by each Holder thereof (other than a broker-dealer, as set
forth below, and any such Holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) without compliance
with the registration and prospectus delivery provisions of the Securities
Act provided that such Exchange Notes are acquired in the ordinary course
of such Holder's business and such Holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes. Eligible Holders wishing to accept the Exchange Offer must
represent to the Company in the Letter of Transmittal that (i) the Exchange
Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is such holder, (ii) neither the holder of Old
Notes nor any such other person has an arrangement or understanding with
any person to participate in the distribution of such Exchange Notes, (iii)
if the holder is not a broker-dealer or is a broker-dealer but will not
receive Exchange Notes for its own account in exchange for Old Notes,
neither the holder nor any such other person is engaged in or intends to
participate in a distribution of the Exchange Notes and (iv) neither the
holder nor any such other person is an "affiliate" of the Company within
the meaning of Rule 405 or if such holder is an "affiliate", that such
holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. Each broker-
dealer (whether or not it is also an "affiliate,") that receives Exchange
Notes for its own account pursuant to the Exchange Offer must represent
that the Old Notes tendered in exchange therefor were acquired as a result
of market-making activities or other trading activities and must
acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with the resales
of Exchange Notes received in exchange for Old Notes where such Old Notes
were acquired by such broker-dealer as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of
180 days after the Expiration Date (as defined herein), it will make this
Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." However, to comply with the
securities laws of certain jurisdictions, if applicable, the Exchange Notes
may not be offered or sold unless they have been registered or qualified
for sale in such jurisdiction or an exemption from registration or
qualification is available and is complied with. The Company does not
currently intend to take any action to register or qualify the Exchange
Notes for resale in any such jurisdictions.
In the event the Exchange Offer is consummated, the Company
will not be required to register the transfer of the Old Notes under the
Securities Act or any applicable securities laws. In such event, holders of
Old Notes seeking liquidity in their investment would have to rely on
exemptions to the registration requirements under such laws. The Old Notes
currently may be sold to "Qualified Institutional Buyers" and to a limited
number of other institutional "Accredited Investors" (as defined in Rule 144A
and Rule 501(a) (1), (2), (3) or (7) under the Securities Act, respectively)
and in offshore transactions complying with Rule 903 or Rule 904 of Regulation
S under the Securities Act or pursuant to another available exemption under
the Securities Act without registration under the Securities Act. To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
reduction in the principal amount of Old Notes outstanding could have an
adverse effect upon, and increase the volatility of the market price for, the
untendered and tendered but unaccepted Old Notes
Exchange Offer Procedures
To participate in the Exchange Offer, and avoid the
restrictions on Old Notes, each Holder of Old Notes must transmit a properly
completed Letter of Transmittal, including all other documents required by
such Letter of Transmittal, to the Bank of New York (the "Exchange Agent") at
the address set forth below under "Exchange Agent" on or prior to the
Expiration Date. In addition, (i) certificates for such Old Notes must be
received by the Exchange Agent along with the Letter of Transmittal, (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the
Holder must comply with the guaranteed delivery procedures. See "The Exchange
Offer."
CAPITALIZATION
The following table sets forth the historical capitalization of
the Company as of December 31, 1996 and the pro forma capitalization of the
Company as of such date after giving effect to the Loomis Fargo Combination
and the Refinancing. The column headed "Actual" should be read in conjunction
with the historical financial statements of the Company, including the related
notes thereto, appearing elsewhere in this Prospectus and the column headed
"Pro Forma" should be read in conjunction with the unaudited Pro Forma
Financial Data, including the related notes thereto, appearing elsewhere in
this Prospectus.
As of December 31, 1996
---------------------------
Actual Pro Forma
--------- ---------
(millions of dollars)
Cash and cash equivalents............ $ 17.8 $ 17.8
====== ======
Short-term debt:
Notes payable................... $ 4.4 $ 3.8
====== ======
Long-term debt:(1)
Old Revolving Loan.............. $ 86.8 --
Old Term Loan(2)................ 196.8 --
New Revolving Facility.......... -- 75.1
9 1/8% Senior Subordinated Notes 149.2 149.2
Notes........................... -- 124.2
Other long-term debt............ 5.4 4.4
------ ------
438.2 352.9
------ ------
Stockholders' equity:
Common stock.................... 0.2 0.2
Other stockholders' equity...... 41.0 41.0
------ ------
41.2 41.2
------ ------
Total capitalization............ $479.4 $394.1
====== ======
- -----------------
(1) Long-term debt does not include amounts available to be drawn under
issued and outstanding letters of credit, which as of December 31, 1996
were $136.3 million ($128.8 million pro forma), or amounts outstanding
under the Company's non-recourse receivables-backed facility, which as
of December 31, 1996 were $120 million. See "Description of Certain
Indebtedness."
(2) In January 1997, the principal amount outstanding under the Old Term Loan
was reduced with the proceeds from the Loomis Fargo Combination.
SELECTED FINANCIAL DATA
Set forth below is certain selected historical consolidated
financial data for the Company as of and for the five fiscal years ended
December 31, 1996. The selected historical consolidated financial data as of
and for the five fiscal years indicated were derived from the financial
statements of the Company which were audited by Deloitte & Touche LLP,
independent auditors, and treat as discontinued operations for all periods
presented BW Automotive, which was spun-off in January 1993, and the Company's
courier unit, which has been treated as a discontinued operation since
September 1996. The selected historical financial data set forth below should
be read in conjunction with the Consolidated Financial Statements of the
Company and the notes thereto included elsewhere in this Prospectus.
[CAPTION]
<TABLE>
Year Ended December 31,
---------------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
(millions of dollars)
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Net service revenues................ $1,457.9 $1,592.1 $1,626.8 $1,708.5 $1,711.2
Cost of services.................... 1,121.8 1,241.2 1,289.4 1,359.3 1,360.2
-------- -------- -------- -------- --------
Gross profit........................ 336.1 350.9 337.4 349.2 351.0
Selling, general and administrative
expenses.......................... 210.7 187.1 220.2 212.5 210.6
Depreciation........................ 46.7 50.5 52.8 52.1 47.0
Amortization of excess of purchase
price over net assets acquired... 20.2 15.2 14.8 13.4 13.4
Other income, net (1)............... (17.2) (3.1) (9.8) -- --
-------- -------- -------- -------- --------
Operating income.................... 75.7 101.2 59.4 71.2 80.0
Non-recurring elimination of excess
purchase price over net assets
acquired (2)...................... -- 250.0 -- -- --
Interest expense
and finance charges............... 46.4 49.9 48.8 55.9 56.6
-------- -------- -------- -------- --------
Earnings (loss) before taxes........ 29.3 (198.7) 10.6 15.3 23.4
Provision (benefit) for
income taxes....................... (23.6) 19.5 (3.2) 6.9 9.5
-------- -------- -------- -------- --------
Earnings (loss) from continuing
operations......................... 52.9 (218.2) 13.8 8.4 13.9
Certain Financial Ratios and Other Data:
EBITDA (3).......................... 142.6 166.9 127.0 136.7 140.4
Capital expenditures and investments
in sales-type leases.............. 65.6 62.3 59.4 47.8 40.7 (4)
Ratio of EBITDA to
interest expense.................. 3.1x 3.3x 2.6x 2.4x 2.5x
Ratio of earnings to
fixed charges (5)................. 1.6x 1.9x 1.2x 1.2x 1.4x
Balance Sheet Data:
Working capital..................... $(62.9) $(37.3) $(27.9) $(6.9) $(11.0)
Total assets........................ 1,742.7 773.5 811.6 838.5 760.8
Total long-term debt,
excluding current
maturities (6).................... 714.1 443.6 450.2 480.9 438.2
Stockholders' equity................ 676.7 27.5 43.8 49.7 41.2
<FN>
- -----------------
(1) For the years ended December 31, 1992, 1993 and 1994 other income
consisted of interest income, gains on asset dispositions and royalty
income.
(2) Following the spin-off of BW Automotive, $250 million of excess purchase
price over net assets acquired not directly attributed to the protective
services business was written off as a charge to earnings in the first
quarter of 1993.
(3) EBITDA consists of earnings (loss) before interest expense, minority
interests, income taxes, depreciation, amortization and equity in
earnings of unconsolidated subsidiaries. EBITDA is commonly used to
analyze companies on the basis of operating performance, leverage and
liquidity. While EBITDA should not be construed as a substitute for
operating income or a better measure of liquidity than cash flow from
operating activities, which are determined in accordance with
generally accepted accounting principles, it is included herein to
provide additional information with respect to the ability of the
Company to meet future debt service, capital expenditures and working
capital requirements.
(4) Capital expenditures and investments in sales-type leases for the year
ended December 31, 1996 includes sales-type leases that were sold to a
third party for $10.4 million.
(5) For the purposes of calculating the ratio of earnings to fixed
charges, earnings represent income (loss) before income taxes plus
fixed charges. Fixed charges consist of interest expense on all
indebtedness plus the interest portion of rental expense on
noncancelable leases, and amortization of debt issuance costs and debt
discount. The calculation for the year ended December 31, 1993
excludes the non-recurring elimination of excess purchase price over
net assets acquired.
(6) Total long-term debt does not include amounts available to be drawn
under issued and outstanding letters of credit, which as of December
31, 1996 were $136.3 million, or amounts outstanding under the
Company's non-recourse receivables-backed facility, which as of
December 31, 1996 were $120 million.
</TABLE>
PRO FORMA FINANCIAL DATA (UNAUDITED)
The following unaudited Pro Forma Financial Data are based on
the historical financial statements of the Company and reflect the Loomis
Fargo Combination and the Refinancing. The accompanying unaudited Pro Forma
Consolidated Statement of Operations for the year ended December 31, 1996
gives effect to the transactions referred to above as if they had been
consummated on January 1, 1996. The unaudited Pro Forma Consolidated Balance
Sheet at December 31, 1996 gives effect to the transactions referred to above
as if they had been consummated as of that date.
While the Company anticipates that it will recognize a gain
from the sale of Wells Fargo Armored unit's net assets, the ultimate gain is
subject to potential purchase price adjustments and other contingencies, the
amounts of which have not been finalized at this time. However, the Company
does not anticipate that the gain will be material, and the Company does not
expect any material nonrecurring charges or credits to result from the Loomis
Fargo Combination.
The unaudited Pro Forma Financial Data is intended for
informational purposes only and is not necessarily indicative of the future
results of operations or financial position of the Company had the
transactions described above occurred on the indicated dates or been in effect
for the periods presented.
The unaudited Pro Forma Financial Data and the accompanying
notes should be read in conjunction with the historical Consolidated Financial
Statements of the Company, including the related notes thereto, appearing
elsewhere in this Prospectus.
BORG-WARNER SECURITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(millions of dollars)
<TABLE>
<CAPTION>
Pro Forma
Adjustments for
the Loomis Pro Forma
Fargo Adjustments for
Historical Combination(a) the Refinancing Pro Forma
---------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
Net service revenues.................. $1,711.2 $(246.3) $1,464.9
Cost of services...................... 1,360.2 (204.5) 1,155.7
Selling, general and
administrative expenses.............. 210.6 (20.7) 189.9
Depreciation.......................... 47.0 (7.1) 39.9
Amortization of excess
purchase price over net
assets acquired...................... 13.4 (1.5) 11.9
Other income.......................... -- 3.8 (e) -- 3.8
Interest expense and finance charges.. 56.6 (9.1)(b) (3.1) (c) 44.4
-------- -------- -------- --------
Earnings before income taxes.......... 23.4 0.4 (3.1) 26.9
Provisions for income taxes........... 9.5 (1.3)(d) 1.2 (d) 9.4
-------- -------- -------- --------
Earnings from continuing
operations........................... $ 13.9 $ 1.7 $ 1.9 $ 17.5
======== ======== ======= ========
</TABLE>
BORG-WARNER SECURITY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1996
(millions of dollars)
<TABLE>
<CAPTION>
Pro Forma
Adjustments for
the Loomis Pro Forma
Fargo Adjustments for
Historical Combination (f) the Refinancing Pro Forma
---------- -------------- --------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................. $ 17.8 $ -- $ 17.8
Receivables, net.......................... 100.4 (28.7) 71.7
Inventories............................... 12.1 (1.8) 10.3
Other current assets...................... 36.8 11.3 (g) 48.1
-------- --------
Total current assets................ 167.1 (19.2) 147.9
Property, plant and equipment, at cost.... 442.6 (76.5) 366.1
Less accumulated depreciation............. 239.5 (45.6) 193.9
-------- -------- --------
Net property, plant and equipment... 203.1 (30.9) 172.2
Net excess purchase price over net assets
acquired................................. 237.2 (27.4) 209.8
Deferred tax asset, net................... 46.8 (5.1) 41.7
Net assets of discontinued operations..... 12.6 -- 12.6
Other assets.............................. 94.0 (7.9) $ 5.7 (h) 88.4
-------- -------- -------- --------
Total assets........................ $ 760.8 $ (90.5) $ 5.7 $ 672.6
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Notes payable............................. $ 4.4 $ (0.6) $ 3.8
Accounts payable and accrued expenses..... 173.7 (10.1) 163.6
-------- -------- --------
Total current liabilities........... 178.1 (10.7) 167.4
Long-term debt............................ 438.2 (91.0) (g) $ 5.7 (i) 352.9
Other long-term liabilities............... 103.3 11.2 (j) 114.5
Capital stock:
Common stock........................ 0.2 -- 0.2
Series I non-voting common stock.... -- -- --
Capital in excess of par value............ 29.0 -- 29.0
Retained earnings......................... 20.6 -- 20.6
Notes receivable--management stock purchas (0.3) -- (0.3)
Cumulative translation adjustment......... 0.5 -- 0.5
-------- -------- --------
50.0 50.0
Treasury common stock..................... (8.8) (8.8)
-------- -------- --------
Total stockholders' equity.......... 41.2 41.2
-------- -------- -------- --------
Total liabilities and
stockholders' equity.............. $ 760.8 $ (90.5) $ 5.7 $ 676.0
======== ======== ======== ========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
BORG-WARNER SECURITY CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) To eliminate the historical revenues and expenses of Wells Fargo
Armored.
(b) Reflects the decrease in interest expense related to the reduction in
the Company's borrowings under the Old Term Loan and Old Revolving
Loan as a result of cash proceeds received by the Company from the
Loomis Fargo Combination. The interest expense adjustment was
computed using the average interest rates for the respective periods.
Such rates were used because management believes these rates would not
have been materially different if the facilities had been negotiated
by the Company on a stand-alone basis without Wells Fargo Armored.
(c) Reflects the decrease in interest expense as a result of lower average
interest rates on borrowings under the New Credit Facility and the
Notes as compared to the Old Term Loan and Old Revolving Loan together
with lower amortization of financing costs.
(d) To record the estimated income tax effect for the pro forma adjustments.
(e) To recognize, under the equity method, the Company's 49% interest in the
pro forma earnings and net assets of Loomis Fargo.
(f) To eliminate the sold assets and liabilities of Wells Fargo Armored.
(g) To eliminate debt retired with proceeds received from the Loomis Fargo
Combination. Cash proceeds from the Loomis Fargo Combination, net of
transaction and related expenses, were approximately $105 million and
were applied as follows: decrease in borrowings under the Old Term
Loan, $80 million; decrease in borrowings under the Old Revolving
Loan, $10 million; and increase in interest-bearing cash deposits
under the non-recourse receivables-backed facility, $15 million.
(h) Reflects capitalized financing fees and expenses incurred in
connection with the Refinancing.
(i) To reflect incremental indebtedness incurred in the Refinancing.
(j) For anticipated expenses incurred as a direct result of the Loomis
Fargo Combination and for purchase price adjustments in connection
therewith.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition
and results of operations should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto and
other data and information appearing elsewhere in this Prospectus.
General
The Company provides a broad range of protective services
through its physical and electronic security service businesses. The Company's
physical security services unit is the nation's largest provider of contract
security personnel with approximately 73,000 employees serving approximately
14,000 customers in the United States, Canada, the United Kingdom and South
America. The Company's electronic security services unit is a leading full
service provider of electronic security services, including intrusion and fire
detection, sprinkler and critical industrial process monitoring, closed
circuit television and access control. The electronic security unit serves
approximately 126,000 customers with approximately 2,200 employees.
The Company believes that the security industry has experienced
and will continue to experience significant changes in the future. Increased
outsourcing of security management needs, customer demand for single point
responsibility, financial stability of security providers and improved quality
and reliability of services are factors driving the trend toward Total
Security Solutions. Through its ability to offer both physical and electronic
security services and access to transportation security services, the Company
believes it is well positioned to effectively and profitably provide customers
with the Total Security Solutions they desire.
Based on the industry trends and customer demands, as well as
the desire to reduce its capital requirements, the Company has focused its
resources on the core electronic and physical security services businesses. As
a result, in the third quarter of 1996, the Company elected to treat its
courier services unit as discontinued, incurring a non-cash charge of $25
million, or earnings per share equivalent of $1.06, to provide for anticipated
future losses and liabilities. Also, the Company combined its armored
transport business with Loomis Armored Inc. in January 1997. The combined
company, known as Loomis, Fargo & Co., is owned 51% by the former Loomis
shareholders and 49% by the Company. The combination created a leading armored
transportation and ATM services company with broad geographic coverage. This
transaction allowed the Company to reduce its total debt, including under the
non-recourse receivables-backed facility, by $105 million.
On March 24, 1997, the Company completed the Refinancing
pursuant to which it offered and sold $125,000,000 aggregate principal amount
of its Old Notes (the "Old Note Offering") and replaced the Old Term Loan, the
Old Revolving Loan and the Old LC Facility with a New Credit Facility. The
New Credit Facility consists of up to a $155 million New Revolving Facility
and up to a $155 million New LC Facility, subject to an overall limit on the
aggregate amount at any time outstanding under both facilities of $285
million. The net proceeds from the Old Note Offering were approximately
$120.4 million. See "Description of Certain Indebtedness--New Credit
Facility;--Old Notes."
In 1995 the Company began recognizing certain long-term alarm
service contracts as sales-type leases rather than operating leases. Revenue
and costs under sales-type leases are recognized immediately based on the
present value of all payments under the lease contract. Under operating
leases, revenue and costs are recognized ratably over the lease term.
Results of Operations
The following table sets forth consolidated operating results
as a percentage of total revenues for the historical periods indicated:
Year Ended December 31,
--------------------------------------
1994 1995 1996
------ ------ ------
Net service revenues........ 100.0% 100.0% 100.0%
Cost of services............ 79.3 79.6 79.5
----- ----- -----
Gross profit................ 20.7 20.4 20.5
Selling, general and
administrative expenses.... 13.5 12.4 12.3
Depreciation................ 3.2 3.0 2.7
----- ----- -----
Operating profit............ 4.0% 5.0% 5.5%
===== ===== =====
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Total revenues increased to $1,711.2 million in 1996 from
$1,708.5 million in 1995, an increase of $2.7 million or 0.2%. Physical
security services revenues increased to $1,223.8 million in 1996 from
$1,222.8 million in 1995, an increase of $1.0 million or 0.1%. Revenue was
essentially flat primarily due to management's decision to prune low margin
and higher risk business during the year. Electronic security services
revenues decreased to $241.1 million in 1996 from $254.7 million in 1995, a
decrease of $13.6 million or 5.3%. In 1995 the Company began recognizing
certain long-term alarm service contracts as sales-type leases rather than
operating leases. This change increased revenues by approximately $24.3
million in 1996 and $38.5 million in 1995. Excluding the impact of
sales-type lease accounting, electronic security services revenues were
essentially flat in 1996 primarily due to management's decision to
implement investment and pricing controls. Armored services total revenues
increased to $246.3 million in 1996 from $231.0 million in 1995, an
increase of $15.3 million or 6.6%. This increase was principally due to
higher volume in ATM services.
Gross profit increased to $351.0 million in 1996 from $349.2
million in 1995, an increase of $1.8 million or 0.5%. Gross profit margin
increased slightly to 20.5% in 1996 from 20.4% in 1995 primarily due to the
Company's commitment to improved contract profitability and internal
productivity improvement programs which offset increased costs.
Selling, general, and administrative expenses decreased to
$210.6 million in 1996 from $212.5 million in 1995, a decrease of $1.9 million
or 0.9%. As a percent of total revenues, selling, general, and administrative
expenses decreased to 12.3% in 1996 from 12.4% in 1995. This decrease was
principally due to continued cost reduction efforts, partially offset by
increased investments in training and recruiting of employees and in
information systems.
Depreciation expenses decreased to $47.0 million in 1996 from
$52.1 million in 1995, a decrease of $5.1 million or 9.8%. The decrease was
principally due to reduced electronic security equipment under operating
leases.
Operating profit increased to $93.1 million in 1996 from $85.9
million in 1995, an increase of $7.2 million or 8.4%. Operating profit margin
increased to 5.4% in 1996 from 5.0% in 1995. Physical security services
operating profit increased to $62.1 million in 1996 from $56.4 million in
1995, an increase of $5.7 million or 10.1%. Electronic security services
operating profit increased to $18.9 million in 1996 from $15.8 million in
1995, an increase of $3.1 million or 19.6%. Armored services operating profit
decreased to $12.1 million in 1996 from $13.7 million in 1995, a decrease of
$1.6 million or 11.7%.
Interest expense, including the amortization of financing
costs, increased to $56.6 million in 1996 from $55.9 million in 1995 as a
result of higher costs associated with the issuance and renegotiation of
certain bank lines of credit and borrowing facilities. This was partially
offset by the benefits of lower short-term market rates of interest and lower
average debt levels outstanding.
Income taxes were $9.5 million and $6.9 million in 1996 and
1995, respectively. The Company's effective tax rate generally exceeds the
statutory rate because of non-deductible excess purchase price amortization.
Earnings from continuing operations for 1996 were $13.9
million, up 65.5% from $8.4 million in 1995. Including the impact of the
discontinued Pony Express Courier business, the Company incurred a net loss of
$14.6 million in 1996, compared with net earnings of $1.2 million in 1995.
The loss from discontinued operations in 1996 included a $25.0
million non-cash charge related to the decision to treat the Company's courier
business as discontinued. In 1995, the Company incurred an extraordinary
charge of $4.7 million, net of tax, related to the early extinguishment of
debt in connection with the amendment of the Company's credit facilities.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Total revenues increased to $1,708.5 million in 1995 from
$1,626.8 million in 1994, an increase of $81.7 million or 5.0%. Physical
security services revenues increased to $1,222.8 million in 1995 from $1,209.4
million in 1994, an increase of $13.4 million or 1.1%. The increase was
principally due to higher billing rates and new business growth. Electronic
security services revenues increased to $254.7 million in 1995 from $206.2
million in 1994, an increase of $48.5 million or 23.5%. In 1995 the Company
began recognizing certain long-term alarm service contracts as sales-type
leases rather than operating leases. This change increased revenues by
approximately $38.5 million in 1995. Excluding the impact of sales-type lease
accounting, alarm revenues were $216.2 million and $206.2 million in the years
1995 and 1994, respectively. The increase of 4.8% was principally due to
higher direct sales of commercial installations and higher service revenue on
residential operations. Armored services total revenues increased to $231.0
million in 1995 from $211.2 million in 1994, an increase of $19.8 million or
9.4%. This increase was principally due to better pricing and higher volume in
the Wells Fargo Armored Express and ATM services operations.
Gross profit increased to $349.2 million in 1995 from $337.4
million in 1994, an increase of $11.8 million or 3.5%. Gross profit margin
decreased to 20.4% in 1995 from 20.7% in 1994. The decrease was primarily due
to competitive price pressures and general cost increases.
Selling, general, and administrative expenses decreased to
$212.5 million in 1995 from $220.2 million in 1994, a decrease of $7.7 million
or 3.5%. As a percent of total revenues, selling, general, and administrative
expenses decreased to 12.4% in 1995 from 13.5% in 1994. This decrease was
principally due to continued cost reduction efforts and reduced selling
expenditures.
Depreciation expenses decreased to $52.1 million in 1995 from
$52.8 million in 1994, a decrease of $0.7 million or 1.3%. The decrease was
principally due to reduced alarm equipment under operating leases.
Operating profit increased to $85.9 million in 1995 from $76.1
million in 1994, an increase of $9.8 million or 12.9%. Operating profit margin
increased to 5.0% in 1995 from 4.7% in 1994. Physical security services
operating profit increased to $56.4 million in 1995 from $54.5 million in
1994, an increase of $1.9 million or 3.5%. Electronic security services
operating profit increased to $15.8 million in 1995 from $14.9 million in
1994, an increase of $0.9 million or 6.0%. Armored services operating profit
increased to $13.7 million in 1995 from $6.7 million in 1994, an increase of
$7.0 million or 104.5% principally due to improved pricing relative to assumed
risks.
Other income in 1994 included a gain of $9.9 million related to
the sale of trademarks and other rights to BW Automotive.
Interest expense, including the amortization of financing
costs, increased to $55.9 million in 1995 from $48.8 million in 1994 as a
result of higher market interest rates combined with increased rates under the
1995 credit agreement amendments and refinancing.
Income taxes were $6.9 million in 1995 compared to a net income
tax benefit of $3.2 million recorded by the Company in 1994 primarily because
of adjustments to deferred income taxes of $7.0 million related to changes in
the tax basis of certain liabilities as a result of sales and settlements. The
Company's effective tax rate generally exceeds the statutory rate because of
non-deductible excess purchase price amortization.
The Company incurred an extraordinary charge of $4.7 million,
net of tax, from the early extinguishment of debt in connection with the
amendment of the Company's credit facilities. Net earnings including such
charge were $1.2 million in 1995 compared to net earnings of $13.1 million in
1994.
International Operations
Revenues from international operations for 1996 were $116.7
million compared with $109.4 million in 1995 and $101.7 million in 1994.
Operations are primarily in Canada, Colombia and the United Kingdom and
principally involve the employment and assignment of contract guard personnel.
Financial Position, Capital Resources and Liquidity
The Company continues its strategy to become less capital
intensive and to produce steady cash flow from operations. In addition to
internally generated cash flow, the Company maintains financing resources that
are sufficient to meet working capital and other needs.
Cash Flow
The Company generated cash flow from operating activities of
$86.9 million in 1996, compared to $52.4 million and $68.0 million in 1995 and
1994, respectively. The improved cash flow in 1996 was due primarily to better
working capital management and reduced net capital spending for subscriber
installations.
Capital expenditures and investments in sales-type leases were
$40.7 million in 1996 down from 1995 and 1994 levels of $47.8 million and
$59.4 million, respectively. This reduction reflects a more selective
investment process, primarily within the electronic security services segment.
The Company's capital expenditures are primarily related to equipment
installations under alarm leases. In 1997, the Company anticipates its capital
expenditures to be up to $55 million, which will be used principally to
support the Company's stated objectives of increasing revenues and cash flows
from operations.
The Company also implemented a program in 1995 to outsource the
financing for capital expenditures related to equipment installations under
alarm leases by selling to a third party a portion of its alarm lease
contracts and receivables. This program reduced the internal capital
requirements necessary to maintain and grow this line of business. The Company
received approximately $10.4 million in outsourcing proceeds in 1996.
Due to restrictions contained in the debt instruments of Loomis
Fargo, the Company does not anticipate receiving cash dividends on its equity
investment in Loomis Fargo.
Leverage/Capitalization
Debt was $442.6 million at year-end 1996, a reduction of $41.9
million from the 1995 year-end level of $484.5 million. This reduction
primarily resulted from cash flow from operations exceeding investing
activities. In January 1997, the Company's debt was further reduced out of the
cash proceeds from the Loomis Fargo Combination.
In 1996, the Company repaid $100 million of 8% senior notes
with $100 million in proceeds from the Old Term Loan, which was due December
31, 1998.
On November 14, 1995, the Company entered into a new $120
million accounts receivable facility to replace the previous facility which
would have expired on November 30, 1995. The new facility is available through
December 31, 1998. Under the terms of this facility, a wholly owned special
purpose subsidiary of the Company purchases customer receivables on a daily
basis from participating operating units and sells an undivided interest in
the revolving pool of receivables through asset-backed certificates issued to
investors. See "Description of Certain Indebtedness--Securitization of
Receivables."
At year-end 1996, the Company maintained bank lines of credit
and term loans totaling $332.2 million of which $283.6 million was utilized
and outstanding. Of the total, $41.6 million was available through June 1999
and $247.8 million would mature at various dates through 1998, with the
remainder to mature at various dates in 1997. The Company also maintained a
$155 million letter of credit facility that was available through 1998. At
year-end 1996, letters of credit totaling $136.3 million were issued and
outstanding.
On March 24, 1997, the Company replaced the Old Term Loan, the
Old Revolving Loan and the Old LC Facility with the $285 million New Credit
Facility. The New Credit Facility consists of up to a $155 million New
Revolving Facility and up to a $155 million New LC Facility, subject to an
overall limit on the aggregate amount at any time outstanding under both
facilities of $285 million. The Company used borrowings under the New
Revolving Facility, together with the proceeds from the offering of the Old
Notes, to repay in full the Old Term Loan and the Old Revolving Loan and pay
transaction costs associated with the Refinancing. The New Credit Facility
will mature on March 31, 2002 with mandatory semiannual reductions in the
total commitments aggregating $10 million in 1999, $20 million in 2000 and $30
million in 2001. The New Credit Facility provides for funds at market rates of
interest throughout the availability periods. See "Description of Certain
Indebtedness--New Credit Facility."
Loans under the New Credit Facility generally bear interest
based on an adjusted Eurodollar rate available for one, two, three or six
month periods plus the applicable Eurodollar rate margin. The applicable
Eurodollar rate margin is subject to adjustment depending on the Company's
interest coverage ratio. Interest rates based on a prime lending rate and the
federal funds rate are also available under the New Credit Facility.
The Company uses selective financial derivative instruments to
limit exposure to fluctuations in short term interest rates.
Contingencies
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.
BUSINESS
The Company is the nation's largest provider of security
services. The Company is the nation's largest supplier of contract guard
services and is a leading provider of electronic security services. As a
result of its significant market presence and breadth of product offerings,
the Company is well positioned to service local, multi-location and national
accounts and provide "Total Security Solutions" to its customers.
Protective Services Industry Overview
The protective services industry can be divided into several
segments including contract guard and investigative services and electronic
security services. The Company believes that a trend towards "Total Security
Solutions" is leading to increased integration of various segments of the
protective services industry.
Guard Services
Security guard and investigative services, which primarily
consist of guard and patrol services, is the largest segment of the protective
services industry. Services provided in this area are typically divided within
the industry into "proprietary" or "contract" services. Under proprietary
arrangements, users of the service employ and manage their own guards. Under
contract arrangements, independent companies such as the Company provide guard
and investigative services to customers. The Company believes that the
industry has experienced and will continue to experience a trend towards
outsourcing of the guard and investigative services due to customer demand for
single point responsibility and improved quality and reliability of services.
According to a recent study, the total United States market for contract guard
and investigative services was approximately $10.9 billion in 1994. The
Company estimates that contract guard services represent approximately half of
the total security guard services market in the United States. No single
company is dominant in the contract guard industry. The Company estimates that
the largest four companies in the contract guard industry have a combined
market share of approximately 20%. While industry trends have been toward
consolidation over the last several years, the market remains highly
fragmented and very competitive.
Electronic Security Services
Electronic security services primarily consist of the design,
sale, installation, monitoring, maintenance, and repair of security alarm
services as well as security consulting and data security services. According
to a recent study the total United States market for electronic security
systems was approximately $4.3 billion in 1994. The industry is characterized
by relatively high capital investment due to the equipment and technology
required and low marginal costs of additional revenue. Despite the opportunity
for economies of scale, the electronic security services industry is highly
fragmented. The Company estimates that the largest five companies in the
industry have a combined market share of approximately 25%, with over 12,000
local and regional companies constituting the remainder of the market.
Business Strategy
The Company's business strategy is to maintain and enhance its
position as the nation's largest provider of security services. The key
elements of this strategy are as follows:
Market Segment Focus. The Company has targeted selected market
segments for increased penetration and development. These markets are
characterized by their growing needs for quality, highly reliable security
services and a willingness to recognize value added service and single point
responsibility for a full range of protective services. Inherent in the
Company's marketing strategy is pricing based on risk-adjusted rates of return
and targeted at improving the Company's overall profitability.
Total Security Solutions. In response to customer demand for
integrated security services with single point responsibility and the trend
toward outsourcing of security management needs, the Company has focused on
providing Total Security Solutions. The Company believes it is well positioned
to effectively and profitably provide Total Security Solutions to
multi-location and national accounts due to its nationwide network of offices
and support facilities. Management believes that the combination of the
Company's electronic and physical security services coupled with its equity
interest in Loomis Fargo provides a significant competitive advantage.
Customer and Employee Retention. Customer and employee
retention are the foundation for the Company's growth and profit
improvement strategies. The Company believes that customer retention is
related to employee retention. Based on extensive customer and employee
needs analysis, the Company has implemented a number of retention
improvement programs. In the physical security services unit, the Company
is establishing regional administrative service centers to improve both
quality and efficiency by standardizing best practices with appropriate
systems support. These improvements include the ability to recruit and
staff jobs promptly, to confirm on-time guard presence as well as adherence
to post requirements, and to communicate incidents to clients in a timely
and effective manner. The Company's electronic security services unit has
implemented programs to upgrade customer installation technology, to
provide enhanced monitoring technology at reduced cost, and to provide
incentives for its sales force to maximize contract renewals. Employee
programs start with recruiting where applicants are not only screened but
also profiled for optimal job assignments. Security officer training
focuses on client orientation, safety, job standards and communication.
The Company also conducts management training programs that emphasize
communication, employee relations and negotiating skills. To support these
efforts, employment "centers of excellence" are being opened to provide
recruiting and training programs. These efforts are reinforced by reward
incentives that recognize exemplary and continuing service to the customer.
Risk Management. The Company believes that significant
improvement in operating results of the business can be attained through its
risk management program. An effective program has been implemented at
national, regional and local levels to reduce workers' compensation costs. The
Company has also established similar programs focused on training and safety
awareness to mitigate employee and general liability claims. Of equal
importance is the Company's policy of pricing business in a manner that is
commensurate with the underlying risks.
Capitalize on Industry Consolidation. The protective services
industry is highly fragmented, consisting of a few national companies and
numerous small and regional companies. The Company believes that customer
demand for full service, financially stable security providers will drive the
protective services industry toward consolidation. The Company believes that
its management is skilled at identifying attractive acquisition candidates and
integrating acquisitions quickly and efficiently. Generally, the Company
acquires the customer base and operations employees of the acquired entity and
integrates the acquired company's operations into the Company's operations.
The Company typically experiences cost savings and productivity gains through
economies of scale and the leverage of the Company's operating systems.
Company's Business Units
The Company's protective services business is divided into two
business units: physical security services and electronic security services.
The net service revenues, operating profit and operating margins of each of
these units for the three years ended December 31, 1996 are as follows:
1994 1995 1996
-------- -------- --------
(millions of dollars)
Net Services Revenues:
Physical Security
Services.................. $1,209.4 $1,222.8 $1,223.8
Electronic Security
Services.................. 206.2 254.7 241.1
Operating Profit:
Physical Security
Services.................. 54.5 56.4 62.1
Electronic Security
Services.................. 14.9 15.8 18.9
Operating Margins (percent):
Physical Security
Services.................. 4.5% 4.6% 5.1%
Electronic Security
Services.................. 7.2% 6.2% 7.8%
Physical Security Services
The Company provides guard services, as well as background
screening, contract employment and investigative services, to approximately
14,000 clients in the United States, Canada, the United Kingdom and South
America. The Company services these clients with approximately 73,000
employees in approximately 280 offices under the Wells Fargo[Registered],
Burns[Registered], Globe[Registered] and other service marks.
The physical security services unit supplies contract uniformed
and plainclothes security officers, who may or may not be armed, to perform a
wide variety of tasks. These security officers patrol and monitor commercial,
financial, industrial, residential and governmental facilities providing
deterrence against crime and breach of governmental security regulations and
detection of fire, accidents and other casualties. The security officers also
monitor electronic systems and control public and employee access to
facilities. Specialized assignments include nuclear and conventional electric
power plant security, pre-departure screening of passengers and luggage at
airports, access control at health care and educational facilities, mailroom
services, staffing services and investigative services, including background
investigations of prospective employees.
The physical security services unit employs approximately
70,600 security officers. Security officers undergo a standardized
pre-employment screening program that features mandatory drug screening,
criminal record checks at the county and municipal court level and
verification of consumer credit reports, Social Security information and
drivers' license records. Security officers receive classroom orientation and
field training in safety, first aid and security techniques and in the
handling of specific problems applicable to particular industries or
situations.
The physical security services unit markets guard services
through approximately 153 sales representatives nationwide and in Canada, the
United Kingdom and South America. Sales personnel operate out of local branch
and sales offices. The physical security services unit also bids on contracts
with governmental agencies.
Physical security services contracts generally provide for such
services on a continuing basis and generally are terminable by either party
upon 30 to 60 days notice. Charges for guard services are negotiated with
customers and are based upon payment of a specified amount per service hour.
Typically, such charges are adjusted for any change in any law, ruling or
collective bargaining agreement causing a change in work hours, wage rates,
working conditions or other costs. Investigative services are generally
provided under specific arrangements, with charges varying according to the
nature of the assignment.
Electronic Security Services
The Company provides integrated electronic security systems,
including intrusion and fire detection, sprinkler and critical industrial
process monitoring, closed circuit television and access control. The Company
designs, installs, monitors and services electronic security systems located
on the premises of approximately 83,000 commercial and 43,000 residential
customers in the United States and Canada under the Wells Fargo[Registered]
and Pony Express[Registered] service marks. The Company provides, under the
Bel-Air Patrol trade name, an integrated guard, patrol and alarm service to
approximately 12,000 customers in Bel Air, Beverly Hills and other Los Angeles
communities. The unit has approximately 2,200 employees.
Customers may either purchase or lease the electronic security
system offered by the Company. If a customer chooses to lease the system, the
Company is entitled to receive the lease payments (and maintenance and
monitoring charges) for the duration of the lease and the equipment upon
termination of the lease. In order to reduce the capital requirements of
carrying the cost of leased equipment, in 1996, the Company began selling
selected lease payment rights under customer contracts for cash to a third
party. In 1996, the Company received net proceeds of $10.4 million from the
sale of payment rights. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Financial Position, Capital Resources and
Liquidity."
Commercial. The Company's electronic security services unit
designs, installs, monitors and services electronic detection systems located
at customers' premises. These systems are tailored to customers' needs and may
include intrusion and fire detection, critical process and sprinkler
monitoring, access control and closed-circuit television monitoring systems.
The Company's alarm systems and devices may be monitored on the premises of
the customer by the customer's own personnel or linked through telephone lines
or long range radio to one of 12 stations operated by the Company in the
United States and Canada. The Company also services its installed systems.
The Company's electronic security unit services approximately
83,000 security systems in financial institutions, industrial and commercial
businesses and complexes, warehouses, facilities of federal, state and local
governments, defense installations, and health care and educational
facilities.
The majority of the Company's monitoring contracts are for an
initial five-year period with automatic renewal for additional one-year terms,
unless terminated by either party. Upon installation, a customer pays an
installation fee and agrees to pay an annual service charge for ordinary
maintenance and monitoring during the life of the contract. It has been the
unit's experience that its customers generally continue the service after
expiration of the initial term of the contract and enter into new five-year
monitoring contracts.
The electronic security unit conducts its sales, installation
and service operations from 40 branch offices in the United States and Canada,
some of which are on the same premises as a monitoring station, and additional
satellite offices. The electronic security unit has a nationwide sales force
that is separated into broad-based commercial groups, as well as specialized
sales teams that address the specific needs of the financial community,
engineered systems market and other high growth segments of the industry. One
group, for example, focuses on multi-location companies such as national
retail and fast food chains that require a single point of control for
planning, servicing, monitoring and reporting for all locations.
The Company also makes direct sales of security equipment to
government and commercial users (including other companies in the alarm
business) and designs, assembles and sells engineered systems for commercial
fire suppression.
Residential. The Company's electronic security unit also
installs fire and intrusion protection systems for residential customers under
the Pony Express[Registered] service mark. Residential customer sales and
service are generally performed from the same facilities as for commercial
accounts. Residential systems are installed by the Company with monitoring
agreements and often with maintenance agreements. The majority of the
residential monitoring contracts are for an initial period of three to five
years with automatic renewal for additional one-year terms, unless terminated
by either party. The unit services approximately 31,000 residential security
systems.
Bel-Air Patrol. The Company also provides a complete
protective package, including central station alarm service and surveillance
systems, security guards and day and night patrols, to residents in Bel Air
and Beverly Hills and other nearby communities of Los Angeles. The Company
provides these services to approximately 12,000 customers under the trade name
Bel-Air Patrol.
The Company's electronic security unit purchases electronic
equipment and component parts for systems from a number of suppliers, and is
not dependent upon any single source for such equipment or parts.
Loomis Fargo
Loomis Fargo Combination
On November 28, 1996, the Company entered into an agreement
with Wingate Partners, L.P. and certain of its affiliates ("Wingate "),
pursuant to which on January 24, 1997 Wells Fargo Armored contributed
substantially all of its assets and assigned certain of its liabilities to
Loomis Fargo, a newly established corporation, in exchange for (i) 49% of
Loomis Fargo's outstanding common stock and (ii) a cash payment of
approximately $105 million (net of transaction costs, but subject to certain
adjustments). Wingate contributed all of the Loomis Holding Corporation's
common stock in exchange for (i) 51% of Loomis Fargo's outstanding common
stock, (ii) a $6 million promissory note and (iii) a cash payment of
approximately $15 million. In addition, Loomis Fargo repaid existing Loomis
indebtedness and redeemed outstanding shares of Loomis preferred stock. Among
the liabilities of Wells Fargo Armored that were retained by the Company are
casualty and employee claims incurred prior to the closing. The Company
accounts for its investment in Loomis Fargo under the equity method.
The Company agreed to indemnify Loomis Fargo for
environmental liabilities associated with existing underground storage
tanks and other known and identified environmental liabilities. Such
indemnification obligation will continue until the earlier of December 31,
1998 or the first anniversary of an initial public offering of Loomis Fargo
common stock. The Company has also agreed to indemnify Loomis Fargo
against certain other claims, including claims relating to receivables and
taxes.
The Company and Wingate entered into a stockholders agreement
(the "Stockholders Agreement") providing that Loomis Fargo's board of
directors initially will consist of seven directors: Loomis Fargo's chief
executive officer; three directors nominated by the Company and three
directors nominated by Wingate. The number of directors that may be designated
pursuant to the Stockholders Agreement may vary if either the Company or
Wingate reduce their ownership interest in Loomis Fargo. The Stockholders
Agreement also provides that the vote of five of the seven directors is
required for Loomis Fargo to engage in certain specified activities. The
Company has nominated Messrs. Adorjan, O'Brien and Wood, its executive
officers, to Loomis Fargo's board of directors.
In addition, the Stockholders Agreement prohibits the transfer
of Loomis Fargo common stock by either party for three years following the
closing without the prior consent of the other party. After such period,
Loomis Fargo common stock may be transferred only in accordance with the
provisions of the Stockholders Agreement, which include rights of first
refusal and co-sale rights. The Stockholders Agreement also provides for
certain preemptive and registration rights with respect to equity issuances by
Loomis Fargo.
Loomis Fargo--Business
Loomis Fargo is one of the largest armored transport companies
in the United States. It operates over 150 branches, employs approximately
8,700 persons, and utilizes a fleet of approximately 2,700 armored vehicles
nationwide to provide armored ground transport services, ATM services, and
cash vault and related services to financial institutions and commercial
customers. Serving all 50 states and Puerto Rico, Loomis Fargo is one of only
two armored transport companies in the United States that provides these
services on a national basis. The Company believes that Loomis Fargo is
favorably positioned for additional revenue opportunities as large financial
and retail institutions are increasingly seeking vendors capable of providing
an array of services on a national basis. In addition, the Company believes
the proliferation of ATMs and the trend of banks and other financial and
retail institutions towards outsourcing cash vault and related services will
contribute to Loomis Fargo's growth prospects. Management of Loomis Fargo
believes that upon successful completion of its consolidation plan, the
combined company will realize cost savings.
Loomis Fargo provides ATM services to over 27,000 ATM
locations nationwide, making it the leading provider of ATM services in the
United States. Both the number of ATM locations and the types of items
being dispensed through ATMs continue to grow. Additionally, many ATM
owners have begun outsourcing the servicing and maintenance of ATM
locations formerly serviced and maintained internally. With its broad
range of services and automated systems, Loomis Fargo intends to build upon
its leading position in the ATM services market.
Loomis Fargo also provides a wide array of cash vault and
related services ranging from passive, secured storage of valuables such as
currency, securities and computer chips to active services such as deposit
processing and consolidation, change order preparation, coin wrapping and
storage and food stamp processing. Loomis Fargo's cash vault capacity is a key
element in supporting services to larger customers and ATM networks.
Employees
The Company's business is labor intensive and, accordingly, is
affected by the availability of qualified personnel and the cost of labor.
Although the protective services industry is characterized generally by high
turnover due to generally low wages, especially in the guard industry, the
Company believes its experience compares favorably with that of the industry.
The Company has not experienced any material difficulty in employing suitable
numbers of qualified security guards and other employees. The Company
considers its relations with its employees to be generally satisfactory.
The Company is a party to collective bargaining agreements with
various local unions covering approximately 5,800 employees. The collective
bargaining agreements expire at various dates from 1997 to 1999 and relate,
among other things, to wages, hours and conditions of employment. Under
section 9(b)(3) of the National Labor Relations Act, if a union admits to
membership, or is affiliated directly or indirectly with a union that admits
to membership, employees other than guards, an employer of guards can refuse
to bargain with such union and such union cannot be certified as the
representative of a unit of guards. As a result, the Company has in many
instances refused to recognize or withdrawn recognition of labor organizations
that admit as members employees other than guards.
Competition
The physical security services unit competes with major
national firms and numerous smaller regional and local companies providing
similar services. Competition in the security guard industry is based on price
in relation to the quality of service, the scope of services performed, the
extent and quality of guard supervision, recruiting and training and name
recognition.
The electronic security services unit competes with major
national firms and numerous small regional and local companies. Competition in
the electronic security services industry is based on price in relation to the
quality of service, the scope of alarm installation and service, and the level
of technological and engineering sophistication.
Regulation
Due to the nature of the Company's business, its operations are
subject to a variety of federal, state, county and municipal laws, regulations
and licensing requirements. The Company believes that its operations are in
substantial compliance with those laws, regulations and requirements.
The Company's physical security services operations are subject
to a variety of city, county and state firearm and occupational licencing
laws. In addition, many states have laws requiring training and registration
of security officers, regulating the use of badges, identification cards and
uniforms and imposing minimum bond surety and insurance requirements. Federal
legislation has been introduced relating to security officer qualification and
training. Similar legislation is pending in several states. The Company
generally supports the creation of standards for the industry and does not
expect that the establishment of such standards will have a material effect on
its physical security services operations.
The Company's electronic security services operations are
subject to regulatory requirements of federal, state and local authorities. In
addition, this unit relies upon the use of telephone lines to transmit
signals, and the cost of such lines and the type of equipment which may be
used are currently regulated by both federal and state governments. In some
instances, the Company contracts with the local government to permit it to
link a customer's business or home directly into the local police or fire
department station for which it may pay a fee to such local government. As a
result of a high incidence of false alarms in some communities, some local
governments have imposed assessments, fines and penalties on customers based
on the number of false alarms reported, or have restricted police response to
systems producing excessive false alarms.
From time to time, in the ordinary course of business, the
Company is subject to penalties or fines as the result of licensing
irregularities or the misconduct of one or more of its agents or employees. In
addition, under principles of common law, the Company can generally be held
liable for acts or omissions of its agents or employees performed in the
course and scope of their employment. In addition, some states have statutes
that expressly impose on the Company legal responsibility for the conduct of
its employees.
Risk Management
The nature of the services provided by the Company potentially
exposes it to greater risks of liability for employee acts, injuries
(including workers' compensation claims) or omissions than may be posed by
other service businesses.
The Company generally obtains customer indemnification or
liability limitations in its contracts to mitigate this risk exposure. The
Company carries insurance of various types, including workers' compensation,
automobile and general liability coverage. These policies include deductibles
per occurrence for which the Company is self-insured. The Company obtains its
insurance at rates and upon terms negotiated periodically with various
underwriters. The loss experience of the Company and, to some extent, other
protective services companies affects premium rates charged to the Company.
The Company does not believe that limitations on, or the uncertainty of,
insurance coverage for punitive damages in certain states in which it operates
is likely to be material, based upon the Company's prior experience with
punitive damages claims. The Company also attempts to manage its risk
liability through analysis of customer facilities and transportation routes
and employee screening, training, supervision and evaluation.
Discontinued Operations
The Company has treated its courier services unit as a
discontinued operation since September 1996. As a result of this decision, a
non-cash charge of $25 million was incurred to provide for anticipated future
losses and liabilities. The unit transports time-sensitive packages for
commercial businesses and non-negotiable financial documents for financial
institutions in approximately 32 states under the Pony Express[Registered]
service mark. The unit employs approximately 3,800 persons and leases from its
employees approximately 65% of its vehicle fleet of approximately 3,025
vehicles. The courier services unit operates both as a common and contract
carrier and uses a combination of tariffs and shipping contracts to control
the terms, conditions and rates applicable to the transportation of shipments.
Rates are dependent upon many factors, including the weight and type of the
shipped item, the distance and urgency of the shipment and the geographical
location.
Trademarks and Patents
The Wells Fargo[Registered], Burns[Registered] and Pony
Express[Registered] service marks are especially important to the Company's
business. The Company believes that its rights in these marks are adequately
protected and of unlimited duration. While the Company has patents it
considers to be important to the overall conduct of its business, it does not
consider any particular patent, or group of related patents, essential to its
operations. For both the United States and the foreign patents, their
expiration, individually, and in the aggregate, is not expected to have any
material effect on the Company's financial condition or results of operations.
Properties
The Company and its subsidiaries maintain courier terminals,
central alarm stations, plants and general offices in various cities in the
United States, Puerto Rico, Canada, the United Kingdom and South America. At
December 31, 1996, the physical security services unit occupied approximately
283 branch and satellite offices, all but one of which were leased. At
December 31, 1996, the electronic security services unit operated 12 central
stations, of which 4 were leased, 28 additional branch and headquarters
offices, 12 of which were owned and 47 separate satellite and sales offices,
all of which were leased. The Company leases approximately 57,000 square feet
of office space in Chicago, Illinois for its executive offices. The Company
believes that its properties are in good condition and are adequate to meet
its current and reasonably anticipated needs.
Legal Proceedings
The Company is presently, and is from time to time, subject to
claims and suits arising in the ordinary course of its business. In certain of
such actions, plaintiffs request punitive or other damages that may not be
covered by insurance. In addition, the Company has been subject to claims and
suits relating to certain discontinued operations. The most important of these
legal proceedings are discussed below. The Company believes that the various
asserted claims and litigation in which it is currently involved will not
materially affect its financial position or future operating results, although
no assurance can be given with respect to the ultimate outcome for any such
claim or litigation. The Company believes that it has established adequate
provisions for litigation liabilities in its financial statements in
accordance with generally accepted accounting principles. These provisions
include both legal fees and possible outcomes of legal proceedings (including
the environmental matters discussed below).
Centaur Litigation
Centaur Insurance Company ("Centaur"), a discontinued
property and casualty insurance subsidiary of the Company, 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 liabilities at an aggregate
level that is not in excess of Centaur's assets. In rehabilitation,
Centaur's assets are 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. The foregoing has resulted in one pending lawsuit
against the Company for recovery of alleged damages from the failure of
Centaur to satisfy its reinsurance obligations. Certain former officers
and directors of the Company's current and former subsidiaries have been
named as defendants in such lawsuit and the Company has agreed to indemnify
such individuals. Centaur is not a defendant in this lawsuit against the
Company. Although the Illinois Director of Insurance has not made any
claims against the Company for any of Centaur's liabilities, the Illinois
Director of Insurance has requested, and the Company has agreed to, an
extension of the statute of limitations for any such claims.
As of December 31, 1995, Centaur's total liabilities were
$137.1 million and its deficit in net worth was $56.1 million, according to
financial statements submitted on behalf of the Illinois Director of
Insurance. Such financial statements were presented on a liquidating basis
with assets carried at their market value or estimated realizable value and
liabilities carried at their present value through the provision of a present
value discount. Although Centaur is a subsidiary of the Company, the Company
does not operate Centaur and has no responsibility for, nor does it participate
in the preparation of such financial statements. Centaur's financial results,
assets and liabilities are not reflected in the Company's financial
statements.
In June 1988, the Insurance Commissioner of the State of
California as trustee of Mission Insurance Trust and four other affiliated
insurance companies filed a complaint in the Superior Court of the State of
California, County of Los Angeles, against the Company and certain of its
current and former subsidiaries alleging damages resulting from the failure of
Centaur to satisfy its reinsurance obligations. This lawsuit alleges damages
to plaintiff, as Trustee of Mission Insurance Company, Mission National
Insurance Company, Enterprise Insurance Company, Holland-America Insurance
Company and Mission Reinsurance Corporation, based on (i) conduct justifying
piercing the corporate veil, (ii) fraud and (iii) negligent misrepresentation.
The complaint was amended in 1989 to add 11 former officers and directors of
the Company's current and former subsidiaries as defendants and to allege
additional causes of action based on (i) breach of fiduciary duty and
imposition of personal liability, (ii) fraudulent conveyance, (iii)
constructive trust and (iv) conspiracy. The complaint was amended again in
1995, to allege additional causes of action based on negligence and breach of
the covenant of good faith and fair dealing. Plaintiff seeks judgment in
excess of $100 million for current losses, future losses and other damages and
also seeks punitive damages.
In 1989, the Company filed a motion to dismiss or stay the
action, pending resolution of Centaur's rehabilitation in Illinois. The court
declined to dismiss the action, but entered an order staying the action until
the rehabilitation proceeding is resolved, except that the parties may pursue
discovery to preserve evidence. In 1992, the Centaur rehabilitator filed a
motion to intervene and dismiss the complaint on the grounds that the
plaintiff lacked standing and that its claims were not ripe for adjudication.
The motion is pending. In 1993, six of the 11 individual defendants were
dismissed from the lawsuit. In September 1994, the court effectively lifted
its stay. The liability phase of the trial was held in 1996 and the court has
set a schedule for hearing the parties' closing arguments in such phase. The
Company intends to defend this lawsuit vigorously.
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 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.
Environmental Proceedings
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 or for claims for natural resource or property
damage or injury to human health caused by contamination at such sites.
Responsibility for cleanup and other remedial activities at a Superfund site
is typically shared among PRPs based on an allocation formula. In addition,
the Company has or may have liability for environmental matters at properties
it presently or previously owned or leased.
Based on currently available information, 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,
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, indemnification obligations in favor of the Company from
the current owners of certain sold or discontinued operations, estimated legal
fees and other factors, the Company has made provisions for indicated
environmental liabilities in its financial statements in the aggregate amount
of approximately $9 million (relating to environmental matters with respect to
discontinued operations of the Company). The Company has requested that BW
Automotive indemnify it against certain past and future costs relating to
environmental and financing liabilities associated with certain former
automotive operations. At December 31, 1996 such past costs were approximately
$2.3 million. BW Automotive has contested its indemnification obligation with
respect to such liabilities. While estimates of liability for environmental
matters can vary over time due to, among other things, changes in laws,
technology or available information, the Company believes that such provisions
for indicated environmental liabilities have been established on a basis
consistent with generally accepted accounting principles.
MANAGEMENT
The following table sets forth certain information concerning
the persons who are executive officers and directors of the Company as of
March 7, 1997; all information is provided as of such date:
<TABLE>
<CAPTION>
Name Age Position and Experience
---- --- -----------------------
<S> <C> <C>
J. Joe Adorjan 58 Chairman of the Board (since January 1996), Chief Executive
Officer (since October 1995), President (since April 1995) and
Director (since 1993) of the Company. Mr. Adorjan was
President of Emerson Electric Co., a manufacturer of electronic,
electrical and other products, from 1992 to 1995 and Chairman
and Chief Executive Officer of ESCO Electronics Corporation
from 1990 to 1992. Mr. Adorjan is also a director of California
Microwave, Inc., The Earthgrains Company, ESCO Electronics
Corporation, Goss Graphic Systems, Inc. and Loomis, Fargo &
Co.
John D. O'Brien 54 Senior Vice President of the Company. Mr. O'Brien has been
Senior Vice President of the Company since 1993 and was Vice
President of the Company from 1987 to 1993. Mr. O'Brien is
also President of Borg-Warner Protective Services Corporation
and a Director of Loomis, Fargo & Co.
Timothy M. Wood 49 Vice President, Finance of the Company. Mr. Wood has been Vice
President, Finance of the Company since 1994 and was Vice
President and Controller of the Company from 1987 to 1994. Mr.
Wood is also a Director of Loomis, Fargo & Co.
James J. Burke, Jr. 45 Director of the Company since 1987, Managing Partner and
director of Stonington Partners, Inc. ("Stonington") since 1993
and director of MLCP since 1985. Mr. Burke was Managing
Partner of MLCP from 1993 to 1994 and was President and
Chief Executive Officer of MLCP from 1987 to 1993. Mr. Burke
is also a director of Ann Taylor Stores Corporation, Education
Management Corporation, Pathmark Stores, Inc., Supermarket
General Holdings Corp. and United Artists Theatre Circuit, Inc.
Albert J. Fitzgibbons, III 51 Director of the Company since 1987, partner and director of
Stonington since 1993 and director of MLCP since 1988. Mr.
Fitzgibbons was a partner of MLCP from 1993 to 1994 and was
Executive Vice President of MLCP from 1988 to 1993. Mr.
Fitzgibbons is also a director of Borg-Warner Automotive, Inc.,
Dictaphone Corporation, Rykoff-Sexton, Inc. and United Artists
Theatre Circuit, Inc.
Arthur F. Golden 50 Director of the Company since 1996, Partner of Davis Polk &
Wardwell, a law firm, since 1978. Mr. Golden is also a director
of Allegiance Corporation.
Dale W. Lang 64 Director of the Company since 1993, President of KX Acquisition
Corp., an owner and operator of television stations, since 1992.
Retired chairman of Lang Communications, Inc., a magazine
publishing company.
Robert A. McCabe 62 Director of the Company since 1993, President of Pilot Capital
Corporation, an investment firm, since 1987. Mr. McCabe is also
a director of Atlantic Bank, Church & Dwight Co., Inc.,
Morrison-Knudsen Corporation, Thermo Electron Corporation
and Thermo Optek Inc.
Andrew McNally IV 57 Director of the Company since 1996, Chairman and Chief
Executive Officer since 1993 and President and Chief Executive
Officer from 1978 to 1993 of Rand McNally, a publishing and
map making company. Mr. McNally is also a director of Hubbell
Incorporated, Mercury Finance Co., Morgan Stanley Funds and
Zenith Electronics Corporation.
Alexis P. Michas 39 Director of the Company since 1987, Managing Partner and
director of Stonington since 1993 and director of MLCP since
1989. Mr. Michas was Senior Vice President of MLCP from
1989 to 1993 and a Managing Director in the Investment
Banking Division of Merrill Lynch, a financial services
company, from 1991 to 1994. Mr. Michas is also a director of
Blue Bird Corporation, Borg- Warner Automotive, Inc.,
Dictaphone Corporation and Goss Graphic Systems, Inc.
H. Norman Schwarzkopf 62 Director of the Company since 1993, author and lecturer since
1991. Mr. Schwarzkopf was a general in the United States Army
until his retirement in 1991. He was Commander in Chief,
United States Central Command, and Commander of Operations
for Desert Shield and Desert Storm. Mr. Schwarzkopf is also a
director of Home Shopping Network, Inc., Kuhlman
Corporation, Remington Arms Company, Inc. and The
Washington Water Power Company.
Donald C. Trauscht 63 Director of the Company since 1987, Chairman of the BW Capital
Corporation, a private investment company, since 1996. Mr.
Trauscht was Chairman of the Board, Chief Executive Officer
and President of the Company from 1992 to 1995 and Chief
Operating Officer and President from 1991 to 1992. Mr.
Trauscht is also a director of Baker Hughes Incorporated, Blue
Bird Corporation, Borg-Warner Automotive, Inc., ESCO
Electronics Corporation, Imo Industries, Inc. and Thiokol
Corporation.
</TABLE>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of March 7, 1997 certain
information regarding beneficial ownership of the Common Stock, par value $.01
per share, of the Company ("Common Stock") by all entities that, to the best
knowledge of the Company, beneficially owned more than five percent of the
Common Stock of the Company. Except as indicated, each entity has sole voting
and investment power with respect to such shares.
Number of Percentage of
Name of Beneficial Owner Shares Class
- ------------------------ ---------- -------------
Merrill Lynch KECALP L.P. 1986.............. 40,000 *
Merrill Lynch KECALP L.P. 1987.............. 200,000 *
Merchant Banking L.P. No. 1................. 500,000 2.2%
ML Venture Partners II, L.P................. 500,000 2.2%
Merrill Lynch Capital Appreciation
Partnership No. VIII, L.P. ................ 6,628,615 29.8%
ML Offshore LBO Partnership No. VIII........ 168,524 *
ML Employees LBO Partnership No. 1, L.P. ... 164,779 *
ML IBK Positions, Inc. ..................... 1,998,082 9.0%
---------- ----------
Total ML Entities........................... 10,200,000 45.8%
Wellington Management Company, LLP (a)...... 1,776,400 8.0%
Vanguard Explorer Fund, Inc. (b)............ 1,200,000 5.4%
- -----------------
* Represents less than one percent.
(a) Pursuant to a Schedule 13G dated February 13, 1997, Wellington
Management Company, LLP indicated that, in its capacity as investment
adviser, it may be deemed to beneficially own 1,776,400 shares of
Common Stock of the Company that are owned of record by its clients.
It indicated that it had shared voting power with respect to 276,400
shares and shared dispositive power with respect to 1,776,400 shares.
One of its clients is Vanguard Explorer Fund, Inc.
(b) Pursuant to a Schedule 13G dated February 4, 1997, Vanguard Explorer
Fund, Inc. indicated that it had sole voting power and shared
dispositive power with respect to all shares.
The address of each of the ML Entities is c/o Merrill Lynch &
Co., Inc., World Financial Center, New York, New York 10281. The address of
Wellington Management Company, LLP is 75 State Street, Boston, Massachusetts
02109. The address of Vanguard Explorer Fund, Inc. is P.O. Box 2600, Valley
Forge, Pennsylvania 19482-2600.
The following table sets forth as of March 7, 1997 certain
information regarding beneficial ownership of Common Stock by the named
directors and executive officers of the Company and by all directors and
executive officers as a group.
Number of Percentage of
Name of Beneficial Owner Shares Class
- ------------------------ ---------- -------------
J. Joe Adorjan (b)........................ 395,778 1.8%
John D. O'Brien........................... 156,916 *
Timothy M. Wood........................... 86,000 *
James J. Burke, Jr. (c)................... 0 *
Albert J. Fitzgibbons, III (c)............ 0 *
Arthur F. Golden.......................... 2,000 *
Dale W. Lang.............................. 7,000 *
Robert A. McCabe.......................... 9,000 *
Andrew McNally IV......................... 12,000 *
Alexis P. Michas (c)...................... 0 *
H. Norman Schwarzkopf..................... 7,000 *
Donald C. Trauscht........................ 220,390 1.0%
All directors and executive
officers of the Company
(12 persons) (b) (c)..................... 896,084 3.9%
- -----------------
* Represents less than one percent.
(a) Includes the following number of shares issuable upon the exercise of
options within the next 60 days: 207,000 for Mr. Adorjan; 94,416 for Mr.
O'Brien; 56,000 for Mr. Wood; 7,000 for each of Messrs. Lang, McCabe and
Schwarzkopf; 2,000 for each of Messrs. Golden and McNally; 100,000 for Mr.
Trauscht; and 482,416 for all directors and officers of the Company.
(b) Excludes 1,800 shares held in trust for Mr. Adorjan's daughter. Mr.
Adorjan is co-trustee of such trust and disclaims beneficial ownership of
such shares. Includes 133,333 shares held in a trust established by the
Company that will be distributed to Mr. Adorjan over up to a three-year
period.
(c) Messrs. Burke, Fitzgibbons and Michas are directors of MLCP, which
manages Merrill Lynch Capital Appreciation Partnership No. VIII, L.P.
and ML Offshore LBO Partnership No. VIII. Such persons may be deemed
to beneficially own the 6,797,139 shares of Common Stock held by such
partnerships. MLCP is part of a group that beneficially owns
10,200,000 shares of Common Stock. They expressly disclaim beneficial
ownership of such shares.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of the agreements described below does
not purport to be complete and is qualified in its entirety by the various
agreements, copies of which have either been filed as exhibits to or
incorporated by reference in the Registration Statement of which this
Prospectus is a part (see "Available Information") or will otherwise be
made available upon request.
New Credit Facility
On March 24, 1997, the Company completed the initial funding
under the $285 million new credit facility (the "New Credit Facility") with
Bankers Trust Company, Canadian Imperial Bank of Commerce and NationsBank,
N.A., acting as agents, consisting of up to a $155 million new revolving
credit facility (the "New Revolving Facility") and up to a $155 million
letter of credit facility (the "New LC Facility"). The New Credit Facility
limits the aggregate amount at any time outstanding under the New Revolving
Facility and the New LC Facility to $285 million. The Company used
borrowings under the New Revolving Facility, together with the proceeds
from the offering of the Old Notes, to repay in full the Old Term Loan, the
Old Revolving Loan and transaction costs associated with the Refinancing.
The Company also used letters of credit under the New LC Facility to
replace all the letters of credit outstanding under the Old LC Facility.
Loans under the New Credit Facility generally bear interest
based on an adjusted Eurodollar rate available for one, two, three or six
month periods plus the applicable Eurodollar rate margin. The applicable
Eurodollar rate margin is subject to adjustment depending on the Company's
interest coverage ratio. Interest rates based on a prime lending rate and the
federal funds rate are also available under the New Credit Facility.
The Company intends to use the funds available under the New
Revolving Facility for the financing of acquisitions and investments, general
corporate purposes and working capital. The Company intends to use the New LC
Facility for the issuance of commercial letters of credit and standby letters
of credit to support workers' compensation contingencies and for certain other
corporate purposes.
The New Credit Facility will mature on March 31, 2002, with
mandatory semiannual reductions in the total commitments aggregating $10
million in 1999, $20 million in 2000 and $30 million in 2001.
Under the New Credit Facility, the Company is permitted to
prepay all amounts borrowed thereunder and/or to reduce the commitments
thereunder without penalty. In addition, the New Credit Facility will require
the Company to prepay such amounts and/or to reduce the commitments in amounts
equal to (i) net proceeds from any cash asset sales by the Company or any of
its subsidiaries to the extent such proceeds are not reinvested in the
Company's business within twelve months of receipt thereof, (ii) net cash
proceeds from issuances of certain debt securities, (iii) 50% of the net cash
proceeds from issuances of the Company's equity securities, (iv) 50% of excess
cash flow (as defined therein) and (v) proceeds from any pension plan
reversions.
All amounts borrowed under the New Credit Facility are secured
by a pledge of certain intercompany indebtedness, all the shares of capital
stock of certain U.S. subsidiaries of the Company, 65% of the shares of
capital stock of certain non-U.S. subsidiaries of the Company and all the
shares of capital stock of Loomis Fargo owned by the Company. Certain of the
Company's U.S. subsidiaries guarantee the Company's obligations under the New
Credit Facility.
The New Credit Facility contains numerous restrictive financial
and other covenants, including, without limitation, (i) restrictions on the
incurrence of indebtedness, liens and guarantees, (ii) restrictions on certain
mergers, sales of assets, transactions with affiliates and conduct of
business, (iii) restrictions on certain acquisitions, investments, capital
expenditures and leases, (iv) restrictions on certain payments (early
redemption or retirement of the Notes and other junior indebtedness,
dividends, redemptions or other payments on the capital stock) and (v)
financial tests, including, among others, those requiring the Company to
maintain a maximum leverage ratio, minimum interest coverage ratio, minimum
net worth and minimum EBITDA (as defined therein).
Notwithstanding the foregoing limitations, the New Credit
Facility permits the Company, subject to pro forma compliance with the
financial covenants and with its other obligations thereunder (i) to make
annual repurchases of up to $10 million of its common stock and (ii) to make
acquisitions of, and investments in, businesses substantially similar to those
currently conducted by the Company and its subsidiaries, subject to an annual
limit of $75 million for such acquisitions and other capital expenditures.
The events of default under the New Credit Facility include,
among others, (i) any failure of the Company to pay principal, interest or
other obligations due thereunder, subject to certain grace periods, (ii) the
material breach of any representations or warranties contained in the New
Credit Facility, (iii) default in any negative covenant and certain
affirmative covenants, or default in certain affirmative covenants that
continues unremedied for a grace period after notice by any co-agent or any
lender, (iv) any failure to pay amounts, above certain limits, due under
certain other obligations of the Company or any of its subsidiaries or
defaults that result in or permit the acceleration of certain other
obligations, (v) certain events of bankruptcy, insolvency or dissolution of
the Company or certain of its subsidiaries, (vi) the entry of certain
judgments or decrees against the Company or any of its subsidiaries in excess
of specified amounts and subject to grace periods, (vii) the failure or
invalidity of any collateral or guaranty under the New Credit Facility, (viii)
the removal, resignation or replacement of more than 50% of the members of the
Company's Board of Directors or the acquisition, directly or indirectly, by
any person or group (as defined by Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended) of more than 30% of the voting stock of the Company.
Upon the occurrence of any event of default under the New Credit Facility, the
lenders may accelerate the maturity of the loans and terminate their
commitments thereunder.
9 1/8% Notes
The $150 million aggregate principal amount of the 9 1/8%
Senior Subordinated Notes due 2003 (the "9 1/8% Notes") was issued by the
Company, at a less than one percent original issue discount, on May 3, 1993
pursuant to an indenture dated as of May 3, 1993 (the "9 1/8% Note
Indenture"). The proceeds from the issuance of the 9 1/8% Notes were used to
redeem debt securities of the Company. Interest on the 9 1/8% Notes is
payable semi-annually. The 9 1/8% Notes will mature on May 1, 2003 and may be
redeemed at the option of the Company, in whole or in part, at any time on or
after May 1, 1998 at a premium declining to par on and after May 1, 2000.
Upon a change of control (as defined in the 9 1/8% Note Indenture), subject to
certain conditions, each holder of the 9 1/8% Notes may require the Company to
purchase such holder's 9 1/8% Notes at 101% of the principal amount thereof,
together with accrued and unpaid interest, if any, to the date of purchase.
The 9 1/8% Note Indenture contains certain restrictive
covenants that are substantially similar to the covenants in the Indenture.
The 9 1/8% Notes are unsecured and subordinated in right of payment and upon
liquidation to existing and future senior indebtedness of the Company (as
defined in the 9 1/8% Note Indenture). The 9 1/8% Notes rank pari passu with
the Old Notes and will rank pari passu with the Exchange Notes. As of March
1, 1997, $150 million aggregate principal amount of the 9 1/8% Notes was
outstanding.
Old Credit Facility
In connection with the spin-off of BW Automotive in 1993 the
Company completed a significant recapitalization entering into a credit
facility (the "Old Credit Facility") consisting of the $225 million revolving
credit facility (the "Old Revolving Loan") and the $155 million letter of
credit facility (the "Old LC Facility"). In 1995 the Company undertook another
recapitalization in connection with which the Old Credit Facility was amended
to include a new $200 million intermediate term loan maturing in 1998 (the
"Old Term Loan") and to amend the terms of the Old Revolving Loan and the Old
LC Facility.
The Old Credit Facility contained numerous financial and
operating covenants and events of default. The borrowings under the Old Credit
Facility were secured by a pledge of stock of certain of the Company's
subsidiaries. In addition, certain of the Company's subsidiaries guaranteed
the Company's obligations under the Old Credit Facility. At March 1, 1997 the
Company was in compliance with all the covenants under the Old Credit
Facility.
The Company terminated the Old Credit Facility and repaid in
full the Old Term Loan, the Old Revolving Loan and the Old LC Facility upon
the completion of the offering of the Old Notes and the simultaneous initial
funding under the New Credit Facility. See "--New Credit Facility."
Securitization of Receivables
In 1995 the Company established a non-recourse
receivables-backed facility. Pursuant to this facility, BPS Financial
Services, Inc. (a wholly-owned special purpose subsidiary of the Company)
purchases customer receivables on a daily basis from participating operating
units and sells an undivided interest in the revolving pool of receivables
through $120 million face amount of asset-backed certificates issued to
investors. The revolving period under this facility ends no later than
December 31, 1998 with final payment anticipated in April 1999.
DESCRIPTION OF THE NOTES
The Old Notes were issued and the Exchange Notes will be issued
under the Indenture dated as of March 24, 1997 (the "Indenture") between the
Company, as issuer, and The Bank of New York, as trustee (the "Trustee").
Copies of the Indenture will be made available to holders of the Notes during
normal business hours at the principal corporate trust office of the Trustee.
The Indenture will be qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The following summary of the material
provisions of the Indenture does not purport to be complete and is subject to,
and qualified in its entirety by reference to, the provisions of the
Indenture, including the definitions of certain terms contained therein and
those terms made part of the Indenture by reference to the Trust Indenture
Act. For definitions of certain capitalized terms used in the following
summary, see "--Certain Definitions."
General
The Notes will mature on March 15, 2007, will be limited to
$125 million aggregate principal amount and will be unsecured senior
subordinated obligations of the Company. Each Note will bear interest at the
rate of 9 5/8% per annum from March 24, 1997 or from the most recent interest
payment date to which interest has been paid or duly provided for, payable in
cash on September 15, 1997 and semiannually thereafter on March 15 and
September 15 in each year until the principal thereof is paid or duly provided
for to the holders of the Notes at the close of business on the March 1 or
September 1 next preceding such interest payment date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will
be payable, and the Notes will be exchangeable and transferable, at the office
or agency of the Company in The City of New York maintained for such purposes
(which initially will be the Trustee); provided, however, that, at the option
of the Company, interest may be paid by check mailed to the address of the
Person entitled thereto as such address shall appear on the security register.
(Sections 301, 305 and 1002) The Old Notes are and the Exchange Notes will be
issued only in registered form without coupons and only in denominations of
$1,000 and any integral multiple thereof. (Section 302) No service charge will
be made for any registration of transfer or exchange or redemption of Notes,
but the Company may require payment in certain circumstances of a sum
sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. (Section 305)
Sinking Fund
The Notes are not and will not be entitled to the benefit of
any sinking fund.
Optional Redemption
Redemption at the Option of the Company after 2002. The Notes
will be redeemable at any time on or after March 15, 2002 at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
prior notice at the redemption prices (expressed as percentages of the
principal amount) set forth below, together with accrued and unpaid interest,
if any, to the redemption date, if redeemed during the 12-month period
beginning March 15 of the years indicated (subject to the right of holders of
record on relevant record dates to receive interest due on an interest payment
date):
Year Redemption Price
---- ----------------
2002................................... 104.812%
2003................................... 102.406%
2004 and thereafter.................... 100.000%
Redemption at the Option of the Company with the Proceeds of
Public Equity Offerings. In addition, at any time prior to March 15, 2000,
the Company may redeem up to 30% of the original aggregate principal amount of
the Notes within 60 days after the closing of one or more Public Equity
Offerings with the net proceeds of such offering at a redemption price equal
to 109.625% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the Redemption Date (subject to the right of holders of
record on relevant record dates to receive interest due on relevant interest
payment dates), provided that not less than $87.5 million aggregate principal
amount of the Notes remains outstanding immediately after the occurrence of
any such redemption.
Treatment by the Company. For United States tax purposes, the
Company does not intend to treat the possibility of an optional redemption as
giving rise to any accrual of "original issue discount" or recognition of
ordinary income upon redemption, sale or exchange of a Note. Holders may wish
to consider that United States Treasury Regulations regarding the treatment of
certain contingencies were recently issued and may wish to consult their tax
advisers in this regard.
Subordination
The indebtedness represented by the Notes is subordinated in
right of payment to the prior payment in full of all Senior Indebtedness;
provided, however, that the Notes shall rank on a pari passu basis (equal to
and without preference) in right of payment with, or prior to, all existing
and future Indebtedness of the Company that is expressly subordinated to any
Senior Indebtedness. (Section 1501)
No payment or distribution shall be made on account of the
principal of or premium, if any, or interest on, or the purchase, redemption
or other acquisition of, the Notes in the event and during the continuation of
any default in the payment of principal, premium, if any, or interest on any
Specified Senior Indebtedness beyond any applicable grace period (a "Payment
Default"). (Section 1503)
During the continuance of any default, other than a Payment
Default, with respect to any Specified Senior Indebtedness pursuant to which
the maturity thereof may be accelerated, no payment or distribution of any
kind or character may be made by the Company on account of the principal of or
premium, if any, or interest on, or the purchase, redemption or other
acquisition of, the Notes for the period specified below (the "Payment
Blockage Period"). The Payment Blockage Period shall commence upon the receipt
of notice by the Trustee from the agent for the Banks or any other
representative of a holder of Specified Senior Indebtedness and shall end on
the earlier of (i) 179 days thereafter, (ii) the date on which such event is
cured, waived or ceases to exist or on which such Specified Senior
Indebtedness is discharged or (iii) such Payment Blockage Period shall have
been terminated by written notice to the Company or the Trustee from the agent
for the Banks or any other representative of a holder of the Specified Senior
Indebtedness initiating such Payment Blockage Period, after which the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments. In no event will a Payment Blockage Period
extend beyond 179 days. Not more than one Payment Blockage Period with respect
to the Notes may be commenced during any period of 365 consecutive days. No
event of default with respect to Specified Senior Indebtedness that existed or
was continuing on the date of the commencement of any Payment Blockage Period
with respect to the Specified Senior Indebtedness initiating such Payment
Blockage Period will be, or can be, made the basis for the commencement of a
second Payment Blockage Period whether or not within a period of 365
consecutive days, unless such event of default has been cured or waived for a
period of not less than 90 consecutive days. (Section 1503)
The Indenture provides that in the event of any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relative to the Company or to its creditors, as such, or its assets, or any
liquidation, dissolution or other winding up of the Company, whether voluntary
or involuntary, or any assignment for the benefit of creditors or other
marshalling of assets or liabilities of the Company, all Senior Indebtedness
must be paid in full in cash or cash equivalents or provision made for such
payment, before any payment or distribution is made on account of the
principal of, premium, if any, or interest on the Notes. (Section 1502) By
reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than the holders of the Notes.
Failure by the Company to make any required payment in respect
of the Notes when due or within any applicable grace period, whether or not
occurring during a Payment Blockage Period, would result in an Event of
Default and, thereafter, holders of the Notes would have the right to
accelerate the maturity thereof. See "--Events of Default."
As of December 31, 1996, on a pro forma basis after giving
effect to the Loomis Fargo Combination and the Refinancing, the Company
would have had approximately $356.7 million aggregate outstanding principal
amount of Indebtedness, of which approximately $75.1 million would have
been Senior Indebtedness (exclusive, in each case, of approximately $128.8
million of undrawn letters of credit that constitute Senior Indebtedness).
In addition, the Company would have had additional availability of $79.9
million for borrowings under the New Credit Facility, all of which would be
Senior Indebtedness. Although the Indenture contains limitations on the
amount of additional Indebtedness that the Company may incur, under certain
circumstances the amount of such Indebtedness could be substantial and such
Indebtedness may be Senior Indebtedness. Moreover, neither the Indenture
nor the Notes impose any limitation on the incurrence by the Company of
liabilities that are not considered Indebtedness under the Indenture or the
Notes. See "--Certain Covenants--Limitation on Indebtedness."
The Company is a holding company that derives all of its
operating income and cash flow from its subsidiaries. Generally, claims of
creditors of a subsidiary, including trade creditors, secured creditors and
creditors holding indebtedness and guarantees issued by such subsidiary, and
claims of preferred stockholders (if any) of such subsidiary will have
priority with respect to the assets and earnings of such subsidiary over the
claims of creditors of its parent company, except to the extent the claims of
creditors of the parent company are guaranteed by such subsidiary. No
guarantees of the Notes were provided by any Person in connection with the Old
Note Offering and there will be no guarantees of the Notes provided by any
Person in connection with the offering of Exchange Notes and, except as
provided under the "Limitation on Issuances of Guarantees of Pari Passu or
Subordinated Indebtedness" covenant, there will be no guarantees of the Notes
in the future. The Notes, therefore, will be effectively subordinated to
creditors (including trade creditors) and preferred stockholders (if any) of
the direct and indirect subsidiaries of the Company. At December 31, 1996, on
a pro forma basis after giving effect to the Loomis Fargo Combination and the
Refinancing, the aggregate outstanding principal amount of indebtedness
(exclusive of obligations in respect of undrawn letters of credit of
approximately $128.8 million) of the Company's subsidiaries (including
guarantees by certain of the Company's subsidiaries of the Company's
obligations under the New Credit Facility) would have been approximately $83.3
million. Although the Indenture and the Notes contain limitations on the
amount of additional Indebtedness that the Company's subsidiaries may incur,
under certain circumstances such Indebtedness could be substantial. Moreover,
neither the Indenture nor the Notes imposes any limitation on the incurrence
by such subsidiaries of liabilities that are not considered Indebtedness under
the Indenture or the Notes. See "--Certain Covenants--Limitation on
Indebtedness." In addition, the Company has a $120 million non-recourse
receivables-backed facility available on a revolving basis. See "Description
of Certain Indebtedness--Securitization of Receivables."
"Specified Senior Indebtedness" means (i) all Indebtedness
under the Bank Credit Agreement to the extent any may be outstanding at any
time; and (ii) any other Senior Indebtedness which (x) at the time of
incurrence exceeds $25,000,000 in aggregate principal amount and (y) is
specifically designated in the instrument evidencing such Senior Indebtedness
as "Specified Senior Indebtedness" by the Company.
"Senior Indebtedness" means the principal of (and premium, if
any, on) and interest on (including interest accruing after the occurrence of
an event of default or after the filing of a petition initiating any
proceeding pursuant to any bankruptcy law whether or not such interest is an
allowable claim in any such proceeding) and other amounts due on or in
connection with any Indebtedness of the Company, whether outstanding on the
date of the Indenture or hereafter created, incurred or assumed, including
under the Bank Credit Agreement, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Notwithstanding the foregoing,
"Senior Indebtedness" shall not include (A) Indebtedness evidenced by the
Notes, (B) Indebtedness evidenced by the 9 1/8% Notes and other Pari Passu
Indebtedness, (C) Indebtedness of the Company that is expressly subordinated
in right of payment to any Senior Indebtedness of the Company, the 9 1/8%
Notes or the Notes, (D) Indebtedness of the Company that by operation of law
is subordinate to any general unsecured obligations of the Company, (E)
Indebtedness of the Company to any Subsidiary, (F) to the extent it might
constitute Indebtedness, any liability for federal, state or local taxes or
other taxes, owed or owing by the Company and (G) to the extent it might
constitute Indebtedness, trade account payables owed or owing by the Company.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade accounts
payable and other accrued current liabilities incurred in the ordinary course
of business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit and
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities, (ii) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (iii) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade accounts payable arising in the ordinary course of business, (iv) all
Capitalized Lease Obligations of such Person, (v) all Indebtedness referred to
in (but not excluded from) clause (i), (ii), (iii) or (iv) above of other
Persons and all dividends of other Persons, the payment of which is secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (vi) all Guaranteed Debt of such Person, (vii)
all Redeemable Capital Stock issued by such Person valued at the greater of
its voluntary or involuntary maximum fixed repurchase price plus accrued and
unpaid dividends, (viii) all obligations under interest rate contracts of such
Person and (ix) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses
(i) through (viii) above. For purposes hereof, the "maximum fixed repurchase
price" of any Redeemable Capital Stock that does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Redeemable Capital Stock, such fair market value to be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness; (ii)
to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make
payment of such Indebtedness or to assure the holder of such Indebtedness
against loss; (iii) to supply funds to, or in any other manner invest in, the
debtor (including any agreement to pay for property or services to be acquired
by such debtor irrespective of whether such property is received or such
services are rendered); (iv) to maintain working capital or equity capital of
the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor; or (v) otherwise to assure a creditor
against loss; provided that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in the ordinary course
of business, or any obligation or liability of such Person in respect of
leasehold interests assigned by such Person to any other Person.
Certain Covenants
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not
permit any Subsidiary to, create, incur or assume or directly or indirectly
guarantee or in any other manner become directly or indirectly liable for the
payment of, or otherwise incur (collectively, "incur"), any Indebtedness
(including Indebtedness of an entity existing at the time such entity becomes
a Subsidiary or assumed in connection with the acquisition of assets from such
entity other than Indebtedness incurred in connection with, or in
contemplation of such entity becoming a Subsidiary or such acquisition), other
than Permitted Indebtedness, unless the Company's Adjusted Fixed Charge
Coverage Ratio for its last four completed fiscal quarters immediately
preceding the incurrence of such Indebtedness, taken as one period (and after
giving pro forma effect to (i) the incurrence of such Indebtedness and (if
applicable) the application of the net proceeds therefrom, as if such
Indebtedness was incurred, and the application of such proceeds occurred, on
the first day of such four-quarter period, (ii) the incurrence, repayment or
retirement of any other Indebtedness by the Company and its Subsidiaries since
the first day of such four-quarter period as if such Indebtedness was
incurred, repaid or retired on the first day of such four-quarter period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average daily
balance of such Indebtedness during such four-quarter period) and (iii) the
acquisition (whether by purchase, merger or otherwise) or disposition (whether
by sale, merger or otherwise) of any company, entity or business acquired or
disposed of by the Company or its Subsidiaries, as the case may be, since the
first day of such four-quarter period, as if such acquisition or disposition
occurred on the first day of such four-quarter period), would have been at
least equal to 2.0 to 1.0. (Section 1008)
Limitation on Restricted Payments. (a) The Company will not,
and will not permit any of its Subsidiaries to, directly or indirectly, take
any of the following actions:
(i) declare or pay any dividend on, or make any distribution to
holders of, Capital Stock of the Company (other than dividends or
distributions payable solely in the Company's own Capital Stock (other than
Redeemable Capital Stock));
(ii) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company or any options, warrants or other
rights to acquire such Capital Stock;
(iii) make any principal payment on, or redeem, repurchase or
defease, or otherwise acquire or retire for value, prior to any scheduled
principal payment or maturity, Indebtedness which is Subordinated
Indebtedness;
(iv) make any Investment (other than a Permitted Investment) in
any Person; or
(v) incur, create or assume any guarantee of Indebtedness of any
Affiliate (other than with respect to (a) guarantees of Indebtedness of any
Subsidiary by the Company or by any Subsidiary or (b) guarantees of
Indebtedness of the Company by any Subsidiary)
(such payments or any other actions described in (i), (ii), (iii), (iv) and
(v), collectively, "Restricted Payments") unless at the time of and after
giving effect to the proposed Restricted Payment (the amount of any such
payment, if other than cash, as determined by the Board of Directors, whose
determination shall be conclusive if evidenced by a Board Resolution), (1)
no Event of Default or event that, after notice or lapse of time or both
would become an Event of Default, shall have occurred or be continuing, and
(2) the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the first paragraph of the "Limitation on
Indebtedness" covenant described above, and (3) the aggregate amount of all
Restricted Payments after April 1, 1993 shall not exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
beginning on April 1, 1993 and ending on the last day of the Company's last
fiscal quarter ending prior to the date of such proposed Restricted Payment
(or, if such aggregate Consolidated Net Income shall be a loss, minus 100% of
such loss), plus
(B) the aggregate net proceeds, including the fair market value
of property or assets other than cash (as determined by the Board of
Directors, whose determination will be conclusive if evidenced by a Board
Resolution), received by the Company from the issue or sale (other than to a
Subsidiary) after April 1, 1993 of Capital Stock of the Company (other than
Redeemable Capital Stock), or of any options, warrants or other rights to
purchase such Capital Stock, plus
(C) the aggregate net cash proceeds received by the Company from
the issue or sale (other than to a Subsidiary) after April 1, 1993 of any debt
securities or Redeemable Capital Stock evidencing Indebtedness of the Company
that thereafter has been converted into or exchanged for Capital Stock of the
Company (other than Redeemable Capital Stock), plus
(D) to the extent not otherwise included in the Consolidated Net
Income of the Company, an amount equal to the net reduction in Investments
(other than reductions in Permitted Investments) in any Person other than a
Subsidiary resulting from the payments in cash of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company or a Subsidiary after the date of the Indenture from
any such Person, not to exceed the total amount of Investments (other than
Permitted Investments) in such Person by the Company and its Subsidiaries.
