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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: February 7, 1997
Date of Earliest Event Reported: January 24, 1997
BORG-WARNER SECURITY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-5529 13-3408028
(State of Incorporation) (Commission File No.) (I.R.S.
Employer
Identification No.)
200 South Michigan Avenue, Chicago, Illinois 60604
(Address of principal executive offices)
Registrant's telephone number, including area code:
(312) 322-8500
<PAGE>
Item 2. Acquisition or Disposition of Assets
------------------------------------
On January 24, 1997 the Company's armored services unit contributed
substantially all of its assets and assigned certain of its liabilities
(including intercompany indebtedness) to Loomis, Fargo & Co. ("Newco") in
exchange for (i) 4,900,000 shares of Newco common stock and (ii) a cash payment
of approximately $105 million, which includes repayment of intercompany
indebtedness. The cash portion of the consideration may be adjusted based on
specified minimum working capital requirements. Among the liabilities of the
armored unit that were not contributed to Newco are casualty and employee claims
incurred prior to the closing.
The Company agreed to indemnify Newco 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 Newco common stock. The Company has also agreed to indemnify Newco
against liability for breach of its representations and warranties and against
certain claims relating to accounts receivable and taxes.
Newco is a Delaware corporation formed in connection with the business
combination of the Company's armored unit and Loomis Holding Corporation
("Loomis"). As part of the business combination, the shareholders of Loomis
contributed all of the Loomis common stock to Newco in exchange for (i)
5,100,000 shares of Newco common stock, (ii) a non-interest bearing promissory
note in the original principal amount of $6 million and (iii) a cash payment of
approximately $15.2 million made to various business trusts and entities,
including an entity that will administer and pay the casualty and employee
claims of Loomis incurred prior to the closing. Newco also repaid existing
Loomis indebtedness and redeemed outstanding shares of Loomis preferred stock.
The Company and the former Loomis shareholders entered into a stockholders
agreement providing that the Newco board of directors initially will consist of
seven directors: three directors nominated by the Company; three directors
nominated by the former Loomis shareholders and Newco's chief executive officer.
The number of directors that may be designated pursuant to the stockholder
agreement may adjust if either the Company or the former Loomis shareholders
reduce their ownership stake in Newco. The stockholder agreement provides that
the vote of five of the seven directors is required for Newco to engage in
certain specified activities. The Company has nominated Messrs. Adorjan, O'Brien
and Wood, its executive officers, to the Newco board of directors.
The stockholder agreement prohibits the transfer of Newco common stock by either
party for three years following the closing without the prior consent of the
other party. After such period Newco common stock may be transferred only in
accordance with the
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provisions of the stockholder agreement, which include rights of first refusal
and co-sale rights. The current stockholders also have certain preemptive and
registration rights with respect to equity issuances by Newco.
Item 7. Financial Statements and Exhibits.
(b) Pro forma financial information
Pro forma consolidated statements of earnings for the year ended
December 31, 1995 and the nine months ended September 30, 1996 and
pro forma condensed consolidated balance sheet at September 30, 1996
are attached as Exhibit 99 hereto and are incorporated by reference
herein
(c) Exhibits
2.1 Contribution Agreement dated as of November 28, 1996 by and
among Borg-Warner Security Corporation, Wells Fargo Armored Service
Corporation, Loomis-Wells Corporation (now known as Loomis, Fargo &
Co.), Loomis Holding Corporation and Loomis Stockholders Trust.
99 Pro forma consolidated statements of earnings for the year ended
December 31, 1995 and the nine months ended September 30, 1996 and
pro forma condensed consolidated balance sheet at September 30, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BORG-WARNER SECURITY CORPORATION
By /s/ Timothy M. Wood
--------------------
Timothy M. Wood
Vice President
Dated: February 7, 1997
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CONTRIBUTION AGREEMENT
Among
BORG-WARNER SECURITY CORPORATION
WELLS FARGO ARMORED SERVICE CORPORATION
LOOMIS-WELLS CORPORATION
LOOMIS HOLDING CORPORATION
LOOMIS ARMORED INC.
and
LOOMIS STOCKHOLDERS TRUST
Dated as of November 28, 1996
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TABLE OF CONTENTS
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ARTICLE I
TRANSFER AND REDEMPTION OF LOOMIS STOCK............... 2
SECTION 1.1. Transfer of Loomis Stock to Loomis Stockholders Trust...... 2
SECTION 1.2. Transfer of Loomis Common Stock to Newco................... 2
SECTION 1.3. Issuance of NOL Note....................................... 4
SECTION 1.4. Redemption of Preferred Stock and Payment of Loomis
Closing Liabilities........................................ 5
ARTICLE II
SALE AND TRANSFER OF WELLS FARGO ASSETS AND LIABILITIES....... 5
SECTION 2.1. Transfer of Assets and Assumption of Liabilities........... 5
SECTION 2.2. Assignment of Contracts and Rights; Associates Lease....... 7
SECTION 2.3. Consideration for Transferred Assets....................... 8
ARTICLE III
POST-CLOSING ADJUSTMENTS....................... 8
SECTION 3.1. Minimum Adjusted Working Capital........................... 8
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF BORG-WARNER AND WELLS FARGO.............. 10
SECTION 4.1. Organization and Qualification............................. 10
SECTION 4.2. Authorization.............................................. 10
SECTION 4.3. No Violation............................................... 11
SECTION 4.4. Subsidiaries and Equity Investments........................ 12
SECTION 4.5. Consents and Approvals..................................... 12
SECTION 4.6. Financial Statements....................................... 13
SECTION 4.7. Absence of Undisclosed Liabilities......................... 13
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SECTION 4.8. Absence of Certain Changes................................. 13
SECTION 4.9. Litigation................................................. 15
SECTION 4.10. Liens and Encumbrances..................................... 15
SECTION 4.11. Certain Agreements......................................... 16
SECTION 4.12. Employee Benefit Plans..................................... 17
SECTION 4.13. Taxes...................................................... 18
SECTION 4.14. Compliance with Applicable Law............................. 19
SECTION 4.15. Brokers' Fees and Commissions.............................. 19
SECTION 4.16. Proprietary Rights......................................... 19
SECTION 4.17. Labor Relations............................................ 20
SECTION 4.18. Real Estate................................................ 21
SECTION 4.19. Personal Property.......................................... 21
SECTION 4.20. Environmental Matters...................................... 21
SECTION 4.21. Certain Business Practices and Regulations................. 24
SECTION 4.22. Related Party Transactions................................. 24
SECTION 4.23. Investment Intent.......................................... 24
SECTION 4.24. Continued Stock Ownership.................................. 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF LOOMIS AND LOOMIS ARMORED..................... 25
SECTION 5.1. Organization and Qualification............................. 25
SECTION 5.2. Authorization.............................................. 25
SECTION 5.3. No Violation............................................... 26
SECTION 5.4. Capitalization of Loomis and Loomis Armored................ 26
SECTION 5.5. Subsidiaries and Equity Investments........................ 28
SECTION 5.6. Consents and Approvals..................................... 28
SECTION 5.7. Financial Statements....................................... 29
SECTION 5.8. Absence of Undisclosed Liabilities......................... 29
SECTION 5.9. Absence of Certain Changes................................. 30
SECTION 5.10. Litigation................................................. 31
SECTION 5.11. Liens and Encumbrances..................................... 31
SECTION 5.12. Certain Agreements......................................... 32
SECTION 5.13. Employee Benefit Plans..................................... 33
SECTION 5.14. Taxes...................................................... 34
SECTION 5.15. Compliance with Applicable Law............................. 35
SECTION 5.16. Brokers' Fees and Commissions.............................. 35
SECTION 5.17. Proprietary Rights......................................... 35
SECTION 5.18. Labor Relations............................................ 36
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(ii)
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SECTION 5.19. Insurance.................................................. 37
SECTION 5.20. Real Estate................................................ 37
SECTION 5.21. Personal Property.......................................... 38
SECTION 5.22. Environmental Matters...................................... 38
SECTION 5.23. Certain Business Practices and Regulations................. 40
SECTION 5.24. Related Party Transactions................................. 40
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF LOOMIS STOCKHOLDERS TRUST............... 41
SECTION 6.1. Ownership of Shares........................................ 41
SECTION 6.2. Authority.................................................. 41
SECTION 6.3. No Conflicts............................................... 42
SECTION 6.4. Investment Intent.......................................... 42
SECTION 6.5. Continued Stock Ownership.................................. 42
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF NEWCO.................. 42
SECTION 7.1. Organization and Qualification............................. 42
SECTION 7.2. Authorization.............................................. 43
SECTION 7.3. Capitalization of Newco.................................... 43
SECTION 7.4. Consents and Approvals..................................... 44
SECTION 7.5. No Operations.............................................. 44
SECTION 7.6. Disposition of Property.................................... 44
SECTION 7.7. No Redemption of Stock..................................... 44
SECTION 7.8. Loomis Common Stock........................................ 44
ARTICLE VIII
COVENANTS............................... 44
SECTION 8.1. Conduct of Business of Each of Loomis and Wells Fargo
Prior to the Closing Date.................................. 44
SECTION 8.2. Access to Information...................................... 47
SECTION 8.3. All Reasonable Efforts..................................... 48
SECTION 8.4. Consents and Approvals..................................... 48
SECTION 8.5. Public Announcements....................................... 49
SECTION 8.6. Notice of Certain Events................................... 49
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(iii)
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SECTION 8.7. No Other Bids; Liquidated Damages; Failure to Obtain
Director Consents.......................................... 49
SECTION 8.8. Stockholders Agreement..................................... 50
SECTION 8.9. Election of Officers or Directors.......................... 50
SECTION 8.10. The Financing.............................................. 50
SECTION 8.11. Wells Fargo Corporate Existence............................ 50
SECTION 8.12. Cancellation of MEGA Units................................. 51
SECTION 8.13. Tax Reporting.............................................. 51
SECTION 8.14. Insurance Coverage......................................... 53
SECTION 8.15. Title Policies............................................. 53
SECTION 8.16. Information Supplied....................................... 53
SECTION 8.17. Transition Services........................................ 54
SECTION 8.18. Accounts Receivable........................................ 55
SECTION 8.19. Wells Fargo Armored Service Corporation of Puerto Rico..... 55
SECTION 8.20. Loomis Casualty Insurance Deposits......................... 55
SECTION 8.21. Employees and Employee Benefits............................ 55
SECTION 8.22. Termination of Management Agreements....................... 58
SECTION 8.23. Use of Name................................................ 58
SECTION 8.24. Consents of Equity Holders................................. 58
SECTION 8.25. Contribution to Reserve.................................... 59
SECTION 8.26. Support Payment............................................ 59
ARTICLE IX
CLOSING CONDITIONS.......................... 59
SECTION 9.1. Conditions to Each Party's Obligations under this
Agreement.................................................. 59
SECTION 9.2. Conditions to the Obligations of the Loomis Stockholders
Trust, Loomis and Loomis Armored under this Agreement...... 60
SECTION 9.3. Conditions to the Obligations of Borg-Warner and Wells
Fargo under this Agreement................................ 60
ARTICLE X
CLOSING............................... 61
SECTION 10.1. Closing.................................................... 61
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(iv)
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ARTICLE XI
TERMINATION AND ABANDONMENT..................... 63
SECTION 11.1. Termination................................................ 63
SECTION 11.2. Procedure and Effect of Termination........................ 64
ARTICLE XII
INDEMNIFICATION........................... 64
SECTION 12.1. Environmental Indemnification.............................. 64
SECTION 12.2. Accounts Receivable Indemnification........................ 67
SECTION 12.3. General Indemnification.................................... 68
SECTION 12.4. Tax Indemnification........................................ 69
SECTION 12.5. Defense and Payment of Claims.............................. 70
SECTION 12.6. Limitation of Liability.................................... 71
ARTICLE XIII
MISCELLANEOUS PROVISIONS....................... 72
SECTION 13.1. Amendment and Modification................................. 72
SECTION 13.2. Waiver of Compliance; Consents............................. 72
SECTION 13.3. Validity................................................... 72
SECTION 13.4. Expenses and Obligations................................... 72
SECTION 13.5. Parties in Interest........................................ 72
SECTION 13.6. Notices.................................................... 72
SECTION 13.7. Governing Law.............................................. 74
SECTION 13.8. Counterparts............................................... 74
SECTION 13.9. Headings................................................... 74
SECTION 13.10. Entire Agreement........................................... 74
SECTION 13.11. Assignment................................................. 75
SECTION 13.12. Termination of Representations and Warranties.............. 75
SECTION 13.13. Bulk Sales................................................. 75
SECTION 13.14. Exclusive Remedy........................................... 75
SECTION 13.15. Jurisdiction and Venue..................................... 76
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(v)
<PAGE>
Exhibit List
Exhibit A -- Form of Stockholders Agreement
Exhibit B -- Officers and Directors of Newco
Exhibit C -- Officers and Directors of Loomis
Exhibit D -- Form of Contingent Exercise Agreements
Exhibit E -- Form of Opinion of Davis Polk & Wardwell
Exhibit F -- Form of Opinion of General Counsel of Borg-Warner
Exhibit G -- Form of Opinion of Weil, Gotshal & Manges LLP
Exhibit H -- Form of Opinion of Prickett, Jones, Elliott, Kristol & Schnee
(vi)
<PAGE>
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT (this "Agreement"), dated as of November 28, 1996,
by and among Borg-Warner Security Corporation, a Delaware corporation ("Borg-
Warner"), Wells Fargo Armored Service Corporation, a Delaware corporation and
wholly-owned subsidiary of Borg-Warner ("Wells Fargo"), Loomis-Wells
Corporation, a Delaware corporation ("Newco"), Loomis Holding Corporation, a
Delaware corporation ("Loomis"), Loomis Armored Inc., a Texas corporation and
wholly-owned subsidiary of Loomis ("Loomis Armored"), and the Loomis
Stockholders Trust, a Delaware business trust (the "Loomis Stockholders Trust").
A list of defined terms used in this Agreement is attached hereto as Appendix A.
RECITALS:
--------
WHEREAS, each of Loomis Armored and Wells Fargo is engaged in providing
armored transport services and certain other security-related services to
financial institutions and other commercial customers;
WHEREAS, the parties hereto desire to contribute the capital stock of
Loomis and substantially all of the assets and certain liabilities of Wells
Fargo in order to combine the armored transport businesses of Loomis Armored and
Wells Fargo in a transaction intended to satisfy the requirements of Section 351
of the Code;
WHEREAS, at or prior to the combination of the businesses of Loomis Armored
and Wells Fargo, (i) the stockholders of Loomis (the "Stockholders"), as of the
date hereof, shall contribute all of the issued and outstanding shares of the
Class A Common Stock, $0.01 par value, of Loomis (the "Loomis Common Stock") to
the Loomis Stockholders Trust organized under the Delaware Business Trust Act
(12 Del.C. (S)(S) 3801-3820) and pursuant to that certain Business Trust
Agreement, dated as of November 27, 1996 (the "Business Trust Agreement"), among
each of the Stockholders and other Persons who may hereafter become parties
thereto, Wilmington Trust Company, a Delaware banking corporation, as trustee,
and Frederick B. Hegi, Jr., as manager, and (ii) all of the holders (the "Loomis
Other Equity Holders") of options, warrants, calls, subscriptions, conversions
or other rights, agreements or commitments (collectively, "Loomis Other Equity
Interests") obligating Loomis to issue any additional shares of its capital
stock or Loomis Voting Securities or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock or Loomis Voting Securities or to participate in the equity of
Loomis (other than participants in the Loomis Management Equity Growth and
Appreciation Plan) shall have exercised, converted or exchanged such Loomis
Other Equity Interests for shares of Loomis Common Stock and contributed such
shares to the Loomis Stockholders Trust; and
<PAGE>
WHEREAS, to effect the combination, the Loomis Stockholders Trust intends
to contribute all of the issued and outstanding shares of Loomis Common Stock to
Newco and Wells Fargo intends to contribute substantially all of the assets and
certain liabilities of Wells Fargo to Newco, in exchange for 51% and 49% of the
newly-issued Newco Common Stock, respectively, and certain other consideration
as set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
TRANSFER AND REDEMPTION OF LOOMIS STOCK
---------------------------------------
SECTION 1.1. Transfer of Loomis Stock to Loomis Stockholders Trust. Upon
the terms and subject to the conditions hereof, at or prior to the Closing Date
without duplication, (i) the Stockholders shall contribute all of the issued and
outstanding shares of Loomis Common Stock to the Loomis Stockholders Trust and
(ii) the Loomis Other Equity Holders shall have exercised, converted or
exchanged all of the outstanding Loomis Other Equity Interests for (x) shares of
Loomis Common Stock and contributed such shares to the Loomis Stockholders Trust
or (y) options in the New MEGA Plan. In exchange for such contributions of
Loomis Common Stock to the Loomis Stockholders Trust, the Stockholders shall
receive beneficial interests in the Loomis Stockholders Trust representing the
right to receive a pro rata allocation of the assets of the Loomis Stockholders
Trust in accordance with the terms and subject to the conditions set forth in
the Business Trust Agreement.
SECTION 1.2. Transfer of Loomis Common Stock to Newco.
(a) Upon the terms and subject to the conditions hereof, at the Closing,
the Loomis Stockholders Trust shall deliver to Newco (i) all of the issued and
outstanding shares of Loomis Common Stock, duly endorsed for transfer by the
Loomis Stockholders Trust, and (ii) the Loomis Excess Claims Assumption
Agreement.
(b) Upon the terms and subject to the conditions hereof, at the Closing, in
exchange for the consideration set forth in Section 1.2(a), Newco shall (i)
issue and deliver to the Loomis Stockholders Trust 5,100,000 shares of common
stock, $0.01 par value, of Newco (the "Newco Common Stock"), (ii) deliver to a
trust (the "Loomis Indemnity Trust") to be established prior to Closing pursuant
to a trust agreement in form and substance reasonably acceptable to Borg-Warner
and the Loomis Stockholders Trust, cash in the
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amount equal to the Loomis Excess Payment by wire transfer of immediately
available funds to an account designated in writing by the Loomis Indemnity
Trust to Newco prior to the Closing Date; provided, that if the Loomis Excess
Payment exceeds $5,400,000, any excess amount will be delivered to the Loomis
Casualty and Employee Claims Trust and/or the Loomis Stockholders Trust in such
proportion as directed by Loomis pursuant to a written notice to be delivered by
Loomis to Newco prior to Closing and transferred by wire transfer of immediately
available funds to an account designated to Newco in writing by the Loomis
Casualty and Employee Claims Trust or the Manager of the Loomis Stockholders
Trust, as the case may be, prior to the Closing Date, (iii) deliver to a trust
(the "Loomis Casualty and Employee Claims Trust") to be established prior to
Closing pursuant to a trust agreement in form and substance reasonably
acceptable to Borg-Warner and the Loomis Stockholders Trust, cash in the amount
of $7,200,000 by wire transfer of immediately available funds to an account
designated in writing by the Loomis Casualty and Employee Claims Trust to Newco
prior to the Closing Date, and (iv) contribute the Class I beneficial interests
in the Loomis Indemnity Trust and the Loomis Casualty and Employee Claims Trust
to the capital of Loomis and assign the Class II beneficial interests in the
Loomis Indemnity Trust and the Loomis Casualty and Employee Claims Trust to the
Loomis Stockholders Trust.
(c) As used in this Agreement:
(i) "Loomis Excess Payment" shall mean an amount equal to $30,100,000
plus cash and cash equivalents held by Loomis (on a consolidated basis)
immediately prior to Closing (including, without limitation, an amount equal to
amounts held in lock-box accounts for the benefit of Loomis Armored) plus
Transaction Costs actually paid by Loomis or its Subsidiaries on or prior to
Closing minus the sum of (x) the amount (including principal, accrued and unpaid
interest, premium, penalties and breakage fees, if any) required to pay, satisfy
or discharge as of the Closing Date all indebtedness for borrowed money
(including any intercompany debt) of Loomis and its Subsidiaries, including
without limitation all indebtedness under Loomis Armored's 14% Senior
Subordinated Notes due September 30, 1999, 9% Junior Subordinated Note due
September 30, 1999 and the Amendment and New Term Loan Agreement dated as of
June 25, 1996 among Loomis, Loomis Armored and the CIT Group/Business Credit,
Inc., but excluding any indebtedness incurred by Loomis or Loomis Armored in
connection with the redemption of the Series I Preferred Stock as contemplated
by Section 1.4, (y) all capitalized leases of Loomis and its Subsidiaries and
any accrued but unpaid amounts thereunder (as shown on a balance sheet prepared
for Loomis on a consolidated basis in accordance with GAAP) as of the Closing
Date (other than the capitalized leases listed in Section 1.2(c) of the
Disclosure Schedule) (the indebtedness included in clauses (x) and (y),
collectively, the "Loomis Indebtedness"), and (z) accrued fees due to Wingate
Partners, L.P., a Delaware limited partnership ("Wingate"), pursuant to that
certain Financial Advisory Agreement, dated as of May 6, 1991, among Loomis,
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Loomis Armored and Wingate (the "Financial Advisory Fees" and, together with the
Loomis Indebtedness, the "Loomis Closing Liabilities");
(ii) "Loomis Casualty and Employee Claims" means any and all claims,
actions, suits or other proceedings asserted against Loomis or any of its
Subsidiaries (and any amounts payable in respect thereof) that are not paid or
reimbursed under insurance policies of Loomis existing on the date hereof (or
any renewal thereof containing substantially similar terms) and with respect to
events, circumstances or activities occurring at or prior to the Closing Date
(x) for worker's compensation, (y) arising out of or relating to the use of
motor vehicles or firearms in connection with or related to its business or
operations, or acts or omissions of its drivers, courier guards, security guards
or their supervisors relating to their employment, in each case that is an act
or omission that otherwise is of a type covered under typical general liability
insurance policies, or (z) alleging discrimination, wrongful discharge, sexual
harassment or other unlawful hiring or employment practices; provided that the
Loomis Casualty and Employee Claims shall not include (I) any Environmental
Claim or any other claim for Environmental Costs and Liabilities, and (II) any
claims related to cargo losses; and
(iii) "Loomis Excess Claims Assumption Agreement" means that certain
Assumption Agreement, to be dated as of the Closing Date and in form and
substance reasonably acceptable to Borg-Warner and the Loomis Stockholders
Trust, among Loomis, Loomis Armored and the Loomis Stockholders Trust, providing
for the assumption by the Loomis Stockholders Trust of (x) the Loomis Casualty
and Employee Claims in excess of the aggregate amount of the corpus of the
Loomis Casualty and Employee Claims Trust, if any, and (y) any indemnity or
payment obligations of the Loomis Stockholders Trust pursuant to this Agreement
other than in respect of the Loomis Casualty and Employee Claims in excess of
the aggregate amount of the corpus of the Loomis Indemnity Trust.
SECTION 1.3. Issuance of NOL Note. At the Closing, Newco shall issue to
the Loomis Stockholders Trust a note (the "NOL Note") in the original principal
amount of $6,000,000, in form and substance reasonably acceptable to Borg-Warner
and the Loomis Stockholders Trust, provided that the NOL Note (i) shall be
issued in an original principal amount of $6,000,000; (ii) shall not bear
interest; and (iii) shall have a term of fifteen years subject to mandatory
prepayment as, and to the extent that, the federal Tax Return filed by Newco for
any taxable period during the term of the NOL Note reflects the realization by
Newco of a tax benefit attributable to the utilization of net operating losses
of Loomis or Loomis Armored available as of the Closing Date ("NOL Tax
Benefit"), calculated on the basis of an assumed tax rate of 40%.
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SECTION 1.4. Redemption of Preferred Stock and Payment of Loomis Closing
Liabilities. At the Closing, (a) Loomis shall redeem all outstanding shares of
the Series I Preferred Stock, $0.01 par value per share, of Loomis (the "Series
I Preferred Stock") by paying an amount necessary to redeem all such shares to
the holders of the Series I Preferred Stock, which amount shall not exceed
$3,500,000 in the aggregate, by wire transfer of immediately available funds to
an account or accounts designated by the holders thereof in writing prior to
Closing against receipt by Loomis of a stock certificate or certificates
evidencing the Series I Preferred Stock, accompanied by duly executed stock
powers assigning such Series I Preferred Stock in blank or otherwise in good
form for transfer, and (b) Newco shall contribute to the capital of Loomis an
amount equal to the Loomis Closing Liabilities and Loomis shall pay the
Financial Advisory Fees to Wingate by wire transfer of immediately available
funds to an account designated by Wingate in writing prior to the Closing and
repay the Loomis Indebtedness (excluding capital lease obligations) to each of
the parties entitled thereto by wire transfer of immediately available funds to
the account or accounts designated by such parties in writing prior to Closing
and obtain the written release of each of such parties with respect to their
respective portions of such Loomis Closing Liabilities.
ARTICLE II
SALE AND TRANSFER OF WELLS FARGO ASSETS AND LIABILITIES
-------------------------------------------------------
SECTION 2.1. Transfer of Assets and Assumption of Liabilities.
(a) Upon the terms and subject to the conditions hereof, Wells Fargo
agrees to sell, assign, transfer, convey and deliver to Newco at the Closing all
of Wells Fargo's assets, properties and rights of every kind and description,
wherever located, real, personal or mixed, tangible or intangible, owned by
Wells Fargo or otherwise used in its business (including, without limitation,
all of the outstanding capital stock of all Subsidiaries of Wells Fargo) as the
same shall exist on the Closing Date (the "Transferred Assets"), except as
provided in Section 8.18, free and clear of all mortgages, liens, pledges,
security interests, charges, claims, restrictions and encumbrances of any nature
except Permitted Liens; provided, however, that notwithstanding anything else
contained herein, the Transferred Assets shall not include the assets,
properties and rights set forth in Section 2.1(a) of the Disclosure Schedule
(the "Excluded Assets"). At the written direction of Newco, legal title to a
portion of the Transferred Assets (the "Designated Transferred Assets") may be
conveyed on behalf of Newco directly to a direct or indirect wholly-owned
subsidiary of Newco. The parties hereto agree that any Designated Transferred
Assets are being contributed to the capital of Newco, followed by one or more
capital contributions of
5
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such Designated Transferred Assets to the applicable subsidiary of Newco, and
all corporate resolutions and other documents, all accounting records and
reports, and all income Tax Returns shall be consistent therewith.
