<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended June 30, 1998
Commission file number: 1-5529
BORG-WARNER SECURITY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3408028
- -------------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
200 South Michigan Avenue, Chicago, Illinois 60604
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 322-8500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
On July 31, 1998 the registrant had 23,527,153 shares of Common Stock
outstanding.
<PAGE>
-1-
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
JUNE 30, 1998
<TABLE>
<CAPTION>
INDEX
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Statement of Operations for
the Three Months Ended June 30, 1998 and 1997................ 2
Consolidated Statement of Operations for
the Six Months Ended June 30, 1998 and 1997.................. 3
Condensed Consolidated Balance Sheet
at June 30, 1998 and December 31, 1997....................... 4
Condensed Consolidated Statement of Cash Flows for
the Six Months Ended June 30, 1998 and 1997 ................. 5
Notes to the Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................. 12
Pro Forma Financial Information................................ 14
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings.............................................. 19
Item 2. Changes in Securities.......................................... 19
Item 3. Defaults Upon Senior Securities................................ 19
Item 4. Submission of Matters to a Vote of Security Holders............ 19
Item 5. Other Information.............................................. 20
Item 6. Exhibits and Reports on Form 8-K............................... 20
SIGNATURES................................................................ 21
</TABLE>
<PAGE>
-2-
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(Millions of dollars, except per share)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net service revenues $ 323.9 $ 317.1
Cost of services 273.0 267.0
Selling, general and administrative expenses (Note 2) 50.0 33.7
Depreciation 1.0 1.2
Other expense, net 2.1 1.8
Interest expense and finance charges, net 4.2 3.7
------------ ------------
Earnings (loss) before income taxes (6.4) 9.7
Provision (benefit) for income taxes (2.4) 4.0
------------ ------------
Earnings (loss) from continuing operations (4.0) 5.7
Earnings (loss) from discontinued operations, net
of income taxes (Note 4) 39.4 (1.6)
------------ ------------
Earnings before extraordinary item 35.4 4.1
Extraordinary item:
Loss from early extinguishment of debt (Note 5) (6.3) --
------------ ------------
Net earnings $ 29.1 $ 4.1
============ ============
Earnings (loss) per common share - basic:
Continuing operations $ (0.17) $ 0.24
Discontinued operations 1.68 (0.07)
Extraordinary item (0.27) --
------------ ------------
Net earnings $ 1.24 $ 0.17
============ ============
Earnings (loss) per common share - diluted:
Continuing operations $ (0.16) $ 0.24
Discontinued operations 1.62 (0.07)
Extraordinary item (0.26) --
------------ ------------
Net earnings $ 1.20 $ 0.17
============ ============
Comprehensive earnings: (Note 11)
Net earnings $ 29.1 $ 4.1
Other comprehensive earnings (loss):
Currency translation adjustment, net of tax
($0.6 benefit in 1998 and $0.2 expense in 1997) (1.4) 0.5
------------ ------------
Comprehensive earnings $ 27.7 $ 4.6
============ ============
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
-3-
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(Millions of dollars, except per share)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------
1998 1997
----------------- ----------------
<S> <C> <C>
Net service revenues $642.5 $643.5
Cost of services 542.1 542.0
Selling, general and administrative expenses (Note 2) 85.7 70.9
Depreciation 2.0 2.8
Other expense, net 4.5 1.7
Interest expense and finance charges, net 8.4 9.0
----------------- ----------------
Earnings (loss) before income taxes (0.2) 17.1
Provision (benefit) for income taxes (0.1) 5.7
----------------- ----------------
Earnings (loss) from continuing operations (0.1) 11.4
Earnings (loss) from discontinued operations, net
of income taxes (Note 4) 20.3 (3.3)
----------------- ----------------
Earnings before extraordinary item 20.2 8.1
Extraordinary item:
Loss from early extinguishment of debt (Note 5) (6.3) --
----------------- ----------------
Net earnings $ 13.9 $ 8.1
================= ================
Earnings (loss) per common share--basic:
Continuing operations $ -- $ 0.48
Discontinued operations 0.87 (0.14)
Extraordinary item (0.27) --
----------------- ----------------
Net earnings $ 0.60 $ 0.34
================= ================
Earnings (loss) per common share--diluted:
Continuing operations $ -- $ 0.48
Discontinued operations 0.83 (0.14)
Extraordinary item (0.26) --
----------------- ----------------
Net earnings $ 0.57 $ 0.34
================= ================
Comprehensive earnings: (Note 11)
Net earnings $ 13.9 $ 8.1
Other comprehensive earnings (loss):
Currency translation adjustment, net of tax
($0.3 benefit in 1998) (0.8) --
----------------- ----------------
Comprehensive earnings $ 13.1 $ 8.1
================= ================
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
-4-
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Millions of dollars)
<TABLE>
<CAPTION>
ASSETS June 30, 1998 December 31, 1997
- ------ -------------------- ---------------------
<S> <C> <C>
Cash and cash equivalents $348.7 $ 8.0
Receivables, net 34.0 18.5
Other current assets 60.7 67.3
-------------------- ---------------------
Total current assets 443.4 93.8
Property, plant and equipment, at cost 38.2 37.4
Less accumulated depreciation 22.2 22.3
-------------------- ---------------------
Net property, plant and equipment 16.0 15.1
Net excess purchase price over net assets acquired 104.8 114.6
Deferred tax asset, net 45.2 40.5
Net assets of discontinued operations -- 327.0
Other assets 29.8 34.9
-------------------- ---------------------
Total assets $639.2 $625.9
==================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Notes payable $151.2 $ 1.2
Accounts payable and accrued expenses 181.2 119.6
-------------------- ---------------------
Total current liabilities 332.4 120.8
Long-term debt 124.3 337.5
Other long-term liabilities 102.1 102.6
Common stock 0.2 0.2
Other shareholders' equity 80.2 64.8
-------------------- ---------------------
Total shareholders' equity 80.4 65.0
-------------------- ---------------------
Total liabilities and shareholders' equity $639.2 $625.9
==================== =====================
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
-5-
BORG-WARNER SECURITY CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In millions of dollars)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------
OPERATING: 1998 1997
-------------- -------------
<S> <C> <C>
Continuing Operations:
Earnings (loss) from continuing operations..................................... $ (0.1) $ 11.4
Adjustments to reconcile net earnings (loss) to net cash provided
by continuing operations:
Non-cash charges to earnings:
Depreciation and amortization............................................ 6.0 6.2
Other, net............................................................... 14.6 2.8
Changes in assets and liabilities:
(Increase) decrease in receivables....................................... (2.3) 1.1
Decrease (increase) in other current assets.............................. 1.6 (0.5)
Decrease in accounts payable and accrued expenses........................ (5.5) (6.7)
Net change in other long-term assets and liabilities..................... (1.9) (4.6)
Gain on sale of assets of armored services unit............................ -- (2.2)
------ -------
Net cash provided by continuing operations................................. 12.4 7.5
Discontinued Operations:
Gain (loss) from discontinued operations....................................... 20.3 (3.3)
Other cash related to discontinued operations.................................. 384.6 4.6
------ -------
Net cash provided by discontinued operations............................... 404.9 1.3
------ -------
------ -------
Net cash provided by operating activities.............................. 417.3 8.8
------ -------
INVESTING:
Capital expenditures........................................................... (3.0) (1.7)
Sale of assets of armored services, net of retained costs...................... (3.1) 98.4
Other, net..................................................................... -- 0.9
------ -------
Net cash (used in) provided by investing activities.................... (6.1) 97.6
------ -------
FINANCING:
Decrease in notes payable...................................................... -- (1.8)
Decrease in debt outstanding under revolving credit facility................... (63.9) (27.8)
Decrease in receivables equalization........................................... (8.0) (9.2)
Issuance of long-term debt..................................................... -- 125.0
Retirement of long-term debt................................................... (0.2) (199.0)
Sales of treasury common stock................................................. -- 0.9
Other, net..................................................................... 1.6 1.1
------ -------
Net cash used in financing activities.................................. (70.5) (110.8)
------ -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................... 340.7 (4.4)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................... 8.0 15.4
------ -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..................................... $348.7 $ 11.0
====== =======
</TABLE>
(The accompanying notes are an integral part of these financial statements)
<PAGE>
-6-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) The financial statements of Borg-Warner Security Corporation and
consolidated subsidiaries ("Company") have been prepared in accordance with the
instructions to Form 10-Q. The statements are unaudited, but include all
adjustments, consisting of normal recurring items, except as noted, which the
Company considers necessary for a fair presentation of the information set forth
herein. The results of operations for the three and six month periods ended June
30, 1998 are not necessarily indicative of the results to be expected for the
entire year. Certain 1997 amounts have been reclassified to conform with the
1998 presentation.
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and related disclosures. Actual
results may differ from those estimates.
(2) Included in selling, general and administrative expense for the three
months ended June 30, 1998 is a provision of $14.4 million that was comprised of
the following: severance and lease termination costs totaling $2.1 million
resulting from the reorganization of administrative operations subsequent to the
sale of the electronic security services business and the closure and
consolidation of certain offices; $5.5 million resulting from a review of the
recoverability of certain intangible assets; $2.3 million related to the final
settlement of matters resulting from prior dispositions; and $4.5 million
related to certain other asset valuation allowances and provisions.
(3) On January 24, 1997, the Company's armored services unit entered into a
business combination with Loomis Armored, which is now known as Loomis, Fargo &
Co ("Loomis, Fargo"). The Company accounts for its investment in Loomis, Fargo
under the equity method. The business combination impacts the comparison of the
Company's 1998 results to prior periods because the armored unit was included in
the Company's results of operations for 23 days in 1997. In the first six months
of 1997, Armored security revenues were $15.3 million and operating profit was
$0.9 million.
The Company's share of the Loomis, Fargo loss for the second quarter of 1998 was
$0.1 million compared with a net earnings of $0.3 million for the second quarter
of 1997. The Company's share of the loss for the first six months of 1998 was
$0.5 million compared with net earnings of $3.0 million (which includes an
after-tax gain of $2.2 million relating to the business combination) for the
first half of 1997. The Company does not guarantee the indebtedness of Loomis,
Fargo nor is it required to fund Loomis, Fargo's future operations.
(4) On May 29, 1998, the Company sold its electronic security services
business to ADT Security Services, a subsidiary of Tyco International, Ltd., for
approximately $425 million. The Company recorded a net after-tax gain of $42.5
million.
On May 29, 1998, the Company sold its courier services unit. In the first
quarter of 1998, the Company recorded a $15.9 million after-tax charge (net of
$11.0 million tax benefit) to reduce its investment in this business and to
provide for costs associated with its disposition. The Company did not record a
gain or loss as a result of completing the sale of the unit.
<PAGE>
-7-
The following table summarizes earnings (loss) from discontinued operations:
<TABLE>
<CAPTION>
(millions of dollars, except per share) Three Months Ended Six Months Ended
June 30, June 30,
--------------------- -------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues from discontinued operations $ 36.0 $ 95.4 $130.0 $187.0
------ ------ ------ ------
Gain on the sale of the electronic security services
business, net $ 42.5 -- $ 42.5 $ --
Electronic security services operations, net (3.1) (1.6) (6.3) (3.3)
Courier services provision -- -- (15.9) --
------ ------ ------ ------
Earnings (loss) from discontinued operations, net $ 39.4 $ (1.6) $ 20.3 $ (3.3)
====== ====== ====== ======
Earnings (loss) per common share -- diluted $ 1.62 $(0.07) $ 0.83 $(0.14)
</TABLE>
(5) In the second quarter of 1998, the Company recorded a $6.3 million
extraordinary charge (net of $4.1 million tax benefit) for the call premium
associated with early redemption of $150 million principal amount of 9 1/8%
senior subordinated notes due 2003 and the write-off of certain deferred
financing fees.
(6) The Company's provisions for income taxes for the three and six month
periods ended June 30, 1998 and 1997 reflect estimated annual tax rates for the
year applied to federal, state and foreign income.
(7) Earnings per common share are based on average outstanding common
shares and common share equivalents. Common share equivalents recognize the
dilutive effects of common shares, which may be used in the future upon exercise
of certain stock options. The number of shares used in the computation of
earnings per share were as follows (thousands of shares):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Basic EPS
Average common shares outstanding 23,486 23,440 23,532 23,398
Diluted EPS
Common share equivalents 784 660 808 604
------------ ------------ ------------ ------------
Average common shares outstanding
and common share equivalents 24,270 24,100 24,340 24,002
============ ============ ============ ============
</TABLE>
<PAGE>
-8-
(8) The allowance for doubtful accounts was $5.0 million at June 30, 1998 and
$4.0 million at December 31, 1997, respectively. The accumulated amortization on
excess purchase price over net assets acquired was $52.9 million at June 30,
1998 and $48.9 million at December 31, 1997.
The Company has an agreement under which it sells a revolving pool of trade
accounts receivable to a special purpose subsidiary of the Company. At June 30,
1998 and December 31, 1997 the subsidiary had purchased $137.8 million and
$150.8 million of such accounts receivable, respectively. The subsidiary sells
up to $120 million of undivided interests in such accounts receivable. The
difference represents the interest retained by the Company, which is considered
an interest in a security and has been included in "Other current assets." The
fair value of the retained interest approximates its carrying value due to the
short-term nature of the receivables. Also included in "Other current assets" is
$25.6 million and $17.6 million at June 30, 1998 and December 31, 1997,
respectively, representing interest-bearing cash deposits held in trust under
the terms of the agreement. The deposits represent proceeds of collections held
back based on the amount of eligible receivables in the pool. The Company's
retained interests in the receivables and cash deposits are generally
restricted.
Net cash payments for interest and income taxes were as follows (millions of
dollars):
<TABLE>
<CAPTION> Six Months Ended
June 30,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Interest paid $20.8 $20.4
Income taxes paid (refund) $(2.3) $ 4.3
</TABLE>
(9) On June 3, 1998, the Company irrevocably called for redemption its $150
million principal amount of 9 1/8% senior subordinated notes due 2003.
Consequently, the notes were reclassified as current liabilities at June 30,
1998. The notes were fully redeemed on July 3, 1998.
<PAGE>
-9-
The following tables summarize the capitalization of the Company at June 30,
1998 and December 31, 1997 (millions of dollars):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------------------------- ------------------------------
DEBT Current Long-Term Current Long-Term
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
9-1/8% senior subordinated notes (face
amount of $150 million) $149.4 -- -- $149.2
9-5/8% senior subordinated notes (face
amount of $125 million due 2007) -- 124.3 -- 124.2
Bank revolving credit loan due through 1999
(at an average rate of 7.9% in 1997) -- -- -- 63.9
Capital lease liability (at an average rate
of 9.2% in 1997) -- -- 0.1 --
Unsecured notes (at an average rate of 8.7% in
1998 and 7.6% in 1997; and 8.7% at June 30, 1.8 -- 1.1 0.2
1998)
------------- ------------- ------------- -------------
Total notes payable and long-term debt $151.2 $124.3 $1.2 $337.5
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY
(millions of dollars) June 30, 1998 December 31, 1997
------------------- ----------------------
<S> <C> <C>
Common stock $ 0.2 $ 0.2
Capital in excess of par value 33.1 30.8
Retained earnings 55.6 41.7
Accumulated comprehensive earnings (0.8) --
------------------- ----------------------
88.1 72.7
Less treasury common stock, 2,768,339 shares
in 1998 and 2,506,400 shares in 1997, at cost (7.7) (7.7)
------------------- ----------------------
Total shareholders' equity $80.4 $65.0
=================== ======================
</TABLE>
<PAGE>
-10-
<TABLE>
<CAPTION>
CAPITAL STOCK -- NUMBER OF SHARES
(thousand of shares) June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Common stock, $.01 par value:
Authorized 50,000.0 50,000.0
Issued 23,564.5 23,362.8
Outstanding 23,516.2 23,326.8
Series I non-voting common stock, $.01 par
value:
Authorized 25,000.0 25,000.0
Issued 2,720.0 2,720.0
Outstanding -- 249.6
Preferred stock, $.01 par value:
Authorized 5,000.0 5,000.0
Issued and Outstanding -- --
</TABLE>
(10) The Company's discontinued property and casualty insurance subsidiary
("Centaur") ceased writing insurance in 1984 and has been operating under
rehabilitation since September 1987. Rehabilitation is a process supervised by
the Illinois Director of Insurance to attempt to compromise claim liabilities at
an aggregate level that is not in excess of Centaur's assets. In rehabilitation,
Centaur's assets are being used to satisfy claim liabilities under direct
insurance policies written by Centaur. Any remaining assets will be applied to
Centaur's obligations to other insurance companies under reinsurance contracts.
On August 10, 1998 the Mission Trust and the Company agreed to settle the
pending suit against the Company, subject to court approval. The suit had
alleged damages in excess of $100 million because of Centaur's failure to
satisfy its reinsurance obligations. As part of the settlement, the Company
agreed to pay the Mission Trust $4 million and one-third of any dividend or
other distribution that may be paid to the Company after rehabilitation of
Centaur. Separately, the Mission Trust and Centaur agreed to an uncontested
liquidated claim in the Centaur estate of $48 million. Additionally, the
Illinois Director of Insurance, on behalf of the Centaur estate, and the Company
agreed to exchange mutual releases of any remaining liability of the Company to
the Centaur estate.
The Company and certain of its current and former subsidiaries have been
identified by the U.S. Environmental Protection Agency and certain state
environmental agencies as potentially responsible parties ("PRPs") at several
hazardous waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund") and equivalent state laws and, as
such, may be liable for the cost of cleanup and other remedial activities at
these sites. Responsibility for cleanup and other remedial activities at a
Superfund site is typically shared among PRPs based on an allocation formula.
The Company believes that none of these matters individually or in the aggregate
will have a material adverse effect on its financial position or future
operating results, generally either because the maximum potential liability at a
site is not large or because liability will be shared with other PRPs,
<PAGE>
-11-
although no assurance can be given with respect to the ultimate outcome of any
such liability. Based on its estimate of allocations of liability among PRPs,
the probability that other PRPs, many of whom are large, solvent public
companies, will fully pay the costs allocated to them, currently available
information concerning the scope of contamination at such sites, estimated
remediation costs at such sites, indemnification obligations in favor of the
Company from the current owners of certain sold or discontinued operations,
estimated legal fees and other factors, the Company has made provisions for
indicated environmental liabilities in the aggregate amount of approximately $7
million (relating to environmental matters with respect to discontinued
operations of the Company).
The Company believes that the various asserted claims and litigation in which it
is involved will not materially affect its financial position, future operating
results or cash flows, although no assurance can be given with respect to the
ultimate outcome of any such claim or litigation.
(11) In 1998, the Company adopted Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income." This statement requires comprehensive
income, also known as comprehensive earnings, to be disclosed on the face of the
financial statements. Comprehensive earnings is net earnings plus or minus any
adjustments to the equity section on the balance sheet other than retained
earnings and any stock related transactions. The accumulated comprehensive loss
balances as of June 30, 1998 and December 31, 1997 were $0.8 million and zero,
respectively. The $0.8 million loss at June 30, 1998 consists solely of currency
translation adjustments.
<PAGE>
-12-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
SIGNIFICANT EVENTS
- ------------------
On January 24, 1997, the Company's armored services unit entered into a business
combination with Loomis Armored, which is now known as Loomis, Fargo & Co
("Loomis, Fargo"). The Company accounts for its investment in Loomis, Fargo
under the equity method. The business combination impacts the comparison of the
Company's 1998 results to prior periods because the armored unit was included in
the Company's results of operations for 23 days in 1997.
On May 29, 1998, the Company sold its electronic security services business to
ADT Security Services, a subsidiary of Tyco International, Ltd., for
approximately $425 million. The Company also recorded a net after-tax gain of
$42.5 million.
On May 29, 1998, the Company sold its courier services unit. The Company
recorded a $15.9 million after-tax charge in the first quarter of 1998 to reduce
the Company's investment in this business and to provide for costs associated
with its disposition. The Company did not record a gain or loss as a result of
completing the sale of the unit.
On June 3, 1998, the Company irrevocably called for redemption its $150 million
principal amount of 9 1/8% senior subordinated notes due 2003. Consequently, the
notes were reclassified as current liabilities at June 30, 1998. The notes were
fully redeemed on July 3, 1998.
The Company entered into an agreement with Borg-Warner Automotive, Inc.
("Automotive") effective July 31, 1998 whereby the Company sold its rights to
the "Borg-Warner" name and mark in the security field for $3.6 million.
Automotive granted the Company an exclusive, royalty-free license to use the
"Borg-Warner" name and mark in the security field for a four-year period.
On August 10, 1998 the Company, the California Insurance Commissioner as trustee
of the Mission Insurance Companies Trust ("Mission Trust") and the Illinois
Director of Insurance as rehabilitator of Centaur Insurance Company agreed to
settle the pending lawsuit between the Mission Trust and the Company, subject to
court approval. As part of such settlement, the Company agreed to pay the
Mission Trust $4 million and one-third of any dividend or other distribution
that may be paid to the Company after rehabilitation of Centaur. Separately, the
Mission Trust and Centaur agreed to an uncontested liquidated claim in the
Centaur estate of $48 million. Additionally, the Illinois Director of Insurance,
on behalf of the Centaur estate, and the Company agreed to exchange mutual
releases of any remaining liability of the Company to the Centaur estate.
<PAGE>
-13-
RESULTS OF OPERATIONS
- ---------------------
Revenues
Consolidated net service revenues for the three and six months ended June 30,
1998 increased 2.1% and decreased 0.2%, respectively, from the comparable 1997
periods. Excluding the armored services unit, physical security services
revenues for the three and six months ended June 30, 1998 increased 2.1% and
2.3%, respectively, compared to the same periods in 1997. The increase was
primarily due to broad-based domestic growth, offset by the impact of withdrawal
from certain low-margin businesses.
The net service revenues were as follows (in millions of dollars):
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- ----------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Physical security services $323.9 $317.1 $642.5 $628.2
Armored security services -- -- -- 15.3
------ ------ ------ ------
Net service revenues $323.9 $317.1 $642.5 $643.5
====== ====== ====== ======
</TABLE>
Costs and Expenses
Cost of services for the three months ended June 30, 1998 increased 2.2%
compared to the same period in 1997. The increase was due principally to higher
labor costs resulting from continued tight labor markets. Cost of services for
the six months ended June 30, 1998 compared to 1997 was essentially flat. Gross
profit margins, as a percentage of revenues, for the three and six months ended
June 30, 1998 were 15.7% and 15.6%, respectively, compared with 15.8% and 15.8%
for the three and six months ended June 30, 1997, respectively. Wage increases
have principally been offset by better pricing and improved employee retention,
which results in generally lower recruiting and training expenses.
Selling, general and administrative expenses for the three and six months ended
June 30, 1998 increased 48.4% and 20.9%, respectively, compared to 1997.
Included in selling, general and administrative expense for the three months
ended June 30, 1998 is a provision of $14.4 million that was comprised of the
following: severance and lease termination costs totaling $2.1 million resulting
from the reorganization of administrative operations subsequent to the sale of
the electronic security services business and the closure and consolidation of
certain offices; $5.5 million resulting from a review of the recoverability of
certain intangible assets; $2.3 million related to the final settlement of
matters resulting from prior dispositions; and $4.5 million related to certain
other asset valuation allowances and provisions. Excluding the provision,
selling, general and administrative expenses for the three and six months ended
June 30, 1998 increased 5.6% and 0.6%, respectively, compared to 1997. The
increase is primarily due to costs associated with implementing the Company's
Total Security Solution program and improved information technology systems.
<PAGE>
-14-
Other net expense includes the Company's equity in results of operations of
Loomis, Fargo. The Company accounts for its investment in Loomis, Fargo under
the equity method. The Company's share of the Loomis, Fargo loss for the second
quarter of 1998 was $0.1 million compared with a net income of $0.3 million for
the second quarter of 1997. The Company's share of the loss for the first six
months of 1998 was $0.5 million compared with net earnings of $3.0 million
(which includes an after-tax gain of $2.2 million relating to the transaction
that formed Loomis, Fargo) for the first half of 1997.
Depreciation expense for the six months ended June 30, 1998 compared to 1997
decreased 28.6% to $2.0 million from $2.8 million. The decrease is primarily due
to the Loomis, Fargo combination.
Net Interest Expense and Finance Charges
Net interest expense and finance charges for the three months ended June 30,
1998 compared to the same period in 1997 increased $0.5 million to $4.2 million
from $3.7 million, respectively. This increase primarily reflects the short-term
investment of cash proceeds from the sale of the electronic security services
unit at lower yielding interest rates while the Company restructures its
generally higher cost debt facilities.
Pro Forma Financial Information
The following Pro Forma Consolidated Statement of Operations for the three and
six months ended June 30, 1998 and 1997 has been prepared to reflect certain
restructuring efforts and eliminate unusual provisions following the sale of the
Company's electronic security services unit.
The accompanying 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. The Pro Forma Financial
Information and the accompanying notes should be read in conjunction with the
historical Consolidated Financial Statements of the Company, including the
related notes thereto.
<PAGE>
-15-
Pro Forma Consolidated Statement of Operations
(millions of dollars, except per share)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
----------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
----------------------------------------------------
<S> <C> <C> <C>
Net service revenues $323.9 -- $323.9
Cost of services 273.0 -- 273.0
Selling, general and administrative expenses 50.0 (14.9) (a) 35.1
Depreciation 1.0 -- 1.0
Other expense, net 2.1 (0.7) (b) 1.4
Interest expense and finance charges, net 4.2 (1.2) (c) 3.0
----------------------------------------------------
Earnings (loss) before income taxes (6.4) 16.8 10.4
Provision (benefit) for income taxes (2.4) 6.6 (d) 4.2
----------------------------------------------------
Earnings (loss) from continuing operations $ (4.0) $10.2 $ 6.2
====================================================
Earnings (loss) per share:
Continuing operations - diluted $(0.16) $0.42 $ 0.26
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997
----------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
----------------------------------------------------
<S> <C> <C> <C>
Net service revenues $317.1 -- $317.1
Cost of services 267.0 -- 267.0
Selling, general and administrative expenses 33.7 (0.5) (a) 33.2
Depreciation 1.2 -- 1.2
Other expense, net 1.8 (0.7) (b) 1.1
Interest expense and finance charges, net 3.7 (0.4) (c) 3.3
----------------------------------------------------
Earnings before income taxes 9.7 1.6 11.3
Provision for income taxes 4.0 0.5 (d) 4.5
----------------------------------------------------
Earnings from continuing operations $ 5.7 $ 1.1 $ 6.8
====================================================
Earnings per share:
Continuing operations - diluted $ 0.24 $0.04 $ 0.28
</TABLE>
<PAGE>
-16-
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
---------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------------------------------------------------
<S> <C> <C> <C>
Net service revenues $642.5 -- $642.5
Cost of services 542.1 -- 542.1
Selling, general and administrative expenses 85.7 (15.4) (a) 70.3
Depreciation 2.0 -- 2.0
Other expense, net 4.5 (1.4) (b) 3.1
Interest expense and finance charges, net 8.4 (2.4) (c) 6.0
---------------------------------------------------
Earnings (loss) before income taxes (0.2) 19.2 19.0
Provision (benefit) for income taxes (0.1) 7.7 (d) 7.6
---------------------------------------------------
Earnings (loss) from continuing operations $ (0.1) $11.5 $ 11.4
===================================================
Earnings per share:
Continuing operations - diluted -- $0.47 $ 0.47
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
---------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
---------------------------------------------------
<S> <C> <C> <C>
Net service revenues $643.5 -- $643.5
Cost of services 542.0 -- 542.0
Selling, general and administrative expenses 70.9 (1.0) (a) 69.9
Depreciation 2.8 -- 2.8
Other expense, net 1.7 (1.4) (b) 0.3
Interest expense and finance charges, net 9.0 (2.4) (c) 6.6
-------------------------------------------------
Earnings before income taxes 17.1 4.8 21.9
Provision for income taxes 5.7 3.1 (d) 8.8
-------------------------------------------------
Earnings from continuing operations $ 11.4 $ 1.7 $ 13.1
=================================================
Earnings per share:
Continuing operations - diluted $ 0.48 $0.07 $ 0.55
</TABLE>
Notes to Pro Forma Consolidated Statement of Operations
(a) Eliminates (i) a $14.4 million ($8.6 million net of tax) non-recurring
charge in the 1998 second quarter resulting from the reorganization of
administrative support operations following the sale of the electronic
security services business, the reduction of certain intangible assets and
other provisions; and (ii) expenses relating to restructuring activities
and other provisions.
<PAGE>
-17-
(b) Reflects reduction of certain intangible assets.