(Section 1009)
(b) None of the provisions set forth in paragraph (a) above shall be
deemed to prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if such declaration complied with the foregoing
provisions on the date of such declaration;
(ii) the redemption, repurchase or other acquisition or retirement
of any shares of any class of Capital Stock of the Company or of any
Subsidiary in exchange for, or out of the proceeds of, a substantially
concurrent issue and sale (other than to a Subsidiary) of other shares of
Capital Stock of the Company;
(iii) so long as no Default or Event of Default shall have
occurred and be continuing, payments with respect to the cancellation or
repurchase of stock or stock options granted or to be granted to employees
of the Company and its Subsidiaries under the Borg-Warner Security
Corporation Management Stock Option Plan or the Borg-Warner Security
Corporation 1993 Stock Option Plan or pursuant to the Borg-Warner Holdings
Corporation Management Stock Subscription Agreement, as amended, in each
case, in effect on the date of the Indenture; provided that the Company
could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the first paragraph of the "Limitation on Indebtedness"
covenant described above; or
(iv) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or out
of the net cash proceeds of (x) a substantially concurrent issuance and sale
(other than to a Subsidiary) of, shares of Capital Stock (other than
Redeemable Capital Stock) of the Company or (y) a substantially concurrent
incurrence (other than to a Restricted Subsidiary) of, new Subordinated
Indebtedness so long as (A) the principal amount of such new Indebtedness does
not exceed the principal amount (or, if such Subordinated Indebtedness being
refinanced provides for an amount less than the principal amount thereof to be
due and payable upon a declaration of acceleration thereof, such lesser amount
as of the date of determination) of the Subordinated Indebtedness being so
purchased, redeemed, defeased, acquired or retired, plus the lesser of the
amount of any premium required to be paid in connection with such refinancing
pursuant to the terms of the Subordinated Indebtedness being refinanced or the
amount of any premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus, in either case, the amount of reasonable
expenses of the Company incurred in connection with such refinancing, (B) such
new Subordinated Indebtedness is subordinated to the Notes to the same extent
as such Subordinated Indebtedness so purchased, redeemed, defeased, acquired
or retired and (C) such new Subordinated Indebtedness has an Average Life
longer than the Average Life of the Notes and a final Stated Maturity of
principal later than the final Stated Maturity of principal of the Notes.
The action described in clauses (ii) and (iv)(x) of this
paragraph shall be a Restricted Payment that shall be permitted to be made in
accordance with this paragraph but shall reduce the amount that would
otherwise be available for Restricted Payments under paragraph (a) above.
(Section 1009)
Limitation on Issuance of Other Senior Subordinated
Indebtedness. The Company will not create, incur or suffer to exist any
Indebtedness that is subordinate in right of payment and upon liquidation to
any Senior Indebtedness unless such Indebtedness is also pari passu with, or
subordinate in right of payment and upon liquidation to, the Notes pursuant to
subordination provisions substantially similar to those contained in the
Indenture. (Section 1010)
Limitation on Issuances and Sale of Preferred Stock by
Subsidiaries. The Company (i) will not permit any of its Subsidiaries to
issue any Preferred Stock to any person (other than to the Company or to a
Wholly Owned Subsidiary of the Company) and (ii) will not permit any person
(other than the Company or a Wholly Owned Subsidiary of the Company) to own
any Preferred Stock of any Subsidiary of the Company; provided, however, that
nothing in such covenant will prohibit Preferred Stock issued by a person
prior to the time (a) such person becomes a Subsidiary of the Company, (b)
such person merges with or into a Subsidiary of the Company or (c) a
Subsidiary of the Company merges with or into such person; provided further
that such Preferred Stock was not issued or incurred by such person in
anticipation of the transaction contemplated by subclause (a), (b), or (c)
above. Section (1014).
Limitations on Issuances of Guarantees of Pari Passu or
Subordinated Indebtedness. The Company will not permit any Subsidiary,
directly or indirectly, to assume, guarantee or in any other manner become
liable with respect to any Indebtedness that is Pari Passu Indebtedness or
Subordinated Indebtedness, unless (i) such Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a
guarantee of payment of the Notes by such Subsidiary, provided that (A) if any
such assumption, guarantee or other liability is subordinated, the guarantee
under such supplemental indenture shall be subordinated to no more than the
same extent as the Notes are subordinated to Senior Indebtedness and (B) with
respect to Subordinated Indebtedness, any such assumption, guarantee or other
liability of such Subsidiary with respect to such Subordinated Indebtedness
shall be subordinated to such Subsidiary's assumption, guarantee or other
liability with respect to the Notes at least to the same extent as such
Subordinated Indebtedness is subordinated to the Notes; and (ii) such
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Subsidiary as a result of
any payment by such Subsidiary under its Guarantee (as defined below) until
such time as the Notes have been paid in full; provided that this paragraph
shall not be applicable to any guarantee, assumption or other liability of any
Subsidiary that (x) existed at the time such Person became a Subsidiary and
(y) was not incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary.
Each guarantee created pursuant to the provisions described in
the foregoing paragraph (or any other guarantee by any Subsidiary of payment
of the Notes provided, that (i) such Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a guarantee
of payment of the Notes by such Subsidiary and providing that (a) such other
guarantee shall be subordinated to no more than the same extent as the Notes
are subordinated to Senior Indebtedness and (b) such other guarantee shall be
senior to at least the same extent as the Notes are senior to Subordinated
Indebtedness, and (ii) such Subsidiary takes the action referred to in clause
(ii) of the prior paragraph) is referred to as a "Guarantee" and the issuer of
each such Guarantee is referred to as a "Guarantor." Notwithstanding the
foregoing, any Guarantee by a Subsidiary of the Notes shall provide by its
terms that it shall be automatically and unconditionally released and
discharged upon (i) any sale, exchange or transfer, to any Person not an
Affiliate of the Company, of all of the Company's Capital Stock in, or all or
substantially all the assets of, such Subsidiary (which sale, exchange or
transfer is not prohibited by the Indenture) or (ii) in the case of any
Guarantee created pursuant to the provisions described in the foregoing
paragraph, the release or discharge of the assumption, guarantee or other
liability which resulted in the creation of such Guarantee, except a discharge
or release by or as a result of payment under such assumption, guarantee or
other liability. (Section 1015)
Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries. The Company will not, and will not permit any
Subsidiary to, create or otherwise cause to exist or become effective any
consensual encumbrance or restriction of any kind, other than those included
in the terms of the Notes, the Bank Credit Agreement as originally executed or
any successor Bank Credit Agreement containing such encumbrances or
restrictions that are no more restrictive than as set forth in the Bank Credit
Agreement as originally executed, or those in existence immediately prior to
the date of the Indenture, on the ability of any Subsidiary to (i) pay
dividends or make any other distribution on its Capital Stock to the Company
or any Subsidiary, (ii) pay any Indebtedness owed to the Company or any
Subsidiary, (iii) make loans or advances to the Company or any Subsidiary,
(iv) transfer any of its property or assets to the Company or any Subsidiary
or (v) guarantee any Indebtedness of the Company or any Subsidiary, except in
each case for such encumbrances or restrictions as are (a) in the case of (iv)
above, permitted to be incurred under the "Limitation on Liens" covenant or
(b) existing under or by reason of any agreement or other instrument of a
Person, or binding with respect to assets, acquired by the Company or any
Subsidiary in existence at the time of such acquisition (but not created in
contemplation thereof), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, or such assets, so acquired. (Section
1011)
Limitation on Liens. The Company will not, and will not permit
any Subsidiary to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind upon any of its property or assets, now owned or
acquired after the date of the Indenture, without making effective provision
whereby all of the Notes shall be directly secured equally and ratably with
(or prior to) the obligation or liability secured by such Lien, except for
Permitted Liens. (Section 1012)
Limitation on Transactions with Affiliates. The Company will
not enter into, renew, extend, or permit any Subsidiary to enter into, renew
or extend, any agreement relating to the sale, purchase or lease of any
assets, property or services from or to any Affiliate of the Company (other
than a Wholly Owned Subsidiary of the Company) unless (i) such transaction or
series of transactions is or are on terms that are no less favorable to the
Company or such Subsidiary, as the case may be, than would be available in a
comparable transaction with an unaffiliated third party; and (ii) (A) with
respect to any transaction or series of transactions involving aggregate
payments in excess of $5 million, but less than $10 million, the Company
delivers an officer's certificate to the Trustee certifying that such
transaction or transactions comply with clause (i) above and (B) with respect
to a transaction or series of transactions, involving aggregate payments equal
to or greater than $10 million, such transaction or transactions shall have
received the approval of a majority of the disinterested directors of the
Board of Directors of the Company; provided, however, that the foregoing
restriction shall not apply to (i) the payment of fees to Merrill Lynch
Capital Partners, Inc. or Merrill Lynch, Pierce, Fenner & Smith Incorporated
or any of their Affiliates for consulting, investment banking or financial
advisory services rendered by such Person to the Company or any of its
Subsidiaries, (ii) actions in connection with indebtedness to the Company
incurred by certain members of management of the Company to purchase shares of
Common Stock, which indebtedness is outstanding on the date of the Indenture,
(iii) sales of goods and services by the Company or any of its Subsidiaries to
Affiliates of the Company in the ordinary course of business, (iv) transactions
pursuant to the Distribution and Indemnity Agreement dated as of January 27,
1993, the Tax Sharing Agreement dated as of January 27, 1993, the Benefits
Agreement dated as of January 27, 1993, and the Service Agreement dated as of
January 27, 1993, in each case as in effect on the date of the Indenture, (v)
the Contribution Agreement dated November 28, 1996, the Stockholders Agreement
dated January 24, 1997 and all agreements related thereto and (vi) services
rendered to Loomis Fargo by the Company's senior executive officers. (Section
1013)
Under Delaware law, the disinterested directors' fiduciary
obligations require that they act in good faith in a manner which they
reasonably believe to be in the best interests of the Company and its
stockholders, which may not necessarily be the same as those of holders of the
Notes.
Provision of Financial Statements and Reports. The Company
will file on a timely basis with the Commission, to the extent such filings
are accepted by the Commission and whether or not the Company has a class of
securities registered under the Exchange Act, the annual reports, quarterly
reports and other documents that the Company would be required to file if it
were subject to Section 13 or 15 of the Exchange Act. The Company will also be
required (a) to file with the Trustee, and provide to each holder of Notes,
without cost to such holder, copies of such reports and documents within 15
days after the date on which the Company files such reports and documents with
the Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required, and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, to supply at the Company's cost copies
of such reports and documents to any prospective holder of Notes promptly upon
written request. (Section 1017)
Purchase of Notes upon Change of Control
If a Change of Control occurs at any time, each holder of Notes
will have the right to require that the Company repurchase each such holder's
Notes at a purchase price in cash equal to 101% of the principal amount of
such Notes plus accrued interest, if any, to the date of purchase pursuant to
the offer described below (the "Change of Control Offer") and as provided in
and subject to the terms of the Indenture. The indenture governing the 9 1/8%
Notes has a similar provision obligating the Company to make an offer to
purchase the 9 1/8% Notes in the event of a Change of Control. If there is a
Change of Control, due to the subordinated nature of the Notes or otherwise,
there can be no assurance that the Company will have available funds
sufficient to pay such purchase price for all of the Notes that holders elect
to require the Company to repurchase.
Within 30 days following a Change of Control and prior to the
mailing of the notice to holders provided for in the next paragraph, the
Company covenants to either (1) repay in full all Indebtedness under the Bank
Credit Agreement or offer to repay in full all such Indebtedness and repay the
Indebtedness of each Bank who has accepted such offer or (2) obtain the
requisite consent under the Bank Credit Agreement to permit the repurchase of
the Notes as provided for in this "Purchase of Notes upon Change of Control"
covenant. The Company shall first comply with the provisions of this paragraph
before it shall be required to repurchase the Notes pursuant to this "Purchase
of Notes upon Change of Control" covenant, and any failure to comply with this
paragraph shall constitute a default for purposes of clause (D) of the first
paragraph under "Events of Default". There can be no assurance that in the
event of a Change of Control the Company will be able to repay all amounts
outstanding under the Bank Credit Agreement or obtain the necessary consents
from the lenders under the Bank Credit Agreement to consummate a Change of
Control Offer. The failure of the Company to make or consummate the Change of
Control Offer or pay the Change of Control Purchase Price when due would
result in an Event of Default and would give the Trustee and the holders of
the Notes the rights described under "--Events of Default."
Within 30 days following any Change of Control, the Company
shall mail a notice to each holder stating (a) that a Change of Control has
occurred and that such holder has the right to require the Company to purchase
such holder's Notes in cash; (b) the date of purchase (which shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed); (c) the purchase price for the purchase; and (d) the instructions
determined by the Company, consistent with this covenant, that a holder must
follow in order to have its Notes repurchased. (Section 1016)
The Company will comply with Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable, in the event that a Change of Control
occurs and the Company is required to purchase Notes as described above. The
existence of a holder's right to require, subject to certain conditions, the
Company to repurchase its Notes upon a Change of Control may deter a third
party from acquiring the Company in a transaction which constitutes a Change
of Control.
The provisions of the Indenture may not afford holders of Notes
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger or similar transaction involving the Company that may
adversely affect holders of the Notes, if such transaction is not a
transaction defined as a Change of Control. Reference is made to "Certain
Definitions" for the definition of "Change of Control". A transaction
involving the Company's management or its affiliates, or a transaction
involving a recapitalization of the Company, will result in a Change of
Control if it is the type of transaction specified by such definition.
The use of the term "all or substantially all" in Indenture
provisions such as clause (b) of the definition of "Change of Control" and
under "--Consolidation, Merger and Sale of Assets" has no clearly established
meaning under New York law (which governs the Indenture) and has been the
subject of limited judicial interpretation in few jurisdictions. Accordingly,
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of a person, which uncertainty should be considered by prospective
purchasers of the Notes.
Treatment by the Company. For United States tax purposes, the
Company does not intend to treat the possibility of a Change of Control Offer
as giving rise to any accrual of "original issue discount" or recognition of
ordinary income upon redemption, sale or exchange of a Note. Holders may wish
to consider that United States Treasury Regulations regarding the treatment of
certain contingencies were recently issued and may wish to consult their tax
advisers in this regard.
Consolidation, Merger and Sale of Assets
The Company may not, in a single transaction or a series of
transactions, consolidate with or merge with or into, or sell, assign, convey,
transfer or lease or otherwise dispose of its properties and assets
substantially as an entirety to, any entity, and the Company will not permit
any of its Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company or the Company and its Subsidiaries, taken as a whole, to any other
entity unless: (i) either (a) the Company shall be the continuing corporation
or (b) the entity (if other than the Company) formed by such consolidation or
into which the Company or such Subsidiary is merged or the entity that
acquires by sale, assignment, conveyance, transfer or lease the properties and
assets of the Company or such Subsidiary, as the case may be, substantially as
an entirety shall be a corporation, partnership or trust organized and validly
existing under the laws of the United States or any State thereof or the
District of Columbia, and shall expressly assume by a supplemental indenture,
the due and punctual payment of the principal of and premium, if any, and
interest on all the Notes and the performance of every covenant of the
Indenture on the part of the Company to be performed or observed; (ii)
immediately thereafter, no Event of Default (and no event that, after notice
or lapse of time, or both, would become an Event of Default) shall have
occurred and be continuing; (iii) immediately thereafter, on a pro forma basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), the Company or such entity, after giving effect to such
transaction or series of transactions on a pro forma basis, could incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) under the first
paragraph of the "Limitation on Indebtedness" covenant described above; (iv)
the Company or such entity shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, sale, assignment, conveyance, transfer or lease and, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture, comply with the Indenture and that all conditions precedent therein
relating to such transaction have been satisfied; and (v) if any of the
property or assets of the Company would thereupon become subject to any Lien,
the Outstanding Notes shall be secured equally and ratably with (or prior to)
the obligation or liability secured by such Lien, unless the Company could
create such Lien under the Indenture without equally and ratably securing the
Notes. (Sections 801 and 803)
In the event of any transaction described in and complying with
the conditions listed in the immediately preceding paragraph in which the
Company is not the continuing corporation, the successor person formed or
remaining shall succeed to, and be substituted for, and may exercise every
right and power of, the Company and, thereafter, except in the case of a
lease, the Company would be discharged from all obligations and covenants
under the Indenture and the Notes. (Section 802)
Events of Default
"Event of Default" means any one of the following events
(whatever the reason for such Event of Default and whether it be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
A. default in the payment of any interest on any Note when it
becomes due and payable, and continuance of such default for a period of 30
days; or
B. default in the payment of the principal of (or any premium,
if any, on) any Note at its Maturity; or
C. default in the performance, or breach, of any covenant or
warranty of the Company in the Indenture (other than a default in the
performance, or breach, of a covenant or warranty which is specifically dealt
with elsewhere in this section of the Indenture), and continuance of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in principal amount of all
Outstanding Notes a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" thereunder; or
D. (a) an event of default shall have occurred under any
mortgage, bond, indenture, loan agreement or other document evidencing any
Indebtedness of the Company or any Subsidiary, which Indebtedness is
outstanding in a principal amount of at least $10,000,000 in the aggregate,
and such default shall result in such Indebtedness becoming, whether by
declaration or otherwise, due and payable prior to the date on which it would
otherwise become due and payable or (b) a default in any payment when due at
final maturity of any such Indebtedness; or
E. any Person entitled to take the actions described in this
section, after the occurrence of any event of default under any agreement or
instrument evidencing any Indebtedness in excess of $10,000,000 in the
aggregate of the Company or any Subsidiary, shall commence judicial
proceedings to foreclose upon assets of the Company or any of its Subsidiaries
having an aggregate value in excess of $10,000,000, or shall have exercised
any right under applicable law or applicable security documents to take
ownership of such assets in lieu of foreclosure; or
F. final judgments or orders rendered against the Company or any
Subsidiary which require the payment in money, either individually or in an
aggregate amount, that is more than $10,000,000 and either (a) an enforcement
proceeding shall have been commenced by any creditor upon such judgment or
order or (b) there shall have been a period of 60 days during which a stay of
enforcement of such judgment or order, by reason of pending appeal or
otherwise, was not in effect; or
G. the entry by a court having jurisdiction in the premises of
(a) a decree or order for relief in respect of the Company or any Material
Subsidiary in an involuntary case or proceeding under any applicable federal
or state bankruptcy, insolvency, reorganization or other similar law or (b) a
decree or order adjudging the Company or any Material Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Material Subsidiary under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Material Subsidiary or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order for relief or any
such other decree or order unstayed and in effect for a period of 60
consecutive days; or
H. the commencement by the Company or any Material Subsidiary of
a voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or of any other
case or proceeding to be adjudicated a bankrupt or insolvent, or the consent
by the Company or any Material Subsidiary to the entry of a decree or order
for relief in respect of the Company or such Material Subsidiary in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, or
the filing by the Company or any Material Subsidiary of a petition or answer
or consent seeking reorganization or relief under any applicable federal or
state law, or the consent by the Company or any Material Subsidiary to the
filing of such petition or the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or similar
official of the Company or such Material Subsidiary or of any substantial part
of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by the Company or any Material Subsidiary in
writing of its inability to pay its debts generally as they become due, or the
taking of corporate action by the Company or any Material Subsidiary in
furtherance of any such action; or
I. any Guarantee required to be in full force and effect by the
terms of the Indenture ceases to be in full force and effect or is declared
null and void, or any Guarantor denies that it has any further liability under
any Guarantee, or gives notice to such effect (other than by reason of the
termination of the Indenture or the release of any such Guarantee in
accordance with the Indenture) and such condition shall have continued for a
period of 60 days after written notice of such failure requiring the Guarantor
and the Company to remedy the same shall have been given (x) to the Company by
the Trustee or (y) to the Company and the Trustee by Holders of at least 25%
in aggregate principal amount of the Notes then outstanding.
If an Event of Default (other than as specified in (G) or (H)
above) occurs and is continuing under the Indenture, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of the outstanding
Notes may immediately accelerate the maturity of all the Notes as provided in
the Indenture; provided, however, that no action on the part of the Trustee or
any Holder of the Notes is required for such acceleration if an Event of
Default specified in (G) or (H) above occurs and is continuing; and provided
further that, after such acceleration, but before a judgment or decree based
on acceleration, the Holders of a majority in aggregate principal amount of
outstanding Notes issued under the Indenture may, under certain circumstances,
rescind or annul such acceleration if all Events of Default, other than the
nonpayment of accelerated principal of, or premium, if any, on, or interest on
the Notes, have been cured or waived as provided in the Indenture. A
declaration of acceleration because of an Event of Default specified in (D) or
(E) above would be automatically annulled if the Indebtedness referred to
therein were discharged, or the Holders thereof rescinded their declaration of
acceleration referred to therein, within 60 days and no other Event of Default
had occurred and not been cured or waived during such period. (Section 502)
The Holders of a majority in principal amount of the Notes Outstanding also
have the right to waive certain past defaults under the Indenture. (Section
513)
No Holder of any Note issued under the Indenture has any right
to institute any proceeding with respect to such Indenture or for any remedy
thereunder, unless (i) such Holder has previously given to the Trustee (and,
if the Bank Credit Agreement is in effect, to the agent under the Bank Credit
Agreement) written notice of a continuing Event of Default under the
Indenture, (ii) the Holders of at least 25% in principal amount of the
Outstanding Notes issued under the Indenture have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
Trustee under the Indenture, and (iii) the Trustee has not received from the
Holders of a majority in principal amount of the Outstanding Notes a direction
inconsistent with such request and the Trustee has failed to institute such
proceeding within 60 days after receipt of such notice. (Section 507) Such
limitations do not apply, however, to a suit instituted by a Holder of a Note
for the enforcement of payment of the principal of or premium, if any, or
interest on such Note on or after the respective due dates expressed in such
Note. (Section 508)
During the existence of an Event of Default, the Trustee is
required to exercise such rights and powers vested in it under the Indenture
and use the same degree of care and skill in its exercise thereof as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs. Subject to the provisions of the Indenture relating to the duties
of the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee is not under any obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders unless
such holders shall have offered to the Trustee reasonable security or
indemnity. (Section 602) Subject to such provisions for the indemnification of
the Trustee, the Holders of a majority in principal amount of the Outstanding
Notes have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee under the Indenture. (Section 512)
The Company is required to furnish to the Trustee an annual
statement as to the performance by the Company of its obligations under the
Indenture. (Section 1004)
Modification or Waiver
Modification and amendment of the Indenture may be made by
the Company and the Trustee with the consent of the Holders of not less
than a majority in principal amount of all Outstanding Notes that are
affected by such modification or amendment; provided that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Note affected thereby, among other things: (i) change the
Stated Maturity of the principal of or any installment of interest on any
such Note; (ii) reduce the principal amount of or the rate of interest on,
or any premium payable upon the redemption of, any such Note; (iii)
adversely affect any right of repayment at the option of any Holder of any
such Note; (iv) change the Place of Payment or the coin or currency of
payment of the principal of, or any premium or interest on, any such Note;
(v) impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof or on or after any
Redemption Date or Repayment Date thereof; (vi) reduce the above-stated
percentage in principal amount of such Outstanding Notes, the consent of
whose Holders is necessary to modify or amend the Indenture or to consent
to any waiver thereunder or certain defaults thereunder; (vii) modify any
of the foregoing requirements or reduce the percentage of such Outstanding
Notes necessary to waive any past default or compliance with certain
restrictive provisions; or (viii) modify any of the provisions of the
Indenture relating to the subordination of the Notes in a manner adverse to
the Holders of Notes. (Section 902)
The Holders of a majority in aggregate principal amount of all
Outstanding Notes affected thereby have the right to waive compliance by the
Company with certain covenants. (Section 1017)
Modification and amendment of the Indenture may be made by the
Company and Trustee without the consent of any Holder for any of the following
purposes: (i) to evidence the succession of another Person to the Company as
obligor under the Indenture and the Notes; (ii) to add to the covenants of the
Company for the benefit of the Holders of Notes or to surrender any right or
power conferred upon the Company by the Indenture; (iii) to add Events of
Default for the benefit of the Holders of Notes; (iv) to secure the Notes
pursuant to the provisions described above under "Limitation on Liens" or
"Consolidation, Merger and Sale of Assets" or otherwise; (v) to provide for
the acceptance of appointment by a successor Trustee; (vi) to cure any
ambiguity, defect or inconsistency in the Indenture, provided such action does
not adversely affect the interests of Holders of Notes in any material
respect; or (vii) to supplement any of the provisions of the Indenture to the
extent necessary to permit or facilitate defeasance and discharge of the
Notes, provided that such action shall not adversely affect the interests of
the Holders of Notes in any material respect. (Section 901)
The Indenture provides that in determining whether the Holders
of the requisite principal amount of Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver thereunder, Notes
owned by the Company or any other obligor upon the Notes or any Affiliate of
the Company or of such other obligor shall be disregarded. (Section 101)
Discharge, Defeasance and Covenant Defeasance
The Company may discharge certain obligations to Holders of
Notes which have not already been delivered to the Trustee for cancellation
and which have either become due and payable or are by their terms due and
payable within one year (or scheduled for redemption within one year) when the
Company has (i) irrevocably deposited with the Trustee in trust funds in an
amount sufficient to pay the entire indebtedness on such Notes for principal
(and premium, if any) and interest to the date of such deposit (if such Notes
have become due and payable) or to the Stated Maturity or Redemption Date, as
the case may be; (ii) paid or caused to be paid all sums payable under the
Indenture by the Company; and (iii) delivered to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided in the Indenture relating to the satisfaction and discharge
of the Indenture have been complied with. (Section 401)
The Company may, at its option and at any time, elect to have
its obligations discharged with respect to the Outstanding Notes
("defeasance"). Such defeasance means that the Company shall be deemed to have
paid and discharged the entire indebtedness represented by such Outstanding
Notes and to have satisfied its other obligations under such Notes and the
Indenture, except for (i) the rights of Holders of such Outstanding Notes to
receive from a trust fund payments in respect of the principal of (and
premium, if any, on) and interest on such Notes when such payments are due,
(ii) the Company's obligations with respect to such Notes relating to the
registration, transfer and exchange of Notes, the replacement of mutilated,
destroyed, lost or stolen Notes, the maintenance of an office or agency in the
applicable Place of Payment and the holding of money for security payments in
trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee,
and (iv) the defeasance provisions of the Indenture. In addition, the Company
may, at its option and at any time, elect to be released from its obligations
with respect to certain covenants in the Indenture ("covenant defeasance"),
and any omission to comply with such obligations thereafter shall not
constitute a Default or an Event of Default with respect to the Notes.
(Sections 1402 and 1403)
In order to exercise either defeasance or covenant defeasance:
(i) the Company must irrevocably deposit with the Trustee (or other qualifying
trustee), in trust, for the benefit of the Holders of such Notes, cash,
Government Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants to pay the principal of (and premium, if any, on) and
interest on such Outstanding Notes on the scheduled due dates therefor; (ii)
in the case of defeasance, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (x) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (y) since the
date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of such Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred; (iii) in the case of covenant defeasance, the
Company shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of such Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such covenant defeasance
had not occurred; (iv) no event or condition shall exist that, pursuant to
certain provisions described under "Subordination" above, would prevent the
Company from making payments of principal of (and premium, if any) and
interest on the Notes at the date of the irrevocable deposit referred to above
or at any time during the period ending on the 91st day after such deposit
date; (v) in the case of defeasance or covenant defeasance, such defeasance
shall not be in violation of the terms of any agreement or instrument to which
the Company is a party or to which any of its properties are subject and the
Agents under the Bank Credit Agreement shall have delivered a certificate to
the Trustee and the Company that such defeasance shall not be in violation of
the terms of the Bank Credit Agreement and (vi) the Company must comply with
certain other conditions. Before the deposit referred to in clause (i) above,
the Company may give to the Trustee, in accordance with the Indenture, a
notice of its election to redeem all or any portion of the Outstanding Notes
at a future date in accordance with the terms of the Notes and the Indenture,
which notice shall be irrevocable. (Sections 1402, 1403 and 1404)
"Government Obligations" means securities which are direct
obligations of the United States the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States, which are not callable or redeemable at the option of the issuer
thereof and shall also include a depository receipt issued by a bank or trust
company as custodian with respect to any such Government Obligation or a
specified payment of interest on or principal of any such Government
Obligation held by such custodian for the account of the holder of a
depository receipt; provided that (except as required by law) such custodian
is not authorized to make any deduction from the amount payable to the holder
of such depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of interest or
principal of the Government Obligation evidenced by such depository receipt.
(Section 101)
In the event that the Company effects covenant defeasance with
respect to any Notes and such Notes are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default
described in clause (C) under "Events of Default" with respect to Sections 803
and 1005 through 1017 of the Indenture (which Sections would no longer be
applicable to such Notes) or described in clause (D) under "Events of Default"
with respect to any other covenant with respect to which there has been
defeasance, the amounts of U.S. dollars and of Government Obligations that are
on deposit with the Trustee will be sufficient to pay amounts due on such
Notes at the time of their Stated Maturity but may not be sufficient to pay
amounts due on such Notes at the time of the acceleration resulting from such
Event of Default. However, the Company would remain liable to make payment of
such amounts due at the time of acceleration. (Section 1403)
If the Trustee or any Paying Agent is unable to apply any money
in accordance with the Indenture by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under the
Indenture and such Notes shall be revived and reinstated as though no deposit
had occurred pursuant to the Indenture, until such time as the Trustee or
Paying Agent is permitted to apply all such money in accordance with the
Indenture; provided, however, that, if the Company makes any payment of
principal of (or premium, if any, on) or interest on any such Note following
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money held
by the Trustee or Paying Agent. (Section 1406)
The Trustee
The Indenture provides that, except during the continuance of
an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. If an Event of Default has occurred
and is continuing, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent Person would exercise under the circumstances in the
conduct of such Person's own affairs. (Section 602)
The Indenture and provisions of the Trust Indenture Act
incorporated by reference therein contain limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received
by it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined in the Trust Indenture Act) it
must eliminate such conflict or resign.
Governing Law
The Indenture, the Notes and any Guarantee are governed by, and
are to be construed in accordance with, the laws of the State of New York. The
Indenture will be qualified under the provisions of the Trust Indenture Act
that are required to be part of the Indenture and shall, to the extent
applicable, be governed by such provisions.
Certain Definitions
Set forth below is a summary of certain defined terms used in
the Indenture. Reference is made to the Indenture for the full definition of
all such terms.
"Adjusted Fixed Charge Coverage Ratio" means for any period
the ratio of (a) the sum of Consolidated Net Income, Consolidated Interest
Expense, Consolidated Tax Expense and Consolidated Non-cash Charges
deducted in computing Consolidated Net Income, in each case, for such
period, on a consolidated basis, to (b) Consolidated Interest Expense for
such period; provided that, in making such computation, the Consolidated
Interest Expense attributable to interest on any Indebtedness computed on a
pro forma basis and bearing a floating interest rate shall be computed as
if the rate in effect on the date of computation had been the applicable
rate for the entire period.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Bank Credit Agreement" means the Credit Agreement among
Bankers Trust Company, Canadian Imperial Bank of Commerce and NationsBank,
N.A., as agents, the other Banks and the Company as in effect on the Original
Issue Date and as such agreement may be amended, renewed, extended,
substituted, refinanced, restructured, replaced, supplemented or otherwise
modified from time to time (including, without limitation, any successive
renewals, extensions, substitutions, refinancings, restructurings,
replacements, supplementations or other modifications of the foregoing).
"Banks" means the banks and other financial institutions from
time to time that are lenders under the Bank Credit Agreement.
"Capitalized Lease Obligation" means any obligations of the
Company and its Subsidiaries on a consolidated basis under any capital lease
of real or personal property that, in accordance with GAAP, has been recorded
as a capitalized lease obligation.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 365 days or less from the date of acquisition
thereof issued or directly and fully guaranteed or insured by the United
States of America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in support
thereof); (ii) time deposits or certificates of deposit or acceptances with a
maturity of one year or less from the date of acquisition thereof of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$100,000,000; (iii) (a) commercial paper with a maturity of one year or less
from the date of acquisition thereof issued by the parent of any commercial
bank (provided that the financial institution is a member of the Federal
Reserve System) of recognized standing having capital and surplus in excess of
$500,000,000 and (b) commercial paper with a maturity of one year or less from
the date of acquisition thereof issued by a corporation that is not an
Affiliate of the Company organized under the laws of any state of the United
States or the District of Columbia and rated at least A-1 by S&P or at least
P-1 by Moody's or at least an equivalent rating category of another nationally
recognized securities rating agency; (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of America
or issued by any agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one year from the date
of acquisition; (v) investments in money market funds substantially all of
whose assets are comprised of securities of the type described in clauses (i)
through (iv) above; and (vi) obligations the interest with respect to which is
excluded from gross income under Section 103 of the Internal Revenue Code of
1986, with a maturity of not more than six months from the date of acquisition
thereof or with the right of the holder to put such obligations for purchase
at par upon not more than seven days' notice, and in each case which are rated
A-2 or higher by S&P or rated P-2 or higher by Moody's.
"Change of Control" means the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act) other than Permitted Holders
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the total
Voting Stock of the Company and the Permitted Holders do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company; (b) the
Company consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other property, other
than any such transaction where (i) the outstanding Voting Stock of the
Company is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and/or other property in an amount which could be paid by
the Company as a Restricted Payment under the Indenture and (ii)
immediately after such transaction either (x) no "person" or "group" (as
such terms are used in Section 13(d) or 14(d) of the Exchange Act), other
than Permitted Holders, directly or indirectly, is the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), of more than
50% of the total Voting Stock of the surviving or transferee corporation,
or (y) the Permitted Holders have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the
Board of Directors of the Company, or (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of 66(2)/3% of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.
"Consolidated Gross PP&E" means, with respect to the Company as
of the end of any fiscal year of the Company, the amount of property, plant
and equipment of the Company and its Subsidiaries, determined on a
consolidated basis, as shown on an audited balance sheet of the Company as of
the end of such fiscal year, without giving effect to accumulated depreciation
and amortization in respect of such property, plant and equipment.
"Consolidated Interest Expense" means for any period the sum of
(i) the aggregate of the interest expense on Indebtedness of the Company and
its consolidated Subsidiaries for such period, on a consolidated basis, plus
(ii) that portion of operating lease rentals representative of the interest
factor (which shall be deemed to be one-third of operating lease rentals), in
each case as determined in accordance with GAAP.
"Consolidated Net Income" means for any period the consolidated
net income of the Company and its consolidated Subsidiaries for such period as
determined in accordance with GAAP adjusted by excluding (i) any gain or loss
realized upon the termination of any employee pension plan, (ii) net
extraordinary gains or net extraordinary losses (less all reasonable fees and
expenses relating thereto), as the case may be, (iii) the portion of net
income (or loss) of the Company and its Subsidiaries allocable to minority
interests in unconsolidated persons to the extent that cash dividends or
distributions have not actually been received by the Company or one of its
Subsidiaries, (iv) net income (or loss) of any person combined with the
Company or one of its subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (v) net gains or
losses (less all reasonable fees and expenses relating thereto) in respect of
dispositions of assets other than in the ordinary course of business, and (vi)
the net income of any Subsidiary of the Company to the extent that the
declaration of dividends or similar distributions by that Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulations applicable to that Subsidiary
or its stockholders.
"Consolidated Non-cash Charges" means, for any period, the
aggregate depreciation, amortization and other non-cash charges of the
Company and its Subsidiaries for such period, as determined in accordance
with GAAP (excluding any such non-cash charge which requires an accrual of
or reserve for cash charges for any future period).
"Consolidated Tax Expense" of the Company means for any period
the aggregate of the tax expense of the Company and its consolidated
Subsidiaries for such period, determined in accordance with GAAP.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Foreign Entity" means any Subsidiary of the Company either (i)
more than 80% of the sales, earnings or assets (determined on a consolidated
basis) of which are located or derived from operations outside of the United
States of America or (ii) which is a "controlled foreign corporation" within
the meaning of Section 952 of the Internal Revenue Code.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States, consistently
applied, that were in effect on the date of the 9 1/8% Note Indenture.
"Investment" means, with respect to any person, any direct or
indirect loan or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition by such person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other person.
"Investments" shall exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien, security
interest or encumbrance of any kind.
"Majority Owned Subsidiary" means any Subsidiary of the Company
of which 80% of the outstanding shares of Voting Stock are owned directly or
indirectly by the Company.
"Material Subsidiary" means (i) any Subsidiary of the Company
now existing or hereafter acquired or formed by the Company which (x) for the
most recent fiscal year of the Company commencing on or after January 1, 1996
accounted for more than 5% of the consolidated revenues of the Company, or (y)
as at the end of such fiscal year, was the owner of more than 5% of the
consolidated assets, all as shown on the consolidated financial statements of
the Company for such fiscal year; and (ii) any other Subsidiary so designated
by the Company, by an Officers' Certificate delivered to the Trustee.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"ML Funds" means Merrill Lynch KECALP L.P. 1986, Merrill Lynch
KECALP L.P. 1987, Merchant Banking L.P. No. 1, ML Venture Partners II, L.P.,
Merrill Lynch Capital Appreciation Partnership No. VIII, L.P., ML Offshore LBO
Partnership No. VIII, ML Employees LBO Partnership No. 1, L.P., ML IBK
Positions, Inc. and any Affiliates of the foregoing that beneficially own,
directly or indirectly, shares of Capital Stock of the Company.
"9 1/8% Notes" means the Company's 9 1/8% Senior Subordinated
Notes due 2003.
"Pari Passu Indebtedness" means the 9 1/8% Notes and any other
Indebtedness which ranks pari passu in right of payment and upon liquidation
to the Notes.
"Permitted Holders" means the ML Funds and the Management
Investors.
"Permitted Indebtedness" means
(i) Indebtedness of the Company (and guarantees of such
Indebtedness of the Company by its Subsidiaries) under the Bank Credit
Agreement in an aggregate principal amount not to exceed $285,000,000 (minus
all principal payments made in respect of any term loans thereunder, and minus
the amount by which any commitments under any revolving loan or letter of
credit facility are permanently reduced);
(ii) Indebtedness of the Company evidenced by the Notes or of any
Guarantor in respect of any guarantee of the Notes;
(iii) Indebtedness arising out of (a) letters of credit incurred in
the ordinary course of business and (b) other letters of credit in an
aggregate principal amount not to exceed $35 million at any time;
(iv) Indebtedness arising under the Company's accounts receivable
facility in effect on the date of the Indenture;
(v) Indebtedness of the Company or any of its Subsidiaries
outstanding on the date of the Indenture, other than Indebtedness pursuant to
clause (i) and (iv) hereof;
(vi) Indebtedness in respect of Capitalized Lease Obligations
incurred in any particular Annual Period in an aggregate principal amount not
to exceed 7 1/2% of the dollar amount of the Company's Consolidated Gross
PP&E as of the end of the immediately preceding full fiscal year;
(vii) Indebtedness of a Majority Owned Subsidiary of the Company
(x) to the Company or (y) to another Majority Owned Subsidiary of the Company,
provided that any disposition, pledge or transfer of any such Indebtedness to
a Person (other than a disposition, pledge or transfer to the Company or a
wholly owned Subsidiary or to or for the benefit of the Banks as provided in
the Bank Credit Agreement) shall be deemed to be an incurrence of such
Indebtedness by such Majority Owned Subsidiary not permitted by this clause
(vii);
(viii) Indebtedness of the Company to a Majority Owned Subsidiary of
the Company which is unsecured and subordinated in right of payment from and
after such time as the Notes shall become due and payable (whether at a Stated
Maturity, by acceleration or otherwise) to the payment and performance of the
Company's obligations under the Indenture and the Notes, provided that any
disposition, pledge or transfer of any such Indebtedness to a Person (other
than a disposition, pledge or transfer to the Company or a wholly owned
Subsidiary or to or for the benefit of the Banks as provided in the Bank
Credit Agreement) shall be deemed to be an incurrence of such Indebtedness by
the Company not permitted by this clause (viii);
(ix) Indebtedness incurred by Foreign Entities, including
guarantees of the Company and its Subsidiaries of such Indebtedness, not
exceeding at any one time outstanding $50,000,000 in aggregate principal
amount;
(x) obligations of the Company pursuant to interest rate
contracts designed to protect the Company against fluctuations in interest
rates in respect of Indebtedness of the Company, which obligations do not
exceed the aggregate principal amount of such Indebtedness;
(xi) Guaranteed Debt resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(xii) any extension, renewal, substitution, refinancing or
replacement of any Permitted Indebtedness referred to in clauses (ii), (iv)
and (v) above, so long as such extension, renewal, substitution, refinancing
or replacement does not result in an increase in the aggregate principal
amount of outstanding Indebtedness or shorten the weighted average life of
such Indebtedness;
(xiii) obligations in respect of any guarantee of any Pari Passu
Indebtedness or Subordinated Indebtedness permitted under the "Limitation on
Issuances of Guarantees of Pari Passu Indebtedness or Subordinated
Indebtedness" covenant; and
(xiv) $100 million less any amounts of outstanding Indebtedness
permitted by clause (ix) above.
"Permitted Investments" means any of the following: (a)
(i) any Investment in any Majority Owned Subsidiaries by the Company or any
other Subsidiary or (ii) any Investment in the Company by any Subsidiary or
(iii) any Investment by the Company or any Majority Owned Subsidiary in
another Person, if as a result of such Investment such other Person is
merged or consolidated with or into the Company or such Majority Owned
Subsidiary; (b) Investments in existence on the date of the Indenture;
(c) loans or advances to employees made in the ordinary course of business
and consistent with past practices of the Company and its Subsidiaries;
(d) any Cash Equivalents; (e) sales of goods or services on trade credit
terms, consistent with the past practices of the Company or any Subsidiary
or as otherwise consistent with trade credit terms in common use in the
industry; (f) negotiable instruments held for collection, lease, utility
and other similar deposits, or stock, obligations or securities received in
settlement of debts owing to the Company or a Subsidiary as a result of
foreclosure, perfection or enforcement of any Lien, in each case as to debt
that arose in the ordinary course of business of the Company or any such
Subsidiary; (g) any Investment in any Person acquired or retained in
connection with any asset sale or other disposition of assets, provided,
that any such sale or other disposition is made for the fair value of such
assets and for at least 75% cash; and (h) Investments, in addition to the
Investments described in the foregoing clauses (a) through (g), in the
aggregate amount of $50 million at any one time outstanding, determined in
the case of each Investment by reference to the amount of the Investment at
the time originally made.
"Permitted Liens" means:
A. any Lien existing as of the date of the Indenture; or
B. any Lien securing any Senior Indebtedness or any guarantee
thereof; or
C. any Lien arising by reason of (a) any judgment, decree or
order of any court, so long as (i) such judgment, decree or order together
with any other judgment, decree or order of the Company or any of its
Subsidiaries is less than $1,000,000, excluding any judgment order or decree
complying with clause (ii) hereof, or (ii) such Lien is adequately bonded and
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may be initiated shall
not have expired; (b) taxes not yet delinquent or which are being contested
in good faith; (c) security for payment of workmen's compensation or other
insurance; (d) good faith deposits in connection with tenders, contracts
(other than contracts for the payment of money) or leases; (e) deposits to
secure public or statutory obligations, or in lieu of surety or appeal bonds;
or (f) operation of law in favor of mechanics, materialmen, laborers,
employees or suppliers, incurred in the ordinary course of business for sums
which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection
thereof;
D. easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the Company
or any of its Subsidiaries;
E. any interest or title of a lessor under any Capitalized Lease
Obligation;
F. Liens in favor of the purchaser and its assignee of the
Company's and its Subsidiaries' receivables with respect to receivables
purchased pursuant to the receivables financing facility permitted under the
Indenture;
G. Liens on the assets or property of a Subsidiary which is a
Foreign Entity securing the Indebtedness incurred by such Foreign Entity and
permitted under the Indenture; and
H. any Liens which may be granted to secure the Notes or any
Guarantees; or
I. any extension, renewal or replacement, in whole or in part,
of any Lien described in the foregoing clause (A), provided that any such
extension, renewal or replacement shall no more restrictive in any material
respect than the Lien so extended, renewed or replaced and shall not extend to
any additional property or assets. (Section 1012)
"Preferred Stock" means, with respect to any person, any and
all shares, interests, participations or other equivalents (however
designated) of such person's preferred or preference stock whether now
outstanding, or issued after the issuance of the Notes, and including, without
limitation, all classes and series of preferred or preference stock of such
person.
"Public Equity Offering" means an underwritten primary public
offering by the Company of its Common Stock pursuant to an effective
registration under the Securities Act.
"Redeemable Capital Stock" means any Capital Stock of the
Company or any Subsidiary that, either by its terms, by the terms of any
security into which it is convertible or exchangeable or otherwise, (i) is or
upon the happening of an event or passage of time would be required to be
redeemed on or prior to the final stated maturity of the Notes or (ii) is
redeemable at the option of the holder thereof at any time prior to such final
stated maturity or (iii) is convertible into or exchangeable for debt
securities at any time prior to such final stated maturity.
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill, Inc. and its successors.
"Subordinated Indebtedness" means Indebtedness of the Company
subordinated in right of payment to the Notes.
"Subsidiary" means any corporation of which at the time of
determination the Company, directly and/or indirectly through one or more
Subsidiaries, owns more than 50% of the shares of Voting Stock.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any person (irrespective of whether or not, at the
time, stock of any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency).
"Wholly Owned Subsidiary" means any subsidiary of the Company
of which 100% of the outstanding Capital Stock is owned by the Company or
another Wholly Owned Subsidiary of the Company. For purposes of this
definition, any directors' qualifying shares or investments by foreign
nationals mandated by applicable law shall be disregarded in determining the
ownership of a Subsidiary.
Book-Entry; Delivery and Form
The certificates representing the Exchange Notes will be issued
in fully registered form, without coupons. Except as described below, the
Exchange Notes will be deposited with, or on behalf of, the Depository Trust
Company, New York, New York ("DTC"), and registered in the name of Cede & Co.
("Cede") as DTC's nominee, in the form of a global Exchange Note certificate
(the "Global Exchange Note").
Holders of Exchange Notes who elect to take physical delivery
of their certificates instead of holding their interest through the Global
Exchange Note (collectively referred to herein as the "Non-Global Holders")
will be issued in registered form a certificated Exchange Note ("Certificated
Exchange Note"). Upon the transfer of any Certificated Exchange Note
initially issued to a Non-Global Holder, such Certificated Exchange Note will,
unless the transferee requests otherwise or the Global Exchange Note has
previously been exchanged in whole for Certificated Exchange Notes, be
exchanged for an interest in the Global Exchange Note.
The Global Exchange Note. The Company expects that pursuant
to procedures established by DTC (a) upon deposit of the Global Exchange
Note, DTC or its custodian will credit on its internal system interests in
the Global Exchange Notes to the accounts of persons who have accounts with
DTC ("Participants") and (b) ownership of the Global Exchange Note will be
shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC or its nominee (with respect to
interests of Participants) and the records of Participants (with respect to
interests of persons other than Participants). Ownership of beneficial
interests in the Global Exchange Note will be limited to Participants or
persons who hold interests through Participants.
So long as DTC or its nominee is the registered owner or
holder of the Exchange Notes, DTC or such nominee will be considered the
sole owner or holder of the Exchange Notes represented by the Global
Exchange Note for all purposes under the Indenture. No beneficial owner of
an interest in the Global Exchange Note will be able to transfer such
interest except in accordance with DTC's procedures, in addition to those
provided for under the Indenture with respect to the Exchange Notes.
Payments of the principal of or premium and interest on the
Global Exchange Note will be made to DTC or its nominee, as the case may be,
as the registered owner thereof. None of the Company, the Trustee or any
paying agent under the Indenture will have any responsibility or liability for
any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Exchange Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interest.
The Company expects that DTC or its nominee, upon receipt of
any payment of the principal of or premium and interest on the Global Exchange
Note, will credit Participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of such Global Exchange Note as shown on the records of DTC or its nominee.
The Company also expects that payments by Participants to owners of beneficial
interests in the Global Exchange Note held through such Participants will be
governed by standing instructions and customary practice as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
Participants.
Transfers between Participants in DTC will be effected in
accordance with DTC rules and will be settled in immediately available funds.
If a holder requires physical delivery of a Certificated Exchange Note for any
reason, including to sell Exchange Notes to persons in states which require
physical delivery of the Exchange Notes or to pledge such securities, such
holder must transfer its interest in the Global Exchange Note in accordance
with the normal procedures of DTC and with the procedures set forth in the
Indenture.
DTC has advised the Company that DTC will take any action
permitted to be taken by a holder of Exchange Notes (including the
presentation of Exchange Notes for exchange as described below) only at the
direction of one or more Participants to whose account at DTC interests in the
Global Exchange Note are credited and only in respect of such portion of the
aggregate principal amount of Exchange Notes as to which such Participant or
Participants has or have given such direction. However, if there is an Event
of Default under the Indenture, DTC will exchange the Global Exchange Note for
Certificated Exchange Notes, which it will distribute to its Participants.
DTC has advised the Company as follows: DTC is a limited
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was
created to hold securities for its Participants and facilitate the clearance
and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interest in the Global Exchange Notes among
Participants, it is under no obligation to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
Participants or Indirect Participants of their respective obligations under
the rules and procedures governing their operations.
Certificated Exchange Notes. Interests in the Global Exchange
Notes will be exchangeable or transferable, as the case may be, for
Certificated Exchange Notes if (i) DTC notifies the Company that it is
unwilling or unable to continue as depositary for such Global Exchange Notes,
or DTC ceases to be a "clearing agency" registered under the Exchange Act, and
a successor depositary is not appointed by the Company within 90 days, or (ii)
an Event of Default has occurred and is continuing with respect to such
Exchange Notes. Upon the occurrence of any of the events described in the
preceding sentence, the Company will cause the appropriate Certificated
Exchange Notes to be delivered.
EXCHANGE OFFER
The Company entered into the Registration Rights Agreement
dated as of March 24, 1997 (the "Registration Rights Agreement") with Merrill
Lynch, Pierce, Fenner & Smith Incorporated, BT Securities Corporation, Credit
Suisse First Boston Corporation and CIBC Wood Gundy Securities Corp.
(collectively the "Initial Purchasers") pursuant to which the Company agreed,
for the benefit of the Holders of the Old Notes, at the Company's cost, (i) to
file a registration statement within 45 days after the March 24, 1997 with the
Commission with respect to an exchange offer for exchange notes with terms
identical in all material respects to the Old Notes (except that such exchange
notes would not contain terms with respect to transfer restrictions), (ii) to
use its best efforts to cause such exchange offer registration statement to be
declared effective under the Securities Act within 105 days after the March
24, 1997 and (iii) to use its best efforts to consummate such exchange offer
within 135 days after the March 24, 1997. The terms of the Exchange Notes
will be identical in all respects to the terms of the Old Notes, except that
because the offer of the Exchange Notes will have been registered under the
Securities Act, the Exchange Notes will not be subject to certain transfer
restrictions and registration rights and related provisions for an increase in
the interest rate payable on the Old Notes under certain circumstances if the
Company defaults with respect to its registration requirements under the
Registration Rights Agreement.
Terms of the Exchange Offer; Period for Tendering Old Notes
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), the Company will accept for exchange Old Notes
which are properly tendered on or prior to the Expiration Date and not
withdrawn as permitted below. For each $1,000 principal amount of Old Notes
surrendered to the Company pursuant to the Exchange Offer, the holder of such
Old Note will receive an Exchange Note having a principal amount equal to that
of the surrendered Old Note. The Company will keep the Exchange Offer open
for not less than 20 business days (or longer if required by applicable law)
after the date notice of the Exchange Offer is mailed to the holders of the
Old Notes. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on __________, 1997; provided, however, that if the Company,
in its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $125,000,000 aggregate
principal amount of the Old Notes was outstanding. This Prospectus, together
with the Letter of Transmittal, is first being sent on or about the date set
forth on the cover page to all Holders of Old Notes at the addresses set forth
in the security register with respect to Old Notes maintained by the Trustee.
The Company's obligations to accept Old Notes for exchange pursuant to the
Exchange Offer is subject to certain conditions as set forth under "Certain
Conditions to the Exchange Offer" below.
The Company expressly reserves the right, at any time or from
time to time, to extend the period of time during which the Exchange Offer is
open, and thereby delay acceptance of any Old Notes, by giving oral or written
notice of such extension to the Exchange Agent and notice of such extension to
the Holders as described below. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering Holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
The Company expressly reserves the right to amend or terminate
the Exchange Offer, and not to accept for exchange any Old Notes not
theretofore accepted for exchange, upon the occurrence of any of the
conditions of the Exchange Offer specified below under "Certain Conditions to
the Exchange Offer." The Company will give oral or written notice of any
extension, amendment, non-acceptance or termination to the Holders of the Old
Notes as promptly as practicable, such notice in the case of any extension to
be issued by means of a press release or other public announcement no later
than 9:00 a.m., New York City Time, on the next business day after the
previously scheduled Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of the State of Delaware or the
Indenture in connection with the Exchange Offer. The Company intends to
conduct the Exchange Offer in accordance with the applicable requirements of
the Exchange Act and the rules and regulations of the Commission thereunder.
Procedures for Tendering Old Notes
The tender to the Company of Old Notes by a Holder thereof
as set forth below and the acceptance thereof by the Company will
constitute a binding agreement between the tendering Holder and the Company
upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal. Except as set forth below,
a Holder who wishes to tender Old Notes for exchange pursuant to the
Exchange Offer must transmit a properly completed and duly executed Letter
of Transmittal, including all other documents required by such Letter of
Transmittal, to The Bank of New York (the "Exchange Agent") at the address
set forth below under "Exchange Agent" on or prior to the Expiration Date.
In addition, (i) certificates for such Old Notes must be received by the
Exchange Agent along with the Letter of Transmittal, (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such
Old Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date
or (iii) the Holder must comply with the guaranteed delivery procedures
described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY,
NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed unless the Old Notes
surrendered for exchange pursuant thereto are tendered (i) by a registered
Holder of the Old Notes who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution (as defined
below). In the event that signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, are required to be guaranteed, such
guarantees must be by a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States (collectively, "Eligible Institutions").
If Old Notes are registered in the name of a person other than the person
signing the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered Holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including
time of receipt) and acceptance of Old Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and
all tenders of any particular Old Notes not properly tendered or to not accept
any particular Old Notes which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right in its sole discretion to waive any defects or irregularities or
conditions of the Exchange Offer as to any particular Old Notes either before
or after the Expiration Date (including the right to waive the ineligibility
of any Holder who seeks to tender Old Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or
irregularities in connection with the tender of Old Notes for exchange must be
cured within such reasonable period of time as the Company shall determine.
Neither the Company, the Exchange Agent nor any other person shall be under
any duty to give notification of any defect or irregularity with respect to
any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons
other than the registered Holder or Holders of Old Notes, such Old Notes must
be endorsed or accompanied by appropriate powers of attorney, in either case
signed exactly as the name or names of the registered Holder or Holders that
appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers or corporations or others acting in a fiduciary or
representative capacity, such person should so indicate when signing and,
unless waived by the Company, proper evidence satisfactory to the Company of
its authority to so act must be submitted.
By tendering, each Holder will represent to the Company that,
among other things, (i) the Exchange Notes acquired pursuant to the Exchange
Offer are being acquired in the ordinary course of business of the person
receiving such Exchange Notes, whether or not such person is the Holder, (ii)
neither the Holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes, (iii) if the Holder is not a broker-dealer, or is a
broker-dealer but will not receive Exchange Notes for its own account in
exchange for Old Notes, neither the Holder nor any such other person is
engaged in or intends to participate in the distribution of such Exchange
Notes and (iv) neither the Holder nor any such other person is an "affiliate,"
as defined under Rule 405 of the Securities Act, of the Company or if such
Holder or such other person is an "affiliate," that such Holder or such other
person will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable. If the tendering Holder is a
broker-dealer that will receive Exchange Notes for its owns account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities, it will be required to acknowledge
that it will deliver a prospectus in connection with any resale of such
Exchange Notes.
Acceptance of Old Notes for Exchange; Delivery of Exchange Notes
Upon satisfaction or waiver of all of the conditions to the
Exchange Offer, the Company will accept, promptly after the Expiration Date,
all Old Notes properly tendered and will issue the Exchange Notes promptly
after acceptance of the Old Notes. See "Certain Conditions to the Exchange
Offer" below. For purposes of the Exchange Offer, the Company shall be deemed
to have accepted properly tendered Old Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Old Notes that
are accepted for exchange pursuant to the Exchange Offer will be made only
after timely receipt by the Exchange Agent of certificates for such Old
Notes or a timely Book-Entry Confirmation of such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to
the book-entry transfer procedures described below, a properly completed
and duly executed Letter of Transmittal and all other required documents.
If any tendered Old Notes are not accepted for any reason set forth in the
terms and conditions of the Exchange Offer or if certificates representing
Old Notes are submitted for a greater principal amount than the Holder
desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering Holder thereof (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such non-exchanged Old Notes will be
credited to an account maintained with such Book-Entry Transfer Facility)
as promptly as practicable after the expiration or termination of the
Exchange Offer.
Interest on the Exchange Notes
The Exchange Notes will bear interest from March 24, 1997,
payable semiannually on March 15 and September 15, of each year commencing on
September 15, 1997, at the rate of 9 5/8% per annum. Holders of Old Notes
whose Old Notes are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of interest on the Old Notes accrued
from March 24, 1997 until the date of the issuance of the Exchange Notes.
Consequently, holders who exchange their Old Notes for Exchange Notes will
receive the same interest payment on September 15, 1997 (the first interest
payment date with respect to the Old Notes and the Exchange Notes) that they
would have received had they not accepted the Exchange Offer.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account
with respect to the Old Notes at the Book-Entry Transfer Facility for purposes
of the Exchange Offer promptly after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account in accordance with the Book-Entry Transfer Facility's
Automated Tender Offer Program ("ATOP") procedures for transfer. However, the
exchange for the Old Notes so tendered will only be made after timely
confirmation of such book-entry transfer of Old Notes into the Exchange
Agent's account, and timely receipt by the Exchange Agent of an Agent's
Message (as such term is defined in the next sentence) and any other documents
required by the Letter of Transmittal. The term "Agent's Message" means a
message, transmitted by the Book-Entry Transfer Facility and received by the
Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from a Participant tendering Old Notes that are the subject of such Book-Entry
Confirmation that such Participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such Participant.
Guaranteed Delivery Procedures
If a registered Holder of the Old Notes desires to tender such
Old Notes and the Old Notes are not immediately available, or time will not
permit such Holder's Old Notes or other required documents to reach the
Exchange Agent before the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if
(i) the tender is made through an Eligible Institution, (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and Notice of Guaranteed Delivery, substantially in the form provided
by the Company (by telegram, telex, facsimile transmission, mail or hand
delivery), setting forth the name and address of the Holder of Old Notes and
the amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that within five New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates of all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required
by the Letter of Transmittal, are received by the Exchange Agent within five
NYSE trading days after the date of execution of the Notice of Guaranteed
Delivery.
Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at one of the addresses
set forth below under "Exchange Agent." Any such notice of withdrawal must
specify the name of the person having tendered the Old Notes to be
withdrawn, identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes), and (where certificates for Old Notes have been
transmitted) specify the name in which such Old Notes are registered, if
different from that of the withdrawing Holder. If certificates for Old
Notes have been delivered or otherwise identified to the Exchange Agent,
then, prior to the release of such certificates, the withdrawing Holder
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by
an Eligible Institution unless such Holder is an Eligible Institution. If
Old Notes have been tendered pursuant to the procedure for book-entry
transfer described above, any note of withdrawal must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Old Notes and otherwise comply with the procedures of
such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the
Company, whose determination shall be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have
been tendered for exchange but which are not exchanged for any reason will
be returned to the Holder thereof without cost to such Holder (or, in the
case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be re-
tendered by following one of the procedures described under "Procedures for
Tendering Old Notes" above at any time on or prior to the Expiration Date.
Certain Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer,
the Company shall not be required to accept for exchange, or to issue
Exchange Notes in exchange for, any Old Notes and may terminate or amend
the Exchange Offer, if at any time before the acceptance of such Old Notes
for exchange or the exchange of the Exchange Notes for such Old Notes, such
acceptance or issuance would violate applicable law or any interpretation
of the staff of the Commission.
The foregoing condition is for the sole benefit of the Company
and may be asserted by the Company regardless of the circumstances giving rise
to such condition or may be waived by the Company in whole or in part at any
time and from time to time in its sole discretion. The failure by the Company
at any time to exercise the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old
Notes tendered, and no Exchange Notes will be issued in exchange for any such
Old Notes, if at such time any stop order shall be threatened or in effect
with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended (the "TIA").
Exchange Agent
The Bank of New York has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or
of the Letter of Transmittal and requests for Notices of Guaranteed Delivery
should be directed to the Exchange Agent, addressed as follows:
Deliver To:
The Bank of New York, Exchange Agent
By Hand or Facsimile By Registered
Overnight Delivery: Transmissions: Or Certified Mail:
(Eligible Institutions Only)
The Bank of New York The Bank of New York
101 Barclay Street (212) 571-3080 101 Barclay Street, 7E
Corporate Trust New York, New York 10286
Services Window
Ground Level To Confirm by Attention: Reorganization
Attention: Reorganization Telephone Section,
Section, or for Arwen Gibbons
Arwen Gibbons Information,
Call: (212) 815-6333
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
Fees and Expenses
The principal solicitation is being made by mail; however,
additional solicitation may be made by telegraph, telephone or in person by
officers and regular employees of the Company and its affiliates. No
additional compensation will be paid to any such officers and employees who
engage in soliciting tenders. The Company will not make any payment to
brokers, dealers, or others soliciting acceptances of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith.
The estimated cash expenses to be incurred in connection with
the Exchange Offer will be paid by the Company and are estimated in the
aggregate to be $________.
Transfer Taxes
Holders who tender their Old Notes for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that
Holders who instruct the Company to register Exchange Notes in the name of, or
request that Old Notes not tendered or not accepted in the Exchange Offer to
be returned to, a person other than the registered tendering Holder will be
responsible for the payment of any applicable transfer tax thereon.
Consequences of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Notes as set forth in the legend
thereon. In general, the Old Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to an exemption from, or
in a transaction not subject to, the Securities Act and applicable state
securities laws. The Company does not intend to register the Old Notes under
the Securities Act. The Company believes that, based upon interpretations
contained in letters issued to third parties by the staff of the Commission,
Exchange Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold or otherwise transferred by each Holder
thereof (other than a broker-dealer, as set forth below, and any such Holder
which is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such Exchange Notes
are acquired in the ordinary course of such Holder's business and such Holder
has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. If any Holder has any arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the
applicable interpretations of the staff of the Commission and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction. Each broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution." In addition, to comply with
the securities laws of certain jurisdictions, if applicable, the Exchange
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdiction or an exemption from registration or
qualification is available and is complied with. The Company does not
currently intend to take any action to register or qualify the Exchange Notes
for resale in any such jurisdiction.
Resale of the Exchange Notes
Under existing interpretations of the staff of the Commission
contained in several no-action letters to third parties, the Exchange Notes
would in general be freely transferable after the Exchange Offer without
further registration under the Securities Act. However, any purchaser of Old
Notes who intends to participate in the Exchange Offer for the purpose of
distributing the Exchange Notes (i) will not be able to rely on the
interpretation of the staff of the Commission, (ii) will not be able to tender
its Old Notes in the Exchange Offer and (iii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any sale or transfer of the Notes unless such sale or transfer
is made pursuant to an exemption from such requirements.
By executing the Letter of Transmittal, each holder of the Old
Notes (other than certain specified holders) will represent that (i) it is not
an affiliate of the Company or if such Holder is an "affiliate," that such
Holder will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable, (ii) any Exchange Notes to be
received by it were acquired in the ordinary course of its business and (iii)
at the time of commencement of the Exchange Offer, it had no arrangement with
any person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes. In addition, in connection with any
resales of Exchange Notes, any broker-dealer (a "Participating Broker-Dealer")
who acquired the Notes for its own account as a result of market-making or
other trading activities must deliver a prospectus meeting the requirements of
the Securities Act. The Commission has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of the Old Notes) with the prospectus contained in the Exchange
Offer Registration Statement. Under the Registration Rights Agreement, the
Company is required to allow Participating Broker-Dealers and other persons,
if any, subject to similar prospectus delivery requirements to use this
Prospectus as it may be amended or supplemented from time to time, in
connection with the resale of such Exchange Notes.
United States Federal Income Tax Consequences of the Exchange Offer
The exchange of Old Notes for Exchange Notes pursuant to the
Exchange Offer will not result in any federal income tax consequences to
Holders. When a Holder exchanges an Old Note for an Exchange Note pursuant
to the Exchange Offer, the Holder will have the same adjusted basis and
holding period in the Exchange Note as in the Old Note immediately before
the Exchange.
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing, retirement, or other
employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"; such plan, a "Plan"), should
consider the fiduciary standards under ERISA in the context of the Plan's
particular circumstances before authorizing an investment of such Plan's
assets in the Notes. Accordingly, such fiduciary should consider whether the
investment satisfies the diversification and prudence requirements of ERISA
and whether the investment is consistent with the documents and instruments
governing the Plan.
In addition to the imposition of general fiduciary standards of
investment prudence and diversification, ERISA and the corresponding
provisions of the Code, prohibit a wide range of transactions involving the
assets of a Plan and persons who have certain specified relationships to the
Plan ("parties in interest", within the meaning of ERISA, "disqualified
persons", within the meaning of the Code). A prohibited transaction described
in Section 406 of ERISA or Section 4975 of the Code could arise if the Company
were, or were to become, a party in interest or a disqualified person with
respect to a Plan purchasing the Notes during the offering or any time
thereafter. A prohibited transaction could also arise if any of the Company's
lenders under the Existing Term Loan and the Existing Revolving Loan, which
will be refinanced with the net proceeds from the offering of the Notes, were
a party in interest or a disqualified person with respect to a Plan purchasing
the Notes during the offering. Certain exemptions from the prohibited
transaction rules could be applicable to the purchase of the Notes by a Plan
or by a person whose assets may constitute assets of a Plan. Included among
these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 90-1,
regarding investments by insurance company pooled separate accounts; PTCE
91-38, regarding investments by bank collective investment funds; PTCE 84-14,
regarding transactions effected by a qualified professional asset manager;
PTCE 96-23, regarding transactions effected by in-house asset managers; and
PTCE 95-60, regarding transactions by insurance company general accounts.
Thus, a fiduciary of a Plan considering an investment in the Notes also should
consider whether the acquisition of the Notes might constitute or give rise to
a non-exempt prohibited transaction.
Certain employee benefit plans, such as governmental plans and
church plans, are not subject to the restrictions of ERISA, and assets of such
plans may be invested in the Notes without regard to the ERISA considerations
described above. The investment in the Notes by such employee benefit plans
may, however, be subject to other applicable federal, state and local laws,
which should be carefully considered by such employee benefit plans before
investing in the Notes.
Every Plan, governmental plan or church plan considering the
acquisition of the Notes should consult with its counsel with respect to the
potential applicability of ERISA, the Code and any other relevant laws to such
investment.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own
account ("Participating Broker-Dealer") pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating Broker-Dealer in connection
with resales of Exchange Notes received in exchange for Old Notes where such
Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that it will make this Prospectus,
as amended or supplemented, available to any Participating Broker-Dealer for
use in connection with any such resale and Participating Broker-Dealers shall
be authorized to deliver this Prospectus for a period not exceeding 180 days
after the Expiration Date. In addition, until ___________, 1997 (90 days
after the date of this Prospectus), all dealers effecting transactions in the
Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of
the Exchange Notes by Participating Broker-Dealers. Exchange Notes
received by Participating Brokers-Dealers for their own account pursuant to
the Exchange Offer may be sold from time to time, in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of
such methods of resale, at market prices prevailing at the time of resale,
at prices related to such prevailing market prices or at negotiated prices.
Any such resale may be made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer. Any broker or dealer that participates in a distribution
of such Exchange Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a Participating Broker-Dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
Participating Broker-Dealer that requests such documents in the Letter of
Transmittal. See "The Exchange Offer."
The Company has agreed to pay all expenses incident to the
Company's performance of, or compliance with, the Registration Rights
Agreement and will indemnify the holders (including any broker-dealers) and
certain parties related to the holders against certain liabilities, including
liabilities under the Securities Act.
MLCP, an affiliate of Merrill Lynch, holds together with its
affiliates, in the aggregate, approximately 46% of the outstanding shares
of the Company's Common Stock. If Merrill Lynch, Pierce, Fenner & Smith
Incorporated conducts any market-making activities in the Exchange Notes,
it may be required to deliver a "market-making prospectus," registered with
the Commission, when effecting offers and sales in the Exchange Notes
because of such equity ownership of the Company by MLCP and such
affiliates. Merrill Lynch, Pierce, Fenner & Smith Incorporated has no
obligation to make a market in the Old Notes or the Exchange Notes, and may
discontinue its market-making activities at any time without notice, at its
sole discretion.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be
passed upon for the Company by Davis Polk & Wardwell, New York, New York.
Arthur F. Golden, a director of the Company, is a partner of Davis Polk &
Wardwell. Davis Polk & Wardwell has represented the Company in connection with
various transactions.
EXPERTS
The consolidated financial statements included in this
Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and are included in
reliance upon the report of such firm as experts in accounting and
auditing.
BORG-WARNER SECURITY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT........................................................................ F-2
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Operations for the Years Ended December 31, 1994, December 31,
1995 and December 31, 1996...................................................................... F-3
Consolidated Balance Sheets as of December 31, 1995 and December 31, 1996........................ F-4
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, December 31,
1995 and December 31, 1996..................................................................... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994,
December 31, 1995 and December 31, 1996........................................................ F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................................................... F-7
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Borg-Warner Security Corporation:
We have audited the consolidated balance sheets of Borg-Warner
Security Corporation and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Borg-Warner
Security Corporation and subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Chicago, Illinois
February 4, 1997
BORG-WARNER SECURITY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1994 1995 1996
-------- -------- --------
(millions of dollars, except per share)
<S> <C> <C> <C>
Net service revenues...................................................... $1,626.8 $1,708.5 $1,711.2
Cost of services.......................................................... 1,289.4 1,359.3 1,360.2
Selling, general and administrative expenses.............................. 220.2 212.5 210.6
Depreciation.............................................................. 52.8 52.1 47.0
Amortization of excess purchase price over net assets acquired............ 14.8 13.4 13.4
Other income, net (Note 10)............................................... (9.8) -- --
Interest expense and finance charges...................................... 48.8 55.9 56.6
-------- -------- --------
Earnings before income taxes.............................................. 10.6 15.3 23.4
Provision (benefit) for income taxes (Note 11)............................ (3.2) 6.9 9.5
-------- -------- --------
Earnings from continuing operations....................................... 13.8 8.4 13.9
Loss from discontinued operations, net of income taxes (Note 3)........... (0.7) (2.5) (28.5)
-------- -------- --------
Earnings (loss) before extraordinary item................................. 13.1 5.9 (14.6)
Extraordinary item:
Loss from early extinguishment of debt, net of
$3.2 tax benefit (Note 5)................................................ -- (4.7) --
-------- -------- --------
Net earnings (loss)....................................................... $ 13.1 $ 1.2 $ (14.6)
======== ======== ========
Earnings (loss) per common share:
Continuing operations................................................ $ 0.59 $ 0.36 $ 0.59
Discontinued operations.............................................. (0.03) (0.11) (1.21)
Extraordinary item................................................... -- (0.20) --
-------- -------- --------
Net earnings (loss) per share............................................. $ 0.56 $ 0.05 $ (0.62)
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
BORG-WARNER SECURITY CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1996
-------- --------
(millions of dollars)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 19.4 $ 17.8
Receivables, net.......................................... 90.7 100.4
Inventories............................................... 12.5 12.1
Other current assets...................................... 59.7 36.8
------ ------
Total current assets................................ 182.3 167.1
Property, plant and equipment
Land and buildings.................................. 47.6 46.9
Machinery and equipment............................. 72.8 5.8
Subscribers' installations.......................... 336.5 374.6
Capital leases...................................... 18.8 14.3
Construction in progress............................ 2.7 1.0
------ ------
478.4 442.6
Less accumulated depreciation............................. 240.5 239.5
------ ------
Net property, plant
and equipment...................................... 237.9 203.1
Net excess purchase price over
net assets acquired................................... 250.2 237.2
Deferred tax asset, net................................... 52.8 46.8
Net assets of discontinued operations..................... 36.8 12.6
Other assets.............................................. 78.5 94.0
------ ------
Total other assets.................................. 418.3 390.6
------- ------
$838.5 $760.8
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable............................................. $ 3.6 $ 4.4
Accounts payable and accrued expenses..................... 185.6 173.7
------ ------
Total current liabilities........................... 189.2 178.1
Long-term debt............................................ 480.9 438.2
Other long-term liabilities............................... 118.7 103.3
Capital stock:
Common stock, issued
22,446,100 shares in 1995 and 1996................... 0.2 0.2
Capital in excess of par value............................ 28.1 29.0
Retained earnings......................................... 31.2 20.6
Notes receivable--management stock purchase............... (0.3) (0.3)
Cumulative translation adjustment......................... (0.4) 0.5
------ ------
58.8 50.0
Treasury common stock, at cost, 1,928,861 shares
in 1995 and 1,862,311 shares in 1996................... (9.1) (8.8)
Total stockholders' equity.......................... 49.7 41.2
------ ------
$838.5 $760.8
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
BORG-WARNER SECURITY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1994 1995 1996
-------- -------- --------
(millions of dollars)
<S> <C> <C> <C>
OPERATING:
Continuing operations:
Earnings from continuing operations......................................... $ 13.8 $ 8.4 $ 13.9
Adjustments to reconcile net earnings to net cash provided by
continuing operations:
Non-cash charges to earnings:
Depreciation and amortization....................................... 67.6 65.5 60.4
Provision for losses on receivables................................. 5.5 4.4 2.7
Deferred income taxes............................................... (9.4) (5.5) (3.8)
Amortization of debt discount....................................... 2.1 2.1 0.6
Changes in assets and liabilities:
(Increase) in receivables........................................... (17.7) (6.1) (12.4)
(Increase) decrease in other current assets......................... (2.8) (6.9) 32.6
Increase (decrease) in accounts payable and accrued expenses........ 19.2 19.3 (8.1)
Net change in other long-term assets and liabilities................ (3.7) (22.0) 5.3
Gain on sales of other assets......................................... (8.5) -- --
-------- ------- -------
Net cash provided by continuing operations............................ 66.1 59.2 91.2
Discontinued operations:
Net loss.............................................................. (0.7) (2.5) (28.5)
Other cash related to discontinued operations......................... 2.6 (4.3) 24.2
-------- -------- -------
Net cash provided by (used in) discontinued operations................ 1.9 (6.8) (4.3)
-------- -------- -------
Net cash provided by operating activities............................. 68.0 52.4 86.9
INVESTING:
Capital expenditures and investments in sales-type leases................... (59.4) (47.8) (40.7)
Payments related to businesses acquired..................................... (9.0) -- --
Proceeds from sales of fixed and other assets............................... 4.2 (1.1) 1.9
-------- -------- -------
Net cash used in investing activities................................. (64.2) (48.9) (38.8)
FINANCING:
Net increase (decrease) in notes payable.................................... 2.9 (6.1) 0.8
Increase (decrease) in debt outstanding under revolving credit facility..... 40.2 19.4 (37.8)
Increases in long-term debt................................................. 17.5 100.0 100.0
Reductions in long-term debt................................................ (53.1) (90.8) (105.5)
Net decrease in receivables sold............................................ (12.0) (20.9) (9.3)
Sales of treasury common stock.............................................. 0.8 1.0 0.3
Other....................................................................... 1.7 (2.0) 1.8
-------- -------- -------
Net cash provided by (used in) financing activities................... (2.0) 0.6 (49.7)
-------- -------- -------
Net increase (decrease) in cash and cash equivalents........................ 1.8 4.1 (1.6)
Cash and cash equivalents at beginning of year.............................. 13.5 15.3 19.4
-------- -------- -------
Cash and cash equivalents at end of year.................................... $ 15.3 $ 19.4 $ 17.8
======== ======== =======
Supplemental cash flow information..........................................
Interest paid......................................................... $ 46.0 $ 54.2 $ 57.7
Income taxes paid (refunded).......................................... (3.2) 0.7 2.8
</TABLE>
See accompanying notes to consolidated financial statements.
BORG-WARNER SECURITY CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1994 1995 1996
-------------------- -------------------- ---------------------
Shares Amount Shares Amount Shares Amount
---------- ---------- --------- ---------- ---------- ---------
(millions of dollars, except share data)
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCK ISSUED
Beginning balance........................ 24,955,700 $ 0.2 25,155,700 $ 0.2 25,166,100 $ 0.2
---------- ------ ---------- ------- ---------- ------
Conversion of Series I non-voting shares
to common shares........................ 200,000 -- 10,400 -- -- --
---------- ------ ---------- ------- ---------- ------
Balance at December 31................... 25,155,700 0.2 25,166,100 0.2 25,166,100 0.2
CAPITAL IN EXCESS OF PAR VALUE
Beginning balance........................ 28.2 30.9 28.1
Shares issued under stock option and
related plans........................... 0.2 (5.4) 0.4
Tax benefit from trust distribution and
exercise of stock options............... 2.5 2.6 0.5
------ ------- ------
Balance at December 31................... 30.9 28.1 29.0
------ ------- ------
RETAINED EARNINGS
Beginning balance........................ 15.9 29.7 31.2
Net earnings (loss)...................... 13.1 1.2 (14.6)
Adjustment for deferred pension
experience loss......................... 0.7 0.3 4.0
------ ------- ------
Balance at December 31................... 29.7 31.2 20.6
------ ------- ------
NOTES RECEIVABLE--MANAGEMENT STOCK
PURCHASE
Beginning balance........................ (1.8) (1.0) (0.3)
Net activity............................. 0.8 0.7 --
------ ------- ------
Balance at December 31................... (1.0) (0.3) (0.3)
------ ------- ------
CUMULATIVE TRANSLATION ADJUSTMENT
Beginning balance........................ 1.3 (0.5) (0.4)
Current year adjustment.................. (1.8) 0.1 0.9
------ ------- ------
Balance at December 31................... (0.5) (0.4) 0.5
------ ------- ------
TREASURY STOCK
Beginning balance........................ 2,151,108 (16.3) 2,237,344 (15.5) 1,928,861 (9.1)
Shares issued under stock option and
related plans........................... (113,764) 0.8 (318,883) 6.4 (66,550) 0.3
Conversion of Series I non-voting shares
to common shares........................ 200,000 -- 10,400 -- --
---------- ------ ---------- ------- ---------- ------
Balance at December 31................... 2,237,344 $(15.5) 1,928,861 $ (9.1) 1,862,311 $ (8.8)
========== ====== ========= ======= ========= ======
$ 43.8 $ 49.7 $ 41.2
Total Stockholders' Equity......... ====== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
BORG-WARNER SECURITY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
The following paragraphs briefly describe significant
accounting policies. Certain 1994 and 1995 amounts have been reclassified to
conform with the 1996 presentation.
Principles of Consolidation
The consolidated financial statements include all significant
subsidiaries. As of September 30, 1996, the Company's courier unit has been
treated as a discontinued operation. The assets, liabilities, results of
operations and adjustments to carrying values of net assets, and cash flows of
the courier unit have been segregated and reported as discontinued operations
for all periods presented, and previously reported results have been restated
(see Note 3).
Use of Estimates
The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts and related
disclosures. Actual results may differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consists primarily of cash and
certificates of deposit with original maturities of three months or less.
Inventories
Inventories are valued at the lower of cost or market. Cost of
substantially all inventories is determined by the first-in, first-out
method.
Property, Plant and Equipment and Depreciation
Property, plant and equipment is carried at cost less
accumulated depreciation. Expenditures for maintenance, repairs and renewals
of relatively minor items are generally charged to expense as incurred.
Renewals of significant items are capitalized. Depreciation is computed
generally on the straight-line method over the following estimated useful
lives:
Buildings and improvements................... 15 to 50 years
Machinery and equipment...................... 3 to 12 years
Subscribers' installations................... 8 to 15 years
Property under capital leases................ 3 to 7 years
Income Taxes
Income taxes are determined using the liability method, under
which deferred tax assets and liabilities are determined based on the
differences between the financial accounting and tax bases of assets and
liabilities. Deferred tax assets or liabilities at the end of each period are
determined using the currently enacted tax rate expected to apply to taxable
income in the periods in which the deferred tax asset or liability is expected
to be settled or realized (see Note 11).
Retirement Benefit Plans
A number of eligible salaried and hourly employees participate
in contributory or noncontributory defined benefit or defined contribution
plans. Funding policy is based upon independent actuarial valuations and is
within the limits required by ERISA for U.S. defined benefit plans.
The benefits provided to certain salaried employees covered
under various defined benefit plans are based on years of service and final
average pay and utilize the projected unit credit method for cost allocation.
The benefits provided to certain hourly employees under various defined
benefit plans are based on years of service and utilize the unit credit method
for cost allocation.
Under the defined contribution plans, contributions by the
Company or its subsidiaries sponsoring the plans are based on the employees'
salary, age, years of service, and/or a fixed schedule. These contributions
are charged to earnings as they are made to the various plans.
Casualty Insurance Liabilities
The Company has accrued a discounted liability for the retained
portion of insurance costs related to its various deductible policies. This
insurance liability is determined by the Company based on claims filed and an
estimate of claims incurred but not yet reported. The discount rate used to
value the future obligation at December 31, 1995 and 1996 was 5.5%.
Amortization of Excess of Purchase Price Over Net Assets
Acquired
Excess of purchase price over net assets acquired is being
amortized on a straight-line basis over 5 to 40 years, with the majority being
amortized over 40 years. The Company periodically reviews its operations to
determine whether there has been a diminution in value of its excess purchase
price over net assets acquired.
Transactions with Borg-Warner Automotive
Under a tax-sharing agreement with the Company, for periods
prior to January 1993, Borg-Warner Automotive is required to pay the Company
for any operating loss carry-forward apportioned to it at such time as the
benefits related to such carry-forward are realized by Borg-Warner Automotive.
Also, certain costs incurred at corporate headquarters are charged to
Borg-Warner Automotive based on a service agreement with the Company.
Derivative Financial Instruments
The Company uses interest rate swap agreements to manage
exposure to interest rate fluctuations. The Company does not use derivative
instruments for speculative purposes. The differential paid or received on
interest rate swap agreements is recognized as an adjustment to interest
expense in the period incurred or earned.
Revenue Recognition
Revenue is recognized at the time services are provided. In
certain circumstances this can result in revenue recognition prior to customer
billing and revenue deferral from advance billings.
Earnings Per Common Share
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.
New Accounting Pronouncements
In 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and For
Long-Lived Assets to Be Disposed Of." The adoption of this standard did not
have a material effect on the financial statements.
In 1996, the Company also adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
(SFAS 123). This statement defines a new "fair value" method of accounting
for stock-based compensation expense, and requires certain additional
disclosures. The statement also allows the retention of the previous
"intrinsic value" method of accounting for expense recognition under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25). The Company has retained the intrinsic value method
and, therefore, the new standard had no effect on the Company's net income
or financial position (see Note 8).
In October 1996, the American Institute of Certified Public
Accountants issued Statement of Position No. 96-1, "Environmental Remediation
Liabilities," which is effective for calendar year 1997. The Company does not
expect adoption of this statement to have a material effect on the financial
statements.
In June 1996, the Financial Accounting Standards Board issued
Statement No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities", which the Company must adopt for
transactions occurring after December 31, 1996. The Company does not expect
adoption of this statement to have a material effect on the financial
statements.
Note 2. Balance Sheet Information
Detailed balance sheet data are as follows:
December 31, December 31,
1995 1996
------------ ------------
(millions of dollars)
Receivables
Customers.................. $ 94.1 $ 102.8
Other...................... 3.4 3.9
------------ ------------
97.5 106.7
Less allowance for
losses.................... 6.8 6.3
------------ ------------
Net receivables.................. $ 90.7 $ 100.4
============ ============
Other assets
Net investment in
sales-type leases......... $ 35.3 $ 54.4
Debt issuance costs........ 14.5 10.4
Deferred pension asset..... 7.5 9.1
Deferred subscribers'
installation costs........ 7.2 5.4
Other...................... 14.0 14.7
------------ ------------
Total other assets............... $ 78.5 $ 94.0
============ ============
Accounts payable
and accrued expenses
Trade payables............. $ 24.4 $ 42.5
Payroll and related........ 58.2 41.6
Casualty insurance......... 45.2 44.4
Interest................... 8.5 5.2
Liabilities to
former shareholders....... 10.9 8.7
Deferred income............ 10.8 10.3
Other...................... 27.6 21.0
------------ ------------
Total accounts payable
and accrued expenses............ $ 185.6 $ 173.7
============ ============
In November 1995 the Company replaced its previous $100
million accounts receivable facility with an agreement to sell a $120
million undivided interest in a revolving pool of customer receivables.