(b) Upon the terms and subject to the conditions hereof, effective at
the Closing, Newco shall assume all of the liabilities and obligations of Wells
Fargo, known and unknown, whether absolute, accrued, contingent or otherwise, of
every kind and description (the "Assumed Liabilities"); provided, however, that
notwithstanding anything else contained herein, Assumed Liabilities shall not
include (i) any liability for Wells Fargo Excluded Taxes, (ii) any liability for
the WF Casualty and Employee Claims, (iii) except for obligations or liabilities
to be assumed by Newco pursuant to Section 8.21, any obligation or liability
arising from or relating to the WF Employee Benefit Plans, and (iv) the
liabilities set forth in Section 2.1(b) of the Disclosure Schedule as Excluded
Liabilities (clauses (i) through (iv) being collectively referred to herein as
the "Excluded Liabilities"). As used in this Agreement, "WF Casualty and
Employee Claims" means any and all claims, actions, suits or other proceedings
asserted against Wells Fargo or any of its Subsidiaries with respect to events,
circumstances or activities occurring at or prior to the Closing Date (x) for
worker's compensation, (y) arising out of or relating to the use of motor
vehicles or firearms in connection with or related to its business or
operations, or acts or omissions of its drivers, courier guards, security guards
or their supervisors relating to their employment, in each case that is an act
or omission that otherwise is of a type generally covered under typical general
liability insurance policies, or (z) alleging discrimination, wrongful
discharge, sexual harassment or other unlawful hiring or employment practices;
provided that the WF Casualty and Employee Claims shall not include (I) any
Environmental Claim or any other claim for Environmental Costs and Liabilities,
and (II) any claims related to cargo losses.
(c) After the Closing Date, Newco shall pay, perform, satisfy or
otherwise discharge the Assumed Liabilities and shall indemnify and hold
harmless Borg-Warner and Wells Fargo and any of their Affiliates from and
against any Indemnifiable Losses incurred or suffered by Borg-Warner or Wells
Fargo or any such Affiliate with respect to (x) any Assumed Liability and (y)
any obligation of Borg-Warner or Wells Fargo (whether such obligation is created
by contract, law, regulation, or otherwise and whether or not joint and
several), to the extent such obligation arises out of any Assumed Liability
(including any guarantee of any Assumed Liability).
(d) After the Closing Date, Borg-Warner on behalf of Wells Fargo shall
pay, perform, satisfy or otherwise discharge the Excluded Liabilities and shall
indemnify and hold harmless Newco and its Affiliates from and against any
Indemnifiable Losses incurred or suffered by Newco or any such Affiliate with
respect to any Excluded Liability.
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(e) The general procedures set forth in Section 12.5(c) shall be
applied to resolve any disputes arising pursuant to clauses (c) and (d) of this
Section 2.1.
SECTION 2.2. Assignment of Contracts and Rights; Associates Lease.
(a) Notwithstanding anything in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign any Transferred Asset if
an attempted assignment thereof, without the consent of a third party thereto,
would constitute a breach or other contravention thereof or in any way adversely
affect the rights of Newco or Wells Fargo or any of their Affiliates thereunder.
Newco and Wells Fargo will use commercially reasonable efforts to obtain the
consent, if required or necessary, of the other parties to any such Transferred
Asset for the assignment thereof to Newco or its Subsidiaries as Newco may
reasonably request; provided that any costs associated therewith shall be borne
by Newco. If such consent is not obtained, or if an attempted assignment thereof
would be ineffective or would adversely affect the rights of Newco or Wells
Fargo or any of their Affiliates thereunder so that Newco would not in fact
receive all such rights, Wells Fargo will cooperate in a mutually agreeable
arrangement under which Newco shall obtain the benefits and assume the
obligations thereunder in accordance with this Agreement, including
subcontracting, sublicensing, or subleasing to Newco, or under which Wells Fargo
would enforce for the benefit of Newco, with Newco assuming Wells Fargo's
obligations with respect to any and all rights of Wells Fargo or any of its
Affiliates against a third party thereto. Newco shall reimburse Wells Fargo for
all reasonable expenses incurred by Wells Fargo in enforcing any agreement,
claim, right or benefit on behalf of Newco. From and after the Closing, Wells
Fargo will promptly pay to Newco when received all monies or other property
received at or after the Closing by Wells Fargo or any of its Affiliates in
respect of any Transferred Asset, including, without limitation, any payment
received in respect of any WF Accounts Receivable.
(b) Each of Newco, Wells Fargo and Borg-Warner shall use its best
efforts to secure the consent of the lessor thereunder to the assignment to
Newco of the Associates Lease. If, in connection with such assignment, the
lessor requires the provision or payment of any credit enhancement, additional
lease payments, additional deposit or other incremental costs in addition to
those direct costs currently borne by Wells Fargo pursuant to the terms of such
lease (without giving effect to this transaction or any acceleration of payments
or other penalties that could be incurred as a result of an attempt to assign
the Associates Lease without the consent of the lessor), Newco shall be
responsible for the first $200,000 in the aggregate in such additional
incremental costs and Borg-Warner shall be responsible for any additional
incremental costs over such $200,000 (but only to the extent that such
incremental costs exceed $200,000); provided, that such incremental additional
costs shall be net of the amount of any reduction in the lease or other payments
owed to the lessor under the
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Associates Lease in effect of the date hereof that is negotiated by the parties
in connection with securing an assignment of the Associates Lease. In connection
with its obligations under the prior sentence, Borg-Warner agrees that it will
provide additional payments or credit enhancement to the lessor under the
Associates Lease to the extent necessary to secure the consent to the assignment
of the Associates Lease.
SECTION 2.3. Consideration for Transferred Assets. As consideration for
the Transferred Assets, at the Closing, Newco shall (a) deliver to Wells Fargo
cash in the amount of $106,000,000 plus (x) Transaction Costs incurred by Borg-
Warner, Wells Fargo or its Subsidiaries prior to Closing and (y) the amount of
any cash retained in Wells Puerto Rico pursuant to Section 8.19 minus the amount
of any indebtedness for borrowed money (including any intercompany debt) of
Wells Fargo (as shown on a balance sheet prepared for Wells Fargo on a
consolidated basis in accordance with GAAP) as of the Closing Date that is an
Assumed Liability by wire transfer of immediately available funds to an account
designated in writing by Wells Fargo to Newco prior to the Closing Date, (b)
issue and deliver to Wells Fargo 4,900,000 shares of Newco Common Stock and (c)
assume the Assumed Liabilities in accordance with Section 2.1(b) hereof.
ARTICLE III
POST-CLOSING ADJUSTMENTS
------------------------
SECTION 3.1. Minimum Adjusted Working Capital.
(a) Within 90 days following the Closing, at the expense of Newco, (i)
Borg-Warner on behalf of Wells Fargo shall cause Deloitte & Touche LLP
("Deloitte") to deliver to each of Newco and the Loomis Stockholders Trust the
balance sheet of Wells Fargo, certified by Deloitte and audited on a
consolidated basis as of the Closing Date (the "WF Closing Balance Sheet") and a
certificate setting forth such auditor's calculation of Adjusted Working Capital
of the Transferred Assets and Assumed Liabilities as determined therefrom and
(ii) the Loomis Stockholders Trust shall cause Ernst & Young LLP ("E&Y") to
deliver to each of Newco and Borg-Warner the balance sheet of Loomis, certified
by E&Y and audited on a consolidated basis as of the Closing Date (the "Loomis
Closing Balance Sheet", and, together with the WF Closing Balance Sheet, the
"Closing Balance Sheets") and a certificate setting forth such auditor's
calculation of Adjusted Working Capital of Loomis as determined therefrom;
provided, however, that at least 10 days prior to the delivery by Deloitte of
the WF Closing Balance Sheet and certificate setting forth the calculation of
Adjusted Working Capital of the Transferred Assets and Assumed Liabilities,
Deloitte shall consult with E&Y with respect to the treatment of vacation
accruals on the WF Closing
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Balance Sheet and shall make such adjustments with respect to such accruals as
shall be reasonably recommended by E&Y in accordance with GAAP; provided,
further, that to the extent the WF Closing Balance Sheet is required to reflect
an additional amount to be booked for purposes of vacation accruals, the WF Base
Amount shall be reduced by such additional accrual amount. The Closing Balance
Sheets shall be prepared in accordance with GAAP consistent with the accounting
policies and practices for Borg-Warner and Wells Fargo used in connection with
preparation of the WF Financial Statements, on the one hand, and for Loomis used
in connection with preparation of the Loomis Financial Statements, on the other
hand, except as may be required pursuant to this Section 3.1(a). Each of the
Closing Balance Sheets (x) shall be prepared without regard to any effects from
the closing of the transactions contemplated hereby or any financing relating
thereto and (y) shall reflect all proposed audit adjustments determined by
Deloitte or E&Y, as the case may be, to be necessary in order to reflect the
respective Closing Balance Sheets in accordance with GAAP on a basis consistent
with such accounting policies and practices. Notwithstanding the foregoing, an
adjustment shall be made to the Loomis Closing Balance Sheet and the WF Closing
Balance Sheet, as the case may be, if the net amount of passed audit adjustments
in connection with the preparation of such balance sheet is greater than
$1,000,000; provided, however, that the amount of any such adjustment shall be
equal only to the extent of any excess over $1,000,000; provided further that,
for purposes hereof, in the case of the WF Closing Balance Sheet, the net amount
of such passed audit adjustments shall exclude (i) any such adjustment for the
reserve for the collection of doubtful accounts receivable unless such
adjustment for the reserve for collection of doubtful accounts receivable
exceeds $500,000 and then only to the extent of such excess and (ii) except as
recommended by E&Y pursuant to the first sentence of this Section 3.1(a), any
adjustment with respect to vacation accruals.
(b) If the Adjusted Working Capital of the Transferred Assets and
Assumed Liabilities as set forth in the Deloitte certificate delivered pursuant
to Section 3.1(a)(i) is less than $20,200,000 (the "WF Base Amount"), Borg-
Warner on behalf of Wells Fargo shall promptly pay to Newco an amount equal to
such deficit. If the Adjusted Working Capital of Loomis as set forth in the E&Y
certificate delivered pursuant to Section 3.1(a)(ii) is less than negative
$3,400,000, the Loomis Indemnity Trust shall promptly pay to Newco an amount
equal to such deficit. Any payment required to be made pursuant to this Article
III shall be payable in cash by wire transfer of immediately available funds to
an account designated in writing by Newco and shall bear interest from the
Closing Date to but not including the date of such payment at a rate per annum
equal to 5%. Any payment pursuant to this Article III shall be treated for all
purposes as an adjustment to the consideration received by Wells Fargo or by the
Loomis Stockholders Trust in connection with the recipient's original
contribution pursuant to Article I or Article II hereof, as the case may be.
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(c) As used in this Agreement, "Adjusted Working Capital" means, as of
the Closing Date prior to the consummation of the transactions contemplated
hereby, and in each case as derived from the respective Closing Balance Sheets,
(i) in the case of Loomis, an amount equal to current assets (excluding the
deferred taxes associated with the net operating losses of Loomis and its
Subsidiaries) minus cash and cash equivalents (including, without limitation, an
amount equal to amounts held in lock-box accounts for the benefit of Loomis
Armored) minus accounts receivable due from Affiliates (other than employees)
minus current liabilities (net of the current portion of Loomis Closing
Liabilities and current reserve and other liabilities in respect of the Loomis
Casualty and Employee Claims), and (ii) in the case of the Transferred Assets
and Assumed Liabilities, an amount equal to current Transferred Assets minus
accounts receivable due from Affiliates (other than employees) that are included
in Transferred Assets minus the current portion of Assumed Liabilities.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF BORG-WARNER AND WELLS FARGO
-----------------------------------------
Each of Borg-Warner and Wells Fargo, jointly and severally, represents and
warrants to each of the Loomis Stockholders Trust, Newco, Loomis and Loomis
Armored as set forth below.
SECTION 4.1. Organization and Qualification. Except as set forth in
Section 4.1 of the Disclosure Schedule, each of Borg-Warner, Wells Fargo and the
Subsidiaries of Wells Fargo is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each
of Wells Fargo and its Subsidiaries has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted, and, except as would not, individually or in the
aggregate, have a Material Adverse Effect on Wells Fargo is qualified or
licensed to do business and is in good standing in every jurisdiction where the
nature of the business conducted by it or the properties owned or leased by it
requires qualification. Borg-Warner has delivered to the Loomis Stockholders
Trust complete and correct copies of the Certificate or Articles of
Incorporation and Bylaws (or similar organizational documents) of each of Borg-
Warner, Wells Fargo and the Subsidiaries of Wells Fargo.
SECTION 4.2. Authorization. Each of Borg-Warner and Wells Fargo has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Borg-Warner and Wells Fargo, the performance by each
of Borg-Warner and Wells Fargo of
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its obligations hereunder, and the consummation by it of the transactions
contemplated hereby, have been duly authorized, as applicable, by the respective
Boards of Directors thereof and by Borg-Warner as the sole stockholder of Wells
Fargo. No other corporate action on the part of Borg-Warner or Wells Fargo is
necessary to authorize the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of Borg-Warner and Wells Fargo
and constitutes a valid and binding obligation of each of Borg-Warner and Wells
Fargo, enforceable against it in accordance with its terms, except to the extent
that such enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
SECTION 4.3. No Violation. Except as set forth in Section 4.3 of the
Disclosure Schedule, and (with respect to clauses (b) and (c) only) except for
such matters that would not, individually or in the aggregate, have a Material
Adverse Effect on Wells Fargo, neither the execution and delivery of this
Agreement by Borg-Warner or Wells Fargo, the performance by Borg-Warner or Wells
Fargo of its obligations hereunder nor the consummation by Borg-Warner or Wells
Fargo of the transactions contemplated hereby will (a) violate, conflict with or
result in any breach of any provision of the Certificate or Articles of
Incorporation or Bylaws of any of Borg-Warner or Wells Fargo or any Subsidiary
of Wells Fargo, (b) violate, conflict with or result in a breach of, or
constitute a default (with or without due notice or lapse of time or both)
under, or permit the termination of, or require the consent of any other party
under, or result in the acceleration of, or entitle any party to accelerate
(whether as a result of a change in control of Wells Fargo or any of its
Subsidiaries or otherwise) any obligation under, or result in the loss of any
benefit under, or give rise to the creation of any Lien upon any of the
properties or assets of Wells Fargo or any Subsidiary of Wells Fargo under, any
of the terms, conditions or provisions of any Contract or obligation to which
Borg-Warner, Wells Fargo or any Subsidiary of Wells Fargo is a party or by which
any of them are bound or affected or by which any of the properties or assets of
Wells Fargo or any Subsidiary of Wells Fargo may be bound or affected, or (c)
violate any order, writ, judgment, injunction, decree, statute, rule or
regulation of any court, governmental authority or stock exchange applicable to
Borg-Warner or Wells Fargo or any Subsidiary of Wells Fargo or any of the
respective properties or assets of Wells Fargo or any Subsidiary of Wells Fargo.
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SECTION 4.4. Subsidiaries and Equity Investments.
(a) Section 4.4 of the Disclosure Schedule sets forth (i) the name of
each direct or indirect Subsidiary of Wells Fargo; (ii) the name of each
corporation, partnership, joint venture or other entity in which Wells Fargo or
any of its Subsidiaries has, or pursuant to any agreement has the right to
acquire at any time by any means, a material equity interest or investment;
(iii) in the case of each of the Subsidiaries of Wells Fargo and such other
entities described in the foregoing clauses (i) and (ii) that is a corporation,
(A) the jurisdiction of incorporation, (B) the capitalization thereof and (C)
the percentage of each class of voting stock or other equity security owned on a
fully-diluted basis by Wells Fargo or any of its Subsidiaries on the date
hereof; and (iv) in the case of each of such unincorporated entities, the
equivalent of the information provided pursuant to the preceding clause (iii)
with regard to corporate entities.
(b) All of the outstanding shares of capital stock of each direct or
indirect Subsidiary of Wells Fargo have been duly authorized and validly issued,
are fully paid and non-assessable, have not been issued in violation of any
preemptive rights and (except as specified in Section 4.4 of the Disclosure
Schedule) are owned of record and beneficially, directly or indirectly, by Wells
Fargo or its Subsidiaries specified in Section 4.4 of the Disclosure Schedule,
free and clear of any Liens. There is no other security outstanding that has
presently, or upon the occurrence of any event would have, the right to vote
with Wells Fargo as the holder of the voting stock of such Subsidiaries on any
matter.
(c) There are no options, warrants, calls, subscriptions, conversion
or other rights, agreements or commitments obligating any of the direct or
indirect Subsidiaries of Wells Fargo to issue any additional shares of capital
stock of such Subsidiary or any other securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of such capital stock.
There are no outstanding rights allowing any Person to otherwise participate in
the equity of any Subsidiary of Wells Fargo.
SECTION 4.5. Consents and Approvals. Except (a) as set forth in Section
4.5 of the Disclosure Schedule, (b) for any consents and approvals of or filings
or registrations with the Antitrust Division of United States Department of
Justice (the "DOJ") and the Federal Trade Commission (the "FTC") pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (c) for such filings, notices, registration, permits, authorizations,
consents or other approvals which the failure to make or obtain would not,
individually or in the aggregate, have a Material Adverse Effect on Wells Fargo,
no filing or registration with, no notice to and no permit, authorization,
consent or approval of any governmental authority, stock exchange or other third
Person is necessary for the execution
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and delivery of this Agreement by Borg-Warner and/or Wells Fargo or for the
consummation by Borg-Warner and/or Wells Fargo of the transactions contemplated
by this Agreement.
SECTION 4.6. Financial Statements. Borg-Warner has delivered to Loomis (a)
copies of the audited consolidated balance sheets of Wells Fargo as of December
31, 1994 and December 31, 1995 (the "WF Year End Balance Sheets"), together with
the related audited consolidated statements of income, stockholder's equity and
cash flows for the fiscal years ended on such dates, and the notes thereto,
accompanied by the reports thereon of the applicable firm of independent public
accountants, and (b) copies of the unaudited consolidated balance sheet of Wells
Fargo as of September 30, 1996 (the "WF Interim Balance Sheet"), together with
the related unaudited consolidated statements of income, stockholder's equity
and cash flows for the nine-month period ended on September 30, 1996
(collectively, the "WF Interim Financial Statements") (such audited and
unaudited financial statements being hereinafter referred to as the "WF
Financial Statements"). The WF Financial Statements, including the notes
thereto, (i) were prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") throughout the periods covered
thereby, except as otherwise disclosed in Section 4.6 of the Disclosure Schedule
and (ii) present fairly in all material respects the consolidated financial
position, results of operations and cash flows of Wells Fargo and its
Subsidiaries as of such dates and for the periods then ended (subject, in the
case of the unaudited WF Financial Statements, to normal year-end audit
adjustments consistent with prior periods that would not be material,
individually or in the aggregate). The accounts receivable shown on the WF Year
End Balance Sheets and the WF Interim Balance Sheet arose out of transactions in
the ordinary course of business of Wells Fargo and its consolidated
Subsidiaries.
SECTION 4.7. Absence of Undisclosed Liabilities. Except for matters
relating to the transactions contemplated by the Agreement, there are no
liabilities or financial obligations of Wells Fargo or any of its Subsidiaries
of any kind whatsoever (whether absolute, accrued, contingent or otherwise, and
whether due or to become due) that will be assumed by Newco at Closing that are
material individually or in the aggregate to the business of Wells Fargo and its
Subsidiaries that are required to be reflected on, or disclosed in the notes to,
a balance sheet prepared in accordance with GAAP, other than liabilities and
obligations: (a) provided for or reserved against in the WF Financial
Statements, (b) arising after September 30, 1996 in the ordinary course of
business consistent with past experience, or (c) disclosed in Section 4.7 of the
Disclosure Schedule. The provisions of this Section do not apply to any
liabilities or financial obligations for or relating to Taxes or arising under
or relating to any Environmental Law, which are covered elsewhere in this
Agreement.
SECTION 4.8. Absence of Certain Changes. Except as disclosed in Section
4.8 of the Disclosure Schedule, and except for matters contemplated by this
Agreement (including,
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without limitation, Section 8.1) or relating to the transactions contemplated
hereby, since September 30, 1996, each of Wells Fargo and its Subsidiaries has
conducted its respective business in the ordinary course and since September 30,
1996 there has not occurred (a) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the equity interests of Wells Fargo or any of its Subsidiaries, (b) any
forgiveness, cancellation or waiver by any of Wells Fargo or any of its
Subsidiaries of debts owed to Wells Fargo or any of its Subsidiaries or claims
or rights of Wells Fargo or any of its Subsidiaries against others, or any
discharge by Wells Fargo or any of its Subsidiaries of any Lien against assets
of others or any payment by Wells Fargo or any of its Subsidiaries of any
liability or obligation owed to others, other than, as relates to all of the
foregoing, in the ordinary course of business consistent with past practices,
(c) any material change in the credit practices of Wells Fargo or any of its
Subsidiaries, (d) (i) any increase in the rate or terms of compensation
(including termination and severance pay) payable or to become payable by Wells
Fargo or its Subsidiaries to any of their respective directors, officers or
employees, or any increase in the rate or terms of any bonus, insurance, pension
or other employee benefit plan, program or arrangement made to, for or with any
such directors, officers or employees, except, in each case, increases occurring
in the ordinary course of business consistent with past practices or as required
by applicable law or agreements existing on the date hereof, or (ii) any entry
by Wells Fargo or any of its Subsidiaries into any employment, severance or
termination agreement with any such person other than in the ordinary course of
business consistent with past practices, (e) any entry into any agreement
relating to the borrowing of money or any material agreement, commitment or
transaction by Wells Fargo or any of its Subsidiaries, except any such
agreements, commitments or transactions entered into in the ordinary course of
business consistent with past practices, (f) any damage, destruction or theft or
other casualty loss to the properties or assets owned or leased by Wells Fargo
or any of its Subsidiaries (other than Excluded Assets), or to property of
others in the custody of Wells Fargo or any of its Subsidiaries, whether or not
insured, which individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on Wells Fargo, (g) any material change by Wells
Fargo or any of its Subsidiaries in their financial or tax accounting principles
or methods, except insofar as may be required by a change in GAAP, applicable
law or circumstances which did not exist as of the date of the respective WF
Financial Statements, (h) any change made or authorized in the Certificate or
Articles of Incorporation or Bylaws of Wells Fargo or any of its Subsidiaries,
(i) any purchase, redemption, issue, sale or other acquisition or disposition by
Wells Fargo or any of its Subsidiaries of any shares of capital stock or other
equity securities of any of its Subsidiaries, or the grant of any options,
warrants or other rights to purchase, or convert or exchange any obligation
into, shares of capital stock or any evidence of indebtedness or other
securities of any of its Subsidiaries, (j) any sale, lease, license, encumbrance
or disposition by Wells Fargo or any of its Subsidiaries of any of their
material assets which is not in the ordinary course of business, (k) any
intercompany loan, advance or
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material acquisition by Wells Fargo or any of its Subsidiaries, taken as a
whole, (l) any cash payment by Wells Fargo or any of its Subsidiaries to Borg-
Warner or its Affiliates except in the ordinary course of business consistent
with past practice, (m) any transfer of assets (other than cash or Excluded
Assets) by Wells Fargo or any of its Subsidiaries to Borg-Warner or its
Affiliates, except for amounts not to exceed $100,000 in the aggregate
transferred at fair market value, or (n) an event or condition that has had or
would reasonably be expected to result in a Material Adverse Effect on Wells
Fargo.
SECTION 4.9. Litigation.
(a) Except as set forth in Section 4.9 of the Disclosure Schedule, as
of the date hereof, there is no action, suit, judicial or administrative
proceeding, arbitration or investigation (collectively, "Litigation") pending
or, to the knowledge of Borg-Warner or Wells Fargo, threatened against or
affecting Wells Fargo or its Subsidiaries or any of their respective properties,
assets or rights before any court, arbitrator or administrative or governmental
body as of the date hereof where alleged damages are either unspecified or in
excess of $50,000, individually or in the aggregate, nor is there any judgment,
decree, injunction, or order of any court, governmental department, commission,
agency, instrumentality or arbitrator outstanding against Wells Fargo or any of
its Subsidiaries or against Borg-Warner affecting Wells Fargo or any Subsidiary
of Wells Fargo that would reasonably be expected to have a Material Adverse
Effect on Wells Fargo.
(b) As of the Closing, except as set forth in Section 4.9 of the
Disclosure Schedule, there will be no Litigation pending or, to the knowledge of
Borg-Warner or Wells Fargo threatened against or affecting Wells Fargo or any
Subsidiary of Wells Fargo that would reasonably be expected to have a Material
Adverse Effect on Wells Fargo.
(c) The provisions of this Section 4.9 do not apply to any Litigation
arising out of or relating to Taxes or under any Environmental Law, which are
covered elsewhere in this Agreement.
SECTION 4.10. Liens and Encumbrances. All of the Transferred Assets are
free and clear of all title defects, liens, pledges, claims, security interests,
restrictions, mortgages, tenancies and other possessory interests, conditional
sale or other title retention agreements, assessments, easements, rights of way,
covenants, restrictions, rights of first refusal, defects in title,
encroachments and other burdens, options or encumbrances of any kind
(collectively, "Liens") except (a) Liens disclosed in Section 4.10 of the
Disclosure Schedule, (b) statutory Liens in respect of obligations not yet
delinquent or the validity of which is being contested in good faith by
appropriate actions, (c) Liens for taxes not yet delinquent or the validity of
which is being contested in good faith by appropriate actions, (d) Liens
reflected in the WF
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Financial Statements (which have not been discharged) and (e) Liens which in the
aggregate do not materially detract from the value of, or materially impair the
continued use by Wells Fargo and its Subsidiaries in the normal conduct of their
business of, the Transferred Assets, taken as a whole (the items referred to in
(a) through (e) of this Section 4.10 being hereinafter referred to collectively
as "Permitted Liens"). Except as set forth on Section 4.10 of the Disclosure
Schedule, all of the material property, plant and equipment of Wells Fargo and
its Subsidiaries, taken as a whole, used from time to time in the operation of
its business is owned or leased by them, as the case may be, and is in
satisfactory condition to conduct the business of Wells Fargo and its
Subsidiaries as presently conducted.