(c) Reflects the interest expense reduction relating to debt restructuring
activities and assumes the Company's existing accounts receivable facility
would not be used while the $125 million principal amount of 9 5/8% senior
subordinated notes due 2007 remain outstanding.
(d) Reflects a tax effect of pro forma adjustments applying an estimated
federal, state and foreign tax rate of 40%.
Earnings from Discontinued Operations
Second quarter and year-to-date 1998 earnings from discontinued operations
reflect a net $42.5 million after-tax gain on the sale of the Company's
electronic security services business. Year-to-date 1998 earnings from
discontinued operations is partially offset by a $15.9 million charge, net of
tax, to reduce the Company's investment in its courier services business and to
provide for costs associated with the disposition.
Extraordinary Item
The Company recorded a $6.3 million extraordinary charge, net of tax, in the
second quarter of 1998 for the call premium associated with early redemption of
$150 million principal amount of 9 1/8% senior subordinated notes due 2003 and
the write-off of certain deferred financing fees.
Cash Flow
The Company generated cash flow from continuing operations of $12.4 million for
the first six months of 1998 and $7.5 million for the first six months of 1997.
Capital expenditures totaled $3.0 million and $1.7 million for the first half of
1998 and 1997, respectively.
Liquidity
Cash proceeds of approximately $425 million from the Company's sale of its
electronic security services business to ADT Security Services were used to
reduce debt and to invest in short-term cash equivalents. Total balance sheet
debt decreased to $275.5 million at June 30, 1998, from $338.7 million at
December 31, 1997. Cash and cash equivalents totaled $348.7 million at June 30,
1998, versus $8.0 million at December 31, 1997.
On March 24, 1997, the Company completed a refinancing pursuant to which it
issued $125 million principal amount 9 5/8% senior subordinated notes due 2007
and replaced its existing term loan, revolving credit and letter of credit
facilities with a new revolving credit facility with up to $155 million letter
of credit availability subject to an overall limit on the aggregate amount
outstanding under both facilities of $285 million. This new credit facility was
amended and restated as of June 30, 1998, to accommodate effects of the sale of
the electronic security services business. Total commitments available under the
facility were reduced from $285 million to $225 million, with a sub-limit on
letters of credit outstanding of $125 million. There are no scheduled commitment
reductions prior to maturity on March 31, 2002. At June 30, 1998, no amounts
were owed under the revolving credit facility and letters of credit totaling
$95.3 were issued and outstanding.
<PAGE>
-18-
The Company has an accounts receivable facility providing for the sale of a $120
million undivided interest in a revolving pool of customer receivables. Other
current assets at June 30, 1998 and December 31, 1997 included interest bearing
cash deposits of $25.6 million and $17.6 million, respectively, that were held
in trust under the terms of the accounts receivable facility. These deposits
represent collections held back based on the amount of eligible receivables in
the revolving receivables pool. The facility matures in the fourth quarter of
1998, and the Company is presently evaluating replacing the facility with a
similar facility.
Year 2000
The Company has initiated programs to upgrade various computer systems and
applications for compatibility with the year 2000. Expenditures to date and
those expected in the future, specifically related to modifications for year
2000 compatibility, are not expected to be material. The Company intends to be
fully compliant on or around the first quarter of 1999.
As discussed more fully in Note 10 of the Notes to Consolidated Financial
Statements, various complaints seeking substantial dollar amounts have been
filed against the Company. The Company believes that it has established
adequate provisions for litigation liabilities in its financial statements in
accordance with generally accepted accounting principles. The Company believes
that none of these matters individually or in the aggregate will have a material
adverse effect on its financial position or future operating results, although
no assurance can be given with respect to the ultimate outcome of any such
proceeding.
<PAGE>
-19-
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
As previously reported in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997, there is a pending lawsuit against the Company for
recovery of alleged damages incurred as a result of the failure of its
discontinued property and casualty insurance subsidiary ("Centaur") to satisfy
its reinsurance obligations. On August 10, 1998 the Company, the California
Insurance Commissioner as trustee of the Mission Insurance Companies Trust
("Mission Trust") and the Illinois Director of Insurance as rehabilitator of
Centaur agreed to settle such lawsuit, subject to court approval. As part of
such settlement, the Company agreed to pay the Mission Trust $4 million and one-
third of any dividend or other distribution that may be paid to the Company
after rehabilitation of Centaur. Separately, the Mission Trust and Centaur
agreed to an uncontested liquidated claim in the Centaur estate of $48 million.
Additionally, the Illinois Director of Insurance, on behalf of the Centaur
estate, and the Company agreed to exchange mutual releases of any remaining
liability of the Company to the Centaur estate.
As previously reported in the Company's Annual Report on Form 10K for the year
ended December 31, 1997, the Company had requested that its former subsidiary,
Borg-Warner Automotive, Inc. ("Automotive"), indemnify it against certain past
and future costs relating to environmental and financing liabilities associated
with certain former automotive operations. Automotive had contested its
indemnification obligation and the parties had submitted the matter to binding
arbitration. Separately, Automotive had filed suit against the Company and
certain current and former directors, officers and employees of the Company for
damages arising from the 1993 spin-off of Automotive to the Company's
stockholders. In May 1998, the Company and Automotive agreed to settle both the
arbitration and the lawsuit. As part of the settlement, the parties agreed to
dismiss the arbitration and litigation claims, and Automotive agreed to
indemnify the Company for all of the next $2.9 million in future costs relating
to the contested environmental and financing liabilities and 50% of the future
costs thereafter.
Item 2. Changes in Securities
Inapplicable.
Item 3. Defaults Upon Senior Securities
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders
On April 21, 1998, the Company held its annual meeting of stockholders. At
such meeting, J. Joe Adorjan, James J. Burke, Jr. and Albert J. Fitzgibbons, III
were elected as directors to serve for a term expiring in 2001. Each of Arthur
F. Golden, Dale W. Lang, Robert A. McCabe, Andrew NcNally IV, Alexis P. Michas,
H. Norman Schwarzkopf and Donald C. Trauscht continued to serve as directors
following the meeting. At such meeting, the following votes were cast in the
election of directors:
<PAGE>
-20-
<TABLE>
<CAPTION>
For Withheld
---------- --------
<S> <C> <C>
J.J. Adorjan 21,464,492 120,665
J.J. Burke, Jr. 21,462,950 122,208
A.J. Fitzgibbons 21,464,550 120,608
</TABLE>
At such meeting, the proposal to adopt the Company's 1998 Non-Affiliate
Directors Stock Option Plan was approved by the following votes:
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
- ---------- ------- ------- ----------------
<S> <C> <C> <C>
20,980,393 595,404 9,361 --
</TABLE>
At such meeting, the selection of Deloitte & Touche, LLP as auditors was
approved by the following votes:
<TABLE>
<CAPTION>
For Against Abstain
- ---------- ------- -------
<S> <C> <C>
21,569,789 12,368 3,001
</TABLE>
Item 5. Other Information
-----------------
The Company entered into an agreement with Borg-Warner Automotive, Inc.
("Automotive") effective July 31, 1998 whereby the Company sold its rights to
the "Borg-Warner" name and mark in the security field for $3.6 million.
Automotive granted the Company an exclusive, royalty-free license to use the
"Borg-Warner" name and mark in the security field for a four-year period.
Automotive is entitled to be reimbursed for certain expenses of maintaining the
relevant trademark registrations.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
4 -- Amended and Restated Credit Agreement dated as of June 30, 1998
between the Company and the lenders and agents named therein.
27 -- Financial Data Schedule.
(b) Reports on Form 8-K:
None.
<PAGE>
-21-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Borg-Warner Security Corporation
-----------------------------------------------
(Registrant)
By /s/ Timothy M. Wood
-----------------------------------------------
(Signature)
Timothy M. Wood
Vice President, Finance
(Principal Financial and Accounting Officer)
Date: August 14, 1998
<PAGE>
$225,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF
JUNE 30, 1998
AMONG
BORG-WARNER SECURITY CORPORATION,
THE LENDERS LISTED HEREIN,
AS LENDERS,
CANADIAN IMPERIAL BANK OF COMMERCE,
AS DOCUMENTATION AGENT,
NATIONSBANK, N.A.,
AS SYNDICATION AGENT,
AND
BANKERS TRUST COMPANY,
AS ADMINISTRATIVE AGENT
<PAGE>
BORG-WARNER SECURITY CORPORATION
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JUNE 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction........................................................................................ 1
Recitals............................................................................................ 1
SECTION 1.
Definitions............................................... 1
1.1 Certain Defined Terms........................................................................ 1
1.2 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement................................................................. 22
1.3 Other Definitional Provisions................................................................ 22
SECTION 2.
Amounts and Terms of Commitments and Loans; Notes; Letters of Credit............................ 23
2.1 Loans and Notes.............................................................................. 23
2.2 Interest on the Loans........................................................................ 26
2.3 Fees......................................................................................... 31
2.4 Prepayments and Payments; Reductions in Commitments.......................................... 31
2.5 Use of Proceeds.............................................................................. 36
2.6 Special Provisions Governing Eurodollar Rate Loans........................................... 36
2.7 Capital Adequacy Adjustment.................................................................. 42
2.8 Taxes........................................................................................ 42
2.9 Letters of Credit............................................................................ 43
2.10 Replacement of Lender........................................................................ 51
SECTION 3.
Conditions to Loans and Letters of Credit...................................... 52
3.1 Conditions to Effectiveness.................................................................. 52
3.2 Conditions to All Loans...................................................................... 54
3.3 Conditions to Letters of Credit.............................................................. 55
SECTION 4.
Company's Representations and Warranties....................................... 56
4.1 Organization, Powers, Good Standing, Business and Subsidiaries............................... 56
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.2 Authorization of Borrowing, etc.............................................................. 57
4.3 Financial Condition.......................................................................... 57
4.4 No Material Adverse Change; No Stock Payments................................................ 58
4.5 Title to Properties; Liens................................................................... 58
4.6 Litigation; Adverse Facts.................................................................... 58
4.7 Payment of Taxes............................................................................. 59
4.8 Materially Adverse Agreements; Performance of Agreements..................................... 59
4.9 Governmental Regulation...................................................................... 59
4.10 Securities Activities........................................................................ 60
4.11 Employee Benefit Plans....................................................................... 60
4.12 Patents, Trademarks, etc..................................................................... 60
4.13 Certain Fees................................................................................. 61
4.14 Environmental Matters........................................................................ 61
4.15 Disclosure................................................................................... 62
4.16 Year 2000 Compliance......................................................................... 63
SECTION 5.
Company's Affirmative Covenants................................................ 63
5.1 Financial Statements and Other Reports....................................................... 63
5.2 Corporate Existence, etc..................................................................... 68
5.3 Payment of Taxes and Claims; Tax Consolidation............................................... 68
5.4 Maintenance of Properties; Insurance......................................................... 69
5.5 Inspection; Lender Meeting; Confidentiality.................................................. 69
5.6 Equal Security for Obligations; No Further Negative Pledges.................................. 70
5.7 Compliance with Laws, etc.................................................................... 70
5.8 Environmental Disclosure and Inspection...................................................... 70
5.9 Hazardous Materials; Remedial Action......................................................... 71
5.10 BW-Other Corporation......................................................................... 71
5.11 Further Assurances as to Future Material Subsidiaries........................................ 72
5.12 FOCI Matters................................................................................. 72
5.13 Blocked Account.............................................................................. 73
5.14 Year 2000 Compliance......................................................................... 73
SECTION 6.
Company's Negative Covenants................................................... 73
6.1 Indebtedness................................................................................. 73
6.2 Liens........................................................................................ 75
6.3 Investments.................................................................................. 76
6.4 Contingent Obligations....................................................................... 77
6.5 Restricted Junior Payments................................................................... 78
6.6 Financial Covenants.......................................................................... 80
6.7 Restriction on Fundamental Changes........................................................... 80
6.8 Sales and Leasebacks......................................................................... 82
6.9 Sale or Discount of Receivables.............................................................. 82
6.10 Transactions with Shareholders and Affiliates................................................ 82
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.11 Disposal of Subsidiary Stock................................................................. 83
6.12 Conduct of Business.......................................................................... 83
6.13 Amendments or Waivers Relating to Subordinated Indebtedness.................................. 83
6.14 Designation of Senior Indebtedness........................................................... 84
6.15 Fiscal Year.................................................................................. 84
SECTION 7.
Events of Default.............................................................. 84
7.1 Failure to Make Payments When Due............................................................ 84
7.2 Default in Other Agreements.................................................................. 85
7.3 Breach of Certain Covenants.................................................................. 85
7.4 Breach of Warranty........................................................................... 85
7.5 Other Defaults Under Agreement or Loan Documents............................................. 85
7.6 Involuntary Bankruptcy; Appointment of Receiver, etc......................................... 86
7.7 Voluntary Bankruptcy; Appointment of Receiver, etc........................................... 86
7.8 Judgments and Attachments.................................................................... 86
7.9 Dissolution.................................................................................. 87
7.10 Employee Benefit Plans....................................................................... 87
7.11 Invalidity of Guaranties..................................................................... 87
7.12 Failure of Security.......................................................................... 87
7.13 Change in Control............................................................................ 87
7.14 Trade Receivables Facility................................................................... 88
SECTION 8.
Agents......................................................................... 89
8.1 Appointment.................................................................................. 89
8.2 Powers; General Immunity..................................................................... 90
8.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness............................................................................. 91
8.4 Right to Indemnity........................................................................... 92
8.5 Registered Persons Treated as Owner.......................................................... 92
8.6 Successor Agents............................................................................. 92
8.7 Loan Guaranties and Collateral Documents..................................................... 93
SECTION 9.
Miscellaneous.................................................................. 93
9.1 Assignments and Participations in Loans and Letters of Credit................................ 93
9.2 Expenses..................................................................................... 96
9.3 Indemnity.................................................................................... 97
9.4 Set Off...................................................................................... 97
9.5 Ratable Sharing.............................................................................. 98
9.6 Amendments and Waivers....................................................................... 99
9.7 Independence of Covenants.................................................................... 100
9.8 Notices...................................................................................... 100
9.9 Survival of Warranties and Certain Agreements................................................ 101
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
9.10 Failure or Indulgence Not Waiver; Remedies Cumulative........................................ 101
9.11 Severability................................................................................. 101
9.12 Obligations Several; Independent Nature of Lenders' Rights................................... 101
9.13 Headings..................................................................................... 102
9.14 APPLICABLE LAW............................................................................... 102
9.15 Successors and Assigns; Subsequent Holders of Notes.......................................... 102
9.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS;
WAIVER OF JURY TRIAL......................................................................... 102
9.17 Counterparts; Effectiveness.................................................................. 103
9.18 Certain Agreements........................................................................... 104
Signatures.......................................................................................... S-1
</TABLE>
iv
<PAGE>
SCHEDULES
Schedule 1.1 -- Subsidiaries
Schedule 2.1 -- Lenders' Commitments and Pro Rata Shares
Schedule 2.9 -- Existing Letters of Credit
Schedule 4.1C -- Conduct of Business
Schedule 6.1 -- Existing Indebtedness
Schedule 6.2 -- Existing Liens
Schedule 6.3 -- Existing Investments
Schedule 6.4 -- Existing Contingent Obligations
Schedule A -- Credit Agreement Disclosure Schedule
v
<PAGE>
EXHIBITS
I -- Form of Notice of Borrowing
II -- Form of Notice of Conversion/Continuation
III -- Form of Note
IV -- Form of Compliance Certificate
V -- Form of Opinion of Company's Special Counsel
VI -- Form of Opinion of Company's General Counsel
VII -- Form of Opinion of O'Melveny & Myers LLP
VIII -- Form of Company Pledge Agreement
IX -- Form of Borg-Warner Subsidiary Guaranty
X -- Form of Borg-Warner Subsidiary Pledge Agreement
XI -- Form of Financial Condition Certificate
XII -- Form of Assignment Agreement
XIII -- Form of Letter of Credit Request
XIV -- Form of Acknowledgement and Consent
vi
<PAGE>
BORG-WARNER SECURITY CORPORATION
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF JUNE 30, 1998
This Amended and Restated Credit Agreement is dated as of June 30, 1998 and
entered into by and among Borg-Warner Security Corporation, a Delaware
corporation ("Company"), as Company, the Lenders listed on the signature pages
-------
hereof, as Lenders, Canadian Imperial Bank of Commerce, acting through one or
more of its agencies, branches or affiliates ("CIBC"), as documentation agent
----
("Documentation Agent"), NationsBank, N.A. ("NationsBank"), as syndication agent
------------------- -----------
("Syndication Agent"), and Bankers Trust Company ("Bankers"), as administrative
----------------- -------
agent for Lenders ("Administrative Agent").
--------------------
RECITALS
WHEREAS, the Company, as borrower, the lenders party thereto, as
lenders, Documentation Agent, Syndication Agent and Administrative Agent, are
parties to that certain Credit Agreement dated as of March 24, 1997 (the
"Existing Credit Agreement");
-------------------------
WHEREAS, the Company has recently sold its electronic security and
courier services businesses and desires to amend and restate the Existing Credit
Agreement to reflect the sale of such businesses and to make certain other
amendments to the Existing Credit Agreement, all as more specifically set forth
herein;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Lenders, Documentation
Agent, Syndication Agent and Administrative Agent agree that as of the Effective
Date (as defined below), the Existing Credit Agreement shall be amended and
restated in its entirety as follows:
SECTION 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS
---------------------
The following terms used in this Agreement shall have the following
meanings:
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination
------------------------
Date, the rate (rounded upward to the next highest one hundredth of one percent)
obtained by dividing (i) the Eurodollar Rate for that date by (ii) a percentage
equal to 100% minus the stated maximum rate of all reserves required to be
-----
maintained against "Eurocurrency liabilities" as specified in
<PAGE>
Regulation D (or against any other category of liabilities which includes
deposits by reference to which the interest rate on Eurodollar Rate Loans is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of any Lender to United States
residents).
"Administrative Agent" means Bankers and any successor thereto
--------------------
appointed pursuant to subsection 8.6.
"Affected Lender" means any Lender affected by any of the events
---------------
described in subsections 2.6B or 2.6C.
"Affiliate", as applied to any Person, means any other Person directly
---------
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise.
"Agent" means, as the context so requires, any or all of the
-----
Administrative Agent, Syndication Agent, Documentation Agent and/or Collateral
Agent.
"Agreement" means this Amended and Restated Credit Agreement dated as
---------
of June 30, 1998, as it may be amended, supplemented or otherwise modified from
time to time.
"Armored Joint Venture" means Loomis, Fargo & Co. a Delaware
---------------------
corporation.
"Asset Sale" means the sale, lease, assignment or other transfer for
----------
value ("transfer") by Company or any of its Subsidiaries to any Person, whether
--------
in a single transaction or a series of related transactions (other than to
Company or any of its Subsidiaries) of (i) any of the stock of any of Company's
Subsidiaries; (ii) all or substantially all of the assets of any division or
line of business of Company or any of its Subsidiaries; or (iii) any other
assets or rights having a book value or market value in excess of $2,000,000
other than in each case (A) the transfer in the ordinary course of business of
- ----------
personal property held for transfer in the ordinary course of business of
Company or any of its Subsidiaries, and (B) the transfer of notes, accounts
receivable, contracts, leases or other receivables to the extent transferred in
connection with the Trade Receivables Facility.
"Bankers" has the meaning assigned to that term in the introduction to
-------
this Agreement.
"Bankruptcy Code" means Title 11 of the United States Code entitled
---------------
"Bankruptcy" as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or
---------
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
2
<PAGE>
"Base Rate Loans" means Loans bearing interest at rates determined by
---------------
reference to the Base Rate as provided in subsection 2.2A.
"Borg-Warner Guarantor Subsidiaries" means the Borg-Warner
----------------------------------
Subsidiaries identified as such on Schedule 1.1 annexed hereto, such list in any
------------
event to include all Material Subsidiaries of Company excluding, however, any
Subsidiaries for which the guaranty of the Obligations may cause adverse tax
consequences for Company or may violate applicable laws.
"Borg-Warner Pledged Subsidiaries" means the Borg-Warner Subsidiaries
--------------------------------
identified as such or as "Foreign Pledged Subsidiaries" on Schedule 1.1 annexed
------------
hereto, such list in any event to include all Material Subsidiaries of Company
excluding, however, any "Foreign Pledged Subsidiaries" to the extent that such
pledge may cause adverse tax consequences for Company or may violate applicable
laws.
"Borg-Warner Subsidiaries" means the Subsidiaries of Company which are
------------------------
listed on Schedule 1.1 annexed hereto.
------------
"Borg-Warner Subsidiary Guaranty" means the Guaranty Agreement to be
-------------------------------
executed and delivered by the Borg-Warner Guarantor Subsidiaries, substantially
in the form of Exhibit IX annexed hereto, as such Borg-Warner Subsidiary
Guaranty may hereafter be amended, supplemented or otherwise modified from time
to time.
"Borg-Warner Subsidiary Pledge Agreement" means the Pledge Agreement
---------------------------------------
to be executed and delivered by the Borg-Warner Guarantor Subsidiaries,
substantially in the form of Exhibit X annexed hereto, pursuant to which certain
shares of capital stock of the Borg-Warner Pledged Subsidiaries, the shares of
the Armored Joint Venture and certain intercompany debt obligations held by such
Borg-Warner Guarantor Subsidiaries shall be pledged by them to Collateral Agent
for the benefit of the Lenders to secure payment of Company's obligations and
their obligations under the Loan Documents, as such Borg-Warner Subsidiary
Pledge Agreement may hereafter be amended, supplemented or otherwise modified
from time to time.
"Business Day" means (i) for all purposes other than as covered by
------------
clause (ii) below, any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the States of New York or Illinois or is a day
on which banking institutions located in such states are authorized or required
by law or other governmental action to close, and (ii) with respect to all
notices, determinations, fundings and payments in connection with the Eurodollar
Rate, any day that is a Business Day described in clause (i) and that is also a
day for trading by and between banks in Dollar deposits in the applicable
interbank Eurodollar market.
"BW-Other Corporation" means the direct and indirect subsidiaries of
--------------------
BW-Other Corporation, a Delaware corporation, prior to its liquidation into
Company, including without limitation Borg-Warner Equities Corporation, Borg-
Warner Equities Corporation of California, Borg-Warner Equities Corporation of
Monterey, Inc., NAL II, Ltd., Borg-Warner Insurance Holding Corporation and
Centaur Insurance Company.
"Capital Lease", as applied to any Person, means any lease of any
-------------
property
3
<PAGE>
(whether real, personal or mixed) by that Person as lessee that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of that
Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
----
"Cash Equivalents" means (i) marketable securities issued or directly
----------------
and unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (ii)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having a rating of AA or better from
Moody's Investors Service, Inc. ("Moody's") or an equivalent rating from
Standard & Poor's Ratings Group, a division of the McGraw Hill Companies
("S&P"); (iii) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at least A-
1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any Lender or any commercial bank chartered in the United
States of America or any state thereof or the District of Columbia having
unimpaired capital and surplus of not less than $250,000,000 (each Lender and
each such commercial bank herein called a "CASH EQUIVALENT BANK"); (v)
Eurodollar time deposits having a maturity of less than one year purchased
directly from any Cash Equivalent Bank (whether such deposit is with such Cash
Equivalent Bank or any other Cash Equivalent Bank); (vi) shares of any money
market mutual fund that (a) has a rating of no less than "AAA" from Moody's and
equivalent rating from S&P and (b) invests solely in the types of investments
referred to in clauses (i) through (v) above or in substantially similar
investments; (vii) with respect to a Foreign Entity, investments of the types
described in clauses (iv) and (v) above issued by or purchased from a Cash
Equivalent Bank or any commercial bank of recognized standing chartered in the
country where such Foreign Entity is domiciled having unimpaired capital and
surplus of at least $100,000,000.
"Centaur" means Centaur Insurance Company, an Illinois corporation and
-------
one of the BW-Other Corporations.
"Centaur Settlement Amount" means all amounts paid or contributed by
-------------------------
Company to Centaur or directly or indirectly paid by Company on behalf of
Centaur, in each case on or after the effective date of this Agreement for the
purpose of settling litigation pending against Centaur or against Company but
relating to Centaur; provided that the aggregate amount of all such payments
--------
does not exceed the amount disclosed in writing by Company to Agents and
approved by Agents as of the effective date of this Agreement.
"CIBC" has the meaning assigned to that term in the introduction to
----
this Agreement.
"Closing Date" means March 24, 1997, the date on which the initial
------------
Loans under the Existing Credit Agreement were made.
"Collateral" means, collectively, (i) the capital stock of the Borg-
----------
Warner Pledged
4
<PAGE>
Subsidiaries, the intercompany Indebtedness and the common stock of the Armored
Joint Venture, in each case as pledged under the Pledge Agreements, and (ii) all
other property, including proceeds, made subject to a Lien pursuant to the
Collateral Documents.
"Collateral Agent" means Bankers acting in the capacity of collateral
----------------
agent under the applicable Collateral Documents on behalf of Lenders.
"Collateral Documents" means the Pledge Agreements and all other
--------------------
instru ments or documents now or hereafter delivered by Company or any Borg-
Warner Guarantor Subsidiary in order to grant to Collateral Agent Liens on any
Collateral for the benefit of the Lenders.
"Commercial Letter of Credit" means any letter of credit or similar
---------------------------
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by Company or
its Subsidiaries in the ordinary course of business of Company or any such
Subsidiary.
"Commitment" or "Commitments" means the commitment or commitments of a
---------- -----------
Lender or Lenders as set forth in subsection 2.1A.
"Commitment Fee Percentage" means the per annum Commitment Fee
-------------------------
Percentage set forth in the table below opposite Company's Interest Coverage
Ratio for the four fiscal quarters ending as of the last day of the fiscal
quarter immediately preceding the fiscal quarter during which the determination
is being made as set forth in the Compliance Certificate delivered pursuant to
subsection 5.1(iv)(b) of the Credit Agreement, any required adjustment to become
automatically effective on the next succeeding Business Day following receipt by
the Administrative Agent of such Compliance Certificate:
<TABLE>
<CAPTION>
Interest Coverage Ratio Commitment Fee Percentage
- ----------------------- --------------------------
<S> <C>
Less than 2.25:1.00 0.50%
Equal to or greater than 2.25:1.00 but less than 0.375%
2.75:1.00
Equal to or greater than 2.75:1.00 0.25%
</TABLE>
;provided however for the period commencing on July 1, 1998, through the date on
-------- -------
which Company first delivers a Compliance Certificate pursuant to subsection 5.1
(iv) (b) or 6.7 (ii), the Commitment Fee Percentage shall be 0.25% per annum.
If Company fails to deliver a Compliance Certificate by the time required by
subsection 5.1(iv), from such time the Compliance Certificate was required to be
delivered until delivery of such Compliance Certificate, the Commitment Fee
Percentage shall be automatically adjusted to 0.50% per annum.
"Common Stock" means the Common Stock and Non-Voting Common Stock of
------------
Company, each series with a par value of $.01 per share.
5
<PAGE>
"Company" has the meaning assigned to that term in the introduction to
-------
this Agreement.
"Company Pledge Agreement" means the Pledge Agreement by and between
------------------------
Company and Collateral Agent, substantially in the form of Exhibit VIII annexed
hereto, as such Company Pledge Agreement may hereafter be amended, supplemented
or otherwise modified from time to time.
"Company Securities" means the Preferred Stock of Company, $.01 par
------------------
value per share, and Common Stock, collectively.
"Compliance Certificate" means a certificate substantially in the form
----------------------
annexed hereto as Exhibit IV delivered to Lenders by Company pursuant to
subsection 5.1(iv).
"Consolidated Adjusted EBITDA" means Consolidated EBITDA, plus, if
----------------------------
during the period for which compliance is being determined, Company or any
subsidiary of Company has made a Permitted Acquisition under subsection 6.7(ii),
the Consolidated EBITDA attributable to such Permitted Acquisition from the
first day of such period. Consolidated EBITDA attributable to a Permitted
Acquisition shall be calculated in the same manner as provided for in the
definition of Consolidated EBITDA for Company and its Consolidated Subsidiaries.
"Consolidated EBITDA" means, for any period, without duplication, the
-------------------
sum of the amounts for such period of (i) Consolidated Net Income excluding
extraordinary items, (ii) provisions for taxes based on income, (iii)
Consolidated Net Interest Expense, (iv) to the extent Consolidated Net Income
has been reduced thereby, amortization expense, depreciation expense and other
non-cash expenses, and (v) other non-cash items reducing Consolidated Net Income
less non-cash items increasing Consolidated Net Income, all as determined on a
- ----
consolidated basis for Company and its Consolidated Subsidiaries in conformity
with GAAP; provided that Consolidated EBITDA shall be calculated as if the sale
or transfer of the electronic security, armored transport and courier services
businesses took place on the first day of such period.