This sold interest is reflected as a reduction of "Receivables, net" in the
accompanying Consolidated Balance Sheet at December 31, 1995 and 1996. The
Company retains, on a subordinated basis, an undivided interest in the pool
of receivables. The Company's retained interest of $15.3 million and $34.9
million at December 31, 1995 and 1996, respectively, is included with
"Receivables, net" on the balance sheet. While the courier unit continues
to participate in the receivables facility, its share of the receivables
pool has been segregated on the balance sheet with "Net assets of
discontinued operations." "Other current assets" at December 31, 1995 and
1996 included interest-bearing cash deposits of $28.9 million and $9.3
million, respectively, held in trust under the terms of the accounts
receivable facility. These deposits represent proceeds of collections held
back 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.
Selling, general and administrative expenses include provisions
for losses on receivables of $5.5 million, $4.4 million and $2.7 million in
1994, 1995 and 1996, respectively.
Accumulated depreciation related to capital leases amounted to
$11.0 million and $8.8 million at December 31, 1995 and 1996, respectively.
Accumulated amortization related to excess purchase price over net assets
acquired amounted to $77.8 million and $74.2 million at December 31, 1995 and
1996, respectively.
Trade payables include checks outstanding in excess of bank
deposits in the Company's central disbursement accounts, since arrangements
with the banks do not call for reimbursement until checks are presented for
payment. Such amounts were $16.1 million and $32.7 million at December 31,
1995 and 1996, respectively.
The non-current portion of the casualty insurance liability,
included in other long-term liabilities, was $44.2 million at December 31,
1995 and 1996. The total discounted insurance accrual, including the portion
reflected in accounts payable and accrued liabilities, was $89.4 million and
$88.6 million at December 31, 1995 and 1996, respectively. The estimated
aggregate undiscounted insurance liability was $101.6 million and $101.9
million at December 31, 1995 and 1996, respectively.
Note 3. Discontinued Operations
As of September 30, 1996, the Company's courier unit has been
treated as a discontinued operation. The assets, liabilities, results of
operations and adjustments to carrying values of net assets, and cash flows of
the courier unit have been segregated and reported as discontinued operations
for all periods presented, and previously reported results have been restated.
As of December 31, 1996, the net assets of the discontinued operation consists
mainly of customer receivables, property, plant and equipment and accounts
payable.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1994 1995 1996
-------- -------- --------
(millions of dollars, except per share)
<S> <C> <C> <C>
Net service revenues........................................ $ 166.1 $ 154.0 $ 140.0
======== ======== ========
Loss from operations before income taxes.................... (0.5) (3.5) (5.4)
Income tax benefit (paid)................................... (0.2) 1.0 1.9
-------- -------- --------
Loss from operations........................................ (0.7) (2.5) (3.5)
Adjustment of assets to estimated realizable
value and other provisions ................................ -- -- (27.0)
Income tax benefit.......................................... -- -- 2.0
Net adjustment and provisions............................... -- -- (25.0)
-------- -------- --------
Net loss from discontinued operations....................... $ (0.7) $ (2.5) $ (28.5)
======== ======== ========
Loss per common share:
Loss from operations.................................. (0.03) (0.11) (0.15)
Net adjustment and provisions......................... -- -- (1.06)
-------- -------- --------
Loss per common share................................. $0.00 $(0.10) $(1.21)
======== ======== ========
</TABLE>
Note 4. Commitments
The Company is committed to pay rents on non-cancelable
operating leases with terms exceeding one year. Rental amounts committed in
future years are summarized at December 31, 1996 as follows:
(millions of
Fiscal year dollars)
- ----------- ------------
1997.................................. $ 19.4
1998.................................. 16.3
1999.................................. 9.9
2000.................................. 6.4
2001.................................. 4.3
2002 and after........................ 8.9
------------
Total............................. $ 65.2
============
Total rental expense amounted to $21.5 million, $26.1 million
and $26.7 million in 1994, 1995 and 1996, respectively.
Note 5. Notes Payable and Long-Term Debt
The following is a summary of notes payable and long-term debt
which reflects all borrowings of the Company and its consolidated
subsidiaries:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------------------
December 31, 1995 December 31, 1996
--------------------------- -------------------------
Current Long-Term Current Long-Term
--------- ---------- -------- ----------
(millions of dollars)
<S> <C> <C> <C> <C>
Bank term loan due 1998 (at an average of
8.3% in 1995 and 8.9% in 1996)..................... $ -- $100.0 $ -- $ 196.8
Bank revolving credit loan due through 1999 (at an
average rate of 7.3% in 1995 and 8.5% in 1996)...... -- 124.6 -- 86.8
8% notes (face amount $100 million due 1996).......... -- 99.5 -- --
Unsecured notes (at an average rate of
7.0% in 1995 and 7.3% in 1996)...................... 0.4 0.6 2.0 0.1
Capital lease liability (at an average rate
of 8.4% in 1995 and 10.2% in 1996).................. 3.2 7.1 2.4 5.3
9 1/8% senior subordinated notes (face
amount $150 million due 2003)....................... -- 149.1 -- 149.2
--------- ------ ------- --------
Total notes payable and long-term debt................ $ 3.6 $480.9 $ 4.4 $ 438.2
========= ====== ======= ========
</TABLE>
Maturities of long-term debt, including unamortized discount of
$0.8 million, are as follows: 1998, $243.4 million; 1999, $42.2 million; 2000,
$1.0 million; 2001, $1.0 million; and after 2001, $151.4 million.
Included in long-term debt at December 31, 1995 and 1996 were
obligations of $255.7 million and $154.5 million, respectively, with fixed
interest rates and $225.2 million and $283.7 million, respectively, with
variable interest rates (generally based on LIBOR or prime rate). Interest
rate swap agreements with a notional amount of $125 million at December 31,
1996 were utilized to manage exposure to interest rate fluctuations. Under
these agreements the Company has exchanged variable rate payments based on
LIBOR for fixed rate payments.
In 1995, the Company completed a financing which updated more
than $600 million of existing bank facilities. The financing included a $200
million intermediate term loan, a $120 million accounts receivable facility,
an extension of the maturity of an existing letter of credit facility of $155
million, and amendments to an existing $166 million revolving credit facility.
The term loan and the receivables facility are available through December 31,
1998 while the revolving credit facility is available through June 30, 1999.
The committed amount under the revolving credit facility
reduces semi-annually during the remaining commitment period. Available future
commitments at December 31 are as follows: 1997, $92.4 million; and 1998,
$41.6 million. Unused commitments at December 31, 1996 under the revolving
credit facility were $48.6 million.
The credit facilities contain numerous financial and operating
covenants including, among others, covenants requiring the Company to maintain
certain financial ratios and restricting its ability to incur additional
indebtedness, to create or permit to exist certain liens, or to pay dividends.
To secure its obligations under these facilities, the Company pledged the
stock of certain of its subsidiaries.
In 1995, an extraordinary loss of $4.7 million, net of tax, was
realized related to the extinguishment of debt in connection with the
amendment of the Company's credit facilities.
Note 6. Contingent Liabilities
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 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 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, indemnification
obligations in favor of the Company from the current owners of certain sold or
discontinued operations, 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). The Company has requested
that its discontinued automotive subsidiary, Borg-Warner Automotive, indemnify
it against certain past and future costs relating to environmental and
financing liabilities associated with certain former automotive operations. At
December 31, 1996 such past costs were approximately $2.3 million. Borg-Warner
Automotive has contested its indemnification obligation with respect to such
liabilities.
The Company believes that the various asserted claims and
litigation in which it is involved will not materially affect its financial
position, future operating results or cash flows, although no assurance can be
given with respect to the ultimate outcome of any such claim or litigation.
Note 7. Retirement Benefits
The Company has various defined benefit and contribution plans
which cover eligible employees.
Retirement benefit expense amounted to $5.8 million, $4.7
million and $4.5 million in 1994, 1995 and 1996, respectively. This expense
includes post-retirement life insurance and medical benefits of $0.2 million,
$0.3 million and $0.3 million for 1994, 1995 and 1996, respectively, as well
as defined contribution plan expenses of $1.6 million, $1.7 million and $1.5
million in 1994, 1995 and 1996, respectively.
The following table sets forth the funded status of the defined
benefit plans:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1996
------------------------- -------------------------
Over Under Over Under
--------- --------- --------- ---------
(millions of dollars)
Funded Status
Actuarial present value of benefit obligations:
<S> <C> <C> <C> <C>
Vested benefits............................ $ 45.6 $ 44.1 $ 60.6 $ 25.7
Non-vested benefits........................ 1.4 2.0 2.6 0.1
-------- -------- -------- --------
Accumulated benefit obligations............ 47.0 46.1 63.2 25.8
Effect of projected future
compensation levels............................. 5.3 -- 5.0 --
-------- -------- -------- --------
Projected benefit obligation............... 52.3 46.1 68.2 25.8
Plan assets at fair value........................ 55.9 34.4 81.4 20.5
-------- -------- -------- --------
Assets in excess of (less than)
projected benefit obligation.................... 3.6 (11.7) 13.2 (5.3)
Unrecognized net loss (gain)..................... 2.9 9.7 (4.9) 3.1
Unrecognized prior
service cost (benefit).......................... (1.7) 2.7 0.8 --
-------- -------- -------- --------
Net asset (liability)
before minimum liability........................ 4.8 0.7 9.1 (2.2)
Adjustment required to
recognize minimum liability..................... -- (12.4) -- (3.1)
-------- -------- -------- --------
Net asset (liability)
on balance sheet................................ $ 4.8 $ (11.7) $ 9.1 $ (5.3)
======== ======== ======== ========
</TABLE>
Assets held in trust for the defined benefit plans are
comprised primarily of marketable equity and fixed income securities.
Net periodic pension expense for the defined benefit plans was
comprised as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1994 1995 1996
------- ------- -------
(millions of dollars)
<S> <C> <C> <C>
Service cost.................... $ 3.0 $ 2.4 $ 3.3
Interest cost.............. 6.7 6.9 7.0
Actual return on assets.... 1.1 (20.4) (12.5)
Net amortization and deferrals (6.9) 13.8 4.9
------- ------- -------
Net periodic pension cost.. $ 3.9 $ 2.7 $ 2.7
======= ======= =======
</TABLE>
The Company's assumptions used as of December 31, 1994, 1995
and 1996 in determining the pension cost and pension liability shown above
were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Discount rate..................... 8.5% 7.5% 8.0%
Rate of salary progression........ 4.0% 4.0% 4.0%
Long-term rate of return
on assets....................... 9.5% 9.5% 10.0%
</TABLE>
The Company also has post-employment benefits covering certain
existing and former employees, including employees of certain businesses which
have been divested by the Company. The liabilities on the Company's balance
sheet for these benefits as of December 31, 1995 and 1996 were $12.4 million
and $11.5 million respectively, and are included in "Other Long-Term
Liabilities." The discount rate used in determining this liability was 7.5% in
1995 and 8.0% in 1996. Medical expense increases are projected to be 7.25% in
1997 grading to 5.25% in 1999.
Note 8. Stock Options and Notes Receivable-Management Stock Purchase
Stock Option Plan
The Company has two plans which authorize the grant of options
to purchase 3,900,000 shares of the Company's common stock. All options
granted to date carry exercise prices ranging from $5.00 to $20.75 per share.
These prices correspond to the fair market value (as defined in the plans) of
the Company's common stock at the time of grant with a graded vesting schedule
between two to three years.
In 1994, 1995 and 1996 there were no options canceled or
converted.
Common shares under option for the years ended December 31,
1994, 1995 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Number of Shares Aggregate Option Price
-------------------------------------- ---------------------------------------
1994 1995 1996 1994 1995 1996
---------- ---------- ---------- ---------- ---------- ----------
(thousands of shares) (millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
Shares under option
at January 1....................... 1,472 1,843 1,810 $ 19.9 $ 26.7 $ 24.2
Granted............................. 593 390 159 9.7 1.7 1.7
Exercised........................... (114) (141) (66) (1.1) (0.7) (0.3)
Forfeited........................... (108) (282) (358) (1.8) (5.1) (6.7)
----- ----- ----- ------- ------ ------
Shares under option
at end of period................... 1,843 1,810 1,545 $ 26.7 $ 24.2 $ 18.9
===== ===== ===== ======= ====== ======
Options exercisable................. 881 800 985
===== ===== =====
Shares available for future grant... 186 78 1,177
===== ===== =====
Weighted-average fair value of
options granted during the year... $3.57 $4.00
===== =====
</TABLE>
Additional information regarding options outstanding as of
December 31, 1996 is as follows (thousands of shares):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------- ---------------------------------
Weighted
Average
Remaining Weighted
Number Contractual Average Number
Outstanding Life (yrs) Exercise Price Exercisable Exercise Price
----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$5.00-8.75......... 668 5.3 $7.04 378 5.92
10.94-15.94........ 548 7.2 14.75 294 15.84
16.03-18.83........ 263 4.3 17.99 263 17.99
19.63-20.75........ 66 6.6 20.14 50 20.21
----- ---
5.00-20.75......... 1,545 5.9 12.20 985 12.84
===== ===
</TABLE>
The 560 thousand options outstanding at December 31, 1996 that
are not presently exercisable will vest according to various schedules between
two to three years.
The Company has retained the "intrinsic value" method of
accounting for stock-based compensation expense under APB 25. Had compensation
cost been determined based on the "fair value" method under SFAS 123, the
Company's pro forma net income and earnings per share would have been as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1995 1996
------------ ------------
(millions of dollars, except per
share)
<S> <C> <C>
Net income (loss)
As reported........... $1.2 $(14.6)
Pro forma............. 1.1 (14.9)
Earnings (loss) per share
As reported........... $0.05 $(0.62)
Pro forma............. 0.04 (0.63)
</TABLE>
The fair value of each option granted is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1995 and 1996, respectively:
expected volatility of 43% and 41%; risk-free interest rates of 6.00-6.81% and
6.15-6.22%; and expected lives of 4 and 3-4 years.
Notes Receivable-Management Stock Purchase
Included among the Company's equity holders are members of
management. Purchases of shares by management have been funded in part by
loans from the Company. These loans, which totaled approximately $0.3 million
at December 31, 1995 and 1996, bear interest at approximately 6% and are
offset against stockholders' equity in the Consolidated Balance Sheet.
Note 9. Business Segment Information
The Company's continuing operations have been classified into
three business segments: guard, alarm and armored services. The guard segment
provides contract security officers to patrol client facilities, monitor
electronic systems and control public and employee access. The alarm segment
primarily designs, installs, monitors and services sophisticated electronic
security systems and fire and intrusion detection systems. The armored segment
transports currency, securities and other valuables. Additionally, this
segment provides full-service automated teller machine operations and cash
management services such as deposit verification and currency processing.
Intersegment sales are not significant. Operating profit by
business segment represents total revenues less operating expenses,
depreciation and amortization, and excludes interest income, interest expense,
income taxes and net unallocated corporate expenses.
Identifiable assets are those assets employed in each segment's
operations, including an allocated value to each segment of cost in excess of
net assets acquired. Corporate assets consist principally of cash and cash
equivalents, certain corporate receivables and other assets.
Summarized financial information by business segment for 1994,
1995 and 1996 is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1994 1995 1996
-------- --------- --------
(millions of dollars)
<S> <C> <C> <C>
Net service revenues:
Guard services.............................. $1,209.4 $1,222.8 $1,223.8
Alarm services.............................. 206.2 254.7 241.1
Armored services............................ 211.2 231.0 246.3
-------- --------- --------
Total net service revenues................ $1,626.8 $ 1,708.5 $1,711.2
======== ========= =========
Operating profit:
Guard services.............................. $ 54.5 $ 56.4 $ 62.1
Alarm services.............................. 14.9 15.8 18.9
Armored services............................ 6.7 13.7 12.1
-------- --------- --------
Total operating profit.................... 76.1 85.9 93.1
Corporate expenses.......................... 26.5 14.7 13.1
Other income................................ (9.8) -- --
Interest expense............................ 48.8 55.9 56.6
-------- --------- --------
Earnings before taxes....................... 10.6 15.3 23.4
Provision (benefit) for income taxes........ (3.2) 6.9 9.5
-------- --------- --------
Earnings from continuing operations....... $ 13.8 $ 8.4 $ 13.9
======== ========= ========
Depreciation:
Guard services.............................. $ 7.4 $ 7.3 $ 5.7
Alarm services.............................. 38.0 37.4 34.2
Armored services............................ 7.0 7.1 7.0
Corporate................................... 0.4 0.3 0.1
-------- --------- --------
Total depreciation........................ $ 52.8 $ 52.1 $ 47.0
======== ========= ========
Amortization of excess purchase
price over net assets acquired:
Guard services.............................. $ 11.1 $ 8.9 $ 8.9
Alarm services.............................. 2.3 2.8 2.9
Armored services............................ 1.3 1.5 1.4
Corporate................................... 0.1 0.2 0.2
-------- --------- --------
Total amortization........................ $ 14.8 $ 13.4 $ 13.4
======== ========= ========
Capital expenditures:
Guard services.............................. $ 8.6 $ 3.6 $ 3.1
Alarm services.............................. 44.6 40.5 29.5
Armored services............................ 6.2 3.7 8.1
-------- --------- --------
Total capital expenditures................ $ 59.4 $ 47.8 $ 40.7
======== ========= ========
Identifiable assets:
Guard services.............................. $ 259.2 $ 231.1
Alarm services.............................. 364.6 348.2
Armored services............................ 89.1 87.4
Discontinued operations..................... 36.8 12.6
Corporate................................... 88.8 81.5
--------- --------
Total identifiable assets................... $ 838.5 $ 760.8
========= ========
</TABLE>
Note 10. Other Income, Net
Other income in 1994 included a $9.9 million gain on the sale
of certain trademarks and other rights to Borg-Warner Automotive.
Note 11. Income Taxes
Earnings before income taxes from continuing operations and
provision (benefit) for income taxes consist of:
<TABLE>
<CAPTION>
1994 1995 1996
---------------------------- ------------------------- -----------------------
U.S. Non-U.S. Total U.S. Non-U.S. Total U.S. Non-U.S. Total
----- -------- ----- ----- -------- ------ ---- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(millions of dollars)
Earnings before income taxes.......... $ 7.9 $2.7 $10.6 $11.9 $ 3.4 $15.3 $19.1 $4.3 $23.4
===== ==== ===== ===== ===== ===== ===== ==== =====
Income taxes:
Current:
Federal/Foreign............. $ 3.6 $1.7 $ 5.3 $ 9.9 $ 1.5 $11.4 $10.5 $1.3 $11.8
State....................... 0.9 -- 0.9 1.0 -- 1.0 1.5 -- 1.5
----- ----- ----- ----- ----- ----- ----- ----- -----
4.5 1.7 6.2 10.9 1.5 12.4 12.0 1.3 13.3
Deferred........................ (9.4) -- (9.4) (5.5) -- (5.5) (3.8) -- (3.8)
----- ----- ----- ----- ----- ----- ----- ----- -----
Provision (benefit) for income taxes.. $(4.9) $1.7 $(3.2) $ 5.4 $ 1.5 $ 6.9 $ 8.2 $1.3 $9.5
===== ==== ===== ===== ===== ===== ===== ==== =====
</TABLE>
The analysis of the variance of income taxes as reported from
income taxes computed at the U.S. statutory federal income tax rate for
continuing operations is as follows:
1994 1995 1996
------ ------ ------
(millions of dollars)
Income taxes at U.S. statutory rate of 35%... $ 3.7 $ 5.3 $ 8.2
Increases (decreases) resulting from:
Change in tax basis......................... (7.0) -- --
State income taxes.......................... 0.6 0.8 0.8
Non-temporary differences................... 0.6 0.7 0.7
Other, net.................................. (1.1) 0.1 (0.2)
----- ----- ----
Income taxes reported........................ $(3.2) $ 6.9 $ 9.5
===== ===== =====
Following are the components of the net deferred tax asset as
of December 31, 1995 and 1996:
1995 1996
------ ------
(millions of dollars)
Deferred tax assets:
Liabilities for casualty insurance................. $35.8 $35.6
Liabilities related to discontinued operations..... 9.8 9.6
Liabilities for pension benefits................... 4.4 0.4
Liabilities for other post-retirement benefits..... 5.1 4.6
Other, net......................................... 8.0 2.8
Net operating loss carry-forward................... 16.7 10.9
General business credit............................ 25.5 26.3
Minimum tax credit................................. 27.0 26.6
Foreign tax credit................................. 2.3 1.3
------ ------
Total deferred tax assets...................... 134.6 118.1
Valuation allowance.................................. (10.6) (6.8)
------ ------
124.0 111.3
Deferred tax liabilities:
Fixed assets....................................... (49.5) (43.9)
Investments........................................ (13.1) (13.1)
Net excess purchase price over net assets acquired. (8.6) (7.5)
------ ------
Total deferred tax liabilities................. (71.2) (64.5)
------ ------
Net deferred tax asset......................... $ 52.8 $ 46.8
====== ======
The foreign tax credit carry-forward has been fully considered
in the valuation allowance at both December 31, 1995 and 1996 while an
additional allowance of $8.3 million and $5.5 million at December 31, 1995 and
1996, respectively, has been established against the other credits. The
general business credit carry-forward will expire in years 2004-2009, the net
operating loss carry-forward will expire in 2009, while the minimum tax credit
can be carried forward indefinitely.
Note 12. Capital Stock
The following table summarizes the Company's capital stock at
December 31, 1995 and 1996:
December 31, December 31,
1995 1996
------------ ------------
(thousands of shares)
Common stock, $.01 par value:
Authorized.................................... 50,000.0 50,000.0
Issued........................................ 22,446.1 22,446.1
Outstanding................................... 22,087.6 22,154.2
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........................ -- --
Note 13. Fair Value of Financial Instruments
The methods and assumptions used to estimate the fair value of
each class of financial instrument are as follows:
Cash and cash equivalents, receivables, notes payable and
accounts payable
The carrying amounts approximate fair value because of the
short maturity of these instruments.
Long-term debt
The carrying amounts of the Company's bank borrowings under its
short-term bank lines and revolving credit agreement approximate fair value
because the interest rates are based on floating rates identified by reference
to market rates. The fair values of the Company's other long-term debt either
approximate carrying value or are estimated based on quoted market prices for
the same or similar issues or on the current rates offered to the Company for
debt of the same remaining maturities.
The carrying amounts and fair values of long-term debt at
December 31, 1995 and 1996 were as follows:
December 31, December 31,
1995 1996
------------ ------------
(millions of dollars)
Carrying amount........................ $473.8 $432.9
Fair value............................. 463.6 432.4
Interest rate swaps
The Company uses interest rate swap agreements to manage
exposure to fluctuations in interest rates. Interest rate swap agreements
involve the exchange of interest obligations on fixed and floating interest
rate debt without the exchange of the underlying principal amounts. The
differential paid or received on interest rate swap agreements is recognized
as an adjustment to interest expense over the term of the underlying debt
agreement. The book value of the interest rate swap agreements represents the
differential receivable or payable with a swap counterparty since the last
settlement date.
The fair value of interest rate swaps is the estimated amount
the Company would receive or pay to terminate the agreement. The fair value is
calculated using current market rates and the remaining terms of the
agreements. The fair value of interest rate swaps at December 31, 1996 is not
significant. In the unlikely event that a counterparty fails to meet the terms
of an interest rate swap, the Company's exposure is limited to the interest
rate differential. The underlying notional amounts on which the Company has
interest rate swap agreements outstanding was $100 million at December 31,
1995 and $125 million at December 31, 1996.
Letters of credit
The Company utilizes third-party letters of credit to guarantee
certain casualty insurance activities. The letters of credit reflect fair
value as a condition of their underlying purpose and are subject to fees
competitively determined in the marketplace. The contract value/fair value of
the letters of credit at December 31, 1995 and 1996 were $150.3 million and
$136.3 million, respectively. To monitor the counterparties' ability to
perform, these letters of credit are only executed with major financial
institutions, and full performance is anticipated.
Note 14. Interim Financial Information (Unaudited)
<TABLE>
<CAPTION>
1996 Quarter Ended
--------------------------------------------------------------------------------
March 31 June 30 September 30 December 31 Year 1996
----------- --------- ------------ ----------- ---------
(millions of dollars, except per share data)
<S> <C> <C> <C> <C> <C>
Net service revenues....................... $414.1 $418.3 $434.9 $443.9 $1,711.2
Cost of services........................... 329.6 332.2 348.2 350.2 1,360.2
Selling, general and administrative
expenses................................... 52.7 52.2 51.8 53.9 210.6
Depreciation............................... 12.1 11.8 11.7 11.4 47.0
Amortization of excess purchase price over
net assets acquired....................... 3.3 3.4 3.4 3.3 13.4
Interest expense and finance charges....... 14.5 14.1 14.1 13.9 56.6
------ ------ ------ ------ --------
Earnings before income taxes......... 1.9 4.6 5.7 11.2 23.4
Provision (benefit) for income taxes....... 0.3 1.7 2.5 5.0 9.5
------ ------ ------ ------ --------
Earnings from continuing operations.. 1.6 2.9 3.2 6.2 13.9
Loss from discontinued operations, net of
income taxes.............................. (1.1) (1.0) (26.4) -- (28.5)
------ ------ ------ ------ --------
Earnings (loss) before extraordinary
item............................... 0.5 1.9 (23.2) 6.2 (14.6)
Extraordinary item:
Loss from early extinguishment of debt,
net of income taxes....................... -- -- -- -- --
------- ------- ------- ------- ---------
Net earnings (loss).................. $ 0.5 $ 1.9 $(23.2) $ 6.2 $ (14.6)
======= ======= ======= ======= =========
Earnings (loss) per common share:
Continuing operations................ $ 0.07 $ 0.12 $ 0.14 $ 0.26 $ 0.59
Discontinued operations.............. (0.05) (0.04) (1.13) -- (1.21)
Extraordinary item................... -- -- -- -- --
------- ------- ------- ------- ---------
Net earnings (loss) per share........ $ 0.02 $ 0.08 $ (0.99) $ 0.26 $ (0.62)
======= ======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
1995 Quarter Ended
--------------------------------------------------------------------------------
March 31 June 30 September 30 December 31 Year 1995
----------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
(millions of dollars, except per share data)
Net service revenues....................... $423.8 $427.6 $427.8 $429.3 $1,708.5
Cost of services........................... 336.0 341.5 341.0 340.8 1,359.3
Selling, general and administrative
expenses................................... 56.8 54.6 51.7 49.4 212.5
Depreciation............................... 13.6 13.0 13.0 12.5 52.1
Amortization of excess purchase price over
net assets acquired....................... 3.5 3.4 3.1 3.4 13.4
Interest expense and finance charges....... 13.4 13.9 13.7 14.9 55.9
------ ------ ------ ------ --------
Earnings before income taxes.......... 0.5 1.2 5.3 8.3 15.3
Provision (benefit) for income taxes....... (0.1) 0.3 2.5 4.2 6.9
------ ------ ------ ------ --------
Earnings from continuing operations........ 0.6 0.9 2.8 4.1 8.4
Loss from discontinued operations, net of
income taxes........................... (0.5) (0.3) (0.4) (1.3) (2.5)
------ ------ ------ ------ --------
Earnings (loss) before extraordinary item.. 0.1 0.6 2.4 2.8 5.9
Extraordinary item:
Loss from early extinguishment of debt,
net of income taxes.................... -- -- -- (4.7) (4.7)
------ ------ ------ ------ --------
Net earnings (loss)........................ $ 0.1 $ 0.6 $ 2.4 $ (1.9) $ 1.2
====== ====== ====== ====== ========
Earnings (loss) per common share:
Continuing operations................. $ 0.02 $ 0.04 $ 0.12 $ 0.18 $0.36
Discontinued operations............... (0.02) (0.01) (0.02) (0.06) (0.11)
Extraordinary item.................... -- -- -- (0.20) (0.20)
------ ------ ------ ------ --------
Net earnings (loss) per share......... $ -- $ 0.03 $ 0.10 $(0.08) $ 0.05
====== ====== ====== ====== ========
</TABLE>
Note 15. Subsequent Event and Related Pro Forma Financial Information
(Unaudited)
The following unaudited Pro Forma Financial Information has been prepared as a
result of the combination on January 24, 1997, of the Company's armored
services unit with Loomis Holding Corporation. The unaudited Pro Forma
Financial Information is based on the historical financial statements of the
Company and gives effect to (i) the disposition of substantially all of the
assets and certain liabilities of the armored unit and other adjustments
related to the business combination and (ii) the application of the net
proceeds received by the Company to repay certain indebtedness. The
accompanying unaudited Pro Forma Consolidated Statement of Operations for the
year ended December 31, 1996 gives effect to the transactions as if they had
been consummated on January 1, 1996. The unaudited Pro Forma Consolidated
Balance Sheet at December 31, 1996 is presented giving effect to the
transactions as if they had been consummated as of that date.
While the Company anticipates that it will recognize a gain from the sale of
the armored unit's net assets, the ultimate gain is subject to potential
purchase price adjustments and other contingencies of which the amounts have
not been finalized at this time. However, the Company does not anticipate that
the gain will be material, and the Company does not expect any material
nonrecurring charges or credits to result from the transaction.
The unaudited Pro Forma Financial Information is intended for informational
purposes only and is not necessarily indicative of the future results of
operations or financial position of the Company had the transactions described
above occurred on the indicated dates or been in effect for the periods
presented.
The unaudited Pro Forma Financial Information and the accompanying notes
should be read in conjunction with the historical Consolidated Financial
Statements of the Company, including the related notes thereto.
Pro Forma Consolidated Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31, 1996
--------------------------------------------------------
Pro Forma
Adjustments
Historical (a) Pro Forma
---------- ------------ ---------
<S> <C> <C> <C>
(millions of dollars, except share data)
Net service revenues........................................... $1,711.2 $(246.3) $1,464.9
Cost of services............................................... 1,360.2 (204.5) 1,155.7
Selling, general and administrative expense.................... 210.6 (20.7) 189.9
Depreciation................................................... 47.0 (7.1) 39.9
Amortization of excess purchase price over net assets acquired. 13.4 (1.5) 11.9
Interest expense and finance charges........................... 56.6 (9.1)(b) 47.5
-------- ------- --------
Earnings before income taxes and equity in earnings of
unconsolidated subsidiaries................................. 23.4 (3.4) 20.0
Provision for income taxes..................................... 9.5 (1.3)(c) 8.2
-------- ------- --------
Earnings before equity in earnings of unconsolidated
subsidiaries................................................ 13.9 (2.1) 11.8
Equity in earnings of Loomis, Fargo & Co....................... -- 3.8 (d) 3.8
-------- ------- --------
Earnings from continuing operations....................... $ 13.9 $ 1.7 $ 15.6
======== ======= ========
Earnings per share from continuing operations.................. $ 0.59 $ 0.66
Average shares outstanding (in thousands)...................... 23,517 23,517
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Consolidated Balance Sheet (Unaudited)
Year Ended December 31, 1996
-----------------------------------------------------------
Pro Forma
Historical Adjustment(e) Pro Forma
---------- ---------- --------
(millions of dollars)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 17.8 -- $ 17.8
Receivables, net...................................... 100.4 $ (28.7) 71.7
Inventories........................................... 12.1 (1.8) 10.3
Other current assets.................................. 36.8 11.3 (b) 48.1
-------- ------- --------
Total current assets............................. 167.1 (19.2) 147.9
Property, plant and equipment, at cost................ 442.6 (76.5) 366.1
Less accumulated depreciation......................... 239.5 (45.6) 193.9
-------- ------- --------
Net property, plant and equipment................ 203.1 (30.9) 172.2
Net excess purchase price over net assets acquired.... 237.2 (27.4) 209.8
Deferred tax asset, net............................... 46.8 (5.1) 41.7
Net assets of discontinued operations................. 12.6 -- 12.6
Investment in Loomis, Fargo & Co...................... -- 3.4 (d) 3.4
Other assets.......................................... 94.0 (11.3) 82.7
-------- ------- --------
Total assets..................................... $ 760.8 $ (90.5) $ 670.3
======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable......................................... $ 4.4 $ (0.6) $ 3.8
Accounts payable and accrued expenses................. 173.7 (10.1) 163.6
-------- ------- --------
Total current liabilities........................ 178.1 (10.7) 167.4
Long-term debt........................................ 438.2 (91.0)(b) 347.2
Other long-term liabilities........................... 103.3 11.2 (f) 114.5
Capital stock:
Common stock..................................... 0.2 -- 0.2
Series I non-voting common stock................. -- -- --
Capital in excess of par value........................ 29.0 -- 29.0
Retained earnings..................................... 20.6 -- 20.6
Notes receivable--management stock purchase........... (0.3) -- (0.3)
Cumulative translation adjustment..................... 0.5 -- 0.5
-------- ------- --------
50.0 -- 50.0
Treasury common stock................................. (8.8) -- (8.8)
-------- ------- --------
Total stockholders' equity....................... 41.2 -- 41.2
-------- ------- --------
Total liabilities and stockholders' equity....... $ 760.8 $ (90.5) $ 670.3
======== ======= ========
</TABLE>
(a) To eliminate the historical revenues and expenses of the armored unit.
(b) To eliminate debt retired with proceeds received from the transaction and
to adjust related interest expense. Cash proceeds from the
transaction, net of transaction and related expenses, were
approximately $105 million and were applied as follows: decrease in
borrowings under the term loan, $80 million; decrease in borrowings
under the revolving line of credit, $10 million; and increase in
interest-bearing cash deposits under the accounts receivable facility,
$15 million. The interest expense adjustment was computed using the
average interest rates for the respective periods. Such rates were
used because management believes these rates would have been the same
if the facilities had been negotiated by the Company on a stand-alone
basis without the armored unit.
(c) To record the estimated income tax effect for the pro forma adjustments
described in Notes (a) and (b) for the respective periods.
(d) To recognize, under the equity method, the Company's 49% interest in the
pro forma net assets and earnings of Loomis, Fargo & Co.
(e) To eliminate the sold assets and liabilities of the armored unit.
(f) For anticipated expenses incurred as a direct result of the business
combination and for purchase price adjustments under the contribution
agreement, including indemnifications and performance guarantees.
====================================== ======================================
No dealer, person or any other
individual has been authorized to
give any information or to make any
representations other than those
contained in this Prospectus in
connection with the offering covered
by this Prospectus. If given or made,
such information or representations
must not be relied upon as having been
authorized by the Company. This
Prospectus does not constitute an
offer to sell or the solicitation
of an offer to buy any security,
other than those to which it $125,000,000
relates, in any jurisdiction in
which such offer or solicitation is Offer to Exchange
not qualified to do so or to any 9 5/8% Senior Subordinated Notes
person to whom it is unlawful to due 2007
make such offer or solicitation. For Any And All Of the Outstanding
Neither the delivery of this 9 5/8% Senior Subordinated Notes
Prospectus nor any sale made due 2007
hereunder shall, under any of
circumstances, create an
implication that there has not been Borg-Warner Security
any change in the facts set forth Corporation
in this Prospectus or in the
affairs of the Company since the
date hereof.
TABLE OF CONTENTS
------------------
Page PROSPECTUS
---- ------------------
Available Information............. 2
Incorporation of Certain
Documents by Reference.......... 2
Prospectus Summary................ 3
Risk Factors...................... 14
Capitalization.................... 20
Selected Financial Data........... 21
Pro Forma Financial Data
(Unaudited)..................... 23
Management's Discussion and
Analysis of Financial ___________, 1997
Condition and Results of
Operations...................... 27
Business.......................... 32
Management........................ 41
Principal Shareholders............ 43
Description of Certain
Indebtedness.................... 45
Description of the Notes.......... 48
Exchange Offer.................... 70
ERISA Considerations.............. 76
Plan of Distribution.............. 77
Legal Matters..................... 77
Experts........................... 78
Financial Statements.............. F-1
====================================== ======================================
[Alternate Cover Page]
PROSPECTUS
Borg-Warner Security Corporation
9 5/8% Senior Subordinated Notes Due 2007
The 9 5/8% Senior Subordinated Notes due 2007, (the
"Exchange Notes") were issued in exchange for the 9 5/8% Senior
Subordinated Notes due 2007 (the "Old Notes" and, together with the
Exchange Notes, the "Notes") by the Borg-Warner Security Corporation (the
"Company"). See "Description of the Exchange Notes."
Interest on the Exchange Notes is payable semi-annually on
March 15 and September 15 of each year, beginning on September 15, 1997. The
Exchange Notes will mature on March 15, 2007 and may be redeemed at the option
of the Company, in whole or in part, at any time on or after March 15, 2002,
at the redemption prices set forth herein, and, subject to certain limitations
described herein, up to 30% of the original aggregate principal amount of the
Notes may be redeemed at the option of the Company with the net cash proceeds
of one or more Public Equity Offerings (as defined herein), provided that not
less than $87.5 million aggregate principal amount of the Notes remains
outstanding immediately after giving effect to such redemption, at any time
prior to March 15, 2000, at the redemption price of 109.625% of the principal
amount thereof, in each case together with accrued and unpaid interest, if
any, to the date of redemption. Upon a Change of Control (as defined herein),
subject to certain conditions, each holder of the Exchange Notes may require
the Company to purchase such holder's Exchange Notes at 101% of the principal
amount thereof, together with accrued and unpaid interest, if any, to the date
of purchase. See "Description of the Exchange Notes."
The Exchange Notes are unsecured obligations of the Company
subordinated in right of payment and upon liquidation to all existing and
future Senior Indebtedness (as defined herein) of the Company, including
indebtedness under the New Credit Facility (as defined herein), which is
secured by pledges of stock of certain of the Company's subsidiaries. The
Company is a holding company and, accordingly, the Exchange Notes are
effectively subordinated to all existing and future indebtedness of the
Company's subsidiaries. Subject to certain restrictions contained in the
Company's debt instruments, the Company may incur additional Senior
Indebtedness and the Company's subsidiaries may incur additional indebtedness
in the future. As of December 31, 1996, after giving pro forma effect to the
Loomis Fargo Combination (as defined herein) and the Refinancing (as defined
herein), the aggregate outstanding principal amount of Senior Indebtedness
(exclusive of undrawn letters of credit of approximately $128.8 million) of
the Company would have been approximately $75.1 million and the aggregate
outstanding principal amount of indebtedness (exclusive of obligations in
respect of undrawn letters of credit of approximately $128.8 million) of the
Company's subsidiaries (including guarantees by certain of the Company's
subsidiaries of the Company's obligations under the New Credit Facility) would
have been approximately $83.3 million. As of December 31, 1996, there were
also $150 million aggregate principal amount of the Company's 9 1/8% Notes (as
defined herein) outstanding which are ranked pari passu in right of payment
and upon liquidation with the Notes. In addition, the Company has a
non-recourse receivables-backed facility. See "Description of Certain
Indebtedness--Securitization of Receivables."
This Prospectus is to be used by Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch") in connection with offers and sales
in market-making transactions at negotiated prices related to prevailing
market prices at the time of sale. Merrill Lynch may act as principal or
agent in such transactions and has no obligation to make a market in the
Exchange Notes, and may discontinue its market-making activities any time
without notice, at its sole discretion. If Merrill Lynch conducts any
market-making activities, it may be required to deliver a "market-making
prospectus" when effecting offers and sales in the Notes because of the
equity ownership of affiliates of Merrill Lynch. Certain affiliates of
Merrill Lynch hold in the aggregate approximately 46% of the outstanding
shares of the Company's Common Stock. The Company will receive no portion
of the proceeds of the sale of such Exchange Notes and will bear expenses
incident to the registration thereof.
No dealer, salesperson, or other person has been authorized to
give information or to make any representations not contained in this
Prospectus, and, if given or made, such information or representations must
not be relied upon as having been authorized by the Company or any dealer,
underwriter or agent. This prospectus does not constitute an offer to sell or
the solicitation of an offer to buy any security other than the Exchange Notes
offered hereby, nor does it constitute an offer to sell or the solicitation of
an offer to buy any of the Exchange Notes to any person in any jurisdiction in
which it is unlawful to make such an offer or solicitation to such person.
Neither the delivery of this Prospectus nor any sale made hereunder shall
under any circumstances create an implication that the information contained
herein is correct as of any date subsequent to the date hereof, or that there
has been no change in the affairs of the Company since such date or, in the
case of information incorporated herein by reference, the date of filing with
the Securities and Exchange Commission.
--------------------
See "Risk Factors" for a discussion of certain factors that
should be considered in connection with an investment in the Exchange
Notes.
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _______, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is currently subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and information may be inspected and copied at the
Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549; and at the regional offices of the Commission at 7
World Trade Center (13th Floor), New York, New York 10048; and at Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains an internet "website" at http://www.sec.gov that
contains reports and other information.
This Prospectus constitutes a part of a registration statement
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained
in the Registration Statement and the exhibits and schedules thereto and
reference is hereby made to the Registration Statement and the exhibits and
schedules thereto for further information with respect to the Company and the
securities offered hereby. Statements contained herein concerning the
provisions of any documents filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and in
each instance reference is made to the copy of such document so filed. Each
such statement is qualified in its entirety by such reference. Copies of the
Registration Statement may be examined without charge at the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the web site (http://www.sec.gov.) maintained by the Commission
and at the Commission's Regional Offices located at Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any portion of
the Registration Statement can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
WITHOUT CHARGE UPON WRITTEN OR ORAL REQUEST FROM BORG-WARNER SECURITY
CORPORATION, 200 SOUTH MICHIGAN AVENUE, CHICAGO, ILLINOIS 60604, TELEPHONE
NUMBER (312) 322-8500. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY ___________, 1997
The following documents filed with the Commission (File No.
1-5529) are incorporated herein by reference: (1) the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, and (2) the
Company's Current Reports on Form 8-K dated February 7, 1997 and Form 8-K/A
dated February 13, 1997.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the this Exchange Offer shall be
deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modified or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, upon written or
oral request of any such person, a copy of any and all of the documents
referred to above which have been or may be incorporated in this Prospectus by
reference, other than exhibits to such documents which are not specifically
incorporated by reference to such documents. Requests for such copies should
be directed to Borg-Warner Security Corporation, 200 South Michigan Avenue,
Chicago, Illinois 60604, telephone number (312) 322-8500.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER
"PROSPECTUS SUMMARY", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS", IN ADDITION TO CERTAIN
STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS, ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995 AND ARE THUS PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS, UNCERTAINTIES
AND OTHER FACTORS ARE DISCUSSED UNDER THE HEADING "RISK FACTORS", BEGINNING ON
PAGE 14 OF THIS PROSPECTUS, AND PERSONS CONSIDERING AN INVESTMENT IN THE
EXCHANGE NOTES ARE URGED TO CAREFULLY CONSIDER SUCH FACTORS.
<PAGE>
Summary Description of the Exchange Notes
The form and terms of the Exchange Notes and the Old Notes are
identical in all respects, except that the offer of the Exchange Notes is
registered under the Securities Act and, therefore, the Exchange Notes are not
subject to certain transfer restrictions, registration rights and related
provisions requiring an increase in the interest rate on the Old Notes under
certain circumstances if the Company defaults with respect to its registration
requirements under the Registration Rights Agreement applicable to the Old
Notes.
Exchange Notes........................ $125,000,000 aggregate principal
amount of 9 5/8% Series B Senior
Subordinated Notes due 2007 (the
"Exchance Notes") of the Company.
Maturity Date......................... March 15, 2007.
Interest Payment Dates................ March 15 and September 15,
beginning September 15, 1997. The
Exchange Notes bear interest from
March 24, 1997, the date of issuance
of the Old Notes that were tendered in
exchange for the Exchange Notes (or the
most recent interest payment date to
which interest on the Old Notes has
been paid). Holders of Old Notes whose
Old Notes were accepted for exchange
have waived the right to receive any
payment in respect of interest on such
Old Notes accrued from March 24, 1997
to the date of the issuance of the
Exchange Notes.
Optional Redemption................... The Notes may be redeemed at
the option of the Company, in whole or
in part, at any time on or after March
15, 2002, at the redemption prices set
forth herein together with accrued and
unpaid interest, if any, to the date
of redemption. In addition, at any
time prior to March 15, 2000, the
Company may redeem up to 30% of the
original aggregate principal amount of
the Notes at a redemption price of
109.625% of the principal amount
thereof (together with accrued and
unpaid interest, if any, to the date
of redemption) with the net cash
proceeds of one or more Public Equity
Offerings (as defined herein);
provided that not less than $87.5
million aggregate principal amount of
the Notes remains outstanding
immediately after giving effect to
such redemption. See "Description of
the Notes--Optional Redemption."
Change of Control..................... Upon a Change of Control,
subject to certain conditions, each
holder of the Notes may require the
Company to purchase such holder's
Notes at 101% of the principal amount
thereof, together with accrued and
unpaid interest, if any, to the date
of purchase. There can be no assurance
that the Company would have sufficient
cash to purchase the Notes in the
event a Change of Control occurs. See
"Description of the Notes--Purchase of
Notes Upon Change of Control."
Ranking............................... The Exchange Notes are,
unsecured obligations of the Company
subordinated in right of payment and
upon liquidation to all existing and
future Senior Indebtedness of the
Company, including indebtedness under
the New Credit Facility. The Company
is a holding company and, accordingly,
the Exchange Notes are, effectively
subordinated to all existing and
future indebtedness of the Company's
subsidiaries. Subject to certain
restrictions contained in the terms of
the Company's indebtedness, the
Company may incur additional Senior
Indebtedness and the Company's
subsidiaries may incur additional
indebtedness in the future. As of
December 31, 1996, after giving pro
forma effect to the Loomis Fargo
Combination and the Refinancing, the
aggregate outstanding principal amount
of Senior Indebtedness (exclusive of
undrawn letters of credit of
approximately $128.8 million) of the
Company would have been approximately
$75.1 million and the aggregate
outstanding principal amount of
indebtedness (exclusive of obligations
in respect of undrawn letters of
credit of approximately $128.8
million) of the Company's subsidiaries
(including guarantees by certain of the
Company's subsidiaries of the
Company's obligations under the New
Credit Facility) would have been
approximately $83.3 million. In
addition, the Company has a $120
million non-recourse receivables-backed
facility available on a revolving
basis. As of December 31, 1996, there
were also $150 million aggregate
principal amount of the Company's 9
1/8% Notes outstanding which rank pari
passu in right of payment and upon
liquidation with the Notes. See "Risk
Factors--Subordination of
Notes;--Holding Company Structure,"
"Description of Certain
Indebtedness--Securitization of
Receivables" and "Description of the
Notes--Subordination."
Certain Covenants..................... The indenture under which the
Exchange Notes were issued (the
"Indenture") contains certain
restrictive covenants that, among
other things, limit the ability of the
Company and its subsidiaries to: (i)
incur additional indebtedness; (ii)
create certain liens; (iii) pay
dividends or make investments or
certain other restricted payments;
(iv) engage in mergers, consolidations
or sales of all or substantially all
assets; (v) engage in certain
transactions with affiliates; (vi)
issue or sell preferred stock of any
subsidiary of the Company; and (vii)
create restrictions on the ability of
any subsidiary of the Company to pay
dividends or make certain other
payments to the Company. All of these
limitations are subject to a number
of important qualifications. See
"Description of the Notes--Certain
Covenants."
Trading Market for the Exchange Notes. There is currently no
established trading market for the
Exchange Notes, and none may develop.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BT Securities
Corporation, Credit Suisse First
Boston Corporation and CIBC Wood Gundy
Securities Corp. (the "Initial
Purchasers") have indicated to the
Company that they currently intend to
make a market in the Exchange Notes,
as permitted by applicable laws and
regulations, but they are under no
obligation to do so; and such
market-making could be discontinued at
any time without notice, at the sole
discretion of the Initial Purchasers.
In addition, such market making
activities may be limited during the
pendency of a Shelf Registration
Statement. Accordingly, no assurance
can be given that an active trading
market for the Exchange Notes will
develop or, if such a market develops,
as to the liquidity of such market. The
Company intends to apply for listing
of the Exchange Notes on the New York
Stock Exchange. If the Exchange Notes,
are traded after their initial
issuance, they may trade at a discount
from their initial offering price,
depending upon prevailing interest
rates, the market for similar
securities, the performance of the
Company and certain other factors.
Use of Proceeds....................... This Prospectus is delivered
in connection with the sale of
Exchange Notes by Merrill Lynch in
market-making transactions. The
Company will not receive any proceeds
from such transactions.
Risk Factors
See "Risk Factors" for a discussion of certain factors which
should be considered in connection with the Exchange Offer or an investment in
the Exchange Notes.
<PAGE>
DESCRIPTION OF THE NOTES
The Exchange Notes were issued under the Indenture dated as of
March 24, 1997 (the "Indenture") between the Company, as issuer, and The Bank
of New York, as trustee (the "Trustee"). Copies of the Indenture will be made
available to holders of the Notes during normal business hours at the
principal corporate trust office of the Trustee. The Indenture has been
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). The following summary of the material provisions of the
Indenture does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the provisions of the Indenture, including the
definitions of certain terms contained therein and those terms made part of
the Indenture by reference to the Trust Indenture Act. For definitions of
certain capitalized terms used in the following summary, see "--Certain
Definitions."
General
The Notes will mature on March 15, 2007, will be limited to
$125 million aggregate principal amount and will be unsecured senior
subordinated obligations of the Company. Each Note bears interest at the rate
of 9 5/8% per annum from March 24, 1997 or from the most recent interest
payment date to which interest has been paid or duly provided for, payable in
cash on September 15, 1997 and semiannually thereafter on March 15 and
September 15 in each year until the principal thereof is paid or duly provided
for to the holders of the Notes at the close of business on the March 1 or
September 1 next preceding such interest payment date. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will
be payable, and the Notes will be exchangeable and transferable, at the office
or agency of the Company in The City of New York maintained for such purposes
(which initially will be the Trustee); provided, however, that, at the option
of the Company, interest may be paid by check mailed to the address of the
Person entitled thereto as such address shall appear on the security register.
(Sections 301, 305 and 1002) The Exchange Notes are issued only in registered
form without coupons and only in denominations of $1,000 and any integral
multiple thereof. (Section 302) No service charge will be made for any
registration of transfer or exchange or redemption of Notes, but the Company
may require payment in certain circumstances of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
(Section 305)
<PAGE>
MARKET-MAKING ACTIVITIES OF MERRILL LYNCH
This Prospectus is to be used by Merrill Lynch in connection
with offers and sales of the Exchange Notes in market-making transactions at
negotiated prices related to prevailing market prices at the time of sale.
Merrill Lynch may act as principal or agent in such transactions. There can
be no assurance that Merrill Lynch will continue to act in such capacities.
Merrill Lynch has no obligation to make a market in the Exchange Notes, and
may discontinue its market-making activities at any time without notice, at
its sole discretion.
MLCP, an affiliate of Merrill Lynch, holds together with its
affiliates, in the aggregate, approximately 46% of the outstanding shares of
the Company's Common Stock. Merrill Lynch acted as an Initial Purchaser in
connection with the original offering of the Old Notes and received an Initial
Purchasers' discount in the aggregate amount of $2,062,500 in connection
therewith.
The Company will receive no portion of the proceeds of the
sales of the Exchange Notes and will bear the expenses incident to the
registration thereof. The Company has agreed to indemnify Merrill Lynch
against certain liabilities, including civil liabilities under the Securities
Act or to contribute to payments Merrill Lynch may be required to make in
respect thereof.
LEGAL MATTERS
Certain legal matters in connection with the sale of the
Exchange Notes were passed upon for the Company by Davis Polk & Wardwell, New
York, New York. Arthur F. Golden, a director of the Company, is a partner of
Davis Polk & Wardwell. Davis Polk & Wardwell has represented the Company in
connection with various transactions.
<PAGE>
====================================== ======================================
No dealer, person or any other
individual has been authorized to
give any information or to make any
representations other than those
contained in this Prospectus in
connection with the offering
covered by this Prospectus. If $125,000,000
given or made, such information or
representations must not be relied
upon as having been authorized by Offer to Exchange
the Company. This Prospectus does 9 5/8% Senior Subordinated Notes
not constitute an offer to sell or due 2007
the solicitation of an offer to buy For Any And All Of the Outstanding
any security, other than those to 9 5/8% Senior Subordinated Notes
which it relates, in any due 2007
jurisdiction in which such offer or of
solicitation is not qualified to do
so or to any person to whom it is Borg-Warner Security
unlawful to make such offer or Corporation
solicitation. Neither the delivery
of this Prospectus nor any sale
made hereunder shall, under any
circumstances, create an
implication that there has not been
any change in the facts set forth
in this Prospectus or in the
affairs of the Company since the
date hereof.
TABLE OF CONTENTS
Page ------------------
---- PROSPECTUS
------------------
Available Information............
Incorporation of Certain
Documents by Reference.........
Forward-Looking Statements.......
Prospectus Summary...............
Risk Factors.....................
Capitalization...................
Selected Financial Data..........
Pro Forma Financial Data
(Unaudited)....................
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations..................... ___________, 1997
Business.........................
Management.......................
Principal Shareholders...........
Description of Certain
Indebtedness...................
Description of the Notes.........
Exchange Offer...................
ERISA Considerations.............
Market-Making Activities of
Merrill Lynch..................
Legal Matters....................
Experts..........................
Financial Statements.............
====================================== ======================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Reference is made to Section 102(b)(7) of the Delaware General
Corporation Law (the "DGCL") which enables a corporation in its original
certificate of incorporation or an amendment thereto to eliminate or limit the
personal liability of a director for violations of the director's fiduciary
duty, except (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the DGCL (providing for liability of directors for
the unlawful payment of dividends or unlawful stock purchases or redemptions)
or (iv) for any transaction from which a director derived an improper personal
benefit. Section 145 of the DGCL empowers the Company to indemnify, subject
to the standards set forth therein, any person in connection with any action,
suit or proceeding brought before or threatened by reason of the fact that the
person was a director, officer, employee or agent of such company, or is or
was serving as such with respect to another entity at the request of such
company. The DGCL also provides that the Company may purchase insurance on
behalf of any such director, officer, employee or agent.
The Company's Amended and Restated Certificate of Incorporation
provides in effect for the indemnification by the Company of each director and
officer of the Company to the fullest extent permitted by applicable law .
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits (see index to exhibits at E-1)
Item 22. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in
the information set forth in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities
offered (if the total dollar value of securities
offered would not exceed that which was registered)
and any deviation from the low or high and of the
estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than
20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report, to security holders
that is incorporated by reference in the prospectus and furnished pursuant to
and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the prospectus,
to deliver, or cause to be delivered to each person to whom the prospectus is
sent or given, the latest quarterly report that is specifically incorporated
by reference in the prospectus to provide such interim financial information.
(d) (1) The undersigned registrant hereby undertakes as follows:
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) The registrant undertakes that every prospectus: (i)
that is filed pursuant to paragraph (1) immediately preceding, or
(ii) that purports to meet the requirements of Section 10(a)(3) of
the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(f) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrants pursuant to the foregoing
provisions, or otherwise, the registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) (1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(h) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of the trustee
to act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Act.
(i) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4,10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(j) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1933, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto to duly authorized in the city of Chicago, State of
Illinois, on the sixth day of May, 1997.
BORG-WARNER SECURITY CORPORATION
By: /s/ Timothy M. Wood Vice President, Finance
- ----------------------------- (Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following persons and in
the capacities on May 6, 1997.
Signature Title
------------- -------
* Chairman of the Board, Chief Executive
----------------------------- Officer and President and Director
J. Joe Adorjan (Principal Executive Officer)
/s/ Timothy M. Wood Vice President, Finance
----------------------------- (Principal Financial and Accounting
Timothy M. Wood Officer)
*
-----------------------------
James J. Burke, Jr. Director
*
-----------------------------
Albert J. Fitzgibbons, III Director
*
-----------------------------
Arthur F. Golden Director
*
-----------------------------
Dale W. Lang Director
*
-----------------------------
Robert A. McCabe Director
*
-----------------------------
Andrew McNally IV Director
*
-----------------------------
Alexis P. Michas Director
*
-----------------------------
H. Norman Schwarzkopf Director
*
-----------------------------
Donald C. Trauscht Director
By: /s/ Timothy M. Wood
-----------------------------
Attorney-in-fact
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document Description
------- -------------------
<S> <C> <C>
* 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992).
* 3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992).
* 4.1 Indenture dated as of April 1, 1986 by and between Borg-Warner and Harris Trust and Savings Bank,
entered into in connection with the registration of up to $150,000,000 of Debt Securities and Warrants
to Purchase Debt Securities for issuance under a shelf registration on Form S-3 (incorporated by
reference to Registration Statement No. 334670).
* 4.2 Indenture dated as of May 3, 1993 by and between the Company and The First National Bank of
Chicago (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1993).
4.3 Indenture dated as of March 24, 1997 by and between the Company and The Bank of New York, as
Trustee.
4.4 Registration Rights Agreement dated as of March 24, 1997 among the Company and the Initial
Purhcasers.
4.5 Credit Agreement dated as of March 24, 1997 among Borg-Warner Security Corporation, as Borrower,
the Lenders named therein, Canadian Imperial Bank of Commerce, as Documentation Agent,
NationsBank, N.A., as Syndication Agent and Bankers Trust Company as Administrative Agent.
5 Opinion of Davis Polk & Wardwell regarding the validity of the securities being registered.
+* 10.1 Borg-Warner Security Corporation Directors Stock Appreciation Rights Plan (incorporated by reference
to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31,
1988).
+* 10.2 Borg-Warner Corporation Management Stock Option Plan, as amended through January 19, 1993 (incorporated by
reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December
31, 1992).
+* 10.3 Borg-Warner Security Corporation 1993 Stock Incentive Plan (incorporated by reference to Exhibit
10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992).
+* 10.4 Employment Agreement dated as of March 28, 1995 for J.J. Adorjan (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for The quarter ended March 31, 1995).
+* 10.5 Form of Employment Agreement for Messrs. O'Brien and Wood (incorporated by reference to Exhibit
10.26 to Registration Statement No. 33-15419), as amended by Form of Amendment of Employment
Agreement dated January 19, 1989 (incorporated by reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1988).
* 10.6 Form of Indemnification Agreement dated September 23, 1986 between the Company and Messrs.
O'Brien and Wood (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1986).
* 10.7 Agreement dated as of March 28, 1995 with D.C. Trauscht (incorporated by reference to Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).
+* 10.8 Borg-Warner Security Corporation Retirement Savings Excess Benefit Plan, as amended and restated
through January l, 1995 (incorporated by reference to Exhibit 10.21 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994).
+* 10.9 Borg-Warner Security Corporation Supplemental Benefits Compensation Program (incorporated by
reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1994).
* 10.10 Consulting Agreement dated as of September 1, 1993 between the Company and H. Norman
Schwarzkopf (incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1993).
* 10.11 Consulting Agreement dated as of January 1, 1996 between the Company and D.C. Trauscht
(incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1995).
* 10.12 Contribution Agreement dated as of November 28, 1996 by and among the Company, Wells Fargo
Armored Service Corporation, Loomis-Wells Corporation (now known as Loomis, Fargo & Co.),
Loomis Holding Corporation and Loomis Stockholders Trust (incorporated by reference to Exhibit 2.1
to the Company's Current Report on Form 8-K dated February 7, 1997).
* 11 Computation of earnings per share (incorporated by reference to Exhibit 11 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996).
12 Statement re: Computation of Ratio of Earnings to Fixed Charges.
* 13 Portions of the 1996 Annual Report to Stockholders (incorporated by reference to Exhibit 13 to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996).
* 21 Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996).
23.1 Consent of Davis Polk & Wardwell (included in Exhibit 5).
23.2 Consent of Deloitte & Touche LLP.
24 Powers of Attorney of certain officers and directors of the Company.
25 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York.
* 27 Financial Data Schedule (incorporated by reference to Exhibit 27 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996).
99.1 Form of Letter of Transmittal to 9 5/8% Series B Senior Subordinated Notes due 2007 of the Company.
99.2 Form of Notice of Guaranteed Delivery to 9 5/8% Series B Senior Notes due 2007 of the Company.
99.3 Instruction to Registered Holder and/or Book-entry Transfer Participant from Owner
of Borg-Warner Securities.
99.4 Form of Letter to Clients.
99.5 Form of Letter to Registered Holder and The Depository Trust Company Participants.
</TABLE>
- ---------------
* Incorporated by reference.
+ Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c).
EXHIBIT 4.3
==============================================================================
EXECUTION COPY
BORG-WARNER SECURITY CORPORATION
TO
THE BANK OF NEW YORK
Trustee
Indenture
Dated as of March 24, 1997
9 5/8% Senior Subordinated Notes due 2007
9 5/8% Series B Senior Subordinated Notes due 2007
==============================================================================
BORG-WARNER SECURITY CORPORATION
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of March 24, 1997
--------------------------------------------------
Trust Indenture Indenture
Act Section Section
- --------------- ----------
Section 310(a)(1)................................. 607
(a)(2)................................... 607
(b)...................................... 608
Section 312(c).................................... 701
Section 314(a).................................... 703
(a)(4)................................... 1004
(c)(1)................................... 102
(c)(2)................................... 102
(e)...................................... 102
Section 315(b).................................... 601
Section 316(a)(last sentence)..................... 101 ("Outstanding")
(a)(1)(A)................................ 502, 512
(a)(1)(B)................................ 513
(b)...................................... 508
(c)...................................... 104(d)
Section 317(a)(1)................................. 503
(a)(2)................................... 504
(b)...................................... 1003
Section 318(a).................................... 111
- ---------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
Table of Contents
Page
PARTIES......................................................................1
RECITALS OF THE COMPANY......................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions................................................. 1
Acquired Indebtedness...................................... 2
Act........................................................ 2
Adjusted Fixed Charge Coverage Ratio....................... 2
Affiliate.................................................. 2
Agent...................................................... 3
Agent Members.............................................. 3
Annual Period.............................................. 3
Authenticating Agent....................................... 3
Average Life............................................... 3
Bank Credit Agreement...................................... 3
Banks...................................................... 3
Board of Directors......................................... 4
Board Resolution........................................... 4
Business Day............................................... 4
Capital Stock.............................................. 4
Capitalized Lease Obligation............................... 4
Cash Equivalents........................................... 4
Change of Control.......................................... 5
Commission................................................. 6
Common Stock............................................... 6
Company.................................................... 6
Company Request or Company Order........................... 6
Consolidated Gross PP&E.................................... 6
Consolidated Interest Expense.............................. 6
Consolidated Net Income.................................... 6
Consolidated Non-cash Charges.............................. 7
Consolidated Tax Expense................................... 7
Corporate Trust Office..................................... 7
corporation................................................ 7
Default.................................................... 7
Defaulted Interest......................................... 7
Dollar or $................................................ 7
Event of Default........................................... 7
Exchange Act............................................... 7
Exchange Notes............................................. 7
Exchange Offer............................................. 8
Exchange Offer Registration Statement...................... 8
Federal Bankruptcy Code.................................... 8
Foreign Entity............................................. 8
Generally Accepted Accounting Principles or GAAP........... 8
Government Obligations..................................... 8
Guarantee.................................................. 8
Guaranteed Debt............................................ 8
Guarantor.................................................. 9
Holder..................................................... 9
Indebtedness............................................... 9
Indenture.................................................. 10
Initial Notes.............................................. 10
Interest Payment Date...................................... 10
Investment................................................. 10
Lien....................................................... 10
ML Funds................................................... 10
Majority Owned Subsidiary.................................. 10
Management Investors....................................... 11
Material Subsidiary........................................ 11
Maturity................................................... 11
Moody's.................................................... 11
9 1/8% Notes............................................... 11
Non-Payment Event of Default............................... 11
Note Register and Note Registrar........................... 11
Notes...................................................... 11
Officers' Certificate...................................... 11
Opinion of Counsel......................................... 12
Original Issue Date........................................ 12
Outstanding................................................ 12
Pari Passu Indebtedness.................................... 13
Payment Event of Default................................... 13
Payment Blockage Period.................................... 13
Paying Agent............................................... 13
Person..................................................... 13
Permitted Holders.......................................... 13
Permitted Indebtedness..................................... 13
Permitted Investments...................................... 15
Permitted Liens............................................ 16
Place of Payment........................................... 17
Predecessor Note........................................... 17
Preferred Stock............................................ 17
Public Equity Offering..................................... 17
Purchase Date.............................................. 17
Redeemable Capital Stock................................... 17
Redemption Date............................................ 17
Redemption Price........................................... 18
Registration Rights Agreement.............................. 18
Regular Record Date........................................ 18
Repayment Date............................................. 18
Repayment Price............................................ 18
Responsible Officer........................................ 18
S&P........................................................ 18
Senior Indebtedness........................................ 18
Special Record Date........................................ 19
Specified Senior Indebtedness.............................. 19
Stated Maturity............................................ 19
Subordinated Indebtedness.................................. 19
Subsidiary................................................. 19
Trust Indenture Act or TIA................................. 19
Trustee.................................................... 19
United States.............................................. 19
Vice President............................................. 19
Voting Stock............................................... 20
Wholly Owned Subsidiary.................................... 20
SECTION 102. Compliance Certificates and Opinions........................ 20
SECTION 103. Form of Documents Delivered to Trustee...................... 21
SECTION 104. Acts of Holders............................................. 21
SECTION 105. Notices, etc., to Trustee, Company and Agents............... 22
SECTION 106. Notice to Holders; Waiver................................... 23
SECTION 107. Effect of Headings and Table of Contents.................... 24
SECTION 108. Successors and Assigns...................................... 24
SECTION 109. Separability Clause......................................... 24
SECTION 110. Benefits of Indenture....................................... 24
SECTION 111. Governing Law............................................... 24
SECTION 112. Legal Holidays.............................................. 25
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally............................................. 25
SECTION 202. Form of Trustee's Certificate of Authentication............. 26
SECTION 203. Restrictive Legends......................................... 27
SECTION 204. Form of Certificate to Be Delivered upon Termination of
Restricted Period.......................................... 29
ARTICLE THREE
THE NOTES
SECTION 301. Amount...................................................... 30
SECTION 302. Denominations............................................... 31
SECTION 303. Execution, Authentication, Delivery and Dating.............. 31
SECTION 304. Temporary Notes............................................. 32
SECTION 305. Registration, Registration of Transfer and Exchange......... 33
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes................. 34
SECTION 307. Payment of Interest; Interest Rights Preserved.............. 35
SECTION 308. Persons Deemed Owners....................................... 36
SECTION 309. Cancellation................................................ 36
SECTION 310. Computation of Interest..................................... 37
SECTION 311. Book-Entry Provisions for Global Notes...................... 37
SECTION 312. Transfer Provisions......................................... 38
SECTION 313. Form of Accredited Investor Certificate..................... 46
SECTION 314. Form of Regulation S Certificate............................ 49
SECTION 315. Form of Rule 144A Certificate............................... 51
SECTION 316. CUSIP Numbers............................................... 52
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture..................... 52
SECTION 402. Application of Trust Money.................................. 54
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default........................................... 54
SECTION 502. Acceleration of Maturity; Rescission and Annulment.......... 56
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee................................................. 58
SECTION 504. Trustee May File Proofs of Claim............................ 58
SECTION 505. Trustee May Enforce Claims Without Possession of Notes...... 59
SECTION 506. Application of Money Collected.............................. 60
SECTION 507. Limitation on Suits......................................... 60
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium
and Interest............................................... 61
SECTION 509. Restoration of Rights and Remedies.......................... 61
SECTION 510. Rights and Remedies Cumulative.............................. 61
SECTION 511. Delay or Omission Not Waiver................................ 62
SECTION 512. Control by Holders.......................................... 62
SECTION 513. Waiver of Past Defaults..................................... 62
SECTION 514. Waiver of Stay or Extension Laws............................ 63
SECTION 515. Undertaking for Costs....................................... 63
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.......................................... 63
SECTION 602. Certain Rights of Trustee................................... 64
SECTION 603. Trustee Not Responsible for Recitals or Issuance of Notes... 65
SECTION 604. May Hold Notes.............................................. 65
SECTION 605. Money Held in Trust......................................... 66
SECTION 606. Compensation and Reimbursement.............................. 66
SECTION 607. Corporate Trustee Required; Eligibility..................... 67
SECTION 608. Resignation and Removal; Appointment of Successor........... 67
SECTION 609. Acceptance of Appointment by Successor...................... 68
SECTION 610. Merger, Conversion, Consolidation or Succession to Business. 69
SECTION 611. Appointment of Authenticating Agent......................... 69
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders................ 71
SECTION 702. Reports by Trustee.......................................... 71
SECTION 703. Reports by Company.......................................... 72
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms........ 72
SECTION 802. Successor Substituted....................................... 73
SECTION 803. Notes to Be Secured in Certain Events....................... 74
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.......... 74
SECTION 902. Supplemental Indentures with Consent of Holders............. 75
SECTION 903. Execution of Supplemental Indentures........................ 76
SECTION 904. Effect of Supplemental Indentures........................... 76
SECTION 905. Conformity with Trust Indenture Act......................... 76
SECTION 906. Reference in Notes to Supplemental Indentures............... 76
SECTION 907. Notice of Supplemental Indentures........................... 77
SECTION 908. Effect on Senior Indebtedness............................... 77
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest........ 77
SECTION 1002. Maintenance of Office or Agency............................ 77
SECTION 1003. Money for Notes Payments to Be Held in Trust............... 78
SECTION 1004. Statement as to Compliance................................. 79
SECTION 1005. Payment of Taxes and Other Claims.......................... 80
SECTION 1006. Maintenance of Properties.................................. 80
SECTION 1007. Corporate Existence........................................ 80
SECTION 1008. Limitation on Company and Subsidiary Indebtedness.......... 80
SECTION 1009. Limitation on Restricted Payments.......................... 81
SECTION 1010. Limitation on Issuance of Other Senior Subordinated
Indebtedness............................................... 83
SECTION 1011. Limitation on Dividends and Other Payment Restrictions
Affecting Subsidiaries.................................... 83
SECTION 1012. Limitation on Liens........................................ 84
SECTION 1013. Limitation on Transactions with Affiliates................. 84
SECTION 1014. Limitation on Issuances and Sale of Preferred Stock by
Subsidiaries.............................................. 85
SECTION 1015. Limitations on Issuances of Guarantees of Pari Passu or
Subordinated Indebtedness.................................. 85
SECTION 1016. Purchase of Notes upon Change of Control................... 86
SECTION 1017. Provision of Financial Statements and Reports.............. 87
SECTION 1018. Waiver of Certain Covenants................................ 88
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Applicability of Article................................... 88
SECTION 1102. Election to Redeem; Notice to Trustee...................... 88
SECTION 1103. Selection by Trustee of Notes to Be Redeemed............... 88
SECTION 1104. Notice of Redemption....................................... 89
SECTION 1105. Deposit of Redemption Price................................ 90
SECTION 1106. Notes Payable on Redemption Date........................... 90
SECTION 1107. Notes Redeemed in Part..................................... 90
SECTION 1108. Redemption................................................. 90
ARTICLE TWELVE
SECTION 1201.............................................................. 91
ARTICLE THIRTEEN
SECTION 1301.............................................................. 91
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Company's Option to Effect Defeasance or Covenant
Defeasance................................................ 91
SECTION 1402. Defeasance and Discharge................................... 91
SECTION 1403. Covenant Defeasance........................................ 92
SECTION 1404. Conditions to Defeasance or Covenant Defeasance............ 92
SECTION 1405. Deposited Money and Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions...................... 94
SECTION 1406. Reinstatement.............................................. 94
ARTICLE FIFTEEN
SUBORDINATION OF NOTES
SECTION 1501. Notes Subordinate to Senior Indebtedness................... 95
SECTION 1502. Payment Over of Proceeds upon Dissolution, etc............. 95
SECTION 1503. Suspension of Payment When Senior Indebtedness in Default.. 97
SECTION 1504. Payment Permitted If No Default............................ 98
SECTION 1505. Subrogation to Rights of Holders of Senior Indebtedness.... 98
SECTION 1506. Provisions Solely to Define Relative Rights................ 98
SECTION 1507. Trustee to Effectuate Subordination........................ 99
SECTION 1508. No Waiver of Subordination Provisions...................... 99
SECTION 1509. Notice to Trustee..........................................100
SECTION 1510. Reliance on Judicial Order or Certificate of Liquidating
Agent.....................................................100
SECTION 1511. Rights of Trustee As a Holder of Senior Indebtedness;
Preservation of Trustee's Rights..........................101
SECTION 1512. Article Applicable to Paying Agents........................101
SECTION 1513. No Suspension of Remedies..................................101
SECTION 1514. Trustee Not Fiduciary for Holders of Senior Indebtedness...101
TESTIMONIUM.............................................................. 89
SIGNATURES AND SEALS..................................................... 89
EXHIBIT A
INDENTURE, dated as of March 24, 1997, between BORG-WARNER
SECURITY CORPORATION, a corporation duly organized and existing under the laws
of the State of Delaware (herein called the "Company"), having its principal
office at 200 South Michigan Avenue, Chicago, Illinois 60604, and THE BANK OF
NEW YORK, a New York banking corporation, Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of and issuance of
its 9 5/8% Senior Subordinated Notes due 2007 (the "Initial Notes"), and its
9 5/8% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes", and
together with the Initial Notes, the "Notes"), of substantially the tenor and
amount hereinafter set forth, and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture.
Upon the issuance of the Exchange Notes, if any, or the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture will be subject to, and shall be governed by the provisions of the
Trust Indenture Act of 1939, as amended, that are required to be part of or
deemed to be part of and to govern the indentures qualified thereunder.
All things necessary have been done to make the Notes, when duly
executed and duly issued by the Company and authenticated and delivered
hereunder by the Trustee or the Authenticating Agent, the valid obligations of
the Company and to make this Indenture a valid agreement of the Company, in
accordance with their and its terms
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
It is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned
to them in this Article and include the plural as well as the singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under
the Trust Indenture Act;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of the
9 1/8% Note Indenture; and
(4) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
"Acquired Indebtedness" means Indebtedness of a Person (i)
existing at the time such Person becomes a Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, other than
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary or such acquisition, as the case may be.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Adjusted Fixed Charge Coverage Ratio" means for any period the
ratio of (a) the sum of Consolidated Net Income, Consolidated Interest
Expense, Consolidated Tax Expense and Consolidated Non-cash Charges deducted
in computing Consolidated Net Income, in each case, for such period, on a
consolidated basis, to (b) Consolidated Interest Expense for such period;
provided that, in making such computation, the Consolidated Interest Expense
attributable to interest on any Indebtedness computed on a pro forma basis and
bearing a floating interest rate shall be computed as if the rate in effect on
the date of computation had been the applicable rate for the entire period.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means with respect to the Bank Credit Agreement, each of
Bankers Trust Company, Canadian Imperial Bank of Commerce and NationsBank,
N.A. and any future agent under the Bank Credit Agreement.
"Agent Members" has the meaning specified in Section 311.
"Annual Period" means a period commencing on January 1 of any
particular calendar year and ending on December 31 of the next succeeding
calendar year.
"Authenticating Agent" means any Person authorized by the Trustee
to act on behalf of the Trustee to authenticate Notes.
"Average Life" means, with respect to any Indebtedness, as of
the date of determination, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years (and any portion thereof) from the
date of determination to the date or dates of each successive scheduled
principal payment of such Indebtedness multiplied by (b) the amount of each
such principal payment by (ii) the sum of all such principal payments;
provided that (A) with respect to Redeemable Capital Stock described in
clause (i) or (ii) of the definition of Redeemable Capital Stock, the only
date of scheduled principal payment shall be deemed, for this purpose, to
be the earliest time at which such Redeemable Capital Stock could be
redeemed, (B) with respect to Redeemable Capital Stock described in clause
(iii) of the definition of Redeemable Capital Stock, the dates of scheduled
principal payments shall be deemed, for this purpose, to be the dates of
scheduled principal payments of the debt securities such Redeemable Capital
Stock is convertible into or exchangeable for, (C) with respect to any
guarantee, the dates of scheduled principal payments shall be deemed to be,
for this purpose, the dates of scheduled principal payments on the
Indebtedness thereby guaranteed and (D) with respect to any Capitalized
Lease Obligation, the dates of scheduled principal payments shall be the
dates of any payments which are required under GAAP to be treated as
principal payments.
"Bank Credit Agreement" means the Credit Agreement among Bankers
Trust Company, Canadian Imperial Bank of Commerce and NationsBank, N.A., as
agents, the other Banks and the Company as in effect on the date hereof and as
such agreement may be amended, renewed, extended, substituted, refinanced,
restructured, replaced, supplemented or otherwise modified from time to time
(including, without limitation, any successive renewals, extensions,
substitutions, refinancings, restructurings, replacements, supplementations or
other modifications of the foregoing).
"Banks" means the banks and other financial institutions from time
to time that are lenders under the Bank Credit Agreement.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of
such certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment or
any other particular location referred to in this Indenture or in the Notes,
means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day
on which banking institutions in that Place of Payment or other location are
authorized or obligated by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock whether now outstanding or issued after the date
of this Indenture, including, without limitation, all Common Stock and
Preferred Stock.
"Capitalized Lease Obligation" means any obligations of the
Company and its Subsidiaries on a consolidated basis under any capital lease
of real or personal property that, in accordance with GAAP, has been recorded
as a capitalized lease obligation.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of 365 days or less from the date of
acquisition thereof issued or directly and fully guaranteed or insured by
the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof); (ii) time deposits or certificates of deposit
or acceptances with a maturity of one year or less from the date of
acquisition thereof of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided
profits of not less than $100,000,000; (iii) (a) commercial paper with a
maturity of one year or less from the date of acquisition thereof issued by
the parent of any commercial bank (provided that the financial institution
is a member of the Federal Reserve System) of recognized standing having
capital and surplus in excess of $500,000,000 and (b) commercial paper with
a maturity of one year or less from the date of acquisition thereof issued
by a corporation that is not an Affiliate of the Company organized under
the laws of any state of the United States or the District of Columbia and
rated at least A-1 by S&P or at least P-1 by Moody's or at least an
equivalent rating category of another nationally recognized securities
rating agency; (iv) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the government of the United States of
America or issued by any agency thereof and backed by the full faith and
credit of the United States of America, in each case maturing within one
year from the date of acquisition; (v) investments in money market funds
substantially all of whose assets are comprised of securities of the type
described in clauses (i) through (iv) above; and (vi) obligations the
interest with respect to which is excluded from gross income under Section
103 of the Internal Revenue Code of 1986, as amended, with a maturity of
not more than six months from the date of acquisition thereof or with the
right of the holder to put such obligations for purchase at par upon not
more than seven days' notice, and in each case which are rated A-2 or
higher by S&P or rated P-2 or higher by Moody's.
"Change of Control" means the occurrence of any of the following
events: (a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) other than Permitted Holders is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of
all securities that such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company and the
Permitted Holders do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company; (b) the Company consolidates with, or merges with or
into, another person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets to any person, or
any person consolidates with, or merges with or into, the Company, in any such
event pursuant to a transaction in which the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where (i) the outstanding Voting Stock of the
Company is converted into or exchanged for (1) Voting Stock (other than
Redeemable Capital Stock) of the surviving or transferee corporation or (2)
cash, securities and/or other property in an amount which could be paid by the
Company as a Restricted Payment under the Indenture and (ii) immediately after
such transaction either (x) no "person" or "group" (as such terms are used in
Section 13(d) or 14(d) of the Exchange Act), other than Permitted Holders,
directly or indirectly, is the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), of more than 50% of the total Voting Stock of the surviving
or transferee corporation, or (y) the Permitted Holders have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of the Company, or (c) during
any consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any
new directors whose election by such Board of Directors or whose nomination
for election by the stockholders of the Company was approved by a vote of
66-2/3% of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election
was previously so approved) cease for any reason to constitute a majority
of the Board of Directors of the Company then in office.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Stock" means the Company's Common Stock, par value $.01
per share, and the Company's Non-Voting Common Stock, par value $.01 per
share.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman, its President, any
Vice President, its Treasurer or an Assistant Treasurer, and delivered to the
Trustee.
"Consolidated Gross PP&E" means, with respect to the Company as of
the end of any fiscal year of the Company, the amount of property, plant and
equipment of the Company and its Subsidiaries, determined on a consolidated
basis, as shown on an audited balance sheet of the Company as of the end of
such fiscal year, without giving effect to accumulated depreciation and
amortization in respect of such property, plant and equipment.
"Consolidated Interest Expense" means for any period the sum of
(i) the aggregate of the interest expense on Indebtedness of the Company and
its consolidated Subsidiaries for such period, on a consolidated basis, plus
(ii) that portion of operating lease rentals representative of the interest
factor (which shall be deemed to be one-third of operating lease rentals), in
each case as determined in accordance with GAAP.
"Consolidated Net Income" means for any period the consolidated
net income of the Company and its consolidated Subsidiaries for such period as
determined in accordance with GAAP adjusted by excluding (i) any gain or loss
realized upon the termination of any employee pension plan, (ii) net
extraordinary gains or net extraordinary losses (less all reasonable fees and
expenses relating thereto), as the case may be, (iii) the portion of net
income (or loss) of the Company and its Subsidiaries allocable to minority
interests in unconsolidated persons to the extent that cash dividends or
distributions have not actually been received by the Company or one of its
Subsidiaries, (iv) net income (or loss) of any person combined with the
Company or one of its Subsidiaries on a "pooling of interests" basis
attributable to any period prior to the date of combination, (v) net gains or
losses (less all reasonable fees and expenses relating thereto) in respect of
dispositions of assets other than in the ordinary course of business, and (vi)
the net income of any Subsidiary of the Company to the extent that the
declaration of dividends or similar distributions by that Subsidiary of that
income is not at the time permitted, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulations applicable to that Subsidiary
or its stockholders.
"Consolidated Non-cash Charges" means, for any period, the
aggregate depreciation, amortization and other non-cash charges of the Company
and its Subsidiaries for such period, as determined in accordance with GAAP
(excluding any such non-cash charge which requires an accrual of or reserve
for cash charges for any future period).
"Consolidated Tax Expense" of the Company means for any period the
aggregate of the tax expense of the Company and its consolidated Subsidiaries
for such period, determined in accordance with GAAP.
"Corporate Trust Office" means the principal corporate trust
office of the Trustee, at which at any particular time its corporate trust
business shall be administered, which office on the date of execution of this
Indenture is located at 101 Barclay Street, New York, New York 10286.
"corporation" includes corporations, associations, companies and
business trusts.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 307.
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Dollar" or "$" means a dollar or other equivalent unit in such
coin or currency of the United States of America as at the time shall be legal
tender for the payment of public and private debts.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" has the meaning stated in the first recital of
this Indenture and refers to any Exchange Notes containing terms substantially
identical to the Initial Notes (except that (i) such Exchange Notes shall not
contain terms with respect to transfer restrictions and shall be registered
under the Securities Act, and (ii) certain provisions relating to an increase
in the stated rate of interest theroeon shall be eliminated) that are issued
and exchanged for the Initial Notes in accordance with the Exchange Offer, as
provided for in the Registration Rights Agreement and this Indenture.
"Exchange Offer" means the offer by the Company to the Holders of
the Initial Notes to exchange all of the Initial Notes for Exchange Notes, as
provided for in the Registration Rights Agreement.
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of
the United States Code, as amended from time to time.
"Foreign Entity" means any Subsidiary of the Company either (i)
more than 80% of the sales, earnings or assets (determined on a consolidated
basis) of which are located or derived from operations outside of the United
States of America or (ii) which is a "controlled foreign corporation" within
the meaning of Section 952 of the Internal Revenue Code.
"Generally Accepted Accounting Principles" or "GAAP" means
generally accepted accounting principles in the United States, consistently
applied, that were in effect on the date of the 9 1/8% Note Indenture.
"Global Notes" has the meaning set forth in Section 201.
"Government Obligations" means securities which are direct
obligations of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which are not callable or redeemable at the option of the
issuer thereof and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligation or the specific payment of interest or principal of the Government
Obligation evidenced by such depository receipt.
"Guarantee" has the meaning specified in Section 1015.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any
manner by such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness,
(ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase
or sell services, primarily for the purpose of enabling the debtor to make
payment of such Indebtedness or to assure the holder of such Indebtedness
against loss, (iii) to supply funds to, or in any other manner invest in, the
debtor (including any agreement to pay for property or services to be acquired
by such debtor irrespective of whether such property is received or such
services are rendered), (iv) to maintain working capital or equity capital of
the debtor, or otherwise to maintain the net worth, solvency or other
financial condition of the debtor or (v) otherwise to assure a creditor
against loss; provided that the term "guarantee" shall not include
endorsements for collection or deposit, in either case in the ordinary course
of business, or any obligation or liability of such Person in respect of
leasehold interests assigned by such Person to any other Person.
"Guarantor" has the meaning specified in Section 1015.
"Holder" means the Person in whose name a Note is registered in
the Note Register.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade accounts
payable and other accrued current liabilities incurred in the ordinary course
of business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit and
acceptances issued under letter of credit facilities, acceptance facilities or
other similar facilities, (ii) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (iii) all indebtedness
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even if the rights
and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding
trade accounts payable arising in the ordinary course of business, (iv) all
Capitalized Lease Obligations of such Person, (v) all Indebtedness referred to
in (but not excluded from) clause (i), (ii), (iii) or (iv) above of other
Persons and all dividends of other Persons, the payment of which is secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness, (vi) all Guaranteed Debt of such Person, (vii)
all Redeemable Capital Stock issued by such Person valued at the greater of
its voluntary or involuntary maximum fixed repurchase price plus accrued and
unpaid dividends, (viii) all obligations under interest rate contracts of such
Person and (ix) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses
(i) through (viii) above. For purposes hereof, the "maximum fixed repurchase
price" of any Redeemable Capital Stock that does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Redeemable
Capital Stock as if such Redeemable Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the fair market
value of such Redeemable Capital Stock, such fair market value to be
determined in good faith by the board of directors of the issuer of such
Redeemable Capital Stock.
"Indenture" means this instrument as originally executed and as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Notes", has the meaning specified in the recitals to this
Indenture.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act.
"Interest Payment Date", when used with respect to any Note, means
the Stated Maturity of an installment of interest on such Note.
"Investment" means, with respect to any person, any direct or
indirect loan or other extension of credit or capital contribution to (by
means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition by such person of any Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by, any other person.
"Investments" shall exclude extensions of trade credit on commercially
reasonable terms in accordance with normal trade practices.
"Lien" means any mortgage, charge, pledge, lien, security interest
or encumbrance of any kind.
"ML Funds" means Merrill Lynch KECALP L.P. 1986, Merrill Lynch
KECALP L.P. 1987, Merchant Banking L.P. No. 1, ML Venture Partners II, L.P.,
Merrill Lynch Capital Appreciation Partnership No. VIII, L.P., ML Offshore LBO
Partnership No. VIII, ML Employees LBO Partnership No. 1, L.P., ML IBK
Positions, Inc. and any Affiliates of the foregoing that beneficially own,
directly or indirectly, shares of Capital Stock of the Company.