SECTION 4.11. Certain Agreements. Except as disclosed in Section 4.11 of
the Disclosure Schedule, neither Wells Fargo nor any of its Subsidiaries is a
party to any agreement, plan or arrangement with any officer, director or
employee of Wells Fargo or any of its Subsidiaries (a) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
any of the transactions contemplated by this Agreement, (b) providing benefits
after the termination of employment regardless of the reason for such
termination of employment, other than benefits generally applicable to Wells
Fargo's or any Subsidiary's salaried or hourly employees, (c) under which any
person may receive payments subject to the tax imposed by Section 4999 of the
Code, or (d) any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement. Except as disclosed in Section 4.11 of the Disclosure
Schedule, neither Wells Fargo nor any of its Subsidiaries is a party to any (i)
Contract relating to or granting a Lien on the Transferred Assets securing the
borrowing of money or the guarantee of any obligation for the borrowing of
money, (ii) Contract or other document that substantially limits the freedom of
Wells Fargo or any of its Subsidiaries to compete in any line of business or
with any Person or in any area or which would so limit the freedom of Newco or
any of its Subsidiaries to so compete after the Closing, (iii) Contract relating
to the acquisition or disposition of any business by Wells Fargo or any of its
Subsidiaries that will be assumed by Newco at the Closing, (iv) Contract with
Borg-Warner or any of its other Affiliates that will be assumed by Newco at the
Closing or (v) other Contract that is material to Wells Fargo and its
Subsidiaries, taken as a whole. Except as set forth in Section 4.11 of the
Disclosure Schedule and except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Wells Fargo, each
Contract described in Section 4.11 of the Disclosure Schedule, or required to be
so described, is a valid and binding obligation of the parties thereto and is in
full force and effect without amendment and neither Wells Fargo nor any of its
Subsidiaries nor, to the knowledge of Wells Fargo, any other party thereto is
(or with the giving of notice or lapse of time or both would be) in breach or
default under any such Contract.
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SECTION 4.12. Employee Benefit Plans.
(a) Section 4.12(a) of the Disclosure Schedule sets forth a true and
complete list of each material bonus, deferred compensation, incentive
compensation, stock purchase, stock option, employment, consulting, severance or
termination pay, medical, life insurance, supplemental unemployment benefits,
profit-sharing, tuition assistance, leave of absence, vacation or retirement
plan, program, agreement or arrangement, and each other material "employee
benefit plan" (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) that is maintained or
contributed to by Wells Fargo or any of its Subsidiaries ("WF Employee Benefit
Plans") as of the date of this Agreement. A true and complete copy of each WF
Employee Benefit Plan has been delivered or made available to Loomis.
(b) Except as set forth in Section 4.12(b) of the Disclosure Schedule
and except for such matters as would not reasonably be expected to have a
Material Adverse Effect on Wells Fargo, neither Wells Fargo nor any of its
Subsidiaries maintains or contributes to, or on or after the date which is six
years prior to the date of this Agreement (the "6-Year Look Back Date") has
maintained or contributed to, any "multiemployer plan," as such term is defined
in Section 3(37) or Section 4001(a)(3) of ERISA, or any single-employer defined
benefit plans covered by Title IV of ERISA. Except as set forth in Section 4.12
of the Disclosure Schedule, each WF Employee Benefit Plan which is intended to
be qualified under Section 401(a) and, if applicable, Section 401(k) of the
Code, is so qualified, and to the knowledge of Borg-Warner or Wells Fargo, no
event or condition has occurred which would cause any such plan to lose such
qualified status.
(c) Except as disclosed in Section 4.12(c) of the Disclosure Schedule
and except for such matters as would not reasonably be expected to have a
Material Adverse Effect on Wells Fargo, (i) no action, suit, inquiry, judicial
or administrative proceeding, arbitration or investigation relating to any WF
Employee Benefit Plan (other than claims for benefits for which the plan
administrative procedures have not been exhausted and "qualified domestic
relations orders" as defined in Section 414(p) of the Code) is pending or, to
the knowledge of Borg-Warner or Wells Fargo, threatened against Wells Fargo, any
of its Subsidiaries or any WF Employee Benefit Plan before any court, arbitrator
or administrative or governmental body, (ii) neither Wells Fargo nor any of its
Subsidiaries has failed to make contributions to any WF Employee Benefit Plan
that are required to be made on or after January 1, 1994 under the terms of such
WF Employee Benefit Plans or under applicable law and (iii) each of the WF
Employee Benefit Plans has been maintained and administered in all material
respects in compliance with all applicable laws and the terms of such WF
Employee Benefit Plans.
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SECTION 4.13. Taxes. (a) Except as disclosed in Section 4.13 of the
Disclosure Schedule and except for such matters as would not reasonably be
expected to have a Material Adverse Effect on Wells Fargo:
(i) All Tax Returns required to be filed by or with respect to
Wells Fargo or any of its Subsidiaries have been duly and timely filed, and
all such Tax Returns are true, correct and complete in all material
respects. None of Wells Fargo or any of its Subsidiaries has requested any
extension of time within which to file any federal income or other material
Tax Return that has not yet been filed. Each of Wells Fargo and its
respective Subsidiaries has duly and timely paid (or there has been paid on
its behalf) all Taxes that are due from or with respect to it. Each of
Wells Fargo and its Subsidiaries has made (or there has been made on its
behalf) all required estimated Tax payments sufficient to avoid any
underpayment penalties. Each of Wells Fargo and its Subsidiaries has
withheld and paid all Taxes required by all applicable laws to be withheld
or paid in connection with any amounts paid or owing to any employee,
stockholder, creditor, independent contractor or other third Person. All
federal income Tax Returns filed with respect to Tax periods of Wells Fargo
or any of its Subsidiaries through the Tax period ending December 31, 1991
have been examined and closed or are Tax Returns with respect to which the
applicable statute of limitations for the assessment of federal income
Taxes, after giving effect to any extension or waiver, has expired.
(ii) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to any
claim for, or the period for the collection or assessment of, Taxes due
from or with respect to Wells Fargo or any of its Subsidiaries for any
taxable period, and no power of attorney granted by or with respect to
Wells Fargo or any of its Subsidiaries relating to Taxes is currently in
force. No closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision) or any similar provision of any state, local, or
foreign law has been entered into by or with respect to Wells Fargo or any
of its Subsidiaries. No audit or other proceeding by any court,
governmental or regulatory authority, or similar person is pending or, to
the knowledge of Wells Fargo, threatened in regard to any Taxes due from or
with respect to Wells Fargo or any of its Subsidiaries or any Tax Return
filed by or with respect to Wells Fargo or any of its Subsidiaries. No
written assessment of Taxes is proposed against Wells Fargo or any of its
Subsidiaries or against any assets of Wells Fargo or its Subsidiaries.
There are no requests for rulings or determinations by a Tax authority
pending with respect to any Taxes of Wells Fargo or any of its
Subsidiaries.
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(iii) No consent to the application of Section 341(f)(2) of the
Code (or any predecessor provision) has been made or filed by or with
respect to Wells Fargo or any of its Subsidiaries or against any assets of
Wells Fargo or its Subsidiaries. Neither Wells Fargo nor any of its
Subsidiaries has agreed (and no agreement has been made on any of their
behalf) to make any adjustment pursuant to Section 481(a) of the Code (or
any predecessor provision) by reason of any change in any accounting
method, and there is no application pending with any taxing authority
requesting permission for any changes in any accounting method of Wells
Fargo. None of the assets of Wells Fargo or any of its Subsidiaries is or
will be required to be treated as being owned by any Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately before the enactment of the Tax Reform
Act of 1986.
(b) None of Wells Fargo or Wells Fargo's Subsidiaries is a party to,
is bound by, and has any obligation under, any Tax sharing agreement, Tax
allocation agreement or similar contract.
SECTION 4.14. Compliance with Applicable Law. Except as set forth in
Section 4.14 of the Disclosure Schedule and except as would not, individually or
in the aggregate, have a Material Adverse Effect on Wells Fargo, each of Wells
Fargo and its Subsidiaries holds all licenses, franchises, permits and
authorizations necessary for the lawful conduct of its business (collectively,
"Permits"), and the business of each of Wells Fargo and its Subsidiaries is not
being conducted in violation of any provision of any Federal, state, local or
foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
Permit or other governmental authorization or approval applicable to any of
them. The provisions of this Section do not apply to Environmental Laws, or
matters relating to Taxes, which are covered elsewhere in this Agreement.
SECTION 4.15. Brokers' Fees and Commissions. None of Borg-Warner, Wells
Fargo or any Subsidiary of Wells Fargo, nor any Person acting on behalf of any
of them, has agreed to pay or is liable with respect to any commission, finder's
fee or similar payment to any Person in connection with the transactions
contemplated hereby which payment or liability will become an obligation of
Newco at or after the Closing.
SECTION 4.16. Proprietary Rights. Section 4.16 of the Disclosure Schedule
contains an accurate and complete list of all software licenses and know-how
licenses, trade names, trademarks, registered copyrights, service marks,
trademark registrations and applications or service mark registrations and
applications ("Intellectual Property") owned or used by any of Wells Fargo or
any of its Subsidiaries in the operation of its businesses that are material to
Wells Fargo and its Subsidiaries, taken as a whole (collectively, the "WF
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Intellectual Property"). Except as set forth in Section 4.16 of the Disclosure
Schedule, each of Wells Fargo and its Subsidiaries owns the entire right, title
and interest in and to the WF Intellectual Property, trade secrets and other
confidential proprietary information used in and material to the operation of
its business (including, without limitation, the right to use and license the
same) that are part of the Transferred Assets. Section 4.16 of the Disclosure
Schedule lists all notices or claims currently pending or received by Wells
Fargo or any of its Subsidiaries which claim infringement of any Intellectual
Property by Wells Fargo or any of its Subsidiaries. Except as set forth in
Section 4.16 of the Disclosure Schedule, to the knowledge of Borg-Warner or
Wells Fargo, neither Wells Fargo nor any of its Subsidiaries infringes or has
misappropriated any Intellectual Property of another Person or has
misappropriated any trade secrets or other confidential proprietary information.
Except as set forth in Section 4.16 of the Disclosure Schedule, all
registrations and certificates issued by any governmental authority relating to
any of the WF Intellectual Property and all licenses and other agreements
pursuant to which Wells Fargo or any of its Subsidiaries use any of the WF
Intellectual Property, are valid and subsisting, have been properly maintained
and none of Wells Fargo, its Subsidiaries or, to the knowledge of Borg-Warner or
Wells Fargo, any other Person is in default or violation in any material respect
thereunder.
SECTION 4.17. Labor Relations. (a) Section 4.17 of the Disclosure Schedule
sets forth an accurate and complete list as of the date hereof of all written
agreements with officers, directors and employees of Wells Fargo and its
Subsidiaries regarding services to be rendered, including collective bargaining
agreements. Except as listed or described on Section 4.17 of the Disclosure
Schedule, as of the date hereof, (i) each of Wells Fargo and its Subsidiaries
(A) is, and has been for the past year, in material compliance with all
applicable laws regarding employment and employment practices, terms and
conditions of employment, wages and hours, and plant closing, occupational
safety and health and workers' compensation and is not engaged in any material
unfair labor practices, (B) has no, and has not had in the past year any,
material unfair labor practice charges or complaints pending or, to the
knowledge of Borg-Warner or Wells Fargo, threatened against any of them before
the National Labor Relations Board, (C) has no, and has not had in the past year
any, material grievances pending or, to the knowledge Borg-Warner or Wells
Fargo, threatened against them and (D) has no, and has not had in the past year
any, material charges pending before the Equal Employment Opportunity Commission
or any state or local agency responsible for the prevention of unlawful
employment practices (the items referred to in clauses (A) through (D),
collectively, the "WF Labor Matters"), (ii) there is no material labor strike,
slowdown, work stoppage or lockout actually pending or, to the knowledge of
Borg-Warner or Wells Fargo, threatened against or affecting Wells Fargo or any
of its Subsidiaries, and (iii) to the knowledge of Borg-Warner or Wells Fargo,
no material union organizational campaign or representation petition is
currently pending with respect to the employees of Wells Fargo or any of its
Subsidiaries.
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(b) As of the Closing Date, except as set forth in Section 4.17 of the
Disclosure Schedule and except for such matters that would not reasonably be
expected to have a Material Adverse Effect on Wells Fargo, (i) there will be no
WF Labor Matters pending or, to the knowledge of Borg-Warner or Wells Fargo,
threatened against or affecting Wells Fargo or any Subsidiary of Wells Fargo,
(ii) except as a result of the nonassumption by Newco of the collective
bargaining agreements of Wells Fargo or actions taken by Newco after the date
hereof and relating to such collective bargaining agreements, there will be no
labor strike, slowdown, work stoppage or lockout pending or, to the knowledge of
Borg-Warner or Wells Fargo, threatened against or affecting Wells Fargo or any
of its Subsidiaries and (iii) to the knowledge of Borg-Warner or Wells Fargo, no
union organizational campaign or representation petition will be pending with
respect to the employees of Wells Fargo or any of its Subsidiaries.
SECTION 4.18. Real Estate. Except as set forth in Section 4.18 of the
Disclosure Schedule, each of Wells Fargo and its Subsidiaries has good and
marketable title in fee simple to all real properties owned by it and good and
transferable leaseholds in all real estate leased by it under valid and
enforceable leases. Section 4.18 of the Disclosure Schedule lists (i) the street
address of each parcel of real property owned by each of Wells Fargo and its
Subsidiaries (the "WF Owned Real Property"), and (ii) the street address of each
parcel of real property leased or licensed by each of Wells Fargo and its
Subsidiaries.
SECTION 4.19. Personal Property. Except as set forth in Section 4.19 of the
Disclosure Schedule, Wells Fargo and its Subsidiaries have good title to all the
machinery, equipment, furniture, fixtures, inventory, receivables and other
tangible or intangible personal property reflected on the WF Interim Balance
Sheet and all such property acquired since the date thereof, except for sales
and other dispositions made in the ordinary course of business consistent with
past practices since such date. Except for the Excluded Assets and except as set
forth in Section 4.19 of the Disclosure Schedule, the Transferred Assets
constitute all assets and rights necessary to operate the consolidated business
currently conducted by Wells Fargo.
SECTION 4.20. Environmental Matters.
(a) Section 4.20(a) of the Disclosure Schedule contains a true and
complete list to the knowledge of Borg-Warner and Wells Fargo, of (i) all
Environmental Claims and accrued and unpaid Environmental Costs and Liabilities
as of the date of this Agreement (collectively, "Known Environmental
Conditions"), and (ii) the street address and description of each parcel of WF
Owned Property and any parcel of real property leased, licensed or otherwise
used by Wells Fargo or its Subsidiaries that have USTs on such property, which
are under the ownership, operation or control of Wells Fargo or its Subsidiaries
or which
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have had USTs that have been removed or closed and at which Wells Fargo has not
yet obtained UST Closure (collectively, the "Wells Fargo Sites").
(b) Except as set forth in Section 4.20(b) of the Disclosure Schedule
and except as would not reasonably be expected to result in a Material Adverse
Effect on Wells Fargo:
(i) the operations of Wells Fargo and its Subsidiaries have been
and are in material compliance with all applicable Environmental Laws;
(ii) (x) each of Wells Fargo and its Subsidiaries has obtained
and currently maintains all Environmental Permits necessary for its
operations and has been and is in material compliance with such
Environmental Permits, (y) there are no Legal Proceedings pending or, to
the knowledge of Borg-Warner or Wells Fargo, threatened to revoke such
Environmental Permits, and (z) none of Wells Fargo or its Subsidiaries has
received any notice from any governmental authority or written notice from
any Person to the effect that there is lacking any Environmental Permit
required for the current use or operation of any property owned, operated
or leased by Wells Fargo or any of its Subsidiaries;
(iii) there are no Legal Proceedings or investigations pending
or, to the knowledge of Borg-Warner or Wells Fargo, threatened against
Wells Fargo or any of its Subsidiaries alleging the violation of or seeking
to impose liability pursuant to any Environmental Law or Environmental
Permit;
(iv) none of Wells Fargo, its Subsidiaries or, to the knowledge
of Borg-Warner or Wells Fargo, any predecessor of any of Wells Fargo or its
Subsidiaries has filed any notice under any Environmental Law indicating
past or present treatment, storage, or disposal of or reporting a Release
or threatened Release of any Hazardous Material;
(v) none of Wells Fargo or its Subsidiaries or any of their
current or, to the knowledge of Borg-Warner or Wells Fargo, past facilities
and operations are subject to any outstanding written Order or Contract
with any governmental authority or other Person respecting (w)
Environmental Laws, (x) Remedial Action, (y) any Environmental Claim or (z)
the Release or threatened Release of any Hazardous Material;
(vi) none of the real property currently or, to the knowledge of
Borg-Warner or Wells Fargo, formerly owned, operated or leased by Wells
Fargo or
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any of its Subsidiaries has been or is contaminated by or from any
Hazardous Materials in quantities or at levels that would require
remediation by Wells Fargo or its Subsidiaries under Environmental Laws;
(vii) none of the operations of Wells Fargo, its Subsidiaries, or
any predecessor of any of Wells Fargo or its Subsidiaries, or, to the
knowledge of Borg-Warner or Wells Fargo, of any owner of premises currently
leased or operated by any of Wells Fargo or its Subsidiaries involves or
previously involved the treatment, storage or disposal of hazardous waste,
as defined under 40 C.F.R. Parts 260-270 or any state, local or foreign
equivalent;
(viii) there is not now, nor (to the knowledge of Borg-Warner or
Wells Fargo for all periods prior to their ownership, lease or operation of
such real property) has there been in the past, on, in or under any real
property currently or, to the knowledge of Borg-Warner and Wells Fargo,
formerly owned, leased or operated by Wells Fargo, its Subsidiaries or any
of their predecessors (i) any USTs, above-ground storage tanks, dikes or
impoundments containing Hazardous Materials, (ii) any asbestos-containing
materials, (iii) any polychlorinated biphenyls or (iv) any radioactive
substances, in each case the presence of which would reasonably be expected
to result in Wells Fargo and its Subsidiaries incurring material
Environmental Costs and Liabilities;
(ix) to the knowledge of Borg-Warner and Wells Fargo, no facts or
circumstances exist which would reasonably be expected to result in Wells
Fargo and its Subsidiaries incurring material Environmental Costs and
Liabilities;
(x) neither the operations of Wells Fargo nor its Subsidiaries
nor any real property owned, operated or leased by Wells Fargo or its
Subsidiaries is of a nature or type that, as a result of the transaction
contemplated hereunder, trigger any environmental property transfer law,
including but not limited to The Connecticut Transfer Act, Con. Gen. Stat.
Ann. (S) 22a-134(b), the Illinois Responsible Property Transfer Act, Pub.
Act 85-1228, the Indiana Responsible Property Transfer Law, or the New
Jersey Industrial Site Recovery Act, 1993 N.J. Laws 139; and
(xi) Borg-Warner and Wells Fargo have delivered to Loomis copies
of all environmental investigations, studies, audits, tests, reviews and
other analyses, including soil and groundwater analysis, conducted by or on
behalf of, or that are in the possession, custody or control of Borg-Warner
or Wells Fargo and its Subsidiaries, in relation to any site or facility
owned, operated or leased, at any time, by Wells Fargo or any of its
Subsidiaries or any of their respective predecessors or a
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site at which Wells Fargo or its Subsidiaries may have disposed of or
arranged for the disposal of Hazardous Materials.
SECTION 4.21. Certain Business Practices and Regulations. To the
knowledge of Borg-Warner and Wells Fargo, as of the date hereof, none of Wells
Fargo, its Subsidiaries or any director, officer, agent or employee of any of
Wells Fargo or its Subsidiaries has (a) used any corporate funds for
contributions, gifts, entertainment or other expenses relating to political
activity in material violation of any Law, or (b) made any payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds in material violation of any Law or
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended.
SECTION 4.22. Related Party Transactions. Except as disclosed in Section
4.22 of the Disclosure Schedule, since January 1, 1995, there have been no
material transactions between Wells Fargo or any of its Subsidiaries on the one
hand, and (a) any officer or director of Borg-Warner, Wells Fargo or any of
their Subsidiaries, (b) to the knowledge of Wells Fargo or Borg-Warner, any
record or beneficial owner of five percent or more of the voting securities of
Borg-Warner, or (c) to the knowledge of Wells Fargo or Borg-Warner, any
Affiliate of any such officer, director or 5% beneficial owner, on the other
hand, other than in the ordinary course of business on an arm's length basis.
SECTION 4.23. Investment Intent.
(a) The Newco Common Stock is being acquired by Wells Fargo solely for
its own account, for investment, and not with a view to any distribution thereof
in violation of the Securities Act or the applicable securities laws of any
state.
(b) Each of Borg-Warner and Wells Fargo understands that the Newco
Common Stock has not been registered under the Securities Act or the securities
laws of any state and must be held indefinitely unless subsequently registered
under the Securities Act and any applicable state securities laws or unless an
exemption from such registration becomes or is available.
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SECTION 4.24. Continued Stock Ownership. Neither Wells Fargo nor Borg-
Warner has any plan or intention, and neither Wells Fargo nor Borg-Warner is
subject to any obligation or commitment, to sell, exchange or otherwise dispose
of, reduce the risk of loss by short sale or otherwise, or consent to the sale,
exchange or other disposition of any interest in the Newco Common Stock. Borg-
Warner has no plan or intention, and is not subject to any obligation or
commitment, to dissolve, liquidate, merge, or consolidate Wells Fargo, or to
cause Wells Fargo to sell, exchange or otherwise dispose of, reduce the risk of
loss by short sale or otherwise or consent to the sale, exchange or other
disposition of any interest in the Newco Common Stock. Neither Wells Fargo nor
Borg-Warner has any plan or intention to take any action following the Closing
that would prevent Section 351 of the Code from applying to the exchanges
required by Articles I and II of this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF LOOMIS AND LOOMIS ARMORED
------------------------------
Each of Loomis and Loomis Armored, jointly and severally, represents
and warrants to each of Borg-Warner, Wells Fargo and Newco as set forth below.
SECTION 5.1. Organization and Qualification. Each of Loomis and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of Loomis
and its Subsidiaries has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is now being
conducted, and, except as would not, individually or in the aggregate, have a
Material Adverse Effect on Loomis, is qualified or licensed to do business and
is in good standing in every jurisdiction where the nature of the business
conducted by it or the properties owned or leased by it requires qualification.
Loomis has delivered to Borg-Warner complete and correct copies of the
Certificate or Articles of Incorporation and Bylaws of each of Loomis and its
Subsidiaries.
SECTION 5.2. Authorization. Each of Loomis and Loomis Armored has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by each of Loomis and Loomis Armored, the performance by each of
Loomis and Loomis Armored of its obligations hereunder, and the consummation by
it of the transactions contemplated hereby, have been duly authorized, as
applicable, by the respective Boards of Directors thereof and the stockholders
of Loomis. No other corporate action on the part of Loomis or Loomis Armored is
necessary to authorize the execution and delivery of this Agreement or
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the consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by each of Loomis and Loomis
Armored and constitutes a valid and binding obligation of each of Loomis and
Loomis Armored, enforceable against them in accordance with its terms, except to
the extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 5.3. No Violation. Except as set forth in Section 5.3 of the
Disclosure Schedule and (with respect to clauses (b) and (c) only) except for
such matters that would not, individually or in the aggregate, have a Material
Adverse Effect on Loomis, neither the execution and delivery of this Agreement
by Loomis or Loomis Armored, the performance by Loomis or Loomis Armored of its
obligations hereunder nor the consummation by Loomis or Loomis Armored of the
transactions contemplated hereby will (a) violate, conflict with or result in
any breach of any provision of the Certificate or Articles of Incorporation or
Bylaws of Loomis or any of its Subsidiaries, (b) violate, conflict with or
result in a breach of, or constitute a default (with or without due notice or
lapse of time or both) under, or permit the termination of, or require the
consent of any other party to, or result in the acceleration of, or entitle any
party to accelerate (whether as a result of a change in control of any of Loomis
or any of its Subsidiaries or otherwise) any obligation under, or result in the
loss of any benefit under, or give rise to the creation of any Lien upon any of
the properties or assets of Loomis or any of its Subsidiaries under, any of the
terms, conditions or provisions of any Contract or obligation to which Loomis or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound or affected, or (c) violate any order, writ,
judgment, injunction, decree, statute, rule or regulation of any court,
governmental authority or stock exchange applicable to Loomis or any of its
Subsidiaries or any of the respective properties or assets of Loomis or its
Subsidiaries.
SECTION 5.4. Capitalization of Loomis and Loomis Armored.
(a) The authorized capital stock of Loomis consists of 10,000,000
shares of Loomis Common Stock, 2,000,000 shares of Class B Common Stock, par
value $.01 per share, of Loomis (the "Loomis Class B Common Stock") and
5,000,000 shares of preferred stock, $0.01 par value per share, of which
4,000,000 shares have been designated as Series I Preferred Stock. As of the
date of this Agreement, there are 1,500,000 shares of Loomis Common Stock, no
shares of Loomis Class B Common Stock and 3,500,000 shares of Series I Preferred
Stock issued and outstanding. All of the issued and outstanding shares of
capital stock of Loomis have been validly issued, are fully paid and non-
assessable and were not
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issued in violation of any preemptive rights. The issued and outstanding shares
of Loomis Common Stock and Series I Preferred Stock are beneficially owned and
owned of record by Persons set forth in Section 5.4 of the Disclosure Schedule,
free and clear of any Liens. Other than the Series I Preferred Stock, there is
no other outstanding security that has presently, or upon the occurrence of any
event would have, the right to vote with the holders of Loomis Common Stock on
any matter ("Loomis Voting Securities"). Except as set forth in Section 5.4 of
the Disclosure Schedule, there are no options, warrants, calls, subscriptions,
conversion or other rights, agreements or commitments obligating Loomis to issue
any additional shares of its capital stock or Loomis Voting Securities or any
other securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of its capital stock or Loomis Voting Securities or to
participate in the equity of Loomis nor are there any options, warrants, calls,
other rights, agreements or commitments obligating any Stockholder to sell,
transfer or otherwise convey any Loomis Common Stock to any other Person.
Immediately prior to the Closing Date (assuming all of the options and warrants
set forth on Section 5.4 of the Disclosure Schedule shall have been exercised),
Loomis will have, in the aggregate, 2,658,970 shares of Loomis Common Stock
issued and outstanding and held of record by the Loomis Stockholders Trust, and
no shares of Class B Common Stock and 3,500,000 shares of Series I Preferred
Stock will be issued and outstanding, all of which issued and outstanding
capital stock will be validly issued, fully paid and non-assessable and will not
have been issued in violation of any preemptive rights. Immediately prior to
the Closing Date and following the transfer by the Stockholders of all
outstanding shares of Loomis Common Stock to the Loomis Stockholders Trust and
the cancellation of the Units under the MEGA Plan, there will be no options,
warrants, calls, subscriptions, conversion or other rights, agreements or
commitments obligating Loomis to issue any additional shares of its capital
stock or Loomis Voting Securities or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of capital
stock of Loomis Voting Securities or to participate in the equity of Loomis nor
will there be any options, warrants, calls, other rights, agreements or
commitments obligating the Loomis Stockholders Trust to sell, transfer or
otherwise convey any Loomis Common Stock to any other Person.