"Consolidated Interest Expense" means, for any period, total interest
-----------------------------
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Company and its Consolidated Subsidiaries
on a consolidated basis with respect to all outstanding Indebtedness of Company
and its Consolidated Subsidiaries, including, without limitation, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and with respect to any sale, discount or other financing of
receivables and net costs under Interest Rate Agreements but excluding, however,
the amortization of the costs of issuance and original issuance discount related
to the 9 1/8% Subordinated Notes, the Senior Subordinated Notes and any fees or
other similar financing costs payable in connection with the Existing Credit
Agreement, the Trade Receivables Facility, or this Agreement which are
capitalized by Company.
"Consolidated Leverage Ratio" means the ratio of Net Funded Debt as of
---------------------------
the last day of the fiscal quarter for which the determination is being made to
Consolidated Adjusted EBITDA for the consecutive four fiscal quarter period
ending as of the last day of the fiscal
6
<PAGE>
quarter for which the determination is being made.
"Consolidated Net Income" means, for any period, the net income (or
-----------------------
loss) of Company and its Consolidated Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (i) the income (or loss) of any
--------
Person (other than a Subsidiary of Company) in which any other Person (other
than Company or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to
Company or any of its Subsidiaries by such Person during such period, (ii) the
income (or loss) of any Person accrued prior to the date it becomes a Subsidiary
of Company or is merged into or consolidated with Company or any of its
Subsidiaries or that Person's assets are acquired by Company or any of its
Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that
the declaration or payment of dividends or similar distributions by that
Subsidiary of that income is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary, and (iv) any
after-tax gains or losses attributable to Asset Sales or returned surplus assets
of any Pension Plan.
"Consolidated Net Interest Expense" means, for any period,
---------------------------------
Consolidated Interest Expense minus income attributable to interest earned on
-----
Cash Equivalents by Company and its Subsidiaries on a consolidated basis
calculated in conformity with GAAP; provided that for periods ending prior to
--------
June 1, 1999, Consolidated Net Interest Expense shall be calculated as follows:
actual Consolidated Interest Expense less actual interest earned on Cash
Equivalents for the period commencing on June 1, 1998 and ending on the last day
of the fiscal quarter for which the determination is being made or such other
date a Compliance Certificate is filed (the "Calculation Period") shall be
multiplied by 365 and the resulting amount divided by the number of days in the
- ------------- ----------
Calculation Period.
"Consolidated Subsidiaries" means all Subsidiaries of Company other
-------------------------
than BW-Other Corporation.
"Contingent Obligation", as applied to any Person, means any direct or
---------------------
indirect liability, contingent or otherwise, of that Person (i) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Currency Agreements or Interest Rate Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with recourse or sale with recourse by such
Person of the obligation of another, and (b) any liability of such Person for
the obligations of another through any agreement (contingent or otherwise) (x)
to purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise), (y) to maintain the
7
<PAGE>
solvency or any balance sheet item, level of income or financial condition of
another, or (z) to make take-or-pay or similar payments if required regardless
of non-performance by any other party or parties to an agreement, if in the case
of any agreement described under subclauses (x) or (y) of this sentence the
primary purpose or intent thereof is as described in the preceding sentence. The
amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported.
"Contractual Obligation", as applied to any Person, means any
----------------------
provision of any security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"Currency Agreement" means any foreign exchange contract, currency
------------------
swap agreement or other similar agreement or arrangement designed to protect
Company or any of its Consolidated Subsidiaries against fluctuations in currency
values; provided that the counterparty to any such agreement shall be a Lender
--------
or any of its Affiliates or ML & Co. or any of its Affiliates or any other
Person reasonably acceptable to Agents and Requisite Lenders.
"Defense Investigative Service Letter" means that certain letter from
------------------------------------
J. William Leonard, Assistant Deputy Director (Industrial Security) of Defense
Investigative Service to Joseph Adorjan, President of Company.
"Deposit Account" means a demand, time, savings, passbook or like
---------------
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Discontinued Operations" means BW-Other Corporation and all other
-----------------------
entities treated as discontinued operations in accordance with GAAP.
"Dollars" and the sign "$" means the lawful money of the United States
------- -
of America.
"Effective Date" means the date on which the conditions precedent set
--------------
forth in subsection 3.1 have been satisfied.
"Eligible Assignee" means (A) (i) a commercial bank organized under
-----------------
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
--------
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including insurance companies, mutual funds and lease
financing companies; and (B) any Lender and any Affiliate of any Lender;
provided that no Affiliate of Company shall be an Eligible Assignee.
- --------
8
<PAGE>
"Employee Benefit Plan" means any "employee benefit plan" as defined
---------------------
in Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by any Loan Party or any of its ERISA Affiliates.
"Environmental Claim" means any written notice of violation, claim,
-------------------
demand or other order or direction (conditional or otherwise) by any
governmental authority or any Person for personal injury (including sickness,
disease or death), tangible or intangible property damage, damage to the
environment, nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, resulting from or based
upon (i) the existence, or the continuation of the existence, of a Release
(whether sudden or non-sudden or accidental or non-accidental), of, or exposure
to, any Hazardous Material, in, into or onto the environment at, in, by, from or
related to any Facility, (ii) the transportation, storage, treatment or disposal
of Hazardous Materials in connection with the operation of any Facility, or
(iii) the violation, or alleged violation, of any statutes, ordinances, orders,
rules, regulations, permits or licenses of or from any governmental authority,
agency or court relating to Hazardous Materials with respect to the Facilities.
"Environmental Laws" means all laws relating to fines, orders,
------------------
injunctions, penalties, damages, contribution, cost recovery compensation,
losses or injuries resulting from the Release or threatened Release of Hazardous
Materials and to the generation, storage, transportation, or disposal of
Hazardous Materials, in any manner applicable to Company or any of its
Subsidiaries or any or their respective properties, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. (S) 9601 et seq.), the Hazardous Material
-- ---
Transportation Act (49 U.S.C. (S) 1801 et seq.), the Resource Conservation and
-- ---
Recovery Act (42 U.S.C. (S) 6901 et seq.), the Federal Water Pollution Control
-- ---
Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C. (S) 7401 et
-- --- --
seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.), the
- --- -- ---
Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.) and the Emergency
-- ---
Planning and Community Right-to-Know Act (42 U.S.C. (S) 11001 et seq.), each as
-- ---
amended or supplemented, and any analogous future or present local, state and
federal statutes and regulations promulgated pursuant thereto, each as in effect
as of the date of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time and any successor statute.
"ERISA Affiliate", as applied to any Person, means (i) any corporation
---------------
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a member; and (iii)
any member of an affiliated service group within the meaning of Section 414(m)
or (o) of the Internal Revenue Code of which that Person, any corporation
described in clause (i) above or any trade or business described in clause (ii)
above is a member. After Company's spin-off of Borg-Warner Automotive, Inc.,
Borg-Warner Automotive, Inc. and its Subsidiaries shall not be ERISA Affiliates
of Company with respect to events occurring after such spin-off unless
9
<PAGE>
the Company is liable under the Code or ERISA with respect to such event.
"ERISA Event" means (i) a "reportable event" within the meaning of
-----------
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan which is not subject to the provision for waiver of the 30-day
notice requirement to the PBGC (excluding a reportable event described in PBGC
Regulation Section 2615.23 arising out of the Company's spin-off of Borg-Warner
Automotive, Inc.); (ii) the failure to meet the minimum funding standard of
Section 412 of the Internal Revenue Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(d) of the Internal Revenue
Code) or the failure to make on its due date a required installment under
Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or
the failure to make any required contribution to a Multi employer Plan; (iii)
the provision by the administrator of any Pension Plan pursuant to Section
4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the withdrawal by a Loan
Party or any of its ERISA Affiliates from any Pension Plan with two or more
contributing sponsors or the termination of any such Pension Plan resulting in
liability pursuant to Sections 4063 or 4064 of ERISA; (v) the institution by the
PBGC of proceedings to terminate any Pension Plan, or the occurrence of any
event or condition which might constitute grounds under ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan;
(vi) the imposition of liability on a Loan Party or any of its ERISA Affiliates
pursuant to Sections 4062(e) or 4069 of ERISA or by reason of the application of
Section 4212(c) of ERISA; (vii) the withdrawal of a Loan Party or any of its
ERISA Affiliates in a complete or partial withdrawal (within the meaning of
Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any
potential liability therefor, or the receipt by a Loan Party or any of its ERISA
Affiliates of notice from any Multiemployer Plan that it is in reorganization or
insolvency pursuant to Sections 4241 or 4245 of ERISA, or that it intends to
terminate or has terminated under Sections 4041A or 4042 of ERISA; (viii) the
occurrence of an act or omission which could give rise to the imposition on a
Loan Party or any of its ERISA Affiliates of any material fines, penalties,
taxes or related charges under Chapter 43 of the Internal Revenue Code or under
Sections 409, 502(c), (i) or (l) or 4071 of ERISA in respect of any Employee
Benefit Plan; (ix) the assertion of a material claim (other than routine claims
for benefits) against any Employee Benefit Plan other than a Multiemployer Plan
or the assets thereof for which any Loan Party or any of its ERISA Affiliates
may be liable, or against any Loan Party or any of its ERISA Affiliates in
connection with any such plan which could reasonably be expected to be
successful; (x) the receipt from the Internal Revenue Service of notice of the
failure of any Pension Plan to qualify under Section 401(a) of the Internal
Revenue Code, or the failure of any trust forming part of any Pension Plan to
fail to qualify for exemption from taxation under Section 401(a) of the Internal
Revenue Code if the resulting fines, penalties and related charges could
reasonably be expected to be material; or (xi) the imposition of a Lien pursuant
to Sections 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to
ERISA with respect to any Pension Plan.
"Eurodollar Rate" means, for any Interest Rate Determination Date, the
---------------
arithmetic average (rounded upwards to the nearest 1/100 of 1%) of the offered
quotation, if any, to first class banks in the Eurodollar market by each of the
Reference Lenders for Dollar deposits of amounts in immediately available funds
comparable to the principal amount of the Eurodollar Rate Loan of that Reference
Lender for which the Eurodollar Rate is being determined with maturities
10
<PAGE>
comparable to the Interest Period for which such Eurodollar Rate will apply as
of approximately 10:00 A.M. (New York time) two Business Days prior to the
commencement of such Interest Period. If any Reference Lender fails to provide
its offered quotation to Administrative Agent, the Eurodollar Rate shall be
determined on the basis of the offered quotation(s) by the other Reference
Lender(s).
"Eurodollar Rate Loans" means Loans bearing interest at rates
---------------------
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"Event of Default" means each of the events set forth in Section 7.
----------------
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, and any successor statute.
"Existing Credit Agreement" has the meaning assigned to that term in
-------------------------
the introduction to this Agreement.
"Existing Indebtedness" means outstanding Indebtedness of Company and
---------------------
its Consolidated Subsidiaries listed in Schedule 6.1 annexed hereto.
------------
"Facility" or "Facilities" means, as at any date of determination, any
-------- ----------
and all real property (including all buildings, fixtures or other improvements
located thereon) owned, leased or operated by Company or any of its Subsidiaries
as at such date.
"Federal Funds Effective Rate" means, for any period, a fluctuating
----------------------------
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
"Fiscal Year" means the fiscal year of Company and its Subsidiaries
-----------
ended on December 31 of each calendar year.
"Foreign Entity" means any Subsidiary of Company or Joint Venture of
--------------
Company either (i) more than 80% of the sales, earnings or assets (determined on
a consolidated basis) of which are located or derived from operations outside of
the United States of America or (ii) which is a "controlled foreign corporation"
within the meaning of Section 952 of the Internal Revenue Code.
"Funded Debt", as applied to any Person, means all Indebtedness of
-----------
that Person that by its terms or by the terms of any instrument or agreement
relating thereto matures more than one year from, or is directly renewable or
extendable at the option of the debtor to a date more than one year from
(including an option of the debtor under a revolving credit or similar
11
<PAGE>
agreement obligating the lender or lenders to extend credit over a period of one
year or more from), the date of the creation thereof.
"Funding Date" means the date of the funding of a Loan.
------------
"GAAP" means, subject to the limitations on application thereof set
----
forth in subsection 1.2, generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, that are applicable to the circumstances as of the
date of determination.
"Government Acts" has the meaning assigned to that term in subsection
---------------
2.9H.
"Guarantor" means the Borg-Warner Guarantor Subsidiaries under the
---------
applicable Loan Guaranty.
"Hazardous Materials" means (i) any oil, petroleum or petroleum
-------------------
derived substance, any drilling fluids, produced waters and other wastes
associated with the exploration, development or production of crude oil, any
flammable substances or explo sives, any radioactive materials, any hazardous
wastes or substances, any toxic wastes or substances or any other materials or
pollutants which (a) pose a hazard to any property of Company or any of its
Subsidiaries or to Persons on or about such property or (b) cause such property
to be in violation of any Environmental Laws, (ii) asbestos in any form which is
or could become friable, urea formaldehyde foam insulation, electrical equipment
which contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (iii) any chemical, material or
substance defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," or "toxic substances" or words of similar import
under any applicable local, state or federal law or under the regulations
adopted or publications promulgated pursuant thereto, including, without
limitation, Environmental Laws, and (iv) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority having jurisdiction over Company or any of its
Subsidiaries or any of their respective properties.
"Indebtedness", as applied to any Person, means (i) all indebtedness
------------
for borrowed money, whether or not evidenced by a promissory note, draft or
similar instrument, (ii) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services, which purchase price is (y) due more than six months from
the date of incurrence of the obligation in respect thereof, or (z) evidenced by
a note or similar written instrument, and (v) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.
12
<PAGE>
"Industry Standards" has the meaning assigned to that term in
------------------
subsection 5.4.
"Interest Coverage Ratio" means the ratio of Consolidated EBITDA to
-----------------------
Consolidated Net Interest Expense.
"Interest Payment Date" means, with respect to any Eurodollar Rate
---------------------
Loan, the last day of each Interest Period applicable to such Loan; provided
--------
that in the case of each Interest Period of longer than three months, "Interest
Payment Date" shall also include each Interest Period Anniversary Date for such
Interest Period.
"Interest Period" means any interest period applicable to a Loan as
---------------
determined pursuant to subsection 2.2B.
"Interest Period Anniversary Date" means, for each Interest Period
--------------------------------
applicable to a Eurodollar Rate Loan that is longer than three months, each
three-month anniversary of the commencement of that Interest Period.
"Interest Rate Agreement" means any interest rate swap agreement,
-----------------------
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect Company or any of its Subsidiaries
against fluctuations in interest rates; provided that the counterparty to any
--------
such agreement shall be a Lender or any of its respective Affiliates or ML & Co.
or any of its Affiliates or any other Person reasonably acceptable to Agents;
provided further that the calculation of payments for early termination shall be
- -------- -------
made on a reasonable basis in accordance with customary industry practices.
"Interest Rate Determination Date" means each date for calculating the
--------------------------------
Eurodollar Rate for purposes of determining the interest rate in respect of an
Interest Period. The Interest Rate Determination Date for any Interest Period
shall be the second Business Day prior to the first day of such Interest Period
for any Eurodollar Rate Loan.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended to the date hereof and from time to time hereafter.
"Investment", as applied to any Person, means any direct or indirect
----------
purchase or other acquisition by that Person of, or a beneficial interest in,
stock or other Securities of any other Person, or any direct or indirect loan,
advance (other than advances to employees for moving and travel expenses,
drawing accounts and similar expenditures in the ordinary course of business) or
capital contribution by that Person to any other Person, including all
indebtedness and accounts receivable from that other Person that are not current
assets or did not arise from sales to that other Person in the ordinary course
of business. The amount of any Investment shall be the original cost of such
Investment plus the cost of all additions thereto, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such investment.
"Issuing Lender" means, with respect to any Letter of Credit, any
--------------
Lender, including the Agents, that issues such Letter of Credit determined as
provided in subsection 2.9.
13
<PAGE>
"Joint Venture" means a joint venture, partnership or other similar
-------------
arrangement, whether in corporate, partnership or other legal form; provided
--------
that, as to any such arrangement in corporate form, such corporation shall not,
as to any Person of which such corporation is a Subsidiary, be considered to be
a Joint Venture to which such Person is a party.
"Lender" and "Lenders" means the persons identified as "Lenders" and
------ -------
listed on the signature pages of this Agreement, together with their successors
and permitted assigns pursuant to subsection 9.1.
"Letter of Credit" means any of the Commercial Letters of Credit or
----------------
Standby Letters of Credit issued or to be issued by Issuing Lenders for the
account of Company pursuant to subsection 2.9 and for the purposes described in
subsection 2.5C.
"Letter of Credit Request" means a request substantially in the form
------------------------
of Exhibit XIII annexed hereto with respect to a proposed issuance of a Letter
of Credit.
"Letter of Credit Usage" means, with respect to any Letter of Credit,
----------------------
as at any date of determination, the sum of (i) the maximum aggregate amount
which is or at any time thereafter may become available for drawing under such
Letter of Credit then outstanding plus (ii) the aggregate amount of all drawings
----
under such Letter of Credit honored by any Issuing Lender and not theretofore
reimbursed by Company.
"Lien" means any lien, mortgage, deed of trust, deed to secure debt,
----
pledge, security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan" or "Loans" means one or more of the loans made by Lenders to
---- -----
Company pursuant to subsection 2.1A.
"Loan Documents" means this Agreement, the Letters of Credit and
--------------
applications for such Letters of Credit, the Notes, and the Loan Guaranties.
"Loan Guaranties" means the Borg-Warner Subsidiary Guaranty.
---------------
"Loan Parties" means Company and the Borg-Warner Subsidiaries,
------------
collectively.
"Margin Stock" has the meaning assigned to that term in Regulation U
------------
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"Material Adverse Effect" means (i) a material adverse effect upon the
-----------------------
business, operations, properties, assets, prospects or condition (financial or
otherwise) of Company and its Consolidated Subsidiaries taken as a whole or (ii)
the material impairment of the ability of any Loan Party to perform its
obligations under any Loan Document or of any Agent or any Lender to enforce or
collect the Obligations, including the obligation of any Loan Party to perform
its
14
<PAGE>
guaranty of the Obligations.
"Material Subsidiary" means (i) each Subsidiary of Company identified
-------------------
as a "Material Subsidiary" on Schedule 1.1 annexed hereto; (ii) any other
------------
Subsidiary of Company now existing or hereafter acquired or formed by Company
which (x) for the most recent fiscal year of Company commencing on or after
January 1, 1996 accounted for more than 3% of the consolidated revenues of
Company, or (y) as at the end of such fiscal year, was the owner of more than 3%
of the consolidated assets, all as shown on the consolidated financial
statements of Company for such fiscal year; and (iii) any other Subsidiary so
designated by Company, by an Officers' Certificate delivered to Administrative
Agent, together with the documents required pursuant to subsection 5.11.
"Maturity Date" means March 31, 2002.
-------------
"ML & Co." or "ML" means Merrill Lynch & Co., Inc., a Delaware
------- --
corporation.
"MLCP" means Merrill Lynch Capital Partners, Inc., a Delaware
----
corporation.
"Multiemployer Plan" means a "multiemployer plan" as defined in
------------------
Section 3(37) of ERISA to which Company or any of its ERISA Affiliates is
contributing or ever has contributed or to which Company or any of its ERISA
Affiliates has, or ever has had, an obligation to contribute.
"NationsBank" has the meaning assigned to that term in the
-----------
introduction to this Agreement.
"Net Cash Proceeds" means, in the case of any Asset Sale, cash
-----------------
payments (including any cash received by way of deferred payment pursuant to a
note receivable or otherwise, but only as and when so received) received from an
Asset Sale, net of costs of sale (including without limitation payment of the
outstanding principal amount of, premium or penalty, if any, and interest on any
Indebtedness (other than the Loans) secured by a Lien on the asset or assets
which are the subject of such Asset Sale and required to be repaid under the
terms thereof as a result of such Asset Sale) and taxes paid or payable within
two years of the date of such Asset Sale as a result thereof.
"Net Funded Debt" means, as of any date of determination, (i) all
---------------
Funded Debt of Company and its Subsidiaries (including without limitation, the
current portion of any indebtedness which constitutes Funded Debt but excluding
the maximum stated amount of all outstanding standby letters of credit
constituting Funded Debt) plus (ii) without duplication of any items included in
----
Funded Debt of Company and its Subsidiaries, an amount equal to (x) the
outstanding amount of the undivided interests sold by Company and its
Subsidiaries in their trade accounts receivable pursuant to the Trade
Receivables Facility minus (y) the outstanding balance of the cash deposits
constituting proceeds of the collection of such trade accounts receivable held
in trust for the benefit of the purchasers of such undivided interests minus
-----
(iii) without duplication of the cash deposits included pursuant to the
foregoing clause (ii)(y), the aggregate Cash Equivalents of Company and its
Subsidiaries.
15
<PAGE>
"9 1/8% Subordinated Notes" means Company's $150,000,000 in initial
-------------------------
aggregate principal amount of 9 1/8% Senior Subordinated Notes due 2003.
"9 1/8% Subordinated Note Indenture" means the indenture pursuant to
----------------------------------
which the 9 1/8% Subordinated Notes were issued, as such indenture may be
amended from time to time to the extent permitted under this Agreement.
"Notes" means the promissory notes of Company issued pursuant to
-----
subsection 2.1E and in substantially the form of Exhibit III annexed hereto.
"Notice of Borrowing" means a notice substantially in the form of
-------------------
Exhibit I annexed hereto with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in
---------------------------------
the form of Exhibit II annexed hereto with respect to a proposed conversion or
continuation.
"Obligations" means all obligations of every nature of Company and its
-----------
Subsidiaries from time to time owed to Agents or Lenders or any of them under
the Loan Documents. Time is of the essence in the performance of all
Obligations, except as otherwise expressly provided in this Agreement.
"Officers' Certificate" means, as applied to any corporation, a
---------------------
certificate executed on behalf of such corporation by its Chairman of the Board
(if an officer) or its Chief Executive Officer or its President or one of its
Vice Presidents and by its Chief Financial Officer, its Chief Accounting
Officer, its Treasurer or its Assistant Treasurer; provided that any Officers'
--------
Certificate required to be delivered by Company on the Effective Date may be
executed on behalf of Company by any one of the foregoing officers; and provided
--------
further that every Officers' Certificate with respect to the compliance with a
- -------
condition precedent to the making of any Loans hereunder shall include (i) a
statement that the officer or officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
contained in this Agreement relating thereto, (ii) a statement that, in the
opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with, and
(iii) a statement as to whether, in the opinion of the signers, such condition
has been complied with.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
----
successor thereto).
"Pension Plan" means any Employee Benefit Plan, other than a
------------
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"Permitted Acquisitions" has the meaning assigned to that term in
----------------------
subsection 6.7(ii).
"Permitted Encumbrances" means the following types of Liens (other
----------------------
than any
16
<PAGE>
Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue
Code or by ERISA):
(i) Liens for taxes, assessments or governmental charges or
claims the payment of which is not at the time required by subsection 5.3;
(ii) Statutory Liens of landlords and Liens of carriers,
warehouse men, mechanics, materialmen and other liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(iv) (y) Any attachment or judgment Lien not in excess of
$1,000,000 (exclusive of any amount adequately covered by insurance as to
which the insurance company has acknowledged coverage); and (z) any other
attachment or judgment Lien unless the judgment it secures shall, within 60
days after the entry thereof, not have been discharged or execution thereof
stayed pending appeal, or shall not have been discharged within 60 days
after the expiration of any such stay;
(v) Leases or subleases granted to others not interfering in
any material respect with the business of Company or any of its
Subsidiaries;
(vi) Easements, rights-of-way, restrictions, minor defects or
irregu larities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of Company and its Consolidated Subsidiaries, taken as a whole;
(vii) Any interest or title of a lessor under any lease
permitted by this Agreement;
(viii) Liens arising from filing UCC financing statements
regarding leases permitted by this Agreement; and
(ix) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payment of customs duties in connection with
the importation of goods.
"Person" means and includes natural persons, corporations, limited
------
partner ships, general partnerships, limited liability companies, joint stock
companies, joint ventures,
17
<PAGE>
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Pledge Agreements" means Company Pledge Agreement and the Borg-Warner
-----------------
Subsidiary Pledge Agreement; provided that none of Company or any Borg-Warner
--------
Subsidiary shall be required to pledge more than 65% of the shares of capital
stock of any Subsidiary which is a Foreign Entity or be required to guaranty any
of the Loans or pledge the shares of capital stock of any Subsidiary otherwise
required to be pledged as collateral to the extent that such guaranty or pledge
would constitute an investment of earnings in United States property under
Section 956 (or a successor provision) of the Internal Revenue Code that would
trigger an increase in income of any United States shareholder of the guarantor
or pledgor of such collateral pursuant to Section 951 (or a successor provision)
of the Internal Revenue Code.
"Potential Event of Default" means a condition or event that, after
--------------------------
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Prime Rate" means the rate that Bankers announces from time to time
----------
as its prime lending rate, as in effect from time to time. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers may make commercial loans or other
loans at rates of interest at, above or below the Prime Rate.
"Pro Rata Share" means, with respect to the Commitments of any Lender,
--------------
the percentage designated as such Lender's Pro Rata Share set forth opposite the
name of such Lender in Schedule 2.1 annexed hereto.
------------
"Reference Lenders" means the Agents.
-----------------
"Register" has the meaning assigned to that term in subsection
--------
2.1D(i).
"Regulation D" means Regulation D of the Board of Governors of the
------------
Federal Reserve System as in effect from time to time.
"Reinvested Asset Sale Proceeds" means the amount of Net Cash Proceeds
------------------------------
of Asset Sales received by Company and its Subsidiaries which Net Cash Proceeds
are reinvested in like assets or in other assets used in the business of Company
and its Consolidated Subsidiaries within twelve months of the receipt of such
Net Cash Proceeds up to a maximum aggregate amount of Reinvested Asset Sale
Proceeds of $10,000,000 in any Fiscal Year. Notwithstanding the foregoing, if
Company and its Subsidiaries have not used any portion of such $10,000,000 in
any Fiscal Year (such unused portion being referred to as the "Unused
------
Reinvestment Amount"), Company and its Subsidiaries may, in the immediately
- -------------------
succeeding Fiscal Year, reinvest Net Cash Proceeds of Asset Sales in like assets
or other assets used in the business of Company and its Consolidated
Subsidiaries in an amount equal to $10,000,000 plus the cumulative amount of any
----
Unused Reinvestment Amount; provided, that the maximum aggregate amount of all
--------
Reinvested Asset Sale Proceeds since the Effective Date shall not exceed
$20,000,000.
18
<PAGE>
"Release" means any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration in, by
or from or related to any Facility into the indoor or outdoor environment,
including the movement of any Hazardous Materials through the air, soil, surface
water, groundwater or property.
"Requisite Lenders" means Lenders having more than 50% of the Commit
-----------------
ments or, if the Commitments have been terminated, Lenders having more than 50%
of the aggregate principal amount of the Loans and Letter of Credit Usage.
"Restricted Junior Payment" means (i) any dividend or other
-------------------------
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Company now or
hereafter outstanding, (iii) any payment or prepayment of principal of, premium,
if any, or interest on, or redemption, purchase, retirement, defeasance, sinking
fund or similar payment with respect to, any Subordinated Indebtedness and (iv)
any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of
Company now or hereafter outstanding.
"Securities" means any stock, shares, voting trust certificates,
----------
bonds, deben tures, options, warrants, notes, or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates for the
purchase or acquisition of, or any right to subscribe to, purchase or acquire,
any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from
--------------
time to time, and any successor statute.
"Senior Subordinated Notes" means Company's $125,000,000 in initial
-------------------------
aggregate principal amount of 9_% Senior Subordinated Notes due March 15, 2007.
"Senior Subordinated Note Indenture" means the indenture pursuant to
----------------------------------
which the Senior Subordinated Notes were issued, as such indenture may be
amended from time to time to the extent permitted under this Agreement.