"Majority Owned Subsidiary" means any Subsidiary of the Company of
which 80% of the outstanding shares of Voting Stock are owned directly or
indirectly by the Company.
"Management Investors" means members of the Company's or
BW-Automotive's management who are party to the Management Stock Subscription
Agreement.
"Material Subsidiary" means (i) any Subsidiary of the Company now
existing or hereafter acquired or formed by the Company which (x) for the most
recent completed fiscal year of the Company commencing on or after January 1,
1996 accounted for more than 5% of the consolidated revenues of the Company,
or (y) as at the end of such fiscal year, was the owner of more than 5% of the
consolidated assets of the Company, all as shown on the consolidated financial
statements of the Company for such fiscal year; and (ii) any other Subsidiary
so designated by the Company, by an Officers' Certificate delivered to the
Trustee.
"Maturity", when used with respect to any Note, means the date on
which the principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity or by declaration of acceleration,
notice of redemption, notice of option to elect repayment or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"9 1/8% Note Indenture" means the indenture dated as of May 3,
1993 between the Company and The First National Bank of Chicago, as
trustee, as amended or supplemented from time to time.
"9 1/8% Notes" means the Company's 9 1/8% Senior Subordinated
Notes due 2003.
"Non-Payment Event of Default" has the meaning specified in
Section 1503.
"Non-U.S. Person" means a person who is not a U.S. person as
defined in Regulation S.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 305.
"Notes" has the meaning stated in the first recital of this
Indenture.
"Officers' Certificate" means a certificate signed by the
Chairman, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee.
"Offshore Global Note" has the meaning set forth in Section 201.
"Offshore Note Exchange Date" has the meaning set forth in Section
203.
"Offshore Physical Note" has the meaning set forth in Section 201.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company, including an employee of the Company, and who
shall be reasonably acceptable to the Trustee.
"Original Issue Date", means the date of original issuance of the
Notes.
"Outstanding", when used with respect to Notes, means, as of the
date of determination, all Notes theretofore authenticated and delivered under
this Indenture, except:
(i) Notes theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Notes, or portions thereof, for whose payment or redemption
or repayment at the option of the Holder money in the necessary amount
has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust
by the Company (if the Company shall act as its own Paying Agent) for
the Holders of such Notes; provided that, if such Notes are to be
redeemed, notice of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has been
made;
(iii) Notes, except to the extent provided in Sections 1402 and
1403, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Fourteen; and
(iv) Notes which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Notes have been authenticated and
delivered pursuant to this Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser in
whose hands such Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Notes owned by
the Company or any other obligor upon the Notes or any Affiliate of the
Company or of such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in making such calculation or in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Notes which
a Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Notes so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right to act with respect to such Notes and that the
pledgee is not the Company or any other obligor upon the Notes or any
Affiliate of the Company or such other obligor.
"Pari Passu Indebtedness" means the 9 1/8% Notes and any other
Indebtedness which ranks pari passu in right of payment and upon liquidation
to the Notes.
"Payment Event of Default" has the meaning specified in Section
1503.
"Payment Blockage Period" has the meaning specified in Section
1503.
"Paying Agent" means any Person (including the Company acting as
Paying Agent) authorized by the Company to pay the principal of (or premium,
if any, on) or interest on any Notes on behalf of the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Permitted Holders" means the ML Funds and the Management
Investors.
"Permitted Indebtedness" means:
(a) Indebtedness of the Company (and guarantees of such
Indebtedness of the Company by its Subsidiaries) under the Bank Credit
Agreement in an aggregate principal amount not to exceed $285,000,000
(minus all principal payments made in respect of any term loans
thereunder, and minus the amount by which any commitments under any
revolving loan or letter of credit facility are permanently reduced);
(b) Indebtedness of the Company evidenced by the Notes or of any
Guarantor in respect of any guarantee of the Notes;
(c) Indebtedness arising out of (i) letters of credit incurred
in the ordinary course of business and (ii) other letters of credit in
an aggregate principal amount not to exceed $35,000,000 at any time;
(d) Indebtedness arising under the Company's accounts receivable
facility in effect on the date of this Indenture;
(e) Indebtedness of the Company or any of its Subsidiaries
outstanding on the date of this Indenture, other than Indebtedness
pursuant to clause (a) and (d) hereof;
(f) Indebtedness in respect of Capitalized Lease Obligations
incurred in any particular Annual Period in an aggregate principal
amount not to exceed 7-1/2% of the Dollar amount of the Company's
Consolidated Gross PP&E as of the end of the immediately preceding full
fiscal year;
(g) Indebtedness of a Majority Owned Subsidiary of the Company
(x) to the Company or (y) to another Majority Owned Subsidiary of the
Company, provided that any disposition, pledge or transfer of any such
Indebtedness to a Person (other than a disposition, pledge or transfer
to the Company or a Wholly Owned Subsidiary or to or for the benefit of
the Banks as provided under the Bank Credit Agreement) shall be deemed
to be an incurrence of such Indebtedness by such Majority Owned
Subsidiary not permitted by this clause (g);
(h) Indebtedness of the Company to a Majority Owned Subsidiary
of the Company which is unsecured and subordinated in right of payment
from and after such time as the Notes shall become due and payable
(whether at a Stated Maturity, by acceleration or otherwise) to the
payment and performance of the Company's obligations under this
Indenture and the Notes, provided that any disposition, pledge or
transfer of any such Indebtedness to a Person (other than a disposition,
pledge or transfer to the Company or a Wholly Owned Subsidiary or to or
for the benefit of the Banks as provided under the Bank Credit
Agreement) shall be deemed to be an incurrence of such Indebtedness by
the Company not permitted by this clause (h);
(i) Indebtedness incurred by Foreign Entities, including
guarantees of the Company and its Subsidiaries of such Indebtedness, not
exceeding at any one time outstanding $50,000,000 in aggregate principal
amount;
(j) obligations of the Company pursuant to interest rate
contracts designed to protect the Company against fluctuations in
interest rates in respect of Indebtedness of the Company, which
obligations do not exceed the aggregate principal amount of such
Indebtedness;
(k) Guaranteed Debt resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(l) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") by the
Company of any Permitted Indebtedness described in clauses (b), (d) and
(e) of this definition of "Permitted Indebtedness", (or successive
extensions, renewals, substitutions, refinancings or replacements) so
long as (1) any such new Indebtedness shall be in a principal amount
that does not exceed the principal amount (or, if such Indebtedness
being refinanced provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) so
refinanced, plus the amount of any premium required to be paid under the
terms of the instrument governing such Indebtedness being so refinanced
or the amount of any premium reasonably determined by the Company as
necessary to accomplish such refinancing through means of a tender offer
or privately negotiated transaction and (2) such new Indebtedness has an
Average Life and final Stated Maturity of principal that exceeds the
Average Life and final Stated Maturity of such Indebtedness;
(m) obligations in respect of any guarantee of any Pari Passu
Indebtedness or Subordinated Indebtedness permitted under Section 1015
of this Indenture; and
(n) $100,000,000 less any amounts of outstanding Indebtedness
permitted by clause (i) above outstanding at any one time.
"Permitted Investments" means any of the following: (a) (i) any
Investment in any Majority Owned Subsidiaries by the Company or any other
Subsidiary or (ii) any Investment in the Company by any Subsidiary or (iii)
any Investment by the Company or any Majority Owned Subsidiary in another
Person, if as a result of such Investment such other Person is merged or
consolidated with or into the Company or such Majority Owned Subsidiary; (b)
Investments in existence on the date of this Indenture; (c) loans or advances
to employees made in the ordinary course of business and consistent with past
practices of the Company and its Subsidiaries; (d) any Cash Equivalents; (e)
sales of goods or services on trade credit terms, consistent with the past
practices of the Company or any Subsidiary or as otherwise consistent with
trade credit terms in common use in the industry; (f) negotiable instruments
held for collection, lease, utility and other similar deposits, or stock,
obligations or securities received in settlement of debts owing to the Company
or a Subsidiary as a result of foreclosure, perfection or enforcement of any
Lien, in each case as to debt that arose in the ordinary course of business of
the Company or any such Subsidiary; (g) any Investment in any Person acquired
or retained in connection with any asset sale or other disposition of assets,
provided that any such sale or other disposition is made for the fair value of
such assets and for at least 75% cash; and (h) Investments, in addition to the
Investments described in the foregoing clauses (a) through (g), in the
aggregate amount of $50,000,000 at any one time outstanding determined in the
case of each Investment by reference to the amount of the Investment at the
time originally made.
"Permitted Liens" means:
(a) any Lien existing as of the date of this Indenture;
(b) any Lien securing any Senior Indebtedness or any guarantee
thereof;
(c) any Lien arising by reason of (1) any judgment, decree or
order of any court, so long as (i) such judgment, decree or order
together with any other judgment, decree or order of the Company or any
of its Subsidiaries is less than $1,000,000, excluding any judgment,
order or decree complying with clause (ii) hereof, or (ii) such Lien is
adequately bonded and any appropriate legal proceedings which may have
been duly initiated for the review of such judgment, decree or order
shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (2) taxes not yet
delinquent or which are being contested in good faith; (3) security for
payment of workmen's compensation or other insurance; (4) good faith
deposits in connection with tenders, contracts (other than contracts for
the payment of money) or leases; (5) deposits to secure public or
statutory obligations, or in lieu of surety or appeal bonds; or (6)
operation of law in favor of mechanics, materialmen, laborers, employees
or suppliers, incurred in the ordinary course of business for sums which
are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection
thereof;
(d) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not
interfering in any material respect with the ordinary conduct of the
business of the Company or any of its Subsidiaries;
(e) any interest or title of a lessor under any Capitalized
Lease Obligation;
(f) Liens in favor of the purchaser and its assignee of the
Company's and its Subsidiaries' receivables with respect to receivables
purchased pursuant to the receivables financing facility permitted under
this Indenture;
(g) Liens on the assets or property of a Subsidiary which is a
Foreign Entity securing the Indebtedness incurred by such Foreign Entity
and permitted under this Indenture;
(h) any Liens which may be granted to secure the Notes or any
Guarantees; or
(i) any extension, renewal or replacement, in whole or in part,
of any Lien described in the foregoing clause (a), provided that any
such extension, renewal or replacement shall be no more restrictive in
any material respect than the Lien so extended, renewed or replaced and
shall not extend to any additional property or assets.
"Physical Notes" has the meaning set forth in Section 201.
"Place of Payment" means the place or places where the principal
of (and premium, if any, on) and interest on the Notes are payable as
specified as contemplated by Sections 301 and 1002.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 306 in exchange for or in lieu of
a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Note.
"Preferred Stock" means, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated) of
such person's preferred or preference stock whether now outstanding, or issued
after the issuance of the Notes, and including, without limitation, all
classes and series of preferred or preference stock of such person.
"Private Placement Legend" has the meaning set forth in Section
203.
"Public Equity Offering" means an underwritten primary public
offering by the Company of its Common Stock pursuant to an effective
registration under the Securities Act.
"Purchase Date" has the meaning set forth in Section 1016.
"QIB" means a "Qualified Institutional Buyer" within the meaning
of Rule 144A under the Securities Act.
"Redeemable Capital Stock" means any Capital Stock of the Company
or any Subsidiary that, either by its terms, by the terms of any security into
which it is convertible or exchangeable or otherwise, (i) is or upon the
happening of an event or passage of time would be required to be redeemed on
or prior to the final Stated Maturity of the Notes or (ii) is redeemable at
the option of the holder thereof at any time prior to such final Stated
Maturity or (iii) is convertible into or exchangeable for debt securities at
any time prior to such final Stated Maturity.
"Redemption Date", when used with respect to any Note to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of March 24, 1997, among the Company and the Holders of
Initial Notes.
"Regular Record Date" has the meaning specified in Section 301.
"Repayment Date" means, when used with respect to any Note to be
repaid at the option of the Holder, the date fixed for such repayment pursuant
to this Indenture.
"Repayment Price" means, when used with respect to any Note to be
repaid at the option of the Holder, the price at which it is to be repaid
pursuant to this Indenture.
"Responsible Officer", when used with respect to the Trustee,
means any vice president, any assistant secretary, any assistant treasurer,
any trust officer or assistant trust officer, or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above-designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Securities Act" means the Securities Act of 1933, as amended.
"S&P" means Standards & Poor's Ratings Group, a division of
McGraw-Hill, Inc. and its successors.
"Senior Indebtedness" means the principal of (and premium, if any,
on) and interest on (including interest accruing after the occurrence of an
event of default or after the filing of a petition initiating any proceeding
pursuant to any bankruptcy law whether or not such interest is an allowable
claim in any such proceeding) and other amounts due on or in connection with
any Indebtedness of the Company, whether outstanding on the date of this
Indenture or hereafter created, incurred or assumed, including under the Bank
Credit Agreement, unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such Indebtedness shall not be senior in
right of payment to the Notes. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (A) Indebtedness evidenced by the Notes, (B)
Indebtedness evidenced by the 9 1/8% Notes and other Pari Passu Indebtedness,
(C) Indebtedness of the Company that is expressly subordinated in right of
payment to any Senior Indebtedness of the Company, the 9 1/8% Notes or the
Notes, (D) Indebtedness of the Company that by operation of law is subordinate
to any general unsecured obligations of the Company, (E) Indebtedness of the
Company to any Subsidiary, (F) to the extent it might constitute Indebtedness,
any liability for federal, state or local taxes or other taxes, owed or owing
by the Company and (G) to the extent it might constitute Indebtedness, trade
account payables owed or owing by the Company.
"Special Record Date" for the payment of any Defaulted Interest on
the Notes means a date fixed by the Trustee pursuant to Section 307.
"Specified Senior Indebtedness" means (i) all Indebtedness under
the Bank Credit Agreement to the extent any may be outstanding at any time,
and (ii) any other Senior Indebtedness which (x) at the time of incurrence
exceeds $25,000,000 in aggregate principal amount and (y) is specifically
designated in the instrument evidencing such Senior Indebtedness as "Specified
Senior Indebtedness" by the Company.
"Stated Maturity", when used with respect to principal of the Note
or any installment of interest thereon, means the date specified in such Note
as the fixed date on which the principal of such Note or such installment of
interest is due and payable.
"Subordinated Indebtedness" means Indebtedness of the Company
subordinated in right of payment to the Notes.
"Subsidiary" means any corporation of which at the time of
determination the Company, directly and/or indirectly through one or more
Subsidiaries, owns more than 50% of the shares of Voting Stock.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939 as in force at the date as of which this Indenture was executed, except
as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder.
"United States" means the United States of America (including the
states and the District of Columbia), its territories, its possessions and
other areas subject to its jurisdiction.
"U.S. Global Note" has the meaning set forth in Section 201.
"U.S. Physical Note" has the meaning set forth in Section 201.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the board of directors,
managers or trustees of any person (irrespective of whether or not, at the
time, stock of any other class or classes shall have, or might have, voting
power by reason of the happening of any contingency).
"Wholly Owned Subsidiary" means any subsidiary of the Company of
which 100% of the outstanding Capital Stock is owned by the Company or another
Wholly Owned Subsidiary of the Company. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all conditions
precedent, if any, provided for in this Indenture (including any covenant
compliance with which constitutes a condition precedent) relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Indenture relating to such particular application or
request, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
covenant or condition provided for in this Indenture (other than pursuant to
Section 1004) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such covenant or condition has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such Person may
certify or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company
stating that the information with respect to such factual matters is in the
possession of the Company, unless such counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or
taken by Holders of the Outstanding Notes may be embodied in and evidenced by
one or more instruments of substantially similar tenor signed by such Holders
in person or by agents duly appointed in writing. Except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as
the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and conclusive in
favor of the Trustee and the Company, if made in the manner provided in
this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes held by
any Person, and the date of holding the same, shall be proved by the Note
Register.
(d) If the Company shall solicit from the Holders of Notes any
request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, by or pursuant to Board Resolution, fix
in advance a record date for the determination of Holders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or
other Act, but the Company shall have no obligation to do so. Notwithstanding
TIA Section 316(c), such record date shall be the record date specified in or
pursuant to such Board Resolution, which shall be a date not earlier than the
date 30 days prior to the first solicitation of Holders generally in
connection therewith and not later than the date such solicitation is
completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holders of record at the close
of business on such record date shall be deemed to be Holders for the purposes
of determining whether Holders of the requisite proportion of Outstanding
Notes have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Notes shall be computed as of such record date;
provided that no such authorization, agreement or consent by the Holders on
such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months
after the record date.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made
upon such Note.
SECTION 105. Notices, etc., to Trustee, Company and Agents.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other documents provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this Indenture
or at any other address previously furnished in writing to the
Trustee by the Company, or
(3) the Agents by the Company, the Trustee or any Holder shall
be sufficient for any purpose hereunder if made, given, furnished or
delivered, in writing to or with the Agents addressed to it as set
forth in the Bank Credit Agreement, or at any other address
previously furnished in writing to the Company and the Trustee by the
Agents.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders
of Notes by the Company or the Trustee, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each such Holder affected by such event, at
his address as it appears in the Note Register, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of
such notice. In any case where notice to Holders is given by mail, neither
the failure to mail such notice, nor any defect in any notice so mailed, to
any particular Holder shall affect the sufficiency of such notice with respect
to other Holders. Any notice mailed to a Holder in the manner herein
prescribed shall be conclusively deemed to have been received by such Holder,
whether or not such Holder actually receives such notice.
In case, by reason of the suspension of or irregularities in
regular mail service or by reason of any other cause, it shall be impractical
to mail notice of any event to Holders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be
sufficient giving of such notice for every purpose hereunder.
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 109. Separability Clause.
In case any provision in this Indenture or in any Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 110. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto, any Authenticating
Agent, any Paying Agent, any Notes Registrar and their successors hereunder
and the Holders and, with respect to any provisions hereof relating to the
subordination of the Notes or the rights of holders of Senior Indebtedness,
the holders of Senior Indebtedness, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 111. Governing Law.
This Indenture and the Notes shall be governed by and construed in
accordance with the law of the State of New York, without regard to conflicts
of laws principles thereof. Upon the effectiveness of the Shelf Registration
Statement or the consummation of the Exchange Offer, this Indenture will be
subject to the provisions of the Trust Indenture Act of 1939, as amended, that
are required to be part of this Indenture and shall, to the extent applicable,
be governed by such provisions.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, or
Stated Maturity or Maturity of any Note shall not be a Business Day at any
Place of Payment, then (notwithstanding any other provision of this Indenture
or of any Note) payment of interest or principal (and premium, if any) need
not be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and
effect as if made on the Interest Payment Date or Redemption Date or at the
Stated Maturity or Maturity; provided that no interest shall accrue for the
period from and after such Interest Payment Date, Redemption Date, Stated
Maturity or Maturity, as the case may be.
ARTICLE TWO
NOTE FORMS
SECTION 201. Forms Generally.
The Initial Notes shall be known as the "9 5/8% Senior
Subordinated Notes due 2007" and the Exchange Notes shall be known as the "9
5/8% Series B Senior Subordinated Notes due 2007", in each case, of the
Company. The Notes and the Trustee's certificate of authentication shall be
in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any
Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note. Each Note shall be dated the date of its
authentication.
The definitive Notes shall be printed, lithographed or engraved on
steel-engraved borders or may be produced in any other manner, all as
determined by the officers of the Company executing such Notes, as evidenced
by their execution of such Notes.
Initial Notes offered and sold in reliance on Rule 144A under the
Securities Act may be issued in the form of one or more permanent global Notes
substantially in the form set forth in Exhibit A (the "U.S. Global Note")
deposited with the Trustee, as custodian for the Depositary or its nominee,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Note may from
time to time be increased or decreased by adjustments made on the records of
the Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Initial Notes offered and sold in offshore transactions in
reliance on Regulation S under the Securities Act shall be issued in the form
of a single permanent global Note in substantially in the form set forth in
Sections 204 and 205 (the "Offshore Global Note") deposited with the Trustee,
as custodian for the Depositary or its nominee, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount at maturity of the Offshore Global Note may from time to time
be increased or decreased by adjustments made in the records of the Trustee,
as custodian for the Depositary or its nominee, as herein provided.
Initial Notes which are offered and sold to Institutional
Accredited Investors which are not QIBs (excluding Non-U.S. Persons) shall be
issued in the form of permanent certificated Notes in substantially the form
set forth in Sections 204 and 205 (the "U.S. Physical Notes"). Notes issued
pursuant to Section 306 in exchange for or upon transfer of beneficial
interests in the U.S. Global Note or the Offshore Global Note shall be in the
form of U.S. Physical Notes or in the form of permanent certificated Notes
substantially in the form set forth in Sections 204 and 205 (the "Offshore
Physical Notes"), respectively, as hereinafter provided.
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "Physical Notes". The U.S. Global Note
and the Offshore Global Note are sometimes collectively referred to as the
"Global Notes".
SECTION 202. Form of Trustee's Certificate of Authentication.
Subject to Section 611, the Trustee's certificate of
authentication shall be in substantially the following form:
This is one of the Notes referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee
By
----------------------------
Authorized Signatory
SECTION 203. Restrictive Legends.
Unless and until (i) an Initial Note is sold pursuant to an
effective Shelf Registration Statement or (ii) an Initial Note is exchanged
for an Exchange Note in an Exchange Offer pursuant to an effective Exchange
Offer Registration Statement, in each case pursuant to the Registration Rights
Agreement, (A) each U.S. Global Note and U.S. Physical Note shall bear the
following legend set forth below (the "Private Placement Legend") on the face
thereof and (B) the Offshore Physical Notes and Offshore Global Note shall
bear the Private Placement Legend on the face thereof until at least 41 days
after the date hereof (the "Offshore Note Exchange Date") and receipt by the
Company and the Trustee of a certificate substantially in the form provided in
Section 204:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904
OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH
IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K)
UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF
THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF
THE COMPANY WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS
SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY
APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL, OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A "QUALIFIED INSTITUTIONAL BUYER" TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN
ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO
WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND, THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. IF ANY
PROPOSED TRANSFER IS BEING MADE IN ACCORDANCE WITH (2)(D), (E) OR
(F) ABOVE, THE HOLDER ACKNOWLEDGES THAT THE COMPANY RESERVES THE
RIGHT TO REQUIRE THE DELIVERY OF SUCH CERTIFICATIONS, LEGAL OPINIONS
OR OTHER INFORMATION SATISFACTORY TO THE COMPANY TO CONFIRM THAT THE
PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION",
"UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note, whether or not an Initial Note, shall also bear
the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTIONS 311 AND 312 OF THE INDENTURE.
SECTION 204. Form of Certificate to Be Delivered upon Termination
of Restricted Period.
On or after May 4, 1997
THE BANK OF NEW YORK
101 Barclay Street
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: BORG-WARNER SECURITY CORPORATION (the "Company")
9 5/8% Senior Subordinated Notes due 2007 (the "Notes")
Ladies and Gentlemen:
This letter relates to $__________ principal amount of Notes
represented by the offshore global note certificate (the "Offshore Global
Note"). Pursuant to Section 204 of the Indenture dated as of March 24, 1997
relating to the Notes (the "Indenture"), we hereby certify that (1) we are the
beneficial owner of such principal amount of Notes represented by the Offshore
Global Note and (2) we are a Non-U.S. Person to whom the Notes could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
Securities Act of 1933, as amended ("Regulation S"). Accordingly, you are
hereby requested to issue an Offshore Physical Note representing the
undersigned's interest in the principal amount of Notes represented by the
Global Note, all in the manner provided by the Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
--------------------------------------
Authorized Signature
ARTICLE THREE
THE NOTES
SECTION 301. Amount.
The aggregate principal amount of Notes which may be authenticated
and delivered under this Indenture is limited to $125,000,000, except for
Notes authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Section 304, 305, 306,
311, 312, 906, 1015 or 1107 or pursuant to an Exchange Offer.
The Initial Notes shall be known and designated as the "9 5/8%
Senior Subordinated Notes due 2007" and the Exchange Notes shall be known and
designated as the "9 5/8% Series B Senior Subordinated Notes due 2007", in
each case, of the Company. The Stated Maturity of the Notes shall be March
15, 2007, and they shall bear interest at the rate of 9 5/8% per annum from
March 24, 1997, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, payable on September 15, 1997 and
semi-annually thereafter on March 15th and September 15th in each year, until
the principal thereof is paid in full and to the Person in whose name the Note
(or any predecessor Note) is registered at the close of business on the March
1st or September 1st next preceding such Interest Payment Date (each a
"Regular Record Date").
The principal of (and premium, if any) and interest on the Notes
shall be payable at the office or agency of the Company maintained for such
purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose; provided, however, that, at the
option of the Company, interest may be paid (a) by check mailed to addresses
of the Persons entitled thereto as such addresses shall appear on the Note
Register or (b) by wire transfer to an account maintained by the payee located
in the United States provided that appropriate written wire instructions have
been provided prior to the relevant record date.
Holders shall have the right to require the Company to purchase
their Notes, in whole or in part, in the event of a Change of Control pursuant
to Section 1016.
The Notes shall be redeemable as provided in Article Eleven and in
the Notes.
The Indebtedness evidenced by the Notes shall be subordinated in
right of payment to Senior Indebtedness as provided in Article Fifteen.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
Chairman, its President or a Vice President, under its corporate seal
reproduced thereon attested by its Secretary or an Assistant Secretary. The
signature of any of these officers on the Notes may be the manual or facsimile
signatures of the present or any future such authorized officer and may be
imprinted or otherwise reproduced on the Notes.
Notes bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or
did not hold such offices at the date of such Notes.
On Company Order, the Trustee shall authenticate for original
issue Exchange Notes in an aggregate principal amount not to exceed
$125,000,000; provided that such Exchange Notes shall be issuable only upon
the valid surrender for cancellation of Initial Notes of a like aggregate
principal amount in accordance with an Exchange Offer pursuant to the
Registration Rights Agreement. In each case, the Trustee shall be entitled to
receive an Officers' Certificate and an Opinion of Counsel of the Company that
it may reasonably request in connection with such authentication of Exchange
Notes. Such order shall specify the amount of Exchange Notes to be
authenticated and the date on which the original issue of Exchange Notes is to
be authenticated.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
duly executed by the Trustee by manual signature of an authorized signatory,
and such certificate upon any Note shall be conclusive evidence, and the only
evidence, that such Note has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture. Notwithstanding the
foregoing, if any Note shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Note to the Trustee for cancellation as provided in Section 310 together with
a written statement (which need not comply with Section 102 and need not be
accompanied by an Opinion of Counsel) stating that such Note has never been
issued and sold by the Company, for all purposes of this Indenture such Note
shall be deemed never to have been authenticated and delivered hereunder and
shall never be entitled to the benefits of this Indenture.
In case the Company or any Guarantor under Section 1015, if any,
pursuant to Article Eight, shall be consolidated or merged with or into any
other Person or shall convey, transfer, lease or otherwise dispose of its
properties and assets substantially as an entirety to any Person, and the
successor Person resulting from such consolidation, or surviving such merger,
or into which the Company or such Guarantor shall have been merged, or the
Person which shall have received a conveyance, transfer, lease or other
disposition as aforesaid, shall have executed an indenture supplemental hereto
with the Trustee pursuant to Article Eight, any of the Notes authenticated or
delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Notes executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Notes surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Request
of the successor Person, shall authenticate and deliver Notes as specified in
such request for the purpose of such exchange. If Notes shall at any time be
authenticated and delivered in any new name of a successor Person pursuant to
this Section 303 in exchange or substitution for or upon registration of
transfer of any Notes, such successor Person, at the option of the Holders but
without expense to them, shall provide for the exchange of all Notes at the
time Outstanding for Notes authenticated and delivered in such new name.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Notes in lieu of which they are issued and with such
appropriate insertions, omissions, substitutions and other variations as
conclusively the officers executing such Notes may determine, as conclusively
evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive
Notes to be prepared without unreasonable delay. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive
Notes, upon surrender of the temporary Notes at the office or agency of the
Company in a Place of Payment, without charge to the Holder. Upon surrender
for cancellation of any one or more temporary Notes, the Company shall execute
and, upon Company Order, the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged the temporary Notes shall in all respects
be entitled to the same benefits under this Indenture as definitive Notes.
SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office
of the Trustee a register for the Notes (the register maintained in the
Corporate Trust Office of the Trustee and in any other office or agency of the
Company in a Place of Payment being herein sometimes collectively referred to
as the "Note Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Notes and of
transfers of Notes. The Note Register shall be in written form or any other
form capable of being converted into written form within a reasonable time.
At all reasonable times, the Note Register shall be open to inspection by the
Trustee. The Trustee is hereby initially appointed as note registrar (the
"Note Registrar") for the purpose of registering Notes and transfers of Notes
as herein provided.
Upon surrender for registration of transfer of any Note at the
office or agency in a Place of Payment, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated
transferee, one or more new Notes, of any authorized denominations and of a
like aggregate principal amount and tenor.
At the option of the Holder, Notes may be exchanged for other
Notes, of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, the Company shall execute,
and the Trustee shall authenticate and deliver, the Notes which the Holder
making the exchange is entitled to receive; provided that no exchange of
Initial Notes for Exchange Notes shall occur until an Exchange Offer
Registration Statement shall have been declared effective by the Commission,
the Trustee shall have received an Officers' Certificate confirming that the
Exchange Offer Registration Statement has been declared effective by the
Commission and the Initial Notes to be exchanged for the Exchange Notes shall
be cancelled by the Trustee.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Note Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Note Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer
or exchange of Notes, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange Notes during a period beginning at the opening of
business 15 days before the day of mailing of a notice of redemption of Notes
under Section 1103 and ending at the close of business on the day of the
mailing of the relevant notice of redemption, or (ii) to register the transfer
of or exchange any Note so selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part, or (iii) to issue,
register the transfer of or exchange any Note which has been surrendered for
repayment at the option of the Holder, except the portion, if any, of such
Note not to be so repaid.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Note of like tenor and principal amount and bearing a number
not contemporaneously outstanding, or, in case any such mutilated Note has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Note, pay such Note.
If there shall be delivered to the Company and to the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note
and (ii) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice
to the Company or the Trustee that such Note has been acquired by a bona fide
purchaser, the Company shall execute and upon Company Order the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Note,
a new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding, or, in case any such destroyed, lost or stolen
Note has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note, shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled
to all the benefits of this Indenture equally and proportionately with any and
all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Unless and until (i) an Initial Note is sold pursuant to an
effective Registration Statement, or (ii) an Initial Note is exchanged for an
Exchange Note in the Exchange Offer pursuant to an effective Registration
Statement, in each case pursuant to the Registration Rights Agreement, the
following provisions shall apply:
Interest on any Note which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest at the office
or agency of the Company maintained for such purpose pursuant to Section 1002;
provided, however, that each installment of interest on any Note may at the
Company's option be paid by (i) mailing a check for such interest, payable to
or upon the written order of the Person entitled thereto pursuant to Section
309, to the address of such Person as it appears on the Note Register or (ii)
transfer to an account maintained by the payee located in the United States.
Any interest on any Note which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease
to be payable to the Holder on the relevant Regular Record Date by virtue of
having been such Holder, and such defaulted interest and, if applicable,
interest on such defaulted interest (to the extent lawful) at the rate
specified in the Notes (such defaulted interest and, if applicable, interest
thereon herein collectively called "Defaulted Interest") may be paid by the
Company, at its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit on or prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less than
10 days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be given in the manner provided in
Section 106, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so given, such Defaulted
Interest shall be paid to the Persons in whose name the Registered Notes
(or their respective Predecessor Notes) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on
the Notes in any other lawful manner not inconsistent with the
requirements of any securities exchange on which such Notes may be
listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed
payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section
305, each Note delivered under this Indenture upon registration of transfer of
or in exchange for or in lieu of any other Note shall carry the rights to
interest accrued and unpaid, and to accrue, which were carried by such other
Note.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Note for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Note is registered as the owner of such Note for
the purpose of receiving payment of principal of (and premium, if any, on) and
(subject to Sections 305 and 307) interest on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Notes surrendered for payment, redemption, repayment at the
option of the Holder, registration of transfer or exchange shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee.
All Notes so delivered to the Trustee shall be promptly cancelled by it. The
Company may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Notes
previously authenticated hereunder which the Company has not issued and sold,
and all Notes so delivered shall be promptly cancelled by the Trustee. If the
Company shall so acquire any of the Notes, however, such acquisition shall not
operate as a redemption or satisfaction of the indebtedness represented by
such Notes unless and until the same are surrendered to the Trustee for
cancellation. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Indenture. All cancelled Notes held by the Trustee shall be disposed
of by the Trustee in accordance with its customary procedures unless by
Company Order the Company shall direct that cancelled Notes be returned to it.
SECTION 310. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 311. Book-Entry Provisions for Global Notes.
(a) Each Global Note initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 203.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note, and
the Depositary may be treated by the Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such Global Note for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a beneficial owner of any Note. The registered holder of a Global
Note may grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent Members, to take any
action which a Holder is entitled to take under this Indenture or the Notes.
(b) Interests of beneficial owners in a Global Note may be
transferred in accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 312. Transfers of a Global Note
shall be limited to transfers of such Global Note in whole, but not in part,
to the Depositary, its successors or their respective nominees, except (i) as
otherwise set forth in Section 312 and (ii) U.S. Physical Notes or Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Note or the Offshore Global
Note, respectively, in the following circumstances: (x) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the applicable Global Note or the Depositary ceases to be a "Clearing
Agency" registered under the Exchange Act and a successor depositary is not
appointed by the Company within 90 days or (y) an Event of Default has
occurred and is continuing and Holders of more than 25% in aggregate principal
amount of the Notes at the time Outstanding represented by the Global Notes
advise the Trustee through the Depositary in writing that the continuation of
a book-entry system through the Depositary with respect to the Global Notes is
no longer required. In connection with a transfer of an entire Global Note to
beneficial owners pursuant to clause (ii) of this paragraph (b), the
applicable Global Note shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the applicable Global
Note, an equal aggregate principal amount at maturity of U.S. Physical Notes
(in the case of the U.S. Global Note) or Offshore Physical Notes (in the case
of the Offshore Global Note), as the case may be, of authorized denominations.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Note for as
long as it remains such an interest.
(d) Any U.S. Physical Note delivered in exchange for an interest
in the U.S. Global Note pursuant to paragraph (b) of this Section shall,
unless such exchange is made on or after the Resale Restriction Termination
Date and except as otherwise provided in Section 312, bear the Private
Placement Legend.
SECTION 312. Transfer Provisions.
Unless and until (i) an Initial Note is sold pursuant to an
effective Registration Statement, or (ii) an Initial Note is exchanged for an
Exchange Note in the Exchange Offer pursuant to an effective Registration
Statement, in each case, pursuant to the Registration Rights Agreement, the
following provisions shall apply:
(a) General. The provisions of this Section 312 shall apply to
all transfers involving any Physical Note and any beneficial interest in any
Global Note.
(b) Certain Definitions. As used in this Section 312 only,
"delivery" of a certificate by a transferee or transferor means the delivery
to the Registrar or Co-Registrar by such transferee or transferor of the
applicable certificate duly completed; "holding" includes both possession of a
Physical Note and ownership of a beneficial interest in a Global Note, as the
context requires; "transferring" a Global Note means transferring that portion
of the principal amount of the transferor's beneficial interest therein that
the transferor has notified the Co-Registrar that it has agreed to transfer;
and "transferring" a Physical Note means transferring that portion of the
principal amount thereof that the transferor has notified the Registrar or
Co-Registrar that it has agreed to transfer.
As used in this Indenture, "Accredited Investor Certificate" means
a certificate substantially in the form set forth in Section 313; "Regulation
S Certificate" means a certificate substantially in the form set forth in
Section 314; "Rule 144A Certificate" means a certificate substantially in the
form set forth in Section 315; and "Non-Registration Opinion and Supporting
Evidence" means a written opinion of counsel reasonably acceptable to the
Company to the effect that, and such other certification or information as the
Company may reasonably require to confirm that, the proposed transfer is being
made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
(c) [Intentionally Omitted]
(d) Deemed Delivery of a Rule 144A Certificate in Certain
Circumstances. A Rule 144A Certificate, if not actually delivered, will be
deemed delivered if (A) (i) the transferor advises the Company and the Trustee
in writing that the relevant offer and sale were made in accordance with the
provisions of Rule 144A (or, in the case of a transfer of a Physical Note, the
transferor checks the box provided on the Physical Note to that effect) and
(ii) the transferee advises the Company and the Trustee in writing that (x) it
and, if applicable, each account for which it is acting in connection with the
relevant transfer, is a qualified institutional buyer within the meaning of
Rule 144A, (y) it is aware that the transfer of Notes to it is being made in
reliance on the exemption from the provisions of Section 5 of the Securities
Act provided by Rule 144A, and (z) prior to the proposed date of transfer it
has been given the opportunity to obtain from the Company the information
referred to in Rule 144A(d)(4), and has either declined such opportunity or
has received such information (or, in the case of a transfer of a Physical
Note, the transferee signs the certification provided on the Physical Note to
that effect); or (B) the transferor holds the U.S. Global Note and is
transferring to a transferee that will take delivery in the form of the U.S.
Global Note.
(e) Procedures and Requirements.
1. If the proposed transfer occurs prior to the Offshore Note
Exchange Date, and the proposed transferor holds:
(A) a U.S. Physical Note which is surrendered to the
Co-Registrar, and the proposed transferee or transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee requests delivery in the
form of Physical Notes, then the Co-Registrar shall (x) register
such transfer in the name of such transferee and record the date
thereof in its books and records, (y) cancel such surrendered U.S.
Physical Note and (z) deliver a new U.S. Physical Note to such
transferee duly registered in the name of such transferee in
principal amount equal to the principal amount being transferred
of such surrendered U.S. Physical Note.
(ii) delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee is or is acting through an
Agent Member and requests that the proposed transferee receive a
beneficial interest in the U.S. Global Note, then the Co-Registrar
shall (x) cancel such surrendered U.S. Physical Note, (y) record
an increase in the principal amount of the U.S. Global Note equal
to the principal amount being transferred of such surrendered U.S.
Physical Note and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such transfer.
(iii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
Offshore Global Note, then the Co-Registrar shall (x) cancel such
surrendered U.S. Physical Note, (y) record an increase in the
principal amount of the Offshore Global Note equal to the
principal amount being transferred of such surrendered U.S.
Physical Note and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such transfer.
In the case described in Section 312(e)(1)(A)(i), the Co-Registrar
shall deliver to the transferor a new U.S. Physical Note in principal
amount equal to the principal amount not being transferred of such
surrendered U.S. Physical Note.
(B) the U.S. Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee requests delivery in the
form of Physical Notes, then the Co-Registrar shall (w) register
such transfer in the name of such transferee and record the date
thereof in its books and records, (x) record a decrease in the
principal amount of the U.S. Global Note in an amount equal to the
beneficial interest therein being transferred, (y) deliver a new
U.S. Physical Note to such transferee duly registered in the name
of such transferee in principal amount equal to the amount of such
decrease and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such transfer.
(ii) delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee is or is acting through an
Agent Member and requests that the proposed transferee receive a
beneficial interest in the U.S. Global Note, then the transfer
shall be effected in accordance with the procedures of the
Depositary therefor.
(iii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
Offshore Global Note, then the Co-Registrar shall (w) register
such transfer in the name of such transferee and record the date
thereof in its books and records, (x) record a decrease in the
principal amount of the U.S. Global Note in an amount equal to the
beneficial interest therein being transferred, (y) record an
increase in the principal amount of the Offshore Global Note equal
to the amount of such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that it approves
of such transfer.
(C) the Offshore Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee requests delivery in the
form of Physical Notes, then the Co-Registrar shall (w) register
such transfer in the name of such transferee and record the date
thereof in its books and records, (x) record a decrease in the
principal amount of the Offshore Global Note in an amount equal to
the beneficial interest therein being transferred, (y) deliver a
new U.S. Physical Note to such transferee duly registered in the
name of such transferee in principal amount equal to the amount of
such decrease and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such transfer.
(ii) delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee is or is acting through an
Agent Member and requests that the proposed transferee receive a
beneficial interest in the U.S. Global Note, then the Registrar or
Co-Registrar shall (x) record a decrease in the principal amount
of the Offshore Global Note in an amount equal to the beneficial
interest therein being transferred, (y) record an increase in the
principal amount of the U.S. Global Note equal to the amount of
such decrease and (z) notify the Depositary in accordance with the
procedures of the Depositary that it approves of such transfer.
(iii) delivers a Regulation S Certificate and the proposed
transferee is or is acting through an Agent Member and requests
that the proposed transferee receive a beneficial interest in the
Offshore Global Note, then the transfer shall be effected in
accordance with the procedures of the Depositary therefor;
provided, however, that until the Offshore Note Exchange Date
occurs, beneficial interests in the Offshore Global Note may be
held only in or through accounts maintained at the Depositary by
Euroclear or Cedel (or by Agent Members acting for the account
thereof), and no person shall be entitled to effect any transfer
or exchange that would result in any such interest being held
otherwise than in or through such an account.
2. If the proposed transfer occurs on or after the Offshore
Notes Exchange Date and the proposed transferor holds:
(A) a U.S. Physical Note which is surrendered to the Registrar
or Co-Registrar, and the proposed transferee or transferor, as
applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee requests delivery in the
form of Physical Notes, then the procedures set forth in Section
312(e)(1)(A)(i) shall apply.
(ii) delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee is or is acting through an
Agent Member and requests that the proposed transferee receive a
beneficial interest in the Offshore Global Note, then the
procedures set forth in Section 312(e)(1)(A)(ii) shall apply.
(iii) delivers a Regulation S Certificate, then the
Co-Registrar shall cancel such surrendered U.S. Physical Note and
at the direction of the transferee, either:
(x) register such transfer in the name of such
transferee, record the date thereof in its books and records
and deliver a new Offshore Physical Note to such transferee
in principal amount equal to the principal amount being
transferred of such surrendered U.S. Physical Note, or
(y) if the proposed transferee is or is acting
through an Agent Member, record an increase in the principal
amount of the Offshore Global Note equal to the principal
amount being transferred of such surrendered U.S. Physical
Note and notify the Depositary in accordance with the
procedures of the Depositary that it approves of such
transfer.
In any of the cases described in this Section 312(e)(2)(A)(i) or
(iii)(x), the Co-Registrar shall deliver to the transferor a new U.S.
Physical Note in principal amount equal to the principal amount not
being transferred of such surrendered U.S. Physical Note.
(B) the U.S. Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers an Accredited Investor Certificate and, if
required by the Company, a Non-Registration Opinion and Supporting
Evidence, or delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee requests delivery in the
form of Physical Notes, then the procedures set forth in Section
312(e)(1)(B)(i) shall apply.
(ii) delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee is or is acting through an
Agent Member and requests that the proposed transferee receive a
beneficial interest in the U.S. Global Note, then the procedures
set forth in Section 312(e)(1)(B)(ii) shall apply.
(iii) delivers a Regulation S Certificate, then the
Co-Registrar shall (x) record a decrease in the principal amount
of the U.S. Global Note in an amount equal to the beneficial
interest therein being transferred, (y) notify the Depositary in
accordance with the procedures of the Depositary that it approves
of such transfer and (z) at the direction of the transferee,
either:
(x) register such transfer in the name of such
transferee, record the date thereof in its books and records
and deliver a new Offshore Physical Note to such transferee
in principal amount equal to the amount of such decrease, or
(y) if the proposed transferee is or is acting
through an Agent Member, record an increase in the principal
amount of the Offshore Global Note equal to the amount of
such decrease.
(C) an Offshore Physical Note which is surrendered to the
Registrar or Co-Registrar, and the proposed transferee or transferor, as
applicable:
(i) delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee is or is acting through an
Agent Member and requests delivery in the form of the U.S. Global
Note, then the Co-Registrar shall (x) cancel such surrendered
Offshore Physical Note, (y) record an increase in the principal
amount of the U.S. Global Note equal to the principal amount being
transferred of such surrendered Offshore Physical Note and (z)
notify the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer.
(ii) where the proposed transferee is or is acting through
an Agent Member, requests that the proposed transferee receive a
beneficial interest in the Offshore Global Note, then the
Co-Registrar shall (x) cancel such surrendered Offshore Physical
Note, (y) record an increase in the principal amount of the
Offshore Global Note equal to the principal amount being
transferred of such surrendered Offshore Physical Note and (z)
notify the Depositary in accordance with the procedures of the
Depositary that it approves of such transfer.
(iii) does not make a request covered by Section
312(e)(2)(C)(i) or Section 312(e)(2)(C)(ii), then the Co-Registrar
shall (x) register such transfer in the name of such transferee
and record the date thereof in its books and records, (y) cancel
such surrendered Offshore Physical Note and (z) deliver a new
Offshore Physical Note to such transferee duly registered in the
name of such transferee in principal amount equal to the principal
amount being transferred of such surrendered Offshore Physical
Note.
In any of the cases described in this Section 312(e)(2)(C), the
Co-Registrar shall deliver to the transferor a new U.S. Physical Note in
principal amount equal to the principal amount not being transferred of such
surrendered U.S. Physical Note.
(D) the Offshore Global Note, and the proposed transferee or
transferor, as applicable:
(i) delivers (or is deemed to have delivered) a Rule 144A
Certificate and the proposed transferee is or is acting through an
Agent Member and requests delivery in the form of the U.S. Global
Note, then the Co-Registrar shall (x) record a decrease in the
principal amount of the Offshore Global Note in an amount equal to
the beneficial interest therein being transferred, (y) record an
increase in the principal amount of the U.S. Global Note equal to
the amount of such decrease and (z) notify the Depositary in
accordance with the procedures of the Depositary that it approves
of such transfer.
(ii) where the proposed transferee is or is acting through
an Agent Member, requests that the proposed transferee receive a
beneficial interest in the Offshore Global Note, then the transfer
shall be effected in accordance with the procedures of the
Depositary therefor.
(iii) does not make a request covered by Section
312(e)(2)(D)(i) or Section 312(e)(2)(D)(ii), then the Co-Registrar
shall (w) register such transfer in the name of such transferee
and record the date thereof in its books and records, (x) record a
decrease in the principal amount of the Offshore Global Note in an
amount equal to the beneficial interest therein being transferred,
(y) deliver a new Offshore Physical Note to such transferee duly
registered in the name of such transferee in principal amount
equal to the amount of such decrease and (z) notify the Depositary
in accordance with the procedures of the Depositary that it
approves of such transfer.
(f) Execution, Authentication and Delivery of Physical Notes.
In any case in which the Co-Registrar is required to deliver a Physical Note
to a transferee, the Company shall execute, and the Trustee shall authenticate
and deliver, such Physical Note.
(g) Certain Additional Terms Applicable to Physical Notes. (i)
Any transferee entitled to receive a Physical Note may request that the
principal amount thereof be evidenced by one or more Physical Notes in any
authorized denomination or denominations and the Registrar or Co-Registrar
shall comply with such request if all other transfer restrictions are
satisfied.
(ii) In the event that a transferor transfers less than the
entire principal amount of a Physical Note surrendered for transfer, following
the transfer the Registrar or Co-Registrar shall deliver to the transferor a
new Physical Note of the same type in principal amount equal to the
untransferred portion of the surrendered Physical Note.
(h) Transfers Not Covered by Section 312(e). The Co-Registrar
shall effect and record, upon receipt of a written request from the Company so
to do, a transfer not otherwise permitted by Section 312(e), such recording to
be done in accordance with the otherwise applicable provisions of Section
312(e), upon the furnishing by the proposed transferor or transferee of a
Non-Registration Opinion and Supporting Evidence.
(i) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in the
Indenture. Neither the Registrar nor the Co-Registrar shall register a
transfer of any Note unless such transfer complies with the restrictions with
respect thereto set forth in this Indenture. Neither the Registrar nor the
Co-Registrar shall be required to determine (but may rely upon a determination
made by the Company) the sufficiency of any such certifications, legal
opinions or other information.
SECTION 313. Form of Accredited Investor Certificate.
Transferee Letter of Representation
Borg-Warner Security Corporation
c/o The Bank of New York, as Trustee
101 Barclay Street, 21st Floor West
New York, New York 10286
Ladies and Gentlemen:
In connection with our proposed purchase of $_______ aggregate
principal amount of the 9 5/8% Senior Subordinated Notes due 2007 (the
"Notes") of Borg-Warner Security Corporation (the "Company"), we confirm that:
1. We understand that the Notes have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and,
unless so registered, may not be sold except as permitted in the
following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or
otherwise transfer such Notes prior to (x) the date which is two years
(or such shorter period of time as permitted by Rule 144(k) under the
Securities Act) after the later of the date of original issue of the
Notes (or of any predecessor of this security) or the last day on which
the Company or any affiliate of the Company was the owner of this
security or any predecessor of this security, and (y) such later date,
if any, as may be required by applicable laws (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the
Securities Act, (c) so long as the Notes are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person we
reasonably believe is a "qualified institutional buyer" under Rule
144A (a "QIB") that purchases for its own account or for the account
of a QIB and to whom notice is given that the transfer is being made
in reliance on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States to "foreign purchasers" (as defined below)
in offshore transactions meeting the requirements of Rule 904 of
Regulation S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2),
(3) or (7) of Rule 501 under the Securities Act (an "Accredited
Investor") that is purchasing for its own account or for the account
of such an institutional "accredited investor" that furnishes a
letter substantially in the form of this letter to the Trustee, which
shall provide, among other things, that the transferee is an
Accredited Investor within the meaning of subparagraph (a)(1), (2),
(3) or (7) of Rule 501 under the Securities Act and that it is
acquiring such Notes for investment purposes and not for distribution
in violation of the Securities Act, or (f) pursuant to an exemption
from registration provided by Rule 144 under the Securities Act (if
available) or any other available exemption. In connection with any
transfer of any Note, we will check the box provided on the reverse
thereof relating to the manner of such transfer and surrender such
Note to the Trustee.
2. We are an Accredited Investor or a QIB purchasing Notes for
our own account or for the account of one or more Accredited Investors,
and we are acquiring Notes for investment purposes and not with a view
to, or for offer or sale in connection with, any distribution in
violation of the Securities Act or the securities law of any state of
the United States and we have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks
of our investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment
in the Notes for an indefinite period.
3. We are acquiring the Notes purchased by us for our own
account or for one or more accounts as to each of which we exercise sole
investment discretion and we and any such account are (a) a QIB, aware
that the sale is being made in reliance on Rule 144A under the
Securities Act, (b) an Accredited Investor, or (c) a person other than a
U.S. person ("foreign purchasers"), which term shall include dealers or
other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate
or trust) in offshore transactions meeting the requirements of Rule 903
of Regulation S under the Securities Act.
4. We have received a copy of the Offering Memorandum and
acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers thereto,
as we deem necessary in order to verify the information contained in the
Offering Memorandum.
We understand that the Trustee will not be required to
accept for registration of transfer any Notes acquired by us, except
upon presentation of evidence satisfactory to the Company and the
Trustee that the foregoing restrictions on transfer have been complied
with. We further understand that the Notes purchased by us will be in
the form of definitive physical certificates and that such certificates
will bear a legend reflecting the substance of this paragraph. We
further agree to provide to any person acquiring any of the Notes from
us a notice advising such person that transfers of such Notes are
restricted as stated herein and that certificates representing such
Notes will bear a legend to that effect.
We represent that you, the Company, the Trustee and others
are entitled to rely upon the truth and accuracy of our acknowledgments,
representations and agreements set forth herein, and we agree to notify
you promptly in writing if any of our acknowledgments, representations
or agreements herein cease to be accurate and complete. You are also
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
We represent to you that we have full power to make the
foregoing acknowledgments, representations and agreements on our own
behalf and on behalf of any investor account for which we are acting as
fiduciary agent.
As used herein, the terms "offshore transaction", "United
States" and "U.S. person" have the respective meanings given to them in
Regulation S under the Securities Act.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
(NAME OF PURCHASER)
By:__________________________
Date:_________________________
Upon transfer, the Notes would be registered in the name of the
new beneficial owner as follows:
Name:_________________________
Address:_______________________
_______________________
_______________________
SECTION 314. Form of Regulation S Certificate.
Regulation S Certificate
To: The Bank of New York,
as Trustee (the "Trustee")
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Indenture (the "Indenture") dated as of March 24, 1997 between
Borg-Warner Security Corporation (the "Company") and the Trustee
Ladies and Gentlemen:
This Certificate relates to our proposed transfer of $____
principal amount of Notes issued under the Indenture. Terms are used in this
Certificate as defined in Regulation S under the Securities Act of 1933, as
amended (the "Securities Act"). We hereby certify as follows:
1. The offer of the Notes was not made to a person in the
United States (unless such person or the account held by it for which it
is acting is excluded from the definition of "U.S. person" pursuant to
Rule 902(o) of Regulation S under the circumstances described in Rule
902(i)(3) of Regulation S) or specifically targeted at an identifiable
group of U.S. citizens abroad.
2. Either (a) at the time the buy order was originated, the
buyer was outside the United States or we and any person acting on our
behalf reasonably believed that the buyer was outside the United States
or (b) the transaction was executed in, on or through the facilities of
a designated offshore securities market, and neither we nor any person
acting on our behalf knows that the transaction was pre-arranged with a
buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on
our or their behalf has made any directed selling efforts in the United
States.
4. The proposed transfer of Notes is not part of a plan or
scheme to evade the registration requirements of the Securities Act.
5. If we are a dealer or a person receiving a selling
concession or other fee or remuneration in respect of the Notes, and the
proposed transfer takes place before the Offshore Note Exchange Date
referred to in the Indenture, or we are an officer or director of the
Company or a distributor, we certify that the proposed transfer is being
made in accordance with the provisions of Rule 904(c) of Regulation S.
You and the Company are entitled to rely upon this Certificate and
are irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF SELLER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
SECTION 315. Form of Rule 144A Certificate.
Rule 144A Certificate
To: The Bank of New York,
as Trustee (the "Trustee")
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Indenture (the "Indenture") dated as of March 24, 1997 between
Borg-Warner Security Corporation (the "Company"), and the Trustee
Ladies and Gentlemen:
This Certificate relates to our proposed purchase of $____
principal amount of Notes issued under the Indenture. We and, if applicable,
each account for which we are acting, are "qualified institutional buyers"
within the meaning of Rule 144A ("Rule 144A") under the Securities Act of
1933, as amended (the "Securities Act"). We are aware that the transfer of
Notes to us is being made in reliance on the exemption from the provisions of
Section 5 of the Securities Act provided by Rule 144A. Prior to the date of
this Certificate we have been given the opportunity to obtain from the Company
the information referred to in Rule 144A(d)(4), and have either declined such
opportunity or have received such information.
You and the Company are entitled to rely upon this Certificate and
are irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER]
By:__________________________
Name:
Title:
Address:
Date of this Certificate: __________ __, 199_
SECTION 316. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the CUSIP numbers.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect with respect to Notes (except as to any surviving rights of
registration of transfer or exchange of Notes expressly provided for) and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when
(1) either
(A) all Notes theretofore authenticated and delivered
(other than (i) Notes which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306,
and (ii) Notes for whose payment money has theretofore been
deposited in trust with the Trustee or any Paying Agent or
segregated and held in trust by the Company and thereafter repaid
to the Company, as provided in Section 1003) have been delivered
to the Trustee for cancellation; or
(B) all Notes and, in the case of (i) or (ii) below, not
theretofore delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) if redeemable at the option of the Company, are
to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose an amount sufficient to
pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest to the date of such
deposit (in the case of Notes which have become due and payable)
or to the Stated Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 606, the
obligations of the Company to any Authenticating Agent under Section 611 and,
if money shall have been deposited with the Trustee pursuant to subclause (B)
of clause (1) of this Section, the obligations of the Trustee under Section
402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003,
all money deposited with the Trustee pursuant to Section 401 shall be held in
trust and applied by it, in accordance with the provisions of the Notes and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of any interest on any Note when such
interest becomes due and payable, and continuance of such default for a
period of 30 days; or
(2) default in the payment of the principal of (or premium, if
any, on) any Note at its Maturity; or
(3) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a default in the
performance, or breach of a covenant or warranty which is specifically
dealt with elsewhere in this Section), and continuance of such default
or breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal
amount of all Outstanding Notes a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(4) (a) an event of default shall have occurred under any
mortgage, bond, indenture, loan agreement or other document evidencing
any Indebtedness of the Company or any Subsidiary, which Indebtedness is
outstanding in a principal amount of at least $10,000,000 in the
aggregate, and such default shall result in such Indebtedness becoming,
whether by declaration or otherwise, due and payable prior to the date
on which it would otherwise become due and payable or (b) a default in
any payment when due at final maturity of any such Indebtedness; or
(5) any Person entitled to take the actions described in this
Section 501(5), after the occurrence of any event of default under any
agreement or instrument evidencing any Indebtedness in excess of
$10,000,000 in the aggregate of the Company or any Subsidiary, shall
commence judicial proceedings to foreclose upon assets of the Company or
any of its Subsidiaries having an aggregate value in excess of
$10,000,000, or shall have exercised any right under applicable law or
applicable security documents to take ownership of such assets in lieu
of foreclosure; or
(6) final judgments or orders rendered against the Company or
any Subsidiary which require the payment in money, either
individually or in an aggregate amount, that is more than $10,000,000
and either (a) an enforcement proceeding shall have been commenced by
any creditor upon such judgment or order or (b) there shall have been
a period of 60 days during which a stay of enforcement of such
judgment or order, by reason of pending appeal or otherwise, was not
in effect; or
(7) the entry by a court having jurisdiction in the premises of
(a) a decree or order for relief in respect of the Company or any
Material Subsidiary in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or (b) a decree or order adjudging the Company or any
Material Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Material Subsidiary
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Material Subsidiary or of any substantial
part of its property, or ordering the winding up or liquidation of its
affairs, and the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a period of 60
consecutive days; or
(8) the commencement by the Company or any Material Subsidiary
of a voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by the Company or any Material Subsidiary to the entry of a
decree or order for relief in respect of the Company or such Material
Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar
law or to the commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by the Company or any Material
Subsidiary of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by the
Company or any Material Subsidiary to the filing of such petition or the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of the
Company or such Material Subsidiary or of any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or the admission by the Company or any Material Subsidiary in
writing of its inability to pay its debts generally as they become due,
or the taking of corporate action by the Company or any Material
Subsidiary in furtherance of any such action; or
(9) any Guarantee required to be in full force and effect by the
terms of this Indenture ceases to be in full force and effect or is
declared null and void, or any Guarantor denies that it has any further
liability under any Guarantee, or gives notice to such effect (other
than by reason of the termination of this Indenture or the release of
any such Guarantee in accordance with this Indenture) and such condition
shall have continued for a period of 60 days after written notice of
such failure requiring the Guarantor and the Company to remedy the same
shall have been given (x) to the Company by the Trustee or (y) to the
Company and the Trustee by Holders of at least 25% in aggregate
principal amount of the Notes then Outstanding.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified
in clause (7) or (8) of Section 501) occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Notes may declare the principal amount of all of the Notes
to be due and payable immediately, by a notice in writing to the Company (and
to the Trustee if given by Holders), and, if the Bank Credit Agreement is in
effect, to the Agents, and upon any such declaration such principal amount
shall become immediately due and payable. If an Event of Default described in
clause (7) or (8) of Section 501 occurs and is continuing, then the principal
amount of all the Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
At any time after a declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the
Holders of a majority in principal amount of the Outstanding Notes, by
written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay,
(A) all overdue interest on all Outstanding Notes,
(B) all unpaid principal of (and premium, if any, on) any
Outstanding Notes which have become due otherwise than by such
declaration of acceleration, and interest on such unpaid principal
at the rate or rates prescribed therefor in such Notes,
(C) interest on overdue interest at the rate or rates
prescribed therefor in such Notes, and
(D) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel; and
(2) all Events of Default, other than the non-payment of amounts
of principal of (or premium, if any, on) or interest on Notes which have
become due solely by such declaration of acceleration, have been cured
or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Notes because of an Event of
Default specified in Section 501(4) or (5) shall have occurred and be
continuing, such declaration of acceleration shall be automatically annulled
if the Indebtedness that is the subject of such Event of Default has been
discharged or the holders thereof have rescinded their declaration of
acceleration in respect of such Indebtedness, and written notice of such
discharge or rescission, as the case may be, shall have been given to the
Trustee by the Company and countersigned by the holders of such Indebtedness
or a trustee, fiduciary or agent for such holders, within 60 days after such
declaration of acceleration in respect of the Notes, and no other Event of
Default has occurred during such 60-day period which has not been cured or
waived during such period.
Upon a determination by the Company that the Bank Credit Agreement
is no longer in effect, the Company shall promptly give to the Trustee written
notice thereof, which notice shall be countersigned by the Agent. Unless and
until the Trustee shall have received such written notice with respect to the
Bank Credit Agreement, the Trustee, subject to the provisions of Section 601,
shall be entitled in all respects to assume that the Bank Credit Agreement is
in effect (unless a Responsible Officer of the Trustee shall have actual
knowledge to the contrary).
SECTION 503. Collection of Indebtedness and Suits for Enforcement
by Trustee.
The Company covenants that if
(1) default is made in the payment of any installment of
interest on any Note when such interest becomes due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof,
then the Company will, upon demand of the Trustee, pay to the Trustee for the
benefit of the Holders of such Notes, the whole amount then due and payable on
such Notes for principal (and premium, if any) and interest, and interest on
any overdue principal (and premium, if any) and on any overdue interest, at
the rate or rates prescribed therefor in such Notes, and, in addition thereto,
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon such Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon such Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and the rights of
the Holders by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid
of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition
or other judicial proceeding relative to the Company or any other obligor upon
the Notes or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Notes
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
on the Company for the payment of overdue principal, premium, if any, or
interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(i) to file and prove a claim for the whole amount of principal
(and premium, if any) and interest owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any
claim for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel) and of the Holders
allowed in such judicial proceeding, and
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders,
to pay to the Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Notes.
All rights of action and claims under this Indenture or the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Fifteen, any money collected by the Trustee
pursuant to this Article shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money
on account of principal (or premium, if any) or interest, upon presentation of
the Notes and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under
Section 606;
Second: To the payment of the amounts then due and unpaid for
principal of (and premium, if any, on) and interest on the Notes in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal
(and premium, if any) and interest, respectively; and
Third: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder,
unless
(1) such Holder has previously given written notice to the
Trustee and to the Agent under the Bank Credit Agreement, if the Bank
Credit Agreement is in effect, of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Notes shall have made a written request to the Trustee to
institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the Outstanding Notes;
it being understood and intended that no one or more of such Holders shall
have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders, or to obtain or to seek to obtain priority or preference over
any other of such Holders or to enforce any right under this Indenture, except
in the manner herein provided and for the equal and ratable benefit of all
Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article
Fourteen) of the principal of (and premium, if any, on) and (subject to
Section 307) interest on, such Note on the respective Stated Maturities
expressed in such Note (or, in the case of redemption, on the Redemption Date)
and to institute suit for the enforcement of any such payment, and such rights
shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders of
Notes shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the
Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders of Notes is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Note
to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this
Article or by law to the Trustee or to the Holders may be exercised from time
to time, and as often as may be deemed expedient, by the Trustee or by the
Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law
or with this Indenture,
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might involve it
in personal liability or be unjustly prejudicial to the Holders of Notes
not consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Notes may on behalf of the Holders of all the Notes waive any past
default hereunder and its consequences, except a default
(1) in respect of the payment of the principal of (or premium,
if any, on) or interest on any Note, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, any such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension
law wherever enacted, now or at any time hereafter in force, which may affect
the covenants or the performance of this Indenture; and the Company (to the
extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 515. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as a Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs, including reasonable
attorney's fees and expenses, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 515 does not apply to a suit by the Trustee
hereof, or a suit by Holders of more than 10% in principal amount of the then
Outstanding Notes.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
Within 90 days after the occurrence of any Default hereunder, the
Trustee shall transmit in the manner and to the extent provided in TIA Section
313(c), notice of such default hereunder known to the Trustee, unless such
Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of (or premium, if any,
on) or interest on any Note, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee
or a trust committee of directors and/or Responsible Officers of the Trustee
in good faith determine that the withholding of such notice is in the interest
of the Holders; and provided further that in the case of any Default of the
character specified in Section 501(3) with respect to Notes, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through 315(d)
(determined as if the TIA were applicable to this Indenture at all times):
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders of Notes pursuant to this Indenture,
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document, but the Trustee, in its discretion, may make
such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon
it by this Indenture; and
(9) the Trustee shall not be deemed to have notice of any Event
of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact
such a default is received by the Trustee at the Corporate Trust Office
of the Trustee, and such notice references the Notes and this Indenture.
The Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers if it
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Notes.
The recitals contained herein and in the Notes, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Notes, except that
the Trustee represents that it is duly authorized to execute and deliver this
Indenture, authenticate the Notes and perform its obligations hereunder and
that the statements made by it in its Statement of Eligibility on Form T-1
supplied to the Company are true and accurate, subject to the qualifications
set forth therein. Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of Notes or the proceeds
thereof.
SECTION 604. May Hold Notes.
The Trustee, any Authenticating Agent, any Paying Agent, any Note
Registrar or any other agent of the Company or of the Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes
and, subject to TIA Sections 310(b) and 311, may otherwise deal with the
Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Note Registrar or such other agent.
SECTION 605. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as
shall be agreed in writing between the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements
and advances incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify each of the Trustee or any predecessor Trustee
and its agents for, and to hold it harmless against, any and all loss,
liability, damage, claim or expense, including taxes (other than taxes
based on the income of the Trustee) incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance
or administration of the trust or trusts hereunder, including the costs
and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or
duties hereunder.
The obligations of the Company under this Section to compensate
the Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture. As security for the performance of such
obligations of the Company, the Trustee shall have a claim prior to the Notes
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the payment of principal of (and premium, if any, on)
or interest on particular Notes.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(7) or Section 501(8), the
expenses (including the reasonable charges and expenses of its counsel) and
the compensation for the services are intended to constitute expenses of
administration under any applicable Federal or State bankruptcy, insolvency or
other similar law.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a
combined capital and surplus of at least $50,000,000. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of Columbia
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall resign immediately
in the manner and with the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective until
the acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
(b) The Trustee may resign at any time with respect to the Notes
by giving written notice thereof to the Company. If the instrument of
acceptance by a successor Trustee required by Section 609 shall not have been
delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Notes.
(c) The Trustee may be removed at any time with respect to the
Notes by Act of the Holders of not less than a majority in principal amount of
the Outstanding Notes, delivered to the Trustee and to the Company. If the
instrument of acceptance by a successor Trustee required by Section 609 shall
not have been delivered to the Trustee within 30 days after the giving of such
notice of removal, the Trustee being removed may petition any court of
competent jurisdiction for the appointment of a successor Trustee with respect
to the Notes.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Note for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Note for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee with respect to all Notes, or (ii) subject to TIA Section 315(e), any
Holder who has been a bona fide Holder of a Note for at least six months may,
on behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee with respect to all
Notes and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee
for any cause, with respect to the Notes, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee. If, within one
year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee with respect to the Notes shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee with respect to the Notes and to
that extent supersede the successor Trustee appointed by the Company. If
no successor Trustee with respect to the Notes shall have been so appointed
by the Company or the Holders and accepted appointment in the manner
hereinafter provided, any Holder who has been a bona fide Holder of a Note
for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the appointment
of a successor Trustee with respect to the Notes.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to the Notes and each appointment of a
successor Trustee with respect to the Notes to the Holders of Notes in the
manner provided for in Section 106. Each notice shall include the name of the
successor Trustee with respect to the Notes and the address of its Corporate
Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee
with respect to all Notes, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all rights, powers and trusts
referred to in paragraph (a) of this Section.
(c) No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or substantially all
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be otherwise qualified
and eligible under this Article, without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case
any Notes shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to
such authenticating Trustee may adopt such authentication and deliver the
Notes so authenticated with the same effect as if such successor Trustee
had itself authenticated such Notes; and in case at that time any of the
Notes shall not have been authenticated, any successor Trustee may
authenticate such Notes either in the name of any predecessor hereunder or
in the name of the successor Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have;
provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or to authenticate Notes in the
name of any predecessor Trustee shall apply only to its successor or
successors by merger, conversion or consolidation.
SECTION 611. Appointment of Authenticating Agent.
At any time when any of the Notes remain Outstanding, the Trustee
may appoint an Authenticating Agent or Agents with respect to the Notes which
shall be authorized to act on behalf of the Trustee to authenticate Notes and
the Trustee shall give written notice of such appointment to all Holders of
Notes with respect to which such Authenticating Agent will serve, in the
manner provided for in Section 106. Notes so authenticated shall be entitled
to the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Any such appointment
shall be evidenced by an instrument in writing signed by a Responsible Officer
of the Trustee, and a copy of such instrument shall be promptly furnished to
the Company. Wherever reference is made in this Indenture to the
authentication and delivery of Notes by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating
Agent and a certificate of authentication executed on behalf of the Trustee by
an Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any state thereof or the
District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by federal or state authority. If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of said supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which
such Authenticating Agent shall be a party, or any corporation succeeding
to the corporate agency or corporate trust business of an Authenticating
Agent, shall continue to be an Authenticating Agent, provided such
corporation shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the
Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give written notice
of such appointment to all Holders of Notes, in the manner provided for in
Section 106. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers and
duties of its predecessor hereunder, with like effect as if originally named
as an Authenticating Agent. No successor Authenticating Agent shall be
appointed unless eligible under the provisions of this Section.
The Company agrees to pay to each Authenticating Agent from time
to time such compensation for its services under this Section as shall be
agreed in writing between the Company and such Authenticating Agent.
If an appointment is made pursuant to this Section, the Notes may
have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Notes designated therein referred to in the
within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By
-----------------------------
as Authenticating Agent
By
-----------------------------
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Notes, by receiving and holding the same, agrees
with the Company and the Trustee that none of the Company or the Trustee or
any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the
Holders in accordance with TIA Section 312, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
TIA Section 312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first
May 15 after the first issuance of Notes pursuant to this Indenture, the
Trustee shall transmit to the Holders of Notes, in the manner and to the
extent provided in TIA Section 313(c), a brief report dated as of such May 15
if required by TIA Section 313(a).
SECTION 703. Reports by Company.
The Company shall:
(1) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from time
to time by rules and regulations prescribe) which the Company may be
required to file with the Commission pursuant to Section 13 or Section
15(d) of the Exchange Act; or, if the Company is not required to file
information, documents or reports pursuant to either of such Sections,
then it shall file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 and
15 of the Exchange Act in respect of a security listed and registered on
a national securities exchange as may be prescribed from time to time in
such rules and regulations;
(2) file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission,
such additional information, documents and reports with respect to
compliance by the Company with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(3) transmit to all Holders, in the manner and to the extent
provided in TIA Section 313(c), within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and
reports required to be filed by the Company pursuant to paragraphs (1)
and (2) of this Section as may be required by rules and regulations
prescribed from time to time by the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain
Terms.
The Company shall not, in a single transaction or a series of
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of its properties and
assets substantially as an entirety to any Person, and the Company will not
permit any of its Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in a sale, assignment, conveyance, transfer, lease or other
disposition of all or substantially all of the properties and assets of the
Company or the Company and its Subsidiaries, taken as a whole, to any other
Person, unless:
(a) either (1) the Company shall be the continuing corporation
or (2) the Person (if other than the Company) formed by such
consolidation or into which the Company or such Subsidiary is merged or
the Person which acquires by sale, assignment, conveyance, transfer or
lease the properties and assets of the Company or such Subsidiary, as
the case may be, substantially as an entirety (i) shall be a
corporation, partnership or trust organized and validly existing under
the laws of the United States or any State thereof or the District of
Columbia and (ii) shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the Trustee, the due and punctual payment of the principal of (and
premium, if any) and interest on all the Notes and the performance and
observance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(b) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time, or
both, would become an Event of Default, shall have occurred and be
continuing;
(c) immediately after giving effect to any such transaction on a
pro forma basis (including, without limitation, any Indebtedness
incurred or anticipated to be incurred in connection with or in respect
of such transaction or series of transactions) the Company (in the case
of clause (1) of Subsection (a) above) or such Person (in the case of
clause (2) of Subsection (a) above), after giving effect to such
transaction or series of transactions on a pro forma basis, could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 1008; and
(d) the Company or such Person shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, sale, assignment, conveyance, transfer
or lease and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture, comply with this Article
and that all conditions precedent herein provided for relating to such
transaction have been satisfied.
SECTION 802. Successor Substituted.
Upon any consolidation or merger, or any sale, assignment,
conveyance, transfer, lease or other disposition of the properties and assets
of the Company substantially as an entirety in accordance with Section 801,
the successor Person formed by such consolidation or into which the Company is
merged or the successor Person to which such sale, assignment, conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor had been named as the Company herein; and
thereafter, except in the case of a lease, the Company shall be discharged
from all obligations and covenants under the Indenture and the Notes.
SECTION 803. Notes to Be Secured in Certain Events.
If, upon any such consolidation of the Company with or merger
of the Company into any other corporation, or upon any sale, assignment,
conveyance, lease, transfer or other disposition of the property of the
Company substantially as an entirety to any other Person in accordance with
Section 801, any property or assets of the Company would thereupon become
subject to any Lien, then unless such Lien could be created pursuant to
Section 1012 without equally and ratably securing the Notes, the Company,
prior to or simultaneously with such consolidation, merger, sale,
assignment, conveyance, lease, transfer or other disposition, will, as to
such property or assets, secure the Notes equally and ratably with (or
prior to) the obligation or liability which upon such consolidation,
merger, sale, assignment, conveyance, lease, transfer or other disposition
is to become secured as to such property or assets by such Lien, or will
cause such Notes to be so secured.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when authorized
by or pursuant to a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
as obligor hereunder and under the Notes; or
(2) to add to the covenants of the Company for the benefit of
the Holders of Notes or to surrender any right or power herein conferred
upon the Company; or;
(3) to add Events of Default for the benefit of Holders of the
Notes; or
(4) to secure the Notes pursuant to the requirements of Section
803 or 1012 or otherwise; or
(5) to provide for the acceptance of appointment hereunder by a
successor Trustee;
(6) to cure any ambiguity, defect or inconsistency in this
Indenture, provided such action does not adversely affect the interests
of Holders of Notes in any material respect; or
(7) to supplement any of the provisions of this Indenture to the
extent necessary to permit or facilitate the defeasance and discharge of
the Notes; provided that such action shall not adversely effect the
interests of the Holders of Notes in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of all Outstanding Notes that are affected thereby, by Act of
said Holders delivered to the Company and the Trustee, the Company, when
authorized by or pursuant to a Board Resolution, and the Trustee may enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holder of each
Outstanding Note affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or
(2) reduce the principal amount of, or the rate of interest on,
or any premium payable upon the redemption of, any such Note, or
(3) adversely affect any right of repayment at the option of any
Holder of any Note, or
(4) change any Place of Payment or the coin or currency of
payment of the principal of, or any such premium or interest on, any
such Note, or
(5) impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the
case of redemption or repayment at the option of the Holder, on or after
the Redemption Date or Repayment Date, as the case may be), or
(6) reduce the percentage in principal amount of the Outstanding
Notes, the consent of whose Holders is required for any such
supplemental indenture, for any waiver of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences provided for in this Indenture, or
(7) modify any of the provisions of this Section, Section 513 or
Section 1010, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Note affected
thereby, or
(8) modify any of the provisions of this Indenture relating to
the subordination of the Notes in a manner adverse to the Holders
thereof.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes;
and every Holder of Notes theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as then in
effect.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so
determine, new Notes so modified as to conform, in the opinion of the Trustee
and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in
exchange for Outstanding Notes.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 902, the Company
shall give notice thereof to the Holders of each Outstanding Note affected, in
the manner provided for in Section 106, setting forth in general terms the
substance of such supplemental indenture.
SECTION 908. Effect on Senior Indebtedness.
No Supplemental Indenture shall adversely affect the rights of the
holders of Senior Indebtedness under Article Fifteen of this Indenture without
the consent of such holders.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and
Interest.
The Company covenants and agrees for the benefit of the Holders of
Notes that it will duly and punctually pay the principal of (and premium, if
any, on) and interest on the Notes in accordance with the terms of the Notes
and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in each Place of Payment of the Notes
and in The City of New York an office or agency where Notes may be presented
or surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
same as its agent to receive such respective presentations, surrenders,
notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind any such designation;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in
accordance with the requirements set forth above for Notes for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency. The Company hereby designates as a Place of Payment for the
Notes the office or agency of the Company in the Borough of Manhattan, The
City of New York, and initially appoints the Trustee at its Corporate Trust
Office as Paying Agent in such city and as its agent to receive all such
presentations, surrenders, notices and demands.
SECTION 1003. Money for Notes Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with
respect to the Notes, it will, on or before each due date of the principal of
(and premium, if any, on) or interest on any of the Notes, segregate and hold
in trust for the benefit of the Persons entitled thereto a sum sufficient to
pay the principal (and premium, if any) or interest so becoming due until such
sums shall be paid to such Persons or otherwise disposed of as herein provided
and will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it will, prior to or on each due date of the principal of (and premium,
if any, on) or interest on any Notes, deposit with a Paying Agent a sum
sufficient to pay the principal (and premium, if any) or interest so becoming
due, such sum to be held in trust for the benefit of the Persons entitled to
such principal, premium or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent (other than the Trustee)
for the Notes to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of
(and premium, if any, on) and interest on the Notes in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or
any other obligor upon the Notes) in the making of any payment of
principal of (or premium, if any, on) or interest on the Notes; and
(3) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which sums were held by the Company
or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any, on) or interest on any Note and remaining unclaimed for
one year after such principal (and premium, if any) or interest has become
due and payable shall be paid to the Company on Company Request, or (if
then held by the Company) shall be discharged from such trust; and the
Holder of such Note shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof, and all liability of the
Trustee or such Paying Agent with respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company
cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that
such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining will be
repaid to the Company.
SECTION 1004. Statement as to Compliance.
The Company will deliver to the Trustee, within 120 days after the
end of each fiscal year, a brief certificate from the principal executive
officer, principal financial officer or principal accounting officer as to his
or her knowledge of the Company's compliance with all conditions and covenants
under this Indenture. For purposes of this Section 1004, such compliance
shall be determined without regard to any period of grace or requirement of
notice under this Indenture.
SECTION 1005. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes,
assessments and governmental charges levied or imposed upon the Company or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (2) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a Lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings.
SECTION 1006. Maintenance of Properties.
The Company will cause all properties owned by the Company or
any Subsidiary or used or held for use in the conduct of its business or
the business of any Subsidiary to be maintained and kept in reasonably good
condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment
of the Company may be necessary so that the business carried on in
connection therewith may be conducted at all times; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
maintenance of any such properties if such action is, in the judgment of
the Company, desirable in the conduct of the business of the Company or any
Subsidiary and not disadvantageous in any material respect to the Holders.
SECTION 1007. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence and the rights (charter and statutory) and franchises of
the Company and each Subsidiary; provided, however, that the Company shall not
be required to preserve any such right or franchise if the Board of Directors
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries as a whole and
that the loss thereof is not disadvantageous in any material respect to the
Holders of Notes.
SECTION 1008. Limitation on Company and Subsidiary Indebtedness.
The Company will not, and will not permit any Subsidiary to,
create, incur, assume or directly or indirectly guarantee or in any other
manner become directly or indirectly liable for the payment of, or
otherwise incur (collectively, "incur"), any Indebtedness (including any
Acquired Indebtedness) other than Permitted Indebtedness, unless, the
Company's Adjusted Fixed Charge Coverage Ratio for its last four completed
fiscal quarters immediately preceding the incurrence of such Indebtedness,
taken as one period and after giving pro forma effect to (i) the incurrence
of such Indebtedness and (if applicable) the application of the net
proceeds therefrom, as if such Indebtedness was incurred, and the
application of such proceeds occurred, on the first day of such four-
quarter period, (ii) the incurrence, repayment or retirement of any other
Indebtedness by the Company and its Subsidiaries since the first day of
such four-quarter period as if such Indebtedness was incurred, repaid or
retired on the first day of such four-quarter period (except that, in
making such computation, the amount of Indebtedness under any revolving
credit facility shall be computed based upon the average daily balance of
such Indebtedness during such four-quarter period) and (iii) the
acquisition (whether by purchase, merger or otherwise) or disposition
(whether by sale, merger or otherwise) of any company, entity or business
acquired or disposed of by the Company or its Subsidiaries, as the case may
be, since the first day of such four-quarter period, as if such acquisition
or disposition occurred on the first day of such four-quarter period, would
have been at least equal to 2.0 to 1.0.
SECTION 1009. Limitation on Restricted Payments.
(a) The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly take any of the following actions:
(i) declare or pay any dividend on, or make any distribution to holders of,
Capital Stock of the Company (other than dividends or distributions payable,
solely in the Company's own Capital Stock (other than Redeemable Capital
Stock)), (ii) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company or any options, warrants or other
rights to acquire such Capital Stock, (iii) make any principal payment on, or
redeem, repurchase or defease, or otherwise acquire or retire for value, prior
to any scheduled principal payment or maturity, Indebtedness which is
Subordinated Indebtedness, (iv) make any Investment (other than a Permitted
Investment) in any Person or (v) incur, create or assume any guarantee of
Indebtedness of any Affiliate (other than with respect to (a) guarantees of
Indebtedness of any Subsidiary by the Company or by any Subsidiary or (b)
guarantees of Indebtedness of the Company by any Subsidiary) (such payments or
any other actions described in (i), (ii), (iii), (iv) and (v), collectively,
"Restricted Payments") unless at the time of and after giving effect to the
proposed Restricted Payment (the amount of such payment, if other than
cash, as determined by the Board of Directors, whose determination will be
conclusive if evidenced by a Board Resolution), (1) no Event of Default or
event that, after notice or lapse of time or both would become an Event of
Default, shall have occurred or be continuing, and (2) the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to Section 1008, and (3) the aggregate amount of all Restricted
Payments after April 1, 1993 shall not exceed the sum of (A) 50% of the
Consolidated Net Income accrued during the period beginning on April 1,
1993 and ending on the last day of the Company's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or, if such
aggregate Consolidated Net Income shall be a loss, minus 100% of such loss)
plus (B) the aggregate net proceeds, including the fair market value of
property or assets other than cash (as determined by the Board of
Directors, whose determination will be conclusive if evidenced by a Board
Resolution), received by the Company from the issue or sale (other than to
a Subsidiary) after April 1, 1993 of Capital Stock of the Company (other
than Redeemable Capital Stock), or of any options, warrants or other rights
to purchase such Capital Stock plus (C) the aggregate net cash proceeds
received by the Company from the issue or sale (other than to a Subsidiary)
after April 1, 1993 of any debt securities or Redeemable Capital Stock
evidencing Indebtedness of the Company that thereafter has been converted
into or exchanged for Capital Stock of the Company (other than Redeemable
Capital Stock) plus (D) to the extent not otherwise included in the
Consolidated Net Income of the Company, an amount equal to the net
reduction in Investments (other than reductions in Permitted Investments)
in any Person other than a Subsidiary resulting from the payments in cash
of interest on Indebtedness, dividends, repayments of loans or advances, or
other transfers of assets, in each case to the Company or a Subsidiary
after the date of the Indenture from any such Person, not to exceed the
total amount of Investments (other than Permitted Investments) in such
Person by the Company and its Subsidiaries.
(b) None of the provisions set forth in paragraph (a) above
shall be deemed to prohibit (i) the payment of any dividend within 60 days
after the date of declaration thereof, if such declaration complied with the
foregoing provisions on the date of such declaration, (ii) the redemption,
repurchase or other acquisition or retirement of any shares of any class of
Capital Stock of the Company or of any Subsidiary in exchange for, or out of
the proceeds of, a substantially concurrent issue and sale (other than to a
Subsidiary) of other shares of Capital Stock of the Company, (iii) so long as
no Default or Event of Default shall have occurred and be continuing, payments
with respect to the cancellation or repurchase of stock or stock options
granted or to be granted to employees of the Company and its Subsidiaries
under the Borg-Warner Security Corporation Management Stock Option Plan or the
Borg-Warner Security Corporation 1993 Stock Option Plan or pursuant to the
Borg-Warner Holdings Corporation Management Stock Subscription Agreement, as
amended, in each case, in effect on the date of this Indenture, provided that
the Company could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 1008 hereof; or (iv) the purchase, redemption,
defeasance or other acquisition or retirement for value of any Subordinated
Indebtedness in exchange for, or out of the net cash proceeds of (x) a
substantially concurrent issuance and sale (other than to a Subsidiary) of,
shares of Capital Stock (other than Redeemable Capital Stock) of the Company
or (y) a substantially concurrent incurrence (other than to a Subsidiary) of,
new Subordinated Indebtedness so long as (A) the principal amount of such new
Indebtedness does not exceed the principal amount (or, if such Subordinated
Indebtedness being refinanced provides for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration
thereof, such lesser amount as of the date of determination) of the
Subordinated Indebtedness being so purchased, redeemed, defeased, acquired or
retired, plus the lesser of the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Subordinated
Indebtedness being refinanced or the amount of any premium reasonably
determined by the Company as necessary to accomplish such refinancing, plus,
in either case, the amount of reasonable expenses of the Company incurred in
connection with such refinancing, (B) such new Subordinated Indebtedness is
subordinated to the Notes to the same extent as such Subordinated Indebtedness
so purchased, redeemed, defeased, acquired or retired and (C) such new
Subordinated Indebtedness has an Average Life longer than the Average Life of
the Notes and a final stated maturity of principal later than the final Stated
Maturity of principal of the Notes. The action described in clauses (ii) and
(iv)(x) of this paragraph (b) shall be a Restricted Payment that shall be
permitted to be made in accordance with this paragraph but shall reduce the
amount that would otherwise be available for Restricted Payments under
paragraph (a) above.
SECTION 1010. Limitation on Issuance of Other Senior Subordinated
Indebtedness.
The Company will not create, incur or suffer to exist any
Indebtedness, other than the Notes, that is subordinate in right of payment
and upon liquidation to any Senior Indebtedness unless such Indebtedness is
also pari passu with, or subordinate in right of payment and upon liquidation
to, the Notes pursuant to subordination provisions substantially similar to
those contained in Article Fifteen.