(b) The authorized capital stock of Loomis Armored consists of 50,000
shares of Common Stock, par value $10.00 per share ("Armored Common Stock"),
46,769 shares of which are issued and outstanding and all of which have been
validly issued, are fully paid and non-assessable and were not issued in
violation of any preemptive rights. Except as set forth in Section 5.4(b) of
the Disclosure Schedule, all of the outstanding shares of Armored Common Stock
are beneficially owned and owned of record by Loomis, free and clear of any
Liens. There is no other security outstanding that has presently, or upon the
occurrence of any event would have, the right to vote with the holders of
Armored Common Stock on any matter. There are no options, warrants, calls,
subscriptions, conversion or
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other rights, agreements or commitments obligating Loomis Armored to issue any
additional shares of its capital stock or any other securities convertible into,
exchangeable for or evidencing the right to subscribe for any shares of its
capital stock or to participate in the equity of Loomis Armored nor are there
any options, warrants, calls, other rights, agreements or commitments obligating
Loomis to sell, transfer or otherwise convey any Armored Common Stock to any
other Person.
SECTION 5.5. Subsidiaries and Equity Investments.
(a) Section 5.5 of the Disclosure Schedule sets forth (i) the name of
each direct or indirect Subsidiary of Loomis; (ii) the name of each corporation,
partnership, joint venture or other entity in which Loomis or any of its
Subsidiaries has, or pursuant to any agreement has the right to acquire at any
time by any means, a material equity interest or investment; (iii) in the case
of each of the Subsidiaries of Loomis and such other entities described in the
foregoing clauses (i) and (ii) that is a corporation, (A) the jurisdiction of
incorporation, (B) the capitalization thereof and (C) the percentage of each
class of voting stock or other equity security owned on a fully-diluted basis by
Loomis or any of its Subsidiaries on the date hereof; and (iv) in the case of
each of such unincorporated entities, the equivalent of the information provided
pursuant to the preceding clause (iii) with regard to corporate entities.
(b) All of the outstanding shares of capital stock of each direct or
indirect Subsidiary of Loomis have been duly authorized and validly issued, are
fully paid and non-assessable, have not been issued in violation of any
preemptive rights, and (except as specified in Section 5.5 of the Disclosure
Schedule) are owned of record and beneficially, directly or indirectly, by
Loomis or its Subsidiary specified in Section 5.5 of the Disclosure Schedule,
free and clear of any Liens.
(c) There are no options, warrants, calls, subscriptions, conversion
or other rights, agreements or commitments obligating any of the direct or
indirect Subsidiaries of Loomis to issue any additional shares of capital stock
of such Subsidiary or any other securities convertible into, exchangeable for or
evidencing the right to subscribe for any shares of such capital stock. There
are no outstanding rights allowing any Person to otherwise participate in the
equity of any Subsidiary of Loomis.
SECTION 5.6. Consents and Approvals. Except (a) as set forth in Section
5.6 of the Disclosure Schedule, (b) for any consents and approvals of or filings
or registrations with the DOJ and FTC pursuant to the HSR Act, and (c) for such
filings, notices, registration, permits, consents or other approvals which the
failure to obtain would not, individually or in the aggregate, have a Material
Adverse Effect on Loomis, no filing or registration with, no
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notice to and no permit, authorization, consent or approval of any governmental
authority, stock exchange or other third Person is necessary for the execution
and delivery of this Agreement by Loomis and/or Loomis Armored, or for the
consummation by Loomis and/or Loomis Armored of the transactions contemplated by
this Agreement.
SECTION 5.7. Financial Statements. Loomis has delivered to Borg-Warner
(a) copies of the audited balance sheets of Loomis Armored as of June 30, 1995
and June 30, 1996 (the "Loomis Year End Balance Sheets"), together with the
related audited statements of income, stockholders' equity and changes in cash
flows for the fiscal years ended on such dates, and the notes thereto,
accompanied by the reports thereon of the applicable firm of independent public
accountants, and (b) copies of the unaudited balance sheet of Loomis Armored as
of September 30, 1996 (the "Loomis Interim Balance Sheet"), together with the
related unaudited statements of income, stockholders' equity and changes in cash
flows for the three-month period ended on September 30, 1996 (collectively, the
"Loomis Interim Financial Statements") (such audited and unaudited financial
statements being hereinafter referred to as the "Loomis Financial Statements").
The Loomis Financial Statements, including the notes thereto, (i) were prepared
in accordance with GAAP throughout the periods covered thereby, except as
otherwise disclosed in Section 5.7 of the Disclosure Schedule and (ii) present
fairly in all material respects the consolidated financial position, results of
operations and changes in cash flows of Loomis Armored as of such dates and for
the periods then ended (subject, in the case of the unaudited Loomis Financial
Statements, to normal year-end audit adjustments consistent with prior periods
that would not be material, individually or in the aggregate). The accounts
receivable shown on the Loomis Year End Balance Sheets and the Loomis Interim
Balance Sheet arose out of transactions in the ordinary course of business of
Loomis Armored.
SECTION 5.8. Absence of Undisclosed Liabilities. Except for matters
relating to the transactions contemplated by the Agreement, there are no
liabilities or financial obligations of Loomis, Loomis Armored, or any of their
Subsidiaries of any kind whatsoever (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) that are material individually or
in the aggregate to the business of Loomis and its Subsidiaries that are
required to be reflected on, or disclosed in the notes to, a balance sheet
prepared in accordance with GAAP, other than liabilities and obligations: (a)
provided for or reserved against in the Loomis Financial Statements, (b) arising
after September 30, 1996 in the ordinary course of business consistent with past
experience, or (c) disclosed in Section 5.8 of the Disclosure Schedule. The
provisions of this Section do not apply to any liabilities or financial
obligations for or relating to Taxes or arising under or relating to any
Environmental Law, which are covered elsewhere in this Agreement.
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SECTION 5.9. Absence of Certain Changes. Except as disclosed in Section
5.9 of the Disclosure Schedule, and except for matters contemplated by this
Agreement (including, without limitation, Section 8.1) or relating to the
transactions contemplated hereby, since September 30, 1996, each of Loomis and
its Subsidiaries has conducted its respective business in the ordinary course
and since September 30, 1996 there has not occurred (a) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to the equity interests of Loomis or any of its
Subsidiaries, (b) any forgiveness, cancellation or waiver by any of Loomis or
any of its Subsidiaries of debts owed to Loomis or any of its Subsidiaries or
claims or rights of Loomis or any of its Subsidiaries against others, or any
discharge by Loomis or any of its Subsidiaries of any Lien against assets of
others or any payment by Loomis or any of its Subsidiaries of any liability or
obligation owed to others, other than, as relates to all of the foregoing, in
the ordinary course of business consistent with past practices, (c) any material
change in the credit practices of Loomis or any of its Subsidiaries, (d) (i) any
increase in the rate or terms of compensation (including termination and
severance pay) payable or to become payable by Loomis or its Subsidiaries to any
of their respective directors, officers or employees, or any increase in the
rate or terms of any bonus, insurance, pension or other employee benefit plan,
program or arrangement made to, for or with any such directors, officers or
employees, except, in each case, increases occurring in the ordinary course of
business consistent with past practices or as required by applicable law or
agreements existing on the date hereof, or (ii) any entry by Loomis or any of
its Subsidiaries into any employment, severance or termination agreement with
any such person other than in the ordinary course of business consistent with
past practices, (e) any entry into any agreement relating to the borrowing of
money or any material agreement, commitment or transaction by Loomis or any of
its Subsidiaries, except any such agreements, commitments or transactions
entered into in the ordinary course of business consistent with past practices,
(f) any damage, destruction or theft or other casualty loss to the properties or
assets owned or leased by Loomis or any of its Subsidiaries, or to property of
others in the custody of Loomis or any of its Subsidiaries, whether or not
insured, which individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect on Loomis, (g) any material change by Loomis or
any of its Subsidiaries in their financial or tax accounting principles or
methods, except insofar as may be required by a change in GAAP, applicable law
or circumstances which did not exist as of the date of the respective Loomis
Armored Financial Statements, (h) any change made or authorized in the
Certificate or Articles of Incorporation or Bylaws of Loomis or any of its
Subsidiaries, (i) any purchase, redemption, issue, sale or other acquisition or
disposition by Loomis or any of its Subsidiaries of any shares of capital stock
or other equity securities of Loomis or any of its Subsidiaries, or the grant of
any options, warrants or other rights to purchase, or convert or exchange any
obligation into, shares of capital stock or any evidence of indebtedness or
other securities of Loomis or any of its Subsidiaries, (j) any sale, lease,
license, encumbrance or disposition by Loomis or any
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of its Subsidiaries of any of their material assets which is not in the ordinary
course of business, (k) any intercompany loan, advance or material acquisition
by Loomis or any of its Subsidiaries, taken as a whole, (l) any cash payment by
Loomis or any of its Subsidiaries to the stockholders of Loomis or their
Affiliates except in the ordinary course of business consistent with past
practice, (m) any transfer of assets (other than cash) by Loomis or any of its
Subsidiaries to the stockholders of Loomis or their Affiliates except for
amounts not to exceed $100,000 in the aggregate transferred at fair market
value, or (n) an event or condition that has had or would reasonably be expected
to result in a Material Adverse Effect on Loomis.
SECTION 5.10. Litigation.
(a) Except as set forth in Section 5.10 of the Disclosure Schedule, as
of the date hereof, there is no Litigation pending or, to the knowledge of
Loomis or Loomis Armored, threatened against or affecting Loomis, any of its
Subsidiaries or any of their respective properties, assets or rights before any
court, arbitrator or administrative or governmental body as of the date hereof
where alleged damages are either unspecified or in excess of $50,000,
individually or in the aggregate, nor is there any judgment, decree, injunction,
or order of any court, governmental department, commission, agency,
instrumentality or arbitrator outstanding against Loomis or any of its
Subsidiaries that would reasonably be expected to have a Material Adverse Effect
on Loomis.
(b) As of the Closing, except as set forth in Section 5.10 of the
Disclosure Schedule, there will be no Litigation pending or, to the knowledge of
Loomis or Loomis Armored, threatened against or affecting Loomis or any of its
Subsidiaries that would reasonably be expected to have a Material Adverse Effect
on Loomis.
(c) The provisions of this Section 5.10 do not apply to any Litigation
arising out of or relating to Taxes or under any Environmental Law, which are
covered elsewhere in this Agreement.
SECTION 5.11. Liens and Encumbrances. All properties and assets owned by
each of Loomis and its Subsidiaries are free and clear of all Liens except (a)
Liens disclosed in Section 5.11 of the Disclosure Schedules, (b) statutory Liens
in respect of obligations not yet delinquent or the validity of which are being
contested in good faith by appropriate actions, (c) Liens for taxes not yet
delinquent or the validity of which is being contested in good faith by
appropriate actions, (d) Liens reflected in the Loomis Financial Statements
(which have not been discharged) and (e) Liens which in the aggregate do not
materially detract from the value of, or materially impair the continued use by
Loomis and its Subsidiaries in the normal conduct of their business of, their
properties or assets, taken as a whole. Except as set forth
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on Section 5.11 of the Disclosure Schedule, all of the material property, plant
and equipment of Loomis and its Subsidiaries, taken as a whole, used from time
to time in the operations of its business is owned or leased by them, as the
case may be, and is in satisfactory condition to conduct the business of Loomis
and its Subsidiaries as presently conducted.
SECTION 5.12. Certain Agreements. Except as disclosed in Section 5.12 of
the Disclosure Schedule, neither Loomis nor any of its Subsidiaries is a party
to any agreement, plan or arrangement with any officer, director or employee of
Loomis or any of its Subsidiaries (a) the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of any of the
transactions contemplated by this Agreement, (b) providing benefits after the
termination of employment regardless of the reason for such termination of
employment, other than benefits generally applicable to Loomis' or any of its
Subsidiaries' salaried or hourly employees, (c) under which any person may
receive payments subject to the tax imposed by Section 4999 of the Code, or (d)
any of the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement. Except as disclosed in Section 5.12 of the Disclosure Schedule,
neither Loomis nor any of its Subsidiaries is a party to any (i) Contract
relating to or granting a Lien securing the borrowing of money or the guarantee
of any obligation for the borrowing of money, (ii) Contract or other document
that substantially limits the freedom of Loomis or any of its Subsidiaries to
compete in any line of business or with any Person or in any area or which would
so limit the freedom of Newco or any of its Subsidiaries to so compete after the
Closing, (iii) Contract relating to the acquisition or disposition of any
business by Loomis or any of its Subsidiaries, (iv) Contract with the
Stockholders or any of their other Affiliates or (v) other Contract that is
material to Loomis and its Subsidiaries, taken as a whole. Except as set forth
in Section 5.12 of the Disclosure Schedule and except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Loomis, each Contract described in Section 5.12 of the Disclosure Schedule, or
required to be so described, is a valid and binding obligation of the parties
thereto and is in full force and effect without amendment and neither Loomis nor
any of its Subsidiaries nor, to the knowledge of Loomis, any other party thereto
is (or with the giving of notice or lapse of time or both would be) in breach or
default under any such agreements in any material respect. Except as set forth
in the Section 5.12 of the Disclosure Schedule, each party has performed all
obligations required to be performed by it through the date hereof under the
agreements so described in Section 5.12 of the Disclosure Schedule and is not
(with or without lapse of time or giving notice, or both) in breach or default
under any such Contract.
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SECTION 5.13. Employee Benefit Plans.
(a) Section 5.13 of the Disclosure Schedule sets forth a true and
complete list of each material bonus, deferred compensation, incentive
compensation, stock purchase, stock option, employment, consulting, severance or
termination pay, medical, life insurance, supplemental unemployment benefits,
profit-sharing, tuition assistance, leave of absence, vacation, or retirement
plan, program, agreement or arrangement, and each other material "employee
benefit plan" (within the meaning of Section 3(3) of ERISA) that is maintained
or contributed to by Loomis or any of its Subsidiaries ("Loomis Employee Benefit
Plans") as of the date of this Agreement. A true and complete copy of each
Loomis Employee Benefit Plan has been delivered or made available to Borg-
Warner.
(b) Except as set forth in Section 5.13 of the Disclosure Schedule and
except for such matters as would not reasonably be expected to have a Material
Adverse Effect on Loomis, neither Loomis nor any of its Subsidiaries maintains
or contributes to, or on or after the 6-Year Look Back Date has maintained or
contributed to, any "multiemployer plan," as such term is defined in Section
3(37) or Section 4001(a)(3) of ERISA, or any single-employer defined benefit
plans covered by Title IV of ERISA. Each Loomis Employee Benefit Plan which is
intended to be qualified under Section 401(a) and, if applicable, Section 401(k)
of the Code, is so qualified, and to the knowledge of Loomis or Loomis Armored,
no event or condition has occurred which would cause any such plan to lose such
qualified status.
(c) Except as disclosed in Section 5.13 of the Disclosure Schedule and
except for such matters as would not reasonably be expected to have a Material
Adverse Effect on Loomis, (i) no action, suit, inquiry, judicial or
administrative proceeding, arbitration or investigation relating to any Loomis
Employee Benefit Plan (other than claims for benefits for which the plan
administrative procedures have not been exhausted and "qualified domestic
relations orders" as defined in Section 414(p) of the Code) is pending or, to
the knowledge of Loomis, threatened against Loomis, any of its Subsidiaries or
any Loomis Employee Benefit Plan before any court, arbitrator or administrative
or governmental body, (ii) neither Loomis nor any of its Subsidiaries has failed
to make contributions to any Loomis Employee Benefit Plan that are required to
be made on or after January 1, 1994 under the terms of such Loomis Employee
Benefit Plans or under applicable law, and (iii) each of the Loomis Employee
Benefit Plans has been maintained and administered in all material respects in
compliance with all applicable laws and the terms of such Loomis Employee
Benefit Plans.
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SECTION 5.14. Taxes. Except as disclosed in Section 5.14 of the
Disclosure Schedule and except for such matters as would not reasonably be
expected to have a Material Adverse Effect on Loomis:
(a) All Tax Returns required to be filed by or with respect to Loomis
or any of its Subsidiaries have been duly and timely filed, and all such Tax
Returns are true, correct and complete in all material respects. None of Loomis
or any of its Subsidiaries has requested any extension of time within which to
file any federal income or other material Tax Return that has not yet been
filed. Each of Loomis and its Subsidiaries has duly and timely paid (or there
has been paid on its behalf) all Taxes that are due, or claimed or asserted by
any taxing authority to be due, from or with respect to it. Each of Loomis and
its Subsidiaries has made (or there has been made on its behalf) all required
estimated Tax payments sufficient to avoid any underpayment penalties. Each of
Loomis and its Subsidiaries has withheld and paid all Taxes required by all
applicable laws to be withheld or paid in connection with any amounts paid or
owing to any employee, stockholder, creditor, independent contractor or other
third party. All federal income Tax Returns filed with respect to Tax periods
of Loomis or any of its Subsidiaries through the Tax period ending June 30, 1992
have been examined and closed or are Tax Returns with respect to which the
applicable statute of limitations for the assessment of federal income Taxes,
after giving effect to any extension or waiver, has expired.
(b) There are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitation applicable to any claim for, or the
period for the collection or assessment of, Taxes due from or with respect to
Loomis or any of its Subsidiaries for any taxable period, and no power of
attorney granted by or with respect to Loomis or any of its Subsidiaries
relating to Taxes is currently in force. No closing agreement pursuant to
Section 7121 of the Code (or any predecessor provision) or any similar provision
of any state, local, or foreign law has been entered into by or with respect to
Loomis or any of its Subsidiaries. No audit or other proceeding by any court,
governmental or regulatory authority, or similar person is pending or, to the
knowledge of Loomis, threatened in regard to any Taxes due from or with respect
to Loomis or any of its Subsidiaries or any Tax Return filed by or with respect
to Loomis or any of its Subsidiaries. No written assessment of Taxes is
proposed against Loomis or any of its Subsidiaries or against any assets of
Loomis or any of its Subsidiaries. There are no requests for rulings or
determinations by a Tax authority pending with respect to Taxes of Loomis or any
of its Subsidiaries.
(c) No election under Section 338 of the Code has been made or filed
by or with respect to Loomis or any of its Subsidiaries. No consent to the
application of Section 341(f)(2) of the Code (or any predecessor provision) has
been made or filed by or
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with respect to Loomis or any of its Subsidiaries or against any assets of
Loomis or any of its Subsidiaries. Neither Loomis nor any of its Subsidiaries
has agreed (and no agreement has been made on any of their behalf) to make any
adjustment pursuant to Section 481(a) of the Code (or any predecessor provision)
by reason of any change in any accounting method, and there is no application
pending with any taxing authority requesting permission for any changes in any
accounting method of Loomis. None of the assets of Loomis or any of its
Subsidiaries is or will be required to be treated as being owned by any person
(other than Newco) pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986.
(d) Neither Loomis nor any of its Subsidiaries is a party to, is bound
by, and has any obligation under, any Tax sharing agreement, Tax allocation
agreement or similar contract under which payments may be required to be made to
any person other than Loomis or a Loomis Subsidiary.
(e) There is no contract, agreement, plan or arrangement covering any
Person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by Loomis by reason of Section 280G of the
Code.
SECTION 5.15. Compliance with Applicable Law. Except as set forth in
Section 5.15 of the Disclosure Schedule and except as would not, individually or
in the aggregate, have a Material Adverse Effect on Loomis, each of Loomis and
its Subsidiaries holds all Permits, and the business of each of Loomis and its
Subsidiaries is not being conducted in violation of any provision of any
Federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, Permit or other governmental authorization or approval
applicable to any of them. The provisions of this Section 5.15 do not apply to
Environmental Laws, or matters relating to Taxes, which are covered elsewhere in
this Agreement.
SECTION 5.16. Brokers' Fees and Commissions. Except as disclosed in
Section 5.16 of the Disclosure Schedule, neither Loomis, any Subsidiary of
Loomis, nor any Person acting on behalf of any of them, has agreed to pay or is
liable with respect to any commission, finder's fee or similar payment to any
Person in connection with the transactions contemplated hereby.
SECTION 5.17. Proprietary Rights. Section 5.17 of the Disclosure Schedule
contains an accurate and complete list of all Intellectual Property owned or
used by any of Loomis or any of its Subsidiaries in the operation of its
businesses that is material to Loomis and its Subsidiaries, taken as a whole
(collectively, the "Loomis Intellectual Property").
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Except as set forth in Section 5.17 of the Disclosure Schedule, each of Loomis
and its Subsidiaries owns the entire right, title and interest in and to the
Loomis Intellectual Property, trade secrets and other confidential proprietary
information used in and material to the operation of its business (including,
without limitation, the right to use and license the same). Section 5.17 of the
Disclosure Schedule lists all notices or claims currently pending or received by
Loomis or any of its Subsidiaries which claim infringement of any Intellectual
Property by Loomis or any of its Subsidiaries. Except as set forth in Section
5.17 of the Disclosure Schedule, to the knowledge of Loomis or Loomis Armored,
neither Loomis nor any of its Subsidiaries infringes or has misappropriated any
Intellectual Property of another Person or has misappropriated any trade secrets
or other confidential proprietary information. Except as set forth in Section
5.17 of the Disclosure Schedule, all registrations and certificates issued by
any governmental authority relating to any of the Loomis Intellectual Property
and all licenses and other agreements pursuant to which Loomis or any of its
Subsidiaries use any of the Loomis Intellectual Property, are valid and
subsisting, have been properly maintained and none of Loomis, its Subsidiaries
or, to the knowledge of Loomis or Loomis Armored, any other Person is in default
or violation in any material respect thereunder.
SECTION 5.18. Labor Relations. (a) Section 5.18 of the Disclosure
Schedule sets forth an accurate and complete list as of the date hereof of all
written agreements with officers, directors and employees of Loomis and its
Subsidiaries regarding services to be rendered, including collective bargaining
agreements. Except as listed or described on Section 5.18 of the Disclosure
Schedule, as of the date hereof each of Loomis and its Subsidiaries (A) is, and
has been for the past year, in material compliance with all applicable laws
regarding employment and employment practices, terms and conditions of
employment, wages and hours, and plant closing, occupational safety and health
and workers' compensation and is not engaged in any material unfair labor
practices, (B) has no, and has not had in the past year any, material unfair
labor practice charges or complaints pending or, to the knowledge of Loomis or
Loomis Armored, threatened against any of them before the National Labor
Relations Board, (C) has no, and has not had in the past year any, material
grievances pending or, to the knowledge of Loomis or Loomis Armored, threatened
against them and (D) has no, and has not had in the past year any, material
charges pending before the Equal Employment Opportunity Commission or any state
or local agency responsible for the prevention of unlawful employment practices
(the items referred to in clauses (A) through (D), collectively, the "Loomis
Labor Matters"), (ii) there is no material labor strike, slowdown, work stoppage
or lockout actually pending or, to the knowledge of Loomis or Loomis Armored,
threatened against or affecting Loomis or any of its Subsidiaries, and (iii) to
the knowledge of Loomis or Loomis Armored, no material union organizational
campaign or representation petition is currently pending with respect to the
employees of Loomis or any of its Subsidiaries.
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(b) As of the Closing Date, except as set forth in Section 5.18 of the
Disclosure Schedule and except for such matters that would not reasonably be
expected to have a Material Adverse Effect on Loomis, (i) there will be no
Loomis Labor Matters pending or, to the knowledge of Loomis, threatened against
or affecting Loomis or any Subsidiary of Loomis, (ii) there will be no labor
strike, slowdown, work stoppage or lockout pending or, to the knowledge of
Loomis, threatened against or affecting Loomis or any of its Subsidiaries and
(iii) to the knowledge of Loomis, no union organizational campaign or
representation petition will be pending with respect to the employees of Loomis
or any of its Subsidiaries.
SECTION 5.19. Insurance. Loomis has and at all times since June 30, 1996
has had insurance policies in full force and effect for such amounts as are
sufficient for material compliance with all requirements of law and of all
material agreements to which any of Loomis and its Subsidiaries are parties or
by which they are bound. Set forth in Section 5.19 of the Disclosure Schedule
is a list of all fire, liability, cargo and other forms of insurance and all
fidelity bonds held by or applicable to Loomis or any of its Subsidiaries or
their businesses or properties, setting forth in respect of each such policy the
policy name, policy number, carrier, term, type of coverage and annual premium.
Except as set forth in Section 5.19 of the Disclosure Schedule, no event
relating to Loomis or its Subsidiaries or their business has occurred which can
reasonably be expected to result in a material retroactive upward adjustment in
premiums under any such insurance policies or which is likely to result in a
material prospective upward adjustment in such premiums. Excluding insurance
policies that have expired and been replaced in the ordinary course of business,
no material insurance policy has been cancelled within the last two years and,
to the knowledge of Loomis or Loomis Armored, no cancellation of any material
insurance policy of Loomis or relating to Loomis and its Subsidiaries is
currently threatened. Except as noted on Section 5.19 of the Disclosure
Schedule, all such insurance will remain in full force and effect with respect
to periods before the Closing after giving effect to the transactions
contemplated hereby. No event has occurred, including, without limitation, the
failure by Loomis or Loomis Armored to give any notice or information or Loomis
or Loomis Armored giving any inaccurate or erroneous notice or information,
which materially limits or impairs the rights of any of Loomis or Loomis Armored
under any such insurance policies.
SECTION 5.20. Real Estate. Except as set forth in Section 5.20 of the
Disclosure Schedule, each of Loomis and its Subsidiaries has good and marketable
title in fee simple to all real properties owned by it and good and transferable
leaseholds in all real estate leased by it under valid and enforceable leases.
Section 5.20 of the Disclosure Schedule lists (i) the street address of each
parcel of real property owned by each of Loomis and its Subsidiaries (the
"Loomis Owned Real Property"), and (ii) the street address of each parcel of
real property leased or licensed by each of Loomis and its Subsidiaries.
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SECTION 5.21. Personal Property. Except as set forth in Section 5.21 of
the Disclosure Schedule, Loomis and its Subsidiaries have good title to all the
machinery, equipment, furniture, fixtures, inventory, receivables and other
tangible or intangible personal property reflected on the Loomis Interim Balance
Sheet and all such property acquired since the date thereof, except for sales
and other dispositions made in the ordinary course of business consistent with
past practices since such date.
SECTION 5.22. Environmental Matters.