"Standby Letter of Credit" means any standby letter of credit or
------------------------
similar instrument issued for the purpose of supporting (i) Indebtedness
incurred by any Foreign Entity or Joint Venture to which Company or any of its
Subsidiaries is a party for working capital and general business purposes, (ii)
obligations of Company or any of its Subsidiaries with respect to capital calls
or similar requirements in respect of Joint Ventures to which Company or such
Subsidiary is a party, (iii) workers' compensation liabilities of Company or any
of its Subsidiaries, (iv) the obligations of third party insurers of Company or
any of its Subsidiaries arising by virtue of the laws of any jurisdiction
requiring third party insurers, (v) Indebtedness in respect of industrial
revenue or development bonds or financings, (vi) obligations with respect to
leases, (vii)
19
<PAGE>
performance, payment, deposit or surety obligations of Company or any of its
Subsidiaries, in any case if required by law or governmental rule or regulation
or in accordance with custom or practice in the industry, or (viii) Indebtedness
or any other obligation of Company or any of its Subsidiaries incurred in the
ordinary course of its business and permitted under this Agreement.
"Stonington" means Stonington Partners, L.P., a Delaware limited
----------
partnership.
"Subordinated Indebtedness" means the 9 1/8% Subordinated Notes and
-------------------------
the Senior Subordinated Notes and any other unsecured Indebtedness of Company
which is subordinated in right of payment to the Obligations on terms and
conditions, including, without limitation, with respect to maturities,
covenants, defaults, remedies and subordination provisions, which are reasonably
acceptable to Agents and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association or other business entity of which more than 50% of the total voting
power of shares of stock or other ownership interests entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Total Utilization of Commitments" means, as at any date of
--------------------------------
determination, (i) the aggregate principal amount of all outstanding Loans plus
----
(ii) the Letter of Credit Usage.
"Trade Receivables Facility" means (i) Company's off-balance sheet
--------------------------
receivables purchase facility providing for the purchase of up to $120,000,000
of receivables from the Company and its Subsidiaries, as such Trade Receivables
Facility is in effect as of the Closing Date and (ii) any other off-balance
sheet receivables purchase facility, which facility has been consented to in
writing by Requisite Lenders, such consent not to be unreasonably withheld, in
each case as they may hereafter be amended, supplemented or otherwise modified
from time to time to the extent permitted under this Agreement.
"Transaction Costs" means the fees, costs and expenses payable by
-----------------
Company pursuant hereto and other fees, costs and expenses payable by Company or
any of its Subsidiaries in connection with this Agreement and the related
transactions.
1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS
------------------------------------------------------------------
UNDER AGREEMENT
---------------
For purposes of this Agreement, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with GAAP.
Financial statements and other information required to be delivered by Company
to Lenders pursuant to subsection 5.1 shall be prepared in accordance with GAAP
as in effect at the time of such preparation. Calculations in connection with
the definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements included in Borg-Warner's Report on Form 10-K for the
fiscal year ended December 31, 1997.
20
<PAGE>
1.3 OTHER DEFINITIONAL PROVISIONS
-----------------------------
Any reference in this Agreement (i) to a Section, a Schedule or an
Exhibit is a reference to a section hereof, a schedule hereto or an exhibit
hereto, respectively; and (ii) to a subsection or a clause is, unless otherwise
stated, a reference to a subsection or a clause of the Section or subsection in
which the reference appears. In this Agreement the singular includes the plural
and the plural the singular; "hereof," "herein," "hereto," "hereunder" and the
like mean and refer to this Agreement as a whole and not merely to the specific
section, paragraph or clause in which the respective word appears. Words
importing any gender include the other genders; references to statutes are to be
construed as including all statutory provisions consolidating, amending or
replacing such statute. References to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible visible form.
The words "including," "includes," and "include" shall be deemed to be followed
by the words "without limitation." References to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
restatements, supplements, assignments and other modifications thereto, but only
to the extent such amendments, restatements, supplements, assignments, and other
modifications are not prohibited by the terms of this Agreement. References to
Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons.
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS; NOTES; LETTERS OF CREDIT
2.1 LOANS AND NOTES
---------------
A. COMMITMENTS. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Company
herein set forth, each Lender hereby severally agrees to lend to Company from
time to time during the period from the Closing Date to but excluding the
Maturity Date its Pro Rata Share of the aggregate Commitments (as defined below)
to be used for the purposes identified in subsection 2.5A. Each Lender's
commitment to make Loans to Company pursuant to this subsection 2.1A and to
issue or participate in Letters of Credit pursuant to subsection 2.9A is herein
called its "Commitment" and such commitments of all Lenders in the aggregate are
----------
herein called the "Commitments". Each Lender is identified as such, and the
-----------
amount of each such Lender's Commitment and its Pro Rata Share of the
Commitments, as of the Effective Date, is set forth opposite its name on
Schedule 2.1 annexed hereto, and the aggregate amount of the Commitments is
- ------------
$225,000,000. Each Lender's Commitment shall expire on the Maturity Date and
all Loans and all other amounts owed hereunder with respect to the Loans shall
be paid in full no later than that date. The amount of the Commitments shall be
reduced by the amount of all reductions thereof made pursuant to subsections
2.4G and 2.4H through the date of determination. In no event shall the
aggregate outstanding principal amount of the Loans from any Lender at any time
exceed its Pro Rata Share of the amount determined in accordance with clause (i)
of the last paragraph of this subsection 2.1A.
21
<PAGE>
Subject to subsection 2.6D, all Loans under this Agreement shall be
made by Lenders simultaneously and proportionately to their Pro Rata Shares, it
being understood that no Lender shall be responsible for any default by any
other Lender in that other Lender's obligation to make Loans hereunder nor shall
the Commitment of any Lender be increased or decreased as a result of the
default by any other Lender in that other Lender's obligation to make Loans
hereunder. Amounts borrowed by Company under this subsection 2.1A may be repaid
and, to but excluding, the Maturity Date, reborrowed.
Notwithstanding the foregoing provisions of this subsection 2.1A, the
Loans shall be subject to the following limitations in the amounts and during
the periods indicated:
(i) The amount available for borrowing under the Commitments as
of any time of determination shall not exceed an amount equal to the amount
of the Commitments minus the amount of the aggregate Letter of Credit
-----
Usage; provided that to the extent the proceeds of such borrowings are to
--------
be then applied to reimburse any Issuing Lender for the amount of any
drawings under any Letters of Credit honored by such Issuing Lender and not
theretofore reimbursed by Company, the amount otherwise available for
borrowing under the Commitments shall not be reduced by the amount of the
Letter of Credit drawings to be so reimbursed; and
(ii) At no time shall the Total Utilization of Commitments
exceed the aggregate Commitments.
B. NOTICE OF BORROWING. Subject to subsection 2.1A, whenever
Company desires to borrow under this subsection 2.1, Company shall deliver to
Administrative Agent a Notice of Borrowing (i) no later than 11:00 A.M. (New
York time) on the proposed Funding Date (in the case of a requested Base Rate
Loan) or (ii) no later than 11:00 A.M. (New York time) at least three Business
Days (in the case of a requested Eurodollar Rate Loan) in advance of the
proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed
Funding Date (which shall be a Business Day), (ii) the amount of the proposed
Loans, (iii) in the case of any Loans requested to be made prior to the earlier
to occur of (x) the date which is ninety (90) days after the Closing Date or (y)
the date on which Administrative Agent notifies Company that the primary
syndication period for the Loans has been completed, that such Loans shall
initially be Base Rate Loans or Eurodollar Rate Loans which have Interest
Periods of one month, (iv) in the case of Loans requested to be made thereafter,
whether such Loans are initially to consist of Base Rate Loans or Eurodollar
Rate Loans or a combination thereof, and (v) if such Loans, or any portion
thereof, are initially to be Eurodollar Rate Loans, the amounts thereof and the
initial Interest Periods therefor. Loans made as Base Rate Loans shall be in an
aggregate minimum amount of $1,000,000 and integral multiples of $250,000 in
excess of that amount; Loans made as Eurodollar Rate Loans shall be in an
aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in
excess of that amount.
Loans may be continued as or converted into Base Rate Loans or
Eurodollar Rate Loans in the manner provided in subsection 2.2D; provided that
--------
the Loans made during the period from and including the Closing Date and ending
on the earlier of (x) the date which is ninety (90)
22
<PAGE>
days after the Closing Date or (y) the date on which the Administrative Agent
notifies the Company that the primary syndication period for the Loans has been
completed, may not be converted other than into Base Rate Loans or Eurodollar
Rate Loans with an Interest Period of one month. In lieu of delivering the
above-described Notice of Borrowing, Company may give Administrative Agent
telephonic notice by the required time of any proposed borrowing under this
subsection 2.1; provided that such notice shall be promptly confirmed in writing
--------
by delivery of a Notice of Borrowing to Administrative Agent on or prior to the
Funding Date of the requested Loans.
Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B and, upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any telephonic
notice, Company shall have effected Loans hereunder.
Except as provided in subsection 2.6D, a Notice of Borrowing for a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Company shall be
bound to make a borrowing in accordance therewith.
C. DISBURSEMENT OF FUNDS. Promptly after receipt of a Notice of
Borrowing pursuant to subsection 2.1B (or telephonic notice thereof),
Administrative Agent shall notify each Lender of the proposed borrowing. Each
Lender shall make the amount of its Loan available to Administrative Agent, in
same day funds, at the office of Administrative Agent located at One Bankers
Trust Plaza, New York, New York not later than 12:00 Noon (New York time) on the
Funding Date. Upon satisfaction or waiver of the conditions precedent specified
in subsection 3.2, Administrative Agent shall make the proceeds of such Loans
available to Company on such Funding Date by causing an amount of same day funds
equal to the proceeds of all such Loans received by Administrative Agent to be
credited to the account of Company at such office of Administrative Agent.
Unless Administrative Agent shall have been notified by any Lender
prior to any Funding Date in respect of any Loans that such Lender does not
intend to make available to Administrative Agent such Lender's Loan on such
Funding Date, Administrative Agent may assume that such Lender has made such
amount available to Administrative Agent on such Funding Date and Administrative
Agent in its sole discretion may, but shall not be obligated to, make available
to Company a corresponding amount on such Funding Date. If such corresponding
amount is not in fact made available to Administrative Agent by such Lender,
Administrative Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon, for each day from such
Funding Date until the date such amount is paid to Administrative Agent, at the
customary rate set by Administrative Agent for the correction of errors among
banks for three Business Days and thereafter at the Base Rate. If such Lender
does not pay such corresponding amount forthwith upon Administrative Agent's
demand therefor, Administrative Agent shall promptly notify Company, and Company
shall immediately pay such corresponding amount to Administrative Agent. Nothing
in this subsection
23
<PAGE>
2.1C shall be deemed to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that Company may have against
any Lender as a result of any default by such Lender hereunder.
D. REGISTER.
(i) Administrative Agent shall maintain a register for the
recordation of the names and addresses of Lenders and the Commitment and Loans
of each Lender from time to time (the "Register"). The Register shall be
--------
available for inspection by Company or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the
Commitment and the Loans from time to time of each Lender and each repayment or
prepayment in respect of the principal amount of the Loans of each Lender. Any
such recordation shall be conclusive and binding on Company and each Lender,
absent manifest error; provided that failure to make any such recordation, or
--------
any error in such recordation, shall not affect any Lender's Commitment or
Company's Obligations in respect of any applicable Loans.
(iii) Each Lender shall record on its internal records the amount of
each Loan made by it and each payment in respect thereof. Any such recordation
shall be conclusive and binding on Company, absent manifest error; provided that
--------
failure to make any such recordation, or any error in such recordation, shall
not affect any Lender's Commitment or Company's Obligations in respect of any
applicable Loans; and provided, further that in the event of any inconsistency
-------- -------
between the Register and any Lender's records, the recordations in the Register
shall govern, absent manifest error.
(iv) Company, Administrative Agent and Lenders shall deem and treat
the Persons listed as Lenders in the Register as the holders and owners of the
corresponding Commitments and Loans listed therein for all purposes hereof, and
no assignment or transfer of any such Commitment or Loan shall be effective, in
each case unless and until an Assignment Agreement effecting the assignment or
transfer thereof shall have been accepted by Administrative Agent and recorded
in the Register as provided in subsection 9.1B(ii). Prior to such recordation,
all amounts owed with respect to the applicable Commitment or Loan shall be owed
to the Lender listed in the Register as the owner thereof, and any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is listed in the Register as a Lender shall be
conclusive and binding on any subsequent holder, assignee or transferee of the
corresponding Commitment or Loans.
E. NOTES. Company shall execute and deliver to each Lender on the
Closing Date a Note substantially in the form of Exhibit III annexed hereto to
evidence that Lender's Loans, in the principal amount of that Lender's
Commitment and with other appropriate insertions.
2.2 INTEREST ON THE LOANS
---------------------
A. RATE OF INTEREST. Subject to the provisions of subsection 2.6,
each Loan
24
<PAGE>
shall bear interest on the unpaid principal amount thereof from the date made
through maturity (whether by acceleration or otherwise) at a rate determined by
reference to the Base Rate or the Adjusted Eurodollar Rate; provided that
--------
nothing herein shall entitle any Lender to charge or receive interest in excess
of the maximum rate allowed by applicable law. The applicable basis for
determining the rate of interest shall be selected by Company initially at the
time a Notice of Borrowing is given pursuant to subsection 2.1B. The basis for
determining the interest rate with respect to any Loan may be changed from time
to time pursuant to subsection 2.2D. If on any day a Loan is outstanding with
respect to which notice has not been delivered to Administrative Agent in
accordance with the terms of this Agreement specifying the basis for determining
the rate of interest, then for that day that Loan shall bear interest determined
by reference to the Base Rate.
On or after July 1, 1998 through maturity, the Loans shall bear
interest (except as provided for in the last sentence of this subsection 2.2A)
as follows:
(i) if a Base Rate Loan, then at the sum of the Base Rate plus the
----
applicable Base Rate margin (the "Base Rate Margin") set forth in the table
----------------
below; or
(ii) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the applicable Eurodollar Rate margin (the "Eurodollar
---- ----------
Rate Margin") set forth in the table below:
-----------
<TABLE>
<CAPTION>
Base Rate Eurodollar
Interest Margin Rate Margin
-------- ------ -----------
Coverage Ratio
--------------
<S> <C> <C>
Less than 2.25:1.00 1.00% 2.00%
Equal to or greater than 0.75% 1.75%
2.25:1.00 but less than
2.75:1.00
Equal to or greater than 0.25% 1.25%
2.75:1.00 but less than
3.25:1.00
Equal to or greater than 3.25:1:00 0.00% 1.00%
</TABLE>
provided, however, for the period commencing on July 1, 1998, through the date
- -------- -------
on which Company first delivers a Compliance Certificate pursuant to subsection
5.1(iv)(b) or 6.7(ii), Eurodollar Rate Loans shall bear interest at the sum of
the Adjusted Eurodollar Rate plus 1.00% per annum and Base Rate Loans shall bear
interest at the Base Rate.
The applicable Base Rate Margin or the applicable Eurodollar Rate
Margin shall be the Base Rate Margin or the Eurodollar Rate Margin, as the case
may be, set forth in the table above opposite Company's Interest Coverage Ratio
for the four fiscal quarters ending as of the
25
<PAGE>
last day of the fiscal quarter immediately preceding the fiscal quarter during
which the determination is being made as set forth in the Compliance Certificate
delivered pursuant to subsection 5.1(iv)(b), any required adjustment to become
automatically effective on the next succeeding Business Day following receipt by
the Administrative Agent of such Compliance Certificate. If Company fails to
deliver a Compliance Certificate by the time required by subsection 5.1(iv),
from such time the Compliance Certificate was required to be delivered until
delivery of such Compliance Certificate, the Base Rate Margin and the Eurodollar
Rate Margin shall automatically be adjusted to 1.00% per annum and 2.00% per
annum, respectively.
B. INTEREST PERIODS. In connection with each Eurodollar Rate Loan
of Company, by giving notice as set forth in subsections 2.1B or 2.2D, Company
shall elect an interest period (each an "Interest Period") to be applicable to
---------------
such Eurodollar Rate Loan, which Interest Period shall be a one, two, three or
six month period; provided that:
--------
(i) the Interest Period for any Loan shall commence on the
date of such Loan;
(ii) in the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the day on which the next
preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that if any Interest Period in respect of
--------
a Eurodollar Rate Loan would otherwise expire on a day that is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iv) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to part (v) below, end on the last Business Day of a
calendar month;
(v) no Interest Period with respect to any Loan shall extend
beyond the Maturity Date;
(vi) the Interest Period for a Loan that is converted pursuant
to subsection 2.6D shall commence on the date of such conversion and shall
expire on the date on which the Interest Period for the Loans of the other
Lenders that were not converted expires; and
(vii) there shall be outstanding at any time no more than
fifteen (15) Interest Periods relating to Eurodollar Rate Loans.
C. INTEREST PAYMENTS. Subject to subsection 2.2E, interest shall be
payable on the Loans as follows:
26
<PAGE>
(i) interest on each Base Rate Loan shall be payable in arrears
on and to each March 25, June 25, September 25, and December 25 of each
year, commencing on June 25, 1997, upon any prepayment (other than a
voluntary prepayment on the Loans) of any such Loan (to the extent accrued
on the amount being prepaid) and at maturity; and
(ii) interest on each Eurodollar Rate Loan shall be payable in
arrears on and to each Interest Payment Date applicable to that Loan, upon
any prepayment of that Loan (to the extent accrued on the amount being
prepaid) and at maturity.
D. CONVERSION OR CONTINUATION. Subject to the provisions of
subsection 2.6, Company shall have the option (i) to convert at any time all or
any part of its outstanding Loans equal to $5,000,000 and integral multiples of
$1,000,000 in excess thereof (in the case of Loans to be converted to Eurodollar
Rate Loans) or $1,000,000 and integral multiples thereof (in the case of Loans
to be converted to Base Rate Loans), from Loans bearing interest at a rate
determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis or (ii) upon the expiration of
any Interest Period applicable to a Eurodollar Rate Loan, to continue all or any
portion of such Loan equal to $5,000,000 and integral multiples of $1,000,000 in
excess of that amount as a Eurodollar Rate Loan and the succeeding Interest
Period(s) of such continued Loan shall commence on the last day of the Interest
Period of the Loan to be continued; provided, however, that a Eurodollar Rate
-------- -------
Loan may only be converted into a Loan bearing interest determined by reference
to an alternative basis on the expiration date of an Interest Period applicable
thereto, and provided further, that no outstanding Loan may be continued as, or
-------- -------
be converted into, a Eurodollar Rate Loan when any Event of Default or Potential
Event of Default has occurred and is continuing; provided further that the Loans
-------- -------
made on the Closing Date may not be converted other than into Base Rate Loans or
Eurodollar Rate Loans with an Interest Period of one month prior to the earlier
to occur of (x) the date which is ninety (90) days after the Closing Date or (y)
the date on which the Administrative Agent notifies the Company that the primary
syndication period for the Loans has been completed; and provided further that,
-------- -------
subject to the provisions of subsection 2.6, no outstanding Eurodollar Rate Loan
may be converted into a Base Rate Loan during the period from December 15 of any
year to, and including, January 15 of the immediately succeeding year.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 1:00 P.M. (New York time) at least one
Business Day in advance of the proposed conversion/continuation date (in the
case of a conversion to a Base Rate Loan), or three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall certify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount of the Loan to be converted/continued, (iii) the
nature of the proposed conversion/continuation and (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, (x) the requested
Interest Period and (y) that no Potential Event of Default or Event of Default
has occurred and is continuing. In lieu of delivering the above-described Notice
of Conversion/Continuation, Company may give Administrative Agent telephonic
notice by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
-------- ----
writing by delivery of a Notice of
27
<PAGE>
Conversion/Continuation to Administrative Agent on or before the proposed
conversion/continuation date.
Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D and, upon
conversion/continuation in accordance with this Agreement pursuant to any
telephonic notice, Company shall have effected such conversion or continuation,
as the case may be.
Promptly after receipt of a Notice of Conversion/Continuation (or
telephonic notice thereof), Administrative Agent shall notify each Lender of the
proposed conversion/continuation. Except as provided in subsection 2.6D, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Company shall be
bound to convert or continue in accordance therewith.
E. DEFAULT RATE; POST-MATURITY INTEREST. Upon the occurrence and
during the continuation of an Event of Default, the interest rate payable by
Company with respect to principal of Loans and, to the extent permitted by law,
interest payments thereon not paid when due, shall be increased, effective from
and after the date of occurrence of such Event of Default, to a rate that is two
percent (2%) per annum in excess of the rate otherwise payable under this
Agreement (or, in the case of fees and other amounts due hereunder, at a rate
which is 2.00% per annum in excess of the interest rate otherwise payable
pursuant to subsection 2.2A of this Agreement for Base Rate Loans); provided
--------
that, in the case of Eurodollar Rate Loans, upon the expiration of the Interest
Period in effect at the time any such increase in interest rate is effective,
such Eurodollar Rate Loans shall thereupon become Base Rate Loans and thereafter
bear interest payable upon demand at a rate which is two percent (2%) per annum
in excess of the interest rate otherwise payable under this Agreement for Base
Rate Loans. The rate provided in this subsection 2.2E shall be reduced by two
percent (2%) per annum to the rate otherwise payable under this Agreement
effective upon the cure pursuant to the terms of this Agreement of all Events of
Default giving rise to the increase provided herein. No waiver of any Event of
Default and no amendment to this Agreement shall operate as a cure of any Event
of Default unless expressly stated in writing in such waiver or amendment. The
payment or acceptance of the increased rate provided by this subsection 2.2E
shall not constitute a waiver of any Event of Default or an amendment to this
Agreement or otherwise prejudice or limit any rights or remedies of any Agent or
any Lender.
F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed
on the basis of a 360-day year and the actual number of days elapsed in the
period during which it accrues. In computing interest on any Loan, the date of
the making of such Loan or the first day of an Interest Period, as the case may
be, shall be included and the date of payment or the expiration date of an
Interest Period, as the case may be, shall be excluded; provided that if a Loan
--------
is repaid on the same day on which it is made, one day's interest shall be paid
on that Loan.
28
<PAGE>
2.3 FEES
----
A. COMMITMENT FEES. Company agrees to pay to Administrative Agent
for distribution to each Lender in proportion to that Lender's Pro Rata Share of
the Commitments, commitment fees for the period from and including the Closing
Date to and excluding the date the Commitments terminate equal to the average of
the daily excess of the Commitments over the aggregate principal amount of Loans
outstanding multiplied by the Commitment Fee Percentage then in effect, such
commitment fees to be calculated on the basis of a 360-day year and the actual
number of days elapsed and to be payable in arrears on but excluding March 25,
June 25, September 25 and December 25 of each year, commencing June 25, 1997,
and ending upon and payable on the earlier to occur of the termination of the
Commitments or the Maturity Date. For purposes of this subsection 2.3A,
calculation of the amount of the Commitments shall not give effect to any
limitation of the amount available for borrowing thereunder set forth in the
numbered paragraphs of subsection 2.1A.
B. OTHER FEES. Company agrees to pay to the Agents, their
respective affiliates and the Lenders, as the case may be, such fees in the
amounts and at the times agreed upon between Company and such Agents, their
respective affiliates and Lenders.
2.4 PREPAYMENTS AND PAYMENTS; REDUCTIONS IN COMMITMENTS
---------------------------------------------------
A. PREPAYMENTS.
(i) Voluntary Prepayments.
---------------------
(a) Company may, upon not less than one (1) Business Day's prior
written or telephonic notice confirmed in writing to Administrative Agent
(which notice Administrative Agent will promptly transmit by telegram,
telex or telephone to each Lender), at any time and from time to time
prepay any Loans in whole or in part in an aggregate minimum amount of
$1,000,000 and integral multiples thereof. In the event that Company
prepays any Eurodollar Rate Loan on a date which is not the expiration date
of the applicable Interest Period, Company shall pay to Lenders any amounts
due pursuant to subsection 2.6E. Notice of prepayment having been given as
aforesaid, the principal amount of the Loans specified in such notice shall
become due and payable on the prepayment date.
(b) In the event Company is entitled to replace a non-consenting
Lender pursuant to subsection 9.6B, Company shall have the right, upon five
Business Days' written notice to Administrative Agent (which notice
Administrative Agent shall promptly transmit to each of the Lenders), to
prepay all Loans, together with accrued and unpaid interest, fees and other
amounts owing to such non-consenting Lender in accordance with subsection
9.6B so long as (1) in the case of the prepayment of the Loans of any
Lender pursuant to this subsection 2.4A(i)(b), the Commitment of such
Lender is terminated concurrently with such prepayment pursuant to
subsection 2.4G(ii) (at which time Schedule 2.1 shall be deemed modified to
------------
reflect the changed Commitments), and (2) in the case of the prepayment of
the Loans of any Lender, the consents required by
29
<PAGE>
subsection 9.6B in connection with the prepayment pursuant to this
subsection 2.4A(i)(b) shall have been obtained, and at such time, such
Lender shall no longer constitute a "Lender" for purposes of this
Agreement, except with respect to indemnifications under this Agreement
(including, without limitation, subsections 2.6E, 2.6H, 2.7, 2.8, 2.9G,
2.9H, 4.13, 9.2 and 9.3), which shall survive as to such Lender.
(ii) Mandatory Prepayments.
----------------------
(a) Prepayments from Certain Asset Sales. No later than the
------------------------------------
second Business Day following the date of receipt by Company or any of its
Subsidiaries of the cash proceeds of any Asset Sale, Company shall prepay
the Loans in an amount equal to the Net Cash Proceeds of such Asset Sale;
provided however, that so long as no Event of Default or Potential Event of
-------- -------
Default shall have occurred and be continuing, Company and its Subsidiaries
shall not be required to apply the Net Cash Proceeds of any such Asset Sale
to the mandatory prepayment of the Loans pursuant to this subsection
2.4A(ii)(a) to the extent that Company intends to reinvest such Net Cash
Proceeds in like assets or in other assets used in the business of Company
and its Consolidated Subsidiaries within twelve months of such sale;
provided that any such Net Cash Proceeds which are not so reinvested within
--------
such twelve months are applied at the end of such twelve-month period to
the prepayment of the Loans pursuant to subsection 2.4A(ii)(a) and that the
aggregate amount of Net Cash Proceeds so reinvested and thereby excluded
from application to the mandatory prepayment of the Loans does not exceed
$10,000,000 in any Fiscal Year. Notwithstanding the foregoing, if Company
and its Subsidiaries have not used any portion of such $10,000,000 in any
Fiscal Year (such unused portion being referred to as the "Unused
------
Reinvestment Amount"), Company and its Subsidiaries may, in the immediately
-------------------
succeeding Fiscal Year, reinvest Net Cash Proceeds of Asset Sales in like
assets or other assets used in the business of Company and its Consolidated
Subsidiaries in an amount equal to $10,000,000 plus the cumulative amount
----
of any Unused Reinvestment Amount; provided, that the maximum aggregate
--------
amount of all Reinvested Asset Sale Proceeds since the Effective Date shall
not exceed $20,000,000. Concurrently with any prepayment of the Loans
pursuant to this subsection 2.4A(ii)(a), Company shall deliver to
Administrative Agent an Officers' Certificate demonstrating the derivation
of the Net Cash Proceeds of the correlative Asset Sale from the gross sales
price thereof. Any such mandatory prepayments shall be applied as
specified in subsection 2.4A(iii).
(b) Prepayments Due to Reversion of Surplus Assets of Pension
---------------------------------------------------------
Plans. On the date of return to Company or any of its Subsidiaries of any
-----
surplus assets of any pension plan of Company or any of its Subsidiaries in
excess of $1,000,000 in the aggregate for all such returned surplus assets,
net of transaction costs and expenses incurred in obtaining such return,
including incremental taxes payable as a result thereof, Company shall
prepay the Loans in an amount equal to 100% of such net returned surplus
assets (the "Net Reversion Amount"). Any such mandatory prepayments shall
--------------------
be applied as specified in subsection 2.4A(iii).
(c) Prepayments Due to Limitations on Commitments. Company shall
---------------------------------------------
make prepayments of Loans necessary to give effect to the limitations set
forth in
30
<PAGE>
subsection 2.1A.
(d) Prepayments Due to Issuance of Debt Securities. In the event
----------------------------------------------
that the Company's Consolidated Leverage Ratio is greater than or equal to
3.0x, then no later than the first Business Day following the date of
receipt by Company or any of its Subsidiaries of the cash proceeds (net of
underwriting discounts, similar placement fees and commissions and other
reasonable costs and expenses associated therewith) from the issuance of
any bonds, notes, debentures or other issuances of similar debt Securities
of Company or any such Subsidiary, excluding in any event the proceeds of
any issuance of debt permitted pursuant to subsections 6.1(i)-(x), Company
shall prepay the Loans in an amount equal to the lesser of (i) such net
cash proceeds or (ii) an amount sufficient to reduce the Company's
Consolidated Leverage Ratio below 3.0x. Any such mandatory prepayments
shall be applied as specified in subsection 2.4A(iii).