SECTION 1011. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any Subsidiary to,
create or otherwise cause to exist or become effective any consensual
encumbrance or consensual restriction of any kind, other than those included
in the terms of the Notes, the Bank Credit Agreement as originally executed or
any successor Bank Credit Agreement containing such encumbrances or
restrictions that are no more restrictive than as set forth in the Bank Credit
Agreement as originally executed, or those in existence immediately prior to
the date of this Indenture, on the ability of any Subsidiary to (a) pay
dividends or make any other distribution on its Capital Stock to the Company
or any Subsidiary, (b) pay any Indebtedness owed to the Company or any
Subsidiary, (c) make loans or advances to the Company or any Subsidiary, (d)
transfer any of its property or assets to the Company or any Subsidiary, or
(e) guarantee any Indebtedness of the Company or any Subsidiary, except in
each case for such encumbrances or restrictions as are (i) in the case of (d),
permitted to be incurred under Section 1012, or (ii) existing under or by
reason of any agreement or other instrument of a Person, or binding with
respect to assets, acquired by the Company or any Subsidiary in existence at
the time of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property or assets of
the Person, or such assets, so acquired.
SECTION 1012. Limitation on Liens.
The Company will not, and will not permit any Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of
any kind upon any of its property or assets, now owned or hereafter acquired,
without making effective provision whereby all of the Notes shall be directly
secured equally and ratably with (or prior to) the obligation or liability
secured by such Lien, except for Permitted Liens.
SECTION 1013. Limitation on Transactions with Affiliates.
The Company will not enter into, renew, extend, or permit any
Subsidiary to enter into, renew or extend, any agreement relating to the sale,
purchase or lease of any assets, property or services from or to any Affiliate
of the Company (other than a Wholly Owned Subsidiary) unless (i) such
transaction or series of transactions is or are on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than would be
available in a comparable transaction with an unaffiliated third party and
(ii) (A) with respect to any transaction or series of transactions involving
aggregate payments in excess of $5,000,000, but less than $10,000,000, the
Company delivers an Officer's Certificate to the Trustee certifying that such
transaction or transactions complies with clause (i) above and (B) with
respect to a transaction or series of transactions, involving aggregate
payments equal to or greater than $10,000,000, such transaction or
transactions shall have received the approval of a majority of the
disinterested directors of the Board of Directors of the Company; provided,
however, that this Section 1013 shall not apply to, (i) the payment of fees to
Merrill Lynch Capital Partners, Inc. or Merrill Lynch, Pierce, Fenner & Smith
Incorporated or any of their Affiliates for consulting, investment banking or
financial advisory services rendered by such Person to the Company or any of
its Subsidiaries, (ii) actions in connection with Indebtedness to the Company
incurred by certain members of management of the Company to purchase shares of
Common Stock, which indebtedness is outstanding on the date of this Indenture,
(iii) sales of goods and services by the Company or any of its Subsidiaries to
Affiliates of the Company in the ordinary course of business, (iv)
transactions pursuant to the Distribution and Indemnity Agreement dated as of
January 27, 1993, the Tax Sharing Agreement dated as of January 27, 1993, the
Benefits Agreement dated as of January 27, 1993, and the Service Agreement
dated as of January 27, 1993, in each case as in effect on the date of the
Indenture, and (v) the Contribution Agreement dated November 28, 1996, the
Stockholders Agreement dated January 24, 1997 and all agreements related
thereto and (vi) services rendered to Loomis, Fargo & Co. by the Company's
senior executive officers.
SECTION 1014. Limitation on Issuances and Sale of Preferred Stock
by Subsidiaries.
The Company will not permit (i) any of its Subsidiaries to issue
any Preferred Stock to any Person (other than to the Company or to a Wholly
Owned Subsidiary of the Company) and (ii) any Person (other than the Company
or a Wholly Owned Subsidiary of the Company) to own any Preferred Stock of any
Subsidiary of the Company; provided, however, that nothing in this Section
1014 will prohibit Preferred Stock issued by a Person prior to the time (a)
such Person becomes a Subsidiary of the Company, (b) such Person merges with
or into a Subsidiary of the Company or (c) a Subsidiary of the Company merges
with or into such Person; provided further that such Preferred Stock was not
issued or incurred by such Person in anticipation of the transaction
contemplated by subclause (a), (b), or (c) above.
SECTION 1015. Limitations on Issuances of Guarantees of Pari
Passu or Subordinated Indebtedness.
(a) The Company will not permit any Subsidiary, directly or
indirectly, to assume, guarantee or in any other manner become liable with
respect to any Indebtedness that is Pari Passu Indebtedness or Subordinated
Indebtedness, unless (i) such Subsidiary simultaneously executes and delivers
a supplemental indenture to this Indenture providing for a guarantee of
payment of the Notes by such Subsidiary, provided that (A) if any such
assumption, guarantee or other liability is subordinated, the guarantee under
such supplemental indenture shall be subordinated to no more than the same
extent as the Notes are subordinated to Senior Indebtedness and (B) with
respect to Subordinated Indebtedness, any such assumption, guarantee or other
liability of such Subsidiary with respect to such Subordinated Indebtedness
shall be subordinated to such Subsidiary's assumption, guarantee or other
liability with respect to the Notes at least to the same extent as such
Subordinated Indebtedness is subordinated to the Notes and (ii) such
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against the Company or any other Subsidiary as a result of
any payment by such Subsidiary under its Guarantee (as defined below) until
such time as the Notes have been paid in full; provided that this paragraph
(a) shall not apply to any guarantee, assumption or other liability of any
Subsidiary that (x) existed at the time such Person became a Subsidiary and
(y) was not incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary.
(b) Each guarantee created pursuant to the provision described
in the paragraph (a) above (or any other guarantee by any Subsidiary of
payment of the Notes provided, that (i) such Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture providing for
a guarantee of payment of the Notes by such Subsidiary and providing that (A)
such other guarantee shall be subordinated to no more than the same extent as
the Notes are subordinated to Senior Indebtedness and (B) such other guarantee
shall be senior to at least the same extent as the Notes are senior to
Subordinated Indebtedness, and (ii) such Subsidiary takes the action referred
to in clause (ii) of paragraph (a) above is referred to as a "Guarantee" and
the issuer of each such Guarantee is referred to as a "Guarantor."
Notwithstanding the foregoing, any Guarantee by a Subsidiary of the Notes
shall provide by its terms that it shall be automatically and unconditionally
released and discharged upon (i) any sale, exchange or transfer, to any Person
not an Affiliate of the Company, of all of the Company's Capital Stock in, or
all or substantially all the assets of, such Subsidiary (which sale, exchange
or transfer is not prohibited by this Indenture) or (ii) in the case of any
Guarantee created pursuant to the provisions of paragraph (a) above, the
release or discharge of the assumption, guarantee or other liability which
resulted in the creation of such Guarantee, except a discharge or release by
or as a result of payment under such assumption, guarantee or other liability.
SECTION 1016. Purchase of Notes upon Change of Control.
(a) Upon the occurrence of a Change of Control, and subject to
the compliance by the Company with the requirements of paragraph (b) of this
Section 1016, each Holder shall have the right to require that the Company
repurchase such Holder's Notes in whole or in part in integral multiples of
$1,000, at a purchase price (the "Purchase Price") in cash in an amount equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase, in accordance with the procedures set forth in
paragraphs (c) and (d) of this Section.
(b) Within 30 days following a Change of Control and prior to
the mailing of the notice to Holders provided for in paragraph (c) below, the
Company covenants to either (x) repay in full all Indebtedness under the Bank
Credit Agreement or to offer to repay in full all such Indebtedness and to
repay the Indebtedness of each Bank who has accepted such offer or (y) obtain
the requisite consent under the Bank Credit Agreement to permit the repurchase
of the Notes as provided for in this Section 1016. The Company shall first
comply with this paragraph (b) before it shall be required to repurchase the
Notes pursuant to this Section 1016 and any failure to comply with this
paragraph (b) shall constitute a default for purposes of clause (iv) of
Section 501.
(c) Within 30 days following any Change of Control, the Company
shall give to each Holder of the Notes in the manner provided in Section 106,
a notice stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's Notes in
cash;
(2) a purchase date (the "Purchase Date") which shall be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed;
(3) the purchase price for the purchase; and
(4) the instructions determined by the Company, consistent with
this Section 1016, that a Holder must follow in order to have its Notes
repurchased in accordance with this Section 1016.
(d) Holders electing to have Notes purchased pursuant to this
Section 1016 will be required to surrender such Notes to the Company at the
address specified in the notice at least five Business Days prior to the
Purchase Date. Holders will be entitled to withdraw their election if the
Company receives, not later than three Business Days prior to the Purchase
Date, a facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Notes delivered for purchase by the Holder as to
which his election is to be withdrawn and a statement that such Holder is
withdrawing his election to have such Notes purchased. Holders whose Notes
are purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered.
SECTION 1017. Provision of Financial Statements and Reports.
The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the
Company has a class of securities registered under the Exchange Act, the
annual reports, quarterly reports and other documents that the Company would
be required to file if it were subject to Section 13 or 15 of the Exchange
Act. The Company will also be required (a) to file with the Trustee, and
provide to each Holder of Notes, without cost to such Holder, copies of such
reports and documents within 15 days after the date on which the Company files
such reports and documents with the Commission or the date on which the
Company would be required to file such reports and documents if the Company
were so required, and (b) if filing such reports and documents with the
Commission is not accepted by the Commission or is prohibited under the
Exchange Act, to supply at the Company's cost copies of such reports and
documents to any prospective Holder of Notes promptly upon written request.
Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 1018. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
term, provision or condition set forth in Section 803 or Sections 1005 to
1017, inclusive, if before the time for such compliance the Holders of at
least a majority in principal amount of all Outstanding Notes affected by such
term, provision or covenant, by Act of such Holders, waive such compliance in
such instance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF NOTES
SECTION 1101. Applicability of Article.
The Notes shall be redeemable in accordance with the terms of such
Notes and in accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes shall be evidenced
by or pursuant to a Board Resolution. In case of any redemption at the
election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of the Notes to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select
the Notes to be redeemed pursuant to Section 1103. In the case of any
redemption of Notes prior to the expiration of any restriction on such
redemption provided in the terms of such Notes or elsewhere in this Indenture,
the Company shall furnish the Trustee with an Officers' Certificate evidencing
compliance with such restriction.
SECTION 1103. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously
called for redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for redemption of
portions of the principal of Notes; provided, however, that no such partial
redemption shall reduce the portion of the principal amount of a Note not
redeemed to less than the minimum authorized denomination for the Notes
established pursuant to Section 301.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Notes selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Note redeemed or to be redeemed only in part, to the portion
of the principal amount of such Note which has been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Notes to be redeemed.
All notices of redemption shall identify the Notes (including
CUSIP number) to be redeemed and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Notes are to be
redeemed, the identification (and, in the case of partial
redemption, the principal amounts) of the particular Notes to be
redeemed,
(4) that on the Redemption Date the Redemption Price
(together with accrued interest, if any, to the Redemption Date
payable as provided in Section 1106) will become due and payable
upon each such Note, or the portion thereof, to be redeemed and,
if applicable, that interest thereon will cease to accrue on and
after said date, and
(5) the place or places where such Notes, maturing after
the Redemption Date, are to be surrendered for payment of the
Redemption Price.
Notice of redemption of Notes to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an
amount of money sufficient to pay the Redemption Price of, and accrued
interest on, all the Notes which are to be redeemed on that date.
SECTION 1106. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price stated therein (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Notes shall cease to bear interest. Upon surrender of any such Note for
redemption in accordance with said notice, such Note shall be paid by the
Company at the Redemption Price, together with accrued interest, if any, to
the Redemption Date; provided, however, that installments of interest on Notes
whose Stated Maturity is on or prior to the Redemption Date shall be payable
to the Holders of such Notes, or one or more Predecessor Notes, registered as
such at the close of business on the relevant Record Dates according to their
terms and the provisions of Section 307.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate of interest set
forth in the Note.
SECTION 1107. Notes Redeemed in Part.
Any Note which is to be redeemed only in part (pursuant to the
provisions of this Article) shall be surrendered at a Place of Payment
therefor (with, if the Company or the Trustee so requires, due endorsement by,
or a written instrument of transfer in form satisfactory to the Company and
the Trustee duly executed by, the Holder thereof or such Holder's attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Note without service
charge, a new Note or Notes, of any authorized denomination as requested by
such Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered.
SECTION 1108. Redemption.
The Notes may or shall be, as the case may be, redeemed, as a
whole or from time to time in part, subject to the conditions and the
Redemption Prices specified in the form of Note, together with accrued and
unpaid interest, if any, to the Redemption Date (subject to the right of
Holders of record on relevant record dates to receive interest due on an
Interest Payment Date), on the Redemption Date.
ARTICLE TWELVE
SECTION 1201. [Reserved.]
ARTICLE THIRTEEN
SECTION 1301. [Reserved.]
ARTICLE FOURTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1401. Company's Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option and at any time, effect defeasance
of the Notes under Section 1402, or covenant defeasance of the Notes under
Section 1403 in accordance with the terms of the Notes and in accordance with
this Article.
SECTION 1402. Defeasance and Discharge.
Upon the Company's exercise of the above option, the Company shall
be deemed to have been discharged from its obligations with respect to the
Outstanding Notes on the date the conditions set forth in Section 1404 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Outstanding Notes, which shall thereafter be
deemed to be "Outstanding" only for the purposes of Section 1405 and the other
Sections of this Indenture referred to in (A) and (B) below, and to have
satisfied all its other obligations under the Notes and this Indenture insofar
as the Notes are concerned (and the Trustee, at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Outstanding Notes to receive,
solely from the trust fund described in Section 1404 and as more fully set
forth in such Section, payments in respect of the principal of (and premium,
if any, on) and interest on such Notes when such payments are due, (B) the
Company's obligations with respect to such Notes under Sections 305, 306, 1002
and 1003, (C) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (D) this Article Fourteen. Subject to compliance with this
Article Fourteen, the Company may exercise its option under this Section 1402
notwithstanding the prior exercise of its option under Section 1403 with
respect to such Notes.
SECTION 1403. Covenant Defeasance.
Upon the Company's exercise of the above option applicable to this
Section with respect to the Notes, the Company shall be released from its
obligations under Section 803 and Sections 1005 through 1017 and with respect
to the Outstanding Notes on and after the date the conditions set forth in
Section 1404 are satisfied (hereinafter, "covenant defeasance"), and such
Notes shall thereafter be deemed not to be "Outstanding" for the purposes of
any direction, waiver, consent or declaration or Act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For
this purpose, such covenant defeasance means that, with respect to such
Outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any
such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 501(3) or otherwise, as the case may be, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby.
SECTION 1404. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1402 or Section 1403 to the Outstanding Notes:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 607 who shall agree to comply with the
provisions of this Article Fourteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (A) an amount in cash, or (B) Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will provide,
not later than one day before the due date of any payment of principal
(including any premium) and interest, if any, on such Notes, money in an
amount, or (C) a combination thereof, in each case in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of (and premium, if any, on) and interest on
such Outstanding Notes on the Stated Maturity (or Redemption Date, if
applicable) of such principal (and premium, if any) or installment or
interest; provided that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such Government
Obligations to said payments with respect to such Notes. Before such a
deposit, the Company may give to the Trustee, in accordance with Section
1102 hereof, a notice of its election to redeem all or any portion of
such Outstanding Notes at a future date in accordance with the terms of
the Notes and Article Eleven hereof, which notice shall be irrevocable.
Such irrevocable redemption notice, if given, shall be given effect in
applying the foregoing.
(2) No Default or Event of Default with respect to such Notes
shall have occurred and be continuing on the date of such deposit or,
insofar as paragraphs (5) and (6) of Section 501 are concerned, at any
time during the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture.
(4) In the case of an election under Section 1402, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or (y) since the date of execution of
this Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such
opinion shall confirm that, the Holders of such Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such defeasance had not occurred.
(5) In the case of an election under Section 1403, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of such Notes will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant defeasance
and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such
covenant defeasance had not occurred.
(6) In the case of defeasance or covenant defeasance, such
defeasance shall not be in violation of the terms of any agreement or
instrument to which the Company is a party or to which any of its
properties are subject, and the Agents under the Bank Credit
Agreement shall have delivered a certificate to the Trustee and the
Company that such defeasance shall not be in violation of the terms
of the Bank Credit Agreement.
(7) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section
1402 or the covenant defeasance under Section 1403 (as the case may be)
have been complied with.
SECTION 1405. Deposited Money and Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003,
all money and Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 1405, the "Trustee") pursuant to Section 1404 in
respect of such Outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture,
to the payment, either directly or through any Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Holders of such Notes of all sums due and to become due thereon in respect of
principal (and premium, if any) and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the Government Obligations
deposited pursuant to Section 1404 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of such Outstanding Notes.
Anything in this Article Fourteen to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or Government Obligations (or other property and any
proceeds therefrom) held by it as provided in Section 1404 which, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, are in
excess of the amount thereof which would then be required to be deposited to
effect an equivalent defeasance or covenant defeasance, as applicable, in
accordance with this Article.
SECTION 1406. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money
in accordance with Section 1405 by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and such Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 1402 or 1403, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 1405; provided, however, that if the
Company makes any payment of principal of (or premium, if any, on) or
interest on any such Note following the reinstatement of its obligations,
the Company shall be subrogated to the rights of the Holders of such Notes
to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE FIFTEEN
SUBORDINATION OF NOTES
SECTION 1501. Notes Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of a Note, by
his or her acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article, the
indebtedness represented by the Notes and the payment of the principal of (and
premium, if any) and interest on each and all of the Notes are hereby
expressly made subordinate and subject in right of payment as provided in this
Article to the prior payment in full in cash or Cash Equivalents of all Senior
Indebtedness; provided, however, that the Notes, the indebtedness represented
thereby and the payment of the principal of (and premium, if any) and interest
on the Notes, in all respects shall rank equally with, or prior to, all
existing and future Indebtedness of the Company that is expressly subordinated
to any Senior Indebtedness.
SECTION 1502. Payment Over of Proceeds upon Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets or liabilities of the
Company, then and in any such event
(1) the holders of Senior Indebtedness shall be entitled to
receive payment in full, in cash or Cash Equivalents, of all amounts due
on or in respect of all Senior Indebtedness, or provision shall be made
for such payment, before the Holders of the Notes are entitled to
receive any payment or distribution of any kind or character on account
of principal of (or premium, if any) or interest on the Notes; and
(2) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, by set-off
or otherwise, to which the Holders or the Trustee would be entitled but
for the provisions of this Article shall be paid by the liquidating
trustee or agent or other person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee or
otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full in
cash or Cash Equivalents of all Senior Indebtedness remaining unpaid,
after giving effect to any concurrent payment or distribution to the
holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions
of this Section, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, in respect
of principal (and premium, if any) and interest on the Notes before all
Senior Indebtedness is paid in full or payment thereof provided for in
cash or Cash Equivalents, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or
other Person making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining unpaid,
to the extent necessary to pay all Senior Indebtedness in full in cash
or Cash Equivalents, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
The consolidation of the Company with, or the merger of the
Company into, another Person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions
set forth in Article Eight shall not be deemed a dissolution, winding up,
liquidation, reorganization, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Section if the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in Article Eight.
SECTION 1503. Suspension of Payment When Senior Indebtedness in
Default.
(a) Unless Section 1502 shall be applicable, upon (1) the
occurrence of any default in the payment of principal, (premium, if any) or
interest on any Specified Senior Indebtedness beyond any applicable grace
period with respect thereto (a "Payment Event of Default") and (2) receipt by
the Trustee from the Agent or any other representative of any holder of
Specified Senior Indebtedness of written notice of such occurrence, no payment
or distribution of any assets of the Company of any kind or character shall be
made by the Company on account of principal of (or premium, if any) or
interest on the Notes or on account of the purchase or redemption or other
acquisition of Notes unless and until such Payment Event of Default shall have
been cured or waived in writing or shall have ceased to exist or such Senior
Indebtedness shall have been discharged, after which the Company shall resume
making any and all required payments in respect of the Notes, including any
missed payments.
(b) Unless Section 1502 shall be applicable, upon (1) the
occurrence of any event (other than a Payment Event of Default) the occurrence
of which entitles one or more Persons to accelerate Specified Senior
Indebtedness (a "Non-Payment Event of Default") and (2) receipt by the Trustee
from the Agent or any other representative of any holder of Specified Senior
Indebtedness of written notice of such occurrence, then no payment or
distribution of any assets of the Company of any kind or character shall be
made by the Company on account of any principal of (or premium, if any) or
interest on the Notes or on account of the purchase or redemption or other
acquisition of Notes for a period ("Payment Blockage Period") commencing upon
the date of receipt by the Trustee of such notice from the Agent or any other
representative of a holder of Specified Senior Indebtedness and ending on the
earlier of (subject to any blockage of payments that may then be in effect
under subsection (a) of this Section) (x) 179 days after the date of receipt
of such written notice by the Trustee, (y) the date on which such Non-payment
Event of Default shall have been cured or waived in writing or shall have
ceased to exist or such Specified Senior Indebtedness shall have been
discharged or (z) the date on which such Payment Blockage Period shall have
been terminated by written notice to the Company or the Trustee from the Agent
or other representative of the holders of the Specified Senior Indebtedness of
the Company initiating such Payment Blockage Period, after which, in the case
of clause (x), (y) or (z), the Company shall resume making any and all
required payments in respect of the Notes, including any missed payments.
Notwithstanding any other provision of this Agreement, only one Payment
Blockage Period may be commenced within any consecutive 365-day period, and no
event of default with respect to Specified Senior Indebtedness which existed
or was continuing on the date of the commencement of any Payment Blockage
Period with respect to the Specified Senior Indebtedness initiating such
Payment Blockage Period shall be, or can be, made the basis for the
commencement of a second Payment Blockage Period whether or not within a
period of 365 consecutive days unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days. In no
event will a Payment Blockage Period extend beyond 179 days.
(c) In the event that, notwithstanding the foregoing, the
Company shall make any payment to the Trustee or the Holder of any Note
prohibited by the foregoing provisions of this Section, then and in such event
such payment shall be paid over and delivered forthwith to the Company.
SECTION 1504. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture
or in any of the Notes shall prevent the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other
winding up, assignment for the benefit of creditors or other marshalling of
assets and liabilities of the Company referred to in Section 1502 or under the
conditions described in Section 1503, from making payments at any time of
principal of (and premium, if any) or interest on the Notes.
SECTION 1505. Subrogation to Rights of Holders of Senior
Indebtedness.
Subject to the prior payment in full in cash or Cash Equivalents
of all Senior Indebtedness, the Holders of the Notes shall be subrogated to
the rights of the holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of (and premium, if any) and interest on the
Notes shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness of any cash, property or
securities to which the Holders of the Notes or the Trustee would be entitled
except for the provisions of this Article, and no payments over pursuant to
the provisions of this Article to the holders of Senior Indebtedness by
Holders of the Notes or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Indebtedness, and the Holders of the
Notes, be deemed to be a payment or distribution by the Company to or on
account of the Senior Indebtedness.
SECTION 1506. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Notes on the one
hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as between the Company and the Holders of the
Notes, the obligation of the Company, which is absolute and unconditional, to
pay to the Holders of the Notes the principal of (and premium, if any) and
interest on the Notes as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights against the
Company of the Holders of the Notes and creditors of the Company other than
the holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder
of any Note from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
SECTION 1507. Trustee to Effectuate Subordination.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes. If
upon any dissolution, winding up or reorganization of the Company, whether in
bankruptcy, insolvency, receivership proceedings or otherwise, the Trustee
does not file a claim in such proceedings prior to 30 days before the
expiration of the time to file such claim, the holders of Senior Indebtedness
or the Agents may file such a claim on behalf of the holders of the Notes.
SECTION 1508. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such
holder, or by any non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof any such
holder may have or be otherwise charged with.
(b) Without in any way limiting the generality of Subsection (a)
of this Section, the holders of Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or the Holders
of the Notes, without incurring responsibility to the Holders of the Notes and
without impairing or releasing the subordination provided in this Article or
the obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner,
place or terms of payment or extend the time of payment of, or renew or alter,
Senior Indebtedness or any instrument evidencing the same or any agreement
under which Senior Indebtedness is outstanding; (2) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (3) release any Person liable in any manner for the
collection or payment of Senior Indebtedness; and (4) exercise or refrain from
exercising any rights against the Company or any other Person.
SECTION 1509. Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making of any
payment to or by the Trustee in respect of the Notes. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment to or by the Trustee in respect
of the Notes, unless and until the Trustee shall have received written notice
thereof from the Company, the Agent or a holder of Senior Indebtedness or from
any trustee, fiduciary or agent therefor; and, prior to the receipt of any
such written notice, the Trustee, subject to the provisions of Section 601,
shall be entitled in all respects to assume that no such facts exist;
provided, however, that, if the Trustee shall not have received the notice
provided for in this Section at least three Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (and premium,
if any) or interest on any Note), then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purpose for which such money
was received and shall not be affected by any notice to the contrary which may
be received by it within three Business Days prior to such date.
(b) Subject to the provisions of Section 601, the Trustee shall
be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor).
In the event that the Trustee determines in good faith that further evidence
is required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article and, if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
SECTION 1510. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to the provisions of Section 601, and
the Holders of the Notes shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Notes, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 1511. Rights of Trustee As a Holder of Senior
Indebtedness; Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee
of any of its rights as such holder. Nothing in this Article shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 606.
SECTION 1512. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying
Agent within its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article in addition to or in place of the
Trustee; provided, however, that Section 1511 shall not apply to the Company
or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.
SECTION 1513. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity
of the Notes pursuant to Article Five or to pursue any rights or remedies
hereunder or under applicable law.
This Indenture may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Indenture.
SECTION 1514. Trustee Not Fiduciary for Holders of Senior
Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness and shall not be liable to any such holders
if the Trustee shall mistakenly, in the absence of gross negligence or willful
misconduct, pay over or distribute to Holders of Notes or to the Company or to
any other person cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article or otherwise. With
respect to the holders of Senior Indebtedness, the Trustee undertakes to
perform or to observe only such of its covenants or obligations as are
specifically set forth in this Article and no implied covenants or obligations
with respect to holders of Senior Indebtedness shall be read into this
Indenture against the Trustee.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed as of the day and year first above written.
BORG-WARNER SECURITY CORPORATION
By: /s/ Brian S. Cooper
---------------------------------
Name: Brian S. Cooper
Title: Treasurer
THE BANK OF NEW YORK
By: /s/ Mary La Gumina
---------------------------------
Name: Mary La Gumina
Title: Assistant Vice President
EXHIBIT A
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR
904 OF REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH
IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER
THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE
LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE,
IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE"), OFFER, SELL, OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A "QUALIFIED
INSTITUTIONAL BUYER" TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-
U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION
S, (E) TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE. IF ANY PROPOSED TRANSFER IS BEING
MADE IN ACCORDANCE WITH (2)(D), (E) OR (F) ABOVE, THE HOLDER ACKNOWLEDGES
THAT THE COMPANY RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION SATISFACTORY TO THE
COMPANY TO CONFIRM THAT THE PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTIONS 311 AND 312 OF THE INDENTURE.](*)
BORG-WARNER SECURITY CORPORATION
9 5/8% Senior Subordinated Note due 2007
U.S. $__________
No. CUSIP No.
BORG-WARNER SECURITY CORPORATION, a Delaware corporation
(herein called the "Company", which term includes any successor Person under
the Indenture hereinafter referred to), for value received, hereby promises to
pay to ______________. or registered assigns, the principal sum of
____________________ Dollars on March 15, 2007, at the office or agency of the
Company referred to below, and to pay interest thereon on September 15, 1997
and semi-annually thereafter, on March 15 and September 15 in each year, from
March 24, 1997, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, at the rate of 9 5/8% per annum,
until the principal hereof is paid or duly provided for, and (to the extent
lawful) to pay on demand interest on any overdue interest at the rate borne by
(*) To be inserted in the case of a Global Note.
the Notes from the date on which such overdue interest becomes payable to the
date payment of such interest has been made or duly provided for. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in said Indenture, be paid to the Person in
whose name this Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the March 1 or September 1 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date. Any such interest not so
punctually paid or duly provided for shall forthwith cease to be payable to
the Holder on such Regular Record Date, and such defaulted interest, and (to
the extent lawful) interest on such defaulted interest at the rate borne by
the Notes, may be paid to the Person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
The Holder of this Note is entitled to the benefits of
the Registration Rights Agreement, dated as of March 24, 1997 (the
"Registration Rights Agreement"), among the Company and the Initial
Purchasers named therein. In the event that either (a) an Exchange Offer
Registration Statement (as such term is defined in the Registration Rights
Agreement) is not filed with the Commission on or prior to the 45th day
following the date of the Indenture, (b) such Exchange Offer Registration
Statement has not been declared effective on or prior to the 105th day
following the date of the Indenture, (c) the Exchange Offer (as such term
is defined in the Registration Rights Agreement) is not consummated or, if
required, a Shelf Registration Statement (as such term is defined in the
Registration Rights Agreement) with respect to the Notes is not declared
effective on or prior to the 135th day following the date of the Indenture
or (d) the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable (each such event referred to in
clauses (a) through (d) above, a "Registration Default") then the per annum
interest rate borne by this Note shall be increased by one-quarter of one
percent per annum for the first 90 day period following the Registration
Default. The per annum interest rate borne by this Note will increase by
an additional one quarter of one percent per annum for each subsequent 90-
day period following such Registration Default to a maximum of one percent
per annum until such Registration Default has been cured. Upon (w) the
filing of the Exchange Offer Registration Statement after the 45-day period
described in clause (a) above, (x) the effectiveness of the Exchange Offer
Registration Statement after the 105-day period described in clause (b)
above or (y) the consummation of the Exchange Offer or the effectiveness of
a Shelf Registration Statement, as the case may be, after the 135-day
period described in clause (c) above, or (z) the cure of any Registration
Default described in clause (d) above, the interest rate borne by the Note
from the date of such filing, effectiveness or consummation, as the case
may be, will be reduced to the original interest rate set forth above if
the Company is otherwise in compliance with this paragraph; provided,
however, that, if after such reduction in interest rate, a different event
specified in clause (a), (b), (c) or (d) above occurs, the interest rate
may again be increased and thereafter reduced pursuant to the foregoing
provisions.
Payment of the principal of (and premium, if any, on) and
interest on this Note will be made at the office or agency of the Company
maintained for that purpose in The City of New York, or at such other office
or agency of the Company as may be maintained for such purpose, in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that
payment of interest may be made at the option of the Company (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear on the Note Register or (ii) by wire transfer to an account maintained
by the payee located in the United States provided that appropriate written
wire instructions have been provided prior to the relevant record date.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
duly executed by the Trustee or the Authenticating Agent referred to on the
reverse hereof by manual signature, this Note shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal.
BORG-WARNER SECURITY CORPORATION
By
-------------------------------
Name:
Title:
[Seal]
Attest:
_________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes referred to in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee
By: _________________________
Authorized Signatory
Dated: __________
[Reverse of Note]
This Note is one of a duly authorized issue of securities
of the Company designated as its 9 5/8% Senior Subordinated Notes due 2007
(the "Notes"), limited (except as otherwise provided in the Indenture
referred to below) in aggregate principal amount to $125,000,000, which may
be issued under an indenture (the "Indenture") dated as of March 24, 1997
between the Company and The Bank of New York, as trustee (the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made
for a statement of the respective rights, limitations of rights, duties,
obligations and immunities thereunder of the Company, the Trustee and the
Holders of the Notes, and of the terms upon which the Notes are, and are to
be, authenticated and delivered.
The indebtedness evidenced by the Notes is, to the extent
and in the manner provided in the Indenture, subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness as defined
in the Indenture, and this Note is issued subject to such provisions. Each
Holder of this Note, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee his
attorney-in-fact for such purpose.
On or before each payment date, the Company shall deliver or
cause to be delivered to the Trustee or the Paying Agent an amount in dollars
sufficient to pay the amount due on such payment date.
At any time on or after March 15, 2002, the Company may
redeem, in whole or in part, upon not less than 30 nor more than 60 days'
prior notice at the Redemption Prices (expressed as percentages of the
principal amount) set forth below, together with accrued and unpaid
interest, if any, to the Redemption Date, if redeemed during the 12-month
period beginning March 15 of the years indicated (subject to the right of
Holders of record on relevant record dates to receive interest due on an
Interest Payment Date):
Redemption
Year Price
---- ----------
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . 104.812%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 102.406%
2004 and thereafter. . . . . . . . . . . . . . . . . . . 100.000%
In addition, at any time prior to March 15, 2000, the
Company may redeem up to 30% of the original aggregate principal amount of
the Notes within 60 days after the closing of one or more Public Equity
Offerings with the net proceeds of such offering at a redemption price
equal to 109.625% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the Redemption Date (subject to the right
of Holders of record on relevant record dates to receive interest due on
relevant interest payment dates), provided that not less than $87,500,000
aggregate principal amount of the Notes remains outstanding immediately
after the occurrence of any such redemption.
If less than all the Notes are to be redeemed pursuant to
the preceding two paragraphs, the Trustee shall select the Notes or
portions thereof to be redeemed in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes being
redeemed are listed, or if the Notes are not so listed, on a pro rata
basis, by lot or by such other method the Trustee shall deem fair and
appropriate; provided that no such partial redemption shall reduce the
portion of the principal amount of a Note not redeemed to less than $1,000.
In the case of any redemption of Notes, interest
installments whose Stated Maturity is on or prior to the Redemption Date
will be payable to the Holders of such Notes, or one or more Predecessor
Notes, of record at the close of business on the relevant Regular Record
Date or Special Record Date, as the case may be, referred to on the face
hereof. Notes (or portions thereof) for whose redemption and payment
provision is made in accordance with the Indenture shall cease to bear
interest from and after the Redemption Date.
In the event of redemption or repurchase of this Note in
part only, a new Note or Notes for the unredeemed portion hereof shall be
issued in the name of the Holder hereof upon the cancellation hereof.
Upon the occurrence of a Change of Control, the Company will
be required to make an offer to purchase on the Purchase Date all outstanding
Notes at a purchase price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if any, to the date
of purchase, in accordance with the Indenture. Holders of Notes that are
subject to an offer to purchase will receive an offer from the Company
pursuant to the Indenture prior to any related Purchase Date.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (a) the entire indebtedness of the Company on this Note and (b) certain
restrictive covenants and the related Defaults and Events of Default, upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Note.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders under the Indenture
and the Note at any time by the Company and the Trustee with the consent of
the Holders of a specified percentage in aggregate principal amount of the
Notes at the time Outstanding. Additionally, the Indenture permits, without
notice to or consent of any Holder, the amendment thereof (a) to evidence the
succession of another person to the Company as obligor under the Indenture and
the Notes, (b) to add to the covenants of the Company for the benefit of the
Holders of Notes or to surrender any right or power conferred upon the Company
by the Indenture, (c) to add Events of Default for the benefit of the Holders
of Notes, (d) to secure the Notes pursuant to the provisions described in
Sections 1012 or 801 of the Indenture or otherwise, (e) to provide for the
acceptance of appointment by a successor Trustee, (f) to cure any ambiguity,
defect or inconsistency in the Indenture, provided such action does not
adversely affect the interests of Holders of Notes in any material respect, or
(g) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and discharge of the Notes,
provided that such action shall not adversely affect the interests of the
Holders of Notes in any material respect.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the obligation of the
Company, any Guarantor or any other obligor on the Notes (in the event such
Guarantor or other obligor is obligated to make payments in respect of the
Notes), which is absolute and unconditional, to pay the principal of (and
premium, if any) and interest on this Note at the times, place, and rate,
and in the coin or currency, herein prescribed, subject to the
subordination provisions of the Indenture.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registerable on
the Note Register of the Company, upon surrender of this Note for registration
of transfer at the office or agency of the Company maintained for such purpose
in The City of New York, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Note
Registrar duly executed by, the Holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Notes, of authorized denominations
and for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
The Notes are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set
forth, the Notes are exchangeable for a like aggregate principal amount of
Notes of a different authorized denomination, as requested by the Holder
surrendering the same.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may require
payment of a sum sufficient to pay all documentary, stamp or similar issue or
transfer taxes or other governmental charges payable in connection therewith.
Prior to the time of due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Company, the Trustee nor any agent shall be affected
by notice to the contrary.
THIS NOTE AND THE INDENTURE SHALL BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK EXCLUDING (TO THE GREATEST EXTENT PERMISSIBLE BY LAW)
ANY RULE OF LAW THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Interest on this Note shall be computed on the basis of a
360-day year of twelve 30-day months.
All terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
please print or typewrite name and address including zip code of assignee
- ------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- ------------------------------------------------------------------------------
attorney to transfer said Note on the books of the Company with full power of
substitution in the premises.
In connection with any transfer of this Note occurring prior
to the Resale Restriction Termination Date, the undersigned confirms that
without utilizing any general solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of
1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished that comply with
the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Note in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 312 of the
Indenture shall have been satisfied.
Date: ____________________NOTICE:_________________________________
The signature must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
-------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with respect to which
it exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has requested pursuant to
Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated: NOTICE: ________________________________
_______________ To be executed by an executive officer.
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 1016 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 1016 of the Indenture, state the amount (in
original principal amount) below:
$_____________________.
Date:
-----------------------------
Your Signature:
--------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:(*)
-----------------------------------------
- -----------------
(*) Guarantor must be a member of the Securities Transfer Agents
Medallion Program ("STAMP"), the New York Stock Exchange Medallion
Signature Program ("MSP") or the Stock Exchange Medallion Program
("SEMP")
EXHIBIT 4.4
=============================================================================
Registration Rights Agreement
Dated as of March 24, 1997
among
Borg-Warner Security Corporation
and
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
BT Securities Corporation,
Credit Suisse First Boston Corporation and
CIBC Wood Gundy Securities Corp.
=============================================================================
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into on March 24, 1997, between BORG-WARNER SECURITY CORPORATION, a
corporation organized under the laws of the State of Delaware (the "Company")
and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("Merrill Lynch"), BT
Securities Corporation, Credit Suisse First Boston Corporation, CIBC Wood Gundy
Securities Corp. (collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated
March 19, 1997 between the Company, and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial
Purchasers of an aggregate of US$125,000,000 principal amount of the Company's
9 5/8% Senior Subordinated Notes due 2007 (the "Initial Notes"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the
Company has agreed to provide to the Initial Purchasers and their direct and
indirect transferees the registration rights set forth in this Agreement. The
execution of this Agreement is a condition to the closing under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble of this
Agreement and also includes the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; provided, however, that any such
depositary must have an address in the Borough of Manhattan, in the City
of New York.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Exchange Notes" shall mean 9 5/8% Senior Subordinated Notes due
2007 issued by the Company under the Indenture containing terms
identical to the Initial Notes (except that (i) interest thereon shall
accrue from the last interest payment date on which interest was paid on
the Initial Notes or, if no such interest has been paid, from the
Original Issue Date, (ii) the transfer restrictions thereon shall be
eliminated and (iii) certain provisions relating to an increase in the
stated rate of interest thereon shall be eliminated), to be offered to
Holders of Initial Notes in exchange for Initial Notes pursuant to the
Exchange Offer.
"GAAP" shall have the meaning set forth in the Indenture.
"Holders" shall mean the Initial Purchasers, for so long as they
own any Registrable Notes, and each of their successors, assigns and
direct and indirect transferees who become registered owners of
Registrable Notes under the Indenture.
"Indenture" shall mean the Indenture relating to the Initial Notes
and Exchange Notes dated as of March 24, 1997 between the Company and
The Bank of New York, as Trustee, as the same may be amended from time
to time in accordance with the terms thereof.
"Initial Notes" shall have the meaning set forth in the preamble
of this Agreement.
"Initial Purchasers" shall have the meaning set forth in the
preamble of this Agreement.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided
that whenever the consent or approval of Holders of a specified
percentage of Registrable Notes is required hereunder, Registrable Notes
held by the Company shall be disregarded in determining whether such
consent or approval was given by the Holders of such required percentage
or amount.
"Merrill Lynch" shall have the meaning set forth in the preamble
of this Agreement.
"Original Issue Date" shall mean the date on which the Initial
Notes are issued under the Indenture.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus
as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Notes covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Registrable Notes" shall mean the Initial Notes; provided,
however, that the Initial Notes shall cease to be Registrable Notes when
(i) a Registration Statement with respect to such Initial Notes shall
have been declared effective under the 1933 Act and such Initial Notes
shall have been disposed of pursuant to such Registration Statement,
(ii) such Initial Notes shall have been sold to the public pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A)
under the 1933 Act, (iii) such Initial Notes shall have ceased to be
outstanding or (iv) such Initial Notes have been exchanged for Exchange
Notes upon consummation of the Exchange Offer.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement,
including without limitation: (i) all SEC, stock exchange or National
Association of Securities Dealers, Inc. (the "NASD") registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws and compliance with
the rules of the NASD (including reasonable fees and disbursements of
counsel for any underwriters or Holders in connection with blue sky
qualification, if any, of any of the Exchange Notes or Registrable
Notes), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements, certificates
representing the Registrable Notes or Exchange Notes and other documents
relating to the performance of and compliance with this Agreement, (iv)
all rating agency fees, (v) all fees and expenses incurred in connection
with the listing, if any, of any of the Registrable Notes or Exchange
Notes on any securities exchange or exchanges, (vi) all fees and
disbursements relating to the qualification of the Indenture under
applicable securities laws, (vii) the fees and disbursements of counsel
for the Company and of the independent public accountants of the
Company, including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance,
(viii) the fees and expenses of a "qualified independent underwriter" as
defined by Conduct Rule 2720 of the NASD (if required by the NASD rules)
in connection with the offering of the Registrable Notes or Exchange
Notes, (ix) the fees and expenses of the Trustee and any escrow agent or
custodian, and (x) any fees and disbursements of the underwriters
customarily required to be paid by issuers or sellers of securities and
the reasonable fees and expenses of any special experts retained by the
Company in connection with any Registration Statement, but excluding
fees of counsel to the underwriters or the Holders and underwriting
discounts and commissions and transfer taxes, if any, relating to the
sale or disposition of Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement of
the Company which covers any of the Exchange Notes or Registrable Notes
pursuant to the provisions of this Agreement, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant
to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of
this Agreement which covers all of the Registrable Notes on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to
such registration statement, including post-effective amendments, in
each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Initial Notes
and Exchange Notes under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange Offer
Registration. To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company at its cost,
shall (A) file within 45 days after the Original Issue Date with the SEC an
Exchange Offer Registration Statement covering the offer by the Company to the
Holders to exchange all of the Registrable Notes for Exchange Notes, (B) use
its best efforts to cause such Exchange Offer Registration Statement to be
declared effective by the SEC within 105 days after the Original Issue Date,
(C) use its best efforts to cause such Exchange Offer Registration Statement
to remain effective until the closing of the Exchange Offer and (D) to
consummate the Exchange Offer within 135 days after the Original Issue Date.
The Exchange Notes will be issued under the Indenture. Upon the effectiveness
of the Exchange Offer Registration Statement, the Company shall promptly
commence the Exchange Offer, it being the objective of such Exchange Offer to
enable each Holder (other than Participating Broker-Dealers (as defined in
Section 3(f)) eligible and electing to exchange Registrable Notes for Exchange
Notes (assuming that such Holder is not an affiliate of the Company within the
meaning of Rule 405 under the 1933 Act, acquires the Exchange Notes in the
ordinary course of such Holder's business and has no arrangements or
understandings with any person to participate in the Exchange Offer for the
purpose of distributing the Exchange Notes) to trade such Exchange Notes from
and after their receipt without any limitations or restrictions under the 1933
Act.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 20 days after
the date notice thereof is mailed to the Holders (or longer if required
by applicable law);
(iii) use the services of the Depositary for the Exchange Offer
with respect to Initial Notes evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Notes at any
time prior to the close of business, New York City time, on the last
business day on which the Exchange Offer shall remain open, by sending
to the institution specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Registrable Notes delivered for exchange, and a
statement that such Holder is withdrawing his election to have such
Registrable Notes exchanged; and
(v) otherwise comply in all material respects with all
applicable laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange Registrable Notes duly tendered and not
validly withdrawn pursuant to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Notes to each Holder of Registrable Notes equal in amount to
the Registrable Notes of such Holder so accepted for exchange.
Interest on each Exchange Note will accrue from the last date on
which interest was paid on the Registrable Notes surrendered in exchange
therefor or, if no interest has been paid on the Registrable Notes, from the
Original Issue Date. The Exchange Offer shall not be subject to any
conditions, other than that the Exchange Offer, or the making of any exchange
by a Holder, does not violate applicable law or any applicable interpretation
of the Staff of the SEC. Each Holder of Registrable Notes (other than
Participating Broker-Dealers) who wishes to exchange such Registrable Notes
for Exchange Notes in the Exchange Offer will be required to represent that
(i) it is not an affiliate of the Company, (ii) any Exchange Notes to be
received by it were acquired in the ordinary course of business and (iii) at
the time of the commencement of the Exchange Offer it has no arrangement with
any person to participate in the distribution (within the meaning of the 1933
Act) of the Exchange Notes. The Company shall inform the Initial Purchasers
of the names and addresses of the Holders to whom the Exchange Offer is made,
and the Initial Purchasers shall have the right to contact such Holders and
otherwise facilitate the tender of Registrable Notes in the Exchange Offer.
(b) Shelf Registration. (i) If, because of any change in law or
applicable interpretations thereof by the Staff of the SEC, the Company is not
permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof,
or (ii) if for any other reason the Exchange Offer is not consummated within
135 days following the Original Issue Date, or (iii) if any Holder (other than
the Initial Purchasers) is not eligible to participate in the Exchange Offer
or (iv) upon the request of any Initial Purchaser (with respect to any
Registrable Notes which it acquired directly from the Company) following the
consummation of the Exchange Offer if such Initial Purchaser shall hold
Registrable Notes which it acquired directly from the Company and if such
Initial Purchaser is not permitted, in the opinion of counsel to such Initial
Purchaser, pursuant to applicable law or applicable interpretation of the
Staff of the SEC, to participate in the Exchange Offer, the Company shall, at
its cost,
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the Registrable
Notes by the Holders from time to time in accordance with the methods of
distribution elected by the Majority Holders of such Registrable Notes
and set forth in such Shelf Registration Statement, and use its best
efforts to cause such Shelf Registration Statement to be declared
effective by the SEC within 135 days after the Original Issue Date. In
the event that the Company is required to file a Shelf Registration
Statement upon the request of any Holder (other than an Initial
Purchaser) not eligible to participate in the Exchange Offer pursuant to
clause (iii) above or upon the request of any Initial Purchaser pursuant
to clause (iv) above, the Company shall file and have declared effective
by the SEC both an Exchange Offer Registration Statement pursuant to
Section 2(a) with respect to all Registrable Notes and a Shelf
Registration Statement (which may be a combined Registration Statement
with the Exchange Offer Registration Statement) with respect to offers
and sales of Registrable Notes held by such Holder or such Initial
Purchaser after completion of the Exchange Offer;
(B) use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of two years
from the date the Shelf Registration Statement is declared effective by
the SEC (or one year from the date the Shelf Registration Statement is
declared effective if such Shelf Registration Statement is filed upon the
request of any Initial Purchaser pursuant to clause (iv) above) or such
shorter period which will terminate when all of the Registrable Notes
covered by the Shelf Registration Statement have been sold pursuant to
the Shelf Registration Statement; and
(C) notwithstanding any other provisions hereof, use its best
efforts to ensure that (1) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming part thereof and any
supplement thereto complies in all material respects with the 1933 Act
and the rules and regulations thereunder, (2) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and (3) any Prospectus forming part of
any Shelf Registration Statement, and any supplement to such Prospectus
(as amended or supplemented from time to time), does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements, in light of the circumstances
under which they were made, not misleading.
The Company further agrees, if necessary, to supplement or amend
the Shelf Registration Statement if reasonably requested by the Majority
Holders with respect to information relating to the Holders and otherwise as
required by Section 3(b) below, to use all reasonable efforts to cause any
such amendment to become effective and such Shelf Registration to become
usable as soon as thereafter practicable and to furnish to the Holders of
Registrable Notes copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
(c) Expenses. The Company shall be liable for and pay all
Registration Expenses in connection with the registration pursuant to Section
2(a) or 2(b) and (x) in the case of any Shelf Registration Statement, will
reimburse the Holders and the Initial Purchasers for the reasonable fees and
disbursements of one firm or counsel designated in writing by the Majority
Holders to act as counsel for the Holders of the Registrable Notes in
connection therewith, and (y) in the case of an Exchange Offer Registration
Statement, will reimburse the Initial Purchasers, as applicable, for the
reasonable fees and disbursements of one firm or counsel in connection
therewith, provided that the aggregate amount of fees and disbursements of
counsel reimbursable by the Company under (x) and (y) above shall not exceed
$15,000. Each Holder shall pay all expenses of its counsel other than as set
forth in the preceding sentence, underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Notes pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. (i) The Company will be
deemed not to have used its best efforts to cause the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may
be, to become, or to remain, effective during the requisite period if it
voluntarily takes any action that would result in any such Registration
Statement not being declared effective or in the Holders of Registrable Notes
covered thereby not being able to exchange or offer and sell such Registrable
Notes during that period unless (A) such action is required by applicable law
or (B) such action is taken by the Company in good faith and for valid
business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, so long as the
Company promptly comply with the requirements of Section 3(k) hereof, if
applicable.
(ii) An Exchange Offer Registration Statement pursuant to Section
2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Notes pursuant
to such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that (i) the
Exchange Offer Registration Statement is not filed with the SEC on or prior to
the 45th calendar day following the Original Issue Date, (ii) the Exchange
Offer Registration Statement is not declared effective on or prior to the
105th calendar day following the Original Issue Date, (iii) the Exchange Offer
is not consummated or a Shelf Registration Statement with respect to the
Registrable Notes is not declared effective on or prior to the 135th calendar
day following the Original Issue Date, or (iv) the Exchange Offer Registration
Statement is declared effective but thereafter ceases to be effective or
usable (each such event referred to in clauses (i)-(iv) above, a "Registration
Default"), the per annum interest rate borne by the Initial Notes shall be
increased by one-quarter of one percent (0.25%) with respect to the first
90-day period following such Registration Default, payable in cash on each
interest payment date, such interest rate to increase by an additional
one-quarter of one percent (0.25%) for each subsequent 90-day period until
such Registration Default has been cured, up to a maximum increase of one
percent (1.0%) per annum. Upon (w) the filing of the Exchange Offer
Registration Statement after the 45-day period described in clause (i) above,
(x) the effectiveness of the Exchange Offer Registration Statement after the
105-day period described in clause (ii) above, (y) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 135-day period described in clause (iii) above or (z)
the cure of any Registration Default described in clause (iv) above, the
interest rate borne by the Initial Notes from the date of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest rate; provided, however, that if, after any such reduction
in interest rate, a different event specified in clause (i), (ii), (iii) or
(iv) above occurs, the interest rate may again be increased pursuant to the
foregoing provisions.
(f) Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section
2(a) and Section 2(b) hereof may result in material irreparable injury to the
Initial Purchasers or the Holders for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers
or any Holder may obtain such relief as may be required to specifically
enforce the Company's obligations under Sections 2(a) and 2(b) hereof.
3. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration Statements
pursuant to Sections 2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement,
within the time period specified in Section 2, on the appropriate form
under the 1933 Act, which form (i) shall be selected by the Company,
(ii) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Notes by the selling Holders thereof and (iii)
shall comply as to form in all material respects with the requirements
of the applicable form and include or incorporate by reference all
financial statements required by the SEC to be filed therewith, and use
its best efforts to cause such Registration Statement to become
effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary under applicable law to keep such Registration Statement
effective for the applicable period; cause each Prospectus to be
supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the 1933 Act; and
comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by each Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder
of Registrable Notes, at least five days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Notes is being
filed and advising such Holders that the distribution of Registrable
Notes will be made in accordance with the method elected by the Majority
Holders; and (ii) furnish to each Holder of Registrable Notes, to
counsel for the Initial Purchasers, and/or the Holders and to each
underwriter of an underwritten offering of Registrable Notes, if any,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such
other documents as such Holder or underwriter may reasonably request,
including financial statements and schedules and, if the Holder so
requests, all exhibits (including those incorporated by reference) in
order to facilitate the public sale or other disposition of the
Registrable Notes; and (iii) subject to the last paragraph of this
Section 3, hereby consent to the use of the Prospectus or any amendment
or supplement thereto by each of the selling Holders of Registrable Notes
in connection with the offering and sale of the Registrable Notes
covered by the Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the Registrable
Notes under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Notes covered by a
Registration Statement and each underwriter of an underwritten offering
of Registrable Notes, if any, shall reasonably request by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with the Holders in connection with any filings required to be
made with the NASD, keep each such registration or qualification
effective during the period such Registration Statement is required to
be effective and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in each such jurisdiction of such Registrable Notes owned
by such Holder; provided, however, that the Company shall not be
required to (i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be required
to qualify but for this Section 3(d) or (ii) take any action which would
subject it to general service of process or taxation in any such
jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and counsel for the Initial Purchasers promptly and,
if requested by such Holder or counsel, confirm such advice in writing
promptly (i) when a Registration Statement has become effective and when
any post-effective amendments and supplements thereto become effective,
(ii) of any request by the SEC or any state securities authority for
post-effective amendments and supplements to a Registration Statement
and Prospectus or for additional information after the Registration
Statement has become effective, (iii) of the issuance by the SEC or any
state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Notes
covered thereby, the representations and warranties of the Company
contained in any underwriting agreement, securities sales agreement or
other similar agreement, if any, relating to such offering cease to be
true and correct in all material respects, (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Registrable Notes for sale in any jurisdiction or
the initiation or threatening of any proceeding for such purpose, (vi)
of the happening of any event or the discovery of any facts during the
period a Shelf Registration Statement is effective which makes any
statement made in such Registration Statement or the related Prospectus
untrue in any material respect or which requires the making of any
changes in such Registration Statement or Prospectus in order to make
the statements therein not misleading and (vii) of any determination by
the Company that a post-effective amendment to a Registration Statement
would be appropriate;
(f) (A) in the case of an Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution"
section covering the use of the Prospectus included in the
Exchange Offer Registration Statement by broker-dealers who
have exchanged their Registrable Notes for Exchange Notes for
the resale of such Exchange Notes, (ii) furnish to each broker-
dealer who desires to participate in the Exchange Offer,
without charge, as many copies of each Prospectus included in
the Exchange Offer Registration Statement, including any
preliminary prospectus, and any amendment or supplement
thereto, as such broker-dealer may reasonably request, (iii)
include in the Exchange Offer Registration Statement a
statement that any broker-dealer who holds Registrable Notes
acquired for its own account as a result of market-making
activities or other trading activities (a "Participating
Broker-Dealer"), and who receives Exchange Notes for
Registrable Notes pursuant to the Exchange Offer, may be a
statutory underwriter and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of
such Exchange Notes, (iv) subject to the last paragraph of this
Section 3, consent to the use of the Prospectus forming part of
the Exchange Offer Registration Statement or any amendment or
supplement thereto, by any broker-dealer in connection with the
sale or transfer of the Exchange Notes covered by the
Prospectus or any amendment or supplement thereto, and (v)
include in the transmittal letter or similar documentation to
be executed by an exchange offeree in order to participate in
the Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to
engage in, a distribution of Exchange Notes. If the
undersigned is a broker-dealer, the undersigned represents
that it will receive Exchange Notes for its own account in
exchange for Registrable Notes and that the Registrable
Notes to be exchanged for Exchange Notes were acquired by it
as a result of market-making activities or other trading
activities and acknowledges that it will deliver a
prospectus meeting the requirements of the 1933 Act in
connection with any resale of such Exchange Notes pursuant
to the Exchange Offer; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of
the 1933 Act";
and (y) a statement to the effect that by making the
acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the exchange of Registrable Notes,
the broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the 1933 Act;
(B) to the extent any Participating Broker-Dealer notifies
the Company that it participates in the Exchange Offer, use its
best efforts to cause to be delivered at the request of an entity
stating that it represents the Participating Broker-Dealers (which
entity shall be Merrill Lynch, unless it elects not to act as such
representative) only one, if any, "cold comfort" letter with
respect to the Prospectus in the form existing on the last date
for which exchanges are accepted pursuant to the Exchange Offer
and with respect to each subsequent amendment or supplement, if
any, effected during the period specified in clause (C) below;
(C) to the extent any Participating Broker-Dealer notifies
the Company that it participates in the Exchange Offer, use its
best efforts to maintain the effectiveness of the Exchange Offer
Registration Statement for a period of one year following the
closing of the Exchange Offer; and
(D) the Company shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer
Registration Statement as would otherwise be contemplated by
Section 3(b), or take any other action as a result of this Section
3(f), for a period exceeding 180 days after the last date for
which exchanges are accepted pursuant to the Exchange Offer (as
such period may be extended by the Company) and Participating
Broker-Dealers shall not be authorized by the Company to, and
shall not, deliver such Prospectus after such period in connection
with resales contemplated by this Section 3;
(g) (i) in the case of an Exchange Offer, furnish counsel for
the Initial Purchasers and, (ii) in the case of a Shelf Registration,
furnish counsel for the Holders of Registrable Notes with copies of any
request by the SEC or any state securities authority for amendments or
supplements to a Registration Statement and Prospectus or for additional
information;
(h) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement as soon
as practicable and provide immediate notice to each Holder of the
withdrawal of any such order;
(i) in the case of a Shelf Registration, furnish to each Holder
of Registrable Notes, without charge, at least one conformed copy of
each Registration Statement and any post-effective amendment thereto
(without documents incorporated therein by reference or exhibits
thereto);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold and not bearing any restrictive legends; and cause such
Registrable Notes to be in such denominations (consistent with the
provisions of the Indenture) and registered in such names as the selling
Holders or the underwriters, if any, may reasonably request at least two
business days prior to the closing of any sale of such Registrable Notes;
(k) in the case of a Shelf Registration, upon the occurrence of
any event or the discovery of any facts, each as contemplated by Section
3(e)(vi) hereof, use its best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes, such Prospectus will not contain at
the time of such delivery any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading. The Company agrees to notify each Holder to suspend use of
the Prospectus as promptly as practicable after the occurrence of such
an event, and each Holder hereby agrees to suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus to correct
such misstatement or omission. At such time as such public disclosure
is otherwise made or the Company determines that such disclosure is not
necessary, in each case to correct any misstatement of a material fact
or to include any omitted material fact, the Company agrees promptly to
notify each Holder of such determination and to furnish each Holder such
numbers of copies of the Prospectus, as amended or supplemented, as such
Holder may reasonably request;
(l) obtain a CUSIP number for all Exchange Notes, or Registrable
Notes, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with printed
certificates for the Exchange Notes or the Registrable Notes, as the
case may be, in a form eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Notes, or Registrable Notes, as the case
may be, (ii) cooperate with the Trustee and the Holders to effect such
changes to the Indenture as may be required for the Indenture to be so
qualified in accordance with the terms of the TIA and (iii) execute, and
use its best efforts to cause the Trustee to execute, all documents as
may be required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested by the
Majority Holders) in order to expedite or facilitate the disposition of
such Registrable Notes and in such connection whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(i) make such representations and warranties to the
Holders of such Registrable Notes and the underwriters, if any, in
form, substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings as may be
reasonably requested by them;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if
any, and the holders of a majority in principal amount of the
Registrable Notes being sold) addressed to each selling Holder and
the underwriters, if any, covering the matters customarily covered
in opinions requested in sales of securities or underwritten
offerings and such other matters as may be reasonably requested
by such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed
to the underwriters, if any, and use reasonable best efforts to
have such letter addressed to the selling Holders of Registrable
Notes, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters to
underwriters in connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the
Holders and an agent of the Holders providing for, among other
things, the appointment of such agent for the selling Holders for
the purpose of soliciting purchases of Registrable Notes, which
agreement shall be in form, substance and scope customary for
similar offerings;
(v) if an underwriting agreement is entered into, cause
the same to set forth indemnification provisions and procedures
substantially equivalent to the indemnification provisions and
procedures set forth in Section 5 hereof with respect to the
underwriters and all other parties to be indemnified pursuant to
said Section; and
(vi) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings.
The above shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective amendment thereto)
and (ii) each closing under any underwriting or similar agreement as and
to the extent required thereunder. In the case of any underwritten
offering, the Company shall provide written notice to the Holders of all
Registrable Notes of such underwritten offering at least 30 days prior
to the filing of a prospectus supplement for such underwritten offering.
Such notice shall (x) offer each such Holder the right to participate in
such underwritten offering, (y) specify a date, which shall be no
earlier than 10 days following the date of such notice, by which such
Holder must inform the Company of its intent to participate in such
underwritten offering and (z) include the instructions such Holder must
follow in order to participate in such underwritten offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Notes
and any underwriters participating in any disposition pursuant to a
Shelf Registration Statement and any counsel or accountant retained by
such Holders or underwriters, all financial and other records, pertinent
corporate documents and properties of the Company reasonably requested
by any such persons, and cause the respective officers, directors,
employees, and any other agents of the Company to supply all information
reasonably requested by any such representative, underwriter, special
counsel or accountant in connection with a Registration Statement;
(p) (i) in the case of an Exchange Offer, a reasonable time
prior to the filing of any Exchange Offer Registration Statement, any
Prospectus forming a part thereof, any amendment to an Exchange Offer
Registration Statement or amendment or supplement to a Prospectus,
provide copies of such document to the Initial Purchasers, and make such
changes in any such document prior to the filing thereof as any of the
Initial Purchasers or their counsel may reasonably request; (ii) in the
case of a Shelf Registration, a reasonable time prior to filing any
Shelf Registration Statement, any Prospectus forming a part thereof, any
amendment to such Shelf Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the
Holders of Registrable Notes, to the Initial Purchasers, to counsel on
behalf of the Holders and to the underwriter or underwriters of an
underwritten offering of Registrable Notes, if any, and make such
changes in any such document prior to the filing thereof as the Holders
of Registrable Notes, Merrill Lynch on behalf of such Holders, their
counsel and any underwriter may reasonably request unless the Company or
its counsel reasonably objects to such changes; and (iii) cause the
representatives of the Company to be available for discussion of such
document as shall be reasonably requested by the Holders of Registrable
Notes, Merrill Lynch on behalf of such Holders or any underwriter and
shall not at any time make any filing of any such document of which such
Holders, Merrill Lynch on behalf of such Holders, their counsel or any
underwriter shall not have previously been advised and furnished a copy
or to which such Holders, Merrill Lynch on behalf of such Holders, their
counsel or any underwriter shall reasonably object;
(q) in the case of a Shelf Registration, use their best efforts
to cause all Registrable Notes to be listed on any securities exchange
on which similar debt securities issued by the Company are then listed
if requested by the Majority Holders or by the underwriter or
underwriters of an underwritten offering of Registrable Notes, if any;
(r) in the case of a Shelf Registration, use their best efforts
to cause the Registrable Notes to be rated with the appropriate rating
agencies, if so requested by the Majority Holders or by the underwriter
or underwriters of an underwritten offering of Registrable Notes, if
any, unless the Registrable Notes are already so rated;
(s) otherwise use their best efforts to comply with all
applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings
statement covering at least 12 months which shall satisfy the provisions
of Section 11(a) of the 1933 Act and Rule 158 thereunder; and
(t) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by
any underwriter and its counsel.
In the case of a Shelf Registration Statement, the Company may (as
a condition to such Holder's participation in the Shelf Registration) require
each Holder of Registrable Notes to furnish to the Company such information
regarding such Holder and the proposed distribution by such Holder of such
Registrable Notes as the Company may from time to time reasonably request in
writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any
event or the discovery of any facts, each of the kind described in clauses
(ii) through (vi) of Section 3(e) hereof, such Holder will forthwith
discontinue disposition of Registrable Notes pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(k) hereof, and, if so directed by
the Company, such Holder will deliver to the Company (at the Company's
expense) all copies in its possession, other than permanent file copies then
in such Holder's possession, of the Prospectus covering such Registrable Notes
current at the time of receipt of such notice. If the Company shall give any
such notice to suspend the disposition of Registrable Notes pursuant to a Shelf
Registration Statement as a result of the happening of any event or the
discovery of any facts, each of the kind described in Section 3(e)(vi) hereof,
the Company shall be deemed to have used its best efforts to keep the Shelf
Registration Statement effective during such period of suspension provided
that the Company shall use its best efforts to file and have declared
effective (if an amendment) as soon as practicable an amendment or supplement
to the Shelf Registration Statement and shall extend the period during which
the Registration Statement shall be maintained effective pursuant to this
Agreement by the number of days during the period from and including the date
of the giving of such notice to and including the date when the Holders shall
have received copies of the supplemented or amended Prospectus necessary to
resume such dispositions.
4. Underwritten Registrations. If any of the Registrable Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Majority Holders of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required under the
terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) The Company shall
indemnify and hold harmless each Holder (including the Initial Purchasers and
Participating Broker-Dealers), and the respective directors, officers,
employees and agents of any Holder and each Person, if any, who controls any
of such parties within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act as follows:
(i) against any and all losses, liabilities, claims, damages and
expenses whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Exchange Notes or Registrable Notes were registered under the 1933 Act,
including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all losses, liabilities, claims, damages and
expenses whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission; provided that (subject to
Section 5(c) below) any such settlement is effected with the written
consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of securities and local
counsel selected in accordance with Section 5(c)), reasonably incurred
in investigating, preparing or defending against any litigation, or
investigation or proceeding by any court or governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
subparagraph (i) or (ii) of this Section 5(a);
provided, however, that this indemnity shall not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by the Initial
Purchasers, any Holder, including Participating Broker-Dealers, or any
underwriter expressly for use in the Registration Statement (or any amendment
thereto) or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto).
(b) In the case of a Shelf Registration, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, the
Initial Purchasers, each underwriter who participates in an offering of
Registrable Notes and the other selling Holders and each of their respective
directors and officers (including each officer of the Company who signed the
Registration Statement) and each Person, if any, who controls the Company,
each Initial Purchaser, any underwriter or any other selling Holder within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against
any and all losses, liabilities, claims, damages and expenses described in the
indemnity contained in Section 5(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto) or the
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such Holder,
as the case may be, expressly for use in the Registration Statement (or any
amendment thereto), or the Prospectus (or any amendment or supplement
thereto); provided, however, that no such Holder shall be liable for any
claims hereunder in excess of the amount of net proceeds received by such
Holder from the sale of Registrable Notes pursuant to such Shelf Registration
Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially prejudiced as
a result thereof and in any event shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement. In
the case of parties indemnified pursuant to Section 5(a) above, counsel to the
indemnified parties shall be selected by Merrill Lynch, and, in the case of
parties indemnified pursuant to Section 5(b) above, counsel to the indemnified
parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel, in addition to any local counsel, for all indemnified
parties in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations
or circumstances. No indemnifying party shall, without the prior written
consent of the indemnified parties, settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 5 (whether or not the indemnified parties are actual
or potential parties thereof), unless such settlement, compromise or consent
(i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) If the indemnification provided for in any of the indemnity
provisions set forth in this Section 5 is for any reason unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party,
as incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company, the Initial Purchaser and the Holders, from
the offering of the Exchange Notes or Registrable Notes included in such
offering or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company, the Initial Purchasers, and the Holders, in connection with
the statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations. The relative fault of the Company, the Initial Purchasers,
and the Holders shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Initial Purchasers or the Holders and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Initial
Purchasers and the Holders of the Registrable Notes agree that it would not be
just and equitable if contribution pursuant to this Section 5 were determined
by pro rata allocation (even if the Initial Purchasers were treated as one
entity, and the Holders were treated as one entity, for such purpose) or by
another method of allocation which does not take account of the equitable
considerations referred to above in this Section 5. The aggregate amount of
losses, liabilities, claims, damages and expenses incurred by an indemnified
party and referred to above in this Section 5 shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by an governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 5, each
person, if any, who controls an Initial Purchaser or Holder within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the
same rights to contribution as such Initial Purchaser or Holder, and each
director of the Company and each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Company. The parties hereto
agree that any underwriting discount or commission or reimbursement of fees
paid to any Initial Purchaser pursuant to the Purchase Agreement shall not be
deemed to be a benefit received by any Initial Purchaser in connection with
the offering of the Exchange Notes or Registrable Notes in such offering.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as
the Company is subject to the reporting requirements of Section 13 or 15 of
the 1934 Act, the Company covenants that it will file the reports required to
be filed by it under the 1933 Act and Section 13(a) or 15(d) of the 1934 Act
and the rules and regulations adopted by the SEC thereunder, that if it ceases
to be so required to file such reports, it will upon the request of any Holder
of Registrable Notes (i) make publicly available such information as is
necessary to permit sales pursuant to Rule 144 under the 1933 Act and (ii)
deliver such information to a prospective purchaser as is necessary to permit
sales pursuant to Rule 144A under the 1933 Act. Upon the request of any
Holder of Registrable Notes, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered
into nor will the Company on or after the date of this Agreement enter into
any agreement which is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders
of the Company's other issued and outstanding securities under any such
agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of
Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Notes affected by such amendment, modification,
supplement, waiver or departure; provided, however, that no amendment,
modification, supplement or waiver or consent to any departure from the
provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Notes unless consented to in writing by such Holder.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery
(i) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 6(d), which address initially is, with respect to an Initial
Purchaser, the address set forth in the Purchase Agreement; and (ii) if to the
Company, initially at the Company's address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(d).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes,
in any manner, whether by operation of law or otherwise, such Registrable
Notes shall be held subject to all of the terms of this Agreement, and by
taking and holding such Registrable Notes, such Person shall be conclusively
deemed to have agreed to be bound by and to perform all of the terms and
provisions of this Agreement, including the restrictions on resale set forth
in this Agreement and, if applicable, the Purchase Agreement, and such Person
shall be entitled to receive the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and the Initial
Purchasers shall have the right to enforce such agreements directly to the
extent they deem such enforcement necessary or advisable to protect their
rights hereunder.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
BORG-WARNER SECURITY
CORPORATION
By: /s/ Timothy M. Wood
---------------------
Name: Timothy M. Wood
Title: Vice President
Confirmed and accepted as of
the date first above
written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
BT SECURITIES CORPORATION
CREDIT SUISSE FIRST BOSTON
CIBC WOOD GUNDY SECURITIES CORP.
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Bennett Rosenthal
-----------------------
Name: Bennett Rosenthal
Title: Managing Director
EXHIBIT 4.5
$285,000,000
CREDIT AGREEMENT
DATED AS OF
MARCH 24, 1997
among
BORG-WARNER SECURITY CORPORATION,
THE LENDERS LISTED HEREIN,
as Lenders,
CANADIAN IMPERIAL BANK OF COMMERCE,
as Documentation Agent,
NATIONSBANK, N.A.,
as Syndication Agent,
and
BANKERS TRUST COMPANY,
as Administrative Agent
BORG-WARNER SECURITY CORPORATION
CREDIT AGREEMENT
Dated as of March 24, 1997
TABLE OF CONTENTS
Page
Introduction.......................................................... 1
Recitals.............................................................. 1
SECTION 1.
Definitions................................................................ 2
1.1 Certain Defined Terms........................................... 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement.................................... 22
1.3 Other Definitional Provisions................................... 22
SECTION 2.
Amounts and Terms of Commitments and Loans; Notes; Letters of Credit....... 23
2.1 Loans and Notes................................................. 23
2.2 Interest on the Loans........................................... 26
2.3 Fees............................................................ 31
2.4 Prepayments and Payments; Reductions in Commitments............. 31
2.5 Use of Proceeds................................................. 36
2.6 Special Provisions Governing Eurodollar Rate Loans.............. 36
2.7 Capital Adequacy Adjustment..................................... 41
2.8 Taxes........................................................... 42
2.9 Letters of Credit............................................... 43
2.10 Replacement of Lender........................................... 50
SECTION 3.
Conditions to Loans and Letters of Credit.................................. 51
3.1 Conditions to the Initial Loans................................. 51
3.2 Conditions to All Loans......................................... 56
3.3 Conditions to Letters of Credit................................. 57
SECTION 4.
Company's Representations and Warranties................................... 57
4.1 Organization, Powers, Good Standing, Business and Subsidiaries.. 57
4.2 Authorization of Borrowing, etc................................. 58
4.3 Financial Condition............................................. 59
4.4 No Material Adverse Change; No Stock Payments................... 59
4.5 Title to Properties; Liens...................................... 60
4.6 Litigation; Adverse Facts....................................... 60
4.7 Payment of Taxes................................................ 60
4.8 Materially Adverse Agreements; Performance of Agreements........ 60
4.9 Governmental Regulation......................................... 61
4.10 Securities Activities........................................... 61
4.11 Employee Benefit Plans.......................................... 61
4.12 Patents, Trademarks, etc........................................ 62
4.13 Certain Fees.................................................... 62
4.14 Environmental Matters........................................... 62
4.15 Disclosure...................................................... 64
SECTION 5.
Company's Affirmative Covenants............................................ 64
5.1 Financial Statements and Other Reports.......................... 64
5.2 Corporate Existence, etc........................................ 68
5.3 Payment of Taxes and Claims; Tax Consolidation.................. 69
5.4 Maintenance of Properties; Insurance............................ 69
5.5 Inspection; Lender Meeting; Confidentiality..................... 69
5.6 Equal Security for Obligations; No Further Negative Pledges..... 70
5.7 Compliance with Laws, etc....................................... 70
5.8 Environmental Disclosure and Inspection......................... 70
5.9 Hazardous Materials; Remedial Action............................ 71
5.10 BW-Other Corporation............................................ 72
5.11 Further Assurances as to Future Material Subsidiaries........... 72
5.12 FOCI Matters.................................................... 72
SECTION 6.
Company's Negative Covenants............................................... 73
6.1 Indebtedness.................................................... 73
6.2 Liens........................................................... 75
6.3 Investments..................................................... 76
6.4 Contingent Obligations.......................................... 77
6.5 Restricted Junior Payments...................................... 78
6.6 Financial Covenants............................................. 79
6.7 Restriction on Fundamental Changes.............................. 84
6.8 Sales and Leasebacks............................................ 85
6.9 Sale or Discount of Receivables................................. 86
6.10 Transactions with Shareholders and Affiliates................... 86
6.11 Disposal of Subsidiary Stock.................................... 86
6.12 Conduct of Business............................................. 87
6.13 Amendments or Waivers Relating to Subordinated Indebtedness..... 87
6.14 Designation of Senior Indebtedness.............................. 87
6.15 Fiscal Year..................................................... 88
SECTION 7.
Events of Default.......................................................... 88
7.1 Failure to Make Payments When Due............................... 88
7.2 Default in Other Agreements..................................... 88
7.3 Breach of Certain Covenants..................................... 89
7.4 Breach of Warranty.............................................. 89
7.5 Other Defaults Under Agreement or Loan Documents................ 89
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc............ 89
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.............. 89
7.8 Judgments and Attachments....................................... 90
7.9 Dissolution..................................................... 90
7.10 Employee Benefit Plans.......................................... 90
7.11 Invalidity of Guaranties........................................ 90
7.12 Failure of Security............................................. 91
7.13 Change in Control............................................... 91
7.14 Receivables Facilities.......................................... 91
SECTION 8.
Agents..................................................................... 93
8.1 Appointment..................................................... 93
8.2 Powers; General Immunity........................................ 93
8.3 Representations and Warranties; No Responsibility For
Appraisal of Creditworthiness................................... 95
8.4 Right to Indemnity.............................................. 95
8.5 Registered Persons Treated as Owner............................. 95
8.6 Successor Agents................................................ 96
8.7 Loan Guaranties and Collateral Documents........................ 96
SECTION 9.
Miscellaneous.............................................................. 96
9.1 Assignments and Participations in Loans and Letters of Credit... 96
9.2 Expenses........................................................ 99
9.3 Indemnity.......................................................100
9.4 Set Off.........................................................100
9.5 Ratable Sharing.................................................101
9.6 Amendments and Waivers..........................................101
9.7 Independence of Covenants.......................................103
9.8 Notices.........................................................103
9.9 Survival of Warranties and Certain Agreements...................103
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative...........104
9.11 Severability....................................................104
9.12 Obligations Several; Independent Nature of Lenders' Rights......104
9.13 Headings........................................................104
9.14 APPLICABLE LAW..................................................104
9.15 Successors and Assigns; Subsequent Holders of Notes.............104
9.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY
TRIAL...........................................................105
9.17 Counterparts; Effectiveness.....................................106
9.18 Certain Agreements..............................................106
Signatures.................................................................S-1
SCHEDULES
Schedule 1.1 -- Subsidiaries
Schedule 2.1A -- Lenders' Commitments and Pro Rata Shares
Schedule 2.9 -- Existing Letters of Credit
Schedule 4.1C -- Conduct of Business
Schedule 6.1 -- Existing Indebtedness
Schedule 6.2 -- Existing Liens
Schedule 6.3 -- Existing Investments
Schedule 6.4 -- Existing Contingent Obligations
Schedule A -- Credit Agreement Disclosure Schedule
EXHIBITS
I -- Form of Notice of Borrowing
II -- Form of Notice of Conversion/Continuation
III -- Form of Note
IV -- Form of Compliance Certificate
V -- Form of Opinion of Company's Special Counsel
VI -- Form of Opinion of Company's General Counsel
VII -- Form of Opinion of O'Melveny & Myers LLP
VIII -- Form of Company Pledge Agreement
IX -- Form of Borg-Warner Subsidiary Guaranty
X -- Form of Borg-Warner Subsidiary Pledge Agreement
XI -- Form of Financial Condition Certificate
XII -- Form of Assignment Agreement
XIII -- Form of Letter of Credit Request
XIV -- Form of Consolidated Excess Cash Flow Calculation
CREDIT AGREEMENT
Dated as of March 24, 1997
This Credit Agreement is dated as of March 24, 1997 and entered
into by and among Borg-Warner Security Corporation, a Delaware corporation
("Company"), as Company, the Lenders listed on the signature pages hereof, as
Lenders, Canadian Imperial Bank of Commerce, acting through one or more of its
agencies, branches or affiliates ("CIBC"), as documentation agent
("Documentation Agent"), NationsBank, N.A. ("NationsBank"), as syndication
agent ("Syndication Agent"), and Bankers Trust Company ("Bankers"), as
administrative agent for Lenders ("Administrative Agent").
RECITALS
WHEREAS, the Company, as borrower, the lenders party thereto, as
lenders, Bank of America Illinois, The Bank of New York and The Bank of Nova
Scotia, as lead managers, CIBC INC., NationsBank, N.A. and Bankers Trust
Company, as co-agents, and Bankers Trust Company, as administrative agent, are
parties to that certain Credit Agreement dated as of January 27, 1993, as
amended (the "Existing Revolving Credit Agreement"), pursuant to which such
lenders have made loans to Company;
WHEREAS, the Company, as borrower, the financial institutions
party thereto and The Long-Term Credit Bank of Japan, Ltd., as agent, are
parties to that certain Credit Agreement dated as of January 27, 1993, as
amended (the "Existing L/C Agreement"), pursuant to which such financial
institutions have agreed to issue letters of credit for the benefit of Company;
WHEREAS, the Company, as borrower, the lenders party thereto, as
lenders, NationsBank, N.A., as documentation agent, and Bankers Trust Company,
as agent, are parties to that certain Credit Agreement dated as of October 16,
1995, as amended (the "Existing Term Loan Agreement"), pursuant to which such
lenders have made loans to Company;
WHEREAS, the Company has requested Lenders to make available to
Company credit facilities to be used, together with the proceeds of an
offering of up to $125,000,000 of senior subordinated notes (the "New Senior
Subordinated Notes"), to repay in full its outstanding indebtedness under the
Existing Term Loan Agreement and the Existing Revolving Credit Agreement and
to replace all outstanding letters of credit under the Existing L/C Agreement
(collectively, the "Refinancings");
WHEREAS, to induce Lenders to make available to Company the credit
facilities provided for in this Agreement, certain Subsidiaries of Company are
willing to guaranty the obligations of Company with respect to the credit
facilities provided by Lenders; and
WHEREAS, Company is willing to secure its obligations under this
Agreement by pledging certain intercompany Indebtedness and the capital stock
of certain of its Subsidiaries, and certain of its Subsidiaries are willing to
secure Company's obligations and their obligations under the Loan Documents by
pledging certain intercompany Indebtedness, the capital stock of certain of
their Subsidiaries and the shares of the Armored Joint Venture;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Company, Lenders,
Documentation Agent, Syndication Agent and Administrative Agent agree as
follows:
SECTION 1.
Definitions
1.1 Certain Defined Terms
The following terms used in this Agreement shall have the
following meanings:
"Adjusted Consolidated Capital Expenditure Amount" means, without
duplication, for any period, the sum of (i) the Consolidated Capital
Expenditures in such period plus (ii) an amount equal to 50% of the Alarm
Installation Costs originated in such period which are sold in connection with
the Alarm Services Contract Securitization Facility plus (iii) an amount equal
to 100% of the Alarm Installation Costs originated in such period which are
treated as sales-type leases which are not sold in connection with the Alarm
Services Contract Securitization Facility.
"Adjusted Eurodollar Rate" means, for any Interest Rate
Determination Date, the rate (rounded upward to the next highest one hundredth
of one percent) obtained by dividing (i) the Eurodollar Rate for that date by
(ii) a percentage equal to 100% minus the stated maximum rate of all reserves
required to be maintained against "Eurocurrency liabilities" as specified in
Regulation D (or against any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodollar Rate Loans is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Lender to United States
residents).
"Administrative Agent" means Bankers and any successor thereto
appointed pursuant to subsection 8.6.
"Affected Lender" means any Lender affected by any of the events
described in subsections 2.6B or 2.6C.
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For the purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of
voting securities or by contract or otherwise.
"Agent" means, as the context so requires, any or all of the
Administrative Agent, Syndication Agent, Documentation Agent and/or Collateral
Agent.
"Agreement" means this Credit Agreement dated as of March 24,
1997, as it may be amended, supplemented or otherwise modified from time to
time.
"Alarm Installation Costs" means the costs allocated to a
subscriber installation in connection with the original installation of an
alarm system, including without limitation all charges for materials and for
the labor associated with such installation.
"Alarm Services Contract Securitization Facility" means that
certain Master Program Agreement for Blind Sale and Assignment of Equipment
Leases, dated as of March 29, 1996 by and between Advanta Business Services
Corp., a Delaware corporation, and Wells Fargo Alarm Services, Inc., a
Delaware corporation, as such Alarm Services Contract Securitization Facility
is in effect as of Closing Date and as it may hereafter be amended,
supplemented or otherwise modified from time to time to the extent permitted
under this Agreement.
"Armored Joint Venture" means Loomis, Fargo & Co. a Delaware
corporation which owns the assets and conducts the operations formerly owned
and conducted by each of Old Armored and its Subsidiaries and Loomis Holding
Corporation and its Subsidiaries.
"Asset Sale" means the sale, lease, assignment or other transfer
for value ("transfer") by Company or any of its Subsidiaries to any Person,
whether in a single transaction or a series of related transactions (other
than to Company or any of its Subsidiaries) of (i) any of the stock of any of
Company's Subsidiaries; (ii) all or substantially all of the assets of any
division or line of business of Company or any of its Subsidiaries; or (iii)
any other assets or rights having a book value or market value in excess of
$2,000,000 other than in each case (A) the transfer in the ordinary course of
business of personal property held for transfer in the ordinary course of
business of Company or any of its Subsidiaries, and (B) the transfer of notes,
accounts receivable, contracts, leases or other receivables to the extent
transferred in connection with the Receivables Facilities.
"Bankers" has the meaning assigned to that term in the
introduction to this Agreement.
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy" as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate
or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective
Rate.
"Base Rate Loans" means Loans bearing interest at rates determined
by reference to the Base Rate as provided in subsection 2.2A.
"Borg-Warner Guarantor Subsidiaries" means the Borg-Warner
Subsidiaries identified as such on Schedule 1.1 annexed hereto, such list in
any event to include all Material Subsidiaries of Company excluding, however,
any Subsidiaries for which the guaranty of the Obligations may cause adverse
tax consequences for Company or may violate applicable laws.
"Borg-Warner Pledged Subsidiaries" means the Borg-Warner
Subsidiaries identified as such or as "Foreign Pledged Subsidiaries" on
Schedule 1.1 annexed hereto, such list in any event to include all Material
Subsidiaries of Company excluding, however, any "Foreign Pledged Subsidiaries"
to the extent that such pledge may cause adverse tax consequences for Company
or may violate applicable laws.
"Borg-Warner Subsidiaries" means the Subsidiaries of Company which
are listed on Schedule 1.1 annexed hereto.
"Borg-Warner Subsidiary Guaranty" means the Guaranty Agreement to
be executed and delivered by the Borg-Warner Guarantor Subsidiaries,
substantially in the form of Exhibit IX annexed hereto, as such Borg-Warner
Subsidiary Guaranty may hereafter be amended, supplemented or otherwise
modified from time to time.
"Borg-Warner Subsidiary Pledge Agreement" means the Pledge
Agreement to be executed and delivered by the Borg-Warner Guarantor
Subsidiaries, substantially in the form of Exhibit X annexed hereto, pursuant
to which certain shares of capital stock of the Borg-Warner Pledged
Subsidiaries, the shares of the Armored Joint Venture and certain intercompany
debt obligations held by such Borg-Warner Guarantor Subsidiaries shall be
pledged by them to Collateral Agent for the benefit of the Lenders to secure
payment of Company's obligations and their obligations under the Loan
Documents, as such Borg-Warner Subsidiary Pledge Agreement may hereafter be
amended, supplemented or otherwise modified from time to time.
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the States of New York or Illinois or is a day
on which banking institutions located in such states are authorized or
required by law or other governmental action to close, and (ii) with respect
to all notices, determinations, fundings and payments in connection with the
Eurodollar Rate, any day that is a Business Day described in clause (i) and
that is also a day for trading by and between banks in Dollar deposits in the
applicable interbank Eurodollar market.
"BW-Other Corporation" means the direct and indirect subsidiaries
of BW-Other Corporation, a Delaware corporation, prior to its liquidation into
Company, including without limitation Borg-Warner Equities Corporation,
Borg-Warner Equities Corporation of California, Borg-Warner Equities
Corporation of Monterey, Inc., NAL II, Ltd., Borg-Warner Insurance Holding
Corporation and Centaur Insurance Company.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalents" means, as at any date of determination, (i)
marketable securities (a) issued or directly and unconditionally guaranteed as
to interest and principal by the United States Government or (b) issued by any
agency of the United States the obligations of which are backed by the full
faith and credit of the United States, in each case maturing within one year
after such date; (ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or any
public instrumentality thereof, in each case maturing within one year after
such date and having, at the time of the acquisition thereof, the highest
rating obtainable from either Standard & Poor's Ratings Group, a division of
the McGraw Hill Companies ("S&P"), or Moody's Investors Service, Inc.