(a) Section 5.22(a) of the Disclosure Schedule contains a true and
complete list of, to the knowledge of Loomis and Loomis Armored, of (i) all
Known Environmental Conditions, and (ii) the street address and description of
each parcel of Loomis Owned Property and any parcel of real property leased,
licensed or otherwise used by Loomis or its Subsidiaries that have USTs on such
property, which are under the ownership, operation or control of Loomis or its
Subsidiaries or which have had USTs that have been removed or closed and at
which Loomis has not yet obtained UST Closure (collectively, the "Loomis
Sites").
(b) Except as disclosed in Section 5.22(b) of the Disclosure Schedule
and except as would not reasonably be expected to result in a Material Adverse
Effect on Loomis:
(i) the operations of Loomis and its Subsidiaries have been and
are in material compliance with all applicable Environmental Laws;
(ii) (x) each of Loomis and its Subsidiaries has obtained and
currently maintains all Environmental Permits necessary for its operations
and has been and is in material compliance with such Environmental Permits,
(y) there are no Legal Proceedings pending or, to the knowledge of Loomis
or Loomis Armored, threatened to revoke such Environmental Permits, and (z)
none of Loomis or its Subsidiaries has received any notice from any
governmental authority or written notice from any Person to the effect that
there is lacking any Environmental Permit required for the current use or
operation of any property owned, operated or leased by Loomis or any of its
Subsidiaries;
(iii) there are no Legal Proceedings or investigations pending
or, to the knowledge of Loomis or Loomis Armored, threatened against Wells
Fargo or any of its Subsidiaries alleging the violation of or seeking to
impose liability pursuant to any Environmental Law or Environmental Permit;
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(iv) none of Loomis, its Subsidiaries or, to the knowledge of
Loomis or Loomis Armored, any predecessor of any of Loomis or its
Subsidiaries has filed any notice under any Environmental Law indicating
past or present treatment, storage, or disposal of or reporting a Release
or threatened Release of any Hazardous Material;
(v) none of Loomis or its Subsidiaries or any of their current
or, to the knowledge of Loomis or Loomis Armored, past facilities and
operations are subject to any outstanding written Order or Contract with
any governmental authority or other Person respecting (w) Environmental
Laws, (x) Remedial Action, (y) any Environmental Claim or (z) the Release
or threatened Release of any Hazardous Material;
(vi) none of the real property currently or, to the knowledge of
Loomis or Loomis Armored, formerly owned, operated or leased by Loomis or
any of its Subsidiaries has been or is contaminated by or from any
Hazardous Materials in quantities or at levels that would require
remediation by Loomis or its Subsidiaries under Environmental Laws;
(vii) none of the operations of Loomis, its Subsidiaries, or any
predecessor of any of Loomis or its Subsidiaries, or, to the knowledge of
Loomis or Loomis Armored, of any owner of premises currently leased or
operated by any of Loomis or its Subsidiaries involves or previously
involved the treatment, storage or disposal of hazardous waste, as defined
under 40 C.F.R. Parts 260-270 or any state, local or foreign equivalent;
(viii) there is not now, nor (to the knowledge of Loomis or
Loomis Armored for all periods prior to their ownership, lease or operation
of such real property) has there been in the past, on, in or under any real
property currently or, to the knowledge of Loomis or Loomis Armored,
formerly owned, leased or operated by Loomis, its Subsidiaries or any of
their predecessors (i) any USTs, above-ground storage tanks, dikes or
impoundments containing Hazardous Materials, (ii) any asbestos-containing
materials, (iii) any polychlorinated biphenyls or (iv) any radioactive
substances, in each case the presence of which would reasonably be expected
to result in Loomis and its Subsidiaries incurring material Environmental
Costs and Liabilities;
(ix) to the knowledge of Loomis or Loomis Armored, no facts or
circumstances exist which would reasonably be expected to result in Loomis
and its Subsidiaries incurring material Environmental Costs and
Liabilities;
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(x) neither the operations of Loomis nor its Subsidiaries nor any
real property owned, operated or leased by Loomis or its Subsidiaries is of
a nature or type that, as a result of the transaction contemplated
hereunder, trigger any environmental property transfer law, including but
not limited to The Connecticut Transfer Act, Con. Gen. Stat. Ann. (S)
22a-134(b), the Illinois Responsible Property Transfer Act, Pub. Act 85-
1228, the Indiana Responsible Property Transfer Law, or the New Jersey
Industrial Site Recovery Act, 1993 N.J. Laws 139; and
(xi) Loomis has delivered to Wells Fargo copies of all
environmental investigations, studies, audits, tests, reviews and other
analyses, including soil and groundwater analysis, conducted by or on
behalf of, or that are in the possession, custody or control of Loomis and
its Subsidiaries, in relation to any site or facility owned, operated or
leased, at any time, by Loomis or any of its Subsidiaries or any of their
respective predecessors or a site at which Loomis or its Subsidiaries may
have disposed of or arranged for the disposal of Hazardous Materials.
SECTION 5.23. Certain Business Practices and Regulations. To the
knowledge of Loomis or Loomis Armored, as of the date hereof, none of Loomis,
its Subsidiaries or any director, officer, agent or employee of any of Loomis or
its Subsidiaries has (a) used any corporate funds for contributions, gifts,
entertainment or other expenses relating to political activity in material
violation of any Law or (b) made any payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds in material violation of any Law or violated any provision
of the Foreign Corrupt Practices Act of 1977, as amended.
SECTION 5.24. Related Party Transactions. Except as disclosed in Section
5.24 of the Disclosure Schedule, since January 1, 1995, there have been no
material transactions between Loomis or any of its Subsidiaries on the one hand,
and (a) any officer or director of Loomis, Loomis Armored or any of their
Subsidiaries, (b) to the knowledge of Loomis or Loomis Armored, any record or
beneficial owner of five percent or more of the voting securities of Loomis, or
(c) to the knowledge of Loomis or Loomis Armored, any Affiliate of any such
officer, director or 5% beneficial owner, on the other hand, other than payment
of compensation for services rendered to or by Loomis Armored or any of its
Subsidiaries in the ordinary course of business.
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ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF LOOMIS STOCKHOLDERS TRUST
---------------------------------------
The Loomis Stockholders Trust represents and warrants to Borg-Warner and
Wells Fargo as set forth below.
SECTION 6.1. Ownership of Shares. Upon the transfer of all of the issued
and outstanding shares of Loomis Common Stock to the Loomis Stockholders Trust
by the Stockholders as contemplated hereby and pursuant to the Business Trust
Agreement, the Loomis Stockholders Trust will be the holder of record and own
beneficially all of the issued and outstanding shares of Loomis Common Stock.
As of the date hereof, the Loomis Stockholders Trust owns 1,344,433 shares of
Loomis Common Stock. At or immediately prior to the Closing, the Loomis
Stockholders Trust will own all of the issued and outstanding shares of Loomis
Common Stock free and clear of any Liens. The Loomis Stockholders Trust is not
a party to any voting trust, proxy or other agreement with respect to the voting
of any shares of Loomis Common Stock other than the Stockholders Agreement among
Loomis and the Stockholders.
SECTION 6.2. Authority.
(a) The Loomis Stockholders Trust has been duly created and is validly
existing under the laws of the State of Delaware. The Loomis Stockholders Trust
has all requisite trust power and authority to execute and deliver this
Agreement and to perform the obligations of the Loomis Stockholders Trust
hereunder, and the execution, delivery and performance by the Loomis
Stockholders Trust of this Agreement and the consummation by the Loomis
Stockholders Trust of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of the Loomis Stockholders Trust.
(b) This Agreement has been duly and validly executed and delivered by
the Loomis Stockholders Trust and constitutes a valid and binding obligation of
the Loomis Stockholders Trust, enforceable against it in accordance with its
terms, except to the extent that such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
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SECTION 6.3. No Conflicts. The execution, delivery and performance by the
Loomis Stockholders Trust of this Agreement does not (i) violate or breach any
provision of any Law applicable to the Loomis Stockholders Trust, except where
the violation or breach would not affect the Loomis Stockholders Trust's ability
to perform its obligations under this Agreement in any material respect or (ii)
violate, breach, cause a default under, or result in the creation of a Lien
pursuant to, any agreement or instrument to which the Loomis Stockholders Trust
is a party or to which it or any of its properties may be subject, except where
the violation, breach, default or creation of a Lien would not affect the Loomis
Stockholders Trust's ability to perform its obligations under this Agreement in
any material respect.
SECTION 6.4. Investment Intent.
(a) The Newco Common Stock is being acquired by the Loomis
Stockholders Trust solely for its own account, for investment, and not with a
view to any distribution thereof in violation of the Securities Act or the
applicable securities laws of any state.
(b) The Loomis Stockholders Trust understands that the Newco Common
Stock has not been registered under the Securities Act or the securities laws of
any state and must be held indefinitely unless subsequently registered under the
Securities Act and any applicable state securities laws or unless an exemption
from such registration becomes or is available.
SECTION 6.5. Continued Stock Ownership. The Loomis Stockholders Trust has
no plan or intention, and is not subject to any obligation or commitment, to
sell, exchange or otherwise dispose of, reduce the risk of loss by short sale or
otherwise, or consent to the sale, exchange or other disposition of any interest
in the Newco Common Stock.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF NEWCO
---------------------------------------
Newco represents and warrants to each of Borg-Warner, Wells Fargo, Loomis,
and the Loomis Stockholders Trust as set forth below.
SECTION 7.1. Organization and Qualification. Newco is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, with all requisite corporate power and authority
to own, operate and lease its
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properties and to carry on its business as it is now being, and as currently
proposed to be, conducted, and, except as would not, individually or in the
aggregate, have a Material Adverse Effect on Newco, is qualified or licensed to
do business and is in good standing in every jurisdiction where the nature of
the business conducted by it or the properties owned or leased by it requires
qualification. Newco has delivered to Borg-Warner complete and correct copies
of the Certificate of Incorporation and Bylaws of Newco. As of the Closing,
Newco shall (i) be qualified or licensed to do business and in good standing in
every jurisdiction where the nature of the business to be conducted by it or the
properties to be owned or leased by it requires qualification and (ii) hold all
material Permits necessary for the lawful conduct of its business, in each case,
after giving effect to the transactions contemplated hereby.
SECTION 7.2. Authorization. Newco has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Newco, the
performance by Newco of its obligations hereunder, and the consummation by it of
the transactions contemplated hereby, have been duly authorized by its Board of
Directors. No other corporate action on the part of Newco is necessary to
authorize the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Newco and constitutes a valid and binding obligation
of Newco, enforceable against it in accordance with its terms, except to the
extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 7.3. Capitalization of Newco. The authorized capital stock of
Newco consists of 20,000,000 shares of Newco Common Stock, no shares of which
are issued and outstanding, and 1,000,000 shares of preferred stock, $0.01 par
value, no shares of which are issued and outstanding. Except as set forth in
Section 7.3 of the Disclosure Schedule, there are no options, warrants, calls,
subscriptions, conversion or other rights, agreements or commitments obligating
Newco to issue any additional shares of its capital stock or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of its capital stock. As of the Closing after giving
effect to the capital stock issuances set forth in Sections 1.2(b) and 2.3,
Newco will have 10,000,000 shares of Newco Common Stock issued and outstanding,
all of which will be validly issued, fully-paid, non-assessable and free and
clear of any Liens (other than those arising by virtue of the Stockholders
Agreement).
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SECTION 7.4. Consents and Approvals. Other than any consents and
approvals of or filings or registrations with the DOJ and FTC pursuant to the
HSR Act, no filing or registration with, no notice to and no permit,
authorization, consent or approval of any governmental authority or other third
party is necessary for the consummation by Newco of the transactions
contemplated by this Agreement.
SECTION 7.5. No Operations. Newco was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement. Prior to the date
hereof, Newco has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
SECTION 7.6. Disposition of Property. Newco has no plan or intention to
sell or otherwise dispose of (or to cause Loomis or any Subsidiary to sell or
otherwise dispose of) any of the Transferred Assets or the Loomis Common Stock
acquired in the transaction, except for dispositions made in the ordinary course
of business or contributions of the Designated Transferred Assets to Loomis and
Loomis Armored.
SECTION 7.7. No Redemption of Stock. Newco has no plan or intention to
redeem or otherwise reacquire any of its stock issued in the transaction, except
in connection with employee benefit programs or otherwise in the ordinary course
of business.
SECTION 7.8. Loomis Common Stock. Newco has no plan or intention to
dissolve, liquidate, merge or consolidate Loomis or to sell or otherwise dispose
of any of the Loomis Common Stock acquired by Newco.
ARTICLE VIII
COVENANTS
---------
SECTION 8.1. Conduct of Business of Each of Loomis and Wells Fargo Prior
to the Closing Date. During the period from the date of this Agreement and
continuing until the Closing Date, Borg-Warner and Wells Fargo agree that except
as set forth in Section 8.1 of the Disclosure Schedule or as expressly
contemplated or permitted by this Agreement or to the extent that the Loomis
Stockholders Trust shall otherwise consent in writing, each of Wells Fargo and
its Subsidiaries shall carry on its respective business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted and
other than actions taken in the ordinary course of business consistent with
prior practice, shall use commercially reasonable efforts to (i) preserve intact
its present business organizations, (ii) keep available the services of its
present officers and key employees and (iii) preserve its
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relationships with material customers and suppliers and others having material
business dealings with it; provided, however, that nothing in this Section 8.1
shall require Wells Fargo or any of its Subsidiaries to deviate from its normal
business practices or to offer any additional compensation or incentives to
employees, customers, suppliers or others. During the period from the date of
this Agreement and continuing until the Closing Date, Loomis agrees that except
as set forth in Section 8.1 of the Disclosure Schedule or as expressly
contemplated or permitted by this Agreement or to the extent that Borg-Warner
shall otherwise consent in writing, each of Loomis and its Subsidiaries shall
carry on its respective business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and other than actions
taken in the ordinary course of business consistent with prior practice, shall
use commercially reasonable efforts to (i) preserve intact its present business
organizations, (ii) keep available the services of its present officers and key
employees and (iii) preserve its relationships with material customers and
suppliers and others having material business dealings with it; provided,
however, that nothing in this Section 8.1 shall require Loomis or any of its
Subsidiaries to deviate from its normal business practices or to offer any
additional compensation or incentives to employees, customers, suppliers or
others. Without limiting the generality of the foregoing, prior to the Closing
Date, and except as expressly contemplated or permitted by this Agreement,
required by applicable law, or disclosed in Section 8.1 of the Disclosure
Schedule, Wells Fargo will not, and Borg-Warner will not permit Wells Fargo or
any of its Subsidiaries to, without the prior written consent of the Loomis
Stockholders Trust, and Loomis will not, and will not permit any of its
Subsidiaries to, without the prior written consent of Borg-Warner:
(a) split, combine or reclassify any shares of its capital stock,
declare, pay or set aside for payment any dividend or other distribution
(whether in cash, stock or property) in respect of its equity interests;
(b) purchase, redeem, issue, sell, or otherwise acquire or dispose of
any of its shares of capital stock or other equity securities, or grant any
options, warrants or other rights to purchase, or convert or exchange any
obligation into, shares of its capital stock or any evidence of its indebtedness
or other securities (other than issuance of certificates in replacement of lost
certificates);
(c) incur any indebtedness for borrowed money or issue any debt
securities other than in the ordinary course of business consistent with past
practices or, other than in the ordinary course consistent with past practices,
assume, guarantee, endorse or otherwise as an accommodation become responsible
for or grant any Lien securing the obligations of any other Person;
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(d) acquire or agree to acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division or significant assets thereof or acquire, or agree to
acquire, directly or indirectly, any equity interest in any person or incur any
capital expenditures other than the capital expenditures set forth in Section
8.1 of the Disclosure Schedule or incurred in the ordinary course of business
consistent with past practices;
(e) amend or modify its Certificate or Articles of Incorporation or
Bylaws;
(f) sell, lease, license, encumber or dispose of any of its material
assets (other than, in the case of Wells Fargo, any Excluded Assets), other than
pursuant to executory contracts or commitments in existence as of the date of
this Agreement and set forth in Section 8.1(g) of the Disclosure Schedule;
(g) amend or terminate any material Contract, other than in the
ordinary course of business consistent with past practices;
(h) make any material change in financial or tax accounting methods,
principles or practices, or make or cause to be made any material elections on
Tax Returns other than, in the case of Wells Fargo, any such changes or
elections that would not have an adverse effect on the Transferred Assets and
Assumed Liabilities, unless required by GAAP or applicable law;
(i) extend credit in the sale of products, collection of receivables
or otherwise, other than in the ordinary course of business consistent with past
practices;
(j) fail to maintain its books, accounts and records in the usual,
regular and ordinary manner on a basis consistent with prior years, unless
otherwise required by GAAP or applicable law;
(k) knowingly take any action or, in the ordinary course of business,
omit to take any commercially reasonable action that would cause (x) any
representation or warranty in Article IV hereof (in the case of Borg-Warner and
Wells Fargo) or Article V hereof (in the case of Loomis and Loomis Armored) (but
excluding any representations or warranties which specifically relate to an
earlier date) to be untrue or incorrect in any material respect as of the
Closing or (y) any of the conditions set forth in Article IX not to be satisfied
as of the Closing;
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(l) adopt or amend in any material respect any collective bargaining
agreement or WF Employee Benefit Plan or Loomis Employee Benefit Plan, as
applicable, other than in the ordinary course of business consistent with prior
practices;
(m) except as set forth in Section 8.1(m) of the Disclosure Schedule,
grant to any executive officer any increase in compensation or in severance or
termination pay, grant any severance or termination pay, or enter into any
employment agreement with any executive officer, except as may be required under
agreements in effect on the date of this Agreement;
(n) enter into any agreement, including an agreement to purchase or
lease assets or operating supplies, which includes an aggregate payment or
commitment on the part of either party of more than $100,000 other than
agreements or arrangements entered into in the ordinary course of business
consistent with prior practices;
(o) submit any binding bid with respect to the sale or purchase of
goods or services other than in the ordinary course of business as currently
conducted;
(p) make any changes or agree to make any changes to any federal or
state income Tax returns filed prior to the date hereof or file any amended
federal or state income Tax Returns other than, in the case of Wells Fargo, any
such changes or agreements that would not have an adverse effect on the
Transferred Assets and Assumed Liabilities;
(q) make any cash payment to its stockholder(s) or Affiliates of its
stockholder(s) except in the ordinary course of business consistent with past
practice;
(r) effect any transfer of assets (other than cash except for amounts
not to exceed $100,000 in the aggregate transferred at fair market value or, in
the case of Wells Fargo, Excluded Assets) to its stockholder(s) or Affiliates of
its stockholder(s); and
(s) agree, in writing or otherwise, to do any of the foregoing.
SECTION 8.2. Access to Information.
(a) Between the date of this Agreement and the Closing Date, upon
reasonable notice and at reasonable times without significant disruption to the
business of the other and subject to the advice of antitrust counsel to each
party, each of Wells Fargo and Loomis will give the other and its authorized
representatives (which representatives shall include but not be limited to
financial advisers, attorneys and environmental professionals) reasonable access
to all personnel, offices and other facilities, and to all of its and its
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Subsidiaries' books and records (including Tax Returns and accounting work
papers) and will permit the other to make and will fully cooperate with regard
to such inspections as the other may reasonably require and will cause its
officers to furnish the other such financial and operating data and other
information with respect to its and its Subsidiaries' business and properties as
the other may from time to time reasonably request. Notwithstanding the
foregoing, each of the parties agree that the above described access to
information shall not include any right to sample the soil and/or groundwater at
any of the other party's properties without prior written consent (and in the
sole discretion) of the party that owns or operates the site at which such
sampling has been requested.
(b) On and after the Closing Date, upon reasonable notice and at
reasonable times without significant disruption to the business of the other,
Newco will give each of Borg-Warner, Wells Fargo and the Loomis Stockholders
Trust and their authorized representatives (which representatives of each party
shall include but not be limited to financial advisors, attorneys and
environmental professionals) reasonable access to all personnel, offices and
other facilities, and to all of its and its Subsidiaries' books and records
(including Tax Returns and accounting work papers), and Newco will permit Borg-
Warner, Wells Fargo and the Loomis Stockholders Trust, and Borg-Warner, Wells
Fargo and the Loomis Stockholders Trust will permit Newco, to make and will
fully cooperate with regard to, such inspections as the other may reasonably
require and will cause its officers to furnish the other such financial and
operating data and other information with respect to its and its Subsidiaries'
business and properties as the other may from time to time reasonably request to
determine any matter relating to its rights and obligations under this Agreement
or, in the case of Borg-Warner, Wells Fargo or the Loomis Stockholders Trust,
any matter arising in any period ending on or before the Closing Date.
SECTION 8.3. All Reasonable Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done as
promptly as practicable, all things necessary, proper and advisable under
applicable laws and regulations to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to effect the
Financing. If at any time after the Closing Date any further action is
necessary or desirable to carry out the purposes of this Agreement, including,
without limitation, the execution of additional instruments, the proper officers
and directors of each party to this Agreement shall take all such necessary
action.
SECTION 8.4. Consents and Approvals. The parties hereto each will
cooperate with one another and use all reasonable efforts to prepare all
necessary documentation (including, without limitation, furnishing all
information required under the HSR Act), to effect promptly all necessary
filings and to obtain all necessary permits, consents, approvals, orders
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and authorizations of or any exemptions by, all third parties and governmental
bodies necessary to consummate the transactions contemplated by this Agreement
(including, without limitation, all Permits and Environmental Permits required
by Newco to operate the combined businesses of Loomis and Wells Fargo and their
Subsidiaries). Each party will keep the other party apprised of the status of
any inquiries made of such party by the DOJ or the FTC or any other governmental
agency or authority or members of their respective staffs with respect to this
Agreement or the transactions contemplated hereby.
SECTION 8.5. Public Announcements. Borg-Warner and the Loomis
Stockholders Trust will consult with each other and will mutually agree (the
agreement of each party not to be unreasonably withheld) upon the content and
timing of any press release or other public statements with respect to the
transactions contemplated by this Agreement, and shall not issue any such press
release or make any such public statement prior to such consultation and
agreement, except as may be required by applicable Law or by obligations
pursuant to any listing agreement with any securities exchange or any stock
exchange regulations; provided, however, that any party required to make any
such press release or other public statement will give prior notice to the other
party of the content and timing of any such press release or other public
statement required by applicable Law or by obligations pursuant to any listing
agreement with any securities exchange or any stock exchange regulations.
SECTION 8.6. Notice of Certain Events. Prior to the Closing, (i) Borg-
Warner will promptly notify the Loomis Stockholders Trust and Newco of the
occurrence of any event or condition which would reasonably be expected to have
a Material Adverse Effect on Wells Fargo and (ii) Loomis will promptly notify
Wells Fargo and Newco of the occurrence of any event or condition which would
reasonably be expected to have a Material Adverse Effect on Loomis.
SECTION 8.7. No Other Bids; Liquidated Damages; Failure to Obtain Director
Consents.
(a) From and after the date hereof, neither Borg-Warner nor Loomis
shall, nor shall they permit any of their Subsidiaries to, nor shall they
authorize or permit any officer, director or employee of or any investment
banker, attorney, accountant or other representative retained by them or any of
their Subsidiaries to, solicit, initiate or encourage submission of any proposal
or offer (including by way of furnishing information) from any Person which
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
As used in this Agreement, "Acquisition Proposal" shall mean any proposal for a
merger or other business combination involving any of Wells Fargo or Loomis or
any of their Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in any of Wells Fargo or Loomis or any of their
Subsidiaries or a substantial portion
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of the assets of any of Wells Fargo or Loomis or any of their Subsidiaries other
than as contemplated hereby.
(b) In the event that the Wells Fargo Parties, on the one hand, or the
Loomis Parties, on the other hand, receive an Acquisition Proposal from any
Person and thereafter consummate a merger, business combination or other similar
transaction with such Person or an Affiliate of such Person arising out of such
Acquisition Proposal (a "Competing Transaction"), then Borg-Warner, in the case
of the Wells Fargo Parties consummating such Competing Transaction, or Loomis
Armored, in the case of the Loomis Parties consummating such Competing
Transaction, shall be obligated to pay the other party liquidated damages in the
amount of $4,000,000, plus all reasonable costs and expenses actually incurred
by such party in connection with this Agreement and the transactions
contemplated hereby.
SECTION 8.8. Stockholders Agreement. At the Closing, Wells Fargo, the
Loomis Stockholders Trust and Newco shall enter into the Stockholders Agreement
in the form attached hereto as Exhibit A (the "Stockholders Agreement").
SECTION 8.9. Election of Officers or Directors. Prior to the Closing
Date, Newco shall cause the Persons set forth on Exhibit B hereto to be elected
as directors and officers of Newco and such Persons shall hold such
directorships and offices at the Closing Date. Effective as of the Closing,
Newco and Loomis shall cause the Persons set forth on Exhibit C hereto to be
elected as directors and officers of Loomis.
SECTION 8.10. The Financing. Each of Loomis, Borg-Warner and Wells Fargo
agree to use commercially reasonable efforts to secure the Financing prior to
the Closing, including by making available, subject to reasonable
confidentiality provisions, its books and records and such officers of such
entity as may be reasonably necessary for prospective lenders and their agents
to complete customary due diligence. The "Financing" shall consist of a senior
subordinated notes offering and a step-down revolving credit facility providing
aggregate proceeds or borrowing capacity to Newco of at least $185,000,000.
SECTION 8.11. Wells Fargo Corporate Existence. From and after the Closing
for a period of two years after the Closing Date, Wells Fargo shall, and Borg-
Warner shall cause Wells Fargo to, do or cause to be done all things necessary
to preserve and keep in full force and effect its corporate existence, and,
without the prior written consent of the Loomis Stockholders Trust, Wells Fargo
shall not, and Borg-Warner shall not cause Wells Fargo to, merge or consolidate
with any Person or dissolve or adopt a plan of liquidation. From and after the
Closing, for a period of two years after the Closing Date, without the prior
written consent of the Loomis Stockholders Trust, Wells Fargo shall not, and
Borg-Warner shall not
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cause Wells Fargo to, sell, convey, assign or otherwise transfer the shares of
Newco Common Stock received by Wells Fargo at the Closing pursuant to this
Agreement; provided that nothing in this Agreement shall preclude Borg-Warner or
Wells Fargo from pledging such shares to secure indebtedness for borrowed money
of Borg-Warner or Wells Fargo.