(e) Prepayments Due to Issuance of Equity Securities. In the
------------------------------------------------
event that the Company's Consolidated Leverage Ratio is greater than or
equal to 3.0x, then on the date of receipt by Company of the cash proceeds
(net of under writing discounts and commissions and other reasonable costs
associated therewith) from the issuance of any equity Securities of
Company, including without limitation additional issuances of Company
Common Stock (other than issuances to employees or directors pursuant to
the Borg-Warner Security Corporation Management Stock Option Plan or 1993
Stock Incentive Plan, as such plans may be amended from time to time, or
any other employee or director stock option, incentive, purchase,
retirement, savings or similar plan), Company shall prepay the Loans in an
amount equal to the lesser of (i) 50% of such net cash proceeds or (ii) an
amount sufficient to reduce the Company's Consolidated Leverage Ratio below
3.0x. Any such mandatory prepayments shall be applied as specified in
subsection 2.4A(iii).
(iii) Application of Prepayments. Any prepayment shall be applied in
--------------------------
the order determined by Company and, if no order is so specified, any such
prepayment shall be applied first to Base Rate Loans to the full extent thereof
before application to Eurodollar Rate Loans in the order determined by
Administrative Agent.
B. MANNER AND TIME OF PAYMENT. All payments of principal, interest
and fees hereunder and under the Notes by Company shall be made without defense,
setoff and counterclaim and in same day funds and delivered to Administrative
Agent not later than 12:00 Noon (New York time) on the date due at its office
located at One Bankers Trust Plaza, New York, New York for the account of
Lenders; funds received by Administrative Agent after that time shall be deemed
to have been paid by Company on the next succeeding Business Day. Company
hereby authorizes Administrative Agent to charge its account with Administrative
Agent in order to cause timely payment to be made to Administrative Agent of all
principal, interest and fees due hereunder (subject to sufficient funds being
available in its account for that purpose).
C. APPLICATION OF PAYMENTS OR PREPAYMENTS TO PRINCIPAL AND
INTEREST. All payments or prepayments, other than with respect to a voluntary
prepayment on the Loans, in
31
<PAGE>
respect of the principal amount of any Loan shall include payment of accrued
interest on the principal amount being repaid or prepaid, and all such payments
or prepayments (and, in any event, any payments or prepayments in respect of any
Loan on a date when interest is due and payable with respect to such Loan) shall
be applied to the payment of interest before application to principal.
D. APPORTIONMENT OF PAYMENTS. Aggregate principal and interest
payments shall be apportioned among all outstanding Loans to which such payments
relate, and such payments shall be apportioned ratably to Lenders, in each case
proportionately to Lenders' respective Pro Rata Shares. Administrative Agent
shall promptly distribute to each Lender at its primary address set forth below
its name on the appropriate signature page hereof or such other address as any
Lender may request its share of all such payments received by Administrative
Agent and the commitment fees of such Lender when received by Administrative
Agent pursuant to subsection 2.3A. Notwithstanding the foregoing provisions of
this subsection 2.4D if, pursuant to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation is withdrawn as to any
Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its
Pro Rata Share of Eurodollar Rate Loans, Administrative Agent shall give effect
thereto in apportioning payments received thereafter.
E. PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be made
hereunder or under the Notes shall be stated to be due on a day that is not a
Business Day, the payment shall be made on the next succeeding Business Day and
such extension of time shall be included in the computation of the payment of
interest hereunder or under the Notes or of the commitment and other fees
hereunder, as the case may be; provided, however, that if the day on which
-------- -------
payment relating to a Eurodollar Rate Loan is due is not a Business Day but is a
day of the month after which no further Business Day occurs in that month, then
the due date thereof shall be the next preceding Business Day.
F. NOTATION OF PAYMENT. Each Lender agrees that before disposing of
any Note held by it, or any part thereof (other than by granting participations
therein), that Lender will make a notation thereon of all Loans and principal
payments previously made thereon and of the date to which interest thereon has
been paid and will notify Company and Administrative Agent of the name and
address of the transferee of that Note; provided that the failure to make (or
--------
any error in the making of) a notation of any Loan made under such Note or to
notify Company and Administrative Agent of the name and address of such
transferee shall not limit or otherwise affect the obligation of Company
hereunder or under such Notes with respect to any Loan and payments of principal
or interest on any such Note.
G. VOLUNTARY REDUCTIONS OF COMMITMENTS.
(i) Company shall have the right, at any time and from time to time,
to terminate in whole or permanently reduce in part, without premium or penalty,
the Commitments in an amount up to the amount by which the Commitments exceed
the then Total Utilization of Commitments at the time of such proposed
termination or reduction.
Company shall give not less than three Business Days' prior written
notice to
32
<PAGE>
Administrative Agent designating the date (which shall be a Business Day) of
such termination or reduction and the amount of any partial reduction. Promptly
after receipt of a notice of such termination or partial reduction,
Administrative Agent shall notify each Lender of the proposed termination or
reduction. Such termination or partial reduction of the Commitments shall be
effective on the date specified in Company's notice and shall reduce the
Commitment of each Lender proportionately to its Pro Rata Share. Any such
partial reduction of the Commitments shall be in an aggregate minimum amount of
$5,000,000, and integral multiples of $1,000,000 in excess of that amount.
(ii) In the event Company is entitled to replace a non-consenting
Lender pursuant to subsection 9.6B, Company shall have the right, upon five
Business Days' written notice to Administrative Agent (which notice
Administrative Agent shall promptly transmit to each of the Lenders), to
terminate the entire Commitment of such non-consenting Lender so long as (1) all
Loans, together with accrued and unpaid interest, fees and other amounts owing
to such Lender are repaid, including without limitation amounts owing to such
non-consenting Lender pursuant to subsection 2.6E, pursuant to subsection
2.4A(i)(b) concurrently with the effectiveness of such termination
(at which time Schedule 2.1 shall be deemed modified to reflect such changed
------------
amounts), and (2) the consents required by subsection 9.6B in connection with
the prepayment pursuant to subsection 2.4A(i)(b) shall have been obtained, and
at such time, such Lender shall no longer constitute a "Lender" for purposes of
this Agreement, except with respect to indemnifications under this Agreement
(including, without limitation, subsections 2.6E, 2.6H, 2.7, 2.8, 2.9G, 2.9H,
4.13, 9.2 and 9.3), which shall survive as to such Lender.
H. MANDATORY REDUCTIONS OF COMMITMENTS. The Commitments shall be
permanently reduced on the date any prepayment of Loans is made or is required
to be made pursuant to subsections 2.4A(ii)(a)-(b) and 2.4A(ii)(d)-(e), by an
amount equal to the amount of such prepayment. Such reductions shall reduce the
Commitment of each Lender proportionately to its Pro Rata Share.
2.5 USE OF PROCEEDS
---------------
A. LOANS. Proceeds of the Loans may be used by Company and its
Subsidiaries for working capital and general corporate purposes, and to make
Permitted Acquisitions.
B. BENEFITS TO SUBSIDIARIES. In consideration for the guaranties
set forth in the Loan Guaranties, Company agrees to make the benefit of the
extensions of credit hereunder available to its Subsidiaries.
C. LETTERS OF CREDIT. The Letters of Credit shall be issued for the
purposes set forth in the definitions of Commercial Letter of Credit and Standby
Letter of Credit and such other general corporate purposes as may, in any
instance, be approved by Administrative Agent and Requisite Lenders.
D. MARGIN REGULATIONS. No portion of the proceeds of any borrowing
or Letter of Credit under this Agreement shall be used by Company in any manner
that might cause
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such borrowing or the application of such proceeds to violate Regulation U,
Regulation T, or Regulation X of the Board of Governors of the Federal Reserve
System or any other regulation of the Board or to violate the Exchange Act, in
each case as in effect on the date or dates of such borrowing and such use of
proceeds.
2.6 SPECIAL PROVISIONS GOVERNING EURODOLLAR RATE LOANS
--------------------------------------------------
Notwithstanding any other provision of this Agreement, the following
provisions shall govern with respect to Eurodollar Rate Loans as to the matters
covered:
A. DETERMINATION OF INTEREST RATE. As soon as practicable after
10:00 A.M. (New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. SUBSTITUTED RATE OF BORROWING. If on any Interest Rate
Determination Date any Lender (including any Agent) shall have determined (which
determination shall be final and conclusive and binding upon all parties but,
with respect to the following clauses (i) and (ii)(b), shall be made only after
consultation with Company and Agents) that:
(i) by reason of any changes arising after the date of this
Agreement affecting the Eurodollar market or affecting the position of that
Lender in such market, adequate and fair means do not exist for
ascertaining the applicable interest rate by reference to the Eurodollar
Rate with respect to the Eurodollar Rate Loans as to which an interest rate
determination is then being made; or
(ii) by reason of (a) any change after the date hereof in any
applicable law or governmental rule, regulation or order (or any
interpretation thereof and including the introduction of any new law or
governmental rule, regulation or order) or (b) other circumstances
affecting that Lender or the Eurodollar market or the position of that
Lender in such market (such as for example, but not limited to, official
reserve requirements required by Regulation D to the extent not given
effect in the Eurodollar Rate), the Adjusted Eurodollar Rate shall not
represent the effective pricing to that Lender for Dollar deposits of
comparable amounts for the relevant period;
then, and in any such event, that Lender shall be an Affected Lender and it
shall promptly (and in any event as soon as possible after being notified of a
borrowing, conversion or continuation) give notice (by telephone confirmed in
writing) to Company and Administrative Agent (which notice Administrative Agent
shall promptly transmit to each other Lender) of such determination.
Thereafter, Company shall pay to the Affected Lender, within five (5) Business
Days after written demand therefor, such additional amounts (in the form of an
increased rate of, or a different method of calculating, interest or otherwise
as the Affected Lender in its sole discretion shall reasonably determine) as
shall be required to cause the Affected Lender to receive interest at a rate per
annum equal to the effective pricing to the Affected Lender for Dollar deposits
to make
34
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or maintain its Eurodollar Rate Loans for the applicable Interest Period
plus the applicable Eurodollar Rate Margin. A certificate as to additional
- ----
amounts owed the Affected Lender, showing in reasonable detail the basis for the
calculation thereof, submitted in good faith to Company and Administrative Agent
by the Affected Lender shall, absent manifest error, be final and conclusive and
binding upon all of the parties hereto.
C. REQUIRED TERMINATION AND PREPAYMENT. If on any date any Lender
shall have reasonably determined (which determination shall be final and
conclusive and binding upon all parties) that the making or continuation of its
Eurodollar Rate Loans has become unlawful by compliance by that Lender in good
faith with any law, governmental rule, regulation or order (whether or not
having the force of law and whether or not failure to comply therewith would be
unlawful), then, and in any such event, that Lender shall be an Affected Lender
and it shall promptly give notice (by telephone confirmed in writing) to Company
and Administrative Agent (which notice Administrative Agent shall promptly
transmit to each Lender) of that determination. Subject to the prior withdrawal
of a Notice of Borrowing or a Notice of Conversion/Continuation or prepayment of
the Eurodollar Rate Loans of the Affected Lender as contemplated by the
following subsection 2.6D, the obligation of the Affected Lender to make or
maintain its Eurodollar Rate Loans (the "Affected Loans") during any such period
--------------
shall be terminated at the earlier of the termination of the Interest Period
then in effect or when required by law and the Affected Loans shall
automatically convert into Base Rate Loans on the date of such termination.
D. OPTIONS OF COMPANY. In lieu of paying an Affected Lender such
additional moneys as are required by subsection 2.6B or the automatic conversion
of an Affected Loan pursuant to subsection 2.6C, Company may exercise any one of
the following options:
(i) If the determination by an Affected Lender relates only to
Eurodollar Rate Loans then being requested by Company pursuant to a Notice
of Borrowing or a Notice of Conversion/Continuation, Company may, by giving
notice (by telephone confirmed in writing) to Administrative Agent (who
shall promptly give similar notice to each Lender) no later than the date
immediately prior to the date on which such Eurodollar Rate Loans are to be
made, withdraw that Notice of Borrowing or Notice of
Conversion/Continuation and the Eurodollar Rate Loans then being requested
shall be made by Lenders as Base Rate Loans; or
(ii) Upon written notice to Administrative Agent and each
Lender, Company may terminate the obligations of Lenders to make or
maintain Loans as, and to convert Loans into, Eurodollar Rate Loans and in
such event, Company shall, prior to the time of automatic conversion
pursuant to subsection 2.6C or, if the provisions of subsection 2.6B are
applicable, at the end of the then current Interest Period, convert all of
the Eurodollar Rate Loans into Base Rate Loans in the manner contemplated
by subsection 2.2D but without satisfying the advance notice requirements
therein; or
(iii) Company may give notice (by telephone confirmed in
writing) to the Affected Lender and Administrative Agent (who shall
promptly give similar notice to each Lender) and require the Affected
Lender to make the Eurodollar Rate Loan then
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being requested as a Base Rate Loan or to continue to maintain its
outstanding Base Rate Loan then the subject of a Notice of
Conversion/Continuation as a Base Rate Loan or to convert its Eurodollar
Rate Loans then outstanding that are so affected into Base Rate Loans at
the end of the then current Interest Period (or at the time of automatic
conversion pursuant to subsection 2.6C) in the manner contemplated by
subsection 2.2D but without satisfying the advance notice requirements
therein, that notice to pertain only to the Loans of the Affected Lender
and to have no effect on the obligations of the other Lenders to make or
maintain Eurodollar Rate Loans or to convert Base Rate Loans into
Eurodollar Rate Loans.
E. COMPENSATION. Company shall compensate each Lender, within five
(5) Business Days after written request by that Lender (which request shall set
forth in reasonable detail the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans and any loss sustained by that Lender in connection
with the re-employment of such funds), that Lender may sustain: (i) if for any
reason (other than a default by that Lender) a borrowing of, a continuation of
or a conversion to any Eurodollar Rate Loan does not occur on a date specified
therefor in a Notice of Borrowing, a Notice of Conversion/Continuation or a
telephonic request for borrowing or conversion/continuation or a successive
Interest Period does not commence after notice therefor is given pursuant to
subsection 2.2D, (ii) if any prepayment of any of its Eurodollar Rate Loans
occurs on a date that is not the last day of an Interest Period applicable to
that Loan, (iii) if any prepayment of any of its Eurodollar Rate Loans is not
made on any date specified in a notice of prepayment given by Company, or (iv)
as a consequence of any other default by Company to repay its Eurodollar Rate
Loans when required by the terms of this Agreement. A certificate as to the
amount payable to a Lender pursuant to this subsection 2.6E setting forth the
amount thereof in reasonable detail, submitted to Company and Administrative
Agent by such Lender, shall, except for manifest error, be final, conclusive and
binding for all purposes.
F. QUOTATION OF EURODOLLAR RATE. Anything herein to the contrary
notwithstanding, if on any Interest Rate Determination Date no Eurodollar Rate
is available by reason of the failure of all Reference Lenders to provide
offered quotations to Administrative Agent in accordance with the definition of
"Eurodollar Rate," Administrative Agent shall give Company and each Lender
prompt notice thereof and the Loans requested shall be made as Base Rate Loans.
G. BOOKING OF EURODOLLAR RATE LOANS. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of, any of its branch
offices or the office of an Affiliate of that Lender.
H. INCREASED COSTS. Except as provided in subsection 2.6B with
respect to certain determinations on Interest Rate Determination Dates, if,
after the date hereof by reason of (x) the introduction of or any change
(including, without limitation, any change by way of imposition or increase of
reserve requirements) in or in the interpretation of any law or regulation, or
(y) the introduction of or any change in or in the interpretation of, or any new
or different compliance is required under, any guideline or request from any
central bank or other
36
<PAGE>
governmental authority or quasi-governmental authority exercising control over
banks or financial institutions generally (whether or not having the force of
law):
(i) any Lender (or its applicable lending office) shall be
subject to any tax, duty, levy, cost or other charge (except for taxes on
the overall net income or alternative minimum taxable income of such Lender
or its applicable lending office imposed by the jurisdiction in which such
Lender's principal executive office or applicable lending office is
organized, located or is doing business) with respect to its Eurodollar
Rate Loans or its obligation to make Eurodollar Rate Loans, or the
recording, registration, notarization or other formalization of the
Eurodollar Rate Loans or the basis of taxation of payments to any Lender of
the principal of or interest or commitment fees or any amount payable on
its Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans
shall change; or
(ii) any reserve (including, without limitation, any imposed by
the Board of Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender's applicable lending office shall be
imposed or deemed applicable or any other condition affecting its
Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans shall
be imposed on any Lender or its applicable lending office or the interbank
Eurodollar market,
and as a result thereof there shall be any increase in the cost to such Lender
of agreeing to make or making, funding or maintaining Eurodollar Rate Loans
(except to the extent already included in the determination of the applicable
Adjusted Eurodollar Rate), or there shall be a reduction in the amount received
or receivable by that Lender or its applicable lending office, then Company
shall from time to time, upon written notice from and demand by that Lender
(with a copy of such notice and demand to Administrative Agent), pay to
Administrative Agent for the account of that Lender, within five (5) Business
Days after the date specified in such notice and demand, additional amounts
sufficient to indemnify that Lender against such increased cost or reduced
amount. A certificate as to the amount of such increased cost or reduced amount
setting forth the calculation thereof in reasonable detail, submitted to Company
and Administrative Agent by that Lender, shall, except for manifest error, be
final, conclusive and binding for all purposes. Any payments to be made by
Company under subsections 2.6B or 2.6H are to be without duplication.
I. ASSUMPTIONS CONCERNING FUNDING OF EURODOLLAR RATE LOANS.
Calculation of all amounts payable to a Lender under this subsection 2.6 shall
be made as though that Lender had actually funded its relevant Eurodollar Rate
Loan through the purchase of a Eurodollar deposit bearing interest at the
Eurodollar Rate in an amount equal to the amount of that Eurodollar Rate Loan
and having a maturity comparable to the relevant Interest Period and through the
transfer of such Eurodollar deposit from an offshore office of that Lender to a
domestic office of that Lender in the United States of America; provided,
--------
however, that each Lender may fund each of its Eurodollar Rate Loans in any
- -------
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this subsection 2.6.
J. EURODOLLAR RATE LOANS AFTER DEFAULT. Unless Requisite Lenders
shall
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<PAGE>
otherwise agree, after the occurrence of and during the continuance of a
Potential Event of Default or Event of Default, Company may not elect to have a
Loan be made or maintained as, or converted to, a Eurodollar Rate Loan after the
expiration of any Interest Period then in effect for that Loan.
K. AFFECTED LENDERS' OBLIGATION TO MITIGATE.
(i) Each Lender agrees that, as promptly as practicable after it
becomes aware of the occurrence of an event or the existence of a condition that
would cause it to be an Affected Lender under subsection 2.6B or 2.6C or that
would entitle such Lender to receive payments under subsection 2.6H, it will, to
the extent not inconsistent with such Lender's internal policies, use reasonable
efforts to make, fund or maintain the affected Eurodollar Rate Loans of such
Lender through another lending office of such Lender if as a result thereof the
additional moneys which would otherwise be required to be paid to such Lender
pursuant to subsection 2.6B or 2.6H would be materially reduced or the
illegality or other adverse circumstances which would otherwise require
conversion of such Loans pursuant to subsection 2.6C would cease to exist, and
if, as determined by such Lender in its sole discretion, the making, funding or
maintaining of such Loans through such other lending office would not otherwise
materially adversely affect such Loans or such Lender. Company hereby agrees to
pay all reasonable expenses incurred by any Lender in utilizing another lending
office of such Lender pursuant to this subsection 2.6K.
(ii) If Company receives a notice pursuant to subsection 2.6H, 2.7 or
2.9G, so long as (i) no Potential Event of Default or Event of Default shall
have occurred and be continuing and Company has obtained a commitment from
another Lender or an Eligible Assignee to purchase at par such Lender's Loans,
Commitments and other Obligations and to assume all obligations of the Lender to
be replaced, (ii) at such time the Lender to be replaced is not an Issuing
Lender with respect to any Letters of Credit outstanding and (iii) such Lender
to be replaced is unwilling to withdraw the notice delivered to Company, upon 30
days prior written notice to such Lender and Administrative Agent, Company may
require the Lender giving such notice to assign all of its Loans, Commitments
and other Obligations to such other Lender or Eligible Assignee pursuant to the
provisions of subsection 9.1B; provided that, prior to or concurrently with such
--------
replacement (i) Company has paid to the Lender giving such notice all amounts
under subsections 2.6H, 2.7 and 2.9G through such date of replacement, (ii)
Company has paid to Agent the processing and recordation fee required to be paid
by subsection 9.1B(i) and (iii) all of the requirements for such assignment
contained in subsection 9.1B, including, without limitation, the consent of
Administrative Agent (if required) and the receipt by Administrative Agent of an
executed Assignment Agreement and other supporting documents, have been
fulfilled.
2.7 CAPITAL ADEQUACY ADJUSTMENT
---------------------------
In the event that any Lender shall have determined that the adoption
or implementation after the date hereof of any law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order regarding capital
adequacy or any change in any such then existing law, treaty, governmental (or
quasi-governmental) rule, regulation, guideline or order or in the
interpretation or application thereof, or compliance by any Lender (or an
Affiliate of such
38
<PAGE>
Lender which makes, carries or transfers Eurodollar Rate Loans) with any request
or directive regarding capital adequacy (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) from any
central bank or governmental agency or body having jurisdiction, does or shall
have the effect of increasing the amount of capital required to be maintained by
such Lender or any Person directly or indirectly controlling such Lender and
thereby reducing the rate of return on such Lender's capital or the capital of
such controlling Person as a consequence of such Lender's obligations hereunder,
then Company shall from time to time, within five (5) Business Days after
receipt of a written request by such Lender (with a copy to Administrative
Agent), pay to such Lender or such controlling Person additional amounts
sufficient to compensate such Lender or such controlling Person for such
reduction. A certificate as to the amount of such reduction setting forth the
calculation thereof in reasonable detail, submitted to Company and
Administrative Agent by such Lender, shall, absent manifest error, be final,
conclusive and binding for all purposes. In determining such amount, a Lender
may use any reasonable averaging and attribution method. Notwithstanding the
foregoing, nothing in this subsection 2.7 is intended to provide and this
subsection 2.7 shall not provide to any Loan Party the right to inspect the
records, files or books of any Lender.
2.8 TAXES
-----
A. TAXES. Any and all payments or reimbursements made under this
Agreement or under the Notes shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto excluding (i)
---------
taxes imposed on the overall income (whether gross or net) or capital of a
Lender by the jurisdiction in which the Lender is organized, resident or doing
business, (ii) franchise taxes, and (iii) taxes, levies, imposts, deductions,
charges or withholdings which are imposed by laws, treaties or regulations in
effect as of the Closing Date; provided, however, that any changes in laws,
-------- -------
treaties or regulations or the interpretation thereof applicable to financial
institutions generally after the Closing Date shall not be excluded pursuant to
this clause (iii) (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
-----
If Company shall be required by law to deduct any Taxes from or with
respect to any sum payable hereunder to any Lender, then the sum payable shall
be increased as may be necessary so that, after making all required deductions,
such Lender receives an amount equal to the sum it would have received had no
such deductions been made.
B. FOREIGN LENDERS. Each Lender organized under the laws of a
jurisdiction outside the United States (referred to in this subsection 2.8B as a
"Foreign Lender") as to which payments to be made under this Agreement or under
--------------
the Notes are exempt from United States withholding tax under an applicable
statute or tax treaty shall provide to Company and Administrative Agent (i) a
properly completed and executed Internal Revenue Service Form 4224 or Form 1001
or other applicable form, certificate or document prescribed by the Internal
Revenue Service of the United States certifying as to such Foreign Lender's
entitlement to such exemption with respect to payments to be made to such
Foreign Lender under this Agreement and under the Notes (referred to in this
subsection 2.8B as a "Certificate of Exemption") or (ii) a letter from any such
------------------------
Foreign Lender stating that it is not entitled to any such exemption (referred
to in
39
<PAGE>
this subsection 2.8B as "Letter of Non-Exemption"). Prior to becoming a
-----------------------
Lender under this Agreement and within 15 days after a reasonable written
request of Company or Administrative Agent from time to time thereafter, each
Foreign Lender that desires to become or that becomes a Lender under this
Agreement shall provide a Certificate of Exemption or a Letter of Non-Exemption
to Company and Administrative Agent.
If a Foreign Lender is entitled to an exemption with respect to
payments to be made to such Foreign Lender under this Agreement and does not
provide a Certificate of Exemption to Company and Administrative Agent within
the time periods set forth in the preceding paragraph, Company shall withhold
taxes from payments to such Foreign Lender at the applicable statutory rates and
Company shall not be required to pay any additional amounts as a result of such
withholding as provided in subsection 2.8A; provided, however, that all such
-------- -------
withholding and associated limitations in payment under subsection 2.8A shall
cease upon delivery by such Foreign Lender of a Certificate of Exemption to
Company and Administrative Agent.
2.9 LETTERS OF CREDIT
-----------------
A. LETTERS OF CREDIT. In addition to Company requesting that
Lenders make Loans pursuant to subsection 2.1, Company may request, in
accordance with the provisions of this subsection, (a) on the Closing Date
solely for purposes of issuing Letters of Credit to replace or support certain
of the Existing Letters of Credit of Company listed on Schedule 2.9 annexed
------------
hereto and (b) from time to time during the period from the Business Day
immediately succeeding the Closing Date to but excluding the Maturity Date that
Administrative Agent or one or more Lenders issue Letters of Credit for the
account of Company; provided that, if no other Lender is willing to provide any
--------
Letter of Credit, Administrative Agent shall, if each of the conditions to
issuance of such Letter of Credit in this Agreement is met, issue such Letter of
Credit; provided further, that
-------- -------
(i) Company shall not request that Administrative Agent or any
Lender issue (and neither Administrative Agent nor any Lender shall issue)
any Letter of Credit if, after giving effect to such issuance, the Total
Utilization of Commitments would exceed the Commitments, as reduced from
time to time pursuant to subsections 2.4G and 2.4H;
(ii) Company shall not request that Administrative Agent or any
Lender issue (and neither Administrative Agent nor any Lender shall issue)
any Letter of Credit if, after giving effect to such issuance, the Letter
of Credit Usage would exceed the lesser of (x) an amount equal to the
amount of the Commitments minus the amount of the outstanding Loans or (y)
-----
$125,000,000;
(iii) in no event shall any Lender issue any Commercial Letter of
Credit having an expiration date which is (a) not acceptable to such
Issuing Lender in its reasonable discretion, or (b) more than one hundred
eighty (180) days after its date of issuance or (c) later than 30 days
prior to the Maturity Date;
(iv) in no event shall Administrative Agent or any Lender issue any
Standby Letter of Credit having an expiration date later than the earlier
of (y) 30 days prior to the
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<PAGE>
Maturity Date, or (z) the date which is one year from the date of issuance
of such Standby Letter of Credit; provided that this clause (z) shall not
--------
prevent any Issuing Lender from agreeing (subject to the preceding clause
(y)) that a Standby Letter of Credit will automatically be extended
annually for a period not to exceed one year unless such Issuing Lender
elects not to extend for such additional period; and
(v) in no event shall Administrative Agent or any Lender issue any
Letter of Credit denominated in any currency other than Dollars and payable
on a sight basis.
The issuance or extension of any Letter of Credit in accordance with
the provisions of this subsection shall require the satisfaction of each
condition set forth in subsection 3.3; provided, however, the obligation of each
-------- -------
Issuing Lender to issue or extend any Letter of Credit is subject to the
condition that (a) such Issuing Lender believed in good faith that all
conditions under subsections 2.9A and 3.3 to the issuance or extension of such
Letter of Credit were satisfied at the time such Letter of Credit was issued or
extended or (b) the satisfaction of any such condition not satisfied had been
waived by Requisite Lenders prior to or at the time such Letter of Credit was
issued or extended; provided further that Issuing Lender shall be entitled to
-------- -------
rely, and shall be fully protected in relying, upon any communication,
instrument or document believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, including, without limitation,
an Officers' Certificate from Company as to the satisfaction of the conditions
under subsection 3.3, in determining the satisfaction of any conditions to the
issuance or extension of any Letter of Credit then in effect.