("Moody's"); (iii) commercial paper maturing no more than one year from the
date of creation thereof and having, at the time of the acquisition thereof, a
rating of at least A-1 from S&P or at least P-1 from Moody's; (iv)
certificates of deposit or bankers' acceptances maturing within one year after
such date and issued or accepted by any Lender or by any commercial bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia that (a) is at least "adequately capitalized" (as
defined in the regulations of its primary Federal banking regulator) and (b)
has Tier 1 capital (as defined in such regulations) of not less than
$100,000,000; and (v) shares of any money market mutual fund that (a) has at
least 95% of its assets invested continuously in the types of investments
referred to in clauses (i) and (ii) above, and (b) has the highest rating
obtainable from either S&P or Moody's.
"Centaur" means Centaur Insurance Company, an Illinois corporation
and one of the BW-Other Corporations.
"Centaur Settlement Amount" means all amounts paid or contributed
by Company to Centaur or directly or indirectly paid by Company on behalf of
Centaur, in each case on or after the effective date of this Agreement for the
purpose of settling litigation pending against Centaur or against Company but
relating to Centaur; provided that the aggregate amount of all such payments
does not exceed the amount disclosed in writing by Company to Agents and
approved by Agents as of the effective date of this Agreement.
"CIBC" has the meaning assigned to that term in the introduction
to this Agreement.
"Closing Date" means the date on or before March 25, 1997, on
which the initial Loans are made.
"Collateral" means, collectively, (i) the capital stock of the
Borg-Warner Pledged Subsidiaries, the intercompany Indebtedness and the common
stock of the Armored Joint Venture, in each case as pledged under the Pledge
Agreements, and (ii) all other property, including proceeds, made subject to a
Lien pursuant to the Collateral Documents.
"Collateral Agent" means Bankers acting in the capacity of
collateral agent under the applicable Collateral Documents on behalf of
Lenders.
"Collateral Documents" means the Pledge Agreements and all other
instruments or documents now or hereafter delivered by Company or any
Borg-Warner Guarantor Subsidiary in order to grant to Collateral Agent Liens
on any Collateral for the benefit of the Lenders.
"Commercial Letter of Credit" means any letter of credit or
similar instrument issued for the purpose of providing the primary payment
mechanism in connection with the purchase of any materials, goods or services
by Company or its Subsidiaries in the ordinary course of business of Company
or any such Subsidiary.
"Commitment" or "Commitments" means the commitment or commitments
of a Lender or Lenders as set forth in subsection 2.1A.
"Commitment Fee Percentage" means (i) from the Closing Date
through but excluding the first date following the first anniversary of the
Closing Date on which the Company delivers a Compliance Certificate pursuant
to subsection 5.1(iv)(b), 0.375% per annum and (ii) on and after the first
date following the first anniversary of the Closing Date on which the Company
delivers a Compliance Certificate pursuant to subsection 5.1(iv)(b) through
maturity, the per annum Commitment Fee Percentage set forth in the table below
opposite Company's Interest Coverage Ratio for the four fiscal quarters ending
as of the last day of the fiscal quarter immediately preceding the fiscal
quarter during which the determination is being made as set forth in the
Compliance Certificate delivered pursuant to subsection 5.1(iv)(b) of the
Credit Agreement, any required adjustment to become automatically effective on
the next succeeding Business Day following receipt by the Administrative Agent
of such Compliance Certificate:
<TABLE>
<S> <C>
Interest Coverage Ratio Commitment Fee Percentage
- ------------------------------------------------- --------------------------
Less than 2.25:1.00 0.50%
Equal to or greater than 2.25:1.00 but less than 0.375%
2.75:1.00
Equal to or greater than 2.75:1.00 0.25%
</TABLE>
If Company fails to deliver a Compliance Certificate by the time required by
subsection 5.1(iv), from such time the Compliance Certificate was required to
be delivered until delivery of such Compliance Certificate, the Commitment Fee
Percentage shall be automatically adjusted to 0.50% per annum.
"Common Stock" means the Common Stock and Non-Voting Common Stock
of Company, each series with a par value of $.01 per share.
"Company" has the meaning assigned to that term in the
introduction to this Agreement.
"Company Pledge Agreement" means the Pledge Agreement by and
between Company and Collateral Agent, substantially in the form of Exhibit
VIII annexed hereto, as such Company Pledge Agreement may hereafter be
amended, supplemented or otherwise modified from time to time.
"Company Securities" means the Preferred Stock of Company, $.01
par value per share, and Common Stock, collectively.
"Compliance Certificate" means a certificate substantially in the
form annexed hereto as Exhibit IV delivered to Lenders by Company pursuant to
subsection 5.1(iv).
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether in cash or accrued as liabilities) by
Company and its Consolidated Subsidiaries during such period that, in
conformity with GAAP, are included or required to be included in the property,
plant or equipment reflected in the consolidated balance sheet of Company and
its Consolidated Subsidiaries.
"Consolidated EBITDA" means, for any period, without duplication,
the sum of the amounts for such period of (i) Consolidated Net Income
excluding extraordinary items, (ii) provisions for taxes based on income,
(iii) Consolidated Interest Expense, (iv) to the extent Consolidated Net
Income has been reduced thereby, amortization expense, depreciation expense
and other non-cash expenses, and (v) other non-cash items reducing
Consolidated Net Income less non-cash items (other than those items relating
to sales-type leases) increasing Consolidated Net Income, all as determined on
a consolidated basis for Company and its Consolidated Subsidiaries in
conformity with GAAP.
"Consolidated Excess Cash Flow" means, for any period, the sum of
(x) Company's "net cash provided by (used in) operating activities" plus (y)
Company's "net cash provided by (used in) investing activities", such amounts
to be determined in a manner consistent with Company's practices as of the
date of this Agreement for the preparation of its consolidated statement of
cash flows as reflected on Exhibit XIV annexed hereto with such changes as may
be required in accordance with GAAP or as may be approved by Requisite
Lenders; provided, that Company may exclude Net Cash Proceeds of Asset Sales
from inclusion in the foregoing clauses (x) or (y) to the extent that such Net
Cash Proceeds are being held for reinvestment in accordance with subsection
2.4A(ii)(a), minus, without duplication, (i) voluntary and scheduled
repayments of Funded Debt made by Company which result in a permanent
reduction of Company's Indebtedness, and (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 Asset Sales applied to the prepayment of Loans
pursuant to subsection 2.4A(ii)(a) of this Agreement, (2) net cash proceeds
received from the sale or discount of notes, accounts receivable, contracts,
leases or other receivables to the extent sold or discounted in connection
with the Alarm Services Contract Securitization Facility and (3) Net Reversion
Amounts applied to the prepayment of Loans pursuant to subsection 2.4A(ii)(c)
of this Agreement.
"Consolidated Interest Expense" means, for any period, total
interest expense (including that portion attributable to Capital Leases in
accordance with GAAP and capitalized interest) of Company and its Consolidated
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of Company and its Consolidated Subsidiaries, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and with respect to any sale, discount or other
financing of receivables and net costs under Interest Rate Agreements but
excluding, however, the amortization of the costs of issuance and original
issuance discount related to the 9 1/8% Subordinated Notes, the New Senior
Subordinated Notes and any fees or other similar financing costs payable in
connection with the Existing Term Loan Agreement, the Receivables Facilities,
the Existing L/C Agreement, the Existing Revolving Credit Agreement or this
Agreement which are capitalized by Company.
"Consolidated Net Income" means, for any period, the net income
(or loss) of Company and its Consolidated Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined in conformity
with GAAP; provided that there shall be excluded (i) the income (or loss) of
any Person (other than a Subsidiary of Company) in which any other Person
(other than Company or any of its Subsidiaries) has a joint interest, except to
the extent of the amount of dividends or other distributions actually paid to
Company or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a
Subsidiary of Company or is merged into or consolidated with Company or any of
its Subsidiaries or that Person's assets are acquired by Company or any of its
Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary, and
(iv) any after-tax gains or losses attributable to Asset Sales or returned
surplus assets of any Pension Plan.
"Consolidated Net Worth" means, as at any date of determination,
the sum of the capital stock and additional paid-in capital plus retained
earnings (or minus accumulated deficit) of Company and its Consolidated
Subsidiaries and Joint Ventures on a consolidated basis calculated in
conformity with GAAP, excluding all effects of foreign currency exchange
adjustments under FASB No. 52.
"Consolidated Subsidiaries" means all Subsidiaries of Company
other than BW-Other Corporation.
"Contingent Obligation", as applied to any Person, means any
direct or indirect liability, contingent or otherwise, of that Person (i) with
respect to any indebtedness, lease, dividend or other obligation of another if
the primary purpose or intent thereof by the Person incurring the Contingent
Obligation is to provide assurance to the obligee of such obligation of
another that such obligation of another will be paid or discharged, or that
any agreements relating thereto will be complied with, or that the holders of
such obligation will be protected (in whole or in part) against loss in
respect thereof, (ii) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings, or (iii) under Currency Agreements or Interest Rate
Agreements. Contingent Obligations shall include, without limitation, (a) the
direct or indirect guaranty, endorsement (otherwise than for collection or
deposit in the ordinary course of business), co-making, discounting with
recourse or sale with recourse by such Person of the obligation of another, and
(b) any liability of such Person for the obligations of another through any
agreement (contingent or otherwise) (x) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), (y) to
maintain the solvency or any balance sheet item, level of income or financial
condition of another, or (z) to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to an
agreement, if in the case of any agreement described under subclauses (x) or
(y) of this sentence the primary purpose or intent thereof is as described in
the preceding sentence. The amount of any Contingent Obligation shall be
equal to the amount of the obligation so guaranteed or otherwise supported.
"Contractual Obligation", as applied to any Person, means any
provision of any security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument
to which that Person is a party or by which it or any of its properties is
bound or to which it or any of its properties is subject.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
Company or any of its Consolidated Subsidiaries against fluctuations in
currency values; provided that the counterparty to any such agreement shall be
a Lender or any of its Affiliates or ML & Co. or any of its Affiliates or any
other Person reasonably acceptable to Agents and Requisite Lenders.
"Defense Investigative Service Letter" means that certain letter
from J. William Leonard, Assistant Deputy Director (Industrial Security) of
Defense Investigative Service to Joseph Adorjan, President of Company.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Discontinued Operations" means BW-Other Corporation, the courier
services business unit and all other entities treated as discontinued
operations in accordance with GAAP.
"Division" means any of the guard services or alarm services
business units of Company.
"Dollars" and the sign "$" means the lawful money of the United
States of America.
"Eligible Assignee" means (A) (i) a commercial bank organized
under the laws of the United States or any state thereof; (ii) a savings and
loan association or savings bank organized under the laws of the United States
or any state thereof; (iii) a commercial bank organized under the laws of any
other country or a political subdivision thereof; provided that (x) such bank
is acting through a branch or agency located in the United States or (y) such
bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iv) any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses including insurance companies,
mutual funds and lease financing companies; and (B) any Lender and any
Affiliate of any Lender; provided that no Affiliate of Company shall be an
Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is, or was at any time, maintained or
contributed to by any Loan Party or any of its ERISA Affiliates.
"Environmental Claim" means any written notice of violation,
claim, demand or other order or direction (conditional or otherwise) by any
governmental authority or any Person for personal injury (including sickness,
disease or death), tangible or intangible property damage, damage to the
environment, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, resulting from or based
upon (i) the existence, or the continuation of the existence, of a Release
(whether sudden or non-sudden or accidental or non-accidental), of, or
exposure to, any Hazardous Material, in, into or onto the environment at, in,
by, from or related to any Facility, (ii) the transportation, storage,
treatment or disposal of Hazardous Materials in connection with the operation
of any Facility, or (iii) the violation, or alleged violation, of any
statutes, ordinances, orders, rules, regulations, permits or licenses of or
from any governmental authority, agency or court relating to Hazardous
Materials with respect to the Facilities.
"Environmental Laws" means all laws relating to fines, orders,
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of
Hazardous Materials and to the generation, storage, transportation, or
disposal of Hazardous Materials, in any manner applicable to Company or any
of its Subsidiaries or any or their respective properties, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air
Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601 et seq.), the Occupational Safety and Health Act (29
U.S.C. Section 651 et seq.) and the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. Section 11001 et seq.), each as amended or
supplemented, and any analogous future or present local, state and federal
statutes and regulations promulgated pursuant thereto, each as in effect as of
the date of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.
"ERISA Affiliate", as applied to any Person, means (i) any
corporation which is a member of a controlled group of corporations within the
meaning of Section 414(b) of the Internal Revenue Code of which that Person is
a member; (ii) any trade or business (whether or not incorporated) which is a
member of a group of trades or businesses under common control within the
meaning of Section 414(c) of the Internal Revenue Code of which that Person
is a member; and (iii) any member of an affiliated service group within the
meaning of Section 414(m) or (o) of the Internal Revenue Code of which that
Person, any corporation described in clause (i) above or any trade or business
described in clause (ii) above is a member. After Company's spin-off of
Borg-Warner Automotive, Inc., Borg-Warner Automotive, Inc. and its
Subsidiaries shall not be ERISA Affiliates of Company with respect to events
occurring after such spin-off unless the Company is liable under the Code or
ERISA with respect to such event.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to
any Pension Plan which is not subject to the provision for waiver of the
30-day notice requirement to the PBGC (excluding a reportable event described
in PBGC Regulation Section 2615.23 arising out of the Company's spin-off of
Borg-Warner Automotive, Inc.); (ii) the failure to meet the minimum funding
standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make on its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension
Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to
terminate such plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the withdrawal by a Loan Party or any of its ERISA Affiliates from
any Pension Plan with two or more contributing sponsors or the termination of
any such Pension Plan resulting in liability pursuant to Sections 4063 or 4064
of ERISA; (v) the institution by the PBGC of proceedings to terminate any
Pension Plan, or the occurrence of any event or condition which might
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; (vi) the imposition of liability on a
Loan Party or any of its ERISA Affiliates pursuant to Sections 4062(e) or 4069
of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii)
the withdrawal of a Loan Party or any of its ERISA Affiliates in a complete or
partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA)
from any Multiemployer Plan if there is any potential liability therefor, or
the receipt by a Loan Party or any of its ERISA Affiliates of notice from any
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Sections 4241 or 4245 of ERISA, or that it intends to terminate or has
terminated under Sections 4041A or 4042 of ERISA; (viii) the occurrence of an
act or omission which could give rise to the imposition on a Loan Party or any
of its ERISA Affiliates of any material fines, penalties, taxes or related
charges under Chapter 43 of the Internal Revenue Code or under Sections 409,
502(c), (i) or (l) or 4071 of ERISA in respect of any Employee Benefit Plan;
(ix) the assertion of a material claim (other than routine claims for
benefits) against any Employee Benefit Plan other than a Multiemployer Plan or
the assets thereof for which any Loan Party or any of its ERISA Affiliates may
be liable, or against any Loan Party or any of its ERISA Affiliates in
connection with any such plan which could reasonably be expected to be
successful; (x) the receipt from the Internal Revenue Service of notice of the
failure of any Pension Plan to qualify under Section 401(a) of the Internal
Revenue Code, or the failure of any trust forming part of any Pension Plan to
fail to qualify for exemption from taxation under Section 401(a) of the
Internal Revenue Code if the resulting fines, penalties and related charges
could reasonably be expected to be material; or (xi) the imposition of a Lien
pursuant to Sections 401(a)(29) or 412(n) of the Internal Revenue Code or
pursuant to ERISA with respect to any Pension Plan.
"Eurodollar Rate" means, for any Interest Rate Determination Date,
the arithmetic average (rounded upwards to the nearest 1/100 of 1%) of the
offered quotation, if any, to first class banks in the Eurodollar market by
each of the Reference Lenders for Dollar deposits of amounts in immediately
available funds comparable to the principal amount of the Eurodollar Rate Loan
of that Reference Lender for which the Eurodollar Rate is being determined with
maturities comparable to the Interest Period for which such Eurodollar Rate
will apply as of approximately 10:00 A.M. (New York time) two Business Days
prior to the commencement of such Interest Period. If any Reference Lender
fails to provide its offered quotation to Administrative Agent, the Eurodollar
Rate shall be determined on the basis of the offered quotation(s) by the other
Reference Lender(s).
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in Section 7.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Existing Indebtedness" means outstanding Indebtedness of Company
and its Consolidated Subsidiaries listed in Schedule 6.1 annexed hereto.
"Existing L/C Agreement" has the meaning assigned to that term in
the introduction to this Agreement.
"Existing Letters of Credit" means the letters of credit listed on
Schedule 2.9 annexed hereto (but not any refinancings, renewals or extensions
thereof).
"Existing Revolving Credit Agreement" has the meaning assigned to
that term in the introduction to this Agreement.
"Existing Term Loan Agreement" has the meaning assigned to that
term in the introduction to this Agreement.
"Facility" or "Facilities" means, as at any date of determination,
any and all real property (including all buildings, fixtures or other
improvements located thereon) owned, leased or operated by Company or any of
its Subsidiaries as at such date.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by Administrative
Agent from three Federal funds brokers of recognized standing selected by
Administrative Agent.
"Fiscal Year" means the fiscal year of Company and its
Subsidiaries ended on December 31 of each calendar year.
"Foreign Entity" means any Subsidiary of Company or Joint Venture
of Company either (i) more than 80% of the sales, earnings or assets
(determined on a consolidated basis) of which are located or derived from
operations outside of the United States of America or (ii) which is a
"controlled foreign corporation" within the meaning of Section 952 of the
Internal Revenue Code.
"Funded Debt", as applied to any Person, means all Indebtedness of
that Person that by its terms or by the terms of any instrument or agreement
relating thereto matures more than one year from, or is directly renewable or
extendable at the option of the debtor to a date more than one year from
(including an option of the debtor under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
one year or more from), the date of the creation thereof.
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on application thereof
set forth in subsection 1.2, generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, that are applicable to the circumstances as of
the date of determination.
"Government Acts" has the meaning assigned to that term in
subsection 2.9H.
"Guarantor" means the Borg-Warner Guarantor Subsidiaries under the
applicable Loan Guaranty.
"Hazardous Materials" means (i) any oil, petroleum or petroleum
derived substance, any drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil, any
flammable substances or explosives, any radioactive materials, any hazardous
wastes or substances, any toxic wastes or substances or any other materials or
pollutants which (a) pose a hazard to any property of Company or any of its
Subsidiaries or to Persons on or about such property or (b) cause such
property to be in violation of any Environmental Laws, (ii) asbestos in any
form which is or could become friable, urea formaldehyde foam insulation,
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million;
(iii) any chemical, material or substance defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous waste," "restricted hazardous waste," or
"toxic substances" or words of similar import under any applicable local,
state or federal law or under the regulations adopted or publications
promulgated pursuant thereto, including, without limitation, Environmental
Laws, and (iv) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority having
jurisdiction over Company or any of its Subsidiaries or any of their
respective properties.
"Indebtedness", as applied to any Person, means (i) all
indebtedness for borrowed money, whether or not evidenced by a promissory
note, draft or similar instrument, (ii) that portion of obligations with
respect to Capital Leases that is properly classified as a liability on a
balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money, (iv) any obligation owed for all or any part of the deferred
purchase price of property or services, which purchase price is (y) due more
than six months from the date of incurrence of the obligation in respect
thereof, or (z) evidenced by a note or similar written instrument, and (v) all
indebtedness secured by any Lien on any property or asset owned or held by
that Person regardless of whether the indebtedness secured thereby shall have
been assumed by that Person or is nonrecourse to the credit of that Person.
"Industry Standards" has the meaning assigned to that term in
subsection 5.4.
"Interest Coverage Ratio" means the ratio of Consolidated EBITDA to
Consolidated Interest Expense.
"Interest Payment Date" means, with respect to any Eurodollar Rate
Loan, the last day of each Interest Period applicable to such Loan; provided
that in the case of each Interest Period of longer than three months,
"Interest Payment Date" shall also include each Interest Period Anniversary
Date for such Interest Period.
"Interest Period" means any interest period applicable to a Loan
as determined pursuant to subsection 2.2B.
"Interest Period Anniversary Date" means, for each Interest Period
applicable to a Eurodollar Rate Loan that is longer than three months, each
three-month anniversary of the commencement of that Interest Period.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect Company or any of its
Subsidiaries against fluctuations in interest rates; provided that the
counterparty to any such agreement shall be a Lender or any of its respective
Affiliates or ML & Co. or any of its Affiliates or any other Person reasonably
acceptable to Agents; provided further that the calculation of payments for
early termination shall be made on a reasonable basis in accordance with
customary industry practices.
"Interest Rate Determination Date" means each date for calculating
the Eurodollar Rate for purposes of determining the interest rate in respect
of an Interest Period. The Interest Rate Determination Date for any Interest
Period shall be the second Business Day prior to the first day of such
Interest Period for any Eurodollar Rate Loan.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended to the date hereof and from time to time hereafter.
"Investment", as applied to any Person, means any direct or
indirect purchase or other acquisition by that Person of, or a beneficial
interest in, stock or other Securities of any other Person, or any direct or
indirect loan, advance (other than advances to employees for moving and travel
expenses, drawing accounts and similar expenditures in the ordinary course of
business) or capital contribution by that Person to any other Person,
including all indebtedness and accounts receivable from that other Person that
are not current assets or did not arise from sales to that other Person in the
ordinary course of business. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such investment.
"Issuing Lender" means, with respect to any Letter of Credit, any
Lender, including the Agents, that issues such Letter of Credit determined as
provided in subsection 2.9.
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal form;
provided that, as to any such arrangement in corporate form, such corporation
shall not, as to any Person of which such corporation is a Subsidiary, be
considered to be a Joint Venture to which such Person is a party.
"Lender" and "Lenders" means the persons identified as "Lenders"
and listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 9.1.
"Letter of Credit" means any of the Commercial Letters of Credit
or Standby Letters of Credit issued or to be issued by Issuing Lenders for the
account of Company pursuant to subsection 2.9 and for the purposes described
in subsection 2.5C.
"Letter of Credit Request" means a request substantially in the
form of Exhibit XIII annexed hereto with respect to a proposed issuance of a
Letter of Credit.
"Letter of Credit Usage" means, with respect to any Letter of
Credit, as at any date of determination, the sum of (i) the maximum aggregate
amount which is or at any time thereafter may become available for drawing
under such Letter of Credit then outstanding plus (ii) the aggregate amount of
all drawings under such Letter of Credit honored by any Issuing Lender and not
theretofore reimbursed by Company.
"Lien" means any lien, mortgage, deed of trust, deed to secure
debt, pledge, security interest, charge or encumbrance of any kind (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Loan" or "Loans" means one or more of the loans made by Lenders
to Company pursuant to subsection 2.1A.
"Loan Documents" means this Agreement, the Letters of Credit and
applications for such Letters of Credit, the Notes, the Loan Guaranties and
the Collateral Documents.
"Loan Guaranties" means the Borg-Warner Subsidiary Guaranty.
"Loan Parties" means Company and the Borg-Warner Subsidiaries,
collectively.
"Margin Stock" has the meaning assigned to that term in Regulation
U of the Board of Governors of the Federal Reserve System as in effect from
time to time.
"Material Adverse Effect" means (i) a material adverse effect upon
the business, operations, properties, assets, prospects or condition
(financial or otherwise) of Company and its Consolidated Subsidiaries taken as
a whole or (ii) the material impairment of the ability of any Loan Party to
perform its obligations under any Loan Document or of any Agent or any Lender
to enforce or collect the Obligations, including the obligation of any Loan
Party to perform its guaranty of the Obligations.
"Material Subsidiary" means (i) each Subsidiary of Company
identified as a "Material Subsidiary" on Schedule 1.1 annexed hereto; (ii) any
other Subsidiary of Company now existing or hereafter acquired or formed by
Company which (x) for the most recent fiscal year of Company commencing on or
after January 1, 1996 accounted for more than 3% of the consolidated revenues
of Company, or (y) as at the end of such fiscal year, was the owner of more
than 3% of the consolidated assets, all as shown on the consolidated financial
statements of Company for such fiscal year; and (iii) any other Subsidiary so
designated by Company, by an Officers' Certificate delivered to Administrative
Agent, together with the documents required pursuant to subsection 5.11.
"Maturity Date" means March 31, 2002.
"ML & Co." or "ML" means Merrill Lynch & Co., Inc., a Delaware
corporation.
"MLCP" means Merrill Lynch Capital Partners, Inc., a Delaware
corporation.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 3(37) of ERISA to which Company or any of its ERISA Affiliates is
contributing or ever has contributed or to which Company or any of its ERISA
Affiliates has, or ever has had, an obligation to contribute.
"NationsBank" has the meaning assigned to that term in the
introduction to this Agreement.
"Net Cash Proceeds" means, in the case of any Asset Sale, cash
payments (including any cash received by way of deferred payment pursuant to a
note receivable or otherwise, but only as and when so received) received from
an Asset Sale, net of costs of sale (including without limitation payment of
the outstanding principal amount of, premium or penalty, if any, and interest
on any Indebtedness (other than the Loans) secured by a Lien on the asset or
assets which are the subject of such Asset Sale and required to be repaid
under the terms thereof as a result of such Asset Sale) and taxes paid or
payable within two years of the date of such Asset Sale as a result thereof.
"New Senior Subordinated Notes" means Company's $125,000,000 in
initial aggregate principal amount of 9 5/8% new Senior Subordinated Notes due
March 15, 2007.
"New Senior Subordinated Note Indenture" means the indenture
pursuant to which the New Senior Subordinated Notes were issued, as such
indenture may be amended from time to time to the extent permitted under this
Agreement.
"9 1/8% Subordinated Notes" means Company's $150,000,000 in
initial aggregate principal amount of 9 1/8% Senior Subordinated Notes due
2003.
"9 1/8% Subordinated Note Indenture" means the indenture pursuant
to which the 9 1/8% Subordinated Notes were issued, as such indenture may be
amended from time to time to the extent permitted under this Agreement.
"Notes" means the promissory notes of Company issued pursuant to
subsection 2.1E and in substantially the form of Exhibit III annexed hereto.
"Notice of Borrowing" means a notice substantially in the form of
Exhibit I annexed hereto with respect to a proposed borrowing.
"Notice of Conversion/
Continuation" means a notice substantially in the form of Exhibit II annexed
hereto with respect to a proposed conversion or continuation.
"Obligations" means all obligations of every nature of Company and
its Subsidiaries from time to time owed to Agents or Lenders or any of them
under the Loan Documents. Time is of the essence in the performance of all
Obligations, except as otherwise expressly provided in this Agreement.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its Chairman of the
Board (if an officer) or its Chief Executive Officer or its President or one
of its Vice Presidents and by its Chief Financial Officer, its Chief
Accounting Officer, its Treasurer or its Assistant Treasurer; provided that
any Officers' Certificate required to be delivered by Company on the Closing
Date may be executed on behalf of Company by any one of the foregoing
officers; and provided further that every Officers' Certificate with respect
to the compliance with a condition precedent to the making of any Loans
hereunder shall include (i) a statement that the officer or officers making or
giving such Officers' Certificate have read such condition and any definitions
or other provisions contained in this Agreement relating thereto, (ii) a
statement that, in the opinion of the signers, they have made or have caused
to be made such examination or investigation as is necessary to enable them to
express an informed opinion as to whether or not such condition has been
complied with, and (iii) a statement as to whether, in the opinion of the
signers, such condition has been complied with.
"Old Armored" means Wells Fargo Armored Service Corporation, a
Delaware corporation.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto).
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue
Code or Section 302 of ERISA.
"Permitted Acquisitions" has the meaning assigned to that term in
subsection 6.7(ii).
"Permitted Encumbrances" means the following types of Liens (other
than any Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges
or claims the payment of which is not at the time required by subsection
5.3;
(ii) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent
or being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor;
(iii) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment
insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) (y) Any attachment or judgment Lien not in excess of
$1,000,000 (exclusive of any amount adequately covered by insurance as
to which the insurance company has acknowledged coverage); and (z) any
other attachment or judgment Lien unless the judgment it secures shall,
within 60 days after the entry thereof, not have been discharged or
execution thereof stayed pending appeal, or shall not have been
discharged within 60 days after the expiration of any such stay;
(v) Leases or subleases granted to others not interfering
in any material respect with the business of Company or any of its
Subsidiaries;
(vi) Easements, rights-of-way, restrictions, minor defects
or irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Company and its Consolidated Subsidiaries, taken as a whole;
(vii) Any interest or title of a lessor under any lease
permitted by this Agreement;
(viii) Liens arising from filing UCC financing statements
regarding leases permitted by this Agreement; and
(ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions
thereof.
"Pledge Agreements" means Company Pledge Agreement and the
Borg-Warner Subsidiary Pledge Agreement; provided that none of Company or any
Borg-Warner Subsidiary shall be required to pledge more than 65% of the shares
of capital stock of any Subsidiary which is a Foreign Entity or be required to
guaranty any of the Loans or pledge the shares of capital stock of any
Subsidiary otherwise required to be pledged as collateral to the extent that
such guaranty or pledge would constitute an investment of earnings in United
States property under Section 956 (or a successor provision) of the Internal
Revenue Code that would trigger an increase in income of any United States
shareholder of the guarantor or pledgor of such collateral pursuant to Section
951 (or a successor provision) of the Internal Revenue Code.
"Potential Event of Default" means a condition or event that,
after notice or lapse of time or both, would constitute an Event of Default if
that condition or event were not cured or removed within any applicable grace
or cure period.
"Prime Rate" means the rate that Bankers announces from time to
time as its prime lending rate, as in effect from time to time. The Prime
Rate is a reference rate and does not necessarily represent the lowest or best
rate actually charged to any customer. Bankers may make commercial loans or
other loans at rates of interest at, above or below the Prime Rate.
"Pro Rata Share" means, with respect to the Commitments of any
Lender, the percentage designated as such Lender's Pro Rata Share set forth
opposite the name of such Lender in Schedule 2.1A annexed hereto.
"Receivables Facilities" means the Trade Receivables Facility and
the Alarm Services Contract Securitization Facility.
"Reference Lenders" means the Agents.
"Register" has the meaning assigned to that term in subsection
2.1D(i).
"Refinancings" has the meaning assigned to that term in the
introduction to this Agreement.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Reinvested Asset Sale Proceeds" means the amount of Net Cash
Proceeds of Asset Sales received by Company and its Subsidiaries which Net
Cash Proceeds are reinvested in like assets or in other assets used in the
business of Company and its Consolidated Subsidiaries within twelve months of
the receipt of such Net Cash Proceeds up to a maximum aggregate amount of
Reinvested Asset Sale Proceeds of $10,000,000 in any Fiscal Year.
Notwithstanding the foregoing, if Company and its Subsidiaries have not used
any portion of such $10,000,000 in any Fiscal Year (such unused portion being
referred to as the "Unused Reinvestment Amount"), Company and its Subsidiaries
may, in the immediately succeeding Fiscal Year, reinvest Net Cash Proceeds of
Asset Sales in like assets or other assets used in the business of Company and
its Consolidated Subsidiaries in an amount equal to $10,000,000 plus the
cumulative amount of any Unused Reinvestment Amount; provided, that the maximum
aggregate amount of all Reinvested Asset Sale Proceeds since the Closing Date
shall not exceed $35,000,000.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration in,
by or from or related to any Facility into the indoor or outdoor environment,
including the movement of any Hazardous Materials through the air, soil,
surface water, groundwater or property.
"Requisite Lenders" means Lenders having more than 50% of the
Commitments or, if the Commitments have been terminated, Lenders having more
than 50% of the aggregate principal amount of the Loans and Letter of Credit
Usage.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of Company now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock to the holders of that class, (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of Company now or hereafter outstanding, (iii) any payment or prepayment of
principal of, premium, if any, or interest on, or redemption, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, any
Subordinated Indebtedness and (iv) any payment made to retire, or to obtain
the surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding.
"Scheduled Commitment Reductions" means scheduled reductions of
Commitments pursuant to subsection 2.4H(ii).
"Scheduled Commitments Reduction Amount" means, with respect to the
mandatory reductions of the Commitments required to be made pursuant to
subsection 2.4H(ii), for each date set forth below, the correlative amount set
forth opposite thereto, as adjusted by operation of the following sentence:
Scheduled Commitments
Date Reduction Amount
---- ---------------------
September 30, 1999 $ 10,000,000
March 31, 2000 10,000,000
September 30, 2000 10,000,000
March 31, 2001 15,000,000
September 30, 2001 15,000,000
March 31, 2002 225,000,000
------------
$285,000,000
On any date the Commitments are permanently reduced pursuant to subsection
2.4G or subsection 2.4H, the amount reduced shall be applied pro rata to
reduce the amounts set forth above.
"Securities" means any stock, shares, voting trust certificates,
bonds, debentures, options, warrants, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities" or any certificates
of interest, shares or participations in temporary or interim certificates for
the purchase or acquisition of, or any right to subscribe to, purchase or
acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness
incurred by any Foreign Entity or Joint Venture to which Company or any of its
Subsidiaries is a party for working capital and general business purposes,
(ii) obligations of Company or any of its Subsidiaries with respect to capital
calls or similar requirements in respect of Joint Ventures to which Company or
such Subsidiary is a party, (iii) workers' compensation liabilities of Company
or any of its Subsidiaries, (iv) the obligations of third party insurers of
Company or any of its Subsidiaries arising by virtue of the laws of any
jurisdiction requiring third party insurers, (v) Indebtedness in respect of
industrial revenue or development bonds or financings, (vi) obligations with
respect to leases, (vii) performance, payment, deposit or surety obligations
of Company or any of its Subsidiaries, in any case if required by law or
governmental rule or regulation or in accordance with custom or practice in
the industry, or (viii) Indebtedness or any other obligation of Company or any
of its Subsidiaries incurred in the ordinary course of its business and
permitted under this Agreement.
"Stonington" means Stonington Partners, L.P., a Delaware limited
partnership.
"Subordinated Indebtedness" means the 9 1/8% Subordinated Notes
and the New Senior Subordinated Notes and any other unsecured Indebtedness of
Company which is subordinated in right of payment to the Obligations on terms
and conditions, including, without limitation, with respect to maturities,
covenants, defaults, remedies and subordination provisions, which are
reasonably acceptable to Agents and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of stock or other ownership interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Total Utilization of Commitments" means, as at any date of
determination, (i) the aggregate principal amount of all outstanding Loans
plus (ii) the Letter of Credit Usage.
"Trade Receivables Facility" means (i) Company's off-balance sheet
receivables purchase facility providing for the purchase of up to $120,000,000
of receivables from the Company and its Subsidiaries, as such Trade
Receivables Facility is in effect as of the Closing Date and (ii) any other
off-balance sheet receivables purchase facility, which facility has been
consented to in writing by Requisite Lenders, such consent not to be
unreasonably withheld, in each case as they may hereafter be amended,
supplemented or otherwise modified from time to time to the extent permitted
under this Agreement.
"Transaction Costs" means the fees, costs and expenses payable by
Company pursuant hereto and other fees, costs and expenses payable by Company
or any of its Subsidiaries in connection with the Refinancings and the related
transactions.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement
For purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with
GAAP. Financial statements and other information required to be delivered by
Company to Lenders pursuant to subsection 5.1 shall be prepared in accordance
with GAAP as in effect at the time of such preparation. Calculations in
connection with the definitions, covenants and other provisions of this
Agreement shall utilize accounting principles and policies in conformity with
those used to prepare the financial statements included in Borg-Warner's
Report on Form 10-K for the fiscal year ended December 31, 1996.
1.3 Other Definitional Provisions
Any reference in this Agreement (i) to a Section, a Schedule or an
Exhibit is a reference to a section hereof, a schedule hereto or an exhibit
hereto, respectively; and (ii) to a subsection or a clause is, unless
otherwise stated, a reference to a subsection or a clause of the Section or
subsection in which the reference appears. In this Agreement the singular
includes the plural and the plural the singular; "hereof," "herein," "hereto,"
"hereunder" and the like mean and refer to this Agreement as a whole and not
merely to the specific section, paragraph or clause in which the respective
word appears. Words importing any gender include the other genders;
references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing such statute. References to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form. The words "including," "includes," and
"include" shall be deemed to be followed by the words "without limitation."
References to agreements and other contractual instruments shall be deemed to
include all subsequent amendments, restatements, supplements, assignments and
other modifications thereto, but only to the extent such amendments,
restatements, supplements, assignments, and other modifications are not
prohibited by the terms of this Agreement. References to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons.
SECTION 2.
Amounts and Terms of Commitments and Loans; Notes; Letters of Credit
2.1 Loans and Notes
A. Commitments. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Company
herein set forth, each Lender hereby severally agrees to lend to Company from
time to time during the period from the Closing Date to but excluding the
Maturity Date its Pro Rata Share of the aggregate Commitments (as defined
below) to be used for the purposes identified in subsection 2.5A. Each
Lender's commitment to make Loans to Company pursuant to this subsection 2.1A
and to issue or participate in Letters of Credit pursuant to subsection 2.9A
is herein called its "Commitment" and such commitments of all Lenders in the
aggregate are herein called the "Commitments". Each Lender is identified as
such, and the initial amount of each such Lender's Commitment and its Pro Rata
Share of the Commitments, is set forth opposite its name on Schedule 2.1A
annexed hereto, and the aggregate initial amount of the Commitments is
$285,000,000. Each Lender's Commitment shall expire on the Maturity Date and
all Loans and all other amounts owed hereunder with respect to the Loans shall
be paid in full no later than that date. The amount of the Commitments shall
be reduced by the amount of all reductions thereof made pursuant to
subsections 2.4G and 2.4H through the date of determination. In no event
shall the aggregate outstanding principal amount of the Loans from any Lender
at any time exceed its Pro Rata Share of the amount determined in accordance
with clause (i) of the last paragraph of this subsection 2.1A.
Subject to subsection 2.6D, all Loans under this Agreement shall
be made by Lenders simultaneously and proportionately to their Pro Rata
Shares, it being understood that no Lender shall be responsible for any
default by any other Lender in that other Lender's obligation to make Loans
hereunder nor shall the Commitment of any Lender be increased or decreased as
a result of the default by any other Lender in that other Lender's obligation
to make Loans hereunder. Amounts borrowed by Company under this subsection
2.1A may be repaid and, to but excluding the Maturity Date, reborrowed.
Notwithstanding the foregoing provisions of this subsection 2.1A,
the Loans shall be subject to the following limitations in the amounts and
during the periods indicated:
(i) The amount available for borrowing under the
Commitments as of any time of determination shall not exceed an amount
equal to the amount of the Commitments minus the amount of the aggregate
Letter of Credit Usage; provided that to the extent the proceeds of such
borrowings are to be then applied to reimburse any Issuing Lender for
the amount of any drawings under any Letters of Credit honored by such
Issuing Lender and not theretofore reimbursed by Company, the amount
otherwise available for borrowing under the Commitments shall not be
reduced by the amount of the Letter of Credit drawings to be so
reimbursed; provided further, that the amount available for borrowing as
Loans, the proceeds of which are to be used for purposes other than the
reimbursement of any Issuing Lender for the amount of any drawings under
any Letter of Credit honored by such Issuing Lender and not theretofore
reimbursed by Company, shall not exceed $155,000,000; and
(ii) At no time shall the Total Utilization of Commitments
exceed the aggregate Commitments.
B. Notice of Borrowing. Subject to subsection 2.1A, whenever
Company desires to borrow under this subsection 2.1, Company shall deliver to
Administrative Agent a Notice of Borrowing (i) no later than 11:00 A.M. (New
York time) on the proposed Funding Date (in the case of a requested Base Rate
Loan) or (ii) no later than 11:00 A.M. (New York time) at least three Business
Days (in the case of a requested Eurodollar Rate Loan) in advance of the
proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed
Funding Date (which shall be a Business Day), (ii) the amount of the proposed
Loans, (iii) in the case of any Loans requested to be made prior to the
earlier to occur of (x) the date which is ninety (90) days after the Closing
Date or (y) the date on which Administrative Agent notifies Company that the
primary syndication period for the Loans has been completed, that such Loans
shall initially be Base Rate Loans or Eurodollar Rate Loans which have
Interest Periods of one month, (iv) in the case of Loans requested to be made
thereafter, whether such Loans are initially to consist of Base Rate Loans or
Eurodollar Rate Loans or a combination thereof, and (v) if such Loans, or any
portion thereof, are initially to be Eurodollar Rate Loans, the amounts
thereof and the initial Interest Periods therefor. Loans made as Base Rate
Loans shall be in an aggregate minimum amount of $1,000,000 and integral
multiples of $250,000 in excess of that amount; Loans made as Eurodollar Rate
Loans shall be in an aggregate minimum amount of $5,000,000 and integral
multiples of $1,000,000 in excess of that amount.
Loans may be continued as or converted into Base Rate Loans or
Eurodollar Rate Loans in the manner provided in subsection 2.2D; provided that
the Loans made during the period from and including the Closing Date and
ending on the earlier of (x) the date which is ninety (90) days after the
Closing Date or (y) the date on which the Administrative Agent notifies the
Company that the primary syndication period for the Loans has been completed,
may not be converted other than into Base Rate Loans or Eurodollar Rate Loans
with an Interest Period of one month. In lieu of delivering the
above-described Notice of Borrowing, Company may give Administrative Agent
telephonic notice by the required time of any proposed borrowing under this
subsection 2.1; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Borrowing to Administrative Agent on or
prior to the Funding Date of the requested Loans.
Neither Administrative Agent nor any Lender shall incur any
liability to Company in acting upon any telephonic notice referred to above
that Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company
or for otherwise acting in good faith under this subsection 2.1B and, upon
funding of Loans by Lenders in accordance with this Agreement pursuant to any
telephonic notice, Company shall have effected Loans hereunder.
Except as provided in subsection 2.6D, a Notice of Borrowing for a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be
irrevocable on and after the related Interest Rate Determination Date, and
Company shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds. Promptly after receipt of a Notice
of Borrowing pursuant to subsection 2.1B (or telephonic notice thereof),
Administrative Agent shall notify each Lender of the proposed borrowing. Each
Lender shall make the amount of its Loan available to Administrative Agent, in
same day funds, at the office of Administrative Agent located at One Bankers
Trust Plaza, New York, New York not later than 12:00 Noon (New York time) on
the Funding Date. Upon satisfaction or waiver of the conditions precedent
specified in subsections 3.1 (in the case of the initial Loans) and 3.2 (in
the case of all Loans), Administrative Agent shall make the proceeds of such
Loans available to Company on such Funding Date by causing an amount of same
day funds equal to the proceeds of all such Loans received by Administrative
Agent to be credited to the account of Company at such office of
Administrative Agent.
Unless Administrative Agent shall have been notified by any Lender
prior to any Funding Date in respect of any Loans that such Lender does not
intend to make available to Administrative Agent such Lender's Loan on such
Funding Date, Administrative Agent may assume that such Lender has made such
amount available to Administrative Agent on such Funding Date and
Administrative Agent in its sole discretion may, but shall not be obligated to,
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest
thereon, for each day from such Funding Date until the date such amount is
paid to Administrative Agent, at the customary rate set by Administrative Agent
for the correction of errors among banks for three Business Days and
thereafter at the Base Rate. If such Lender does not pay such corresponding
amount forthwith upon Administrative Agent's demand therefor, Administrative
Agent shall promptly notify Company, and Company shall immediately pay such
corresponding amount to Administrative Agent. Nothing in this subsection 2.1C
shall be deemed to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that Company may have against
any Lender as a result of any default by such Lender hereunder.
D. Register.
(i) Administrative Agent shall maintain a register for the
recordation of the names and addresses of Lenders and the Commitment and Loans
of each Lender from time to time (the "Register"). The Register shall be
available for inspection by Company or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the
Commitment and the Loans from time to time of each Lender and each repayment
or prepayment in respect of the principal amount of the Loans of each Lender.
Any such recordation shall be conclusive and binding on Company and each
Lender, absent manifest error; provided that failure to make any such
recordation, or any error in such recordation, shall not affect any Lender's
Commitment or Company's Obligations in respect of any applicable Loans.
(iii) Each Lender shall record on its internal records the amount
of each Loan made by it and each payment in respect thereof. Any such
recordation shall be conclusive and binding on Company, absent manifest error;
provided that failure to make any such recordation, or any error in such
recordation, shall not affect any Lender's Commitment or Company's Obligations
in respect of any applicable Loans; and provided, further that in the event of
any inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern, absent manifest error.
(iv) Company, Administrative Agent and Lenders shall deem and
treat the Persons listed as Lenders in the Register as the holders and owners
of the corresponding Commitments and Loans listed therein for all purposes
hereof, and no assignment or transfer of any such Commitment or Loan shall be
effective, in each case unless and until an Assignment Agreement effecting the
assignment or transfer thereof shall have been accepted by Administrative
Agent and recorded in the Register as provided in subsection 9.1B(ii). Prior
to such recordation, all amounts owed with respect to the applicable
Commitment or Loan shall be owed to the Lender listed in the Register as the
owner thereof, and any request, authority or consent of any Person who, at the
time of making such request or giving such authority or consent, is listed in
the Register as a Lender shall be conclusive and binding on any subsequent
holder, assignee or transferee of the corresponding Commitment or Loans.
E. Notes. Company shall execute and deliver to each Lender on
the Closing Date a Note substantially in the form of Exhibit III annexed
hereto to evidence that Lender's Loans, in the principal amount of that
Lender's Commitment and with other appropriate insertions.
2.2 Interest on the Loans
A. Rate of Interest. Subject to the provisions of subsection
2.6, each Loan shall bear interest on the unpaid principal amount thereof from
the date made through maturity (whether by acceleration or otherwise) at a
rate determined by reference to the Base Rate or the Adjusted Eurodollar Rate;
provided that nothing herein shall entitle any Lender to charge or receive
interest in excess of the maximum rate allowed by applicable law. The
applicable basis for determining the rate of interest shall be selected by
Company initially at the time a Notice of Borrowing is given pursuant to
subsection 2.1B. The basis for determining the interest rate with respect to
any Loan may be changed from time to time pursuant to subsection 2.2D. If on
any day a Loan is outstanding with respect to which notice has not been
delivered to Administrative Agent in accordance with the terms of this
Agreement specifying the basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Base
Rate.
From the Closing Date through the first date following the first
anniversary of the Closing Date on which the Company delivers a Compliance
Certificate pursuant to subsection 5.1(iv)(b), the Loans shall bear interest
(except as provided for in the last sentence of this subsection 2.2A) as
follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus
0.75% per annum; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus 1.75% per annum.
On or after the first date following the first anniversary of the
Closing Date on which the Company delivers a Compliance Certificate pursuant
to subsection 5.1(iv)(b) through maturity, the Loans shall bear interest
(except as provided for in the last sentence of this subsection 2.2A) as
follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus
the applicable Base Rate margin (the "Base Rate Margin") set forth in
the table below; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the applicable Eurodollar Rate margin (the
"Eurodollar Rate Margin") set forth in the table below.
Interest Base Rate Eurodollar
Coverage Ratio Margin Rate Margin
- -------------- --------- -----------
Less than 2.25:1.00 1.00% 2.00%
Equal to or greater than 2.25:1.00 but 0.75% 1.75%
less than 2.75:1.00
Equal to or greater than 2.75:1.00 but 0.25% 1.25%
less than 3.25:1.00
Equal to or greater than 3.25:1:00 0.00% 1.00%
The applicable Base Rate Margin or the applicable Eurodollar Rate
Margin shall be the Base Rate Margin or the Eurodollar Rate Margin, as the
case may be, set forth in the table above opposite Company's Interest Coverage
Ratio for the four fiscal quarters ending as of the last day of the fiscal
quarter immediately preceding the fiscal quarter during which the
determination is being made as set forth in the Compliance Certificate
delivered pursuant to subsection 5.1(iv)(b), any required adjustment to become
automatically effective on the next succeeding Business Day following receipt
by the Administrative Agent of such Compliance Certificate. If Company fails
to deliver a Compliance Certificate by the time required by subsection
5.1(iv), from such time the Compliance Certificate was required to be
delivered until delivery of such Compliance Certificate, the Base Rate Margin
and the Eurodollar Rate Margin shall automatically be adjusted to 1.00% per
annum and 2.00% per annum, respectively.
B. Interest Periods. In connection with each Eurodollar Rate
Loan of Company, by giving notice as set forth in subsections 2.1B or 2.2D,
Company shall elect an interest period (each an "Interest Period") to be
applicable to such Eurodollar Rate Loan, which Interest Period shall be a one,
two, three or six month period; provided that:
(i) the Interest Period for any Loan shall commence on the
date of such Loan;
(ii) in the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on
which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that if any Interest Period in
respect of a Eurodollar Rate Loan would otherwise expire on a day that
is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on
the next preceding Business Day;
(iv) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to part (v) below, end on the last Business Day
of a calendar month;
(v) no Interest Period with respect to any Loan shall
extend beyond the Maturity Date;
(vi) no Interest Period may extend beyond a date on which
Company is required to make a prepayment of principal on the Loans
unless the aggregate principal amount of Base Rate Loans and Eurodollar
Rate Loans with Interest Periods expiring on or before such date equals
or exceeds the principal amount required to be paid on the Loans on such
date;
(vii) the Interest Period for a Loan that is converted
pursuant to subsection 2.6D shall commence on the date of such
conversion and shall expire on the date on which the Interest Period for
the Loans of the other Lenders that were not converted expires; and
(viii) there shall be outstanding at any time no more than
twenty-four (24) Interest Periods relating to Eurodollar Rate Loans.
C. Interest Payments. Subject to subsection 2.2E, interest
shall be payable on the Loans as follows:
(i) interest on each Base Rate Loan shall be payable in
arrears on and to each March 25, June 25, September 25, and December 25
of each year, commencing on June 25, 1997, upon any prepayment (other
than a voluntary prepayment on the Loans) of any such Loan (to the
extent accrued on the amount being prepaid) and at maturity; and
(ii) interest on each Eurodollar Rate Loan shall be payable
in arrears on and to each Interest Payment Date applicable to that Loan,
upon any prepayment of that Loan (to the extent accrued on the amount
being prepaid) and at maturity.
D. Conversion or Continuation. Subject to the provisions of
subsection 2.6, Company shall have the option (i) to convert at any time all
or any part of its outstanding Loans equal to $5,000,000 and integral
multiples of $1,000,000 in excess thereof (in the case of Loans to be
converted to Eurodollar Rate Loans) or $1,000,000 and integral multiples
thereof (in the case of Loans to be converted to Base Rate Loans), from Loans
bearing interest at a rate determined by reference to one basis to Loans
bearing interest at a rate determined by reference to an alternative basis or
(ii) upon the expiration of any Interest Period applicable to a Eurodollar
Rate Loan, to continue all or any portion of such Loan equal to $5,000,000 and
integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate
Loan and the succeeding Interest Period(s) of such continued Loan shall
commence on the last day of the Interest Period of the Loan to be continued;
provided, however, that a Eurodollar Rate Loan may only be converted into a
Loan bearing interest determined by reference to an alternative basis on the
expiration date of an Interest Period applicable thereto, and provided
further, that no outstanding Loan may be continued as, or be converted into, a
Eurodollar Rate Loan when any Event of Default or Potential Event of Default
has occurred and is continuing; provided further that the Loans made on the
Closing Date may not be converted other than into Base Rate Loans or
Eurodollar Rate Loans with an Interest Period of one month prior to the
earlier to occur of (x) the date which is ninety (90) days after the Closing
Date or (y) the date on which the Administrative Agent notifies the Company
that the primary syndication period for the Loans has been completed; and
provided further that, subject to the provisions of subsection 2.6, no
outstanding Eurodollar Rate Loan may be converted into a Base Rate Loan during
the period from December 15 of any year to, and including, January 15 of the
immediately succeeding year.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 1:00 P.M. (New York time) at least one
Business Day in advance of the proposed conversion/continuation date (in
the case of a conversion to a Base Rate Loan), or three Business Days in
advance of the proposed conversion/continuation date (in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan). A Notice of
Conversion/Continuation shall certify (i) the proposed conversion/
continuation date (which shall be a Business Day), (ii) the amount of the
Loan to be converted/continued, (iii) the nature of the proposed
conversion/continuation and (iv) in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan, (x) the requested Interest Period
and (y) that no Potential Event of Default or Event of Default has occurred
and is continuing. In lieu of delivering the above-described Notice of
Conversion/Continuation, Company may give Administrative Agent telephonic
notice by the required time of any proposed conversion/continuation under
this subsection 2.2D; provided that such notice shall be promptly confirmed
in writing by delivery of a Notice of Conversion/Continuation to
Administrative Agent on or before the proposed conversion/continuation
date.
Neither Administrative Agent nor any Lender shall incur any
liability to Company in acting upon any telephonic notice referred to above
that Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or
for otherwise acting in good faith under this subsection 2.2D and, upon
conversion/
continuation in accordance with this Agreement pursuant to any telephonic
notice, Company shall have effected such conversion or continuation, as the
case may be.
Promptly after receipt of a Notice of Conversion/
Continuation (or telephonic notice thereof), Administrative Agent shall notify
each Lender of the proposed conversion/
continuation. Except as provided in subsection 2.6D, a Notice of Conversion/
Continuation for conversion to, or continuation of, a Eurodollar Rate Loan (or
telephonic notice in lieu thereof) shall be irrevocable on and after the
related Interest Rate Determination Date, and Company shall be bound to
convert or continue in accordance therewith.
E. Default Rate; Post-Maturity Interest. Upon the occurrence
and during the continuation of an Event of Default, the interest rate payable
by Company with respect to principal of Loans and, to the extent permitted by
law, interest payments thereon not paid when due, shall be increased,
effective from and after the date of occurrence of such Event of Default, to a
rate that is two percent (2%) per annum in excess of the rate otherwise
payable under this Agreement (or, in the case of fees and other amounts due
hereunder, at a rate which is 2.00% per annum in excess of the interest rate
otherwise payable pursuant to subsection 2.2A of this Agreement for Base Rate
Loans); provided that, in the case of Eurodollar Rate Loans, upon the
expiration of the Interest Period in effect at the time any such increase in
interest rate is effective, such Eurodollar Rate Loans shall thereupon become
Base Rate Loans and thereafter bear interest payable upon demand at a rate
which is two percent (2%) per annum in excess of the interest rate otherwise
payable under this Agreement for Base Rate Loans. The rate provided in this
subsection 2.2E shall be reduced by two percent (2%) per annum to the rate
otherwise payable under this Agreement effective upon the cure pursuant to the
terms of this Agreement of all Events of Default giving rise to the increase
provided herein. No waiver of any Event of Default and no amendment to this
Agreement shall operate as a cure of any Event of Default unless expressly
stated in writing in such waiver or amendment. The payment or acceptance of
the increased rate provided by this subsection 2.2E shall not constitute a
waiver of any Event of Default or an amendment to this Agreement or otherwise
prejudice or limit any rights or remedies of any Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be
computed on the basis of a 360-day year and the actual number of days elapsed
in the period during which it accrues. In computing interest on any Loan, the
date of the making of such Loan or the first day of an Interest Period, as the
case may be, shall be included and the date of payment or the expiration date
of an Interest Period, as the case may be, shall be excluded; provided that if
a Loan is repaid on the same day on which it is made, one day's interest shall
be paid on that Loan.
2.3 Fees
A. Commitment Fees. Company agrees to pay to Administrative
Agent for distribution to each Lender in proportion to that Lender's Pro Rata
Share of the Commitments, commitment fees for the period from and including
the Closing Date to and excluding the date the Commitments terminate equal to
the average of the daily excess of the Commitments over the aggregate
principal amount of Loans outstanding multiplied by the Commitment Fee
Percentage then in effect, such commitment fees to be calculated on the basis
of a 360-day year and the actual number of days elapsed and to be payable in
arrears on but excluding March 25, June 25, September 25 and December 25 of
each year, commencing June 25, 1997, and ending upon and payable on the
earlier to occur of the termination of the Commitments or the Maturity Date.
For purposes of this subsection 2.3A, calculation of the amount of the
Commitments shall not give effect to any limitation of the amount available
for borrowing thereunder set forth in the numbered paragraphs of subsection
2.1A.
B. Other Fees. Company agrees to pay to the Agents, their
respective affiliates and the Lenders, as the case may be, such fees in the
amounts and at the times agreed upon between Company and such Agents, their
respective affiliates and Lenders.
2.4 Prepayments and Payments; Reductions in Commitments
A. Prepayments.
(i) Voluntary Prepayments.
(a) Company may, upon not less than one (1) Business Day's
prior written or telephonic notice confirmed in writing to
Administrative Agent (which notice Administrative Agent will promptly
transmit by telegram, telex or telephone to each Lender), at any time
and from time to time prepay any Loans in whole or in part in an
aggregate minimum amount of $1,000,000 and integral multiples thereof.
In the event that Company prepays any Eurodollar Rate Loan on a date
which is not the expiration date of the applicable Interest Period,
Company shall pay to Lenders any amounts due pursuant to subsection
2.6E. Notice of prepayment having been given as aforesaid, the
principal amount of the Loans specified in such notice shall become due
and payable on the prepayment date.
(b) In the event Company is entitled to replace a
non-consenting Lender pursuant to subsection 9.6B, Company shall have
the right, upon five Business Days' written notice to Administrative
Agent (which notice Administrative Agent shall promptly transmit to each
of the Lenders), to prepay all Loans, together with accrued and unpaid
interest, fees and other amounts owing to such non-consenting Lender in
accordance with subsection 9.6B so long as (1) in the case of the
prepayment of the Loans of any Lender pursuant to this subsection
2.4A(i)(b), the Commitment of such Lender is terminated concurrently
with such prepayment pursuant to subsection 2.4G(ii) (at which time
Schedule 2.1A shall be deemed modified to reflect the changed
Commitments), and (2) in the case of the prepayment of the Loans of any
Lender, the consents required by subsection 9.6B in connection with the
prepayment pursuant to this subsection 2.4A(i)(b) shall have been
obtained, and at such time, such Lender shall no longer constitute a
"Lender" for purposes of this Agreement, except with respect to
indemnifications under this Agreement (including, without limitation,
subsections 2.6E, 2.6H, 2.7, 2.8, 2.9G, 2.9H, 4.13, 9.2 and 9.3), which
shall survive as to such Lender.
(ii) Mandatory Prepayments.
(a) Prepayments from Certain Asset Sales. 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, 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 such Asset Sale to the mandatory prepayment of the Loans
pursuant to this subsection 2.4A(ii)(a) to the extent that Company
intends to reinvest such Net Cash Proceeds in like assets or in other
assets used in the business of Company and its Consolidated Subsidiaries
within twelve months of such sale; provided that any such Net Cash
Proceeds which are not so reinvested within such twelve months are
applied at the end of such twelve-month period to the prepayment of the
Loans pursuant to subsection 2.4(ii)(a) and that the aggregate amount of
Net Cash Proceeds so reinvested and thereby excluded from application to
the mandatory prepayment of the Loans does not exceed $10,000,000 in any
Fiscal Year. Notwithstanding the foregoing, if Company and its
Subsidiaries have not used any portion of such $10,000,000 in any Fiscal
Year (such unused portion being referred to as the "Unused Reinvestment
Amount"), Company and its Subsidiaries may, in the immediately
succeeding Fiscal Year, reinvest Net Cash Proceeds of Asset Sales in
like assets or other assets used in the business of Company and its
Consolidated Subsidiaries in an amount equal to $10,000,000 plus the
cumulative amount of any Unused Reinvestment Amount; provided, that the
maximum aggregate amount of all Reinvested Asset Sale Proceeds since the
Closing Date shall not exceed $35,000,000. Concurrently with any
prepayment of the Loans pursuant to this subsection 2.4A(ii)(a), 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).
(b) Prepayments Due to Excess Cash Flow. In the event
that there shall be Consolidated Excess Cash Flow for any Fiscal Year,
within 90 days after the last day of such Fiscal Year, Company shall
prepay the Loans in an amount equal to 50% of such Consolidated Excess
Cash Flow. Any such mandatory prepayments shall be applied as specified
in subsection 2.4A(iii).
(c) Prepayments Due to Reversion of Surplus Assets of
Pension Plans. On the date of return to Company or any of its
Subsidiaries of any surplus assets of any pension plan of Company or any
of its Subsidiaries in excess of $1,000,000 in the aggregate for all
such returned surplus assets, net of transaction costs and expenses
incurred in obtaining such return, including incremental taxes payable
as a result thereof, Company shall prepay the Loans in an amount equal
to 100% of such net returned surplus assets (the "Net Reversion
Amount"). Any such mandatory prepayments shall be applied as specified
in subsection 2.4A(iii).
(d) Prepayments Due to Commitment Reduction. On each date
that any reduction in the Commitments pursuant to subsection 2.4H(ii)
occurs, Company shall make a prepayment of the Loans or, to the extent
no Loans remain outstanding, cash collateralize Letters of Credit, in an
amount equal to the excess, if any, of the Total Utilization of
Commitments over the Commitments as so reduced.
(e) Prepayments Due to Limitations on Commitments.
Company shall make prepayments of Loans necessary to give effect to the
limitations set forth in subsection 2.1A.
(f) Prepayments Due to Issuance of Debt Securities. No
later than the first Business Day following the date of receipt by
Company or any of its Subsidiaries of the cash proceeds (net of
underwriting discounts, similar placement fees and commissions and other
reasonable costs and expenses associated therewith) from the issuance of
any bonds, notes, debentures or other issuances of similar debt
Securities of Company or any such Subsidiary, excluding in any event the
proceeds of any issuance of debt permitted pursuant to subsections
6.1(i)-(xi), Company shall prepay the Loans in an amount equal to such
net cash proceeds. Any such mandatory prepayments shall be applied as
specified in subsection 2.4A(iii).
(g) Prepayments Due to Issuance of Equity Securities. On
the date of receipt by Company of the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated
therewith) from the issuance of any equity Securities of Company,
including without limitation additional issuances of Company Common
Stock (other than issuances to employees or directors pursuant to the
Borg-Warner Security Corporation Management Stock Option Plan or 1993
Stock Incentive Plan, as such plans may be amended from time to time, or
any other employee or director stock option, incentive, purchase,
retirement, savings or similar plan), Company shall prepay the Loans in
an amount equal to 50% of such net cash proceeds. Any such mandatory
prepayments shall be applied as specified in subsection 2.4A(iii).
(iii) Application of Prepayments. Any prepayment shall be applied
in the order determined by Company and, if no order is so specified, any such
prepayment shall be applied first to Base Rate Loans to the full extent
thereof before application to Eurodollar Rate Loans in the order determined by
Administrative Agent.
B. Manner and Time of Payment. All payments of principal,
interest and fees hereunder and under the Notes by Company shall be made
without defense, setoff and counterclaim and in same day funds and delivered
to Administrative Agent not later than 12:00 Noon (New York time) on the date
due at its office located at One Bankers Trust Plaza, New York, New York for
the account of Lenders; funds received by Administrative Agent after that time
shall be deemed to have been paid by Company on the next succeeding Business
Day. Company hereby authorizes Administrative Agent to charge its account
with Administrative Agent in order to cause timely payment to be made to
Administrative Agent of all principal, interest and fees due hereunder
(subject to sufficient funds being available in its account for that purpose).
C. Application of Payments or Prepayments to Principal and
Interest. All payments or prepayments, other than with respect to a voluntary
prepayment on the Loans, in respect of the principal amount of any Loan shall
include payment of accrued interest on the principal amount being repaid or
prepaid, and all such payments or prepayments (and, in any event, any payments
or prepayments in respect of any Loan on a date when interest is due and
payable with respect to such Loan) shall be applied to the payment of interest
before application to principal.
D. Apportionment of Payments. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such
payments relate, and such payments shall be apportioned ratably to Lenders, in
each case proportionately to Lenders' respective Pro Rata Shares.
Administrative Agent shall promptly distribute to each Lender at its primary
address set forth below its name on the appropriate signature page hereof or
such other address as any Lender may request its share of all such payments
received by Administrative Agent and the commitment fees of such Lender when
received by Administrative Agent pursuant to subsection 2.3A. Notwithstanding
the foregoing provisions of this subsection 2.4D if, pursuant to the
provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/
Continuation is withdrawn as to any Affected Lender or if any Affected Lender
makes Base Rate Loans in lieu of its Pro Rata Share of Eurodollar Rate Loans,
Administrative Agent shall give effect thereto in apportioning payments
received thereafter.
E. Payments on Non-Business Days. Whenever any payment to be
made hereunder or under the Notes shall be stated to be due on a day that is
not a Business Day, the payment shall be made on the next succeeding Business
Day and such extension of time shall be included in the computation of the
payment of interest hereunder or under the Notes or of the commitment and
other fees hereunder, as the case may be; provided, however, that if the day
on which payment relating to a Eurodollar Rate Loan is due is not a Business
Day but is a day of the month after which no further Business Day occurs in
that month, then the due date thereof shall be the next preceding Business Day.
F. Notation of Payment. Each Lender agrees that before
disposing of any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all Loans
and principal payments previously made thereon and of the date to which
interest thereon has been paid and will notify Company and Administrative
Agent of the name and address of the transferee of that Note; provided that
the failure to make (or any error in the making of) a notation of any Loan
made under such Note or to notify Company and Administrative Agent of the name
and address of such transferee shall not limit or otherwise affect the
obligation of Company hereunder or under such Notes with respect to any Loan
and payments of principal or interest on any such Note.
G. Voluntary Reductions of Commitments.
(i) Company shall have the right, at any time and from time to
time, to terminate in whole or permanently reduce in part, without premium or
penalty, the Commitments in an amount up to the amount by which the
Commitments exceed the then Total Utilization of Commitments at the time of
such proposed termination or reduction.
Company shall give not less than three Business Days' prior
written notice to Administrative Agent designating the date (which shall be a
Business Day) of such termination or reduction and the amount of any partial
reduction. Promptly after receipt of a notice of such termination or partial
reduction, Administrative Agent shall notify each Lender of the proposed
termination or reduction. Such termination or partial reduction of the
Commitments shall be effective on the date specified in Company's notice and
shall reduce the Commitment of each Lender proportionately to its Pro Rata
Share. Any such partial reduction of the Commitments shall be in an aggregate
minimum amount of $5,000,000, and integral multiples of $1,000,000 in excess
of that amount.
(ii) In the event Company is entitled to replace a non-consenting
Lender pursuant to subsection 9.6B, Company shall have the right, upon five
Business Days' written notice to Administrative Agent (which notice
Administrative Agent shall promptly transmit to each of the Lenders), to
terminate the entire Commitment of such non-consenting Lender so long as (1)
all Loans, together with accrued and unpaid interest, fees and other amounts
owing to such Lender are repaid, including without limitation amounts owing to
such non-consenting Lender pursuant to subsection 2.6E, pursuant to subsection
2.4A(i)(b) concurrently with the effectiveness of such termination (at which
time Schedule 2.1A shall be deemed modified to reflect such changed amounts),
and (2) the consents required by subsection 9.6B in connection with the
prepayment pursuant to subsection 2.4A(i)(b) shall have been obtained, and at
such time, such Lender shall no longer constitute a "Lender" for purposes of
this Agreement, except with respect to indemnifications under this Agreement
(including, without limitation, subsections 2.6E, 2.6H, 2.7, 2.8, 2.9G, 2.9H,
4.13, 9.2 and 9.3), which shall survive as to such Lender.
H. Mandatory Reductions of Commitments. The Commitments shall
be permanently reduced (i) on the date any prepayment of Loans is made or is
required to be made pursuant to subsections 2.4A(ii)(a)-(c) and
2.4A(ii)(f)-(g), by an amount equal to the amount of such prepayment, and (ii)
on each date specified in the definition of "Scheduled Commitments Reduction
Amount" by an amount equal to the correlative amount specified in that
definition. Such reductions shall reduce the Commitment of each Lender
proportionately to its Pro Rata Share.
2.5 Use of Proceeds
A. Loans. Approximately $85,800,000 of the proceeds of the
Loans made on the Closing Date shall, together with the net proceeds of
Company's issuance of the New Senior Subordinated Notes, be applied by Company
(i) to repay in full approximately $114,600,000 in aggregate principal amount
of term loans outstanding under the Existing Term Loan Agreement, (ii) to
repay in full approximately $90,200,000 in aggregate principal amount of
revolving loans outstanding under the Existing Revolving Credit Agreement, and
(iii) to pay approximately $6,000,000 in fees and expenses associated with the
Refinancings and related transactions. Additionally, on the Closing Date
approximately $129,000,000 in aggregate face amount of letters of credit
outstanding under the Existing L/C Agreement shall become Existing Letters of
Credit under this Agreement, shall be replaced or supported by letters of
credit issued under this Agreement or shall otherwise be permitted hereunder.
Proceeds of the Loans may also be used by Company and its Subsidiaries for
working capital and general corporate purposes, and to make Permitted
Acquisitions.
B. Benefits to Subsidiaries. In consideration for the
guaranties set forth in the Loan Guaranties, Company agrees to make the
benefit of the extensions of credit hereunder available to its Subsidiaries.
C. Letters of Credit. The Letters of Credit shall be issued
for the purposes set forth in the definitions of Commercial Letter of Credit
and Standby Letter of Credit and such other general corporate purposes as may,
in any instance, be approved by Administrative Agent and Requisite Lenders.
D. Margin Regulations. No portion of the proceeds of any
borrowing or Letter of Credit under this Agreement shall be used by Company in
any manner that might cause such borrowing or the application of such proceeds
to violate Regulation G, Regulation U, Regulation T, or Regulation X of the
Board of Governors of the Federal Reserve System or any other regulation of
the Board or to violate the Exchange Act, in each case as in effect on the
date or dates of such borrowing and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans
Notwithstanding any other provision of this Agreement, the
following provisions shall govern with respect to Eurodollar Rate Loans as to
the matters covered:
A. Determination of Interest Rate. As soon as practicable
after 10:00 A.M. (New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent
manifest error, be final, conclusive and binding upon all parties) the
interest rate that shall apply to the Eurodollar Rate Loans for which an
interest rate is then being determined for the applicable Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed in
writing) to Company and each Lender.
B. Substituted Rate of Borrowing. If on any Interest Rate
Determination Date any Lender (including any Agent) shall have determined
(which determination shall be final and conclusive and binding upon all
parties but, with respect to the following clauses (i) and (ii)(b), shall be
made only after consultation with Company and Agents) that:
(i) by reason of any changes arising after the date of
this Agreement affecting the Eurodollar market or affecting the position
of that Lender in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate by reference to the Eurodollar
Rate with respect to the Eurodollar Rate Loans as to which an interest
rate determination is then being made; or
(ii) by reason of (a) any change after the date hereof in
any applicable law or governmental rule, regulation or order (or any
interpretation thereof and including the introduction of any new law or
governmental rule, regulation or order) or (b) other circumstances
affecting that Lender or the Eurodollar market or the position of that
Lender in such market (such as for example, but not limited to, official
reserve requirements required by Regulation D to the extent not given
effect in the Eurodollar Rate), the Adjusted Eurodollar Rate shall not
represent the effective pricing to that Lender for Dollar deposits of
comparable amounts for the relevant period;
then, and in any such event, that Lender shall be an Affected Lender and it
shall promptly (and in any event as soon as possible after being notified of a
borrowing, conversion or continuation) give notice (by telephone confirmed in
writing) to Company and Administrative Agent (which notice Administrative
Agent shall promptly transmit to each other Lender) of such determination.
Thereafter, Company shall pay to the Affected Lender, within five (5) Business
Days after written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as the Affected Lender in its sole discretion shall reasonably determine) as
shall be required to cause the Affected Lender to receive interest at a rate
per annum equal to the effective pricing to the Affected Lender for Dollar
deposits to make or maintain its Eurodollar Rate Loans for the applicable
Interest Period plus the applicable Eurodollar Rate Margin. A certificate as
to additional amounts owed the Affected Lender, showing in reasonable detail
the basis for the calculation thereof, submitted in good faith to Company and
Administrative Agent by the Affected Lender shall, absent manifest error, be
final and conclusive and binding upon all of the parties hereto.
C. Required Termination and Prepayment. If on any date any
Lender shall have reasonably determined (which determination shall be final
and conclusive and binding upon all parties) that the making or continuation
of its Eurodollar Rate Loans has become unlawful by compliance by that Lender
in good faith with any law, governmental rule, regulation or order (whether or
not having the force of law and whether or not failure to comply therewith
would be unlawful), then, and in any such event, that Lender shall be an
Affected Lender and it shall promptly give notice (by telephone confirmed in
writing) to Company and Administrative Agent (which notice Administrative
Agent shall promptly transmit to each Lender) of that determination. Subject
to the prior withdrawal of a Notice of Borrowing or a Notice of Conversion/
Continuation or prepayment of the Eurodollar Rate Loans of the Affected Lender
as contemplated by the following subsection 2.6D, the obligation of the
Affected Lender to make or maintain its Eurodollar Rate Loans (the "Affected
Loans") during any such period shall be terminated at the earlier of the
termination of the Interest Period then in effect or when required by law and
the Affected Loans shall automatically convert into Base Rate Loans on the
date of such termination.
D. Options of Company. In lieu of paying an Affected Lender
such additional moneys as are required by subsection 2.6B or the automatic
conversion of an Affected Loan pursuant to subsection 2.6C, Company may
exercise any one of the following options:
(i) If the determination by an Affected Lender relates
only to Eurodollar Rate Loans then being requested by Company
pursuant to a Notice of Borrowing or a Notice of
Conversion/Continuation, Company may, by giving notice (by telephone
confirmed in writing) to Administrative Agent (who shall promptly
give similar notice to each Lender) no later than the date
immediately prior to the date on which such Eurodollar Rate Loans are
to be made, withdraw that Notice of Borrowing or Notice of
Conversion/Continuation and the Eurodollar Rate Loans then being
requested shall be made by Lenders as Base Rate Loans; or
(ii) Upon written notice to Administrative Agent and each
Lender, Company may terminate the obligations of Lenders to make or
maintain Loans as, and to convert Loans into, Eurodollar Rate Loans and
in such event, Company shall, prior to the time of automatic conversion
pursuant to subsection 2.6C or, if the provisions of subsection 2.6B are
applicable, at the end of the then current Interest Period, convert all
of the Eurodollar Rate Loans into Base Rate Loans in the manner
contemplated by subsection 2.2D but without satisfying the advance
notice requirements therein; or
(iii) Company may give notice (by telephone confirmed in
writing) to the Affected Lender and Administrative Agent (who shall
promptly give similar notice to each Lender) and require the Affected
Lender to make the Eurodollar Rate Loan then being requested as a
Base Rate Loan or to continue to maintain its outstanding Base Rate
Loan then the subject of a Notice of Conversion/Continuation as a
Base Rate Loan or to convert its Eurodollar Rate Loans then
outstanding that are so affected into Base Rate Loans at the end of
the then current Interest Period (or at the time of automatic
conversion pursuant to subsection 2.6C) in the manner contemplated by
subsection 2.2D but without satisfying the advance notice
requirements therein, that notice to pertain only to the Loans of the
Affected Lender and to have no effect on the obligations of the other
Lenders to make or maintain Eurodollar Rate Loans or to convert Base
Rate Loans into Eurodollar Rate Loans.
E. Compensation. Company shall compensate each Lender, within
five (5) Business Days after written request by that Lender (which request
shall set forth in reasonable detail the basis for requesting such amounts),
for all reasonable losses, expenses and liabilities (including, without
limitation, any interest paid by that Lender to lenders of funds borrowed by
it to make or carry its Eurodollar Rate Loans and any loss sustained by that
Lender in connection with the re-employment of such funds), that Lender may
sustain: (i) if for any reason (other than a default by that Lender) a
borrowing of, a continuation of or a conversion to any Eurodollar Rate Loan
does not occur on a date specified therefor in a Notice of Borrowing, a Notice
of Conversion/Continuation or a telephonic request for borrowing or conversion/
continuation or a successive Interest Period does not commence after notice
therefor is given pursuant to subsection 2.2D, (ii) if any prepayment of any
of its Eurodollar Rate Loans occurs on a date that is not the last day of an
Interest Period applicable to that Loan, (iii) if any prepayment of any of its
Eurodollar Rate Loans is not made on any date specified in a notice of
prepayment given by Company, or (iv) as a consequence of any other default by
Company to repay its Eurodollar Rate Loans when required by the terms of this
Agreement. A certificate as to the amount payable to a Lender pursuant to
this subsection 2.6E setting forth the amount thereof in reasonable detail,
submitted to Company and Administrative Agent by such Lender, shall, except
for manifest error, be final, conclusive and binding for all purposes.
F. Quotation of Eurodollar Rate. Anything herein to the
contrary notwithstanding, if on any Interest Rate Determination Date no
Eurodollar Rate is available by reason of the failure of all Reference Lenders
to provide offered quotations to Administrative Agent in accordance with the
definition of "Eurodollar Rate," Administrative Agent shall give Company and
each Lender prompt notice thereof and the Loans requested shall be made as Base
Rate Loans.
G. Booking of Eurodollar Rate Loans. Any Lender may make,
carry or transfer Eurodollar Rate Loans at, to, or for the account of, any of
its branch offices or the office of an Affiliate of that Lender.
H. Increased Costs. Except as provided in subsection 2.6B with
respect to certain determinations on Interest Rate Determination Dates, if,
after the date hereof by reason of (x) the introduction of or any change
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in or in the interpretation of any law or regulation, or
(y) the introduction of or any change in or in the interpretation of, or any
new or different compliance is required under, any guideline or request from
any central bank or other governmental authority or quasi-governmental
authority exercising control over banks or financial institutions generally
(whether or not having the force of law):
(i) any Lender (or its applicable lending office) shall be
subject to any tax, duty, levy, cost or other charge (except for taxes
on the overall net income or alternative minimum taxable income of such
Lender or its applicable lending office imposed by the jurisdiction in
which such Lender's principal executive office or applicable lending
office is organized, located or is doing business) with respect to its
Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans,
or the recording, registration, notarization or other formalization of
the Eurodollar Rate Loans or the basis of taxation of payments to any
Lender of the principal of or interest or commitment fees or any amount
payable on its Eurodollar Rate Loans or its obligation to make Eurodollar
Rate Loans shall change; or
(ii) any reserve (including, without limitation, any
imposed by the Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by, any Lender's applicable
lending office shall be imposed or deemed applicable or any other
condition affecting its Eurodollar Rate Loans or its obligation to make
Eurodollar Rate Loans shall be imposed on any Lender or its applicable
lending office or the interbank Eurodollar market,
and as a result thereof there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining Eurodollar Rate Loans
(except to the extent already included in the determination of the applicable
Adjusted Eurodollar Rate), or there shall be a reduction in the amount
received or receivable by that Lender or its applicable lending office, then
Company shall from time to time, upon written notice from and demand by that
Lender (with a copy of such notice and demand to Administrative Agent), pay to
Administrative Agent for the account of that Lender, within five (5) Business
Days after the date specified in such notice and demand, additional amounts
sufficient to indemnify that Lender against such increased cost or reduced
amount. A certificate as to the amount of such increased cost or reduced amount
setting forth the calculation thereof in reasonable detail, submitted to
Company and Administrative Agent by that Lender, shall, except for manifest
error, be final, conclusive and binding for all purposes. Any payments to be
made by Company under subsections 2.6B or 2.6H are to be without duplication.
I. Assumptions Concerning Funding of Eurodollar Rate Loans.
Calculation of all amounts payable to a Lender under this subsection 2.6 shall
be made as though that Lender had actually funded its relevant Eurodollar Rate
Loan through the purchase of a Eurodollar deposit bearing interest at the
Eurodollar Rate in an amount equal to the amount of that Eurodollar Rate Loan
and having a maturity comparable to the relevant Interest Period and through
the transfer of such Eurodollar deposit from an offshore office of that Lender
to a domestic office of that Lender in the United States of America; provided,
however, that each Lender may fund each of its Eurodollar Rate Loans in any
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection 2.6.
J. Eurodollar Rate Loans After Default. Unless Requisite
Lenders shall otherwise agree, after the occurrence of and during the
continuance of a Potential Event of Default or Event of Default, Company may
not elect to have a Loan be made or maintained as, or converted to, a
Eurodollar Rate Loan after the expiration of any Interest Period then in effect
for that Loan.
K. Affected Lenders' Obligation to Mitigate.
(i) Each Lender agrees that, as promptly as practicable after it
becomes aware of the occurrence of an event or the existence of a condition
that would cause it to be an Affected Lender under subsection 2.6B or 2.6C or
that would entitle such Lender to receive payments under subsection 2.6H, it
will, to the extent not inconsistent with such Lender's internal policies, use
reasonable efforts to make, fund or maintain the affected Eurodollar Rate
Loans of such Lender through another lending office of such Lender if as a
result thereof the additional moneys which would otherwise be required to be
paid to such Lender pursuant to subsection 2.6B or 2.6H would be materially
reduced or the illegality or other adverse circumstances which would otherwise
require conversion of such Loans pursuant to subsection 2.6C would cease to
exist, and if, as determined by such Lender in its sole discretion, the
making, funding or maintaining of such Loans through such other lending office
would not otherwise materially adversely affect such Loans or such Lender.
Company hereby agrees to pay all reasonable expenses incurred by any Lender in
utilizing another lending office of such Lender pursuant to this subsection
2.6K.
(ii) If Company receives a notice pursuant to subsection 2.6H,
2.7 or 2.9G, so long as (i) no Potential Event of Default or Event of Default
shall have occurred and be continuing and Company has obtained a commitment
from another Lender or an Eligible Assignee to purchase at par such Lender's
Loans, Commitments and other Obligations and to assume all obligations of the
Lender to be replaced, (ii) at such time the Lender to be replaced is not an
Issuing Lender with respect to any Letters of Credit outstanding and (iii)
such Lender to be replaced is unwilling to withdraw the notice delivered to
Company, upon 30 days prior written notice to such Lender and Administrative
Agent, Company may require the Lender giving such notice to assign all of its
Loans, Commitments and other Obligations to such other Lender or Eligible
Assignee pursuant to the provisions of subsection 9.1B; provided that, prior
to or concurrently with such replacement (i) Company has paid to the Lender
giving such notice all amounts under subsections 2.6H, 2.7 and 2.9G through
such date of replacement, (ii) Company has paid to Agent the processing and
recordation fee required to be paid by subsection 9.1B(i) and (iii) all of the
requirements for such assignment contained in subsection 9.1B, including,
without limitation, the consent of Administrative Agent (if required) and the
receipt by Administrative Agent of an executed Assignment Agreement and other
supporting documents, have been fulfilled.
2.7 Capital Adequacy Adjustment
In the event that any Lender shall have determined that the
adoption or implementation after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy or any change in any such then existing law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order or in the interpretation or application thereof, or compliance by any
Lender (or an Affiliate of such Lender which makes, carries or transfers
Eurodollar Rate Loans) with any request or directive regarding capital
adequacy (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful) from any central bank or governmental
agency or body having jurisdiction, does or shall have the effect of
increasing the amount of capital required to be maintained by such Lender or
any Person directly or indirectly controlling such Lender and thereby reducing
the rate of return on such Lender's capital or the capital of such controlling
Person as a consequence of such Lender's obligations hereunder, then Company
shall from time to time, within five (5) Business Days after receipt of a
written request by such Lender (with a copy to Administrative Agent), pay to
such Lender or such controlling Person additional amounts sufficient to
compensate such Lender or such controlling Person for such reduction. A
certificate as to the amount of such reduction setting forth the calculation
thereof in reasonable detail, submitted to Company and Administrative Agent by
such Lender, shall, absent manifest error, be final, conclusive and binding
for all purposes. In determining such amount, a Lender may use any reasonable
averaging and attribution method. Notwithstanding the foregoing, nothing in
this subsection 2.7 is intended to provide and this subsection 2.7 shall not
provide to any Loan Party the right to inspect the records, files or books of
any Lender.
2.8 Taxes
A. Taxes. Any and all payments or reimbursements made under
this Agreement or under the Notes shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto
excluding (i) taxes imposed on the overall income (whether gross or net) or
capital of a Lender by the jurisdiction in which the Lender is organized,
resident or doing business, (ii) franchise taxes, and (iii) taxes, levies,
imposts, deductions, charges or withholdings which are imposed by laws,
treaties or regulations in effect as of the Closing Date; provided, however,
that any changes in laws, treaties or regulations or the interpretation
thereof applicable to financial institutions generally after the Closing Date
shall not be excluded pursuant to this clause (iii) (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities
being hereinafter referred to as "Taxes").
If Company shall be required by law to deduct any Taxes from or
with respect to any sum payable hereunder to any Lender, then the sum payable
shall be increased as may be necessary so that, after making all required
deductions, such Lender receives an amount equal to the sum it would have
received had no such deductions been made.
B. Foreign Lenders. Each Lender organized under the laws of a
jurisdiction outside the United States (referred to in this subsection 2.8B as
a "Foreign Lender") as to which payments to be made under this Agreement or
under the Notes are exempt from United States withholding tax under an
applicable statute or tax treaty shall provide to Company and Administrative
Agent (i) a properly completed and executed Internal Revenue Service Form 4224
or Form 1001 or other applicable form, certificate or document prescribed by
the Internal Revenue Service of the United States certifying as to such
Foreign Lender's entitlement to such exemption with respect to payments to be
made to such Foreign Lender under this Agreement and under the Notes (referred
to in this subsection 2.8B as a "Certificate of Exemption") or (ii) a letter
from any such Foreign Lender stating that it is not entitled to any such
exemption (referred to in this subsection 2.8B as "Letter of Non-Exemption").
Prior to becoming a Lender under this Agreement and within 15 days after a
reasonable written request of Company or Administrative Agent from time to
time thereafter, each Foreign Lender that desires to become or that becomes a
Lender under this Agreement shall provide a Certificate of Exemption or a
Letter of Non-Exemption to Company and Administrative Agent.
If a Foreign Lender is entitled to an exemption with respect to
payments to be made to such Foreign Lender under this Agreement and does not
provide a Certificate of Exemption to Company and Administrative Agent within
the time periods set forth in the preceding paragraph, Company shall withhold
taxes from payments to such Foreign Lender at the applicable statutory rates
and Company shall not be required to pay any additional amounts as a result of
such withholding as provided in subsection 2.8A; provided, however, that all
such withholding and associated limitations in payment under subsection 2.8A
shall cease upon delivery by such Foreign Lender of a Certificate of Exemption
to Company and Administrative Agent.