SECTION 8.12. Cancellation of MEGA Units. At or prior to the Closing,
Loomis shall terminate the Loomis Management Equity Growth and Appreciation Plan
(the "MEGA Plan") and cause the units granted pursuant thereto to be cancelled,
and the holders thereof shall in lieu of such units receive options to purchase
a number of shares of Newco Common Stock that is equivalent in value pursuant to
a Newco MEGA Units Holder Plan reasonably satisfactory to the parties hereto to
be established by Newco (the "New MEGA Plan"). Such options shall be subject to
the same vesting schedule and other limitations on exercise and transfer as
presently exist with respect to the units outstanding under the MEGA Plan. Upon
exercise of any option issued pursuant to the New MEGA Plan, the Loomis
Stockholders Trust shall deliver one share of Newco Common Stock to Newco for
each share of Newco Common Stock to be issued by Newco with respect to such
exercise and Newco shall deliver to the Loomis Stockholders Trust the exercise
price paid by such option holder with respect to such exercise, in each case in
accordance with a Stock Contribution Agreement by and between the Loomis
Stockholders Trust and Newco in form and substance that is reasonably
satisfactory to the parties hereto.
SECTION 8.13. Tax Reporting.
(a) Within 90 days after the Closing Date, Borg-Warner on behalf of
Wells Fargo shall prepare or caused to be prepared and delivered to each of
Newco and the Loomis Stockholders Trust a schedule setting forth in detail the
basis of the Transferred Assets, its proposed computation of gain and loss to be
recognized with respect to the Transferred Assets upon the transfer of the
Transferred Assets to Newco, its estimation of the fair market value and useful
lives of those Transferred Assets (the "Amortizable Intangibles") that are
eligible for amortization or depreciation deductions under the applicable
federal income Tax law in effect prior to the effective date of Section 197 of
the Code, and its proposal with respect to Newco's Tax basis in the Transferred
Assets (the "Basis Schedule"). In the event that the Loomis Stockholders Trust
delivers written notice to Borg-Warner to the effect that a majority of the
unitholders of the Loomis Stockholders Trust disagrees with all or any portion
of the Basis Schedule or with Wells Fargo's determinations as to the existence
or basis of Amortizable Intangibles, Wells Fargo and a representative appointed
by a majority of the unitholders of the Loomis Stockholders Trust shall
negotiate in good faith in order to resolve any such disagreements regarding the
Basis Schedule or Amortizable Intangibles. In the event that Wells Fargo and
the representative of the Loomis Stockholders Trust are unable to reach
agreement regarding the Basis Schedule or certain aspects of Wells Fargo's
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determinations relating to the Amortizable Intangibles within thirty days of the
receipt thereof by the Loomis Stockholders Trust, such disagreement shall be
submitted for resolution to the CPA Firm, and such resolution shall be binding
among the parties hereto. All of the costs and expenses of the parties incurred
in connection with this Section 8.13 (including, without limitation, reasonable
accountants' and appraisers' fees) shall be borne by Newco.
(b) Unless there has been a Final Determination to the contrary, the
parties covenant and agree for all Tax purposes, including the filing of Tax
Returns and in any audit, administrative or judicial proceeding relating to
Taxes, to (and to cause any Affiliate or successor to) take each of the
positions set forth below and not to take any positions or agree to any
settlements inconsistent therewith:
(i) the transfer of the Transferred Assets by Wells Fargo to
Newco and the transfer of the Loomis Common Stock by the Loomis Stockholders
Trust together constitute an exchange qualifying under Section 351 of the Code;
(ii) the transfer of the Transferred Assets by Newco to Loomis
constitutes an exchange qualifying under Section 351 of the Code;
(iii) Wells Fargo will recognize gain or loss with respect to
each of the Transferred Assets in a manner which is consistent with the Basis
Schedule, as finally determined hereunder;
(iv) the Tax basis of each of the Transferred Assets is as set
forth in the Basis Schedule, as finally determined hereunder; and
(v) the holding period of each Transferred Asset will include the
period during which such asset was held by Wells Fargo.
(c) Each of the parties hereto agrees to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Transferred Assets and the business
as is reasonably necessary for the filing of all Tax Returns, the making of any
election relating to Taxes, the preparation for any audit by any Tax Authority,
and the prosecution or defense of any claim, suit or proceeding relating to any
Tax Return. The parties will cooperate with each other in the conduct of any
audit or other proceeding relating to the Transferred Assets or to the business,
and each will execute and deliver such powers of attorney and other documents as
are necessary to carry out the intent of this section.
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(d) The term "Final Determination" means (i) a final, unappealable
decision by a court of competent jurisdiction; (ii) the expiration of the time
for filing a claim for refund or, if a refund claim has been timely filed, the
expiration of the time for instituting suit in respect of such refund claim, if
no further adjustment to the items of income, gain, deduction, loss, or credit
may thereafter be made; (iii) the execution by or on behalf of the taxpayer and
the Internal Revenue Service of a closing agreement under Section 7121 of the
Code (or any comparable agreement under state, local or foreign law); (iv) the
acceptance by the Internal Revenue Service of a tender pursuant to an offer in
compromise pursuant to Section 7122 of the Code (or any comparable procedure
under state, local or foreign law); (v) the execution of a Form 870-AD (or any
comparable form under state, local or foreign law); or (vi) any other final and
irrevocable determination of Tax liability.
SECTION 8.14. Insurance Coverage. From and after the date hereof until
Closing, Borg-Warner shall maintain in place and shall not amend in any material
respect any fire or other property damage insurance covering any of the
Transferred Assets. In the event of the occurrence of any property loss
suffered by Wells Fargo or its Subsidiaries with respect to any Transferred
Asset from and after the date hereof until Closing that is covered by any fire
or other property damage insurance policy of Wells Fargo or its Subsidiaries,
Borg-Warner and Wells Fargo shall submit such claim to the insurer pursuant to
such policy, and to the extent any proceeds are collected by Borg-Warner or
Wells Fargo after the Closing in respect of such claim, such proceeds shall be
promptly delivered to Newco.
SECTION 8.15. Title Policies. Wells Fargo shall use its best efforts to
locate all title policies which exist with respect to the WF Owned Real Property
and deliver any such located title policies to Newco at Closing. Loomis shall
use its best efforts to locate all title policies which exist with respect to
the Loomis Owned Real Property and deliver any such located title policies to
Newco prior to Closing.
SECTION 8.16. Information Supplied.
(a) Borg-Warner and Wells Fargo agree that none of the information
supplied or to be supplied solely by Borg-Warner or Wells Fargo specifically for
inclusion or incorporation by reference in the offering memorandum (the
"Offering Memorandum") or the registration statement (the "Registration
Statement") with respect to the offer, sale and exchange of the senior
subordinated notes of Newco which shall constitute part of the Financing will,
at the time the Offering Memorandum is first distributed to potential investors
or the Registration Statement is filed with the Securities and Exchange
Commission, or at any time the Offering Memorandum or Registration Statement is
supplemented or amended, or at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any
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material fact required to be stated therein as necessary to make the statements
therein not misleading.
(b) Loomis and the Loomis Stockholders Trust agree that none of the
information supplied or to be supplied solely by Loomis or the Loomis
Stockholders Trust specifically for inclusion or incorporation by reference in
the Offering Memorandum or the Registration Statement with respect to the offer,
sale and exchange of the senior subordinated notes of Newco which shall
constitute part of the Financing will, at the time the Offering Memorandum is
first distributed to potential investors or the Registration Statement is filed
with the Securities and Exchange Commission, or at any time the Offering
Memorandum or Registration Statement is supplemented or amended, or at the time
the Registration Statement becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein as necessary to make the statements therein not
misleading.
SECTION 8.17. Transition Services. At the Closing, Newco and Borg-Warner
will enter into a "Transition Services Agreement" pursuant to which Borg-Warner,
through its Subsidiaries, shall provide to Newco (a) those services currently
provided to Wells Fargo pursuant to the licensing and other agreements listed in
Section 8.17 of the Disclosure Schedule and (b) assistance in the administration
of the Wells Fargo medical insurance plans in respect of Assumed Liabilities
arising thereunder ("Administrative Assistance"). The Transition Services
Agreement shall contain mutually acceptable terms and conditions customary to
such agreements and shall provide that:
(i) Borg-Warner shall cause such services to be provided to Newco
for a period not to exceed 150 days;
(ii) Newco shall pay to Borg-Warner or its Subsidiaries a fee
equal to (A) the percentage of the costs and expenses currently allocated to
Wells Fargo in respect of such services multiplied by (B) the costs and expenses
of such services, in each case, consistent with past practices; provided that
the fee paid by Newco for Administrative Assistance shall be equal to the actual
cost to Borg-Warner, through its Subsidiaries, of administering the applicable
plans;
(iii) In addition to the fee referred to in clause (ii), Newco
shall be responsible for all incremental third party costs or charges, if any,
incurred for services rendered directly or indirectly to it pursuant to the
agreements set forth in Section 8.17 of the Disclosure Schedule; and
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(iv) upon 30 days prior written notice to Borg-Warner, Newco may
terminate the Transition Services Agreement prior to the last date on which
Borg-Warner is required to provide such services to Newco thereunder and, upon
such termination, Newco shall not be responsible for any fees, costs, expenses
or charges with respect to such services or pursuant to the agreements set forth
in Section 8.17 of the Disclosure Schedule other than such fees, costs, expenses
and charges payable in respect of such services by Newco for the period prior to
such termination.
SECTION 8.18. Accounts Receivable. At the Closing, before giving effect
to the transactions contemplated hereby, Wells Fargo will deliver to Newco all
of the accounts receivable set forth on the WF Closing Balance Sheet free and
clear of any Liens.
SECTION 8.19. Wells Fargo Armored Service Corporation of Puerto Rico. The
parties hereby agree that the amount of cash held as an asset by Wells Fargo
Armored Service Corporation of Puerto Rico, a Tennessee corporation that is a
wholly-owned subsidiary of Wells Fargo ("Wells Puerto Rico"), immediately prior
to Closing and not retained as an Excluded Asset will be not more than $900,000
nor less than $200,000 and that Wells Fargo shall be reimbursed at Closing for
such amount pursuant to Section 2.3.
SECTION 8.20. Loomis Casualty Insurance Deposits. Newco agrees that any
Loomis Casualty Insurance Deposits shall be for the benefit of the Loomis
Casualty and Employee Claims Trust and that Newco will not act to reduce such
deposit in any way. From and after the Closing, upon the earlier of termination
of the casualty insurance policy or policies in effect in respect of the Loomis
Casualty and Employee Claims or the satisfaction and discharge of all Loomis
Casualty and Employee Claims, Loomis shall promptly pay to the Loomis Casualty
and Employee Claims Trust an amount equal to all Loomis Casualty Insurance
Deposits maintained with respect to such policy.
SECTION 8.21. Employees and Employee Benefits.
(a) Except for certain headquarters employees of Wells Fargo set forth
on a list to be provided by Newco to Wells Fargo at least five days prior to the
Closing Date, Newco shall offer employment as of the Closing Date on an "at
will" basis to substantially all employees of Wells Fargo and its Subsidiaries
who are actively employed on such date ("Active Employees"). Each such offer of
employment (i) to each non-bargaining unit employee shall be on terms and
conditions to be determined by Newco in its sole discretion and (ii) to each
bargaining unit employee shall be at least the same wage rate and with
substantially comparable benefits, other than participation in a tax-qualified
defined benefit plan, in the aggregate (based on the prior year's cost), as in
effect for such employee immediately prior to the Closing Date, and other terms
and conditions to be determined by
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Newco in its sole discretion. All Active Employees who accept Newco's offer of
employment by the Closing Date shall be deemed "Transferred Employees." Newco
shall also offer employment to employees of Wells Fargo or any of its
Subsidiaries who are not actively employed on the Closing Date and have a right
to re-employment with Wells Fargo or any of its Subsidiaries, on terms and
conditions to be determined by Newco in its sole discretion; provided, however,
that any such employee shall be offered employment by Newco only if he or she is
fully able to return to active employment in accordance with Newco's employment
policies within six (6) months after the Closing Date.
(b) With respect to each Transferred Employee, service with Wells
Fargo or any of its Affiliates shall be counted for purposes of determining any
period of eligibility to participate or to vest in benefits under Newco's
benefit plans to the same extent such service was counted under any similar type
of WF Benefit Plan under which such Transferred Employee was covered immediately
prior to the Closing Date, except that such service with Wells Fargo shall not
be counted for purposes of Newco's severance policies to the extent that
Transferred Employees have received severance benefits for such service. Newco,
for purposes of deductible limits under its welfare plans, shall credit each
Transferred Employee with the amounts so credited with respect to the portion of
the calendar year preceding the Closing Date under the same type of WF Benefit
Plan in which such Transferred Employee is participating as of the Closing Date.
With respect to each Transferred Employee, Newco's group health plans shall not
exclude coverage for pre-existing conditions that were not excluded under
similar WF Benefit Plans in which such Transferred Employee is participating as
of the Closing Date.
(c) Newco agrees that, within ten business days after the date
hereof, it will advise each union with which Wells Fargo has a collective
bargaining agreement that it does not intend to assume such collective
bargaining agreement in connection with the transactions set forth herein.
Newco also agrees that it will bargain in good faith with representatives of
each such union regarding the employment terms and conditions of each bargaining
unit employee.
(d) As of the Closing Date, Newco shall assume the obligations and
liabilities under the Wells Fargo Non-Officers Severance Compensation and
Benefits Policy, as amended and restated as of October 29, 1996, and Senior
Officer Severance Compensation and Benefits Policy, as adopted effective October
29, 1996, and Newco or its designee shall replace Wells Fargo and its management
as the plan administrator under both policies. At a time (but in any event
prior to the Closing Date) and in a manner reasonably satisfactory to Newco,
Wells Fargo shall communicate and make available to its officers and home office
employees the terms of its severance policies described above and shall clearly
indicate that the terms of such severance policies shall govern any terminations
of employment on account
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of the transactions contemplated hereby and supersede any prior communications
with respect thereto.
(e) Newco shall assume the liability as of the Closing Date for the
accrued and unpaid vacation and sick days with respect to the employees of Wells
Fargo or any of its Subsidiaries.
(f) Newco shall promptly reimburse Wells Fargo for the liability of
Wells Fargo and its Subsidiaries for claims incurred and unpaid prior to the
Closing Date under the WF Employee Benefit Plans which constitute welfare
benefit plans (including the related portion of any retrospective insurance
premiums, but excluding any WF Casualty and Employee Claims) to the extent such
liability (i) is not covered under a non-experience-rated insurance contract and
(ii) exceeds the amount of the related portion of any retention or reserves
(including but not limited to amounts held in a voluntary employee beneficiary
association or under an experience-rated insurance contract, and intercompany
contributions and insurance premiums paid in excess of claims paid). As of the
end of the plan year following the Closing Date, Wells Fargo shall pay to Newco
the excess portion of any retention or reserves under the WF Employee Benefit
Plans which constitute welfare benefit plans to the extent allocable to Wells
Fargo and its Subsidiaries.
(g) As soon as practicable after the Closing Date, the account
balances as of the Closing Date of the Transferred Employees held in the Borg-
Warner Security Corporation Investment Plan (the "401(k) Plan"), as equitably
adjusted for earnings thereon, additional contributions thereto with respect to
the period prior to the Closing Date and distributions therefrom through the
date of transfer, shall be transferred to a tax-qualified defined contribution
plan sponsored, maintained or contributed to by Newco ("Newco Plan"). Such
transfer shall be effected in accordance with applicable law and regulations.
Newco shall make or cause to be made, and Borg-Warner or Wells Fargo, as the
case may be, shall make or cause to be made, any required filings in connection
therewith. Newco and Borg-Warner may each require, as a condition to the making
of any such transfer, evidence reasonably satisfactory to it of the qualified
status of the 401(k) Plan and Newco Plan, including, without limitation, a copy
of a favorable determination letter from the Internal Revenue Service. In
consideration of and effective upon such transfer, the Newco Plan shall assume
all liabilities to Transferred Employees under the 401(k) Plan to the extent of
the amount of assets transferred by the 401(k) Plan to the Newco Plan. Each of
the parties shall pay its own expenses in connection with such transfer. Newco
shall not assume any other obligations or liabilities arising under or
attributable to the 401(k) Plan, the same to be retained or assumed by Borg-
Warner.
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(h) Wells Fargo and Borg-Warner, on one hand, and Newco, on the other
hand, shall each promptly and reasonably cooperate in good faith with each other
to ensure that their respective obligations with respect to employee benefit
plans are timely and properly satisfied, including sharing information regarding
employees and coordinating communications with employees.
SECTION 8.22. Termination of Management Agreements. The parties hereby
agree that, effective as of the Closing, all management or other advisory
agreements between (a) Wingate and any of its Affiliates, on the one hand, and
Loomis and/or Loomis Armored, on the other, and (b) Borg Warner and any of its
Affiliates, on the one hand, and Wells Fargo or any of its Subsidiaries, on the
other, in each case, shall be terminated with no further obligation of any party
thereunder other than the payment of any fees or expenses owing as of the
Closing Date.
SECTION 8.23. Use of Name. Wells Fargo and Borg-Warner agree that they
will use their best efforts to secure by December 13, 1996 the consent of Wells
Fargo & Company and Wells Fargo Bank, National Association (together, "Wells
Fargo Bank"), to the use by Newco of the word "Fargo" in its name by means of a
perpetual, royalty-free license containing covenants and restrictions that are
customary for similar licenses or, in the alternative, an acknowledgement in
writing from Wells Fargo Bank that such use of the name "Fargo" does not
infringe on any intellectual property rights of Wells Fargo Bank.
SECTION 8.24. Consents of Equity Holders. Loomis agrees that it will use
its best efforts to secure the consent of the Loomis Other Equity Holders to
convert or exchange their Loomis Other Equity Interests for shares of Loomis
Common Stock and contribute such shares of Loomis Common Stock to the Loomis
Stockholders Trust prior to Closing, all pursuant to the terms of the Waiver and
Termination of Purchase Agreement and Exercise Agreement, the Waiver, Exercise,
and Termination of Warrant Agreement, the Contingent Contribution Agreement and
the Optionholder Acknowledgement Agreement (collectively, the "Contingent
Exercise Agreements") in the forms attached hereto as Exhibit D, as applicable.
Loomis agrees that it will not modify the forms of Contingent Exercise
Agreements or amend, terminate or modify any such Contingent Exercise Agreements
after the execution and delivery thereof by a Loomis Other Equity Holder, in
each case, without the prior written consent of Wells Fargo. Further, the
Loomis Stockholders Trust agrees that it will use its best efforts to secure the
agreement of each of the holders of rights under the MEGA Plan to exchange such
rights for options issued pursuant to the New MEGA Plan, without any further
liability or obligation on the part of Loomis.
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SECTION 8.25. Contribution to Reserve. On the Closing Date, the reserve
in respect of doubtful accounts reflected in the financial statements of Wells
Fargo shall be at least $2 million.
SECTION 8.26. Support Payment. In the event that any participant in the
MEGA Plan declines to exchange such participant's rights therein for options for
Newco Common Stock issued pursuant to the New MEGA Plan, and, thereafter, such
participant becomes entitled to any payment as a result of participation in the
MEGA Plan, the Loomis Stockholders Trust shall promptly pay to such participant
the amount of any such payment to which such participant would otherwise be
entitled from Loomis and will indemnify and hold Newco harmless from any and all
claims, damages or losses in respect of such nonexchanged MEGA Plan units.
ARTICLE IX
CLOSING CONDITIONS
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SECTION 9.1. Conditions to Each Party's Obligations under this Agreement.
The respective obligations of each party under this Agreement shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated;
(b) No injunction, restraining order or other ruling or order issued
by any court of competent jurisdiction or governmental authority prohibiting the
consummation of the transactions contemplated hereby shall be in effect;
(c) Wells Fargo, the Loomis Stockholders Trust and Newco shall have
executed and delivered the Stockholders Agreement, and the Stockholders
Agreement shall be in full force and effect;
(d) the Financing shall be available and the lenders thereunder shall
have informed the parties that they are willing to fund the entire amount of the
Financing (subject to any applicable agreed-upon borrowing base) without
reservation, other than subject to the consummation of the transactions
contemplated hereby; and
(e) the consent of the Lessor under the Associates Lease to the
assignment of such Lease to Newco shall have been obtained.
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SECTION 9.2. Conditions to the Obligations of the Loomis Stockholders
Trust, Loomis and Loomis Armored under this Agreement. The obligations of the
Loomis Stockholders Trust, Loomis and Loomis Armored under this Agreement shall
be further subject to the satisfaction, at or prior to the Closing Date, of the
following conditions:
(a) Each of the obligations of Borg-Warner and Wells Fargo,
respectively, required to be performed by them at or prior to the Closing
pursuant to this Agreement shall have been duly performed and complied with in
all material respects, and the representations and warranties of each of Borg-
Warner and Wells Fargo contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing as
though made at and as of the Closing (except as to any representation or
warranty which specifically relates to an earlier date), and the Loomis
Stockholders Trust shall have received a certificate to that effect signed by an
officer of each of Borg-Warner and Wells Fargo, as applicable;
(b) Any and all material Permits, consents, waivers, clearances, and
approvals of all governmental bodies which are necessary in connection with the
consummation of the transactions contemplated hereby and all third party
consents which are set forth in Section 9.2(b) of the Disclosure Schedule shall
have been obtained and there shall have not been imposed in connection with
obtaining the same any materially adverse or burdensome terms on Loomis or
Newco;
(c) The Loomis Stockholders Trust shall have received from Davis Polk
& Wardwell, counsel to Borg-Warner and Wells Fargo, an opinion substantially in
the form of Exhibit E hereto; and
(d) The Loomis Stockholders Trust shall have received from the General
Counsel of Borg-Warner an opinion substantially in the form of Exhibit F hereto.
SECTION 9.3. Conditions to the Obligations of Borg-Warner and Wells Fargo
under this Agreement. The obligations of each of Borg-Warner and Wells Fargo
under this Agreement shall be further subject to the satisfaction, at or prior
to the Closing Date, of the following conditions:
(a) Each of the obligations of the Loomis Stockholders Trust, Loomis,
Loomis Armored and Newco, respectively, required to be performed by it at or
prior to the Closing pursuant to the terms of this Agreement shall have been
duly performed and complied with in all material respects, and the
representations and warranties of each of the Loomis Stockholders Trust, Loomis,
Loomis Armored and Newco, respectively, contained in this Agreement shall be
true and correct in all material respects as of the date of this
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Agreement and as of the Closing Date as though made at and as of the Closing
Date (except as to any representation or warranty which specifically relates to
an earlier date), and Borg-Warner and Wells Fargo shall have received a
certificate to that effect signed by an officer or other authorized
representative of each of Loomis, Newco and the Loomis Stockholders Trust, as
applicable;
(b) Any and all material Permits, consents, waivers, clearances,
approvals and authorizations of all governmental bodies which are necessary in
connection with the consummation of the transactions contemplated hereby and all
third party consents which are set forth in Section 9.3(b) of the Disclosure
Schedule shall have been obtained and there shall have not been imposed in
connection with obtaining the same any materially adverse or burdensome terms on
Wells Fargo or Newco;
(c) Borg-Warner shall have received from Weil, Gotshal & Manges LLP,
counsel to Loomis, an opinion in substantially the form of Exhibit G hereto;
(d) Borg-Warner shall have received from Prickett, Jones, Elliott,
Kristol & Schnee, counsel to the Loomis Stockholders Trust, an opinion
substantially in the form of Exhibit H hereto;
(e) The Loomis Stockholder Trust and Newco shall have executed and
delivered the Loomis Excess Claims Assumption Agreement, and the Loomis Excess
Claims Assumption Agreement shall be in full force and effect; and
(f) Newco shall have established each of the Loomis Casualty and
Employee Claims Trust and the Loomis Indemnity Trust, each in form and substance
reasonably satisfactory to Wells Fargo and the Loomis Stockholders Trust.
ARTICLE X
CLOSING
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SECTION 10.1. Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Weil, Gotshal
& Manges LLP, 767 Fifth Avenue, New York, NY 10153, subject to the satisfaction
or waiver of the conditions set forth in Article IX, on the later of (i) two
business days after the receipt of all requisite governmental approvals and (ii)
the date of the closing of the Financing, or at such other time and place and on
such other date as Borg-Warner and the Loomis Stockholders Trust shall agree
(the "Closing Date"). At the Closing:
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(a) Borg-Warner and Wells Fargo shall deliver the following:
(i) the certificates described in Section 9.2(a); and
(ii) copies of such bills of sale, assignments, general warranty
deeds, and other good and sufficient instruments of transfer as Loomis and
the Loomis Stockholders Trust may reasonably request conveying and
transferring to Newco title to the Transferred Assets.
(b) the Loomis Stockholders Trust shall deliver or cause to be
delivered the following:
(i) the certificates described in Section 9.3(a);
(ii) certificate(s) representing all of the outstanding shares of
Loomis Common Stock duly endorsed or accompanied by stock powers duly
endorsed in blank or for transfer to Newco; and
(iii) the Loomis Excess Claims Assumption Agreement.
(c) Newco shall deliver the following:
(i) to Wells Fargo, a certificate for 4,900,000 shares of Newco
Common Stock registered in the name of Wells Fargo;
(ii) to Wells Fargo, an assignment and assumption agreement with
respect to the transfer of the Transferred Assets and the assumption of the
Assumed Liabilities;
(iii) to Wells Fargo, a cash payment in accordance with Section
2.3;
(iv) to the Loomis Stockholders Trust, a certificate for
5,100,000 shares of Newco Common Stock registered in the name of the Loomis
Stockholders Trust;
(v) to the Loomis Stockholders Trust, the NOL Note;
(vi) to the Loomis Indemnity Trust, a cash payment in accordance
with Section 1.2(b);
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(vii) to the Loomis Casualty and Employee Claims Trust, a cash
payment in accordance with Section 1.2(b);
(viii) to Loomis, a capital contribution consisting of a cash
payment in the amount of the Loomis Closing Liabilities;
(ix) to Loomis, a capital contribution consisting of the Class I
beneficial interests in the Loomis Indemnity Trust and the Loomis Casualty
and Employee Claims Trust; and
(x) to the Loomis Stockholders Trust, an assignment of the Class
II beneficial interests in the Loomis Indemnity Trust and the Loomis
Casualty and Employee Claims Trust.
(d) Loomis shall redeem the Series I Preferred Stock in accordance
with Section 1.4.