Immediately upon the issuance of each Letter of Credit, each Lender
shall be deemed to, and hereby agrees to, have irrevocably purchased from the
Issuing Lender a participation in such Letter of Credit and drawings thereunder
in an amount equal to such Lender's Pro Rata Share of the maximum amount which
is or at any time may become available to be drawn thereunder. Upon satisfaction
of the conditions set forth in subsection 3.1, the Existing Letters of Credit
shall, effective as of the Closing Date, become Letters of Credit under this
Agreement to the same extent as if initially issued hereunder (if not replaced
or supported) and each Lender shall be deemed to have irrevocably purchased from
the Issuing Lender of such Existing Letters of Credit a participation in such
Letters of Credit and drawings thereunder in an amount equal to such Lender's
Pro Rata Share of the maximum amount which is or at any time may become
available to be drawn thereunder. All such Existing Letters of Credit which
become Letters of Credit under this Agreement shall be fully secured by the
Collateral commencing on the Closing Date to the same extent as if initially
issued hereunder on such date.
Each Letter of Credit supporting the payment of Indebtedness may
provide that the Issuing Lender may (but shall not be required to) pay the
beneficiary thereof upon the occurrence of an Event of Default and the
acceleration of the maturity of the Loans or, if payment is not then due to the
beneficiary, provide for the deposit of funds in an account to secure payment to
the beneficiary and that any funds so deposited shall be paid to the beneficiary
of such Letter of Credit if conditions to such payment are satisfied or returned
to the Issuing Lender for distribution to Lenders (or, if all Obligations shall
have been indefeasibly paid in full, to Company) if no payment to the
beneficiary has been made and the final date available for drawings under the
Letter of Credit has passed. Each payment or deposit of funds by the Issuing
Lender as provided
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<PAGE>
in this paragraph shall be treated for all purposes of this Agreement as a
drawing duly honored by the Issuing Lender under the related Letter of Credit.
B. LETTER OF CREDIT REQUEST. Whenever Company desires to cause
Administrative Agent or any Lender to issue a Letter of Credit, it shall deliver
to Administrative Agent and that Lender a Letter of Credit Request substantially
in the form of Exhibit XIII annexed hereto no later than 1:00 P.M. (New York
time) at least ten (10) Business Days in advance of the proposed date of
issuance or such shorter time as may be acceptable to the Issuing Lender. The
Letter of Credit Request shall specify (i) the proposed Issuing Lender, (ii) the
proposed date of issuance (which shall be a Business Day), (iii) whether the
Letter of Credit is to be a Standby Letter of Credit or a Commercial Letter of
Credit; (iv) the face amount of the Letter of Credit, (v) the expiration date of
the Letter of Credit, (vi) the name and address of the beneficiary, (vii) such
other documents or materials as such Issuing Lender may reasonably request, and
(viii) either the verbatim text of the proposed Letter of Credit or the proposed
terms and conditions thereof, including a precise description of any documents
to be presented by the beneficiary which, if presented by the beneficiary in
substantial compliance with the terms and conditions of the applicable Letter of
Credit on or prior to the expiration date of the applicable Letter of Credit,
would require the Issuing Lender to make payment under the applicable Letter of
Credit; provided that the Issuing Lender, in its sole judgment, may require
--------
changes in any such documents and certificates; provided further that the
-------- -------
Issuing Lender shall not be required to issue any Letter of Credit that on its
terms requires payment thereunder prior to the third Business Day following
receipt by the Issuing Lender of such documents and certificates. In determining
whether to pay any Letter of Credit, the Issuing Lender shall be responsible
only to use reasonable care to determine that the documents and certificates
required to be delivered under that Letter of Credit have been delivered and
that they substantially comply on their face with the requirements of that
Letter of Credit. In the case of Standby Letters of Credit, promptly upon the
issuance of a Letter of Credit, the Issuing Lender shall notify Administrative
Agent and each Lender of the issuance and the amount of each such Lender's
respective participation therein determined in accordance with subsection 2.9D.
In the case of Commercial Letters of Credit, each Issuing Lender (other than
Administrative Agent) will send by facsimile transmission to Administrative
Agent, promptly on the first Business Day of each week, the aggregate face
amount of outstanding Commercial Letters of Credit issued by such Issuing Lender
for each day of the immediately preceding week. The Administrative Agent shall
deliver to each Lender upon each calendar month end a report setting forth for
such period the daily aggregate stated amount available to be drawn under the
Commercial Letters of Credit issued by all Issuing Lenders during such period.
C. PAYMENT OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. In the event
of any request for drawing under any Letter of Credit by the beneficiary
thereof, the Issuing Lender shall immediately notify Company and Administrative
Agent and Company shall reimburse the Issuing Lender on the day on which such
drawing is honored in an amount in same day funds equal to the amount of such
drawing; provided that, anything contained in this Agreement to the contrary
--------
notwithstanding, (i) unless prior to 11:00 A.M. (New York time) on the date of
such drawing (a) Company shall have notified the Issuing Lender and
Administrative Agent that Company intends to reimburse the Issuing Lender for
the amount of such drawing with funds other than the proceeds of Loans or (b)
Company shall have delivered a Notice of Borrowing
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requesting Loans which are Base Rate Loans in an amount equal to the amount of
such drawing, then Company shall be deemed to have given a Notice of Borrowing
to Administrative Agent requesting Lenders to make Loans which are Base Rate
Loans on the date on which such drawing is honored in an amount equal to the
amount of such drawing, and (ii) if so requested by Administrative Agent,
Lenders shall, on the date of such drawing, make Loans which are Base Rate Loans
in the amount of such drawing, the proceeds of which shall be applied directly
by Administrative Agent to reimburse the Issuing Lender for the amount of such
drawing; and provided further that, if for any reason proceeds of such Loans are
-------- -------
not received by the Issuing Lender on such date in an amount equal to the amount
of such drawing, Company shall reimburse the Issuing Lender, on the Business Day
immediately following the date of such drawing, in an amount in same day funds
equal to the excess of the amount of such drawing over the amount of such Loans,
if any, which are so received, plus accrued interest on such amount at the rate
set forth in subsection 2.9E(iii).
D. PAYMENT BY LENDERS. If Company shall fail to reimburse the
Issuing Lender, for any reason, as provided in subsection 2.9C in an amount
equal to the amount of any drawing honored by the Issuing Lender under a Letter
of Credit issued by it, the Issuing Lender shall promptly notify each Lender of
the unreimbursed amount of such drawing and of such Lender's respective
participation therein based on such Lender's Pro Rata Share. Each Lender shall
make available to the Issuing Lender an amount equal to its respective
participation, in same day funds, at the office of the Issuing Lender specified
in such notice, not later than 1:00 P.M. (New York time) on the Business Day
after the date notified by the Issuing Lender. If any Lender fails to make
available to the Issuing Lender the amount of such Lender's participation in
such Letter of Credit as provided in this subsection 2.9D, the Issuing Lender
shall be entitled to recover such amount on demand from such Lender together
with interest at the customary rate set by the Issuing Lender for the correction
of errors among banks for one (1) Business Day and thereafter at the Base Rate.
Nothing in this subsection shall be deemed to prejudice the right of any Lender
to recover from the Issuing Lender any amounts made available by such Lender to
the Issuing Lender pursuant to this subsection if it is determined in a final
judgment by a court of competent jurisdiction that the payment with respect to a
Letter of Credit by the Issuing Lender in respect of which payment was made by
such Lender constituted gross negligence or willful misconduct on the part of
the Issuing Lender. The Issuing Lender shall distribute to each other Lender
which has paid all amounts payable by it under this subsection with respect to
any Letter of Credit issued by the Issuing Lender such other Lender's Pro Rata
Share of all payments received by the Issuing Lender from Company or pursuant to
the last paragraph of subsection 2.9A in reimbursement of drawings honored by
the Issuing Lender under such Letter of Credit when such payments are received.
E. COMPENSATION. Company agrees to pay the following amounts with
respect to each Letter of Credit issued on its behalf:
(i) an administrative fee equal to 0.1875% per annum of the maximum
amount available from time to time to be drawn under such Letter of Credit
payable in arrears on and to (but not including) each March 25, June 25,
September 25 and December 25 of each year, commencing on June 25, 1997 and
on the Maturity Date or such earlier date upon which the entire Commitment
is terminated provided that the administrative fee
--------
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payable with respect to each Letter of Credit shall not be less than $500
per annum;
(ii) with respect to each Standby Letter of Credit, a commission equal
to (x)(1) the Eurodollar Rate Margin then applicable with respect to
Eurodollar Rate Loans pursuant to subsection 2.2A of this Agreement minus
-----
(2) the Commitment Fee Percentage multiplied by (y) the maximum amount
----------
available from time to time to be drawn under such Standby Letter of
Credit, such commission to be calculated on the basis of a 360-day year and
the actual number of days elapsed, and with respect to each Commercial
Letter of Credit, a commission as negotiated by and between the Company and
the applicable Issuing Lender, in each case payable in arrears on and to
(but not including) each March 25, June 25, September 25 and December 25 of
each year, commencing on June 25, 1997 and on the Maturity Date or such
earlier date upon which the entire Commitment is terminated;
(iii) with respect to drawings made under any Letter of Credit,
interest, payable on demand, on the amount paid by the Issuing Lender in
respect of each such drawing from the date of such drawing through the date
such amount is reimbursed by Company (including any such reimbursement out
of the proceeds of Loans pursuant to subsection 2.9C) at a rate which is
equal to the interest rate otherwise payable pursuant to subsection 2.2A of
this Agreement for Base Rate Loans; provided that if such amount is not
--------
paid on demand, the Obligations shall bear interest thereafter in
accordance with the provisions of subsection 2.2E; and
(iv) with respect to the amendment or transfer of each Letter of
Credit and each drawing made thereunder, documentary and processing charges
in accordance with the Issuing Lender's standard schedule for such charges
in effect at the time of such issuance, amendment, transfer or drawing, as
the case may be, or as otherwise agreed to by the Issuing Lender.
The Company shall pay promptly to Administrative Agent all amounts
described in clauses (ii) or (iii) of this subsection 2.9E with respect to a
Letter of Credit, and Administrative Agent shall distribute to each Lender its
Pro Rata Share. Company also shall pay promptly to the applicable Issuing
Lender for its own account all amounts described pursuant to clauses (i) and
(iv) of this subsection 2.9E with respect to a Letter of Credit. With respect
to Existing Letters of Credit, the fees described in clauses (i) and (ii) above
shall accrue from and including the Closing Date.
F. OBLIGATIONS ABSOLUTE. The obligation of Company to reimburse the
Issuing Lender for drawings made under the Letters of Credit issued by it and to
repay any Loans made by Lenders pursuant to subsection 2.9C and the obligations
by Lenders under subsection 2.9D shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances including, without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
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(ii) the existence of any claim, set-off, defense or other right
which Company may have at any time against a beneficiary or any transferee
of any Letter of Credit (or any persons or entities for whom any such
transferee may be acting), any Agent, any Lender or any other Person,
whether in connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction
between Company and the beneficiary for which the Letter of Credit was
procured);
(iii) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the Issuing Lender under any Letter of Credit
against presentation of a demand, draft or certificate or other document
which does not comply with the terms of such Letter of Credit; provided
--------
that such payment does not constitute gross negligence or willful
misconduct of such Issuing Lender;
(v) any adverse change in the condition (financial or otherwise) of
Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
Company or any of its Subsidiaries, any Agent or any Lender (other than the
Issuing Lender);
(vii) any other circumstance or happening whatsoever, which is
similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing.
G. ADDITIONAL PAYMENTS. If by reason of (i) any change in any
applicable law, regulation, rule, decree or regulatory requirement or any change
in the interpretation or application by any judicial or regulatory authority of
any law, regulation, rule, decree or regulatory requirement applicable to
financial institutions generally or (ii) compliance by the Issuing Lender or any
Lender with any direction, request or requirement (whether or not having the
force of law) of any governmental or monetary authority including, without
limitation, Regulation D:
(a) the Issuing Lender or any Lender shall be subject to any tax,
levy, charge or withholding of any nature or to any variation thereof or to
any penalty with respect to the maintenance or fulfillment of its
obligations under this subsection 2.9, whether directly or by such being
imposed on or suffered by the Issuing Lender or any Lender;
(b) any reserve, special deposit, premium, FDIC assessment, capital
adequacy or similar requirement is or shall be applicable, imposed or
modified in respect of any Letters of Credit issued by the Issuing Lender
or participations therein purchased by any Lender; or
45
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(c) there shall be imposed on the Issuing Lender or any Lender any
other condition regarding this subsection 2.9, any Letter of Credit or any
participation therein;
and the result of the foregoing is to directly or indirectly increase the cost
to the Issuing Lender or any Lender of issuing, making or maintaining any Letter
of Credit or of purchasing or maintaining any participation therein, or to
reduce the amount receivable in respect thereof by the Issuing Lender or any
Lender, then and in any such case the Issuing Lender or such Lender may, at any
time within a reasonable period after the additional cost is incurred or the
amount received is reduced, notify Company and Administrative Agent and provide
appropriate proof of such cost, and Company shall pay within five (5) Business
Days of the date of such notice such amounts as the Issuing Lender or such
Lender may specify to be necessary to compensate the Issuing Lender or such
Lender for such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a rate equal
at all times to the interest otherwise payable pursuant to subsection 2.2A of
this Agreement for Base Rate Loans. The determination by the Issuing Lender or
any Lender, as the case may be, of any amount due pursuant to this subsection
2.9G as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest error, be final and
conclusive and binding on all of the parties hereto.
H. INDEMNIFICATION; NATURE OF ISSUING LENDER'S DUTIES. In addition
to amounts payable as elsewhere provided in this subsection, Company hereby
agrees to protect, indemnify, pay and save harmless the Issuing Lender from and
against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees and allocated costs
of internal counsel) which the Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit,
including, without limitation, the payment of draws thereunder, other than as a
result of gross negligence or willful misconduct of the Issuing Lender as
determined by a court of competent jurisdiction or (ii) the failure of the
Issuing Lender to honor a drawing under any Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present or future de jure
or de facto government or governmental authority (all such acts or omissions
herein called "Government Acts"). Each Lender, proportionately to its Pro Rata
---------------
Share, severally agrees to indemnify Issuing Lender to the extent Issuing Lender
shall not have been reimbursed by Company or its Subsidiaries, for and against
any of the foregoing claims, demands, liabilities, damages, losses, costs,
charges and expenses to which Issuing Lender is entitled to reimbursement from
Company or its Subsidiaries.
As between Company and the Issuing Lender, Company assumes all risks
of the acts and omissions of, or misuse of the Letters of Credit issued by the
Issuing Lender by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Issuing Lender shall not
be responsible (absent gross negligence or willful misconduct (as determined by
a court of competent jurisdiction)): (i) for the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of such Letters of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) for failure of the
46
<PAGE>
beneficiary of any such Letter of Credit to comply fully with conditions
required in order to draw upon such Letter of Credit; (iv) for errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(v) for errors in interpretation of technical terms; (vi) for any loss or delay
in the transmission or otherwise of any document required in order to make a
drawing under any such Letter of Credit or of the proceeds thereof; (vii) for
the misapplication by the beneficiary of any such Letter of Credit of the
proceeds of any drawing under such Letter of Credit; (viii) for any consequences
arising from causes beyond the control of the Issuing Lender, including, without
limitation, any Government Acts and (ix) any special, consequential, indirect or
incidental damages, including, but not limited to, lost profits arising out of
or in connection with the issuance of any Letter of Credit or any action taken
or not taken by the Issuing Lender in connection with any Letter of Credit, or
any document or property referred to in or related to any Letter of Credit. None
of the above shall affect, impair, or prevent the vesting of any of the Issuing
Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Lender under or in connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith and absent gross
negligence or willful misconduct of the Issuing Lender (as determined by a court
of competent jurisdiction), shall not put the Issuing Lender under any resulting
liability to Company.
Notwithstanding anything to the contrary contained in this subsection,
Company shall have no obligation to indemnify the Issuing Lender in respect of
any liability incurred by the Issuing Lender arising solely out of the gross
negligence or willful misconduct of the Issuing Lender as determined by a court
of competent jurisdiction, or out of the wrongful dishonor by the Issuing Lender
of a proper demand for payment made under the Letters of Credit.
For purposes of this subsection 2.9H, the term "Issuing Lender" means
--------------
the Issuing Lender and any Lender purchasing a participation in any Letter of
Credit pursuant to subsection 2.9D.
I. COMPUTATION OF INTEREST AND FEES. Interest and fees payable
pursuant to this subsection 2.9 shall be computed on the basis of a 360-day year
and the actual number of days elapsed in the period during which they accrue.
2.10 REPLACEMENT OF LENDER
---------------------
In the event that Company receives a notice pursuant to subsection
2.6H, 2.7 or 2.9G or in the event of a refusal by a Lender to consent to a
proposed change, waiver, discharge or termination with respect to this Agreement
which has been approved by the Requisite Lenders as provided in subsection 9.6,
Company shall have the right, if no Potential Event of Default or Event of
Default then exists, to replace such Lender (a "Replaced Lender") with one or
---------------
more Eligible Assignees (collectively, the "Replacement Lender") acceptable to
------------------
Administrative Agent, provided that (i) at the time of any replacement pursuant
--------
to this subsection 2.10, the Replacement Lender shall enter into one or more
Assignment Agreements pursuant to subsection 9.1B (and
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<PAGE>
with all fees payable pursuant to such subsection 9.1B to be paid by the
Replacement Lender) pursuant to which the Replacement Lender shall acquire all
of the outstanding Loans and Commitments of, and in each case participations in
Letters of Credit by, the Replaced Lender and, in connection therewith, shall
pay to (x) the Replaced Lender in respect thereof an amount equal to the sum of
(A) an amount equal to the principal of, and all accrued interest on, all
outstanding Loans of the Replaced Lender, (B) an amount equal to all unpaid
drawings with respect to Letters of Credit that have been funded by (and not
reimbursed to) such Replaced Lender, together with all then unpaid interest with
respect thereto at such time and (C) an amount equal to all accrued, but
theretofore unpaid, fees owing to the Replaced Lender with respect thereto, and
(y) the appropriate Issuing Lender an amount equal to such Replaced Lender's Pro
Rata Share of any unpaid drawings with respect to Letters of Credit (which at
such time remains an unpaid drawing) issued by it to the extent such amount was
not theretofore funded by such Replaced Lender, and (ii) all obligations
(including without limitation all such amounts, if any, owing under subsection
2.6E) of Company owing to the Replaced Lender (other than those specifically
described in clause (i) above in respect of which the assignment purchase price
has been, or is concurrently being, paid), shall be paid in full to such
Replaced Lender concurrently with such replacement. Upon the execution of the
respective Assignment Agreements, recordation of such assignment in the Register
by Agent pursuant to subsection 2.1D, the payment of amounts referred to in
clauses (i) and (ii) above and delivery to the Replacement Lender of the
appropriate Note or Notes executed by Company, the Replacement Lender shall
become a Lender hereunder and the Replaced Lender shall cease to constitute a
Lender hereunder except with respect to indemnification provisions under this
Agreement which by the terms of this Agreement survive the termination of this
Agreement (including, without limitation, subsections 2.6E, 2.6H, 2.7, 2.8,
2.9G, 2.9H, 4.13, 9.2 and 9.3), which indemnification provisions shall survive
as to such Replaced Lender. Notwithstanding anything to the contrary contained
above, no Issuing Lender may be replaced hereunder at any time while it has
Letters of Credit outstanding hereunder unless arrangements satisfactory to such
Issuing Lender (including the furnishing of a Standby Letter of Credit in form
and substance, and issued by an issuer, satisfactory to such Issuing Lender or
the furnishing of cash collateral in amounts and pursuant to arrangements
satisfactory to such Issuing Lender) have been made with respect to such
outstanding Letters of Credit.
SECTION 3.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans hereunder and to issue
Letters of Credit are subject to the satisfaction of all of the following
conditions.
3.1 CONDITIONS TO EFFECTIVENESS.
---------------------------
This Amended and Restated Credit Agreement shall become effective only
upon satisfaction of all of the following conditions precedent:
A. On or before the Effective Date, Company shall deliver to Lenders
(or to Administrative Agent for Lenders with sufficient originally executed
copies for each Lender and
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Administrative Agent's counsel) each, unless otherwise noted, dated the
Effective Date:
1. Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement and
the other Loan Documents to which it is to be a party in form and substance
satisfactory to Agents and their counsel, certified as of the Effective
Date by its corporate secretary or an assistant secretary as being in full
force and effect without modification or amendment;
2. Signature and incumbency certificates of its officers
executing this Agreement and the other Loan Documents to which it is to be
a party;
3. Executed copies of this Agreement and the other Loan
Documents; and
4. Such other documents as any Agent or any Lender may
reasonably request.
B. On or before the Effective Date, each of the Borg-Warner
Guarantor Subsidiaries that are Material Subsidiaries shall execute and deliver
to Lenders (or to Administrative Agent for Lenders with sufficient originally
executed copies for each Lender and Administrative Agent's counsel), each,
unless otherwise noted, dated the Effective Date:
1. Acknowledgement and Consent substantially in the form of
Exhibit XIV annexed hereto; and
2. Such other documents as any Agent or any Lender may
reasonably request.
C. Concurrently with the Effective Date, the Administrative Agent
will release all funds other than $50.0 million held in the blocked account
referred to in that certain Limited Waiver dated as of May 28, 1998.
D. On or before the Effective Date, all corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by the Agents, acting on behalf of Lenders, and their counsel shall
be reasonably satisfactory in form and substance to the Agents and such counsel,
and the Agents and Administrative Agent's counsel shall have received all such
counterpart originals or certified copies of such documents as the Agents or any
Lender may reasonably request.
E. On or before the making of the Loans, Company shall have
delivered to Administrative Agent an Officers' Certificate, dated the Effective
Date and addressed to the Agents and Lenders, in form and substance reasonably
satisfactory to the Agents, to the effect that (i) the representations and
warranties in Section 4 hereof pertaining to such Person are true, correct and
complete in all material respects on and as of the Effective Date to the same
extent as though made on and as of that date, (ii) since December 31, 1997
through the Effective Date
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there has been no material adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Company
or of Company and its Subsidiaries taken as a whole (provided that the sale of
the Company's electronic security, armored transport and courier services
businesses shall not constitute a material adverse change) and (iii) Company has
performed all of its respective obligations required to be performed at or prior
to the Effective Date.
F. Each Loan Party shall have performed in all material respects all
agreements which this Agreement provides shall be performed on or before the
Effective Date except as otherwise disclosed to and agreed to in writing by the
Agents.
3.2 CONDITIONS TO ALL LOANS
-----------------------
The obligations of Lenders to make all Loans (which shall not include
conversions or continuations of existing Loans pursuant to subsection 2.2D) on
each Funding Date are subject to the following further conditions precedent:
A. Administrative Agent shall have received, in accordance with the
provisions of subsection 2.1B, as the case may be, before that Funding Date, an
originally executed Notice of Borrowing signed by the chief executive officer,
the chief financial officer, the treasurer or any assistant treasurer of Company
or by any executive officer of Company designated by any of the above-described
officers on behalf of Company in writing delivered to Administrative Agent.
B. As of that Funding Date:
1. The representations and warranties contained herein and in
the other Loan Documents shall be true, correct and complete in all
material respects on and as of that Funding Date to the same extent as
though made on and as of that date;
2. No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such Notice
of Borrowing that would constitute (a) an Event of Default or (b) a
Potential Event of Default;
3. Each Loan Party shall have performed in all material respects
all agreements and satisfied all conditions which this Agreement and other
Loan Documents provide shall be performed by it on or before that Funding
Date;
4. No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making that Loan;
5. The making of the Loans requested on such Funding Date shall
not violate any law, including Regulation T, Regulation U or Regulation X
of the Board of Governors of the Federal Reserve Board; and
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6. There shall not be pending or, to the knowledge of Company,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting any Loan Party or any of its Subsidiaries
or any property of any Loan Party or any of its Subsidiaries, that has not
been disclosed by Company in writing pursuant to subsection 4.6 or 5.1(ix)
prior to the making of the last preceding Loans (or, in the case of the
initial Loans, prior to the execution of this Agreement) and there shall
have occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, that,
in either event, in the opinion of Requisite Lenders, would reasonably be
expected to have a Material Adverse Effect. No injunction or other
restraining order shall have been issued and no hearing to cause an
injunction or other restraining order to be issued shall be pending or
noticed with respect to any action, suit or proceeding seeking to enjoin or
otherwise prevent the consummation of, or to recover any damages or obtain
relief as a result of this Agreement or the making of Loans hereunder.
3.3 CONDITIONS TO LETTERS OF CREDIT
-------------------------------
The obligation of any Issuing Lender to issue or extend any Letter of
Credit hereunder is subject to prior or concurrent satisfaction of all of the
following conditions:
A. On or before the date of issuance of such Letter of Credit, the
Issuing Lender with respect thereto shall have received, in accordance with the
provisions of subsection 2.9B, a notice requesting the issuance of such Letter
of Credit and all other information specified in subsection 2.9B, and such other
documents as such Issuing Lender may reasonably require in connection with the
issuance of such Letter of Credit.
B. On the date of issuance or extension of such Letter of Credit,
all conditions precedent described in subsection 3.2B shall be satisfied to the
same extent as though the issuance or extension of such Letter of Credit were
the making of a Loan and the date of issuance or extension of such Letter of
Credit were a Funding Date.
SECTION 4.
COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement, Company
represents and warrants to each Lender that the following statements are true,
correct and complete:
4.1 ORGANIZATION, POWERS, GOOD STANDING, BUSINESS AND SUBSIDIARIES
--------------------------------------------------------------
A. ORGANIZATION AND POWERS. Each of the Loan Parties is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation (which jurisdiction is set forth on
Schedule 1.1 annexed hereto). Each of the Loan Parties has all requisite
- ------------
corporate power and authority to own and operate its properties, to carry on its
business
51
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as now conducted and proposed to be conducted, to enter into each Loan
Document to which it is a party and to carry out the transactions contemplated
hereby and thereby, and, in the case of Company, to issue the Notes to be issued
by it.
B. GOOD STANDING. Each of the Loan Parties is in good standing
wherever necessary to carry on its present business and operations, except in
jurisdictions in which the failure to be in good standing has not had and will
not have a Material Adverse Effect.
C. CONDUCT OF BUSINESS. On the date hereof, Loan Parties will be
engaged only in the businesses described in Schedule 4.1C annexed hereto.
-------------
D. SUBSIDIARIES. All of the Subsidiaries of each of the Loan Parties
(other than those Subsidiaries which are inactive or have no operating assets)
as of the date of this Agreement and as of the Effective Date are identified on
Schedule 1.1 annexed hereto. The capital stock of each Person identified in
- ------------
Schedule 1.1 is duly authorized, validly issued, fully paid and nonassessable.
- ------------
As of December 31, 1997, the Material Subsidiaries own not less than 54.5% of
the value of all tangible assets of Loan Parties taken as a whole as reflected
on the balance sheet of the Company as of such date. The capital stock of each
Person identified on Schedule 1.1 is not Margin Stock. Each of the Subsidiaries
------------
identified on Schedule 1.1 is duly organized, validly existing and in good
------------
standing under the laws of its respective jurisdiction of incorporation and has
full corporate power and authority to own its assets and properties and to
operate its business as presently owned and conducted, except where failure to
be in good standing or a lack of corporate power and authority has not had and
will not have a Material Adverse Effect. Schedule 1.1 correctly sets forth the
------------
ownership interest of each of the Loan Parties in each of its Subsidiaries
identified therein and identifies (i) all Material Subsidiaries, (ii) all Borg-
Warner Guarantor Subsidiaries and (iii) all Borg-Warner Pledged Subsidiaries.
4.2 AUTHORIZATION OF BORROWING, ETC.
--------------------------------
A. AUTHORIZATION OF BORROWING. The execution, delivery and
performance of, and the consummation of the transactions contemplated by, the
Loan Documents and the issuance, delivery and payment of the Notes have been
duly authorized by all necessary corporate action by each Loan Party.
B. NO CONFLICT. The execution, delivery and performance by each
Loan Party of, and the consummation of the transactions contemplated by, each
Loan Document to which it is respectively a party and the issuance, delivery and
performance of the Notes do not and will not (i) violate any provision of law
applicable to any Loan Party, the Certificate of Incorporation or Bylaws of any
Loan Party, or any order, judgment or decree of any court or other agency of
government binding on any Loan Party, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of any Loan Party, (iii) result in or require the
creation or imposition of any Lien upon any of the properties or assets of any
Loan Party (other than Liens in favor of the Collateral Agent), or (iv) require
any approval of stockholders or any approval or consent of any Person under any
Contractual Obligation of any Loan Party, except for (a) such approvals, or
consents which will be obtained on or before the Closing Date and disclosed in
writing to Lenders, and (b) with respect to Loan Parties, such
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violations, conflicts, breaches, Liens and defaults which would not have, and
such approvals the absence of which would not have, a Material Adverse Effect.