2.9 Letters of Credit
A. Letters of Credit. In addition to Company requesting that
Lenders make Loans pursuant to subsection 2.1, Company may request, in
accordance with the provisions of this subsection, on and after the date on
which all of the conditions set forth in subsection 3.1 are satisfied, (a) on
the Closing Date solely for purposes of issuing Letters of Credit to replace
or support certain of the Existing Letters of Credit of Company listed on
Schedule 2.9 annexed hereto and (b) from time to time during the period from
the Business Day immediately succeeding the Closing Date to but excluding the
Maturity Date that Administrative Agent or one or more Lenders issue Letters
of Credit for the account of Company; provided that, if no other Lender is
willing to provide any Letter of Credit, Administrative Agent shall, if each
of the conditions to issuance of such Letter of Credit in this Agreement is
met, issue such Letter of Credit; provided further, that
(i) Company shall not request that Administrative Agent or any
Lender issue (and neither Administrative Agent nor any Lender shall
issue) any Letter of Credit if, after giving effect to such issuance,
the Total Utilization of Commitments would exceed the Commitments, as
reduced from time to time pursuant to subsections 2.4G and 2.4H;
(ii) Company shall not request that Administrative Agent or any
Lender issue (and neither Administrative Agent nor any Lender shall
issue) any Letter of Credit if, after giving effect to such issuance,
the Letter of Credit Usage would exceed the lesser of (x) an amount
equal to the amount of the Commitments minus the amount of the
outstanding Loans or (y) $155,000,000;
(iii) in no event shall any Lender issue any Commercial Letter of
Credit having an expiration date which is (a) not acceptable to such
Issuing Lender in its reasonable discretion, or (b) more than one
hundred eighty (180) days after its date of issuance or (c) later than
30 days prior to the Maturity Date;
(iv) in no event shall Administrative Agent or any Lender issue
any Standby Letter of Credit having an expiration date later than the
earlier of (y) 30 days prior to the Maturity Date, or (z) the date which
is one year from the date of issuance of such Standby Letter of Credit;
provided that this clause (z) shall not prevent any Issuing Lender from
agreeing (subject to the preceding clause (y)) that a Standby Letter of
Credit will automatically be extended annually for a period not to
exceed one year unless such Issuing Lender elects not to extend for such
additional period; and
(v) in no event shall Administrative Agent or any Lender issue
any Letter of Credit denominated in any currency other than Dollars and
payable on a sight basis.
The issuance or extension of any Letter of Credit in accordance
with the provisions of this subsection shall require the satisfaction of each
condition set forth in subsection 3.3; provided, however, the obligation of
each Issuing Lender to issue or extend any Letter of Credit is subject to the
condition that (a) such Issuing Lender believed in good faith that all
conditions under subsections 2.9A and 3.3 to the issuance or extension of such
Letter of Credit were satisfied at the time such Letter of Credit was issued
or extended or (b) the satisfaction of any such condition not satisfied had
been waived by Requisite Lenders prior to or at the time such Letter of Credit
was issued or extended; provided further that Issuing Lender shall be entitled
to rely, and shall be fully protected in relying, upon any communication,
instrument or document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons, including, without
limitation, an Officers' Certificate from Company as to the satisfaction of
the conditions under subsection 3.3, in determining the satisfaction of any
conditions to the issuance or extension of any Letter of Credit then in effect.
Immediately upon the issuance of each Letter of Credit, each
Lender shall be deemed to, and hereby agrees to, have irrevocably purchased
from the Issuing Lender a participation in such Letter of Credit and drawings
thereunder in an amount equal to such Lender's Pro Rata Share of the maximum
amount which is or at any time may become available to be drawn thereunder.
Upon satisfaction of the conditions set forth in subsection 3.1, the Existing
Letters of Credit shall, effective as of the Closing Date, become Letters of
Credit under this Agreement to the same extent as if initially issued
hereunder (if not replaced or supported) and each Lender shall be deemed to
have irrevocably purchased from the Issuing Lender of such Existing Letters of
Credit a participation in such Letters of Credit and drawings thereunder in
an amount equal to such Lender's Pro Rata Share of the maximum amount which is
or at any time may become available to be drawn thereunder. All such Existing
Letters of Credit which become Letters of Credit under this Agreement shall be
fully secured by the Collateral commencing on the Closing Date to the same
extent as if initially issued hereunder on such date.
Each Letter of Credit supporting the payment of Indebtedness may
provide that the Issuing Lender may (but shall not be required to) pay the
beneficiary thereof upon the occurrence of an Event of Default and the
acceleration of the maturity of the Loans or, if payment is not then due to
the beneficiary, provide for the deposit of funds in an account to secure
payment to the beneficiary and that any funds so deposited shall be paid to
the beneficiary of such Letter of Credit if conditions to such payment are
satisfied or returned to the Issuing Lender for distribution to Lenders (or,
if all Obligations shall have been indefeasibly paid in full, to Company) if
no payment to the beneficiary has been made and the final date available for
drawings under the Letter of Credit has passed. Each payment or deposit of
funds by the Issuing Lender as provided in this paragraph shall be treated for
all purposes of this Agreement as a drawing duly honored by the Issuing Lender
under the related Letter of Credit.
B. Letter of Credit Request. Whenever Company desires to cause
Administrative Agent or any Lender to issue a Letter of Credit, it shall
deliver to Administrative Agent and that Lender a Letter of Credit Request
substantially in the form of Exhibit XIII annexed hereto no later than 1:00
P.M. (New York time) at least ten (10) Business Days in advance of the
proposed date of issuance or such shorter time as may be acceptable to the
Issuing Lender. The Letter of Credit Request shall specify (i) the proposed
Issuing Lender, (ii) the proposed date of issuance (which shall be a Business
Day), (iii) whether the Letter of Credit is to be a Standby Letter of Credit
or a Commercial Letter of Credit; (iv) the face amount of the Letter of
Credit, (v) the expiration date of the Letter of Credit, (vi) the name and
address of the beneficiary, (vii) such other documents or materials as such
Issuing Lender may reasonably request, and (viii) either the verbatim text of
the proposed Letter of Credit or the proposed terms and conditions thereof,
including a precise description of any documents to be presented by the
beneficiary which, if presented by the beneficiary in substantial compliance
with the terms and conditions of the applicable Letter of Credit on or prior
to the expiration date of the applicable Letter of Credit, would require the
Issuing Lender to make payment under the applicable Letter of Credit; provided
that the Issuing Lender, in its sole judgment, may require changes in any such
documents and certificates; provided further that the Issuing Lender shall not
be required to issue any Letter of Credit that on its terms requires payment
thereunder prior to the third Business Day following receipt by the Issuing
Lender of such documents and certificates. In determining whether to pay any
Letter of Credit, the Issuing Lender shall be responsible only to use
reasonable care to determine that the documents and certificates required to
be delivered under that Letter of Credit have been delivered and that they
substantially comply on their face with the requirements of that Letter of
Credit. In the case of Standby Letters of Credit, promptly upon the issuance
of a Letter of Credit, the Issuing Lender shall notify Administrative Agent
and each Lender of the issuance and the amount of each such Lender's
respective participation therein determined in accordance with subsection
2.9D. In the case of Commercial Letters of Credit, each Issuing Lender (other
than Administrative Agent) will send by facsimile transmission to
Administrative Agent, promptly on the first Business Day of each week, the
aggregate face amount of outstanding Commercial Letters of Credit issued by
such Issuing Lender for each day of the immediately preceding week. The
Administrative Agent shall deliver to each Lender upon each calendar month end
a report setting forth for such period the daily aggregate stated amount
available to be drawn under the Commercial Letters of Credit issued by all
Issuing Lenders during such period.
C. Payment of Amounts Drawn Under Letters of Credit. In the
event of any request for drawing under any Letter of Credit by the beneficiary
thereof, the Issuing Lender shall immediately notify Company and
Administrative Agent and Company shall reimburse the Issuing Lender on the day
on which such drawing is honored in an amount in same day funds equal to the
amount of such drawing; provided that, anything contained in this Agreement to
the contrary notwithstanding, (i) unless prior to 11:00 A.M. (New York time)
on the date of such drawing (a) Company shall have notified the Issuing Lender
and Administrative Agent that Company intends to reimburse the Issuing Lender
for the amount of such drawing with funds other than the proceeds of Loans or
(b) Company shall have delivered a Notice of Borrowing requesting Loans which
are Base Rate Loans in an amount equal to the amount of such drawing, then
Company shall be deemed to have given a Notice of Borrowing to Administrative
Agent requesting Lenders to make Loans which are Base Rate Loans on the date
on which such drawing is honored in an amount equal to the amount of such
drawing, and (ii) if so requested by Administrative Agent, Lenders shall, on
the date of such drawing, make Loans which are Base Rate Loans in the amount
of such drawing, the proceeds of which shall be applied directly by
Administrative Agent to reimburse the Issuing Lender for the amount of such
drawing; and provided further that, if for any reason proceeds of such Loans
are not received by the Issuing Lender on such date in an amount equal to the
amount of such drawing, Company shall reimburse the Issuing Lender, on the
Business Day immediately following the date of such drawing, in an amount in
same day funds equal to the excess of the amount of such drawing over the
amount of such Loans, if any, which are so received, plus accrued interest on
such amount at the rate set forth in subsection 2.9E(iii).
D. Payment by Lenders. If Company shall fail to reimburse the
Issuing Lender, for any reason, as provided in subsection 2.9C in an amount
equal to the amount of any drawing honored by the Issuing Lender under a
Letter of Credit issued by it, the Issuing Lender shall promptly notify each
Lender of the unreimbursed amount of such drawing and of such Lender's
respective participation therein based on such Lender's Pro Rata Share. Each
Lender shall make available to the Issuing Lender an amount equal to its
respective participation, in same day funds, at the office of the Issuing
Lender specified in such notice, not later than 1:00 P.M. (New York time) on
the Business Day after the date notified by the Issuing Lender. If any Lender
fails to make available to the Issuing Lender the amount of such Lender's
participation in such Letter of Credit as provided in this subsection 2.9D,
the Issuing Lender shall be entitled to recover such amount on demand from
such Lender together with interest at the customary rate set by the Issuing
Lender for the correction of errors among banks for one (1) Business Day and
thereafter at the Base Rate. Nothing in this subsection shall be deemed to
prejudice the right of any Lender to recover from the Issuing Lender any
amounts made available by such Lender to the Issuing Lender pursuant to this
subsection if it is determined in a final judgment by a court of competent
jurisdiction that the payment with respect to a Letter of Credit by the
Issuing Lender in respect of which payment was made by such Lender constituted
gross negligence or willful misconduct on the part of the Issuing Lender. The
Issuing Lender shall distribute to each other Lender which has paid all
amounts payable by it under this subsection with respect to any Letter of
Credit issued by the Issuing Lender such other Lender's Pro Rata Share of all
payments received by the Issuing Lender from Company or pursuant to the last
paragraph of subsection 2.9A in reimbursement of drawings honored by the
Issuing Lender under such Letter of Credit when such payments are received.
E. Compensation. Company agrees to pay the following amounts
with respect to each Letter of Credit issued on its behalf:
(i) an administrative fee equal to 0.1875% per annum of the
maximum amount available from time to time to be drawn under such Letter
of Credit payable in arrears on and to (but not including) each March
25, June 25, September 25 and December 25 of each year, commencing on
June 25, 1997 and on the Maturity Date or such earlier date upon which
the entire Commitment is terminated provided that the administrative fee
payable with respect to each Letter of Credit shall not be less than
$500 per annum;
(ii) with respect to each Standby Letter of Credit, a commission
equal to (x)(1) the Eurodollar Rate Margin then applicable with respect
to Eurodollar Rate Loans pursuant to subsection 2.2A of this Agreement
minus (2) the Commitment Fee Percentage multiplied by (y) the maximum
amount available from time to time to be drawn under such Standby Letter
of Credit, such commission to be calculated on the basis of a 360-day
year and the actual number of days elapsed, and with respect to each
Commercial Letter of Credit, a commission as negotiated by and between
the Company and the applicable Issuing Lender, in each case payable in
arrears on and to (but not including) each March 25, June 25, September
25 and December 25 of each year, commencing on June 25, 1997 and on the
Maturity Date or such earlier date upon which the entire Commitment is
terminated;
(iii) with respect to drawings made under any Letter of Credit,
interest, payable on demand, on the amount paid by the Issuing Lender in
respect of each such drawing from the date of such drawing through the
date such amount is reimbursed by Company (including any such
reimbursement out of the proceeds of Loans pursuant to subsection 2.9C)
at a rate which is equal to the interest rate otherwise payable
pursuant to subsection 2.2A of this Agreement for Base Rate Loans;
provided that if such amount is not paid on demand, the Obligations
shall bear interest thereafter in accordance with the provisions of
subsection 2.2E; and
(iv) with respect to the amendment or transfer of each Letter of
Credit and each drawing made thereunder, documentary and processing
charges in accordance with the Issuing Lender's standard schedule for
such charges in effect at the time of such issuance, amendment, transfer
or drawing, as the case may be, or as otherwise agreed to by the Issuing
Lender.
The Company shall pay promptly to Administrative Agent all amounts
described in clauses (ii) or (iii) of this subsection 2.9E with respect to a
Letter of Credit, and Administrative Agent shall distribute to each Lender its
Pro Rata Share. Company also shall pay promptly to the applicable Issuing
Lender for its own account all amounts described pursuant to clauses (i) and
(iv) of this subsection 2.9E with respect to a Letter of Credit. With respect
to Existing Letters of Credit, the fees described in clauses (i) and (ii)
above shall accrue from and including the Closing Date.
F. Obligations Absolute. The obligation of Company to
reimburse the Issuing Lender for drawings made under the Letters of Credit
issued by it and to repay any Loans made by Lenders pursuant to subsection
2.9C and the obligations by Lenders under subsection 2.9D shall be
unconditional and irrevocable and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other right
which Company may have at any time against a beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom
any such transferee may be acting), any Agent, any Lender or any other
Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any
underlying transaction between Company and the beneficiary for which the
Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by the Issuing Lender under any Letter of Credit
against presentation of a demand, draft or certificate or other document
which does not comply with the terms of such Letter of Credit; provided
that such payment does not constitute gross negligence or willful
misconduct of such Issuing Lender;
(v) any adverse change in the condition (financial or otherwise)
of Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
Company or any of its Subsidiaries, any Agent or any Lender (other than
the Issuing Lender);
(vii) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing.
G. Additional Payments. If by reason of (i) any change in any
applicable law, regulation, rule, decree or regulatory requirement or any
change in the interpretation or application by any judicial or regulatory
authority of any law, regulation, rule, decree or regulatory requirement
applicable to financial institutions generally or (ii) compliance by the
Issuing Lender or any Lender with any direction, request or requirement
(whether or not having the force of law) of any governmental or monetary
authority including, without limitation, Regulation D:
(a) the Issuing Lender or any Lender shall be subject to any
tax, levy, charge or withholding of any nature or to any variation
thereof or to any penalty with respect to the maintenance or fulfillment
of its obligations under this subsection 2.9, whether directly or by
such being imposed on or suffered by the Issuing Lender or any Lender;
(b) any reserve, special deposit, premium, FDIC assessment,
capital adequacy or similar requirement is or shall be applicable,
imposed or modified in respect of any Letters of Credit issued by the
Issuing Lender or participations therein purchased by any Lender; or
(c) there shall be imposed on the Issuing Lender or any Lender
any other condition regarding this subsection 2.9, any Letter of Credit
or any participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to the Issuing Lender or any Lender of issuing, making or maintaining any
Letter of Credit or of purchasing or maintaining any participation therein, or
to reduce the amount receivable in respect thereof by the Issuing Lender or
any Lender, then and in any such case the Issuing Lender or such Lender may,
at any time within a reasonable period after the additional cost is incurred
or the amount received is reduced, notify Company and Administrative Agent and
provide appropriate proof of such cost, and Company shall pay within five (5)
Business Days of the date of such notice such amounts as the Issuing Lender or
such Lender may specify to be necessary to compensate the Issuing Lender or
such Lender for such additional cost or reduced receipt, together with
interest on such amount from the date demanded until payment in full thereof
at a rate equal at all times to the interest otherwise payable pursuant to
subsection 2.2A of this Agreement for Base Rate Loans. The determination by
the Issuing Lender or any Lender, as the case may be, of any amount due
pursuant to this subsection 2.9G as set forth in a certificate setting forth
the calculation thereof in reasonable detail, shall, in the absence of
manifest error, be final and conclusive and binding on all of the parties
hereto.
H. Indemnification; Nature of Issuing Lender's Duties. In
addition to amounts payable as elsewhere provided in this subsection, Company
hereby agrees to protect, indemnify, pay and save harmless the Issuing Lender
from and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees and
allocated costs of internal counsel) which the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of any
Letter of Credit, including, without limitation, the payment of draws
thereunder, other than as a result of gross negligence or willful misconduct
of the Issuing Lender as determined by a court of competent jurisdiction or
(ii) the failure of the Issuing Lender to honor a drawing under any Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or governmental authority
(all such acts or omissions herein called "Government Acts"). Each Lender,
proportionately to its Pro Rata Share, severally agrees to indemnify Issuing
Lender to the extent Issuing Lender shall not have been reimbursed by Company
or its Subsidiaries, for and against any of the foregoing claims, demands,
liabilities, damages, losses, costs, charges and expenses to which Issuing
Lender is entitled to reimbursement from Company or its Subsidiaries.
As between Company and the Issuing Lender, Company assumes all
risks of the acts and omissions of, or misuse of the Letters of Credit issued
by the Issuing Lender by, the respective beneficiaries of such Letters of
Credit. In furtherance and not in limitation of the foregoing, the Issuing
Lender shall not be responsible (absent gross negligence or willful misconduct
(as determined by a court of competent jurisdiction)): (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
such Letters of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason; (iii) for failure of the
beneficiary of any such Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (v) for errors in interpretation of technical terms; (vi) for
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) for the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing under such Letter of Credit; (viii) for
any consequences arising from causes beyond the control of the Issuing Lender,
including, without limitation, any Government Acts and (ix) any special,
consequential, indirect or incidental damages, including, but not limited to,
lost profits arising out of or in connection with the issuance of any Letter
of Credit or any action taken or not taken by the Issuing Lender in connection
with any Letter of Credit, or any document or property referred to in or
related to any Letter of Credit. None of the above shall affect, impair, or
prevent the vesting of any of the Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Lender under or in connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith and absent gross
negligence or willful misconduct of the Issuing Lender (as determined by a
court of competent jurisdiction), shall not put the Issuing Lender under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this
subsection, Company shall have no obligation to indemnify the Issuing Lender
in respect of any liability incurred by the Issuing Lender arising solely out
of the gross negligence or willful misconduct of the Issuing Lender as
determined by a court of competent jurisdiction, or out of the wrongful
dishonor by the Issuing Lender of a proper demand for payment made under the
Letters of Credit.
For purposes of this subsection 2.9H, the term "Issuing Lender"
means the Issuing Lender and any Lender purchasing a participation in any
Letter of Credit pursuant to subsection 2.9D.
I. Computation of Interest and Fees. Interest and fees payable
pursuant to this subsection 2.9 shall be computed on the basis of a 360-day
year and the actual number of days elapsed in the period during which they
accrue.
2.10 Replacement of Lender
In the event that Company receives a notice pursuant to subsection
2.6H, 2.7 or 2.9G or in the event of a refusal by a Lender to consent to a
proposed change, waiver, discharge or termination with respect to this
Agreement which has been approved by the Requisite Lenders as provided in
subsection 9.6, Company shall have the right, if no Potential Event of Default
or Event of Default then exists, to replace such Lender (a "Replaced Lender")
with one or more Eligible Assignees (collectively, the "Replacement Lender")
acceptable to Administrative Agent, provided that (i) at the time of any
replacement pursuant to this subsection 2.10, the Replacement Lender shall
enter into one or more Assignment Agreements pursuant to subsection 9.1B (and
with all fees payable pursuant to such subsection 9.1B to be paid by the
Replacement Lender) pursuant to which the Replacement Lender shall acquire all
of the outstanding Loans and Commitments of, and in each case participations
in Letters of Credit by, the Replaced Lender and, in connection therewith,
shall pay to (x) the Replaced Lender in respect thereof an amount equal to the
sum of (A) an amount equal to the principal of, and all accrued interest on,
all outstanding Loans of the Replaced Lender, (B) an amount equal to all
unpaid drawings with respect to Letters of Credit that have been funded by
(and not reimbursed to) such Replaced Lender, together with all then unpaid
interest with respect thereto at such time and (C) an amount equal to all
accrued, but theretofore unpaid, fees owing to the Replaced Lender with
respect thereto, and (y) the appropriate Issuing Lender an amount equal to
such Replaced Lender's Pro Rata Share of any unpaid drawings with respect to
Letters of Credit (which at such time remains an unpaid drawing) issued by it
to the extent such amount was not theretofore funded by such Replaced Lender,
and (ii) all obligations (including without limitation all such amounts, if
any, owing under subsection 2.6E) of Company owing to the Replaced Lender
(other than those specifically described in clause (i) above in respect of
which the assignment purchase price has been, or is concurrently being, paid),
shall be paid in full to such Replaced Lender concurrently with such
replacement. Upon the execution of the respective Assignment Agreements,
recordation of such assignment in the Register by Agent pursuant to subsection
2.1D, the payment of amounts referred to in clauses (i) and (ii) above and
delivery to the Replacement Lender of the appropriate Note or Notes executed
by Company, the Replacement Lender shall become a Lender hereunder and the
Replaced Lender shall cease to constitute a Lender hereunder except with
respect to indemnification provisions under this Agreement which by the terms
of this Agreement survive the termination of this Agreement (including, without
limitation, subsections 2.6E, 2.6H, 2.7, 2.8, 2.9G, 2.9H, 4.13, 9.2 and 9.3),
which indemnification provisions shall survive as to such Replaced Lender.
Notwithstanding anything to the contrary contained above, no Issuing Lender
may be replaced hereunder at any time while it has Letters of Credit
outstanding hereunder unless arrangements satisfactory to such Issuing Lender
(including the furnishing of a Standby Letter of Credit in form and substance,
and issued by an issuer, satisfactory to such Issuing Lender or the furnishing
of cash collateral in amounts and pursuant to arrangements satisfactory to
such Issuing Lender) have been made with respect to such outstanding Letters
of Credit.
SECTION 3.
Conditions to Loans and Letters of Credit
The obligations of Lenders to make Loans hereunder and to issue
Letters of Credit are subject to the satisfaction of all of the following
conditions.
3.1 Conditions to the Initial Loans
The obligations of Lenders to make the initial Loans are, in
addition to the conditions precedent specified in subsection 3.2, subject to
prior or concurrent satisfaction of the following conditions:
A. On or before the Closing Date, Company shall deliver to
Lenders (or to Administrative Agent for Lenders with sufficient originally
executed copies for each Lender and, except for Notes, Administrative Agent's
counsel) each, unless otherwise noted, dated the Closing Date:
1. Certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of State of
the State of Delaware, each to be dated a recent date prior to the
Closing Date;
2. Copies of its Bylaws, certified as of the Closing Date
by its corporate secretary or an assistant secretary;
3. Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement
and the other Loan Documents to which it is to be a party and approving
and authorizing the execution, delivery and payment of the Notes and the
consummation of the Refinancings and related transactions, in form and
substance satisfactory to Agents and their counsel, each certified as of
the Closing Date by its corporate secretary or an assistant secretary as
being in full force and effect without modification or amendment;
4. Signature and incumbency certificates of its officers
executing this Agreement, the other Loan Documents to which it is to be
a party and the Notes;
5. Executed copies of this Agreement, the Company Pledge
Agreement and the Notes, executed in accordance with subsection 2.1E,
substantially in the form of Exhibit III annexed hereto, drawn to the
order of each Lender and with appropriate insertions; and
6. Such other documents as any Agent or any Lender may
reasonably request.
B. On or before the Closing Date, each of the Borg-Warner
Guarantor Subsidiaries that are Material Subsidiaries and each of the other
Borg-Warner Subsidiaries that are Material Subsidiaries shall execute and
deliver to Lenders (or to Administrative Agent for Lenders with sufficient
originally executed copies for each Lender and Administrative Agent's
counsel), each, unless otherwise noted, dated the Closing Date:
1. Certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of State of
the jurisdiction of its incorporation, each to be dated a recent date
prior to the Closing Date;
2. Copies of its Bylaws, certified as of the Closing Date
by its corporate secretary or an assistant secretary;
3. Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of the Loan
Documents to which it is to be a party, in form and substance
satisfactory to the Agents and their counsel, each certified as of the
Closing Date by its corporate secretary or an assistant secretary as
being in full force and effect without modification or amendment;
4. Signature and incumbency certificates of its officers
executing the Loan Documents to which it is a party;
5. With respect to each Borg-Warner Guarantor Subsidiary,
executed copies of the Borg-Warner Subsidiary Guaranty and the
Borg-Warner Subsidiary Pledge Agreement; and
6. Such other documents as any Agent or any Lender may
reasonably request.
C. On or before the Closing Date, each Loan Party shall have
obtained all such consents, waivers, amendments, approvals and the like as may
be required from any Person to permit the Refinancings and the other related
transactions, including the consummation of the transactions contemplated by
this Agreement, all of the foregoing to be in form and substance satisfactory
to the Agents.
D. On or prior to the Closing Date, the Company shall have
issued $125,000,000 aggregate principal amount of New Senior Subordinated
Notes. The New Senior Subordinated Notes shall be unsecured and shall have no
scheduled principal payments payable prior to the tenth anniversary of the
Closing Date. In addition, all other terms of the New Senior Subordinated
Notes shall be satisfactory to the Agents and Lenders. The New Senior
Subordinated Notes will not rank senior to the Company's 9 1/8% Subordinated
Notes.
E. Concurrently with the Closing Date, the Company shall have
terminated all commitments, and shall have repaid in full all outstanding
Indebtedness, and all security therefor will be released from the liens and
pledges created, under the Existing Term Loan Agreement, the Existing
Revolving Credit Agreement and the Existing L/C Agreement and all such
agreements and documents will terminate in accordance with their terms. As of
the Closing Date, the Company shall have no indebtedness other than
Indebtedness under this Agreement, $150,000,000 aggregate principal amount of
9 1/8% Subordinated Notes, $125,000,000 aggregate principal amount of New
Senior Subordinated Notes, approximately $8,200,000 of other long-term debt
obligations and $120,000,000 of Receivables Facilities.
F. Company shall have furnished to Administrative Agent copies
of all Existing Letters of Credit and all amendments to such Existing Letters
of Credit. Company shall have paid to the lenders with respect to such
Existing Letters of Credit all fees and other amounts owing with respect
thereto to but excluding the Closing Date. With respect to letters of credit
issued under the Existing L/C Agreement which do not become Existing Letters of
Credit under this Agreement, Company shall have replaced or supported all such
letters of credit with Letters of Credit issued under this Agreement or such
letter of credit shall be otherwise permitted hereunder.
G. The Agents shall have received satisfactory evidence that
the fees and expenses to be incurred in connection with the Refinancings and
the related transactions will not exceed $6,000,000 in the aggregate.
H. The Lenders shall have received (i) audited financial
statements of the Company and its Subsidiaries for the fiscal years ended
December 31, 1994, 1995 and 1996, and (ii) a pro forma balance sheet of the
Company and its Subsidiaries as of December 31, 1996 after giving effect to
the Refinancings, the related transactions and the transactions contemplated
hereby, all of the foregoing to be in form and substance satisfactory to the
Agents and Lenders.
I. Company shall have delivered to the Agents a Financial
Condition Certificate dated the Closing Date, substantially in the form
annexed hereto as Exhibit XI, with appropriate attachments demonstrating that,
after giving effect to the consummation of the Refinancings and related
transactions, Company will have a positive net worth on a pro forma basis,
will not be insolvent by the Indebtedness incurred in connection herewith,
will be able to pay its debts as they mature and will not have unreasonably
small capital to conduct its business.
J. On or before the Closing Date, Agents shall have received
reports and other information in form, scope and substance satisfactory to
Administrative Agent concerning the environmental liabilities of Company.
K. On or before the Closing Date, Agents shall have received
information concerning the litigation and potential liabilities of Company
with respect to Centaur Insurance Company in form, scope and substance
satisfactory to the Agents.
L. On or before the Closing Date, Company shall have paid to
Administrative Agent for distribution to Lenders, the Agents and their
respective affiliates, the fees referred to in subsection 2.3 and payable to
such parties on the Closing Date. Administrative Agent and the other Agents
shall have paid to each Lender such fees as Administrative Agent and the other
Agents shall have agreed to pay such Lender on the Closing Date.
M. On or before the Closing 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 Agents, acting on behalf of Lenders, and their counsel shall
be reasonably satisfactory in form and substance to the Agents and such
counsel, and the Agents and Administrative Agent's counsel shall have received
all such counterpart originals or certified copies of such documents as the
Agents or any Lender may reasonably request.
N. Lenders and their respective counsel shall have received
originally executed copies of one or more written opinions of Davis, Polk &
Wardwell, special counsel for Company, in form and substance satisfactory to
the Agents and their counsel, dated as of the Closing Date, and setting forth
substantially the matters in the opinions designated in Exhibit V annexed
hereto and as to such other matters as any Agent or any Lender may reasonably
request, together with evidence satisfactory to Agents that Company has
requested such counsel to deliver such opinions to Lenders.
O. Lenders and their respective counsel shall have received
originally executed copies of one or more written opinions of the general
counsel for Company and the Borg-Warner Subsidiaries or such other counsel as
is satisfactory to the Agents, in form and substance satisfactory to the
Agents and their counsel, dated as of the Closing Date, and setting forth
substantially the matters in the opinions designated in Exhibit VI annexed
hereto and as to such other matters as any Agent may reasonably request.
P. Lenders shall have received an originally executed copy of
one or more written opinions of O'Melveny & Myers LLP, counsel to
Administrative Agent, dated as of the Closing Date, substantially in the form
of Exhibit VII annexed hereto.
Q. On or before the making of the Loans, Company shall have
delivered to Administrative Agent an Officers' Certificate, dated the Closing
Date and addressed to the Agents and Lenders, in form and substance reasonably
satisfactory to the Agents, to the effect that (i) the representations and
warranties in Section 4 hereof pertaining to such Person are true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date, (ii) since December 31, 1996
through the Closing Date there has been no material adverse change in the
business, operations, properties, assets, condition (financial or otherwise)
or prospects of Company or of Company and its Subsidiaries taken as a whole
(it being understood that the Armored Joint Venture shall not constitute such
a material adverse change) and (iii) Company has performed all of its
respective obligations required to be performed at or prior to such time in
order to consummate the Refinancings and related transactions.
R. Each Loan Party shall have performed in all material
respects all agreements which this Agreement provides shall be performed on or
before the Closing Date except as otherwise disclosed to and agreed to in
writing by the Agents.
S. Company shall have taken or caused to be taken such actions
in such a manner so that Collateral Agent, on behalf of Lenders, has a valid
and perfected, first priority security interest in the entire Collateral
(except to the extent any such security interest cannot be granted under
applicable laws). Such actions shall include, without limitation: (1) the
delivery pursuant to the applicable Pledge Agreement by Company and the
Borg-Warner Guarantor Subsidiaries of certificates (which certificates shall
be registered in the name of Collateral Agent or properly endorsed in blank
for transfer or accompanied by irrevocable undated stock powers duly endorsed
in blank, all in form and substance satisfactory to Collateral Agent)
representing all of the capital stock of the Borg-Warner Pledged Subsidiaries
and of the Armored Joint Venture required to be pledged pursuant to the Pledge
Agreements and (2) the delivery pursuant to the applicable Pledge Agreement of
the evidences of indebtedness (which evidences of indebtedness shall be
properly endorsed in blank or to Collateral Agent, in form and substance
satisfactory to Collateral Agent) representing the intercompany debt
obligations.
T. Company shall have delivered such other documents as the
Agents may reasonably request.
Each Lender hereby agrees that by its execution and delivery of
its signature page hereto and by the funding of its Loans to be made on the
Closing Date, such Lender approves of and consents to each of the matters set
forth in this subsection 3.1 which must be approved by, or which must be
satisfactory to, all or Requisite Lenders; provided
that in the case of any agreement or document which must be approved by, or
which must be satisfactory to, all or Requisite Lenders, Administrative Agent
or Company shall have delivered a copy of such agreement or document to such
Lender on or prior to the Closing Date in substantially the form in which such
agreement or document is executed or delivered on or prior to the Closing Date.
3.2 Conditions to All Loans
The obligations of Lenders to make all Loans (which shall not
include conversions or continuations of existing Loans pursuant to subsection
2.2D) on each Funding Date are subject to the following further conditions
precedent:
A. Administrative Agent shall have received, in accordance with
the provisions of subsection 2.1B, as the case may be, before that Funding
Date, an originally executed Notice of Borrowing signed by the chief executive
officer, the chief financial officer, the treasurer or any assistant treasurer
of Company or by any executive officer of Company designated by any of the
above-described officers on behalf of Company in writing delivered to
Administrative Agent.
B. As of that Funding Date:
1. The representations and warranties contained herein
and in the other Loan Documents shall be true, correct and complete in
all material respects on and as of that Funding Date to the same extent
as though made on and as of that date;
2. No event shall have occurred and be continuing or
would result from the consummation of the borrowing contemplated by such
Notice of Borrowing that would constitute (a) an Event of Default or (b)
a Potential Event of Default;
3. Each Loan Party shall have performed in all material
respects all agreements and satisfied all conditions which this
Agreement and other Loan Documents provide shall be performed by it on
or before that Funding Date;
4. No order, judgment or decree of any court, arbitrator
or governmental authority shall purport to enjoin or restrain any Lender
from making that Loan;
5. The making of the Loans requested on such Funding Date
shall not violate any law, including Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve Board; and
6. There shall not be pending or, to the knowledge of
Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting any Loan Party or any
of its Subsidiaries or any property of any Loan Party or any of its
Subsidiaries, that has not been disclosed by Company in writing pursuant
to subsection 4.6 or 5.1(ix) prior to the making of the last preceding
Loans (or, in the case of the initial Loans, prior to the execution of
this Agreement) and there shall have occurred no development not so
disclosed in any such action, suit, proceeding, governmental
investigation or arbitration so disclosed, that, in either event, in the
opinion of Requisite Lenders, would reasonably be expected to have a
Material Adverse Effect. No injunction or other restraining order shall
have been issued and no hearing to cause an injunction or other
restraining order to be issued shall be pending or noticed with respect
to any action, suit or proceeding seeking to enjoin or otherwise prevent
the consummation of, or to recover any damages or obtain relief as a
result of, the Refinancings and related transactions, this Agreement or
the making of Loans hereunder.
3.3 Conditions to Letters of Credit
The obligation of any Issuing Lender to issue or extend any Letter
of Credit hereunder is subject to prior or concurrent satisfaction of all of
the following conditions:
A. On or before the date of issuance of such Letter of Credit,
the initial Loans shall have been made pursuant to subsection 3.1.
B. On or before the date of issuance of such Letter of Credit,
the Issuing Lender with respect thereto shall have received, in accordance
with the provisions of subsection 2.9B, a notice requesting the issuance of
such Letter of Credit and all other information specified in subsection 2.9B,
and such other documents as such Issuing Lender may reasonably require in
connection with the issuance of such Letter of Credit.
C. On the date of issuance or extension of such Letter of
Credit, all conditions precedent described in subsection 3.2B shall be
satisfied to the same extent as though the issuance or extension of such
Letter of Credit were the making of a Loan and the date of issuance or
extension of such Letter of Credit were a Funding Date.
SECTION 4.
Company's Representations and Warranties
In order to induce Lenders to enter into this Agreement, Company
represents and warrants to each Lender that the following statements are true,
correct and complete:
4.1 Organization, Powers, Good Standing, Business and Subsidiaries
A. Organization and Powers. Each of the Loan Parties is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation (which jurisdiction is set forth on
Schedule 1.1 annexed hereto). Each of the Loan Parties has all requisite
corporate power and authority to own and operate its properties, to carry on
its business as now conducted and proposed to be conducted, to enter into each
Loan Document to which it is a party and to carry out the transactions
contemplated hereby and thereby, and, in the case of Company, to issue the
Notes to be issued by it.
B. Good Standing. Each of the Loan Parties is in good standing
wherever necessary to carry on its present business and operations, except in
jurisdictions in which the failure to be in good standing has not had and will
not have a Material Adverse Effect.
C. Conduct of Business. On the date hereof, Loan Parties will
be engaged only in the businesses described in Schedule 4.1C annexed hereto.
D. Subsidiaries. All of the Subsidiaries of each of the Loan
Parties (other than those Subsidiaries which are inactive or have no operating
assets) as of the date of this Agreement and as of the Closing Date are
identified on Schedule 1.1 annexed hereto. The capital stock of each Person
identified in Schedule 1.1 is duly authorized, validly issued, fully paid and
nonassessable. As of December 31, 1996, the Material Subsidiaries own not
less than 54.5% of the value of all tangible assets of Loan Parties taken as a
whole as reflected on the balance sheet of the Company as of such date. The
capital stock of each Person identified on Schedule 1.1 is not Margin Stock.
Each of the Subsidiaries identified on Schedule 1.1 is duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation and has full corporate power and authority to own its assets and
properties and to operate its business as presently owned and conducted,
except where failure to be in good standing or a lack of corporate power and
authority has not had and will not have a Material Adverse Effect. Schedule
1.1 correctly sets forth the ownership interest of each of the Loan Parties in
each of its Subsidiaries identified therein and identifies (i) all Material
Subsidiaries, (ii) all Borg-Warner Guarantor Subsidiaries and (iii) all
Borg-Warner Pledged Subsidiaries.
4.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and
performance of, and the consummation of the transactions contemplated by, the
Loan Documents and the issuance, delivery and payment of the Notes have been
duly authorized by all necessary corporate action by each Loan Party.
B. No Conflict. The execution, delivery and performance by
each Loan Party of, and the consummation of the transactions contemplated by,
each Loan Document to which it is respectively a party and the issuance,
delivery and performance of the Notes do not and will not (i) violate any
provision of law applicable to any Loan Party, the Certificate of Incorporation
or Bylaws of any Loan Party, or any order, judgment or decree of any court or
other agency of government binding on any Loan Party, (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 any Loan Party, (iii) result in
or require the creation or imposition of any Lien upon any of the properties
or assets of any Loan Party (other than Liens in favor of the Collateral
Agent), or (iv) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of any Loan Party,
except for (a) such approvals, or consents which will be obtained on or before
the Closing Date and disclosed in writing to Lenders, and (b) with respect to
Loan Parties, such violations, conflicts, breaches, Liens and defaults which
would not have, and such approvals the absence of which would not have, a
Material Adverse Effect.
C. Governmental Consents. The execution, delivery and
performance by each Loan Party of, and the consummation of the transactions
contemplated by, the Loan Documents to which it is a party and application of
the proceeds of the Loans and the issuance, delivery and performance of the
Notes, 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 except for any filings required in
connection with the perfection of security interests granted pursuant to Loan
Documents and other filings, authorizations and consents and approvals either
referred to in subsection 4.9 hereof or the absence of which would not have a
Material Adverse Effect.
D. Binding Obligation. This Agreement is, and the other Loan
Documents and the Notes, when executed and delivered will be, the legally
valid and binding obligations of the applicable Loan Parties, enforceable
against the applicable Loan Parties 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 and
subject to the availability of equitable remedies.
4.3 Financial Condition
Company has heretofore delivered to Lenders, at Lenders' request,
the audited financial statements of Company on a consolidated basis, as of
December 31, 1996 and the related audited statements of income, shareholders'
equity and cash flow for the fiscal period then ended.
Such financial statements were prepared in conformity with GAAP
and fairly present the consolidated financial position of Company and its
Subsidiaries as at the date thereof and the consolidated results of operations
and statement of cash flow of Company and its Subsidiaries for each of the
periods covered thereby. Except as disclosed on Schedule 6.4, neither Company
nor any of its Consolidated Subsidiaries, taken as a whole, has any material
Contingent Obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment, which is not reflected in
the foregoing financial statements, or the notes thereto.
4.4 No Material Adverse Change; No Stock Payments
Since December 31, 1996, there has been no change in the business,
operations, properties, assets, prospects or condition (financial or
otherwise) of Company and its Consolidated Subsidiaries which has been, either
in any case or in the aggregate, materially adverse to Company and its
Consolidated Subsidiaries, taken as a whole, other than changes contemplated
by or disclosed in this Agreement. Neither Company nor any of its Subsidiaries
has directly or indirectly declared, ordered, paid or made or set apart any
sum or property for any Restricted Junior Payment or agreed so to do except as
permitted by subsection 6.5 or, prior to the Closing Date, except as permitted
by the Existing Revolving Credit Agreement, the Existing L/C Agreement or the
Existing Term Loan Agreement.
4.5 Title to Properties; Liens
Each Loan Party and each Subsidiary thereof has good, sufficient
and legal title, subject to Permitted Encumbrances, to all their respective
material properties and assets reflected in the most recent consolidated
balance sheet referred to in subsection 4.3 or in the most recent financial
statements delivered pursuant to subsection 5.1 of this Agreement and to all
their material properties and assets acquired since the date of such
consolidated balance sheet or financial statements, except for assets disposed
of in the ordinary course of business since the date of such consolidated
balance sheet or financial statements. Except as permitted by this Agreement,
all such properties and assets are free and clear of Liens.
4.6 Litigation; Adverse Facts
Except as set forth on Schedule A annexed hereto, there is no
action, suit, proceeding, governmental investigation or arbitration (whether
or not purportedly on behalf of any Loan Party or any respective Subsidiary
thereof) at law or in equity or before or by any Federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company,
threatened against or affecting any Loan Party or any of their respective
Subsidiaries or any property of any Loan Party or any Subsidiary thereof that
would reasonably be expected to result in a Material Adverse Effect. As of
the Closing Date, no Loan Party has received any notice of termination of any
material contract, lease or other agreement or suffered any material damage,
destruction or loss (whether or not covered by insurance) or had any employee
strike, work-stoppage, slow-down or lock-out or any substantial, nonfrivolous
threat directed to it of any imminent strike, work-stoppage, slow-down or
lock-out, any of which remain pending, that could reasonably be expected to
result in any Material Adverse Effect.
4.7 Payment of Taxes
Except to the extent permitted by subsection 5.3, all material tax
returns and reports of each Loan Party and each Subsidiary of each Loan Party
required to be filed by any of them have been timely filed, and all material
taxes, assessments, fees and other governmental charges upon such Persons and
upon their respective properties, assets, income and franchises which are due
and payable have been paid when due and payable. Company knows of no proposed
tax assessment against any such Person that would be material to the condition
(financial or otherwise) of Company and its Subsidiaries, taken as a whole,
which is not being actively contested by such Person to the extent affected
thereby, in good faith and by appropriate proceedings, provided that such
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
4.8 Materially Adverse Agreements; Performance of Agreements
A. No Loan Party is a party to or is subject to any material
agreement or instrument materially and adversely affecting the financial
condition of Company and its Subsidiaries, taken as a whole.
B. None of the Loan Parties and none of the respective
Subsidiaries of the Loan Parties is in default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
any Contractual Obligation of any such Person, and no condition exists that,
with the giving of notice or the lapse of time or both, would constitute such
a default, except where the consequences, direct or indirect, of such default
or defaults, if any, would not have a Material Adverse Effect.
4.9 Governmental Regulation
Except for state laws applicable to certain motor carrier
operations of Company's Subsidiaries, no Loan Party is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act or
the Investment Company Act of 1940 or to any Federal or state statute or
regulation limiting its ability to incur Indebtedness for money borrowed. The
Interstate Commerce Act does not restrict the ability of any Loan Party to
incur or guarantee any Indebtedness.
4.10 Securities Activities
None of the Loan Parties and none of the Subsidiaries of the Loan
Parties is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any
Margin Stock.
4.11 Employee Benefit Plans
A. Except as set forth in Schedule A, Item 1 of Section 4.11
annexed hereto, each Loan Party is in material compliance with all applicable
provisions and requirements of Title I, II and IV of ERISA and the Internal
Revenue Code and the regulations and published interpretations thereunder with
respect to each Employee Benefit Plan, and has performed all its obligations
under each Employee Benefit Plan in all material respects.
B. No ERISA Event (determined without regard to any materiality
standard in that definition) has occurred or is reasonably expected to occur
which could reasonably be expected to result in liability to a Loan Party or
any of its ERISA Affiliates in excess of $2,500,000.
C. Except to the extent required under Section 4980B of the
Internal Revenue Code or except as described on Schedule A annexed hereto, no
Employee Benefit Plan provides health or welfare benefits (through the
purchase of insurance or otherwise) for any retired or former employee of a
Loan Party or any of its Subsidiaries.
D. As of the most recent valuation date for all Pension Plans,
the excess of the aggregated accumulated benefit obligations, as defined in
Statement of Financial Accounting Standards No. 87 (the "ABO"), over the
aggregate total fair market value for all such Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which the fair
market value of the assets exceeds the ABO), does not exceed $40,000,000.
4.12 Patents, Trademarks, etc.
Each Loan Party owns, or is licensed to use, all patents,
trademarks, trade names, copyrights, technology, know-how and processes used
in or necessary for the conduct of its business as currently conducted that
are material to the condition (financial or other), business, or operations of
Company and its Subsidiaries, taken as a whole ("Intellectual Property").
Except as disclosed on Schedule A, no claim has been asserted by any Person
with respect to the use of any such Intellectual Property, or challenging or
questioning the validity or effectiveness of any such Intellectual Property
and Company does not know of any valid basis for any such claim. Except as
disclosed on Schedule A, the use of such Intellectual Property by Loan Parties
does not infringe on the rights of any Person, subject to such claims and
infringements as do not, in the aggregate, give rise to any liability on the
part of Loan Parties that is material to Company and its Subsidiaries, taken
as a whole. The rights of Loan Parties to sell, franchise or license under
such trade names then being used may be transferred in connection with any
sale of assets or stock of the related business by Loan Parties.
4.13 Certain Fees
Company hereby indemnifies Lenders against and agrees that it will
hold Lenders harmless from any claim, demand or liability for broker's or
finder's fees alleged to have been incurred in connection with the
Refinancings or any of the other transactions contemplated thereby and any
expenses, including reasonable legal fees, arising in connection with any such
claim, demand or liability. No other similar fees or commissions will be
payable by Company for any other services rendered to Company or any of its
Subsidiaries ancillary to the transactions contemplated hereby.
4.14 Environmental Matters
A. Except as disclosed on Schedule A annexed hereto:
(i) the operations of Loan Parties comply in all material
respects with all Environmental Laws;
(ii) Loan Parties have obtained all material environmental,
health and safety permits, licenses and approvals necessary for their
respective operations, and all such permits, licenses and approvals are
in good standing and Loan Parties are in material compliance with all
terms and conditions of such permits, licenses and approvals;
(iii) No Loan Parties have received (A) any written notice
or claim to the effect that any of them is or may be liable in any
material respect to any Person as a result of the Release or threatened
Release of any Hazardous Materials or (B) any letter or request for
information under Section 104 of the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or
comparable state laws, and to the best of Company's knowledge, none of
the operations of any Loan Party is the subject of any federal or state
investigation evaluating whether any remedial action is needed to
respond to a Release or threatened Release of any Hazardous Material at
any Facility or at any other location, in each case, regarding any
matter which could be reasonably expected to result in a Material
Adverse Effect;
(iv) none of the operations of any Loan Party is the
subject of any pending judicial or administrative proceeding alleging
the violation of or liability under any Environmental Laws which if
adversely determined could reasonably be expected to have a Material
Adverse Effect;
(v) No Loan Party nor any of its present Facilities or
operations, or its past Facilities or operations, is subject to any
outstanding written order or agreement with any governmental authority
or private party respecting (A) any Environmental Laws or (B) any
Environmental Claims which could reasonably be expected to have a
Material Adverse Effect;
(vi) No Loan Party has any Contingent Obligation in
connection with any Release of any Hazardous Materials by any Loan Party
which could reasonably be expected to have a Material Adverse Effect;
(vii) No Loan Party's operations involve the generation,
transportation, treatment or disposal of hazardous waste, as defined
under 40 C.F.R. Parts 260-270 or any state equivalent and no Loan Party
nor, to the best of Company's knowledge, any predecessor in title to any
Loan Party or any third party at any time occupying any Facility has at
any time used, generated, disposed of, stored, transported to or from,
released or threatened the release of any Hazardous Materials, in any
form, quantity or concentration on, from, under or affecting such
Facility in a manner that could reasonably expect to result in material
liability of or material claim against any Loan Party;
(viii) No event or condition has occurred with respect to
underground storage tanks or surface impoundments on or at the
Facilities violating any Environmental Laws or relating to any Release
of any Hazardous Materials at such storage tanks or surface impoundments
which, individually, or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect; and
(ix) no Lien in favor of any governmental authority for (A)
any liability under Environmental Laws, or (B) damages arising from or
costs incurred by such governmental authority in response to a Release
has been filed or attached to the Facilities.
B. No Material Adverse Effect. No Hazardous Materials exist
on, under or about any Facility in a manner that could reasonably be expected
to give rise to an Environmental Claim having a Material Adverse Effect and no
Loan Party has filed any notice or report of a Release of any Hazardous
Materials that could reasonably be expected to give rise to an Environmental
Claim having a Material Adverse Effect. The matters disclosed on Schedule A,
individually or in the aggregate, could not reasonably be expected to give
rise to an Environmental Claim having a Material Adverse Effect.
4.15 Disclosure.
No representation or warranty of any Loan Party contained in this
Agreement, or any other document, certificate or written statement furnished
to Lenders by or on behalf of any such Person for use in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact (known to any such Person in
the case of any document not furnished by it) necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the
time made, it being recognized by Lenders that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such projections may differ from the projected
results. There is no fact known to any such Person (other than matters of a
general economic nature) that materially and adversely affects the business,
operations, property, assets, prospects or condition (financial or otherwise)
of any such Person and its respective Subsidiaries, taken as a whole, that has
not been disclosed herein or in such other documents, certificates and
statements furnished to Lenders for use in connection with the transactions
contemplated hereby.
SECTION 5.
Company's Affirmative Covenants
Company covenants and agrees that, so long as any of the
Commitments hereunder shall be in effect and until payment in full of all of
the Loans and Notes and all other amounts owing hereunder and expiration of
all Letters of Credit, unless Requisite Lenders shall otherwise give prior
written consent, Company shall perform all covenants in this Section 5.
5.1 Financial Statements and Other Reports
Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance
with sound business practices to permit preparation of financial statements in
conformity with GAAP. Company will deliver to Lenders:
(i) as soon as practicable and in any event within 45 days
(in the case of the last month of each fiscal quarter) or 30 days (in
the case of all other months) after the end of each month ending after
the Closing Date in each of Company's fiscal years, the monthly
financial reporting package distributed internally to the officers of
Company (the "G-1 Report"), which shall include (a) the consolidated
balance sheets of Company as at the end of such month and the related
consolidated statements of income of Company for such month and for the
period from the beginning of the then current fiscal year to the end of
such month and the related consolidated statements of cash flow of
Company for the period from the beginning of the then current fiscal
year to the end of such month, (b) a schedule of the outstanding
Indebtedness for borrowed money of Company describing each such debt
issue or loan outstanding, and the principal amount in respect of each
such debt issue or loan, and (c) a brief summary describing the
operations of Company and its Subsidiaries and a schedule containing
summaries of revenues and operating income, in each case for such month
and for the period from the beginning of the then current fiscal year to
the end of such month by Division, setting forth in each case in
comparative form the corresponding figures for the corresponding periods
of the previous fiscal year and the corresponding figures from the
consolidated plan and financial forecast for the current fiscal year
delivered pursuant to subsection 5.1(xii), all in reasonable detail and
certified by the chief financial officer, chief accounting officer or
treasurer of Company that they fairly present the financial condition
of Company and its Subsidiaries as at the dates indicated and the
results of their operations and changes in their cash flow for the
periods indicated, subject to changes resulting from audit and normal
year-end adjustment;
(ii) as soon as practicable and in any event within 45 days
after the end of the first three fiscal quarters (a) a G-1 Report for
the fiscal period then ended and (b) the quarterly report of Company
filed with the Securities and Exchange Commission on Form 10-Q or the
financial statements of Company which would be required to be filed on
Form 10-Q if such Form 10-Q is not filed;
(iii) as soon as practicable and in any event within 90 days
after the end of each fiscal year of Company (a) a G-1 Report for the
fiscal period then ended, (b) the Annual Report on Form 10-K of Company
filed with the Securities and Exchange Commission or the audited
financial statements of Company which would be required to be filed on
Form 10-K if such Form 10-K is not filed, (c) in the case of such
consolidated financial statements, accompanied by a report thereon of
independent certified public accountants of recognized national standing
selected by Company, which report shall be unqualified as to going
concern and scope of audit and shall state that such consolidated
financial statements present fairly the financial position of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flow for the periods indicated in conformity
with GAAP and that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards, and (d) certified by the
chief financial officer, treasurer or chief accounting officer of
Company that such statements fairly present the financial condition of
Company and its Subsidiaries as at such date and the results of their
operations for the periods covered thereby;
(iv) together with each delivery of financial statements of
Company and its Subsidiaries pursuant to subdivisions (ii) and (iii)
above, (a) an Officers' Certificate of Company stating that the signers
have reviewed the terms of this Agreement and the Notes and have made,
or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of Company and its Subsidiaries
during the accounting period covered by such financial statements and
that such review has not disclosed the existence during or at the end of
such accounting period, and that the signers do not have knowledge of
the existence as at the date of the Officers' Certificate, of any
condition or event that constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action
Company has taken, is taking and proposes to take with respect thereto;
(b) a Compliance Certificate demonstrating in reasonable detail
compliance during and at the end of the applicable accounting periods
with the restrictions contained in subsections 6.1, 6.2, 6.3, 6.4, 6.5,
6.6 and 6.7; and (c) an Officers' Certificate listing Asset Sales, the
Net Cash Proceeds of which have not yet been utilized to make
prepayments on the Loans pursuant to subsection 2.4A(ii)(a), and the
aggregate amount of such Net Cash Proceeds;
(v) together with each delivery of consolidated financial
statements of Company and its Subsidiaries pursuant to subdivision (iii)
above, a written statement by the independent public accountants giving
the report thereon (a) stating that their audit examination has included
a review of the terms of this Agreement and the Notes as they relate to
accounting matters, (b) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of Default
or Potential Event of Default has come to their attention, and if such a
condition or event has come to their attention, specifying the nature
and period of existence thereof; provided that such accountants shall
not be liable by reason of any failure to obtain knowledge of any such
Event of Default or Potential Event of Default with respect to
accounting matters that would not be disclosed in the course of their
audit examination, and (c) stating that based on their audit examination
nothing has come to their attention that causes them to believe that the
information contained in either or both the certificates delivered
therewith pursuant to subdivision (iv) above is not correct or that the
matters set forth in the Compliance Certificate delivered therewith
pursuant to clause (b) of such subdivision (iv) above for the applicable
fiscal year are not stated in accordance with the terms of this
Agreement;
(vi) promptly upon receipt thereof, a summary of
significant comments submitted to Company by independent public
accountants in connection with each annual, interim or special audit of
the financial statements of Company made by such accountants, including,
without limitation, the comment letter submitted by such accountants to
management in connection with their annual audit;
(vii) promptly upon their becoming available, copies of (a)
all financial statements, reports, notices and proxy statements sent or
made available generally by Company to its security holders or by any
Subsidiary of Company to its security holders other than Company or
another Subsidiary, (b) all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by Company or any of its Subsidiaries with
any securities exchange or with the Securities and Exchange Commission
or any governmental or private regulatory authority and (c) all press
releases and other statements made available generally by Company or any
of its Subsidiaries to the public concerning material developments in the
business of Company or any of its Subsidiaries;
(viii) promptly upon any officer of Company obtaining
knowledge (a) of any condition or event that constitutes an Event of
Default or Potential Event of Default, or becoming aware that any Lender
or Administrative Agent has given any notice or taken any other action
with respect to a claimed Event of Default or Potential Event of Default
under this Agreement, (b) that any Person has given any notice to
Company or any Subsidiary of Company or taken any other action with
respect to a claimed default or event or condition of the type referred
to in subsection 7.2, (c) of any condition or event that would be
required to be disclosed or is disclosed in a current report filed by
Company with the Securities and Exchange Commission on Form 8-K (Items
1, 2, 4 and 5 of such Form as in effect on the date hereof) if Company
were required to file such reports under the Exchange Act, or (d) of a
material adverse change in the business, operations, properties, assets,
prospects or condition (financial or otherwise) of Company and its
Subsidiaries, taken as a whole, an Officers' Certificate specifying the
nature and period of existence of such condition or event, or specifying
the notice given or action taken by such holder or Person and the nature
of such claimed default, Event of Default, Potential Event of Default,
event or condition, and what action Company has taken, is taking and
proposes to take with respect thereto;
(ix) promptly upon any officer of Company obtaining
knowledge of (a) the institution of, or non-frivolous threat of, any
action, suit, proceeding, governmental investigation or arbitration
against or affecting Company or any of its Subsidiaries or any property
of Company or any of its Subsidiaries not previously disclosed by
Company to Lenders, or (b) any material development in any such action,
suit, proceeding, governmental investigation or arbitration, that, in
either case
(y) if there exists a reasonable likelihood that
such action, suit, proceeding, governmental investigation or
arbitration would be adversely determined, might have a Material
Adverse Effect; or
(z) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a
result of, the Refinancings and related transactions;
Company shall promptly give notice thereof to Lenders and provide such
other information as may be reasonably available to it to enable Lenders
and their counsel to evaluate such matters;
(x) promptly upon becoming aware of the occurrence of or
forthcoming occurrence of any ERISA Event, a written notice specifying
the nature thereof, what action the applicable Loan Party or any of its
ERISA Affiliates has taken, is taking or proposes to take with respect
thereto, and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect
thereto;
(xi) with reasonable promptness, copies of (a) upon request
of Requisite Lenders, each Schedule B (Actuarial Information) to the
annual report (Form 5500 Series) filed by a Loan Party or any of its
ERISA Affiliates with the Internal Revenue Service with respect to each
Pension Plan (in which any employees of Company or any of its
Subsidiaries have ever participated as employees of Company or one of its
Subsidiaries) for which a Schedule B is required to be filed; (b) all
notices received by Company or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (c) copies of
such other documents or governmental reports or filings relating to any
Employee Benefit Plan as any Agent or any Lender shall reasonably
request;
(xii) as soon as practicable and in any event within 30 days
after the Board of Directors of Company has given its approval, the
annual budget and financial forecast for each succeeding fiscal year of
Company and its Subsidiaries and setting forth forecasted sales,
operating profit, cash flows, capital expenditures and depreciation on
a Division by Division basis;
(xiii) as soon as practicable and in any event by the last
day of each fiscal year of Company, a report in form and substance
reasonably satisfactory to Agents and Requisite Lenders outlining all
material insurance coverage maintained as of the date of such report by
Company and its Subsidiaries and all material insurance coverage planned
to be maintained by such Persons in the subsequent fiscal year;
(xiv) together with each delivery of financial statements of
Company and its Subsidiaries pursuant to subsection (iii) above, a
written notice setting forth with respect to each Person that became a
Subsidiary of Company (a) the date on which such Person became a
Subsidiary of Company and (b) all of the data required to be set forth
in Schedule 1.1 annexed hereto with respect to all Subsidiaries of
Company (it being understood that such written notice shall be deemed to
supplement Schedule 1.1 annexed hereto for all purposes of this
Agreement);
(xv) at such time as Company sends a notice to Defense
Investigative Service pursuant to paragraph 2 of the Defense
Investigative Service Letter, Company will concurrently notify its then
relationship manager at Administrative Agent, via telephone, of the
transmission of such notice to Defense Investigative Service and will
also concurrently fax a copy of Company's notice to its then
relationship manager at Administrative Agent; and
(xvi) with reasonable promptness, such other information and
data with respect to Company or any of its Subsidiaries as from time to
time may be reasonably requested by any Lender.
5.2 Corporate Existence, etc.
Company will, and will cause each of its Subsidiaries to, at all
times preserve and keep in full force and effect its corporate existence and
rights and franchises material to its business; provided, however, that the
corporate existence of any such Subsidiary may be terminated if such
termination is not materially disadvantageous to any Lender.
5.3 Payment of Taxes and Claims; Tax Consolidation
A. Company will, and will cause each of its Subsidiaries to, pay
all taxes, assessments and other governmental charges imposed upon it or any
of its properties or assets or in respect of any of its franchises, business,
income or property before any material penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a material Lien upon any of its properties or assets, prior to the time
when any material penalty or fine shall be incurred with respect thereto;
provided that no such charge or claim need be paid if being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted
and if such reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return with
any Person (other than Company or any of its Subsidiaries).
5.4 Maintenance of Properties; Insurance
Company will maintain or cause to be maintained in good repair,
working order and condition all material properties used or useful in the
business of Company and its Subsidiaries and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Company will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business and
the properties and business of its Subsidiaries against loss or damage of the
kinds customarily insured against by corporations of established reputation
engaged in the same or similar businesses and similarly situated, of such
types and in such amounts as are customarily carried under similar
circumstances by such other corporations ("Industry Standards") and may self
insure to the extent, but only to the extent, consistent with Industry
Standards.
5.5 Inspection; Lender Meeting; Confidentiality
A. Company shall permit any authorized representatives designated
by any Lender to visit and inspect any of the properties of Company or any of
its Subsidiaries, including its and their financial and accounting records,
and to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants, all upon reasonable notice and at such reasonable times
during normal business hours and as often as may be reasonably requested.
Without in any way limiting the foregoing, Company will participate in a
meeting of Agents and Lenders if requested by Agents to be held at Company's
corporate offices at such time as may be agreed to by Company and Requisite
Lenders.
B. Each Agent and each Lender acknowledges that Company is a
public company subject to the Exchange Act and that in the course of complying
with this Agreement, such Agent and Lender may obtain material, non-public
information, and each Agent and each Lender hereby agrees to keep any
non-public information delivered or made available to such Agent or such
Lender pursuant to the Loan Documents, which Company or its authorized
representative has identified as non-public, confidential information,
confidential from any Person other than Persons, including attorneys,
consultants or other professional advisors, employed by or retained by such
Agent or such Lender who are or are expected to become engaged in evaluating,
approving, structuring or administering the Loans or Affiliates of such Agent
or such Lender which have agreed to keep such information confidential
pursuant to this subsection 5.5B; provided, that nothing herein shall prevent
any Lender from disclosing such information to any bona fide assignee,
transferee or participant in connection with the contemplated assignment or
transfer of any Loans or participation therein (whether or not such
assignment, transfer or participation actually occurs), or as required or
requested by a governmental agency or representative thereof, or pursuant to
legal process or otherwise required by law, or as required in connection with
the exercise of any remedy under the Loan Documents; provided, however, that
this subsection shall no longer apply to information which has become public
other than through a breach by any Agent or any Lender of this subsection or
information that has been received by a Lender without restrictions as to
disclosure or use from a Person who, to such Lender's knowledge or reasonable
belief, was not prohibited from disclosing such information by any duty of
confidentiality.
5.6 Equal Security for Obligations; No Further Negative Pledges
A. If Company or any of its Subsidiaries shall create or assume
any Lien upon any of its property or assets, whether now owned or hereafter
acquired, other than Liens excepted by the provisions of subsection 6.2, it
shall make or cause to be made effective provision whereby the Obligations
will be secured by such Lien equally and ratably with any and all other
Indebtedness thereby secured as long as any such Indebtedness shall be secured;
provided that notwithstanding the foregoing, this covenant shall not be
construed as a consent by Requisite Lenders to any creation or assumption of
any such Lien not permitted by the provisions of subsection 6.2.
B. Except with respect to specific property encumbered to
secure payment of particular Indebtedness or to be sold pursuant to an
executed agreement with respect to an Asset Sale, or as may be restricted by
the 9 1/8% Subordinated Note Indenture, the New Senior Subordinated Note
Indenture or the Receivables Facilities, neither Company nor any of its
Subsidiaries shall enter into any agreement prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired.
5.7 Compliance with Laws, etc.
Company and its Subsidiaries shall exercise all due diligence in
order to comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority, noncompliance with which
would have a Material Adverse Effect.
5.8 Environmental Disclosure and Inspection
(i) Company shall comply, and shall cause each of its
Subsidiaries and their Facilities to comply, and shall use its reasonable
efforts to cause (a) their respective employees, agents, contractors and
subcontractors, (b) all tenants under any lease or occupancy agreement
affecting any portion of the Facilities and (c) all other Persons on or
occupying such property to comply, with all Environmental Laws.
(ii) Company shall promptly advise Administrative Agent in
writing and in reasonable detail of (a) any Release of any Hazardous Material
required to be reported to any federal, state or local governmental or
regulatory agency under all applicable Environmental Laws, (b) any remedial
action taken by Company or, to the extent Company or any of its Subsidiaries
has any such knowledge, any other Person in response to (1) any Hazardous
Material on, under or about any Facility, the existence of which could
reasonably be expected to result in a Material Adverse Effect or (2) any
Environmental Claim that could reasonably be expected to result in a Material
Adverse Effect, and (c) any request for information from any governmental
agency that indicates such agency is investigating whether Company or its
Subsidiaries may be potentially responsible for a Release of Hazardous
Materials.
(iii) Company shall, at its own expense, provide copies to
Administrative Agent of such documents or information to which Company or any
of its Subsidiaries has access as Administrative Agent or Requisite Lenders
may reasonably request in relation to any matters disclosed pursuant to this
subsection 5.8.
5.9 Hazardous Materials; Remedial Action
A. Company shall, and shall cause its Subsidiaries to, (i)
store, use, dispose of and transport any Hazardous Materials in material
compliance with all applicable Environmental Laws and (ii) promptly take any
and all necessary remedial action in response to the Release of any Hazardous
Materials on, under or about any Facility. In the event Company or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Material on, under or about any Facility, Company or such Subsidiary shall
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when Company's
or such Subsidiary's liability for such presence, storage, use, disposal,
transportation or discharge of any Hazardous Material is being contested in
good faith by Company or such Subsidiary and such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have
been made therefor.
B. Company shall not and shall not permit its Subsidiaries to
install or permit to be installed any asbestos in any property owned by any of
them and Company shall not and shall not permit its Subsidiaries to install,
and Company and its Subsidiaries shall otherwise use their best efforts to
prevent the installation of, any asbestos in any property leased by any of
them. With respect to any asbestos currently present in such property,
Company shall and shall cause its Subsidiaries to promptly and in accordance
with all applicable Environmental Laws and prudent industry practices maintain
such asbestos in good and safe condition.
5.10 BW-Other Corporation
A. Company and its Subsidiaries may not make direct or indirect
Investments in or become or be liable with respect to any Contingent
Obligation with respect to BW-Other Corporation except for existing
investments listed on Schedule 6.3; provided, however, that Company may pay
the Centaur Settlement Amount; and, provided further that Company may pay
routine costs and expenses related to BW-Other Corporation in the ordinary
course of business consistent with past practices. Company will not and will
not permit any of its Subsidiaries to directly or indirectly enter into or
permit to exist any transaction between Company and its Subsidiaries and
BW-Other Corporation on terms that are less favorable to Company and its
Subsidiaries than those that might be obtained from third parties.
B. Company will not, and will not permit any of its Consolidated
Subsidiaries to, merge or consolidate with or otherwise acquire, in one
transaction or a series of transactions, any material portion of BW-Other
Corporation.
5.11 Further Assurances as to Future Material Subsidiaries
Company will notify Administrative Agent promptly in the event
that any Subsidiary becomes a Material Subsidiary and from and after the
Closing Date will cause each such Subsidiary to execute counterparts of the
Borg-Warner Subsidiary Guaranty and the Borg-Warner Subsidiary Pledge
Agreement (or appropriate amendments thereof), in each case to the same extent
and subject to the same limitations as though such Subsidiary were a
Borg-Warner Guarantor Subsidiary or Borg-Warner Pledged Subsidiary on the date
hereof, and to take all such further action as may be required to perfect the
security interests granted thereunder as may be required by Agents and
Requisite Lenders.
5.12 FOCI Matters
Company will notify the Administrative Agent promptly in the event
that any governmental agency requests the Administrative Agent to take any
action necessary or desirable to maintain the security clearances of Company
and its Subsidiaries. The Administrative Agent hereby agrees that, if so
requested, it will provide an officer's certificate, in form and substance
satisfactory to the Administrative Agent, to the appropriate governmental
agency to the effect that after the occurrence and continuation of an Event of
Default, it will provide such governmental agency with not less than 30 days
advance notification of the time at which it believes it may commence
exercising its foreclosure rights with respect to any Pledged Shares and that
in the event that it forecloses on such Pledged Shares, it will notify such
governmental agency immediately of any intended sale, transfer or other
disposition of such Pledged Shares; provided that such officer's certificate
shall also include such acknowledgements, qualifications or limitations with
respect to the foregoing that Administrative Agent believes to be necessary
or desirable. The Company agrees that at any time it may be required to
notify any governmental agency with respect to such matters that it will
concurrently notify the Administrative Agent of such notice and provide a copy
of such notice to Administrative Agent. The Company also acknowledges and
agrees that any agreement of Administrative Agent to provide the foregoing
officer's certificate or to take any other appropriate action is not intended
to, and does not in fact, waive, modify, amend or change, in any respect, any
of the terms and conditions of any of the Loan Documents, including without
limitation, Administrative Agent's ability to exercise any of its rights or
remedies under any of the Loan Documents against any of the Loan Parties or
with respect to any of the Pledged Collateral at the times and in the manner
permitted by such Loan Documents, and that no Loan Party is intended to be,
and no Loan Party shall be, a third party beneficiary of any officer's
certificate provided by Administrative Agent to such governmental agency.
SECTION 6.
Company's Negative Covenants
Company covenants and agrees that, so long as any of the
Commitments shall be in effect and until payment in full of all of the Loans
and Notes and all other amounts owing hereunder and expiration of all Letters
of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Company will perform all covenants in this Section 6.
6.1 Indebtedness
Company shall not, and shall not permit any of its Consolidated
Subsidiaries to, directly or indirectly, create, incur, assume, guaranty, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Company and its Consolidated Subsidiaries may become
and remain liable with respect to the Obligations;
(ii) Company and its Consolidated Subsidiaries (other than
Old Armored) may remain and may become and remain liable with respect to
Indebtedness to Company and its Consolidated Subsidiaries; provided that
(a) any Indebtedness owed by Company to any of its Subsidiaries shall,
to the extent permitted by applicable law, be subordinated in right of
payment, from and after such time as the Loans shall become due and
payable (whether at stated maturity, by acceleration or otherwise), to
the payment in full of the Obligations of Company under this Agreement
and the Obligations of a Subsidiary under the Loan Guaranties and the
Borg-Warner Subsidiary Pledge Agreement, and (b) any payment by any of
Company's Subsidiaries under any guaranty of the Obligations shall
result in a pro tanto reduction of the amount of any intercompany
Indebtedness owed by such Subsidiary to Company or any of its
Subsidiaries for whose benefit the payment is made;
(iii) Company and its Consolidated Subsidiaries may remain
liable with respect to each of the items of Existing Indebtedness
described in Schedule 6.1 annexed hereto and any Indebtedness incurred
to refinance such Existing Indebtedness; provided that after giving
effect to such refinancing Indebtedness and the repayment of the
corresponding Existing Indebtedness with the proceeds thereof, (a) the
aggregate principal amount of the refinancing Indebtedness and the
corresponding Existing Indebtedness so refinanced shall not be greater
than the outstanding principal amount of such Existing Indebtedness
immediately prior to such refinancing, (b) the weighted average life to
maturity of such refinancing Indebtedness shall be no shorter than the
Existing Indebtedness being refinanced and (c) such refinancing
Indebtedness shall not be secured by any additional property than that
which secures the Existing Indebtedness being refinanced;
(iv) Company and its Consolidated Subsidiaries may become
and remain liable with respect to Indebtedness in respect of Capital
Leases; provided that the aggregate outstanding amount of such Capital
Leases does not exceed $30,000,000 at any time;
(v) Company and its Consolidated Subsidiaries may become
and remain liable with respect to Contingent Obligations permitted by
subsection 6.4 and, upon any obligations actually arising pursuant
thereto, the Indebtedness incurred in connection with the satisfaction
of such Contingent Obligations so extinguished;
(vi) Company may remain liable with respect to $150,000,000
in aggregate principal amount of the 9 1/8% Subordinated Notes and
$125,000,000 in aggregate principal amount of the New Senior
Subordinated Notes;
(vii) BPS Financial Services, Inc. may become and remain
liable with respect to the Trade Receivables Facility and with respect
to intercompany promissory notes in favor of Company and its other
Consolidated Subsidiaries, evidencing BPS Financial Services, Inc.'s
obligations with respect to the purchase price of receivables purchased
by BPS Financial Services, Inc. under the Trade Receivables Facility
provided that all intercompany promissory notes issued to Company or
Material Subsidiaries shall be pledged by Company or such Material
Subsidiaries to Collateral Agent for the benefit of Lenders;
(viii) In addition to the Indebtedness permitted by clauses
(i)-(vii) and clauses (ix) and (xi), Company's Consolidated Subsidiaries
which constitute Foreign Entities may incur and remain liable with
respect to Indebtedness not exceeding at any one time $10,000,000 in
aggregate outstanding principal amount;
(ix) Wells Fargo Alarm Services, Inc., BW-Canada Alarm
(Wells Fargo) Corporation, and their respective wholly owned
subsidiaries may become and remain liable with respect to the Alarm
Services Contract Securitization Facility;
(x) Indebtedness of the Company and its Subsidiaries
assumed or acquired in connection with a Permitted Acquisition under
subsection 6.7 which Indebtedness existed immediately prior to the time
of such Permitted Acquisition; provided that such Indebtedness is not
incurred in contemplation of such Permitted Acquisition; and
(xi) Company and its Subsidiaries may become and remain
liable with respect to other Indebtedness; provided that the maximum
aggregate liability of Company and its Subsidiaries with respect to such
other Indebtedness, together with the Contingent Obligations permitted
pursuant to subsection 6.4(xi), shall not at any one time exceed
$25,000,000.
6.2 Liens
Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument in respect of goods or accounts receivable), of Company
or any of its Consolidated Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents in
favor of Collateral Agent for the benefit of the Lenders and the
beneficiaries of the guaranties permitted pursuant to subsection
6.4(iii);
(iii) Liens described in Schedule 6.2 annexed hereto securing
Indebtedness permitted pursuant to subsection 6.1(iii) or (v);
(iv) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements
of Company or its Subsidiaries;
(v) Liens on property subject to such Capital Leases
securing the Indebtedness described in subsection 6.1(iv);
(vi) Liens in favor of the purchaser and its assignee of
Company's and its Consolidated Subsidiaries' receivables with respect to
receivables purchased pursuant to the Trade Receivables Facility
permitted pursuant to subsection 6.1(vii);
(vii) Liens on the assets or property of a Consolidated
Subsidiary which is a Foreign Entity securing the Indebtedness incurred
by such Foreign Entity and permitted pursuant to subsection 6.1(viii);
(viii) Liens in favor of the purchaser of receivables,
contracts and/or leases from Wells Fargo Alarm Services, Inc., BW-Canada
Alarm (Wells Fargo) Corporation, and their respective subsidiaries, with
respect to such receivables, contracts and/or leases in connection with
the Alarm Services Contract Securitization Facility permitted under
subsection 6.1(ix);
(ix) Liens securing Indebtedness permitted under subsection
6.1(x), which Liens are existing prior to the time such Indebtedness was
assumed or acquired by the Company or its Consolidated Subsidiaries or
the time the entity which incurred such Indebtedness became a Subsidiary
of Company; provided that such Liens were not incurred in connection
with, or in contemplation of, the acquisition of such Subsidiary and
such Liens extend to or cover only the property and assets of such
entity which were covered by such Liens and which were owned by such
entity, in each case at the time such entity became a Subsidiary of
Company;
(x) The New Senior Subordinated Note Indenture or the 9
1/8% Subordinated Note Indenture may contain covenants requiring Company
to provide for equal and ratable Liens or security to the holders of the
New Senior Subordinated Notes and 9 1/8% Subordinated Notes,
respectively; provided that notwithstanding the foregoing, this
exception shall not be construed as a consent by Requisite Lenders to
any creation or assumption of any such Lien or security not otherwise
permitted by the provisions of this subsection 6.2; and
(xi) Liens securing Indebtedness permitted pursuant to
subsection 6.1(xi).
6.3 Investments
Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, except:
(i) Company and its Consolidated Subsidiaries may make and
own Investments in Cash Equivalents;
(ii) Company and its Consolidated Subsidiaries may make and
own Investments described on Schedule 6.3 annexed hereto;
(iii) Company and its Consolidated Subsidiaries may make
intercompany loans to the extent permitted under subsection 6.1(ii);
Company and its Consolidated Subsidiaries may own the Investments
existing on the Closing Date in Company's Subsidiaries; Company and its
Consolidated Subsidiaries may make and own additional Investments after
the Closing Date in Consolidated Subsidiaries (other than Old Armored)
which constitute Material Subsidiaries or in Consolidated Subsidiaries
(other than Old Armored) which are both Borg-Warner Guarantor
Subsidiaries and Borg-Warner Pledged Subsidiaries;
(iv) Company and its Consolidated Subsidiaries may acquire
and retain ownership of Investments in connection with Asset Sales
permitted by subsection 6.7(iii);
(v) Company and its Consolidated Subsidiaries may make and
own Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business;
(vi) Company and its Consolidated Subsidiaries may make
intercompany investments in BPS Financial Services, Inc. to the extent
permitted pursuant to subsection 6.1(vii); and
(vii) Company and its Consolidated Subsidiaries may create
or acquire new Consolidated Subsidiaries, make Investments in such
Consolidated Subsidiaries, make additional Investments in the Armored
Joint Venture and make other Investments, including in Joint Ventures,
to the extent not otherwise prohibited under this Agreement provided
that the aggregate amount of all such Investments in any Fiscal Year
together with the Adjusted Consolidated Capital Expenditure Amount in
such Fiscal Year plus all amounts expended for Permitted Acquisitions
pursuant to subsection 6.7(ii) in such Fiscal Year does not exceed
$75,000,000, as such amount may be increased by any Reinvested Asset
Sale Proceeds for such Fiscal Year.
6.4 Contingent Obligations
Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, create or become or be liable with
respect to any Contingent Obligation except:
(i) Guaranties resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(ii) Contingent Obligations under the Loan Guaranties;
(iii) Guaranties in favor of Lenders or their respective
Affiliates of Interest Rate Agreements and Currency Agreements entered
into by Company;
(iv) Contingent Obligations relating to obligations of
Company to make payments with respect to the cancellation or repurchase
of certain stock or stock options granted or to be granted to employees
of Company and its Subsidiaries under the Borg-Warner Security
Corporation Management Stock Option Plan, the 1993 Stock Incentive Plan
or any other employee or director stock option, incentive, purchase,
retirement, savings or similar plan or pursuant to subscription
agreements with respect to shares of Common Stock;
(v) Interest Rate Agreements and Currency Agreements
entered into by Company or its Subsidiaries;
(vi) Contingent Obligations described on Schedule 6.4
annexed hereto;
(vii) Contingent Obligations in respect of liabilities of
Company and its Subsidiaries permitted pursuant to subsection 6.1(vii)
and in respect of any other obligation of Company or its Consolidated
Subsidiaries which constitute Material Subsidiaries which is permitted
under this Agreement;
(viii) Contingent Obligations relating to guaranties of the
obligations of suppliers, customers, franchisees and licensees of
Company and its Consolidated Subsidiaries; provided that the maximum
aggregate liability of Company and its Consolidated Subsidiaries under
all such Contingent Obligations, shall not at any one time exceed
$5,000,000 (including any Contingent Obligations in existence as of the
date hereof);
(ix) Contingent Obligations of Company relating to
Indebtedness permitted under subsection 6.1(viii) that is incurred by a
Foreign Entity which is a Consolidated Subsidiary;
(x) Contingent Obligations with respect to the Alarm
Services Contract Securitization Facility;
(xi) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of letters of
credit issued other than under this Agreement; provided that the maximum
aggregate liability of Company and its Subsidiaries under all such
Contingent Obligations, together with the Indebtedness permitted
pursuant to subsection 6.1(xi), shall not at any one time exceed
$25,000,000;
(xii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of Letters of
Credit; and
(xiii) In addition to the Contingent Obligations permitted
by clauses (i)-(xii), Company and its Consolidated Subsidiaries may
become and remain liable with respect to other Contingent Obligations;
provided that the maximum aggregate liability of Company and its
Consolidated Subsidiaries in respect of all such Contingent Obligations
shall not at any one time exceed $10,000,000.
6.5 Restricted Junior Payments
Company shall not, and shall not permit any of its Consolidated
Subsidiaries to, directly or indirectly, declare, order, pay, make or set
apart any sum for any Restricted Junior Payment; except:
(i) Company may make Restricted Junior Payments to cancel or
repurchase stock or stock options granted or to be granted to directors
or employees of Company or any of its Consolidated Subsidiaries under
the Borg-Warner Security Corporation Management Stock Option Plan, the
1993 Stock Incentive Plan or any other employee or director stock
option, incentive, purchase, retirement, savings or similar plan or
pursuant to any stock subscription agreements with respect to shares of
Common Stock in an aggregate amount which does not exceed $5,000,000 in
any calendar year and $20,000,000 in the aggregate;
(ii) On or after the first anniversary of the Closing Date,
Company may make Restricted Junior Payments to repurchase shares of
Common Stock then outstanding in an aggregate annual amount which does
not exceed $10,000,000; provided, that after giving effect to any
Restricted Junior Payment permitted under this subsection 6.5(ii), the
Company is in pro forma compliance with the financial covenants referred
to in subsection 6.6; and
(iii) Company may make Restricted Junior Payments in respect of
Company's obligations to pay interest on its Subordinated Indebtedness
in accordance with the terms of, and only to the extent required by, the
terms of such Subordinated Indebtedness, as such terms are in effect on
the Closing Date;
provided that immediately prior to and immediately after giving effect to any
Restricted Junior Payment permitted by this subsection 6.5, no Event of
Default or Potential Event of Default exists or will exist.
Company will not, and will not permit any of its Subsidiaries to,
deposit any funds for the purpose of making any Restricted Junior Payment with
a trustee, paying agent or registrar or other payment intermediary more than
three (3) Business Days prior to the date such payment is due, unless required
to do so by the terms, as of the Closing Date, of the applicable indenture.
In addition, Company will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Subsidiary to (a) pay dividends or make any other distribution on any
of such Subsidiary's capital stock owned by Company or any Subsidiary of
Company, (b) subject to subordination provisions, pay any indebtedness owed to
Company or any other Subsidiary, (c) make loans or advances to Company or any
other Subsidiary or (d) transfer any of its property or assets to Company or
any other Subsidiary, except as provided herein, in the 9 1/8% Subordinated
Note Indenture, in the New Senior Subordinated Note Indenture or in the Trade
Receivables Facility (with respect to BPS Financial Services, Inc.), any
restrictions existing under any other agreements as in effect on the Closing
Date or any renewals or extensions thereof; provided that the terms and
conditions of any such renewals or extensions are no less favorable to Lenders
than the agreements being renewed or extended.
6.6 Financial Covenants
A. Interest Coverage Ratio. Company will not permit its
Interest Coverage Ratio as of the last day of each of the fiscal quarters
shown below for the four consecutive preceding fiscal quarters ended on such
date, to be less than the correlative ratio indicated below:
Minimum
Fiscal Quarter Ended Interest Coverage Ratio
-------------------- -----------------------
March 31, 1997 2.20:1.00
June 30, 1997 2.20:1.00
September 30, 1997 2.20:1.00
December 31, 1997 2.20:1.00
March 31, 1998 2.25:1.00
June 30, 1998 2.25:1.00
September 30, 1998 2.30:1.00
December 31, 1998 2.30:1.00
March 31, 1999 2.40:1.00
June 30, 1999 2.40:1.00
September 30, 1999 2.40:1.00
December 31, 1999 2.40:1.00
March 31, 2000 2.50:1.00
June 30, 2000 2.50:1.00
September 30, 2000 2.60:1.00
December 31, 2000 2.75:1.00
March 31, 2001 2.75:1.00
June 30, 2001 2.75:1.00
September 30, 2001 2.75:1.00
December 31, 2001 2.75:1.00
March 31, 2002 2.75:1.00
B. Leverage Ratio. Company will not permit the ratio as of the
last day of each of the fiscal quarters shown below of Funded Debt to
Consolidated EBITDA for the four consecutive preceding fiscal quarters ended
on such date to be more than the correlative ratio indicated for such date:
Fiscal Quarter Ended Maximum Leverage Ratio
-------------------- ----------------------
March 31, 1997 3.40:1.00
June 30, 1997 3.40:1.00
September 30, 1997 3.45:1.00
December 31, 1997 3.50:1.00
March 31, 1998 3.50:1.00
June 30, 1998 3.50:1.00
September 30, 1998 3.45:1.00
December 31, 1998 3.45:1.00
March 31, 1999 3.30:1.00
June 30, 1999 3.30:1.00
September 30, 1999 3.30:1.00
December 31, 1999 3.30:1.00
March 31, 2000 3.20:1.00
June 30, 2000 3.20:1.00
September 30, 2000 3.10:1.00
December 31, 2000 3.10:1.00
March 31, 2001 3.00:1.00
June 30, 2001 3.00:1.00
September 30, 2001 3.00:1.00
December 31, 2001 3.00:1.00
March 31, 2002 3.00:1.00
C. Consolidated Net Worth. Company will not permit its
Consolidated Net Worth as of the last day of the fiscal quarters set forth
below and at all times thereafter (until the last day of the next fiscal
quarter when such amounts shall be increased as provided for herein) to be
less than the correlative amount indicated below:
Fiscal Quarter Ended Consolidated Net Worth
-------------------- ----------------------
March 31, 1997 $ 30,000,000
June 30, 1997 33,000,000
September 30, 1997 36,000,000
December 31, 1997 40,000,000
March 31, 1998 44,500,000
June 30, 1998 49,000,000
September 30, 1998 54,000,000
December 31, 1998 58,000,000
March 31, 1999 63,000,000
June 30, 1999 68,500,000
September 30, 1999 74,000,000
December 31, 1999 81,000,000
March 31, 2000 85,500,000
June 30, 2000 94,000,000
September 30, 2000 99,000,000
December 31, 2000 106,000,000
March 31, 2001 108,000,000
June 30, 2001 114,000,000
September 30, 2001 119,000,000
December 31, 2001 121,000,000
March 31, 2002 121,000,000
D. Consolidated EBITDA. Company will not permit Consolidated
EBITDA as of the last day of each of the fiscal quarters shown below for the
four consecutive preceding fiscal quarters ended on such date to be less than
the correlative amount indicated below:
Minimum Consolidated
Fiscal Quarter Ended EBITDA
-------------------- --------------------
March 31, 1997 $ 115,000,000
June 30, 1997 111,000,000
September 30, 1997 104,000,000
December 31, 1997 95,000,000
March 31, 1998 96,000,000
June 30, 1998 97,000,000
September 30, 1998 99,000,000
December 31, 1998 100,000,000
March 31, 1999 100,000,000
June 30, 1999 101,000,000
September 30, 1999 102,000,000
December 31, 1999 103,000,000
March 31, 2000 105,000,000
June 30, 2000 105,000,000
September 30, 2000 108,000,000
December 31, 2000 110,000,000
March 31, 2001 110,000,000
June 30, 2001 112,000,000
September 30, 2001 112,000,000
December 31, 2001 112,000,000
March 31, 2002 112,000,000
E. Consolidated Capital Expenditures. Company and its
Subsidiaries shall not permit the sum of (x) the Adjusted Consolidated Capital
Expenditure Amount in any Fiscal Year plus (y) the amount of the Investments
permitted under subsection 6.3(vii) made in such Fiscal Year plus (z) the
amount of the Permitted Acquisitions permitted under subsection 6.7(ii) made
in such Fiscal Year to exceed $75,000,000, as such amount may be increased by
any Reinvested Asset Sale Proceeds for such Fiscal Year. Notwithstanding the
foregoing, if any portion of such $75,000,000 for any Fiscal Year has not been
incurred within such Fiscal Year (the unutilized portion of such $75,000,000
being referred to as the "Unutilized Amount"), Company and its Subsidiaries
may, in the immediately succeeding Fiscal Year, make additional Consolidated
Capital Expenditures in an amount not to exceed the lesser of (i) the
Unutilized Amount and (ii) $10,000,000. In determining the Unutilized Amount
for any Fiscal Year, such amount shall be determined solely on the basis of
the $75,000,000 of permitted expenditures for that Fiscal Year and shall not
include any Unutilized Amount from any prior period.