ARTICLE XI
TERMINATION AND ABANDONMENT
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SECTION 11.1. Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) by mutual consent of Borg-Warner and the Loomis Stockholders
Trust; or
(b) by either of Borg-Warner and the Loomis Stockholders Trust:
(i) if there shall have been a breach of any representation,
warranty, covenant or agreement on the part of Borg-Warner or Wells Fargo
on the one hand, or Loomis, Loomis Armored or the Loomis Stockholders Trust
on the other, set forth in this Agreement which breach would result in a
Material Adverse Effect on Wells Fargo or Loomis, respectively, and which
shall not have been cured within 20 business days following receipt by the
breaching party of notice of such breach; provided, however, that such 20
business day period shall be extended so long as the breaching party shall
use its best efforts to cure such breach and such breach is capable of
being cured prior to the Closing;
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(ii) if a court of competent jurisdiction or governmental,
regulatory or administrative agency or commission shall have issued an
order, decree or ruling or taken any other action (which order, decree or
ruling the parties hereto shall use their best efforts to lift), in each
case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable; or
(iii) if the Closing Date shall not have occurred on or before
April 1, 1997; provided, however, that the right to terminate this
Agreement shall not be available to any party whose material breach of this
Agreement has been the cause of, or resulted in, the failure of the Closing
to occur on or before such date.
SECTION 11.2. Procedure and Effect of Termination. In the event of
termination pursuant to Section 11.1, written notice thereof shall forthwith be
given to the other parties to this Agreement and this Agreement shall terminate
without further action by any of the parties hereto. If this Agreement is
terminated as provided herein:
(a) upon request therefor, each party will redeliver all documents,
work papers and other material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the execution hereof, to
the party furnishing the same; and
(b) no party hereto shall have any liability or further obligation to
any other party to this Agreement resulting from such termination except (i)
that the provisions of Sections 8.5 and 8.7(b) (but, in the case of Section
8.7(b), only if there has been a breach of Section 8.7(a) prior to such
termination) and this Section 11.2 shall remain in full force and effect and
(ii) no party waives any claim or right against a breaching party to the extent
that such termination results from (x) a knowing material breach by a party
hereto of any of its covenants or agreements set forth in this Agreement or (y)
a knowing material breach by a party hereto of any representation or warranty
set forth in this Agreement, but only if such breach shall have occurred or was
otherwise existing as of the date of this Agreement.
ARTICLE XII
INDEMNIFICATION
---------------
SECTION 12.1. Environmental Indemnification.
(a) From and after the Closing until the date set forth in clause (d)
below,
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(i) Borg-Warner shall indemnify, pay, reimburse, defend and
otherwise hold harmless Newco and its Subsidiaries (collectively, the
"Newco Parties") from and against any and all reasonable costs and expenses
incurred by Newco to (x) remove or upgrade any USTs on the Wells Fargo
Sites as necessary to bring such USTs into compliance, by December 31,
1998, with the UST Rules, (y) investigate, monitor, remediate or otherwise
clean up any Hazardous Materials Released on or prior to the Closing or in
conjunction with actions required pursuant to clause (x) immediately above,
in each case, from any USTs on the Wells Fargo Sites with respect to which
UST Closure has not been obtained prior to Closing, and (z) investigate,
monitor, remediate or otherwise address any Known Environmental Condition
existing as of the date of this Agreement and set forth in Section 4.20(a)
of the Disclosure Schedule; and
(ii) the Loomis Stockholders Trust shall indemnify, pay,
reimburse, defend and otherwise hold harmless the Newco Parties from and
against any and all reasonable costs and expenses incurred by Newco to (x)
remove or upgrade any USTs on the Loomis Sites as necessary to bring such
USTs into compliance, by December 31, 1998, with the UST Rules, (y)
investigate, monitor, remediate or otherwise clean up any Hazardous
Materials Released on or prior to the Closing or in conjunction with
actions required by clause (x) immediately above, in each case, from any
USTs on the Loomis Sites with respect to which UST Closure has not been
obtained prior to the Closing, and (z) investigate, monitor, remediate or
otherwise address any Known Environmental Condition existing as of the date
of this Agreement and disclosed in Section 5.22(a) of the Disclosure
Schedule.
(b) Any removal, upgrade, investigation, monitoring, remedial or other
actions undertaken pursuant to Section 12.1(a)(i)(x) or Section 12.1(a)(ii)(x)
shall be performed in a reasonable and cost-effective manner, taking into
account the current use of the site, and shall be limited to those actions
necessary to comply with the UST Rules and, if applicable, to receive UST
Closure and, with respect to any remedial, monitoring, investigation or clean-up
activities undertaken pursuant to Section 12.1(a)(i)(y) or (z) or Section
12.1(a)(ii)(y) or (z), shall be limited to those activities required by
applicable regulatory authorities to comply with Environmental Laws and shall be
performed in a reasonable and cost-effective manner, taking into account the
current use of the site. In the event Newco shall cause the removal of any UST
that could otherwise be upgraded pursuant to Section 12.1(a) in a reasonable and
cost-effective manner, Borg-Warner or the Loomis Stockholders Trust, as the case
may be, shall only be liable for that amount which would have been necessary (as
provided in the prior sentence) to upgrade such UST (including, if necessary,
for any remedial actions which would have been necessary in connection with such
upgrade).
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(c) Newco agrees to (i) use reasonable efforts to perform any
investigatory, remedial or other actions in a manner which will permit Newco to
recover the maximum available funds under any applicable state UST funds and any
applicable insurance policies, (ii) apply for any reimbursements or payments
from such funds or policies on a timely basis and (iii) promptly reimburse Wells
Fargo or the Loomis Stockholders Trust, as applicable, for any amounts received
from such funds or policies.
(d) The respective obligations of Borg-Warner and the Loomis
Stockholders Trust pursuant to the provisions set forth in Section 12.1(a) shall
survive until the earlier to occur of (i) December 31, 1998 and (ii) the first
anniversary of the initial public offering of Newco Common Stock. Thereafter,
except as set forth in the next sentence, each of Newco, Wells Fargo and the
Loomis Stockholders Trust hereby waives any contribution or similar rights any
may have against the others, whether in law or in equity, with respect to
environmental matters covered by this Agreement. To the extent there are
remedial activities in process as of the date the indemnification obligation
terminates pursuant to this clause (d), Newco shall provide Borg-Warner or the
Loomis Stockholders Trust, as applicable, with a written estimate describing in
reasonable detail the remaining costs and expenses expected to be incurred by
Newco which would otherwise have been covered by this Section 12.1. Such costs
and expenses may be satisfied in cash (subject to a present value discount rate
equal to 8%) or pursuant to an irrevocable letter of credit issued in the full
amount of such costs and expenses; provided, however, that prior to the issuance
of any such letter of credit, Borg-Warner and the Loomis Stockholders Trust
shall agree upon the period of time in which such pending remedial activities
are reasonably expected to be completed and such letter of credit shall be
maintained without interruption until the expiration of such period. Except as
otherwise provided in the preceding sentence, the procedure for payment of such
estimated amounts, or objections thereto, shall be addressed as set forth in
clause (e) below.
(e) As costs and expenses are incurred by Newco from time to time
after the Closing pursuant to this Section 12.1, Newco shall provide Borg-Warner
or the Loomis Stockholders Trust, as applicable, with a written statement
describing in reasonable detail such costs and expenses incurred or estimated in
good faith to be incurred by Newco. In the event that Borg-Warner or the Loomis
Stockholders Trust, as applicable, has no objections to such statement, such
party shall pay Newco the amount set forth in such statement within 60 days of
receipt of such statement. In the event that Borg-Warner or the Loomis
Stockholders Trust, as applicable, objects to any such costs and expenses set
forth in any statement, such party shall, within 30 days of receipt of such
statement, submit to Newco a written notice of objection thereto stating in
reasonable detail the reason for such objection. In the event that such party
and Newco cannot come to a mutual agreement regarding the costs and expenses
objected to by such party within 30 days after the receipt by Newco of written
notice
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objecting to such costs and expenses, the matter shall be settled exclusively by
arbitration in the manner set forth in Section 12.5(c) hereof. Any amounts due
to Newco as a result of such arbitration shall be paid promptly following the
conclusion of such arbitration.
SECTION 12.2. Accounts Receivable Indemnification. From and after the
Closing, Borg-Warner shall indemnify, pay, reimburse, defend and otherwise hold
harmless the Loomis Stockholders Trust from and against any Accounts Receivable
Reserve Excess; provided, however, that notwithstanding anything in this
Agreement to the contrary, in no event will Borg-Warner be liable hereunder for
any amount of Accounts Receivable Reserve Excess greater than $500,000 in the
aggregate. As used in this Agreement, "Accounts Receivable Reserve Excess"
means the amount in excess of $2,000,000, if any, of gross accounts receivable
of Wells Fargo reflected on the WF Final Balance Sheet ("WF Accounts
Receivable") that are not collected within 180 days after the Closing Date,
minus any amounts previously paid by Borg-Warner to the Loomis Stockholders
Trust for Accounts Receivable Reserve Excess pursuant to this Section 12.2.
Newco hereby agrees to pursue the collection of the WF Accounts Receivable in
the same manner and at the same level of diligence as Newco shall pursue the
collection of its other similar accounts receivable. Not later than 195 days
after the Closing Date, Newco shall give notice, certified by the Chief
Financial Officer of Newco (the "Receivables Notice"), to Borg-Warner and the
Loomis Stockholders Trust setting forth the collection of WF Accounts Receivable
through such 180th day and the amount, if any, of any Accounts Receivable
Reserve Excess, together with a written description in reasonable detail of the
calculation thereof. Following the date of such Receivables Notice, Borg-Warner
shall have 30 days within which to (i) pay the amount of any Accounts Receivable
Reserve Excess set forth in the Receivables Notice to the Loomis Stockholders
Trust or (ii) provide Newco and the Loomis Stockholders Trust written objection
(the "Receivables Objection") to the calculation of the amount of Accounts
Receivable Reserve Excess, if any. The Loomis Stockholders Trust shall then
have 30 days to review and respond in writing to the Receivables Objection. If
Borg-Warner and the Loomis Stockholders Trust are unable to resolve any
disagreements with respect to the determination of the Accounts Receivable
Reserve Excess within 30 days following the Loomis Stockholders Trust's response
to the Receivables Objection, Borg-Warner may refer their remaining differences
to the CPA Firm, which shall, acting as arbitrators, determine, only with
respect to the remaining differences so submitted, whether and to what extent
the Accounts Receivable Reserve Excess set forth in the Receivables Notice
requires adjustment. The CPA Firm's determination shall be delivered in writing
to Borg-Warner and the Loomis Stockholders Trust and shall be conclusive and
binding upon Borg-Warner and the Loomis Stockholders Trust. In the event that
the CPA Firm determines that any amount is due and owing to the Loomis
Stockholders Trust pursuant to this Section 12.2, or Borg-Warner and the
representative for the Loomis Stockholders Trust agree as to any amount due and
owing pursuant hereto, such amount shall be paid promptly to the Loomis
Stockholders Trust by
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wire transfer to an account designated by the Loomis Stockholders Trust. The
fees and disbursements of the CPA Firm shall be paid (x) by Borg-Warner if the
difference between Borg-Warner's calculation of the Accounts Receivable Reserve
Excess and the CPA Firm's calculation thereof is greater than the difference
between the Loomis Stockholders Trust's calculation of the Accounts Receivables
Reserve Excess and the CPA Firm's calculation thereof and (y) by the Loomis
Stockholders Trust if the difference between the Loomis Stockholders Trust's
calculation of the Accounts Receivable Reserve Excess and the CPA Firm's
calculation thereof is greater than the difference between Borg-Warner's
calculation of the Accounts Receivable Reserve Excess and the CPA Firm's
calculation. Borg-Warner and Newco shall make readily available to the CPA Firm
all relevant books and records and any work papers relating to the Accounts
Receivable Reserve Excess calculation and all other items reasonably requested
by the CPA Firm and shall, at the request of the CPA Firm, request that Deloitte
make available its work papers as permitted under relevant professional
standards.
SECTION 12.3. General Indemnification.
(a) After the Closing, subject to Sections 12.6(a) and 13.12 hereof,
Borg-Warner and Wells Fargo, jointly and severally, will indemnify, defend and
hold harmless the Newco Parties from and against any and all Indemnifiable
Losses to the extent relating to, resulting from or arising out of any breach by
Borg-Warner or Wells Fargo of any of their respective representations,
warranties, covenants or agreements contained in Article IV (except for Section
4.20, which indemnity shall be governed exclusively by Section 12.1 hereof;
Section 4.13, which indemnity shall be governed exclusively by Section 12.4; and
any breach of a representation or warranty by Borg-Warner or Wells Fargo
relating to WF Accounts Receivable, which indemnity shall be governed
exclusively by Section 12.2) and Article VIII hereof.
(b) After the Closing, subject to Sections 12.6(b) and 13.12 hereof,
the Loomis Stockholders Trust will indemnify, defend and hold harmless the Newco
Parties from and against any and all Indemnifiable Losses to the extent relating
to, resulting from or arising out of any breach by Loomis, Loomis Armored, or
the Loomis Stockholders Trust of any of their respective representations,
warranties, covenants or agreements contained in Articles V (except for Section
5.22, which indemnity shall be governed exclusively by Section 12.1 hereof; and
Section 5.14, which indemnity shall be governed exclusively by Section 12.4),
Article VI and Article VIII hereof.
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SECTION 12.4. Tax Indemnification.
(a) Subject to Section 12.4(c), after the Closing, Borg-Warner and
Wells Fargo, jointly and severally, will indemnify, defend and hold harmless the
Newco Parties from and against any and all Wells Fargo Indemnifiable Taxes and
the Indemnifiable Losses relating to, resulting from or arising out of such
Wells Fargo Indemnifiable Taxes and any and all Indemnifiable Losses to the
extent relating to, resulting from or arising out of any breach by Borg-Warner
or Wells Fargo of the representations and warranties set forth in Section
4.13(b); provided that neither Borg-Warner nor Wells Fargo shall have any
obligation to make any payment to any of the Newco Parties pursuant to this
Section 12.4(a) unless and until the aggregate amount of all claims arising
pursuant hereto exceeds $250,000 and then only for the amount of such excess.
(b) Subject to Section 12.4(c), after the Closing, the Loomis
Stockholders Trust will indemnify, defend and hold harmless the Newco Parties
from and against any and all Loomis Excluded Taxes and the Indemnifiable Losses
relating to, resulting from or arising out of such Loomis Excluded Taxes and any
and all Indemnifiable Losses to the extent relating to, resulting from or
arising out of any breach by Loomis or Loomis Armored of the representations and
warranties set forth in Section 5.14(d); provided that the Loomis Stockholders
Trust shall have no obligation to make any payment to any of the Newco Parties
pursuant to this Section 12.4(b) unless and until the aggregate amount of all
claims arising pursuant hereto exceeds $250,000 and then only for the amount of
such excess.
(c) The indemnification obligations set forth in this Section 12.4
shall survive until the earlier of the second anniversary of the Closing Date
and the consummation of the initial public offering of Newco Common Stock;
provided, however, that any claim asserted by the relevant taxing authority
prior to such time shall survive until paid or until there is a Final
Determination that no portion of such claim is owed to such taxing authority.
In the event that Borg-Warner or the Loomis Stockholders Trust, as applicable,
objects to the calculation of any such indemnification obligations, such party
shall, within 30 days of receipt of such claim, submit to Newco a written notice
of objection thereto stating in reasonable detail the reason for such objection.
In the event that the such party and Newco cannot come to a mutual agreement
regarding the claim objected to by such party within 30 days after the receipt
by Newco of written notice objecting to such claim, the matter shall be settled
exclusively by arbitration in the manner set forth in Section 12.5(c) hereof.
Any amounts due to Newco as a result of such arbitration shall be paid promptly
following the conclusion of such arbitration.
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SECTION 12.5. Defense and Payment of Claims.
(a) If Newco receives notice of the assertion or commencement of any
Third Party Claim which is subject to indemnification under this Agreement,
Newco will give Borg-Warner and the Loomis Stockholders Trust reasonably prompt
written notice thereof. Such notice will (i) describe the Third Party Claim in
reasonable detail, (ii) include copies of all material written evidence thereof
and (iii) indicate the estimated amount, if reasonably practicable, of the cost,
expense, loss or diminution in value that has been or may be sustained by Newco
as a result of such Third Party Claim. The indemnifying party shall have the
right to participate in, or, by giving written notice to Newco, to assume and
control the defense of any Third Party Claim at such indemnifying party's own
expense and by such indemnifying party's own counsel (reasonably satisfactory to
Newco), and Newco will, and, to the extent that such Third Party Claim relates
to acts or omissions of Wells Fargo prior to the Closing, Borg-Warner and Wells
Fargo will, cooperate in good faith in such defense. If an indemnifying party
shall not assume the defense of a Third Party Claim or shall not diligently
defend a Third Party Claim so assumed by such indemnifying party, Newco shall
defend such Third Party Claims and may settle such claims at the discretion of
the Board of Directors of Newco. The indemnifying party shall not be liable for
any settlement of any Third Party Claim effected without its consent, which
shall not be unreasonably withheld. Within thirty days after the receipt of
notice from Newco of such settlement or a judgment in respect of such claim
which is final and nonappealable or as to which a decision by Newco and the
indemnifying party has been made not to undertake any further appeal, the
indemnifying party shall deliver cash payment to Newco in the amount of such
Indemnifiable Loss.
(b) Newco will give Borg-Warner and the Loomis Stockholders Trust
reasonably prompt notice of the incurrence of any Indemnifiable Loss which does
not result from a Third Party Claim (a "Direct Claim"). Any such notice will
(i) describe the Direct Claim in reasonable detail, (ii) include copies of all
material written evidence thereof and (iii) indicate the estimated amount, if
reasonably practicable, of the Indemnifiable Loss that has been or may be
sustained by the Loomis Parties or the Wells Fargo Parties, as the case may be,
as a result of such Direct Claim. Within thirty days after the receipt of the
notice of a Direct Claim, the Loomis Stockholders Trust or Borg-Warner, as the
case may be, shall deliver cash payment to Newco in the amount set forth in such
notice, unless the procedures for arbitration set forth in Section 12.5(c) are
elected by such party for any disputed Indemnifiable Loss as a result of a
Direct Claim within such thirty days.
(c) Subject to Section 12.6 hereof, in the event that either Borg-
Warner or the Loomis Stockholders Trust disagree as to the amount of any
Indemnifiable Loss which arises out of a Direct Claim or in connection with
Section 12.1, 12.3 or 12.4 hereof, at the
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request of either the Loomis Stockholders Trust or Borg-Warner, as the case may
be, the matter shall be settled exclusively by arbitration held in such place as
is determined by the arbitrators, pursuant to the Commercial Arbitration Rules
of the American Arbitration Association. The arbitration shall be heard before
three arbitrators, each experienced in the matters at issue, one to be selected
by the Loomis Stockholders Trust or Borg-Warner, as the case may be, one to be
selected by Newco and the third to be selected by the first two arbitrators.
The arbitrators shall apply the law of the State of New York applicable to
contracts made and to be performed entirely in such state (without giving effect
to conflicts of law provisions thereof) in resolving any such dispute. The
arbitrators shall not have the power or authority to alter, modify, amend, add
to or subtract from any term or provision of this Agreement, nor to grant any
injunctive relief, including interim relief, of any nature. In all other
respects, the Commercial Arbitration Rules of the American Arbitration
Association shall govern the arbitration. The parties acknowledge and agree
that the decision of the arbitrators pursuant to this Section 12.5(c) shall be
final and nonappealable and may be enforced by either the Loomis Stockholders
Trust or Borg-Warner, as the case may be, or Newco in any court of record having
jurisdiction over the subject matter or over any of the parties to this
Agreement. Any amount awarded by the arbitrator pursuant to this Section 12.5
shall be paid promptly to the appropriate party by wire transfer to an account
designated by such party.
SECTION 12.6. Limitation of Liability.
(a) Newco shall not be entitled to make a claim pursuant to Section
12.3 against Borg-Warner or Wells Fargo for any Indemnifiable Losses unless and
until the aggregate amount of such Indemnifiable Losses exceeds $500,000 and
then only in the amount of such excess; provided, however, that in no event
shall Borg-Warner and Wells Fargo, together, be liable pursuant to Section 12.3
for any Indemnifiable Losses in excess of $5,000,000 in the aggregate.
(b) Newco shall not be entitled to make a claim pursuant to Section
12.3 against the Loomis Stockholders Trust for any Indemnifiable Losses unless
and until the aggregate amount of such Indemnifiable Losses exceeds $500,000 and
then only in the amount of such excess; provided, however, that in no event
shall the Loomis Stockholders Trust be liable pursuant to Section 12.3 for any
Indemnifiable Losses in excess of $5,000,000 in the aggregate; provided further
that the limitations set forth in this Section 12.6(b) shall not apply to any
Indemnifiable Losses incurred by Newco pursuant to Section 8.26.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
------------------------
SECTION 13.1. Amendment and Modification. This Agreement may be amended
by a written instrument signed by Loomis, the Loomis Stockholders Trust, Borg-
Warner and Wells Fargo and, as applicable, approved by action taken by their
respective Boards of Directors, at any time.
SECTION 13.2. Waiver of Compliance; Consents. Any failure of Loomis,
Loomis Armored or the Loomis Stockholders Trust, on the one hand, or Borg-Warner
or Wells Fargo, on the other hand, to comply with any obligation, covenant,
agreement or condition contained herein may be waived in writing by Borg-Warner
or the Loomis Stockholders Trust, respectively, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
other failure.
SECTION 13.3. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
SECTION 13.4. Expenses and Obligations. The filing fees incurred in
connection with the filings or registrations with the DOJ and FTC pursuant to
the HSR Act shall be borne equally by Wells Fargo and Loomis. Except as
otherwise provided in this Agreement, Newco shall pay or otherwise be
responsible for all Transaction Costs incurred by Loomis, Borg-Warner or their
Subsidiaries; provided that Newco shall not pay or otherwise be responsible for
any costs or expenses related to any fairness opinion to be obtained by Borg-
Warner in connection with the consummation of the transactions contemplated
hereby.
SECTION 13.5. Parties in Interest. This Agreement shall be binding upon
and, except as provided below, inure solely to the benefit of each party hereto,
and, nothing in this Agreement, except as set forth below, express or implied,
is intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
SECTION 13.6. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given upon the earlier of delivery
thereof if by hand or upon receipt if sent by mail (registered or certified
mail, postage prepaid, return receipt requested) or on the second next business
day after deposit if sent by a recognized overnight delivery
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service or upon transmission if sent by telecopy or facsimile transmission (with
request of assurance of receipt in a manner customary for communication of such
type) as follows:
(a) If to Loomis, to:
Loomis Holding Corporation
c/o Wingate Partners, L.P.
750 North St. Paul, Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Facsimile No.: 214/871-8799
with copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201
Attention: Mary R. Korby, Esq.
Facsimile No.: 214/746-7777
(b) If to Borg-Warner or Wells Fargo, to:
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: J. Joe Adorjan
Facsimile No.: 312/322-8629
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William Rosoff, Esq.
Facsimile No.: 212/450-5954
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(c) If to the Loomis Stockholders Trust, to:
Wingate Partners, L.P.
750 North St. Paul
Suite 1200
Dallas, Texas 75201
Attention: Frederick B. Hegi, Jr.
Facsimile No.: 214/871-8799
with a copy to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201-6950
Attention: Mary R. Korby, Esq.
Facsimile No.: 214/746-7777
SECTION 13.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the conflicts-of-laws rules thereof.
SECTION 13.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
SECTION 13.9. Headings. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 13.10. Entire Agreement. This Agreement, the Loomis Indemnity
Trust Agreement, the Loomis Casualty and Employee Claims Trust Agreement, the
Loomis Excess Claims Assumption Agreement, the Stockholders Agreement and the
Disclosure Schedule embody the entire agreement and understanding of the parties
hereto in respect of the subject matter contained herein or therein. There are
no agreements, representations, warranties or covenants in respect of the
subject matter contained herein or therein other than those expressly set forth
herein or therein. This Agreement, the Loomis Indemnity Trust Agreement, the
Loomis Casualty and Employee Claims Trust Agreement, the Loomis Excess Claims
Assumption Agreement, the Stockholders Agreement and the Disclosure Schedule
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supersede all prior agreements and understandings between the parties with
respect to such subject matter.
SECTION 13.11. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 13.12. Termination of Representations and Warranties. All
representations and warranties of Borg-Warner, Wells Fargo, Newco, the Loomis
Stockholders Trust, Loomis and Loomis Armored shall survive the Closing until
the date which is 30 days following the date of delivery to Newco, Borg-Warner
and the Loomis Stockholders Trust of the unqualified report by Newco's
independent auditor on the audited consolidated balance sheet of Newco as of
December 31, 1997, together with the related audited consolidated statements of
income, stockholders' equity and changes in cash flows for the fiscal year ended
December 31, 1997 (the "Newco Audited Financials"); provided, that the
representations and warranties set forth in Sections 4.13(a), 4.20, 5.14(a),
(b), (c) and (e) and 5.22 and any representation and warranty of Borg-Warner or
Wells Fargo relating to WF Accounts Receivable shall terminate on the Closing
Date and provided further that the representations and warranties set forth in
Section 4.13(b) and 5.14(d) shall survive for the period specified in Section
12.4(c). Newco agrees that is shall cause its independent auditor to deliver
copies of the Newco Audited Financials to Borg-Warner and the Loomis
Stockholders Trust simultaneously with the delivery thereof to Newco. Any
claims for indemnification with respect to any of such matters which are not
asserted by notice given to the indemnifying party relating thereto within such
specified period of survival may not be pursued and are hereby irrevocably
waived after such time. Any claims for indemnification asserted within such
period of survival as herein provided will be timely made for purposes hereof,
and the representations and warranties which are the subject of such claims will
be deemed to survive but only with respect to such claims and only until such
claims are resolved in accordance with the indemnification procedures set forth
herein.
SECTION 13.13. Bulk Sales. Newco waives compliance by Wells Fargo with
the provisions of the so-called bulk sales Law of any jurisdiction; provided,
however, that Borg-Warner and Wells Fargo will jointly and severally indemnify,
defend and hold harmless Newco and its Affiliates in respect of any
Indemnifiable Loss relating to, resulting from or arising out of Wells Fargo's
failure to so comply with such Laws in connection with the transactions
contemplated by this Agreement.
SECTION 13.14. Exclusive Remedy. Each party hereto agrees that, to the
fullest extent permitted by law, such party's sole and exclusive remedy after
the Closing with respect to any claim or cause of action asserted by it relating
to or arising from breaches of the representations and warranties of any other
party contained in this Agreement or the
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covenants of any other party contained in Article VIII of this Agreement shall
be limited to its rights under, and shall be subject to the terms and conditions
of, this Agreement.