C. GOVERNMENTAL CONSENTS. The execution, delivery and performance
by each Loan Party of, and the consummation of the transactions contemplated by,
the Loan Documents to which it is a party and application of the proceeds of the
Loans and the issuance, delivery and performance of the Notes, do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by, any Federal, state or other governmental authority
or regulatory body except for any filings required in connection with the
perfection of security interests granted pursuant to Loan Documents and other
filings, authorizations and consents and approvals either referred to in
subsection 4.9 hereof or the absence of which would not have a Material Adverse
Effect.
D. BINDING OBLIGATION. This Agreement is, and the other Loan
Documents and the Notes, when executed and delivered will be, the legally valid
and binding obligations of the applicable Loan Parties, enforceable against the
applicable Loan Parties in accordance with their respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally and subject to the
availability of equitable remedies.
4.3 FINANCIAL CONDITION
-------------------
Company has heretofore delivered to Lenders, at Lenders' request, the
audited financial statements of Company on a consolidated basis, as of December
31, 1997 and the related audited statements of income, shareholders' equity and
cash flow for the fiscal period then ended.
Such financial statements were prepared in conformity with GAAP and
fairly present the consolidated financial position of Company and its
Subsidiaries as at the date thereof and the consolidated results of operations
and statement of cash flow of Company and its Subsidiaries for each of the
periods covered thereby. Except as disclosed on Schedule 6.4, neither Company
------------
nor any of its Consolidated Subsidiaries, taken as a whole, has any material
Contingent Obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment, which is not reflected in the
foregoing financial statements, or the notes thereto.
4.4 NO MATERIAL ADVERSE CHANGE; NO STOCK PAYMENTS
---------------------------------------------
Since December 31, 1997, there has been no change in the business,
operations, properties, assets, prospects or condition (financial or otherwise)
of Company and its Consolidated Subsidiaries which has been, either in any case
or in the aggregate, materially adverse to Company and its Consolidated
Subsidiaries, taken as a whole, other than changes contemplated by or disclosed
in this Agreement. Neither Company nor any of its Subsidiaries has directly or
indirectly declared, ordered, paid or made or set apart any sum or property for
any Restricted Junior Payment or agreed so to do except as permitted by
subsection 6.5 or, prior to the Effective Date, except as permitted by the
Existing Credit Agreement.
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4.5 TITLE TO PROPERTIES; LIENS
--------------------------
Each Loan Party and each Subsidiary thereof has good, sufficient and
legal title, subject to Permitted Encumbrances, to all their respective material
properties and assets reflected in the most recent consolidated balance sheet
referred to in subsection 4.3 or in the most recent financial statements
delivered pursuant to subsection 5.1 of this Agreement and to all their material
properties and assets acquired since the date of such consolidated balance sheet
or financial statements, except for assets disposed of in the ordinary course of
business since the date of such consolidated balance sheet or financial
statements. Except as permitted by this Agreement, all such properties and
assets are free and clear of Liens.
4.6 LITIGATION; ADVERSE FACTS
-------------------------
Except as set forth on Schedule A annexed hereto, there is no action,
----------
suit, proceeding, governmental investigation or arbitration (whether or not
purportedly on behalf of any Loan Party or any respective Subsidiary thereof) at
law or in equity or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, pending or, to the knowledge of Company, threatened against
or affecting any Loan Party or any of their respective Subsidiaries or any
property of any Loan Party or any Subsidiary thereof that would reasonably be
expected to result in a Material Adverse Effect. As of the Effective Date, no
Loan Party has received any notice of termination of any material contract,
lease or other agreement or suffered any material damage, destruction or loss
(whether or not covered by insurance) or had any employee strike, work-stoppage,
slow-down or lock-out or any substantial, nonfrivolous threat directed to it of
any imminent strike, work-stoppage, slow-down or lock-out, any of which remain
pending, that could reasonably be expected to result in any Material Adverse
Effect.
4.7 PAYMENT OF TAXES
----------------
Except to the extent permitted by subsection 5.3, all material tax
returns and reports of each Loan Party and each Subsidiary of each Loan Party
required to be filed by any of them have been timely filed, and all material
taxes, assessments, fees and other governmental charges upon such Persons and
upon their respective properties, assets, income and franchises which are due
and payable have been paid when due and payable. Company knows of no proposed
tax assessment against any such Person that would be material to the condition
(financial or otherwise) of Company and its Subsidiaries, taken as a whole,
which is not being actively contested by such Person to the extent affected
thereby, in good faith and by appropriate proceedings, provided that such
--------
reserves or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made or provided therefor.
4.8 MATERIALLY ADVERSE AGREEMENTS; PERFORMANCE OF AGREEMENTS
--------------------------------------------------------
A. No Loan Party is a party to or is subject to any material
agreement or instrument materially and adversely affecting the financial
condition of Company and its Subsidiaries, taken as a whole.
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B. None of the Loan Parties and none of the respective Subsidiaries
of the Loan Parties is in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any Contractual
Obligation of any such Person, and no condition exists that, with the giving of
notice or the lapse of time or both, would constitute such a default, except
where the consequences, direct or indirect, of such default or defaults, if any,
would not have a Material Adverse Effect.
4.9 GOVERNMENTAL REGULATION
-----------------------
Except for state laws applicable to certain motor carrier operations
of Company's Subsidiaries, no Loan Party is subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act or the
Investment Company Act of 1940 or to any Federal or state statute or regulation
limiting its ability to incur Indebtedness for money borrowed. The Interstate
Commerce Act does not restrict the ability of any Loan Party to incur or
guarantee any Indebtedness.
4.10 SECURITIES ACTIVITIES
---------------------
None of the Loan Parties and none of the Subsidiaries of the Loan
Parties is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any
Margin Stock.
4.11 EMPLOYEE BENEFIT PLANS
----------------------
A. Except as set forth in Schedule A, Item 1 of Section 4.11
----------------------------------
annexed hereto, each Loan Party is in material compliance with all applicable
provisions and requirements of Title I, II and IV of ERISA and the Internal
Revenue Code and the regulations and published interpretations thereunder with
respect to each Employee Benefit Plan, and has performed all its obligations
under each Employee Benefit Plan in all material respects.
B. No ERISA Event (determined without regard to any materiality
standard in that definition) has occurred or is reasonably expected to occur
which could reasonably be expected to result in liability to a Loan Party or any
of its ERISA Affiliates in excess of $2,500,000.
C. Except to the extent required under Section 4980B of the
Internal Revenue Code or except as described on Schedule A annexed hereto, no
----------
Employee Benefit Plan provides health or welfare benefits (through the purchase
of insurance or otherwise) for any retired or former employee of a Loan Party or
any of its Subsidiaries.
D. As of the most recent valuation date for all Pension Plans, the
excess of the aggregated accumulated benefit obligations, as defined in
Statement of Financial Accounting Standards No. 87 (the "ABO"), over the
---
aggregate total fair market value for all such Pension Plans (excluding for
purposes of such computation any Pension Plans with respect to which the fair
market value of the assets exceeds the ABO), does not exceed $40,000,000.
55
<PAGE>
4.12 PATENTS, TRADEMARKS, ETC.
------------------------
Each Loan Party owns, or is licensed to use, all patents, trademarks,
trade names, copyrights, technology, know-how and processes used in or necessary
for the conduct of its business as currently conducted that are material to the
condition (financial or other), business, or operations of Company and its
Subsidiaries, taken as a whole ("Intellectual Property"). Except as disclosed
---------------------
on Schedule A, no claim has been asserted by any Person with respect to the use
----------
of any such Intellectual Property, or challenging or questioning the validity or
effectiveness of any such Intellectual Property and Company does not know of any
valid basis for any such claim. Except as disclosed on Schedule A, the use of
----------
such Intellectual Property by Loan Parties does not infringe on the rights of
any Person, subject to such claims and infringements as do not, in the
aggregate, give rise to any liability on the part of Loan Parties that is
material to Company and its Subsidiaries, taken as a whole. The rights of Loan
Parties to sell, franchise or license under such trade names then being used may
be transferred in connection with any sale of assets or stock of the related
business by Loan Parties.
4.13 CERTAIN FEES
------------
Company hereby indemnifies Lenders against and agrees that it will
hold Lenders harmless from any claim, demand or liability for broker's or
finder's fees alleged to have been incurred in connection with this Agreement or
any of the other transactions contemplated hereby and any expenses, including
reasonable legal fees, arising in connection with any such claim, demand or
liability. No other similar fees or commissions will be payable by Company for
any other services rendered to Company or any of its Subsidiaries ancillary to
the transactions contemplated hereby.
4.14 ENVIRONMENTAL MATTERS
---------------------
A. Except as disclosed on Schedule A annexed hereto:
----------
(i) the operations of Loan Parties comply in all material
respects with all Environmental Laws;
(ii) Loan Parties have obtained all material environmental,
health and safety permits, licenses and approvals necessary for their
respective operations, and all such permits, licenses and approvals are in
good standing and Loan Parties are in material compliance with all terms
and conditions of such permits, licenses and approvals;
(iii) No Loan Parties have received (A) any written notice or
claim to the effect that any of them is or may be liable in any material
respect to any Person as a result of the Release or threatened Release of
any Hazardous Materials or (B) any letter or request for information under
Section 104 of the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. (S) 9604) or comparable state laws, and to the
best of Company's knowledge, none of the operations of any Loan Party is
the subject of any federal or state investigation evaluating whether any
remedial action is needed to respond to a Release or threatened Release of
any Hazardous Material at any
56
<PAGE>
Facility or at any other location, in each case, regarding any matter which
could be reasonably expected to result in a Material Adverse Effect;
(iv) none of the operations of any Loan Party is the subject
of any pending judicial or administrative proceeding alleging the violation
of or liability under any Environmental Laws which if adversely determined
could reasonably be expected to have a Material Adverse Effect;
(v) No Loan Party nor any of its present Facilities or
operations, or its past Facilities or operations, is subject to any
outstanding written order or agreement with any governmental authority or
private party respecting (A) any Environmental Laws or (B) any
Environmental Claims which could reasonably be expected to have a Material
Adverse Effect;
(vi) No Loan Party has any Contingent Obligation in connection
with any Release of any Hazardous Materials by any Loan Party which could
reasonably be expected to have a Material Adverse Effect;
(vii) No Loan Party's operations involve the generation,
transportation, treatment or disposal of hazardous waste, as defined under
40 C.F.R. Parts 260-270 or any state equivalent and no Loan Party nor, to
the best of Company's knowledge, any predecessor in title to any Loan Party
or any third party at any time occupying any Facility has at any time used,
generated, disposed of, stored, transported to or from, released or
threatened the release of any Hazardous Materials, in any form, quantity or
concentration on, from, under or affecting such Facility in a manner that
could reasonably expect to result in material liability of or material
claim against any Loan Party;
(viii) No event or condition has occurred with respect to
underground storage tanks or surface impoundments on or at the Facilities
violating any Environmental Laws or relating to any Release of any
Hazardous Materials at such storage tanks or surface impoundments which,
individually, or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect; and
(ix) no Lien in favor of any governmental authority for (A)
any liability under Environmental Laws, or (B) damages arising from or
costs incurred by such governmental authority in response to a Release has
been filed or attached to the Facilities.
B. NO MATERIAL ADVERSE EFFECT. No Hazardous Materials exist on,
under or about any Facility in a manner that could reasonably be expected to
give rise to an Environmental Claim having a Material Adverse Effect and no Loan
Party has filed any notice or report of a Release of any Hazardous Materials
that could reasonably be expected to give rise to an Environmental Claim having
a Material Adverse Effect. The matters disclosed on Schedule A, individually or
----------
in the aggregate, could not reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect.
57
<PAGE>
4.15 DISCLOSURE.
----------
No representation or warranty of any Loan Party contained in this
Agreement, or any other document, certificate or written statement furnished to
Lenders by or on behalf of any such Person for use in connection with the
transactions contemplated by this Agreement contains any untrue statement of a
material fact or omits to state a material fact (known to any such Person in the
case of any document not furnished by it) necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. The projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by such Persons to be reasonable at the time
made, it being recognized by Lenders that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
There is no fact known to any such Person (other than matters of a general
economic nature) that materially and adversely affects the business, operations,
property, assets, prospects or condition (financial or otherwise) of any such
Person and its respective Subsidiaries, taken as a whole, that has not been
disclosed herein or in such other documents, certificates and statements
furnished to Lenders for use in connection with the transactions contemplated
hereby.
4.16 YEAR 2000 COMPLIANCE.
--------------------
Company has (i) initiated a review and assessment of its and its
Subsidiaries' business and operations (including those affected by suppliers and
vendors) that Company believes could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by Company or
Subsidiaries (or suppliers or vendors) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan
substantially in accordance with that timetable. Company believes that its own
computer applications that are material to its or its Subsidiaries' business and
operations will on a timely basis be able to perform properly date-sensitive
functions for all dates before and after January 1, 2000 (that is, be "Year 2000
compliant") except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect.
SECTION 5.
COMPANY'S AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall be in effect and until payment in full of all of the Loans and
Notes and all other amounts owing hereunder and expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform all covenants in this Section 5.
58
<PAGE>
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS
--------------------------------------
Company will maintain, and cause each of its Subsidiaries to maintain,
a system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Lenders:
(i) as soon as practicable and in any event within 45 days
(in the case of the last month of each fiscal quarter) or 30 days (in the
case of all other months) after the end of each month ending after the
Closing Date in each of Company's fiscal years, the monthly financial
reporting package distributed internally to the officers of Company (the
"G-1 Report"), which shall include (a) the consolidated balance sheets of
----------
Company as at the end of such month and the related consolidated statements
of income of Company for such month and for the period from the beginning
of the then current fiscal year to the end of such month and the related
consolidated statements of cash flow of Company for the period from the
beginning of the then current fiscal year to the end of such month, (b) a
schedule of the outstanding Indebtedness for borrowed money of Company
describing each such debt issue or loan outstanding, and the principal
amount in respect of each such debt issue or loan, and (c) a brief summary
describing the operations of Company and its Subsidiaries and a schedule
containing summaries of revenues and operating income, in each case for
such month and for the period from the beginning of the then current fiscal
year to the end of such month setting forth in each case in comparative
form the corresponding figures for the corresponding periods of the
previous fiscal year and the corresponding figures from the consolidated
plan and financial forecast for the current fiscal year delivered pursuant
to subsection 5.1(xii), all in reasonable detail and certified by the chief
financial officer, chief accounting officer or treasurer of Company that
they fairly present the financial condition of Company and its Subsidiaries
as at the dates indicated and the results of their operations and changes
in their cash flow for the periods indicated, subject to changes resulting
from audit and normal year-end adjustment;
(ii) as soon as practicable and in any event within 45 days
after the end of the first three fiscal quarters (a) a G-1 Report for the
fiscal period then ended and (b) the quarterly report of Company filed with
the Securities and Exchange Commission on Form 10-Q or the financial
statements of Company which would be required to be filed on Form 10-Q if
such Form 10-Q is not filed;
(iii) as soon as practicable and in any event within 90 days
after the end of each fiscal year of Company (a) a G-1 Report for the
fiscal period then ended, (b) the Annual Report on Form 10-K of Company
filed with the Securities and Exchange Commission or the audited financial
statements of Company which would be required to be filed on Form 10-K if
such Form 10-K is not filed, (c) in the case of such consolidated financial
statements, accompanied by a report thereon of independent certified public
accountants of recognized national standing selected by Company, which
report shall be unqualified as to going concern and scope of audit and
shall state that such consolidated financial statements present fairly the
financial position of Company and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flow for the
periods indicated in conformity with GAAP and that the examination by such
accountants in
59
<PAGE>
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards, and (d) certified by
the chief financial officer, treasurer or chief accounting officer of
Company that such statements fairly present the financial condition of
Company and its Subsidiaries as at such date and the results of their
operations for the periods covered thereby;
(iv) together with each delivery of financial statements of
Company and its Subsidiaries pursuant to subdivisions (ii) and (iii) above,
(a) an Officers' Certificate of Company stating that the signers have
reviewed the terms of this Agreement and the Notes and have made, or caused
to be made under their supervision, a review in reasonable detail of the
transactions and condition of Company and its Subsidiaries during the
accounting period covered by such financial statements and that such review
has not disclosed the existence during or at the end of such accounting
period, and that the signers do not have knowledge of the existence as at
the date of the Officers' Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if any
such condition or event existed or exists, specifying the nature and period
of existence thereof and what action Company has taken, is taking and
proposes to take with respect thereto; (b) a Compliance Certificate
demonstrating in reasonable detail compliance during and at the end of the
applicable accounting periods with the restrictions contained in
subsections 6.1, 6.4, 6.5, 6.6, 6.7 and 6.8; and (c) an Officers'
Certificate listing Asset Sales, the Net Cash Proceeds of which have not
yet been utilized to make prepayments on the Loans pursuant to subsection
2.4A(ii)(a), and the aggregate amount of such Net Cash Proceeds;
(v) together with each delivery of consolidated financial
statements of Company and its Subsidiaries pursuant to subdivision (iii)
above, a written statement by the independent public accountants giving the
report thereon (a) stating that their audit examination has included a
review of the terms of this Agreement and the Notes as they relate to
accounting matters, (b) stating whether, in connection with their audit
examination, any condition or event that constitutes an Event of Default or
Potential Event of Default has come to their attention, and if such a
condition or event has come to their attention, specifying the nature and
period of existence thereof; provided that such accountants shall not be
--------
liable by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default with respect to accounting matters
that would not be disclosed in the course of their audit examination, and
(c) stating that based on their audit examination nothing has come to their
attention that causes them to believe that the information contained in
either or both the certificates delivered therewith pursuant to subdivision
(iv) above is not correct or that the matters set forth in the Compliance
Certificate delivered therewith pursuant to clause (b) of such subdivision
(iv) above for the applicable fiscal year are not stated in accordance with
the terms of this Agreement;
(vi) promptly upon receipt thereof, a summary of significant
comments submitted to Company by independent public accountants in
connection with each annual, interim or special audit of the financial
statements of Company made by such accountants, including, without
limitation, the comment letter submitted by such accountants to
60
<PAGE>
management in connection with their annual audit;
(vii) promptly upon their becoming available, copies of (a) all
financial statements, reports, notices and proxy statements sent or made
available generally by Company to its security holders or by any Subsidiary
of Company to its security holders other than Company or another
Subsidiary, (b) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and prospectuses, if
any, filed by Company or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any governmental
or private regulatory authority and (c) all press releases and other
statements made available generally by Company or any of its Subsidiaries
to the public concerning material developments in the business of Company
or any of its Subsidiaries;
(viii) promptly upon any officer of Company obtaining knowledge
(a) of any condition or event that constitutes an Event of Default or
Potential Event of Default, or becoming aware that any Lender or
Administrative Agent has given any notice or taken any other action with
respect to a claimed Event of Default or Potential Event of Default under
this Agreement, (b) that any Person has given any notice to Company or any
Subsidiary of Company or taken any other action with respect to a claimed
default or event or condition of the type referred to in subsection 7.2,
(c) of any condition or event that would be required to be disclosed or is
disclosed in a current report filed by Company with the Securities and
Exchange Commission on Form 8-K (Items 1, 2, 4 and 5 of such Form as in
effect on the date hereof) if Company were required to file such reports
under the Exchange Act, or (d) of a material adverse change in the
business, operations, properties, assets, prospects or condition (financial
or otherwise) of Company and its Subsidiaries, taken as a whole, an
Officers' Certificate specifying the nature and period of existence of such
condition or event, or specifying the notice given or action taken by such
holder or Person and the nature of such claimed default, Event of Default,
Potential Event of Default, event or condition, and what action Company has
taken, is taking and proposes to take with respect thereto;
(ix) promptly upon any officer of Company obtaining knowledge
of (a) the institution of, or non-frivolous threat of, any action, suit,
proceeding, governmental investigation or arbitration against or affecting
Company or any of its Subsidiaries or any property of Company or any of its
Subsidiaries not previously disclosed by Company to Lenders, or (b) any
material development in any such action, suit, proceeding, governmental
investigation or arbitration, that, in either case
(y) if there exists a reasonable likelihood that such
action, suit, proceeding, governmental investigation or arbitration
would be adversely determined, might have a Material Adverse Effect;
or
(z) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as a
result of, this Agreement and related transactions;
61
<PAGE>
Company shall promptly give notice thereof to Lenders and provide such
other information as may be reasonably available to it to enable Lenders
and their counsel to evaluate such matters;
(x) promptly upon becoming aware of the occurrence of or
forthcoming occurrence of any ERISA Event, a written notice specifying the
nature thereof, what action the applicable Loan Party or any of its ERISA
Affiliates has taken, is taking or proposes to take with respect thereto,
and, when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor or the PBGC with respect thereto;
(xi) with reasonable promptness, copies of (a) upon request of
Requisite Lenders, each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) filed by a Loan Party or any of its ERISA
Affiliates with the Internal Revenue Service with respect to each Pension
Plan (in which any employees of Company or any of its Subsidiaries have
ever participated as employees of Company or one of its Subsidiaries) for
which a Schedule B is required to be filed; (b) all notices received by
Company or any of its ERISA Affiliates from a Multiemployer Plan sponsor
concerning an ERISA Event; and (c) copies of such other documents or
governmental reports or filings relating to any Employee Benefit Plan as
any Agent or any Lender shall reasonably request;
(xii) as soon as practicable and in any event within 30 days
after the Board of Directors of Company has given its approval, the annual
budget and financial forecast for each succeeding fiscal year of Company
and its Subsidiaries and setting forth forecasted sales, operating profit,
cash flows, capital expenditures and depreciation on a Division by Division
basis;
(xiii) as soon as practicable and in any event by the last day
of each fiscal year of Company, a report in form and substance reasonably
satisfactory to Agents and Requisite Lenders outlining all material
insurance coverage maintained as of the date of such report by Company and
its Subsidiaries and all material insurance coverage planned to be
maintained by such Persons in the subsequent fiscal year;
(xiv) together with each delivery of financial statements of
Company and its Subsidiaries pursuant to subsection (iii) above, a written
notice setting forth with respect to each Person that became a Subsidiary
of Company (a) the date on which such Person became a Subsidiary of Company
and (b) all of the data required to be set forth in Schedule 1.1 annexed
------------
hereto with respect to all Subsidiaries of Company (it being understood
that such written notice shall be deemed to supplement Schedule 1.1 annexed
------------
hereto for all purposes of this Agreement);
(xv) at such time as Company sends a notice to Defense
Investigative Service pursuant to paragraph 2 of the Defense Investigative
Service Letter, Company will concurrently notify its then relationship
manager at Administrative Agent, via telephone, of the transmission of such
notice to Defense Investigative Service and will also concurrently fax a
copy of Company's notice to its then relationship manager at
62
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Administrative Agent; and
(xvi) with reasonable promptness, such other information and
data with respect to Company or any of its Subsidiaries as from time to
time may be reasonably requested by any Lender.
5.2 CORPORATE EXISTENCE, ETC.
-------------------------
Company will, and will cause each of its Subsidiaries to, at all times
preserve and keep in full force and effect its corporate existence and rights
and franchises material to its business; provided, however, that the corporate
-------- -------
existence of any such Subsidiary may be terminated if such termination is not
materially disadvantageous to any Lender.
5.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION
----------------------------------------------
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its franchises, business, income or
property before any material penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a material
Lien upon any of its properties or assets, prior to the time when any material
penalty or fine shall be incurred with respect thereto; provided that no such
--------
charge or claim need be paid if being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such reserve or
other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than Company or any of its Subsidiaries).
5.4 MAINTENANCE OF PROPERTIES; INSURANCE
------------------------------------
Company will maintain or cause to be maintained in good repair,
working order and condition all material properties used or useful in the
business of Company and its Subsidiaries and from time to time will make or
cause to be made all appropriate repairs, renewals and replacements thereof.
Company will maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business and
the properties and business of its Subsidiaries against loss or damage of the
kinds customarily insured against by corporations of established reputation
engaged in the same or similar businesses and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations ("Industry Standards") and may self insure to the
------------------
extent, but only to the extent, consistent with Industry Standards.
5.5 INSPECTION; LENDER MEETING; CONFIDENTIALITY
-------------------------------------------
A. Company shall permit any authorized representatives designated by
any Lender
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to visit and inspect any of the properties of Company or any of its
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants, all upon reasonable notice and at such reasonable times during
normal business hours and as often as may be reasonably requested. Without in
any way limiting the foregoing, Company will participate in a meeting of Agents
and Lenders if requested by Agents to be held at Company's corporate offices at
such time as may be agreed to by Company and Requisite Lenders.
B. Each Agent and each Lender acknowledges that Company is a public
company subject to the Exchange Act and that in the course of complying with
this Agreement, such Agent and Lender may obtain material, non-public
information, and each Agent and each Lender hereby agrees to keep any non-public
information delivered or made available to such Agent or such Lender pursuant to
the Loan Documents, which Company or its authorized representative has
identified as non-public, confidential information, confidential from any Person
other than Persons, including attorneys, consultants or other professional
advisors, employed by or retained by such Agent or such Lender who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans or Affiliates of such Agent or such Lender which have
agreed to keep such information confidential pursuant to this subsection 5.5B;
provided, that nothing herein shall prevent any Lender from disclosing such
- --------
information to any bona fide assignee, transferee or participant in connection
with the contemplated assignment or transfer of any Loans or participation
therein (whether or not such assignment, transfer or participation actually
occurs), or as required or requested by a governmental agency or representative
thereof, or pursuant to legal process or otherwise required by law, or as
required in connection with the exercise of any remedy under the Loan Documents;
provided, however, that this subsection shall no longer apply to information
- -------- -------
which has become public other than through a breach by any Agent or any Lender
of this subsection or information that has been received by a Lender without
restrictions as to disclosure or use from a Person who, to such Lender's
knowledge or reasonable belief, was not prohibited from disclosing such
information by any duty of confidentiality.
5.6 EQUAL SECURITY FOR OBLIGATIONS; NO FURTHER NEGATIVE PLEDGES
-----------------------------------------------------------
A. If Company or any of its Subsidiaries shall create or assume any
Lien upon any of its property or assets, whether now owned or hereafter
acquired, other than Liens excepted by the provisions of subsection 6.2, it
shall make or cause to be made effective provision whereby the Obligations will
be secured by such Lien equally and ratably with any and all other Indebtedness
thereby secured as long as any such Indebtedness shall be secured; provided that
--------
notwithstanding the foregoing, this covenant shall not be construed as a consent
by Requisite Lenders to any creation or assumption of any such Lien not
permitted by the provisions of subsection 6.2.
B. Except with respect to specific property encumbered to secure
payment of particular Indebtedness or to be sold pursuant to an executed
agreement with respect to an Asset Sale, or as may be restricted by the 9 1/8%
Subordinated Note Indenture, the Senior Subordinated Note Indenture or the Trade
Receivables Facility, neither Company nor any of its Subsidiaries shall enter
into any agreement prohibiting the creation or assumption of any Lien
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upon its properties or assets, whether now owned or hereafter acquired.
5.7 COMPLIANCE WITH LAWS, ETC.
-------------------------
Company and its Subsidiaries shall exercise all due diligence in order
to comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, noncompliance with which would have a
Material Adverse Effect.
5.8 ENVIRONMENTAL DISCLOSURE AND INSPECTION
---------------------------------------
(i) Company shall comply, and shall cause each of its Subsidiaries
and their Facilities to comply, and shall use its reasonable efforts to cause
(a) their respective employees, agents, contractors and subcontractors, (b) all
tenants under any lease or occupancy agreement affecting any portion of the
Facilities and (c) all other Persons on or occupying such property to comply,
with all Environmental Laws.
(ii) Company shall promptly advise Administrative Agent in writing
and in reasonable detail of (a) any Release of any Hazardous Material required
to be reported to any federal, state or local governmental or regulatory agency
under all applicable Environmental Laws, (b) any remedial action taken by
Company or, to the extent Company or any of its Subsidiaries has any such
knowledge, any other Person in response to (1) any Hazardous Material on, under
or about any Facility, the existence of which could reasonably be expected to
result in a Material Adverse Effect or (2) any Environmental Claim that could
reasonably be expected to result in a Material Adverse Effect, and (c) any
request for information from any governmental agency that indicates such agency
is investigating whether Company or its Subsidiaries may be potentially
responsible for a Release of Hazardous Materials.
(iii) Company shall, at its own expense, provide copies to
Administrative Agent of such documents or information to which Company or any of
its Subsidiaries has access as Administrative Agent or Requisite Lenders may
reasonably request in relation to any matters disclosed pursuant to this
subsection 5.8.