6.7 Restriction on Fundamental Changes
Subject to subsection 5.2, each of Company and its Consolidated
Subsidiaries will not enter into any transaction of merger or consolidate, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, exchange, lease, sub-lease, transfer or
otherwise dispose of, in one transaction or a series of related transactions,
all or any of its business, property or fixed assets, or all or any portion of
the stock or beneficial ownership, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all the business,
property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person, except:
(i) any Subsidiary of Company may be merged or
consolidated with or into Company or any wholly-owned Subsidiary of
Company, or be liquidated, wound up or dissolved, or all or
substantially all of its business, property or assets may be conveyed,
sold, leased, transferred or otherwise disposed of, in one transaction
or a series of transactions, to Company or any wholly-owned Subsidiary
of Company; provided that, in the case of such a merger or
consolidation, Company or such wholly-owned Subsidiary shall be the
continuing or surviving corporation; provided further that, in the case
of such a merger or consolidation or disposition of a majority of the
stock of a Subsidiary or substantially all of the business, property or
assets of such a Subsidiary (the "Affected Subsidiary") of Company which
is a guarantor of any of the Obligations, (a) the continuing, surviving
or transferee corporation shall expressly assume the obligations of the
Affected Subsidiary under such guaranty and (b) in the case of a merger
or consolidation, the net worth of the continuing or surviving
corporation (calculated without giving effect to any increase in the
amount of intercompany Indebtedness for which the continuing or
surviving corporation is liable as compared to the amount of
intercompany Indebtedness for which the Affected Subsidiary was liable
immediately prior to such merger or consolidation) shall not be less
than the net worth of the Affected Subsidiary immediately prior to such
merger or consolidation; and provided still further that, subject to the
terms of the applicable Collateral Document, in the case of such a
merger or consolidation or disposition of a majority of the stock of a
Subsidiary or substantially all of the business, property or assets of
such a Subsidiary of Company the stock of which is pledged to secure the
Obligations, the stock of the continuing, surviving or transferee
corporation shall, at the time of consummation of such merger,
consolidation or transfer, be pledged to secure the Obligations;
(ii) Company and its Consolidated Subsidiaries may acquire
the business, property or fixed assets of, or stock or other evidence of
beneficial ownership of, any Person or any operating division of such
Person engaged in businesses substantially similar to those currently
conducted by the Company and its Consolidated Subsidiaries (such asset
or stock acquisitions being herein collectively referred to as
"Permitted Acquisitions"); provided that (x) the aggregate purchase
price (including the amount of all assumed Indebtedness) paid with
respect to such Permitted Acquisitions in any Fiscal Year plus (y) the
Adjusted Consolidated Capital Expenditure Amount in such Fiscal Year
plus (z) Investments permitted pursuant to subsection 6.3(vii) in such
Fiscal Year shall not exceed $75,000,000, as such amount may be
increased by any Reinvested Asset Sale Proceeds for such Fiscal Year;
provided that in calculating the purchase price of such Permitted
Acquisitions, that to the extent that Company pays all or any portion
of the purchase price for a Permitted Acquisition through the issuance
of shares of Common Stock, the value of the shares of such Common Stock
shall be deducted from the calculation of the purchase price payable by
Company or its Consolidated Subsidiaries for such Permitted Acquisition
for purposes of determining compliance with the provisions of this
subsection 6.7(ii); provided further that no Potential Event of Default
or Event of Default shall then exist or shall occur under this Agreement
as a result of any Permitted Acquisition; provided further that after
giving effect to any such Permitted Acquisition, the Company is in pro
forma compliance with the financial covenants referred to in subsection
6.6; and provided further that any such Person so acquired that
constitutes a Material Subsidiary shall execute counterparts of the
Borg-Warner Subsidiary Guaranty and the Borg-Warner Subsidiary Pledge
Agreement as provided in subsection 5.11;
(iii) Company may sell, exchange or otherwise dispose of
assets to the extent sold or disposed of in connection with the
Receivables Facilities or pursuant to Asset Sale transactions; provided
that (a) any such Asset Sale is made for the fair market value of such
assets and for at least eighty-five percent (85%) cash, and (b) the Net
Cash Proceeds of each such Asset Sale are applied in conformity with
subsection 2.4; and, provided, further, that Company and its
Subsidiaries may not sell, exchange or otherwise dispose of all or a
substantial portion of any Division without the prior written consent
of Requisite Lenders;
(iv) Company and its Subsidiaries may, in the ordinary
course of business, sell, lease, assign or transfer for value personal
property held for sale or lease in ordinary course of business of
Company and its Subsidiaries;
(v) Company and its Subsidiaries may make Restricted
Junior Payments permitted under subsection 6.5; and
(vi) Company may sell, exchange or otherwise dispose of
assets relating to its discontinued courier services business unit;
provided, (a) that such Asset Sale (1) is made for the fair market value
of such assets and for all cash and (2) does not result in any
continuing liabilities for the Company and its Subsidiaries other than
ordinary and customary indemnification obligations relating to such
sales or (b) such Asset Sale is otherwise consented to in writing by
Requisite Lenders and, in each case, the Net Cash Proceeds of such Asset
Sale is applied in conformity with subsection 2.4A(ii)(a).
6.8 Sales and Leasebacks
Company and its Consolidated Subsidiaries shall not, directly or
indirectly, become or remain liable as lessee or as a guarantor or other
surety with respect to any lease, whether an operating lease or a Capital
Lease, of any property (whether real, personal or mixed), whether now owned or
hereafter acquired, (i) which Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other than Company
or any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection
with such lease, except to the extent that the proceeds of all such sales or
transfers does not exceed $15,000,000 in the aggregate or the Net Cash
Proceeds of any such transactions are applied in accordance with the
provisions of subsection 2.4A(ii)(a).
6.9 Sale or Discount of Receivables
Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, sell with recourse, or discount or
otherwise sell for less than the face value thereof, notes, accounts
receivable, contracts, leases or other receivables, other than pursuant to the
Receivables Facilities.
6.10 Transactions with Shareholders and Affiliates
Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity securities of Company or with any Affiliate of Company or of
any such holder, as the case may be, on terms that are less favorable to
Company or that Subsidiary, as the case may be, than those that might be
obtained at the time from Persons who are not such a holder or Affiliate;
provided that the foregoing restriction shall not apply to (i) any transaction
between Company and any of its wholly-owned Subsidiaries or between any of its
wholly-owned Subsidiaries, (ii) customary fees paid to members of the Board
of Directors of Company and its Subsidiaries; or (iii) financial advisory
arrangements for services rendered by Stonington or ML & Co. or any of its
Affiliates to Company or any of its Subsidiaries; provided that such
arrangements are no less favorable to Company and its Subsidiaries than those
obtainable in a comparable arm's-length transaction with a Person that is not
an Affiliate of the Company.
6.11 Disposal of Subsidiary Stock
Except as permitted by subsection 6.7 and as contemplated by the
Pledge Agreements, Company will not,
(i) directly or indirectly sell, assign, pledge or
otherwise encumber or dispose of any shares of capital stock or other
equity securities of (or warrants, rights or options to acquire shares
or other equity securities of) any of its Consolidated Subsidiaries,
except to qualify directors if required by applicable law; or
(ii) permit any of its Consolidated Subsidiaries directly
or indirectly to sell, assign, pledge or otherwise encumber or dispose
of any shares of capital stock or other securities of (or warrants,
rights or options to acquire shares or other securities of) such
Subsidiary, except to Company, another Subsidiary of Company or to
qualify directors if required by applicable law.
6.12 Conduct of Business
Company will not and will not permit any of its Subsidiaries to
engage in any business other than (i) the business engaged in by Company and
its Subsidiaries (other than Discontinued Operations) on the date hereof as
described in Schedule 4.1C and substantially similar or related businesses and
(ii) such other lines of business as may be consented to by Requisite Lenders.
6.13 Amendments or Waivers Relating to Subordinated Indebtedness
A. Neither Company nor any of its Subsidiaries will (i) amend,
waive or otherwise change the terms of any Subordinated Indebtedness, or make
any payment consistent with an amendment, waiver or change thereto, without
the consent of Requisite Lenders; provided that notwithstanding the foregoing
Company may agree to amend any provisions of the Subordinated Indebtedness (a)
to cure any ambiguity, or to correct or supplement any provision therein which
may be defective or inconsistent with any other provision of such Subordinated
Indebtedness, (b) to comply with the Trust Indenture Act of 1939, or (c) to
make modifications of a technical or clarifying nature which are no less
favorable to the Lenders than the provisions of the Subordinated Indebtedness
in effect on the Closing Date; or (ii) defease, or make any payments the
effect of which is to defease (whether pursuant to the defeasance provisions
of the Subordinated Indebtedness or otherwise and including without limitation
any covenant defeasance), the Subordinated Indebtedness in whole or in part.
B. Neither Company nor any of its Subsidiaries will amend,
modify, waive or supplement or otherwise change any of the terms of the
Receivables Facilities from those in effect on the Closing Date, without the
prior written consent of Requisite Lenders if such amendment, modification,
waiver, supplement or change would be less favorable to, or increase the
obligations of, Company or any of its Subsidiaries or would confer additional
rights on any other party to such agreement adverse to the Company or any of
its Subsidiaries or would be adverse to the Lenders under this Agreement.
Company agrees to deliver to Administrative Agent upon execution thereof
copies of all program documents (other than any fee or expense letters) for
the Receivables Facilities and any amendments, modifications, waivers,
supplements or changes thereto (without regard to whether the prior written
consent of Requisite Lenders is required thereto).
6.14 Designation of Senior Indebtedness
Neither Company nor any of its Subsidiaries will, without
obtaining the prior written consent of Requisite Lenders, enter into any
agreements or instruments creating or evidencing Indebtedness if such
agreements or instruments (other than this Agreement and the Notes)
specifically designate such Indebtedness to be "Specified Senior Indebtedness",
"Designated Senior Indebtedness" or any similar characterization under any of
the Subordinated Indebtedness (or any comparable provision of any refinancing
agreement entered into in respect thereof). The Company acknowledges and
agrees that its Obligations under this Agreement are "Specified Senior
Indebtedness" for purposes of the 9 1/8% Subordinated Note Indenture and, to
the extent required under the terms of such indenture, hereby designates its
Obligations under this Agreement as "Specified Senior Indebtedness" for
purposes of the 9 1/8% Subordinated Note Indenture.
6.15 Fiscal Year
Company shall not change its Fiscal Year-end from December 31.
SECTION 7.
Events of Default
If any of the following conditions or events ("Events of Default")
shall occur and be continuing:
7.1 Failure to Make Payments When Due
Failure to pay any installment of principal of any Loan when due,
whether at stated maturity, by acceleration, by declaration of acceleration,
by notice of prepayment or otherwise; or failure to pay any interest on any
Loan or any other amount due under this Agreement within five days after the
date due; or
7.2 Default in Other Agreements
(i) Failure of Company or any of its Subsidiaries to pay when due
(a) any principal of or interest on any Indebtedness (other than Indebtedness
referred to in subsection 7.1) in an individual principal amount of $3,000,000
or more or any items of Indebtedness with an aggregate principal amount of
$6,000,000 or more or (b) any Contingent Obligation in an individual principal
amount of $3,000,000 or more or any Contingent Obligations with an aggregate
principal amount of $6,000,000 or more, in each case beyond the end of any
grace period provided therefor; or (ii) breach or default by Company or any of
its Subsidiaries with respect to any other material term of (a) any evidence
of any Indebtedness in an individual principal amount of $3,000,000 or more or
any items of Indebtedness with an aggregate principal amount of $6,000,000 or
more or any Contingent Obligation in an individual principal amount of
$3,000,000 or more or any Contingent Obligations with an aggregate principal
amount of $6,000,000 or more or (b) any loan agreement, mortgage, indenture or
other agreement relating to such Indebtedness or Contingent Obligation(s), if
the effect of such breach or default is to cause, or to permit the holder or
holders of that Indebtedness or Contingent Obligation(s) (or a trustee on
behalf of such holder or holders) to cause, that Indebtedness or Contingent
Obligation(s) to become or be declared due and payable prior to its stated
maturity or the stated maturity of any underlying obligation, as the case may
be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
7.3 Breach of Certain Covenants
Failure of Company to perform or comply with any term or condition
contained in clauses (i) and (ii) of the third paragraph of subsection 2.1A,
subsections 2.4A, 2.5, 5.2 or 5.6 or Section 6; or
7.4 Breach of Warranty
Any representation, warranty, certification or other statement
made by any Loan Party in any Loan Document or in any statement or certificate
at any time given by such Person in writing pursuant hereto or in connection
herewith shall be false in any material respect on the date as of which made;
or
7.5 Other Defaults Under Agreement or Loan Documents
Company or any other Loan Party shall default in the performance
of or compliance with any term contained in this Agreement or the other Loan
Documents other than those referred to above in subsections 7.1, 7.3 or 7.4
and such default shall not have been remedied or waived within 30 days after
receipt by Company of notice from any Agent or any Lender of such default; or
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a
decree or order for relief in respect of Company or any of its Material
Subsidiaries in an involuntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, which decree or order is not stayed; or any other similar relief shall
be granted under any applicable federal or state law; or (ii) an involuntary
case is commenced against Company or any of its Material Subsidiaries under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee,
custodian or other officer having similar powers over Company or any of its
Material Subsidiaries, or over all or a substantial part of its property,
shall have been entered; or the involuntary appointment of an interim
receiver, trustee or other custodian of Company or any of its Material
Subsidiaries for all or a substantial part of its property; or the issuance of
a warrant of attachment, execution or similar process against any substantial
part of the property of Company or any of its Material Subsidiaries, and the
continuance of any such event in clause (ii) for 60 days unless dismissed,
bonded or discharged; or
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Company or any of its Material Subsidiaries shall have an
order for relief entered with respect to it or commence a voluntary case under
the Bankruptcy Code or any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or shall consent to the entry of an order for
relief in an involuntary case, or to the conversion of an involuntary case to
a voluntary case, under any such law, or shall consent to the appointment of
or taking possession by a receiver, trustee or other custodian for all or a
substantial part of its property; the making by Company or any of its Material
Subsidiaries of any assignment for the benefit of creditors; or
(ii) the inability or failure of Company or any of its Material
Subsidiaries, or the admission by Company or any of its Material Subsidiaries
in writing of its inability, to pay its debts as such debts become due; or the
Board of Directors of Company or any of its Material Subsidiaries (or any
committee thereof) adopts any resolution or otherwise authorizes action to
approve any of the actions referred to in clause (i) or this clause (ii); or
7.8 Judgments and Attachments
(i) One or more judgments or decrees shall be entered against
Company or any of its Material Subsidiaries involving in the aggregate a
liability of $1,000,000 or more (to the extent not covered by insurance) and
all such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 60 days from the entry thereof or (ii) Company
or any of its Material Subsidiaries shall settle or otherwise resolve any
litigation or proceeding, and the aggregate liability in connection therewith,
whether current or prospective, shall exceed $5,000,000, and in the case of
clause (ii) such aggregate liability could reasonably be expected to result in
a Material Adverse Effect; or
7.9 Dissolution
Any order, judgment or decree shall be entered against Company or
any of its Material Subsidiaries decreeing the dissolution or split up of
Company or that Material Subsidiary and such order shall remain undischarged
or unstayed for a period in excess of 30 days; or
7.10 Employee Benefit Plans
There occurs one or more ERISA Events (determined without regard
to any materiality standard in that definition) which individually or in the
aggregate results in or is reasonably expected to result in liability of a
Loan Party or any of its ERISA Affiliates in excess of $10,000,000 (or
$5,000,000 if as a result of any such ERISA Event a Lien has been or is
reasonably likely to be imposed) during the term of this Agreement; or there
exists an excess of aggregated accumulated benefit obligations, as defined in
Statement of Financial Accounting Standards No. 87 (the "ABO"), over the
aggregate total fair market value for all Pension Plans (excluding for
purposes of such computation each Pension Plan with respect to which the fair
market value of the assets exceeds the ABO) which exceeds $40,000,000; or
7.11 Invalidity of Guaranties
Any of the Loan Guaranties for any reason, other than the
satisfaction in full of all Obligations and termination of this Agreement,
ceases to be in full force and effect or is declared to be null and void, or
Company or any Borg-Warner Guarantor Subsidiary denies that it has any further
liability under the Loan Guaranty to which it is party, or gives notice to such
effect; or
7.12 Failure of Security
Any Pledge Agreement or any other Collateral Document shall, at
any time, cease to be in full force and effect or shall be declared null and
void, or the validity or enforceability thereof shall be contested by any Loan
Party or the Collateral Agent shall not have or shall cease to have a valid
and perfected first priority security interest in the Collateral in each case
for any reason other than the failure of Collateral Agent or any Lender to
take any action within its control; or
7.13 Change in Control
(i) A change shall occur in the Board of Directors of Company so
that a majority of the Board of Directors of Company ceases to consist
of the individuals who constituted the Board of Directors of Company on
the Closing Date (or individuals whose election or nomination for
election was approved by a vote of at least 75% of the directors then in
office who either were directors on the Closing Date or whose election
or nomination for election was previously so approved); or
(ii) Any Person or group (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission) other than ML & Co. and its
Affiliates and members of Company's management on the Closing Date shall
become or be the owner, directly or indirectly, beneficially or of
record, of shares representing more than 30% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of
Company on a fully diluted basis, unless ML & Co. and its Affiliates
shall own and continue to so own a majority of such capital stock; or
7.14 Receivables Facilities
(i) Any condition or event shall occur under the Trade Receivables
Facility that constitutes an Early Amortization Event (as such term is defined
in the Trade Receivables Facility as of the Closing Date) or an event or
condition which, after notice or lapse of time or both, would constitute an
Early Amortization Event if that event or condition were not cured or removed
within any applicable grace or cure period (a "Unmatured Early Amortization
Event"), or any condition or event shall occur under any Receivables Facility
the effect of which is the same as, or similar to, any such Early Amortization
Event or Unmatured Early Amortization Event; (ii) any condition or event shall
occur, or any breach or default by Company or any of its Subsidiaries shall
occur, under any Receivables Facility if the effect of such condition, event,
breach or default is to cause, or to permit any purchaser or other investor
under any Receivables Facility to cause, upon the giving or receiving of
notice, lapse of time, both or otherwise, any commitment to purchase
receivables or to advance or invest funds for the purchase of receivables
under any such Receivables Facility in whole or in part to be suspended or
terminated or any principal repayment or amortization or accumulation period
to commence prior to January 1, 1999 in the case of the Trade Receivables
Facility or prior to the scheduled commencement date for such repayment,
amortization or accumulation as in effect on the initial closing date for such
Receivables Facility in the case of the Alarm Services Contract Securitization
Facility; (iii) Company or any of its Subsidiaries shall optionally redeem,
retire, prepay, purchase for value or make any similar optional payment of the
principal of, any Receivables Certificates (as defined in subsection 9.18)
issued to finance the purchase of receivables under the Trade Receivables
Facility; or (v) 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 $3,000,000 or clause
(vii) of Section 20.1 of the Alarm Services Contract Securitization Facility;
or any condition or event shall occur which constitutes an Event of Seller
Default (as defined in the Security Agreement executed in connection with the
Alarm Services Contract Securitization Facility) involving an amount in excess
of $3,000,000;
THEN (i) upon the occurrence of any Event of Default described in
the foregoing subsections 7.6 or 7.7(i), each of (a) the unpaid principal
amount of and accrued interest on the Loans, (b) an amount equal to the
maximum amount that may at any time be drawn under all Letters of Credit then
outstanding (whether or not any beneficiary under any Letter of Credit shall
have presented or be entitled to present, the drafts and other documents
required to draw under the Letter of Credit), and (c) all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by Company and the obligation of each Lender to make any Loan
and the obligation of any Lender to issue any Letter of Credit shall thereupon
terminate and (ii) upon the occurrence and during the continuance of any other
Event of Default, Requisite Lenders may, by written notice to Company, declare
all or any portion of the amounts described in clauses (a) through (c) above
to be, and the same shall forthwith become, immediately due and payable,
together with accrued interest thereon, and the obligation of each Lender to
make any Loan and the obligation of any Lender to issue any Letter of Credit
shall thereupon terminate; provided, that the foregoing shall not affect in
any way the obligations of Lenders to make Loans to reimburse drawings under
Letters of Credit as provided in subsection 2.9C. So long as any Letter of
Credit shall remain outstanding, any amounts described in clause (b) above
with respect to Letters of Credit, when received by the Issuing Lender, shall
be held by the Issuing Lender, pursuant to such documentation as the Issuing
Lender shall request, as cash collateral for the obligation of Company to
reimburse the Issuing Lender in the event of any drawing under such Letters of
Credit, and so much of such funds shall at all times remain on deposit as cash
collateral as aforesaid as shall equal the maximum amount available at any
time for drawing under all Letters of Credit (the "Maximum Available Amount");
provided that in the event of cancellation or expiration of any Letter of
Credit or any reduction in the Maximum Available Amount, the Issuing Lender
shall apply the difference between the cash collateral held by the Issuing
Lender immediately prior to such cancellation, expiration or reduction and the
Maximum Available Amount immediately after such cancellation, expiration or
reduction first to the payment of any outstanding Obligations, and second to
the payment to whomsoever shall be lawfully entitled to receive such funds.
Notwithstanding anything contained in the foregoing paragraph, if
at any time within 60 days after acceleration of the maturity of any Loan,
Company shall pay all arrears of interest and all payments on account of the
principal which shall have become due otherwise than by acceleration (with
interest on principal and, to the extent permitted by law, on overdue
interest, at the rates specified in this Agreement or the Notes) and all
Events of Default and Potential Events of Default (other than non-payment of
principal of and accrued interest on the Loans and the Notes and payments of
amounts referred to in clause (b) above, in each case which is due and payable
solely by virtue of acceleration) shall be remedied or waived pursuant to
subsection 9.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul the acceleration and its consequences and any
Issuing Lender shall return to Company any amounts held as cash collateral in
respect of the amounts described in clause (b) above; but such action shall
not affect any subsequent Event of Default or Potential Event of Default or
impair any right consequent thereon.
SECTION 8.
Agents
8.1 Appointment
Bankers is hereby appointed Administrative Agent and Collateral
Agent hereunder by each Lender, CIBC is hereby appointed Documentation Agent
and NationsBank is hereby appointed Syndication Agent. Each Lender hereby
authorizes each Agent to act hereunder and under the other instruments and
agreements referred to herein (including, without limitation, the Collateral
Documents) as its agent hereunder and thereunder. Each Agent agrees to act as
such upon the express conditions contained in this Section 8 and in the
Collateral Documents. The provisions of this Section 8 are solely for the
benefit of Agents and Lenders, and Company shall not have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, each Agent shall act solely as agent
of Lenders and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for Company or
any of its Subsidiaries.
8.2 Powers; General Immunity
A. Duties Specified. Each Lender irrevocably authorizes each
Agent to take such action on such Lender's behalf and to exercise such powers
hereunder and under the other instruments and agreements referred to herein
(including, without limitation, the Collateral Documents) as are specifically
delegated to such Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. Each Agent shall have only those
duties and responsibilities that are expressly specified in this Agreement and
the Collateral Documents and it may perform such duties by or through its
agents or employees. The duties of each Agent shall be mechanical and
administrative in nature; each Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and nothing in
this Agreement, expressed or implied, is intended to or shall be so construed
as to impose upon any Agent any obligations in respect of this Agreement or
the other instruments and agreements referred to herein except as expressly
set forth herein or therein.
B. No Responsibility for Certain Matters. Each Agent shall not
be responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectability or sufficiency of this Agreement, any
other Loan Document or the Notes or Letters of Credit, or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection
herewith or therewith furnished or made by any Agent to Lenders or by or on
behalf of Company to any Agent or any Lender or be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the
use of the proceeds of the Loans or Letters of Credit or of the existence or
possible existence of any Event of Default or Potential Event of Default.
Anything contained in this Agreement to the contrary notwithstanding Agent
shall not have any liability arising from confirmations of the amount of
outstanding Loans.
C. Exculpatory Provisions. No Agent and none of their
respective officers, directors, employees or agents shall be liable to Lenders
for any action taken or omitted hereunder or in connection herewith
(including, without limitation, any act or omission under the Collateral
Documents) unless caused by its or their gross negligence or willful
misconduct. If any Agent shall request instructions from Lenders with respect
to any act or action (including the failure to take an action) in connection
with this Agreement, such Agent shall be entitled to refrain from such act or
taking such action unless and until such Agent shall have received
instructions from Requisite Lenders or, to the extent such action requires the
consent of all Lenders pursuant to the express terms of this Agreement, from
all Lenders. Without prejudice to the generality of the foregoing, (i) each
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any communication, instrument or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons, and
shall be entitled to rely and shall be protected in relying on opinions and
judgments of attorneys (who may be attorneys for Company), accountants,
experts and other professional advisors selected by it; and (ii) no Lender
shall have any right of action whatsoever against any Agent as a result of
such Agent acting or (where so instructed) refraining from acting under this
Agreement or the other instruments and agreements referred to herein in
accordance with the instructions of Requisite Lenders or all Lenders, as
applicable. Each Agent shall be entitled to refrain from exercising any
power, discretion or authority vested in it under this Agreement or the other
instruments and agreements referred to herein unless and until it has obtained
the instructions of Requisite Lenders or all Lenders, as applicable.
D. Agents Entitled to Act as Lenders. The agency hereby
created shall in no way impair or affect any of the rights and powers of, or
impose any duties or obligations upon, any Agent in its individual capacity as
a Lender hereunder. With respect to its participation in the Loans and
Letters of Credit, each Agent shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not performing
the duties and functions delegated to it hereunder and the term "Lender" or
"Lenders" or any similar term shall, unless the context clearly otherwise
indicates, include each Agent in its individual capacity. Each Agent and each
of their respective Affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial advisory or other
business with Company or any Affiliate of Company as if it were not performing
the duties specified herein, and may accept fees and other consideration from
Company for services in connection with this Agreement and otherwise without
having to account for the same to Lenders.
8.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company in
connection with the making of the Loans hereunder and has made and shall
continue to make its own appraisal of the creditworthiness of Company. No
Agent shall have any duty or responsibility either initially or on a
continuing basis to make any such investigation or any such appraisal on
behalf of Lenders or, unless expressly required hereunder, to provide any
Lender with any credit or other information with respect thereto whether
coming into its possession before the making of the Loans or any time or times
thereafter and no Agent shall further have any responsibility with respect to
the accuracy of or the completeness of the information provided to Lenders.
8.4 Right to Indemnity
Each Lender, proportionately to its Commitment, severally agrees
to indemnify each Agent to the extent such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against such Agent in performing its duties hereunder
in its capacity as Administrative Agent, Collateral Agent, Documentation Agent
or Syndication Agent, as applicable, in any way relating to or arising out of
this Agreement; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from such Agent's gross
negligence or willful misconduct. If any indemnity furnished to such Agent
for any purpose shall, in the opinion of such Agent, be insufficient or become
impaired, such Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity
is furnished.
8.5 Registered Persons Treated as Owner
Administrative Agent may deem and treat the Persons listed as
Lenders in the Register as the owner of the corresponding Loan listed therein
for all purposes hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with Administrative Agent and recorded
in the Register. Any request, authority or consent of any person or entity
who, at the time of making such request or giving such authority or consent,
is listed in the Register as a Lender shall be conclusive and binding on any
subsequent holder, transferee or assignee of the corresponding Loan.
8.6 Successor Agents
Any Agent may resign at any time by giving 30 days' prior written
notice thereof to Lenders and Company, and any Agent may be removed at any
time with or without cause by an instrument or concurrent instruments in
writing delivered to Company and such Agent and signed by Requisite Lenders.
Upon any such notice of resignation or any such removal, Requisite Lenders
shall have the right, upon five days' notice to Company, to appoint a
successor Agent. Upon the acceptance of any appointment as an Agent hereunder
by a successor Agent, that successor Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring or removed Agent, and the retiring or removed Agent shall be
discharged from its duties and obligations under this Agreement. After any
retiring or removed Agent's resignation or removal hereunder as Agent, the
provisions of this Section 8 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
8.7 Loan Guaranties and Collateral Documents
A. Authorization of Agents. Each Lender hereby authorizes the
Collateral Agent to enter into the Loan Guaranties and the Collateral
Documents; provided that Collateral Agent shall not enter into or consent to
any amendment, modification, termination or waiver of any provision contained
in any Loan Guaranty or Collateral Document without the prior consent of
Requisite Lenders or, to the extent required by subsection 9.6A(ii), all of
the Lenders. Each Lender agrees that no Lender shall have any right
individually to seek or to enforce any Loan Guaranty or to realize upon the
security granted by any Collateral Documents, it being understood and agreed
that such rights and remedies may be exercised by Collateral Agent for the
benefit of Lenders upon the terms of the Loan Guaranties and the Collateral
Documents. Each Lender and Agent hereby authorizes Collateral Agent to
release Collateral as permitted or required under this Agreement or the
Collateral Documents, and agrees that a certificate executed by Collateral
Agent evidencing such release of Collateral shall be conclusive evidence of
such release as to any third party.
B. Conflict in Loan Documents. If there is any conflict
between this Agreement and any other Loan Document, this Agreement and such
other Loan Document shall be interpreted and construed, if possible, so as to
avoid or minimize such conflict but, to the extent (and only to the extent) of
such conflict, this Agreement shall prevail and control.
SECTION 9.
Miscellaneous
9.1 Assignments and Participations in Loans and Letters of Credit.
A. General. Subject to subsection 9.1B, each Lender shall have
the right at any time to (i) sell, assign or transfer to any Eligible
Assignee, or (ii) sell participations to any Person in, all or any part of its
Commitment or any Loan or Loans made by it or its Letters of Credit or
participations therein or any other interest herein or in any other
Obligations owed to it; provided that no such sale, assignment, transfer or
participation shall, without the consent of Company, require Company to file a
registration statement with the Securities and Exchange Commission or apply to
qualify such sale, assignment, transfer or participation under the securities
laws of any state; provided, further that no such sale, assignment or transfer
described in clause (i) above shall be effective unless and until an
Assignment Agreement substantially in the form of Exhibit XII annexed hereto
effecting such sale, assignment or transfer shall have been accepted by
Administrative Agent and recorded in the Register as provided in subsection
9.1B(ii); and provided, further that no such sale, assignment, transfer or
participation of any Letter of Credit or any participation therein may be made
separately from a sale, assignment, transfer or participation of a
corresponding interest in the Commitment and the Loans of the Lender effecting
such sale, assignment, transfer or participation. Except as otherwise provided
in this subsection 9.1, no Lender shall, as between Company and such Lender,
be relieved of any of its obligations hereunder as a result of any sale,
assignment or transfer of, or any granting of participations in, all or any
part of its Commitment or the Loans, the Letters of Credit or participations
therein, or the other Obligations owed to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment,
Loan, Letter of Credit or participation therein, or other Obligation may
(a) be assigned by any Lender in an amount not less than $5,000,000 or
the entire remaining amount of its Loans and Commitments and Letters of
Credit if less than $5,000,000, provided that assignments by any Lender
to an Affiliate of such Lender or to any other Lender shall not be
subject to the limitations of this clause (a) so long as such
assignments to Affiliates are made in accordance with clause (b) below,
or (b) be assigned to any other Eligible Assignee with the giving of
notice to Company and Administrative Agent and with the prior consent of
Company and, in the case of assignments by Lenders other than the
Administrative Agent, consent of Administrative Agent (which consent of
Company and Administrative Agent shall not be unreasonably withheld or
delayed). To the extent of any such assignment in accordance with
either clause (a) or (b) above, the assigning Lender shall be relieved
of its obligations with respect to its Commitment, Loans, Letters of
Credit or participations therein, or other Obligations or the portion
thereof so assigned. The parties to each such assignment shall execute
and deliver to Administrative Agent, for its acceptance and recording in
the Register, an Assignment Agreement, together with a processing and
recordation fee of $3,500 and such forms, certificates or other
evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may
be required to deliver to Administrative Agent pursuant to subsection
2.8B. Upon such execution, delivery, and acceptance and recordation,
from and after the effective date specified in such Assignment
Agreement, (y) the assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and (z) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment Agreement,
relinquish its rights (other than any rights which survive the
termination of this Agreement under subsection 9.9B) and be released
from its obligations under this Agreement (and, in the case of an
Assignment Agreement covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall not relinquish its
rights which survive the termination of this Agreement under subsection
9.9B; provided that, anything contained in any of the Loan Documents to
the contrary notwithstanding, if such Lender is the Issuing Lender with
respect to any outstanding Letters of Credit such Lender shall continue
to have all rights and obligations of an Issuing Lender with respect to
such Letters of Credit until the cancellation or expiration of such
Letters of Credit and the reimbursement of any amounts drawn
thereunder). The Commitments hereunder shall be modified to reflect the
Commitment of such assignee and any remaining Commitment of such
assigning Lender and, if any such assignment occurs after the issuance
of the Notes hereunder, the assigning Lender shall, upon the
effectiveness of such assignment or as promptly thereafter as
practicable, surrender its Note to Administrative Agent for
cancellation, and thereupon Company shall issue and deliver to
Administrative Agent new Notes, substantially in the form of Exhibit III
annexed hereto with appropriate insertions, to be delivered to the
assignee and, if applicable, to the assigning Lender, which new Notes
will reflect the new Commitments of the assignee and, if applicable, the
assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in
Register. Upon its receipt of an Assignment Agreement executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing and recordation fee referred to
in subsection 9.1B(i) and any forms, certificates or other evidence with
respect to United States federal income tax withholding matters that such
assignee may be required to deliver to Administrative Agent pursuant to
subsection 2.8B, Administrative Agent shall, if Administrative Agent and
Company have consented to the assignment evidenced thereby (to the
extent such consent is required pursuant to subsection 9.1B(i)), (a)
accept such Assignment Agreement by executing a counterpart thereof as
provided therein (which acceptance shall evidence any required consent of
Administrative Agent to such assignment), (b) record the information
contained therein in the Register, and (c) give prompt notice thereof to
Company. Administrative Agent shall maintain a copy of each Assignment
Agreement delivered to and accepted by it as provided in this subsection
9.1B(ii).
C. Participations. The amount and number of participations
shall not be limited. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
directly affecting (i) the extension of the scheduled final maturity date of or
interest on any Loan allocated to such participation or (ii) the reduction of
any fees related thereto allocated to such participation, or (iii) a reduction
of the principal amount of or the rate of interest payable on any Loan
allocated to such participation or any fees related thereto, and all amounts
payable by Company hereunder (including amounts payable to such Lender pursuant
to subsections 2.6B, 2.6E, 2.6H, 2.7, 2.8 and 2.9G) shall be determined as if
such Lender had not sold such participation. Company and each Lender hereby
acknowledge and agree that, solely for purposes of subsections 2.6, 2.7, 9.4
and 9.5, (a) any participation will give rise to a direct obligation of
Company to the participant and (b) the participant shall be considered to be a
"Lender".
D. Assignments to Federal Reserve Banks. In addition to the
assignments and participations permitted under the foregoing provisions of
this subsection 9.1, any Lender may assign and pledge all or any portion of
its Loans, the other Obligations owed to such Lender, and its Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank; provided that (i) no Lender shall, as
between Company and such Lender, be relieved of any of its obligations
hereunder as a result of any such assignment and pledge and (ii) in no event
shall such Federal Reserve Bank be considered to be a "Lender" or be entitled
to require the assigning Lender to take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information
concerning Company and its Subsidiaries in the possession of that Lender from
time to time to assignees and participants (including prospective assignees
and participants); provided, that each Lender shall obtain the agreement of
such prospective assignees and participants to maintain confidentiality of
such confidential information in accordance with subsection 5.5B.
F. Representations of Lenders. Each Lender listed on the
signature pages hereof hereby represents and warrants (i) that it is an
Eligible Assignee described in clause (A) of the definition thereof; (ii) that
it has experience and expertise in the making of loans such as the Loans; and
(iii) that it will make its Loans for its own account in the ordinary course
of its business and without a view to distribution of such Loans within the
meaning of the Securities Act or the Exchange Act or other federal securities
laws (it being understood that, subject to the provisions of this subsection
9.1, the disposition of such Loans or any interests therein shall at all times
remain within its exclusive control). Each Lender that becomes a party hereto
pursuant to an Assignment Agreement shall be deemed to agree that the
representations and warranties of such Lender contained in Section 2(c) of
such Assignment Agreement are incorporated herein by this reference.
9.2 Expenses
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents and all the costs of
furnishing all opinions by counsel for Company (including without limitation
any opinions requested by Lenders as to any legal matters arising hereunder),
and of Company's performance of and compliance with all agreements and
conditions contained herein on its part to be performed or complied with; (ii)
the reasonable fees, expenses and disbursements of counsel to Administrative
Agent, in connection with the negotiation, preparation, execution and
administration of the Loan Documents, the Loans and Letters of Credit
hereunder, and any amendments and waivers hereto or thereto; (iii) all the
actual costs and expenses of creating and perfecting Liens in favor of Lenders
pursuant to any Loan Document, including filing and recording fees and
expenses, title insurance, fees and expenses of counsel for providing such
opinions as Lenders may reasonably request and reasonable fees and expenses of
legal counsel to Administrative Agent; (iv) all other actual and reasonable
costs and expenses incurred by Agents in connection with the syndication of the
Loans and Letters of Credit and the negotiation, preparation and execution of
the Loan Documents and the transactions contemplated hereby; and (v) after the
occurrence of an Event of Default, all costs and expenses (including
reasonable attorneys' fees, including allocated costs of internal counsel, and
costs of settlement) incurred by Lenders in enforcing any Obligations of or in
collecting any payments due from Company or any Guarantor hereunder or under
the Letters of Credit or the Notes or any of the other Loan Documents by
reason of such Event of Default or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or of any insolvency or bankruptcy proceedings.
9.3 Indemnity
In addition to the payment of expenses pursuant to subsection 9.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to indemnify, pay and hold harmless Lenders and any holder of
any of the Notes, and the officers, directors, employees, agents, and
affiliates of Lenders and such holders (collectively called the "Indemnitees")
from and against, any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto), that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents, the statements contained in the commitment letters
delivered by any Lender, any activity related to the Refinancings, Lenders'
agreement to make the Loans and to issue Letters of Credit hereunder and
Lenders' agreements to purchase participations therein as provided herein, or
the use or intended use of the Letters of Credit or the proceeds of any of the
Loans hereunder (the "indemnified liabilities"); provided that Company shall
have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of that
Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it
is violative of any law or public policy, Company shall contribute the maximum
portion that it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them.
9.4 Set Off
In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuation of any Event of Default, each Lender
and each subsequent holder of any Note is hereby authorized by Company at any
time or from time to time, without notice to Company, or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate
and to apply any and all deposits (general or special, including, but not
limited to, Indebtedness evidenced by certificates of deposit, whether matured
or unmatured but not including trust accounts) and any other Indebtedness at
any time held or owing by that Lender or that subsequent holder to or for the
credit or the account of Company, against and on account of the obligations
and liabilities of Company to that Lender or that subsequent holder under this
Agreement and such Note or with respect to the Letters of Credit, including,
but not limited to, all claims of any nature or description arising out of or
connected with this Agreement or with respect to the Letters of Credit, the
Notes or any other Loan Document, irrespective of whether or not (a) that
Lender or that subsequent holder shall have made any demand hereunder or (b)
the principal of or the interest on the Loans, Notes or any Obligations with
respect to the Letters of Credit, and other amounts due hereunder shall have
become due and payable pursuant to Section 7 and although said obligations and
liabilities, or any of them, may be contingent or unmatured.
9.5 Ratable Sharing
Each Lender and each subsequent holder by acceptance of a Note
agree among themselves that if any of them shall, through the exercise of any
right of counterclaim, set-off, banker's lien or otherwise or as adequate
protection of a deposit treated as cash collateral under the Bankruptcy Code,
receive payment or reduction of a proportion of the aggregate amount of
principal and interest then due with respect to the Notes held by that Lender
or holder, the amount then due to that Lender or holder with respect to any
Letter of Credit or any participation therein or amounts due to that Lender or
holder in respect of facility fees or commitment fees hereunder (collectively,
the "Aggregate Amounts Due" to such Lender or holder), which is greater than
the proportion received by any other Lender or holder of the Notes in respect
to the Aggregate Amounts Due to such other Lender or holder, then the Lender
or holder of the Notes receiving such proportionately greater payment shall
(y) notify each other Lender and Administrative Agent of such receipt and (z)
purchase participations (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in the Aggregate Amounts Due to the other
Lenders and holders so that all such recoveries of Aggregate Amounts Due shall
be shared by the Lenders and holders of the Notes in proportion to the
Aggregate Amounts Due them; provided that if all or part of such
proportionately greater payment received by such purchasing Lender or holder
is thereafter recovered from such Lender or holder, those purchases shall be
rescinded and the purchase prices paid for such participations shall be
returned to that Lender or holder to the extent of such recovery, but without
interest. Company expressly consents to the foregoing arrangement and agrees
that any holder of a participation so purchased and any other subsequent
holder of a participation in any Note or Letter of Credit otherwise acquired
may exercise any and all rights of banker's lien, set-off or counterclaim with
respect to any and all monies owing by Company to that holder as fully as if
that holder were a holder of such a Note or Letter of Credit in the amount of
the participation held by that holder.
9.6 Amendments and Waivers
A. No amendment, modification, termination or waiver of any
provision of this Agreement or of the Notes, and no consent to any departure
by Company therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that no such amendment,
modification, termination, waiver or consent shall, without the consent of each
Lender (with Obligations directly affected in the case of the following clause
(i)): (i) extend the scheduled final maturity of any Loan or Note, or extend
the stated expiration date of any Letter of Credit beyond the Maturity Date,
or reduce the rate of interest (other than any waiver of any increase in the
interest rate applicable to any of the Loans pursuant to subsection 2.2E) or
fees thereon, or extend the time of payment of interest or fees thereon, or
reduce the principal amount thereof, (ii) release all or substantially all of
the Collateral or all or substantially all of the Borg-Warner Guarantor
Subsidiaries from the Borg-Warner Subsidiary Guaranty except as expressly
provided in the Loan Documents, (iii) amend, modify, terminate or waive any
provision of this subsection 9.6, (iv) reduce the percentage specified in the
definition of Requisite Lenders (it being understood that, with the consent of
the Requisite Lenders, additional extensions of credit pursuant to this
Agreement may be included in the determination of the Requisite Lenders on
substantially the same basis as the extensions of Commitments are included on
the Closing Date) or (v) consent to the assignment or transfer by Company of
any of its rights and obligations under this Agreement; provided further that
no such amendment, modification, termination or waiver shall (1) increase the
Commitments of any Lender over the amount thereof then in effect without the
consent of such Lender (it being understood that amendments, modifications or
waivers of conditions precedent, covenants, Potential Events of Default or
Events of Default or of a mandatory reduction in the Commitments shall not
constitute an increase of the Commitment of any Lender, and that an increase
in the available portion of any Commitment of any Lender shall not constitute
an increase in the Commitment of such Lender); (2) no amendment, modification,
termination or waiver relating to the obligations of Lenders relating to the
purchase of participations in Letters of Credit shall be effective without the
written concurrence of each Issuing Lender having a Letter of Credit then
outstanding or which has not been reimbursed for a drawing under a Letter of
Credit issued by Administrative Agent and of Administrative Agent; or (3)
without the consent of Agents, amend, modify, terminate or waive any provision
of Section 8 as the same applies to Agents or of any other provision of this
Agreement as the same applies to the rights or obligations of Agents.
B. If, in connection with any proposed amendment, modification,
termination or waiver of any of the provisions of this Agreement or the Notes
as contemplated by clauses (i) through (v) of the first proviso of subsection
9.6A, the consent of the Requisite Lenders is obtained but the consent of one
or more of such other Lenders whose consent is required is not obtained, then
Company shall have the right, so long as all non-consenting Lenders whose
individual consent is required are treated as described in either clause (i)
or (ii) below, to either (i) replace each such non-consenting Lender or
Lenders with one or more Replacement Lenders pursuant to subsection 2.10 so
long as at the time of such replacement, each such Replacement Lender consents
to the proposed amendment, modification, termination or waiver, or (ii)
terminate such non-consenting Lender's Commitments and repay in full its
outstanding Loans in accordance with subsections 2.4A(i)(b) and 2.4G(ii);
provided that unless the Commitments that are terminated and the Loans that
are repaid pursuant to the preceding clause (ii) are immediately replaced in
full at such time through the addition of new Lenders or the increase of the
Commitments and/or outstanding Loans of existing Lenders (who in each case must
specifically consent thereto), then in the case of any action pursuant to the
preceding clause (ii), the Requisite Lenders (determined before giving effect
to the proposed action) shall specifically consent thereto; provided further
that Company shall not have the right to terminate such non-consenting
Lender's Commitment and repay in full its outstanding Loans pursuant to clause
(ii) of this subsection 9.6B if, immediately after the termination of such
Lender's Commitment in accordance with subsection 2.4G(ii), the aggregate
principal amount of outstanding Loans of all Lenders plus the Letter of Credit
Usage would exceed the Commitments of all Lenders; provided still further that
Company shall not have the right to replace a Lender solely as a result of the
exercise of such Lender's rights (and the withholding of any required consent
by such Lender) pursuant to the second proviso to subsection 9.6A.
C. Administrative Agent may, but shall have no obligation to,
with the concurrence of any Lender, execute amendments, modifications, waivers
or consents on behalf of that Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on Company in any case shall entitle
Company to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 9.6 shall be binding upon each
Lender at the time outstanding, each future Lender and, if signed by Company,
on Company.
9.7 Independence of Covenants
All covenants hereunder shall be given independent effect so that
if a particular action or condition is not permitted by any of such covenants,
the fact that it would be permitted by an exception to, or be otherwise within
the limitations of, another covenant shall not avoid the occurrence of an
Event of Default or Potential Event of Default if such action is taken or
condition exists.
9.8 Notices
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in
person, receipt of telecopy or telex or four Business Days after depositing it
in the United States mail, registered or certified, with postage prepaid and
properly addressed; provided that notices to any Agent shall not be effective
until received. For the purposes hereof, the addresses of the parties hereto
(until notice of a change thereof is delivered as provided in this subsection
9.8) shall be as set forth under each party's name on the signature pages
hereof.
9.9 Survival of Warranties and Certain Agreements
A. All agreements, representations and warranties made herein
shall survive the execution and delivery of this Agreement, the making of the
Loans hereunder and the execution and delivery of the Notes.
B. Notwithstanding anything in this Agreement or implied by law
to the contrary, the agreements of Company set forth in subsections 2.6B,
2.6C, 2.6E, 2.6H, 2.7, 2.8, 2.9E, 2.9G, 2.9H, 4.13, 5.5B, 9.2, 9.3 and 9.4 and
the agreements of Lenders set forth in subsections 8.2C, 8.4, 9.4 and 9.5
shall survive the payment of the Loans and the Notes, the expiration of the
Letters of Credit, the termination of a non-consenting Lender's Commitment
pursuant to subsection 9.6B, and the termination of this Agreement.
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative
No failure or delay on the part of any Lender or any holder of any
Note in the exercise of any power, right or privilege hereunder or under the
Notes shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under this Agreement, the Notes or the Letters of Credit are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.
9.11 Severability
In case any provision in or obligation under this Agreement, the
Notes or the Letters of Credit shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
9.12 Obligations Several; Independent Nature of Lenders' Rights
The obligation of each Lender hereunder is several, and no Lender
shall be responsible for the obligation or commitment of any other Lender
hereunder. Nothing contained in this Agreement and no action taken by Lenders
pursuant hereto shall be deemed to constitute Lenders to be a partnership, an
association, a joint venture or any other kind of entity. The amounts payable
at any time hereunder to each Lender shall be a separate and independent debt,
and each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
9.13 Headings
Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose or be given any substantive effect.
9.14 APPLICABLE LAW
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE
OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.15 Successors and Assigns; Subsequent Holders of Notes
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the
parties hereto and the successors and assigns of Lenders. The terms and
provisions of this Agreement shall inure to the benefit of any assignee or
transferee of the Notes, and in the event of such transfer or assignment, the
rights and privileges herein conferred upon Lenders shall automatically extend
to and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. Company's rights or any interest therein hereunder may not
be assigned without the written consent of all Lenders. Lenders' rights of
assignment are subject to subsection 9.1.
9.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY
TRIAL
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY NOTE OR ANY OBLIGATION MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS AND ANY OBJECTION TO THE VENUE OF ANY SUCH PROCEEDING,
AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN
CONNECTION WITH THIS AGREEMENT, SUCH NOTE OR SUCH OBLIGATION. ALL PARTIES TO
THIS AGREEMENT IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY NOTE OR ANY
OBLIGATION. COMPANY DESIGNATES AND APPOINTS MLCP, ATTENTION: PRESIDENT, AND
SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY COMPANY IRREVOCABLY
AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE
OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING
HEREBY ACKNOWLEDGED BY COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED
MAIL TO COMPANY AT ITS ADDRESS PROVIDED IN THE APPLICABLE SIGNATURE PAGE
HERETO, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO
MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY
AGENT APPOINTED BY COMPANY REFUSES TO ACCEPT SERVICE, COMPANY HEREBY AGREES
THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW OR SHALL LIMIT THE RIGHT OF ANY LENDER TO BRING PROCEEDINGS AGAINST
COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
COMPANY, EACH AGENT AND EACH LENDER HEREBY MUTUALLY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
AND THE LENDER/
BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in
any court and that relate to the subject matter of this transaction, including
without limitation, contract claims, tort claims, breach of duty claims, and
all other common law and statutory claims. Company, each Agent and each
Lender each acknowledge that this waiver is a material inducement to enter
into a business relationship, that each has already relied on the waiver in
entering into this Agreement, and that each will continue to rely on the
waiver in their related future dealings. Company, each Agent and each Lender
further warrant and represent that each has reviewed this waiver with its
legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENT OR ANY OTHER DOCUMENTS OR
AGREEMENTS RELATING TO THE LOANS OR THE LETTERS OF CREDIT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
9.17 Counterparts; Effectiveness
This Agreement and any amendments, waivers, consents, or
supplements 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. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto and written or telephonic notification of such execution and
authorization of delivery thereof has been received by Company and
Administrative Agent.
9.18 Certain Agreements
Lenders agree, for the benefit of the holders from time to time of
trade receivables backed certificates issued in connection with the Trade
Receivables Facility (the "Receivables Certificates"), not to:
(a) challenge the transfers of receivables and related assets
from the sellers under such Trade Receivables Facilities (the "Sellers")
to BPS Financial Services, Inc. (the "Transferor"), whether on the
grounds that such sales were disguised financings or fraudulent
conveyances or otherwise, so long as such transfers are carried out in
all material respects in accordance with the Trade Receivables Facility;
(b) assert that the Transferor and any Seller should be
substantively consolidated; or
(c) institute or join any other Person in instituting any
bankruptcy or other insolvency proceeding against the Transferor so long
as any of the Receivables Certificates shall be outstanding or there
shall not have lapsed one year plus one day since the last day on which
any of the Receivables Certificates shall have been outstanding.
[Remainder of page intentionally left blank]
Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
BORG-WARNER SECURITY CORPORATION
By: /s/ Brian S. Cooper
-------------------
Title: Treasurer
Notice Address:
Borg-Warner Security Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: Chief Financial Officer
LENDERS:
BANKERS TRUST COMPANY,
individually and as Administrative Agent
By: /s/ Mary Jo Jolly
-----------------
Title: Senior Vice President
Notice Address:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Ariana Boer
with a copy to
Bankers Trust Company
300 South Grand Avenue
41st Floor
Los Angeles, CA 90071
Attention: Keith Bernstein
CIBC INC.,
individually and as Documentation Agent
By: /s/ John Kunkle
-----------------------
Title: Authorized Signatory
Notice Address:
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Attention: Bill Koslo
With a copy to:
CIBC Inc.
200 West Madison Street
Suite 2300
Chicago, Illinois 60606
Attention: John Kunkle
NATIONSBANK, N.A., individually and as
Syndication Agent
By: /s/ Mary Carol Daly
-------------------
Title: Vice President
Notice Address:
NationsBank, N.A.
NC 1-001-15-04
101 N. Tryon Street
Charlotte, North Carolina 28255
Attention: Jennifer Sawdey
ABN AMRO BANK, N.V., CHICAGO BRANCH
By: /s/ Nancy L. Capecci
--------------------
Title: Assistant Vice President
By: /s/ Ronald R. Richter
---------------------
Title: Group Vice President
Notice Address:
ABN AMRO Bank, N.V., Chicago Branch
135 S. LaSalle Street, Suite 625
Chicago, Illinois 60674
Attention: Nancy Capecci
ARAB BANKING CORPORATION
By: /s/ Sheldon Tilney
------------------
Title: Deputy General Manager
Notice Address:
Arab Banking Corporation
277 Park Avenue - 32nd Floor
New York, New York 10172
Attention: Grant McDonald
BANK OF HAWAII
By: /s/ Donna R. Parker
-------------------
Title: Vice President
Notice Address:
Bank of Hawaii
1850 North Central Avenue, Suite 400
Phoenix, Arizona 85004
Attention: Donna Parker
THE BANK OF NEW YORK
By: /s/ John M. Lokay, Jr.
----------------------
Title: Vice President
Notice Address:
The Bank of New York
One Wall Street, 19th Floor
New York, New York 10286
Attention: John Lokay
BANQUE PARIBAS
By: /s/ Nicholas C. Mast
--------------------
Title: Vice President
Branch Manager
By: /s/ Joli A. Bruns
--------------------
Title: Asst. Vice President
Notice Address:
Banque Paribas
277 West Monroe Street
Suite 3300
Chicago, Illinois 60606
Attention: Joli Bruns
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ Dean Balice
---------------
Title: Senior Vice President
Branch Manager
Notice Address:
Caisse Nationale de Credit Agricole
55 East Monroe Street, Suite 4700
Chicago, Illinois 60603
Attention: Lynn Rosinsky
CITY NATIONAL BANK
By: /s/ Sami Ambar
--------------
Title: Vice President
Notice Address:
City National Bank
400 North Roxbury Drive
Beverly Hills, California 90210
Attention: Sami Ambar
THE FUJI BANK, LIMITED
CHICAGO BRANCH
By: /s/ Peter L. Chinnice
---------------------
Title: Joint General Manager
Notice Address:
The Fuji Bank, Limited
Chicago Branch
225 West Wacker Drive, Suite 2000
Chicago, Illinois 60606
Attention: James Fayen
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., CHICAGO BRANCH
By: /s/ Brady S. Sadek
------------------
Title: Vice President & Deputy
General Manager
Notice Address:
The Long-Term Credit Bank of Japan, Ltd.,
Chicago Branch
190 South LaSalle Street, Suite 800
Chicago, Illinois 60603
Attention: Brady S. Sadek
MERCANTILE BANK NATIONAL ASSOCIATION
By: /s/ David Higbee
----------------
Title: Vice President
Notice Address:
Mercantile Bank National Association
1 Mercantile Center, 12th Floor
St. Louis, Missouri 63101
Attention: David Higbee
MERITA BANK
By: /s/ Paul S. Brooks
------------------
Title: Vice President
By: /s/ Frank Maffei
------------------
Title: Vice President
Notice Address:
Merita Bank
437 Madison Avenue - 22nd Floor
New York, New York 10022
Attention: Chip Carstensen
THE NIPPON CREDIT BANK, LTD.
By: /s/ Barry S. Fein
-----------------
Title: Asst. Vice President
Notice Address:
The Nippon Credit Bank, Ltd.
245 Park Avenue - 30th Floor
New York, New York 10167
Attention: Mun Kim
TORONTO DOMINION (TEXAS), INC.
By: /s/ Lisa Allison
------------------
Title: Vice President
Notice Address:
Toronto Dominion
31 West 52nd Street
New York, New York 10019
Attention: Cecile Martin
With a copy to:
Toronto Dominion
Houston Agency
909 Fannin Street
Houston, Texas 77010
Attention: Dave Parker
EXHIBIT 5
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
212-450-4000
May 6, 1997
Borg-Warner Security Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
Ladies and Gentlemen:
We have acted as special counsel to Borg-Warner Security
Corporation (the "Company") in connection with the Company's offer (the
"Exchange Offer") to exchange its 9 5/8% Series B Senior Subordinated Notes
due 2007 (the "Exchange Notes") for any and all of its outstanding 9 5/8%
Senior Subordinated Notes due 2007 (the "Old Notes").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary or advisable for the purpose of rendering this opinion.
Upon the basis of the foregoing and, assuming the due execution
and delivery of the Exchange Notes, we are of the opinion that the Exchange
Notes, when executed, authenticated and delivered in exchange for the Old
Notes in accordance with the Exchange Offer, will be valid and binding
obligations of the Company enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and similar laws affecting creditors' rights generally and
equitable principles.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement relating to the Exchange Offer. We also consent
to the reference to us under the caption "Legal Matters" in the Prospectus
contained in such Registration Statement.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other
purpose or relied upon by or furnished to any other person without our prior
written consent.
Very truly yours,
Davis Polk & Wardwell
EXHIBIT 12
BORG-WARNER SECURITY CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(millions of dollars)
<TABLE>
Year Ended December 31,
-------------------------------------------------------------------------
1996
1992 1993 1994 1995 1996 Pro Forma
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings before income
taxes........................ $29.3 $51.3 $10.8 $15.3 $23.4 $26.9
Fixed charges................. 51.8 57.0 57.3 64.6 65.5 49.9
Total earnings................ $81.1 $108.3 $68.1 $79.9 $88.9 $76.8
Ratio of earnings to fixed
charges...................... 1.6x 1.9x 1.2x 1.2x 1.4x 1.5x
</TABLE>
- ----------
Note: For the purpose of calculating the ratio of earnings to fixed charges,
earnings represent income (loss) before income taxes plus fixed charges.
Fixed charges consist of interest expense on all indebtedness plus the
interest portion of rental expense on noncancelable leases, and
amortization of debt issuance costs and debt discount. The calculation
for the year ended December 31, 1993 excludes the non-recurring
elimination of excess purchase price over net assets acquired.
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Borg-Warner Security
Corporation on Form S-4 of our report dated February 4, 1997, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Chicago, Illinois
May 2, 1997
EXHIBIT 24
POWER OF ATTORNEY
The undersigned directors of Borg-Warner Security Corporation (the "Company")
hereby appoint J. Joe Adorjan and Timothy M. Wood and any agent for service
named in the Registration Statement referred to herein, and each of them, as
their true and lawful attorneys-in-fact, with full power of substitution and
resubstitution, for and on their behalf to execute, in their names and
capacities as directors of the Company, and to file any and all Registration
Statements and amendments thereto (including any and all post-effective
amendments) pursuant to which up to $125 million of the Company's 9 5/8% Senior
Subordinated Notes due 2007 are to be offered for sale by the Company,
granting unto said attorneys-in-fact full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises as fully to all intents and purposes as they might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
may lawfully do or cause to be done by virtue hereof.
This Power of Attorney automatically ends as to each appointee upon the
termination of his service with the Company.
In witness whereof, the undersigned have executed this Power of Attorney on
April 22, 1997.
/s/ J. Joe Adorjan /s/ James J. Burke, Jr.
- -------------------------------- --------------------------------
J. Joe Adorjan James J. Burke, Jr.
/s/ Albert J. Fitzgibbons, III /s/ Arthur F. Golden
- -------------------------------- --------------------------------
Albert J. Fitzgibbons, III Arthur F. Golden
/s/ Dale W. Lang /s/ Robert A. McCabe
- -------------------------------- --------------------------------
Dale W. Lang Robert A. McCabe
/s/ Andrew McNally IV /s/ Alexis P. Michas
- -------------------------------- --------------------------------
Andrew McNally IV Alexis P. Michas
/s/ H. Norman Schwarzkopf /s/ Donald C. Trauscht
- -------------------------------- --------------------------------
H. Norman Schwarzkopf Donald C. Trauscht
EXHIBIT 25
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------
BORG-WARNER SECURITY CORPORATION
(Exact name of obligor 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)
------------
9 5/8% Senior Subordinated Notes due 2007
(Title of the indenture securities)
===============================================================================
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany,
N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit
1 to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or
examining authority.
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of
New York, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in The City of
New York, and State of New York, on the 29th day of April, 1997.
THE BANK OF NEW YORK
By: /s/ Vivian Georges
---------------------
Name: Vivian Georges
Title: Assistant Vice
President
- -----------------------------------------------
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business September 30, 1996,
published in accordance with a call made
by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,404,522
Interest-bearing balances........... 732,833
Securities:
Held-to-maturity securities ........ 789,964
Available-for-sale securities ........ 2,005,509
Federal funds sold in domestic offices
of the bank:
Federal funds sold ................... 3,364,838
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 28,728,602
LESS: Allowance for loan and
lease losses ..................... 584,525
LESS: Allocated transfer risk
reserve........................... 429
Loans and leases, net of unearned
income, allowance, and reserve 28,143,648
Assets held in trading accounts ...... 1,004,242
Premises and fixed assets (including
capitalized leases) ................ 605,668
Other real estate owned .............. 41,238
Investments in unconsolidated
subsidiaries and associated
companies .......................... 205,031
Customers' liability to this bank on
acceptances outstanding ............ 949,154
Intangible assets .................... 490,524
Other assets ......................... 1,305,839
----------
Total assets ......................... $44,043,010
==========
LIABILITIES
Deposits:
In domestic offices ................ $20,441,318
Noninterest-bearing ................ 8,158,472
Interest-bearing ................... 12,282,846
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 11,710,903
Noninterest-bearing ................ 46,182
Interest-bearing ................... 11,664,721
Federal funds purchased in
domestic offices of the
bank:
Federal funds purchased ............ 1,565,288
Demand notes issued to the U.S.
Treasury ........................... 293,185
Trading liabilities .................. 826,856
Other borrowed money:
With original maturity of one year
or less .......................... 2,103,443
With original maturity of more than
one year ......................... 20,766
Bank's liability on acceptances exe-
cuted and outstanding .............. 951,116
Subordinated notes and debentures .... 1,020,400
Other liabilities .................... 1,522,884
----------
Total liabilities .................... 40,456,160
==========
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 2,129,376
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ (2,073)
Cumulative foreign currency
translation adjustments ........... (8,403)
----------
Total equity capital ................ 3,586,850
----------
Total liabilities and equity
capital ........................... $44,043,010
==========
I, Robert E. Keilman, Senior Vice President and Comptroller of
the above-named bank do hereby declare that this Report of
Condition has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System
and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us
and to the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true and correct.
J. Carter Bacot }
Thomas A. Renyi } Directors
Alan R. Griffith }
- ----------------------------------------------------
EXHIBIT 99.1
LETTER OF TRANSMITTAL
Offer to Exchange
9 5/8% Series B Senior Subordinated Notes due 2007
for Any and All Outstanding
9 5/8% Senior Subordinated Notes due 2007
of
Borg-Warner Security Corporation
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME ON ______________, 1997
(THE "EXPIRATION DATE")
UNLESS EXTENDED BY BORG-WARNER SECURITY CORPORATION
EXCHANGE AGENT:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Hand or Overnight Delivery: Facsimile Transmissions: By Registered Or Certified Mail:
(Eligible Institutions Only)
The Bank of New York The Bank of New York
101 Barclay Street (212) 571-3080 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level To Confirm by Telephone Attention: Reorganization Section,
Attention: Reorganization Section, or for Information Call: Arwen Gibbons
Arwen Gibbons
(212) 815-6333
</TABLE>
Delivery of this Letter of Transmittal to an address other than
as set forth above or transmission of this letter of transmittal via a
facsimile transmission to a number other than as set forth above will not
constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus dated
__________, 1997 (the "Prospectus") of Borg-Warner Security Corporation (the
"Company") which, together with this Letter of Transmittal (the "Letter of
Transmittal"), describes the Company's offer (the "Exchange Offer") to
exchange $1,000 in principal amount of 9 5/8% Senior Subordinated Notes due
2007 (the "Exchange Notes") for each $1,000 in principal amount of
outstanding 9 5/8% Series B Senior Subordinated Notes due 2007 (the "Old
Notes"). The terms of the Exchange Notes are identical in all material
respects (including principal amount, interest rate and maturity) to the
terms of the Old Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the offering of the Exchange Notes will have
been registered under the Securities Act of 1933, as amended and,
therefore, the Exchange Notes will not bear legends restricting the
transfer thereof and certain provisions relating to an increase in the
stated rate of interest shall be eliminated.
The undersigned has checked the appropriate boxes below and
signed this Letter of Transmittal to indicate the action the undersigned
desires to take with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST
BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES
OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE
EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate Numbers
and Principal Amounts should be listed on a separate signed schedule affixed
hereto.
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
Aggregate
Principal
Name(s) and Address(es) Amount Principal
of Registered Holder(s) Certificate Represented Amount
(Please fill in) Number(s)* by Old Notes* Tendered**
- ----------------------- ----------- ------------- -------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
**Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by Old Notes. See
Instruction 2.
- ------------------------------------------------------------------------------
This Letter of Transmittal is to be used either if certificates
for Old Notes are to be forwarded herewith or if delivery of Old Notes is to
be made by book-entry transfer to an account maintained by the Exchange
Agent at The Depository Trust Company ("DTC"), pursuant to the procedures
set forth in "The Exchange OfferBook-Entry Transfer" in the Prospectus.
Delivery of documents to a book-entry transfer facility does not constitute
delivery to the Exchange Agent.
Unless the context requires otherwise, the term "Holder" for
purposes of this Letter of Transmittal means any person in whose name Old
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder or any
person whose Old Notes are held of record by DTC or its nominee who desires to
deliver such Old Notes by book-entry transfer at DTC.
Holders whose Old Notes are not immediately available or who
cannot deliver their Old Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Old Notes
according to the guaranteed delivery procedure set forth in the Prospectus
under the caption "The Exchange Offer-Guaranteed Delivery Procedures."
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH THE DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution______________________________________
___________________________________________________________________
The Depository Trust Company
Account Number_____________________________________________________
Transaction Code Number____________________________________________
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)_______________________________________
___________________________________________________________________
Name of Eligible Institution that Guaranteed Delivery
___________________________________________________________________
If Delivered by Book-Entry Transfer:
Account Number_____________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:______________________________________________________________
Address:___________________________________________________________
___________________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange
Offer, the undersigned hereby tenders to the Company the above-described
principal amount of Old Notes. Subject to, and effective upon, the acceptance
for exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the undersigned in connection with the
Exchange Offer) to cause the Old Notes to be assigned, transferred and
exchanged. The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes and to
acquire Exchange Notes issuable upon the exchange of such tendered Old Notes,
and that, when the same are accepted for exchange, the Company will acquire
good and unencumbered title to the tendered Old Notes, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company
to be necessary or desirable to complete the exchange, assignment and transfer
of tendered Old Notes or transfer ownership of such Old Notes on the account
books maintained by The Depository Trust Company.
The Exchange Offer is subject to certain conditions as set
forth in the Prospectus under the caption "The Exchange Offer." The
undersigned recognizes that as a result of these conditions (which may be
waived, in whole or in part, by the Company), as more particularly set forth
in the Prospectus, the Company may not be required to exchange any of the Old
Notes tendered hereby and, in such event, the Old Notes not exchanged will be
returned to the undersigned at the address shown below the signature of the
undersigned.
By tendering, each holder of Old Notes represents to the
Company that (i) the Exchange Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of business of the person receiving
such Exchange Notes, whether or not such person is such holder, (ii) neither
the holder of Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes, (iii) if the holder is not a broker-dealer or is a
broker-dealer but will not receive Exchange Notes for its own account in
exchange for Old Notes, neither the holder nor any such other person is
engaged in or intends to participate in a distribution of the Exchange Notes
and (iv) neither the holder nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act of 1933, as
amended (the "Act") or if such holder is an "affiliate", that such holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable. If the tendering holder is a
broker-dealer (whether or not it is also an "affiliate") that will receive
Exchange Notes for its own account in exchange for Old Notes, it represents
that the Old Notes to be exchanged for the Exchange Notes were acquired by it
as a result of market-making activities or other trading activities, and
acknowledges that it will deliver a prospectus meeting the requirements of the
Act in connection with any resale of such Exchange Notes. By acknowledging
that it will deliver and by delivering a prospectus meeting the requirements
of the Act in connection with any resale of such Exchange Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Act.
All authority herein conferred or agreed to be conferred shall
survive the death, bankruptcy or incapacity of the undersigned and every
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned. Tendered
Old Notes may be withdrawn at any time prior to the Expiration Date.
Certificates for all Exchange Notes delivered in exchange for
tendered Old Notes and any Old Notes delivered herewith but not exchanged, in
each case registered in the name of the undersigned, shall be delivered to the
undersigned at the address shown below the signature of the undersigned.
TENDERING HOLDER(S) SIGN HERE
______________________________________________________________________________
______________________________________________________________________________
Signature(s) of Holder(s)
Dated:_______________________________, 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become
registered holder(s) by endorsements and documents transmitted herewith or, if
the Old Notes are held of record by DTC or its nominee, the person in whose
name such Old Notes are registered on the books of DTC. If signature by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth the full title of such person.) See Instruction 3.
Name(s):______________________________________________________________________
______________________________________________________________________________
(Please Print)
Capacity (full title):________________________________________________________
Address:______________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.___________________________________________________
______________________________________________________________________________
Tax Identification No.
GUARANTEE OF SIGNATURE(S)
(If Required--See Instruction 3)
Authorized Signature:_________________________________________________________
Name:_________________________________________________________________________
Title:________________________________________________________________________
Address:______________________________________________________________________
Name of Firm:_________________________________________________________________
Area Code and Telephone No.___________________________________________________
Dated:_________________, 1997
INSTRUCTIONS
Forming Part of the Terms and Conditions
of the Exchange Offer
1. Delivery of this Letter of Transmittal and Certificates.
Certificates for all physically delivered Old Notes or confirmation of any
book-entry transfer to the Exchange Agent's account at The Depository Trust
Company of Old Notes tendered by book-entry transfer, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal,
must be received by the Exchange Agent at any of its addresses set forth
herein on or prior to the Expiration Date.
The method of delivery of this Letter of Transmittal, the Old
Notes and any other required documents is at the election and risk of the
holder and, except as otherwise provided below, the delivery will be deemed
made only when actually received by the Exchange Agent. If such delivery is by
mail, it is suggested that registered mail with return receipt requested,
properly insured, be used.
Holders whose Old Notes are not immediately available or who
cannot deliver their Old Notes and all other required documents to the
Exchange Agent on or prior to the Expiration Date or comply with book-entry
transfer procedures on a timely basis may tender their Old Notes pursuant to
the guaranteed delivery procedure set forth in the Prospectus under "The
Exchange Offer-Guaranteed Delivery Procedures." Pursuant to such procedure:
such tender must be made by or through an Eligible Institution (as defined
therein); on or prior to the Expiration Date the Exchange Agent must have
received from such Eligible Institution, a letter, telegram or facsimile
transmission setting forth the name and address of the tendering holder, the
names in which such Old Notes are registered, and, if possible, the
certificate numbers of the Old Notes to be tendered; and all tendered Old
Notes (or a confirmation of any book-entry transfer of such Old Notes into the
Exchange Agent's account at The Depository Trust Company) as well as this
Letter of Transmittal and all other documents required by this Letter of
Transmittal must be received by the Exchange Agent within five New York Stock
Exchange trading days after the date of execution of such letter, telegram or
facsimile transmission, all as provided in the Prospectus under the caption
"The Exchange Offer-Guaranteed Delivery Procedures."
No alternative, conditional, irregular or contingent tenders
will be accepted. All tendering holders, by execution of this Letter of
Transmittal (or facsimile thereof), shall waive any right to receive notice of
the acceptance of the Old Notes for exchange.
2. Partial Tenders; Withdrawals. Tenders of Old Notes
will be accepted in all denominations of $1,000 and integral multiples in
excess thereof. If less than the entire principal amount of Old Notes
evidenced by a submitted certificate is tendered, the tendering holder must
fill in the principal amount tendered in the box entitled "Principal Amount
Tendered." A newly issued certificate for the principal amount of Old Notes
submitted but not tendered will be sent to such holder as soon as
practicable after the Expiration Date. All Old Notes delivered to the
Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
Tenders of Old Notes pursuant to the Exchange Offer are
irrevocable, except that Old Notes tendered pursuant to the Exchange Offer may
be withdrawn at any time prior to the Expiration Date. To be effective, a
written, telegraphic or facsimile transmission notice of withdrawal must be
timely received by the Exchange Agent. Any such notice of withdrawal must
specify the person named in the Letter of Transmittal as having tendered Old
Notes to be withdrawn, the certificate numbers of the Old Notes to be
withdrawn, the principal amount of Old Notes delivered for exchange, a
statement that such a holder is withdrawing its election to have such Old
Notes exchanged, and the name of the registered holder of such Old Notes, and
must be signed by the holder in the same manner as the original signature on
the Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to the Company that the person
withdrawing the tender has succeeded to the beneficial ownership of the Old
Notes being withdrawn. The Exchange Agent will return the properly withdrawn
Old Notes promptly following receipt of notice of withdrawal. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer, any
notice of withdrawal must specify the name and number of the account at The
Depository Trust Company to be credited with the withdrawn Old Notes or
otherwise comply with The Depository Trust Company's procedures.
3. Signature on this Letter of Transmittal; Written
Instruments and Endorsements; Guarantee of Signatures. If this Letter of
Transmittal is signed by the registered holder(s) of the Old Notes tendered
hereby, the signature must correspond with the name(s) as written on the
face of certificates without alteration, enlargement or any change
whatsoever.
If any of the Old Notes tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of
Transmittal.
If a number of Old Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Old Notes.
When this Letter of Transmittal is signed by the registered
holder or holders of Old Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than
the registered holder or holders of the Old Notes listed, such Notes must be
endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the
registered holder, in either case signed exactly as the name or names of the
registered holder or holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate
written instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed
by an Eligible Institution, provided the Old Notes are tendered: (i) by a
registered holder of such Old Notes and the certificates for Exchange Notes to
be issued in exchange therefor are to be issued (or any untendered amount of
Old Notes are to be reissued) to the registered holder; or (ii) for the
account of any Eligible Institution.
4. Transfer Taxes. The Company shall pay all transfer
taxes, if any, applicable to the transfer and exchange of Old Notes to it
or its order pursuant to the Exchange Offer. If, however, Exchange Notes
are to be delivered to, or are to be registered or issued in the name of,
any person other than the registered holder of the Old Notes tendered
hereby, or if a transfer tax is imposed for any reason other than the
transfer of Old Notes to the Company or its order pursuant to the Exchange
Offer, the amount of any such transfer taxes (whether imposed on the
registered holder or any other person) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception
therefrom is not submitted herewith the amount of such transfer taxes will
be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be
necessary for transfer tax stamps to be affixed to the Old Notes listed in
this Letter of Transmittal.
5. Waiver of Conditions. The Company reserves the absolute
right to waive, in whole or in part, any of the conditions to the Exchange
Offer set forth in the Prospectus.
6. Mutilated, Lost, Stolen or Destroyed Notes. Any holder
whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated below for further
instructions.
7. Requests for Assistance or Additional Copies. Questions
relating to the procedure for tendering, as well as requests for additional
copies of the Prospectus and this Letter of Transmittal, may be directed to
the Exchange Agent at the address and telephone number set forth below. In
addition, all questions relating to the Exchange Offer, as well as requests
for assistance or additional copies of the Prospectus and this Letter of
Transmittal, may be directed to the Company at 200 South Michigan Avenue,
Chicago, Illinois 60604. Attention: Jeffrey Bilas (312) 322-8500.
8. Irregularities. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of Letters of
Transmittal or Old Notes will be resolved by the Company, whose
determination will be final and binding. The Company reserves the absolute
right to reject any or all Letters of Transmittal or tenders that are not
in proper form or the acceptance of which would, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the right to
waive any irregularities or conditions of tender as to the particular Old
Notes covered by any Letter of Transmittal or tendered pursuant to such
letter. None of the Company, the Exchange Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
The Company's interpretation of the terms and conditions of the Exchange
Offer shall be final and binding.
9. Definitions. Capitalized terms used in this Letter of
Transmittal and not otherwise defined have the meanings given in the
Prospectus.
IMPORTANT: This Letter of Transmittal or a facsimile
thereof (together with certificates for Old Notes or confirmation of book-
entry transfer and all other required documents) or a Notice of Guaranteed
Delivery must be received by the Exchange Agent on or prior to the
Expiration Date.
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
Offer to Exchange
9 5/8% Series B Senior Subordinated Notes due 2007
for Any and All Outstanding
9 5/8% Senior Subordinated Notes due 2007
of
BORG-WARNER SECURITY CORPORATION
Registered holders of outstanding 9 5/8% Senior Subordinated Notes due
2007 (the "Old Notes") who wish to tender their Old Notes in exchange for a
like principal amount of 9 5/8% Series B Senior Subordinated Notes due 2007
(the "Exchange Notes") and, in each case, whose Old Notes are not immediately
available or who cannot deliver their Old Notes and Letter of Transmittal (and
any other documents required by the Letter of Transmittal) to The Bank of New
York (the "Exchange Agent") prior to the Expiration Date, may use this Notice
of Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight delivery) or mail to the Exchange Agent. See "The Exchange Offer -
Guaranteed Delivery Procedures" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Hand or Overnight Delivery: Facsimile Transmissions: By Registered Or Certified Mail:
(Eligible Institutions Only)
The Bank of New York The Bank of New York
101 Barclay Street (212) 571-3080 101 Barclay Street, 7E
Corporate Trust Services Window New York, New York 10286
Ground Level To Confirm by Telephone Attention: Reorganization Section,
Attention: Reorganization Section, or for Information Call: Arwen Gibbons
Arwen Gibbons
(212) 815-6333
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than
as set forth above or transmission of instructions via a facsimile
transmission to a number other than as set forth above will not constitute a
valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee mush appear in
the applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Note to be used for signature guarantee)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States, hereby guarantees to deliver to
the Exchange Agent at one of its addresses set forth above, the certificates
representing the Old Notes, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, and any other documents required by the Letter of
Transmittal within five New York Stock Exchange, Inc. trading days after the
date of execution of this Notice of Guaranteed Delivery.
Name of Firm:______________________________ __________________________________
(Authorized Signature)
Address:___________________________________ Title:____________________________
___________________________________________ Name:_____________________________
(Zip Code) (Please type or print)
Area Code and Telephone Number: Date:_____________________________
___________________________________________
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED
DELIVERY. NOTES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
EXHIBIT 99.3
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM OWNER
OF
BORG-WARNER SECURITY CORPORATION
9 5/8% Series B Senior Subordinated Notes due 2007
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1997 (the "Prospectus") of Borg-Warner Security Corporation,
a Delaware corporation (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal"), that together constitute the
Company's offer (the "Exchange Offer"). Capitalized terms used but not
defined herein have the meaning as ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (fill in amount):
$___________ of the 9 5/8% Senior Subordinated Notes due 2007
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[ ] To TENDER the following Old Notes held by you for the account
of the undersigned (insert principal amount of Old Notes to be
tendered, if any):
$___________ of the 9 5/8% Senior Subordinated Notes due 2007
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations, that
(i) the Exchange Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the undersigned, (ii) neither
the undersigned nor any such other person has an arrangement or understanding
with any person to participate in the distribution of such Exchange Notes,
(iii) if the undersigned is not a broker-dealer, or is a broker-dealer but
will not receive Exchange Notes for its own account in exchange for Old Notes,
neither the undersigned nor any such other person is engaged in or intends to
participate in the distribution of such Exchange Notes and (iv) neither the
undersigned nor any such person is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act") or if the undersigned is an "affiliate", that the
undersigned will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the
undersigned is a broker-dealer (whether or not it is also an "affiliate") that
will receive Exchange Notes for its own account in exchange for Old Notes, it
represents that such Old Notes were acquired as a result of market-making
activities or other trading activities, and it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. By acknowledging that it
will deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s):__________________________________________________
Signature(s):_________________________________________________________________
Name(s) (please print):_______________________________________________________
Address:______________________________________________________________________
______________________________________________________________________________
Telephone Number:_____________________________________________________________
Taxpayer Identification or Social Security Number:____________________________
______________________________________________________________________________
Date:_________________________________________________________________________
EXHIBIT 99.4
Offer to Exchange
9 5/8% Series B Senior Subordinated Notes due 2007
for Any and All Outstanding
9 5/8% Senior Subordinated Notes due 2007
of
BORG-WARNER SECURITY CORPORATION
To Our Clients:
We are enclosing herewith a Prospectus, dated _________ __,
1997, of Borg-Warner Security Corporation (the "Company"), a Delaware
corporation, and a related Letter of Transmittal (which together constitute
the "Exchange Offer") relating to the offer by the Company to exchange its 9
5/8% Series B Senior Subordinated Notes due 2007 (the "Exchange Notes"),
pursuant to an offering registered under the Securities Act of 1933, as
amended (the "Securities Act"), for a like principal amount of its issued and
outstanding 9 5/8% Senior Subordinated Notes due 2007 (the "Old Notes") upon
the terms and subject to the conditions set forth in the Exchange Offer.
Please note that the Exchange Offer will expire at 5:00 p.m.,
New York City time, on _________ __, 1997, unless extended.
The Exchange Offer is not conditioned upon any minimum number
of Old Notes being tendered.
We are the holder of record and/or participant in the
book-entry transfer facility of Old Notes held by us for your account. A
tender of such Old Notes can be made only by us as the record holder and/or
participant in the book-entry transfer facility and pursuant to your
instructions. The Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Old Notes held by us for
your account.
We request instructions as to whether you wish to tender any or
all of the Old Notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we
may on your behalf make the representations contained in the Letter of
Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes
will represent to the Company that (i) the Exchange Notes acquired in the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is such
holder, (ii) neither the holder of the Old Notes nor any such other person has
an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, (iii) if the holder is not a
broker-dealer or is a broker-dealer but will not receive Exchange Notes for
its own account in exchange for Old Notes, neither the holder nor any such
other person is engaged in or intends to participate in a distribution of the
Exchange Notes and (iv) neither the holder nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act of 1933, as amended (the "Act") or if such holder is an "affiliate", that
such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. If the tendering
holder is a broker-dealer (whether or not it is also an "affiliate") that will
receive Exchange Notes for its own account in exchange for Old Notes, we will
represent on behalf of such broker-dealer that the Old Notes to be exchanged
for the Exchange Notes were acquired by it as a result of market-making
activities or other trading activities, and acknowledge on behalf of such
broker-dealer that it will deliver a prospectus meeting the requirements of
the Act in connection with any resale of such Exchange Notes. By
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Act in connection with any resale of such Exchange Notes,
the undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Act.
Very truly yours,
EXHIBIT 99.5
Offer to Exchange
9 5/8% Series B Senior Subordinated Notes due 2007
for Any and All Outstanding
9 5/8% Senior Subordinated Notes due 2007
of
BORG-WARNER SECURITY CORPORATION
To Registered Holders and The Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to
the offer by Borg-Warner Security Corporation , a Delaware corporation,
(the "Company") to exchange its 9 5/8% Series B Senior Subordinated Notes
due 2007 (the "Exchange Notes"), pursuant to an offering registered under
the Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount of its issued and outstanding 9 5/8% Senior Subordinated
Notes due 2007 (the "Old Notes") upon the terms and subject to the
conditions set forth in the Company's Prospectus, dated ___________ __,
1997, and the related Letter of Transmittal (which together constitute the
"Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated ____________ __, 1997;
2. Letter of Transmittal;
3. Notice of Guaranteed Delivery;
4. Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Owner; and
5. Letter which may be sent to your clients for whose account
you hold Old Notes in your name or in the name of your
nominee, to accompany the instruction form referred to
above, for obtaining such client's instruction with
regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that
the Exchange Offer will expire at 5:00 p.m., New York City time, on
_____________ __, unless extended.
The Exchange Offer is not conditioned upon any minimum number
of Old Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes
will represent to the Company that (i) the Exchange Notes acquired in the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is such
holder, (ii) neither the holder of the Old Notes nor any such other person
has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, (iii) if the holder is not a broker-
dealer or is a broker-dealer but will not receive Exchange Notes for its
own account in exchange for Old Notes, neither the holder nor any such
other person is engaged in or intends to participate in a distribution of
the Exchange Notes and (iv) neither the holder nor any such other person is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Act") or if such holder is an
"affiliate", that such holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable. If the tendering holder is a broker-dealer (whether or not it
is also an "affiliate") that will receive Exchange Notes for its own
account in exchange for Old Notes, you will represent on behalf of such
broker-dealer that the Old Notes to be exchanged for the Exchange Notes
were acquired by it as a result of market-making activities or other
trading activities, and acknowledge on behalf of such broker-dealer that it
will deliver a prospectus meeting the requirements of the Act in connection
with any resale of such Exchange Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the Act
in connection with any resale of such Exchange Notes, the undersigned is
not deemed to admit that it is an "underwriter" within the meaning of the
Act.
The enclosed Instruction to Registered Holder and/or Book-Entry
Transfer Participant from Owner contains an authorization by the beneficial
owners of the Old Notes for you to make the foregoing representations.
The Company will not pay any fee or commission to any broker or
dealer or to any other persons (other than the Exchange Agent) in connection
with the solicitation of tenders of Old Notes pursuant to the Exchange Offer.
The Company will pay or cause to be paid any transfer taxes payable on the
transfer of Old Notes to it, except as otherwise provided in Instruction 4 of
the enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from
the undersigned.
Very truly yours,
THE BANK OF NEW YORK
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF BORG-WARNER SECURITY CORPORATION OR THE BANK OF NEW YORK OR AUTHORIZE
YOU TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION
WITH THE EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE
STATEMENTS CONTAINED THEREIN.