SECTION 13.15. Jurisdiction and Venue. The parties hereto agree that any
suit, action or proceeding arising out of or relating to this Agreement shall be
instituted only in the United States District Court for the District of New
York, United States of America or, in the absence of jurisdiction, the Supreme
Court of New York. Each party waives any objection it may have now or hereafter
to the laying of the venue of any such suit, action or proceeding, and
irrevocably submits to the jurisdiction of any such court in any such suit,
action or proceeding.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed on its behalf by its duly authorized officers, all as of
the day and year first above written.
BORG-WARNER SECURITY CORPORATION
By: /S/ Timothy M. Wood
----------------------------------------
Name: Timothy M. Wood
----------------------------------------
Title: Vice President
----------------------------------------
WELLS FARGO ARMORED SERVICE CORPORATION
By: /S/ Timothy M. Wood
----------------------------------------
Name: Timothy M. Wood
----------------------------------------
Title: Vice President
----------------------------------------
LOOMIS-WELLS CORPORATION
By: /S/ Frederick B. Hegi, Jr.
----------------------------------------
Name: Frederick B. Hegi, Jr.
----------------------------------------
Title: President
----------------------------------------
LOOMIS HOLDING CORPORATION
By: /S/ Frederick B. Hegi, Jr.
----------------------------------------
Name: Frederick B. Hegi, Jr.
----------------------------------------
Title: Chairman and Chief Executive Officer
----------------------------------------
<PAGE>
LOOMIS ARMORED INC.
By: /S/ Frederick B. Hegi, Jr.
------------------------------
Name: Frederick B. Hegi, Jr.
------------------------------
Title: Chairman
------------------------------
LOOMIS STOCKHOLDERS TRUST
By: /S/ Frederick B. Hegi, Jr.
------------------------------
Name: Frederick B. Hegi, Jr.
------------------------------
Title: Manager
<PAGE>
APPENDIX A
Defined Terms
For purposes of the Agreement and the Disclosure Schedule, the
term:
"Accounts Receivable Reserve Excess" shall have the meaning set
forth in Section 12.2.
"Acquisition Proposal" shall have the meaning set forth in
Section 8.7(a).
"Active Employees" shall have the meaning set forth in Section
8.21(a).
"Adjusted Working Capital" shall have the meaning set forth in
Section 3.1(c).
"Administrative Assistance" shall have the meaning set forth in
Section 8.17.
"Affiliate" shall mean a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, another Person; provided, that for purposes of this
Agreement, Newco shall not be an Affiliate of any other party hereto.
"Agreement" shall have the meaning set forth in the introductory
paragraph.
"Amortizable Intangibles" shall have the meaning set forth in
Section 8.13(a).
"Armored Common Stock" shall have the meaning set forth in
Section 5.4(b).
"Associates Lease" shall mean that certain Truck Lease Agreement,
dated as of June 16, 1993, between Associates Leasing, Inc. and Wells Fargo.
"Assumed Liabilities" shall have the meaning set forth in Section
2.1(b).
"Basis Schedule" shall have the meaning set forth in Section
8.13(a).
"Borg-Warner" shall have the meaning set forth in the
introductory paragraph.
"Business Trust Agreement" shall have the meaning set forth in
the Recitals.
<PAGE>
"Closing" shall have the meaning set forth in Section 10.1.
"Closing Balance Sheets" shall have the meaning set forth in
Section 3.1(a).
"Closing Date" shall have the meaning set forth in Section 10.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Transaction" shall have the meaning set forth in
Section 8.7(b).
"Contingent Exercise Agreements" shall have the meaning set forth
in Section 8.24.
"Contract" means any contract, agreement, indenture, note, bond,
loan, instrument, deed of trust, lease, license, conditional sales contract,
mortgage, license, franchise, insurance policy, commitment or other arrangement
or agreement.
"CPA Firm" means an independent public accounting firm of
national prominence that is unanimously approved by the executive committee of
Newco or, failing such approval, chosen by Deloitte and E&Y.
"Deloitte" shall have the meaning set forth in Section 3.1(a).
"Designated Transferred Assets" shall have the meaning set forth
in Section 2.1(a).
"Direct Claim" shall have the meaning set forth in Section
12.5(b).
"Disclosure Schedule" shall mean the Disclosure Schedule
delivered by Loomis, Loomis Armored and the Loomis Stockholders Trust, on the
one hand, and Borg-Warner and Wells Fargo, on the other hand, at or prior to the
execution of this Agreement.
"DOJ" shall have the meaning set forth in Section 4.5.
"E&Y" shall have the meaning set forth in Section 3.1(a).
"Environmental Claim" means any notice of violation, action,
claim, Environmental Lien, demand, abatement or other Order or direction
(conditional or otherwise) by any governmental authority or any other person
for personal injury (including
<PAGE>
sickness, disease or death), tangible or intangible property damage, damage to
the environment (including natural resources), nuisance, pollution,
contamination, trespass or other adverse effects on the environment, or for
fines, penalties or restrictions resulting from or based upon (i) the existence,
or the continuation of the existence, of a Release (including, without
limitation, sudden or non-sudden accidental or non-accidental Releases) of, or
exposure to, any Hazardous Material, odor or audible noise in, into or onto the
environment (including, without limitation, the air, soil, surface water or
ground water) in quantities or at levels that would require remediation under
the Environmental Laws; (ii) the transportation, storage, treatment or disposal
of Hazardous Materials on or prior to the Closing Date; or (iii) the violation,
or alleged violation, of any Environmental Law, Order or Environmental Permit of
or from any governmental authority relating to environmental matters in
existence on the Closing Date.
"Environmental Costs and Liabilities" means any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions, claims,
costs and expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and Remedial Action) of or relating to
Wells-Fargo and/or Loomis or arising in connection with or relating to the
business, the Transferred Assets or activities or operations conducted at any
property now or previously owned, licensed, or leased by Wells-Fargo and/or
Loomis, respectively, arising from or under any (i) Environmental Law,
Environmental Claim or (ii) Contract in existence as of the Closing Date with
any governmental authority or other Person relating to any Environmental Law.
"Environmental Law" means any applicable federal, state, local,
or foreign law (including common law), statute, code, ordinance, rule,
regulation or other requirement relating to the environmental, or natural
resources, or public or employee health and safety and includes, but is not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), 42 U.S.C. (S)9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. (S) 1801 et seq., the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. (S) 6901 et seq., the Clean Water Act, 33
U.S.C. (S) 1251 et seq., the Clean Air Act, 33 U.S.C (S) 2601 et seq., the Toxic
Substances Control Act, 15 U.S.C. (S) 2601 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. (S) 136 et seq., the Oil Pollution Act
of 1990, 33 U.S.C. (S) 2701 et seq. and Federal Safe Drinking Water Act 42
U.S.C. (S) 300 F et seq., as such laws have been amended or supplemented, on or
prior to the Closing Date and the regulations promulgated pursuant thereto on or
prior to the Closing Date, and all analogous state or local statutes as in
effect on or prior to the Closing Date.
3
<PAGE>
"Environmental Permit" means any permit, approval, authorization,
license, variance, registration, or permission required under any applicable
Environmental Law or any Order relating to any Environmental Law.
"ERISA" shall have the meaning set forth in Section 4.12(a).
"Excluded Assets" shall have the meaning set forth in Section
2.1(a).
"Excluded Liabilities" shall have the meaning set forth in
Section 2.1(b).
"Final Determination" shall have the meaning set forth in Section
8.13(d).
"Financial Advisory Fees" shall have the meaning set forth in
Section 1.2(c).
"Financing" shall have the meaning set forth in Section 8.10.
"FTC" shall have the meaning set forth in Section 4.5.
"GAAP" shall have the meaning set forth in Section 4.6.
"Hazardous Materials" means any substance, material or waste
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous substance," "restricted hazardous waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of, or
otherwise regulated under, any Environmental Law, and includes, but is not
limited to, petroleum, petroleum products (including crude oil and any fraction
thereof), asbestos, asbestos-containing materials, urea formaldehyde and
polychlorinated biphenyls.
"HSR Act" shall have the meaning set forth in Section 4.5.
"Indemnifiable Losses" means any and all damages, losses,
liabilities, obligations, costs and expenses, and any and all claims, demands or
suits (by any Person), including without limitation the reasonable costs and
expenses of any and all actions, suits, proceedings, demands, assessments,
judgments, settlements and compromises relating thereto and including reasonable
attorneys' fees and expert consultant and engineering fees and expenses in
connection therewith.
"Intellectual Property" shall have the meaning set forth in
Section 4.16.
4
<PAGE>
"knowledge" of Borg-Warner or Wells Fargo shall mean the actual
knowledge, after due inquiry, of J. Joe Adorjan, Timothy M. Wood, John D.
O'Brien and each of the executive officers of Wells Fargo, and "knowledge" of
Loomis or Loomis Armored shall mean the knowledge, after due inquiry, of
Frederick B. Hegi, Jr., Jay I. Applebaum and each of the executive officers of
Loomis.
"Known Environmental Conditions" shall have the meaning set forth
in Section 4.20(a).
"Law" means any domestic or foreign statute, law, ordinance, rule
or regulation of any domestic or foreign court, government, governmental agency,
authority, entity or instrumentality.
"Legal Proceedings" means any judicial, administrative or
arbitral actions, suits, proceedings (public or private) or governmental
proceedings.
"Liens" shall have the meaning set forth in Section 4.10.
"Litigation" shall have the meaning set forth in Section 4.9.
"Loomis" shall have the meaning set forth in the introductory
paragraph.
"Loomis Armored" shall have the meaning set forth in the
introductory paragraph.
"Loomis Casualty and Employee Claims" shall have the meaning set
forth in Section 1.2(c).
"Loomis Casualty and Employee Claims Trust" shall have the
meaning set forth in Section 1.2(b).
"Loomis Casualty Insurance Deposits" mean all deposits with
respect to the casualty insurance policy or policies with CIGNA in effect
immediately prior to Closing in respect of the Loomis Casualty and Employee
Claims, whether such deposits are, for accounting purposes, reported as cash or
a reduction of insurance reserves.
"Loomis Class B Common Stock" shall have the meaning set forth in
Section 5.4(a).
5
<PAGE>
"Loomis Closing Balance Sheet" shall have the meaning set forth
in Section 3.1(a).
"Loomis Closing Liabilities" shall have the meaning set forth in
Section 1.2(c).
"Loomis Common Stock" shall have the meaning set forth in the
Recitals.
"Loomis Employee Benefit Plans" shall have the meaning set forth
in Section 5.13(a).
"Loomis Excess Claims Assumption Agreement" shall have the
meaning set forth in Section 1.2(c).
"Loomis Excess Payment" shall have the meaning set forth in
Section 1.2(c).
"Loomis Excluded Taxes" shall mean (A) any liability for Taxes
with respect to any taxable period (or portion thereof) of Loomis or any
Subsidiary (or any predecessor) ending on or before the Closing Date (including
a period deemed to end on the Closing Date as herein provided), except to the
extent such Taxes are reflected as liabilities set forth in the Loomis Closing
Balance Sheet; (B) any liability for Taxes of any member of an affiliated,
consolidated, combined or unitary group (other than Loomis or any Subsidiary) of
which Loomis or any Subsidiary (or any predecessor) is or was a member on or
prior to the Closing Date by reason of the liability of Loomis or any Subsidiary
pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous or similar
state, local or foreign law or regulation; and (C) any liability for Taxes
attributable to or resulting from the transactions occurring pursuant to Article
I of this Agreement, other than sales, use, recording, transfer or other similar
Taxes included within the definition of Transaction Costs. With respect to any
taxable period which includes but does not end on the Closing Date, any
liability for Taxes allocable to Loomis and its Subsidiaries shall be determined
by closing the books of Loomis and its Subsidiaries as of the close of business
on the Closing Date or, where not susceptible to such allocation, based on the
number of elapsed days through the Closing Date, and by allocating Taxes through
the Closing Date to Loomis.
"Loomis Financial Statements" shall have the meaning set forth
in Section 5.7.
"Loomis Indebtedness" shall have the meaning set forth in Section
1.2(c).
"Loomis Indemnity Trust" shall have the meaning set forth in
Section 1.2(b).
6
<PAGE>
"Loomis Intellectual Property" shall have the meaning set fort in
Section 5.17.
"Loomis Interim Balance Sheet" shall have the meaning set forth
in Section 5.7.
"Loomis Interim Financial Statements" shall have the meaning set
forth in Section 5.7.
"Loomis Labor Matters" shall have the meaning set forth in
Section 5.18(a).
"Loomis Other Equity Holders" shall have the meaning set forth in
the Recitals.
"Loomis Owned Real Property" shall have the meaning set forth in
Section 5.20.
"Loomis Sites" shall have the meaning set forth in Section 5.22.
"Loomis Stockholders Trust" shall have the meaning set forth in
the introductory paragraph; provided, that upon the dissolution for any reason
of the Loomis Stockholders Trust, such term shall, for purposes of any notice or
consent required hereunder, mean Wingate for so long as Wingate and its
Affiliates hold 50% or more of the Newco Common Stock held beneficially by them
on the Closing Date (as such stock may subsequently be split, combined,
exchanged or recapitalized).
"Loomis Voting Securities" shall have the meaning set forth in
Section 5.4(a).
"Loomis Year End Balance Sheets" shall have the meaning set forth
in Section 5.7.
"material" means with respect to any Person, an event, change or
effect related to the condition of (financial or otherwise),properties, assets,
liabilities, business or operations of such Person or any of its Subsidiaries
that is material to such Person and its Subsidiaries, taken as a whole.
7
<PAGE>
"Material Adverse Effect" means a material adverse effect on the
business, operations, liabilities, properties, assets or financial condition of
the referenced entity and its Subsidiaries taken as a whole.
"MEGA Plan" shall have the meaning set forth in Section 8.12.
"New MEGA Plan" shall have the meaning set forth in Section 8.12.
"Newco" shall have the meaning set forth in the introductory
paragraph.
"Newco Audited Financials" shall have the meaning set forth in
Section 13.12.
"Newco Common Stock" shall have the meaning set forth in Section
1.2(b).
"Newco Parties" shall have the meaning set forth in Section
12.1(a).
"Newco Plan" shall have the meaning set forth in Section 8.21(g).
"NOL Note" shall have the meaning set forth in Section 1.3.
"NOL Tax Benefit" shall have the meaning set forth in Section
1.3.
"Offering Memorandum" shall have the meaning set forth in Section
8.16(a).
"Order" means any order, injunction, judgment, decree, ruling,
assessment or arbitration award.
"Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or, as
applicable, any other entity.
"Permitted Liens" shall have the meaning set forth in Section
4.10.
"Permits" shall have the meaning set forth in Section 4.14.
"Receivables Notice" shall have the meaning set forth in Section
12.2.
"Receivables Objection" shall have the meaning set forth in
Section 12.2.
"Registration Statement" shall have the meaning set forth in
Section 8.16(a).
8
<PAGE>
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, dispersal, leaching,
or migration on or into the indoor or outdoor environment or into or out of any
property;
"Remedial Action" means all actions, including, without
limitation, any capital expenditures, required to be taken under Environmental
Laws to (i) clean up, remove, treat, or in any other way address a release or
threatened release of any Hazardous Material or (ii) bring an property owned,
operated or leased by the facilities located and operations conducted thereon by
Wells-Fargo or Loomis or any of their respective Subsidiaries, as applicable
into compliance with all Environmental Laws and Environmental Permits.
"Securities Act" means the Securities Act of 1933 and the rules
and regulations promulgated thereunder, as amended.
"Series I Preferred Stock" shall have the meaning set forth in
Section 1.4.
"Stockholders" shall have the meaning set forth in the Recitals.
"Stockholders Agreement" shall have the meaning set forth in
Section 8.8.
"Subsidiary" of any Person means any entity of which securities
or other ownership interests have ordinary voting power to elect a majority of
the board of directors of other persons performing similar functions are owned
directly or indirectly by such Person.
"Taxes" shall mean all taxes, charges, fees, levies, or other
similar assessments or liabilities, including without limitation (i) income,
gross receipts, ad valorem, premium, excise, real property, personal property,
sales, use, transfer, withholding, employment, payroll, medicare, and franchise
taxes imposed by the United States of America, or by any state, local, or
foreign government, or any subdivision, agency, or other similar Person of the
United States or any such government; and (ii) any interest, fines, penalties,
assessments, or additions to taxes resulting from, attributable to, or incurred
in connection with any Tax or any contest, dispute, or refund thereof.
"Tax Returns" shall mean any report, return, or statement
required to be supplied to a taxing authority in connection with Taxes.
9
<PAGE>
"Third Party Claim" means any claim, action or proceeding made or
brought by any Person who is not a party to the Agreement or an Affiliate of a
party to the Agreement.
"Transaction Costs" means all costs, fees, expenses and other
disbursements (including, without limitation, sales, use, recording, transfer or
other similar Taxes) incurred by Loomis, Borg-Warner or Wells Fargo, as
applicable, in connection with the consummation of the transactions contemplated
by this Agreement, including without limitation, all fees and expenses of legal,
accounting and other experts and professional representatives; provided,
however, that Transaction Costs shall not include any costs, fees, expenses or
disbursements related solely to the rendering of a fairness opinion to the board
of directors of Borg-Warner.
"Transferred Assets" shall have the meaning set forth in Section
2.1(a).
"Transferred Employees" shall have the meaning set forth in
Section 8.21.
"Transition Services Agreement" shall have the meaning set forth
in Section 8.17.
"UST Closure" means a "no further action" letter from the
governmental authority having jurisdiction over a UST or other reasonably
satisfactory proof of closure of a UST under or pursuant to Environmental Laws.
"UST Rules" means those federal requirements relating to
Underground Storage Tanks set forth in 42 U.S.C. Section 6991 et seq. and any
regulations promulgated pursuant to such statutory provisions or as set forth in
any state UST program.
"UST" means underground storage tanks as defined in 42 U.S.C. (S)
6991 et seq.
"Wells Fargo" shall have the meaning set forth in the
introductory paragraph.
"Wells Fargo Bank" shall have the meaning set forth in Section
8.23.
"Wells Fargo Excluded Taxes" shall mean (A) any liability for
Taxes of any member of an affiliated, consolidated, combined, or unitary group
(other than Wells Fargo or any Subsidiary) of which Wells Fargo or any
Subsidiary (or any predecessor) is or was a member on or prior to the Closing
Date by reason of the liability of Wells Fargo or any
10
<PAGE>
Subsidiary pursuant to Treasury Regulation Section 1.1502-6(a) or any analogous
or similar state, local or foreign law or regulation; and (B) any liability for
Taxes attributable to or resulting from the transactions occurring pursuant to
Article II of this Agreement, other than sales, use, recording, transfer or
other similar Taxes included within the definition of Transaction Costs.
"Wells Fargo Indemnifiable Taxes" shall mean any liability for
taxes with respect to any taxable period (or portion thereof) of Wells Fargo or
any Subsidiary (or any predecessor) ending on or before the Closing Date
(including a period deemed to end on the Closing Date as herein provided),
except to the extent such Taxes are reflected as liabilities set forth in the WF
Closing Balance Sheet. With respect to any taxable period which includes but
does not end on the Closing Date, any liability for Taxes allocable to Wells
Fargo and its Subsidiaries shall be determined by closing the books of Wells
Fargo and its Subsidiaries as of the close of business on the Closing Date or,
where not susceptible to such allocation, based on the number of elapsed days
through the Closing Date, and by allocating Taxes through the Closing Date to
Wells Fargo.
"Wells Fargo Sites" shall have the meaning set forth in Section
4.20(a).
"Wells Puerto Rico" shall have the meaning set forth in Section
8.19.
"Wingate" shall have the meaning set forth in Section 1.2(c).
"WF Accounts Receivable" shall have the meaning set forth in
Section 12.2.
"WF Base Amount" shall have the meaning set forth in Section
3.1(b).
"WF Casualty and Employee Claims" shall have the meaning set
forth in Section 2.1(b).
"WF Closing Balance Sheet" shall have the meaning set forth in
Section 3.1(a).
"WF Employee Benefit Plans" shall have the meaning set forth in
Section 4.12(a).
"WF Financial Statements" shall have the meaning set forth in
Section 4.6.
"WF Intellectual Property" shall have the meaning set forth in
Section 4.16.
11
<PAGE>
"WF Interim Balance Sheet" shall have the meaning set forth in
Section 4.6.
"WF Interim Financial Statements" shall have the meaning set
forth in Section 4.6.
"WF Labor Matters" shall have the meaning set forth in Section
4.17.
"WF Owned Real Property" shall have the meaning set forth in
Section 4.18.
"WF Year End Balance Sheets" shall have the meaning set forth in
Section 4.6.
"6-Year Look Back Date" shall have the meaning set forth in
Section 4.12(b).
"401(k) Plan" shall have the meaning set forth in Section
8.21(g).
12
<PAGE>
EXHIBIT 99
BORG-WARNER SECURITY CORPORATION
SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
(MILLIONS OF DOLLARS)
Introduction
- ------------
The accompanying unaudited Pro Forma Financial Information has been prepared as
a result of the combination of the Company's armored services unit ("WFAS") with
Loomis, as described in the preceding information. The unaudited Pro Forma
Financial Information is based on the historical financial statements of the
Company and WFAS and gives effect to (i) the disposition of substantially all of
the assets and certain liabilities of WFAS 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 Statements of Earnings for the year ended December 31, 1995 and the
nine months ended September 30, 1996 give effect to the transactions as if they
had been consummated on January 1, 1995. The unaudited Pro Forma Condensed
Consolidated Balance Sheet at September 30, 1996 is presented giving effect to
the transactions as if they had been consummated as of that date.
The pro forma results of operations do not include any nonrecurring charges or
credits which will directly result from the transaction and which will be
included in the Company's results of operations within the 12 months following
the transaction. While the Company anticipates that it will recognize a gain
from the sale of WFAS' assets, the transaction is subject to potential
significant purchase price adjustments and any gain cannot be reasonably
estimated at this time. The Company does not anticipate that the gain will be
material. The Company does not expect any other 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, and are qualified in their entirety by, the
historical consolidated financial statements of the Company and WFAS, including
the related notes thereto.
<PAGE>
BORG-WARNER SECURITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995
(MILLIONS OF DOLLARS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments (a) Pro Forma
---------- -------------- ---------
<S> <C> <C> <C>
Net service revenue $1,711.2 ($231.0) $1,480.2
Cost of services 1,360.2 (188.6) 1,171.6
Selling, general and administrative expenses 210.6 (18.7) 191.9
Depreciation 47.0 (7.2) 39.8
Amortization of excess purchase price
over net assets acquired 13.4 (1.5) 11.9
Interest expense and finance charges 56.6 (8.9)(b) 47.7
-------- -------- --------
Earnings before income taxes and equity in
earnings of unconsolidated subsidiaries 23.4 (6.1) 17.3
Provision for income taxes 9.5 (2.6)(c) 6.9
-------- -------- --------
Earnings before equity in earnings of
unconsolidated subsidiaries 13.9 (3.5) 10.4
Equity in earnings of Loomis Fargo - 3.3 (d) 3.3
-------- -------- --------
Earnings from continuing operations $13.9 ($0.2) $13.7
======== ======== ========
Earnings per share from continuing operations $0.59 $0.59
Average shares outstanding (thousands) 23,399 23,399
</TABLE>
<PAGE>
BORG-WARNER SECURITY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
9 MONTHS ENDED SEPTEMBER 30, 1996
(MILLIONS OF DOLLARS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments (a) Pro Forma
---------- --------------- ---------
<S> <C> <C> <C>
Net service revenue $1,267.3 $(182.3) $1,085.0
Cost of services 1,010.0 (153.4) 856.6
Selling, general and administrative expenses 156.7 (13.8) 142.9
Depreciation 35.6 (5.2) 30.4
Amortization of excess purchase price
over net assets acquired 10.1 (1.1) 9.0
Interest expense and finance charges 42.7 (7.1)(b) 35.6
------- ------- --------
Earnings before income taxes and equity in
earnings of unconsolidated subsidiaries 12.2 (1.7) 10.5
Provision for income taxes 4.5 (0.9)(c) 3.6
------- ------- --------
Earnings before equity in earnings of
unconsolidated subsidiaries 7.7 (0.8) 6.9
Equity in earnings of Loomis Fargo - 1.9 (d) 1.9
------- ------- --------
Earnings from continuing operations $7.7 $1.1 $8.8
======= ======= ========
Earnings per share from continuing operations $0.33 $0.38
Average shares outstanding (thousands) 23,502 23,502
</TABLE>
<PAGE>
BORG-WARNER SECURITY CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1996
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments (e) Pro Forma
---------- --------------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 17.3 - $ 17.3
Receivables, net 99.9 ($ 28.9) 71.0
Inventories 12.6 (1.8) 10.8
Other current assets 31.4 10.5(b) 41.9
------ ------ -----
Total current assets 161.2 (20.2) 141.0
Property, plant and equipment, at cost 446.1 (79.9) 366.2
Less accumulated depreciation 234.1 (49.0) 185.1
------ ------ -----
Net property, plan and equipment 212.0 (30.9) 181.1
Net excess purchase price over net assets acquired 240.3 (27.8) 212.5
Deferred tax asset 62.3 - 62.3
Net assets of discontinued operations 11.5 - 11.5
Investment in Loomis Fargo - 5.3(d) 5.3
Other assets 88.3 (4.2) 84.1
------ ------ ------
Total assets $775.6 ($ 77.8) $697.8
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 2.9 ($ 0.7) $ 2.2
Accounts payable and accrued expenses 176.9 (11.8) 165.1
------ ------ ------
Total current liabilities 179.8 (12.5) 167.3
Long-term debt 456.9 (91.0)(b) 365.9
Other long-term liabilities 109.5 25.7(f) 135.2
Capital stock:
Common stock 0.2 - 0.2
Series I non-voting common stock - - -
Other stockholders' equity 29.2 - 29.2
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Total stockholders' equity 29.4 - 29.4
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Total liabilities and stockholders' equity $775.6 ($ 77.8) $697.8
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BORG-WARNER SECURITY CORPORATION
SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Notes to Pro Forma Statements of Earnings and Balance Sheet
- -----------------------------------------------------------
a To eliminate the historical revenues and expenses of WFAS and subsidiaries
for the respective periods presented.
b To eliminate debt retired with proceeds received from the transaction and to
adjust interest expense. 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 WFAS.
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 historical assets, liabilities and stockholder's equity of
WFAS and subsidiaries.
f To establish allowances 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.