5.9 HAZARDOUS MATERIALS; REMEDIAL ACTION
------------------------------------
A. Company shall, and shall cause its Subsidiaries to, (i) store,
use, dispose of and transport any Hazardous Materials in material compliance
with all applicable Environmental Laws and (ii) promptly take any and all
necessary remedial action in response to the Release of any Hazardous Materials
on, under or about any Facility. In the event Company or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Material on, under or about any Facility, Company or such Subsidiary shall
conduct and complete such remedial action in compliance with all applicable
Environmental Laws, and in accordance with the policies, orders and directives
of all federal, state and local governmental authorities except when Company's
or such Subsidiary's liability for such presence, storage, use, disposal,
transportation or discharge of any Hazardous Material is being contested in good
faith by Company or such Subsidiary and such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor.
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B. Company shall not and shall not permit its Subsidiaries to
install or permit to be installed any asbestos in any property owned by any of
them and Company shall not and shall not permit its Subsidiaries to install, and
Company and its Subsidiaries shall otherwise use their best efforts to prevent
the installation of, any asbestos in any property leased by any of them. With
respect to any asbestos currently present in such property, Company shall and
shall cause its Subsidiaries to promptly and in accordance with all applicable
Environmental Laws and prudent industry practices maintain such asbestos in good
and safe condition.
5.10 BW-OTHER CORPORATION
--------------------
A. Company and its Subsidiaries may not make direct or indirect
Investments in or become or be liable with respect to any Contingent Obligation
with respect to BW-Other Corporation except for existing investments listed on
Schedule 6.3; provided, however, that Company may pay the Centaur Settlement
- ------------ -------- -------
Amount; and, provided further that Company may pay routine costs and expenses
-------- -------
related to BW-Other Corporation in the ordinary course of business consistent
with past practices. Company will not and will not permit any of its
Subsidiaries to directly or indirectly enter into or permit to exist any
transaction between Company and its Subsidiaries and BW-Other Corporation on
terms that are less favorable to Company and its Subsidiaries than those that
might be obtained from third parties.
B. Company will not, and will not permit any of its Consolidated
Subsidiaries to, merge or consolidate with or otherwise acquire, in one
transaction or a series of transactions, any material portion of BW-Other
Corporation.
5.11 FURTHER ASSURANCES AS TO FUTURE MATERIAL SUBSIDIARIES
-----------------------------------------------------
Company will notify Administrative Agent promptly in the event that
any Subsidiary becomes a Material Subsidiary and from and after the Closing Date
will cause each such Subsidiary to execute counterparts of the Borg-Warner
Subsidiary Guaranty and the Borg-Warner Subsidiary Pledge Agreement (or
appropriate amendments thereof), in each case to the same extent and subject to
the same limitations as though such Subsidiary were a Borg-Warner Guarantor
Subsidiary or Borg-Warner Pledged Subsidiary on the date hereof, and to take all
such further action as may be required to perfect the security interests granted
thereunder as may be required by Agents and Requisite Lenders.
5.12 FOCI MATTERS
------------
Company will notify the Administrative Agent promptly in the event
that any governmental agency requests the Administrative Agent to take any
action necessary or desirable to maintain the security clearances of Company and
its Subsidiaries. The Administrative Agent hereby agrees that, if so requested,
it will provide an officer's certificate, in form and substance satisfactory to
the Administrative Agent, to the appropriate governmental agency to the effect
that after the occurrence and continuation of an Event of Default, it will
provide such governmental agency with not less than 30 days advance notification
of the time at which it believes it may commence exercising its foreclosure
rights with respect to any Pledged Shares and that in the
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event that it forecloses on such Pledged Shares, it will notify such
governmental agency immediately of any intended sale, transfer or other
disposition of such Pledged Shares; provided that such officer's certificate
--------
shall also include such acknowledgements, qualifications or limitations with
respect to the foregoing that Administrative Agent believes to be necessary or
desirable. The Company agrees that at any time it may be required to notify any
governmental agency with respect to such matters that it will concurrently
notify the Administrative Agent of such notice and provide a copy of such notice
to Administrative Agent. The Company also acknowledges and agrees that any
agreement of Administrative Agent to provide the foregoing officer's certificate
or to take any other appropriate action is not intended to, and does not in
fact, waive, modify, amend or change, in any respect, any of the terms and
conditions of any of the Loan Documents, including without limitation,
Administrative Agent's ability to exercise any of its rights or remedies under
any of the Loan Documents against any of the Loan Parties or with respect to any
of the Pledged Collateral at the times and in the manner permitted by such Loan
Documents, and that no Loan Party is intended to be, and no Loan Party shall be,
a third party beneficiary of any officer's certificate provided by
Administrative Agent to such governmental agency.
5.13 BLOCKED ACCOUNT
---------------
Company shall leave on deposit $50,000,000 in a blocked account
controlled by Collateral Agent for the ratable benefit of the Lenders, such
$50,000,000 to be released only upon the approval of Requisite Lenders. The
amounts held in such blocked account may be invested in Cash Equivalents.
5.14 YEAR 2000 COMPLIANCE
--------------------
Company will promptly notify Agent in the event Company discovers or
determines that any computer application (including those of its suppliers and
vendors) that is material to its or its Subsidiaries' business and operations
will not be Year 2000 compliant as of January 1, 2000 except to the extent that
such failure could not reasonably be expected to have a Material Adverse Effect.
SECTION 6.
COMPANY'S NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
shall be in effect and until payment in full of all of the Loans and Notes and
all other amounts owing hereunder and expiration of all Letters of Credit,
unless Requisite Lenders shall otherwise give prior written consent, Company
will perform all covenants in this Section 6.
6.1 INDEBTEDNESS
------------
Company shall not, and shall not permit any of its Consolidated
Subsidiaries to, directly or indirectly, create, incur, assume, guaranty, or
otherwise become or remain directly or
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indirectly liable with respect to, any Indebtedness, except:
(i) Company and its Consolidated Subsidiaries may become and
remain liable with respect to the Obligations;
(ii) Company and its Consolidated Subsidiaries may remain and
may become and remain liable with respect to Indebtedness to Company and
its Consolidated Subsidiaries; provided that (a) any Indebtedness owed by
--------
Company to any of its Subsidiaries shall, to the extent permitted by
applicable law, be subordinated in right of payment, from and after such
time as the Loans shall become due and payable (whether at stated maturity,
by acceleration or otherwise), to the payment in full of the Obligations of
Company under this Agreement and the Obligations of a Subsidiary under the
Loan Guaranties and the Borg-Warner Subsidiary Pledge Agreement, and (b)
any payment by any of Company's Subsidiaries under any guaranty of the
Obligations shall result in a pro tanto reduction of the amount of any
--- -----
intercompany Indebtedness owed by such Subsidiary to Company or any of its
Subsidiaries for whose benefit the payment is made;
(iii) Company and its Consolidated Subsidiaries may remain
liable with respect to each of the items of Existing Indebtedness described
in Schedule 6.1 annexed hereto and any Indebtedness incurred to refinance
------------
such Existing Indebtedness; provided that after giving effect to such
--------
refinancing Indebtedness and the repayment of the corresponding Existing
Indebtedness with the proceeds thereof, (a) the aggregate principal amount
of the refinancing Indebtedness and the corresponding Existing Indebtedness
so refinanced shall not be greater than the outstanding principal amount of
such Existing Indebtedness immediately prior to such refinancing, (b) the
weighted average life to maturity of such refinancing Indebtedness shall be
no shorter than the Existing Indebtedness being refinanced and (c) such
refinancing Indebtedness shall not be secured by any additional property
than that which secures the Existing Indebtedness being refinanced;
(iv) Company and its Consolidated Subsidiaries may become and
remain liable with respect to Indebtedness in respect of Capital Leases;
provided that the aggregate outstanding amount of such Capital Leases does
--------
not exceed $15,000,000 at any time;
(v) Company and its Consolidated Subsidiaries may become and
remain liable with respect to Contingent Obligations permitted by
subsection 6.4 and, upon any obligations actually arising pursuant thereto,
the Indebtedness incurred in connection with the satisfaction of such
Contingent Obligations so extinguished;
(vi) Company may remain liable with respect to $150,000,000 in
aggregate principal amount of the 9 1/8% Subordinated Notes until such 9%
Subordinated Notes are redeemed in accordance with a notice of redemption
given by the Company on June 3, 1998 from the proceeds of the sale of Wells
Fargo Alarm Services, Inc. and $125,000,000 in aggregate principal amount
of the Senior Subordinated Notes;
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<PAGE>
(vii) BPS Financial Services, Inc. may become and remain liable
with respect to the Trade Receivables Facility and with respect to
intercompany promissory notes in favor of Company and its other
Consolidated Subsidiaries, evidencing BPS Financial Services, Inc.'s
obligations with respect to the purchase price of receivables purchased by
BPS Financial Services, Inc. under the Trade Receivables Facility provided
--------
that all intercompany promissory notes issued to Company or Material
Subsidiaries shall be pledged by Company or such Material Subsidiaries to
Collateral Agent for the benefit of Lenders;
(viii) In addition to the Indebtedness permitted by clauses (i)-
(vii) and clause (x), Company's Consolidated Subsidiaries which constitute
Foreign Entities may incur and remain liable with respect to Indebtedness
not exceeding at any one time $10,000,000 in aggregate outstanding
principal amount;
(ix) Indebtedness of the Company and its Subsidiaries assumed
or acquired in connection with a Permitted Acquisition under subsection 6.7
which Indebtedness existed immediately prior to the time of such Permitted
Acquisition; provided that such Indebtedness is not incurred in
--------
contemplation of such Permitted Acquisition; and
(x) Company and its Subsidiaries may become and remain liable
with respect to other Indebtedness; provided that the maximum aggregate
--------
liability of Company and its Subsidiaries with respect to such other
Indebtedness, together with the Contingent Obligations permitted pursuant
to subsection 6.4(x), shall not at any one time exceed $25,000,000.
6.2 LIENS
-----
Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument in respect of goods or accounts receivable), of Company
or any of its Consolidated Subsidiaries, whether now owned or hereafter
acquired, or any income or profits therefrom, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the Collateral Documents in
favor of Collateral Agent for the benefit of the Lenders and the
beneficiaries of the guaranties permitted pursuant to subsection 6.4(iii);
(iii) Liens described in Schedule 6.2 annexed hereto securing
------------
Indebtedness permitted pursuant to subsection 6.1(iii) or (v);
(iv) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual or warranty requirements of
Company or its Subsidiaries;
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(v) Liens on property subject to such Capital Leases securing
the Indebtedness described in subsection 6.1(iv);
(vi) Liens in favor of the purchaser and its assignee of
Company's and its Consolidated Subsidiaries' receivables with respect to
receivables purchased pursuant to the Trade Receivables Facility permitted
pursuant to subsection 6.1(vii);
(vii) Liens on the assets or property of a Consolidated
Subsidiary which is a Foreign Entity securing the Indebtedness incurred by
such Foreign Entity and permitted pursuant to subsection 6.1(viii);
(viii) Liens securing Indebtedness permitted under subsection
6.1(ix), which Liens are existing prior to the time such Indebtedness was
assumed or acquired by the Company or its Consolidated Subsidiaries or the
time the entity which incurred such Indebtedness became a Subsidiary of
Company; provided that such Liens were not incurred in connection with, or
--------
in contemplation of, the acquisition of such Subsidiary and such Liens
extend to or cover only the property and assets of such entity which were
covered by such Liens and which were owned by such entity, in each case at
the time such entity became a Subsidiary of Company;
(ix) The Senior Subordinated Note Indenture and the 9%
Subordinated Note Indenture may contain covenants requiring Company to
provide for equal and ratable Liens or security to the holders of the
Senior Subordinated Notes and 9% Subordinated Notes, respectively;
provided that notwithstanding the foregoing, this exception shall not be
--------
construed as a consent by Requisite Lenders to any creation or assumption
of any such Lien or security not otherwise permitted by the provisions of
this subsection 6.2; and
(x) Liens securing Indebtedness permitted pursuant to
subsection 6.1(x).
6.3 INVESTMENTS
-----------
Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, except:
(i) Company and its Consolidated Subsidiaries may make and
own Investments in Cash Equivalents;
(ii) Company and its Consolidated Subsidiaries may make and
own Investments described on Schedule 6.3 annexed hereto;
------------
(iii) Company and its Consolidated Subsidiaries may own the
Investments existing on the Effective Date in Company's Subsidiaries and
may create or acquire new Consolidated Subsidiaries, may make additional
Investments in such
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Subsidiaries and in the Armored Joint Venture and may make other
Investments, including in Joint Ventures, to the extent not otherwise
prohibited under this Agreement; provided that all such Investments made
--------
after the Effective Date are in the form of equity or intercompany loans
permitted pursuant to subsection 6.1(ii);
(iv) Company and its Consolidated Subsidiaries may acquire and
retain ownership of Investments in connection with Asset Sales permitted by
subsection 6.7(iii);
(v) Company and its Consolidated Subsidiaries may make and
own Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business; and
(vi) Company and its Consolidated Subsidiaries may make
intercompany investments in BPS Financial Services, Inc. to the extent
permitted pursuant to subsection 6.1(vii).
6.4 CONTINGENT OBLIGATIONS
----------------------
Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, create or become or be liable with
respect to any Contingent Obligation except:
(i) Guaranties resulting from endorsement of negotiable
instruments for collection in the ordinary course of business;
(ii) Contingent Obligations under the Loan Guaranties;
(iii) Guaranties in favor of Lenders or their respective
Affiliates of Interest Rate Agreements and Currency Agreements entered into
by Company;
(iv) Contingent Obligations relating to obligations of Company
to make payments with respect to the cancellation or repurchase of certain
stock or stock options granted or to be granted to employees of Company and
its Subsidiaries under the Borg-Warner Security Corporation Management
Stock Option Plan, the 1993 Stock Incentive Plan or any other employee or
director stock option, incentive, purchase, retirement, savings or similar
plan or pursuant to subscription agreements with respect to shares of
Common Stock;
(v) Interest Rate Agreements and Currency Agreements entered
into by Company or its Subsidiaries;
(vi) Contingent Obligations described on Schedule 6.4 annexed
------------
hereto;
(vii) Contingent Obligations in respect of liabilities of
Company and its Subsidiaries permitted pursuant to subsection 6.1(vii) and
in respect of any other
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obligation of Company or its Consolidated Subsidiaries which constitute
Material Subsidiaries which is permitted under this Agreement;
(viii) Contingent Obligations relating to guaranties of the
obligations of suppliers, customers, franchisees and licensees of Company
and its Consolidated Subsidiaries; provided that the maximum aggregate
--------
liability of Company and its Consolidated Subsidiaries under all such
Contingent Obligations, shall not at any one time exceed $5,000,000
(including any Contingent Obligations in existence as of the date hereof);
(ix) Contingent Obligations of Company relating to
Indebtedness permitted under subsection 6.1(viii) that is incurred by a
Foreign Entity which is a Consolidated Subsidiary;
(x) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of letters of credit
issued other than under this Agreement; provided that the maximum aggregate
--------
liability of Company and its Subsidiaries under all such Contingent
Obligations, together with the Indebtedness permitted pursuant to
subsection 6.1(x), shall not at any one time exceed $25,000,000;
(xi) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of Letters of Credit; and
(xii) In addition to the Contingent Obligations permitted by
clauses (i)-(xi), Company and its Consolidated Subsidiaries may become and
remain liable with respect to other Contingent Obligations; provided that
--------
the maximum aggregate liability of Company and its Consolidated
Subsidiaries in respect of all such Contingent Obligations shall not at any
one time exceed $10,000,000.
6.5 RESTRICTED JUNIOR PAYMENTS
--------------------------
Company shall not, and shall not permit any of its Consolidated
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment; except:
(i) Company may make Restricted Junior Payments to cancel or
repurchase stock or stock options granted or to be granted to directors or
employees of Company or any of its Consolidated Subsidiaries under the
Borg-Warner Security Corporation Management Stock Option Plan, the 1993
Stock Incentive Plan or any other employee or director stock option,
incentive, purchase, retirement, savings or similar plan or pursuant to any
stock subscription agreements with respect to shares of Common Stock in an
aggregate amount which does not exceed $5,000,000 in any calendar year and
$20,000,000 in the aggregate;
(ii) Company may make Restricted Junior Payments to repurchase shares
of Common Stock then outstanding and to declare and pay dividends on,
and make other
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distributions with respect to, shares of its Common Stock; provided that
--------
the aggregate amount of all such Junior Restricted Payments made since
December 31, 1997 shall not exceed the sum of: (I) $15,000,000 plus,
provided that the Company's Consolidated Leverage Ratio on a pro forma
--------
basis after giving effect to such Junior Restricted Payments and to any
Indebtedness incurred in connection therewith is less than 3.00:1.00, (II)
the sum of (1) 25% of positive Consolidated Net Income accrued during the
period beginning on January 1, 1998 and ending on the last day of the
Company's fiscal quarter ending immediately prior to the date of such
proposed Restricted Junior Payment (or, if such aggregate Consolidated Net
Income shall be a loss, minus 100% of such loss) and (2) 50% of the
aggregate net cash proceeds received by the Company from the issue or sale
(other than to a Subsidiary) after December 31, 1997 of Common Stock of the
Company, or of any options, warrants or other rights to purchase such
Common Stock; provided further, that after giving effect to any Restricted
-------- -------
Junior Payment permitted under this subsection 6.5(ii), the Company is in
pro forma compliance with the financial covenants set forth in subsection
--- -----
6.6;
(iii) Company may make Restricted Junior Payments in respect of
Company's obligations to pay interest on its Subordinated Indebtedness in
accordance with the terms of, and only to the extent required by, the terms
of such Subordinated Indebtedness, as such terms are in effect on the
Closing Date; and
(iv) Company may redeem or repurchase all of its outstanding 9 1/8%
Subordinated Notes in accordance with a notice of redemption dated June 3,
1998, plus pay a premium thereon of up to 104.6% of the principal amount
thereof; and Company may redeem or repurchase all of its outstanding Senior
Subordinated Notes at a redemption price or repurchase price which does not
exceed the principal amount thereof plus a premium; provided, that after
--------
giving effect to any such redemption or repurchase of the Senior
Subordinated Notes, including any indebtedness incurred in connection with
such redemption or repurchase, the Company is in pro forma compliance with
--- -----
the financial covenants set forth in subsection 6.6;
provided that immediately prior to and immediately after giving effect to any
- --------
Restricted Junior Payment permitted by this subsection 6.5, no Event of Default
or Potential Event of Default exists or will exist.
Company will not, and will not permit any of its Subsidiaries to,
deposit any funds for the purpose of making any Restricted Junior Payment with a
trustee, paying agent or registrar or other payment intermediary more than three
(3) Business Days prior to the date such payment is due, unless required to do
so by the terms, as of the Effective Date, of the applicable indenture.
In addition, Company will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Subsidiary to (a) pay dividends or make any other distribution on any of
such Subsidiary's capital stock owned by Company or any Subsidiary of Company,
(b) subject to subordination provisions, pay any indebtedness owed to Company or
any other Subsidiary, (c) make loans or advances to Company or any other
Subsidiary or (d) transfer
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any of its property or assets to Company or any other Subsidiary, except as
provided herein, in the 9 1/8% Subordinated Note Indenture, in the Senior
Subordinated Note Indenture or in the Trade Receivables Facility (with respect
to BPS Financial Services, Inc.), any restrictions existing under any other
agreements as in effect on the Closing Date or any renewals or extensions
thereof; provided that the terms and conditions of any such renewals or
--------
extensions are no less favorable to Lenders than the agreements being renewed or
extended.
6.6 FINANCIAL COVENANTS
-------------------
A. INTEREST COVERAGE RATIO. Company will not permit its Interest
Coverage Ratio as of the last day of each fiscal quarter for the four
consecutive preceding fiscal quarters ended on such date, to be less than
2.25:1.00.
B. LEVERAGE RATIO. Company will not permit its Consolidated
Leverage Ratio as of the last day of each fiscal quarter to exceed 3.25:1.00.
6.7 RESTRICTION ON FUNDAMENTAL CHANGES
----------------------------------
Subject to subsection 5.2, each of Company and its Consolidated
Subsidiaries will not enter into any transaction of merger or consolidate, or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, exchange, lease, sub-lease, transfer or otherwise
dispose of, in one transaction or a series of related transactions, all or any
of its business, property or fixed assets, or all or any portion of the stock or
beneficial ownership, whether now owned or hereafter acquired, or acquire by
purchase or otherwise all or substantially all the business, property or fixed
assets of, or stock or other evidence of beneficial ownership of, any Person,
except:
(i) any Subsidiary of Company may be merged or consolidated with
or into Company or any wholly-owned Subsidiary of Company, or be
liquidated, wound up or dissolved, or all or substantially all of its
business, property or assets may be conveyed, sold, leased, transferred or
otherwise disposed of, in one transaction or a series of transactions, to
Company or any wholly-owned Subsidiary of Company; provided that, in the
--------
case of such a merger or consolidation, Company or such wholly-owned
Subsidiary shall be the continuing or surviving corporation; provided
--------
further that, in the case of such a merger or consolidation or disposition
-------
of a majority of the stock of a Subsidiary or substantially all of the
business, property or assets of such a Subsidiary (the "Affected
--------
Subsidiary") of Company which is a guarantor of any of the Obligations, (a)
the continuing, surviving or transferee corporation shall expressly assume
the obligations of the Affected Subsidiary under such guaranty and (b) in
the case of a merger or consolidation, the net worth of the continuing or
surviving corporation (calculated without giving effect to any increase in
the amount of intercompany Indebtedness for which the continuing or
surviving corporation is liable as compared to the amount of intercompany
Indebtedness for which the Affected Subsidiary was liable immediately prior
to such merger or consolidation) shall not be less than the net worth of
the Affected Subsidiary immediately prior to such merger or consolidation;
and provided still further that, subject to the terms of the applicable
-------- ----- -------
Collateral Document, in the case of such a merger or
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<PAGE>
consolidation or disposition of a majority of the stock of a Subsidiary or
substantially all of the business, property or assets of such a Subsidiary
of Company the stock of which is pledged to secure the Obligations, the
stock of the continuing, surviving or transferee corporation shall, at the
time of consummation of such merger, consolidation or transfer, be pledged
to secure the Obligations;
(ii) Company and its Consolidated Subsidiaries may acquire the
business, property or fixed assets of, or stock or other evidence of
beneficial ownership of, any Person or any operating division of such
Person engaged in businesses substantially similar to those currently
conducted by the Company and its Consolidated Subsidiaries (such asset or
stock acquisitions being herein collectively referred to as "Permitted
---------
Acquisitions"); provided that any such Permitted Acquisition with an
------------ --------
aggregate purchase price (including cash and the amount of all Indebtedness
assumed or acquired in connection with such Permitted Acquisition) greater
than $20,000,000 will be subject to the following conditions: (x) no
Potential Event of Default or Event of Default shall then exist or shall
occur under this Agreement as a result of such Permitted Acquisition; (y)
after giving effect to any such Permitted Acquisition, the Company is in
pro forma compliance with the financial covenants referred to in subsection
--- -----
6.6 as evidenced by a pro forma Compliance Certificate delivered to the
--- -----
Administrative Agent not less than five business days prior to the
consummation of any such Permitted Acquisition, and (z) Company shall have
delivered to Administrative Agent not less than five Business days prior to
the consummation of any such Permitted Acquisition a description of such
Permitted Acquisition and financial statements of the entity which is the
subject of the Permitted Acquisition; provided further that upon
-------- -------
consummation of any Permitted Acquisition, there shall be at least
$20,000,000 in aggregate Commitments available under this Agreement.
(iii) Company may sell, exchange or otherwise dispose of assets
to the extent sold or disposed of in connection with the Trade Receivables
Facility or pursuant to Asset Sale transactions; provided that (a) any such
--------
Asset Sale is made for the fair market value of such assets and for at
least eighty-five percent (85%) cash, and (b) the Net Cash Proceeds of each
such Asset Sale are applied in conformity with subsection 2.4;
(iv) Company and its Subsidiaries may, in the ordinary course
of business, sell, lease, assign or transfer for value personal property
held for sale or lease in ordinary course of business of Company and its
Subsidiaries; and
(v) Company and its Subsidiaries may make Restricted Junior
Payments permitted under subsection 6.5.
6.8 SALES AND LEASEBACKS
--------------------
Company and its Consolidated Subsidiaries shall not, directly or
indirectly, become or remain liable as lessee or as a guarantor or other surety
with respect to any lease, whether an operating lease or a Capital Lease, of any
property (whether real, personal or mixed), whether now owned or hereafter
acquired, (i) which Company or any of its Subsidiaries has sold or
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transferred or is to sell or transfer to any other Person (other than Company or
any of its Subsidiaries) or (ii) which Company or any of its Subsidiaries
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by Company or any of its Subsidiaries
to any Person (other than Company or any of its Subsidiaries) in connection with
such lease, except to the extent that the proceeds of all such sales or
transfers does not exceed $15,000,000 in the aggregate or the Net Cash Proceeds
of any such transactions are applied in accordance with the provisions of
subsection 2.4A(ii)(a).
6.9 SALE OR DISCOUNT OF RECEIVABLES
-------------------------------
Company will not, and will not permit any of its Consolidated
Subsidiaries to, directly or indirectly, sell with recourse, or discount or
otherwise sell for less than the face value thereof, notes, accounts receivable,
contracts, leases or other receivables, other than pursuant to the Trade
Receivables Facility.
6.10 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
---------------------------------------------
Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity securities of Company or with any Affiliate of Company or of any
such holder, as the case may be, on terms that are less favorable to Company or
that Subsidiary, as the case may be, than those that might be obtained at the
time from Persons who are not such a holder or Affiliate; provided that the
--------
foregoing restriction shall not apply to (i) any transaction between Company and
any of its wholly-owned Subsidiaries or between any of its wholly-owned
Subsidiaries, (ii) customary fees paid to members of the Board of Directors of
Company and its Subsidiaries; or (iii) financial advisory arrangements for
services rendered by Stonington or ML & Co. or any of its Affiliates to Company
or any of its Subsidiaries; provided that such arrangements are no less
--------
favorable to Company and its Subsidiaries than those obtainable in a comparable
arm's-length transaction with a Person that is not an Affiliate of the Company.
6.11 DISPOSAL OF SUBSIDIARY STOCK
----------------------------
Except as permitted by subsection 6.7 and as contemplated by the
Pledge Agreements, Company will not,
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
securities of (or warrants, rights or options to acquire shares or other
equity securities of) any of its Consolidated Subsidiaries, except to
qualify directors if required by applicable law; or
(ii) permit any of its Consolidated Subsidiaries directly or
indirectly to sell, assign, pledge or otherwise encumber or dispose of any
shares of capital stock or other securities of (or warrants, rights or
options to acquire shares or other securities of) such Subsidiary, except
to Company, another Subsidiary of Company or to qualify directors if
required by applicable law.
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6.12 CONDUCT OF BUSINESS
-------------------
Company will not and will not permit any of its Subsidiaries to
engage in any business other than (i) the business engaged in by Company and its
Subsidiaries (other than Discontinued Operations) on the date hereof as
described in Schedule 4.1C and substantially similar or related businesses and
-------------
(ii) such other lines of business as may be consented to by Requisite Lenders.
6.13 AMENDMENTS OR WAIVERS RELATING TO SUBORDINATED INDEBTEDNESS
-----------------------------------------------------------
A. Neither Company nor any of its Subsidiaries will (i) amend, waive
or otherwise change the terms of any Subordinated Indebtedness, or, except as
may be permitted by subsection 6.5(iv), make any payment consistent with an
amendment, waiver or change thereto, without the consent of Requisite Lenders;
provided that notwithstanding the foregoing Company may agree to amend any
- --------
provisions of the Subordinated Indebtedness (a) to cure any ambiguity, or to
correct or supplement any provision therein which may be defective or
inconsistent with any other provision of such Subordinated Indebtedness, (b) to
comply with the Trust Indenture Act of 1939, or (c) to make modifications which
do not confer additional rights on the holders of such Subordinated
Indebtedness, which do not increase the obligations of the Company thereunder,
which are not adverse to the Company and which are no less favorable to the
Lenders than the provisions of the Subordinated Indebtedness in effect on the
Closing Date; or (ii) except as may be permitted by subsection 6.5(iv), defease,
or make any payments the effect of which is to defease (whether pursuant to the
defeasance provisions of the Subordinated Indebtedness or otherwise and
including without limitation any covenant defeasance), the Subordinated
Indebtedness in whole or in part.
B. Neither Company nor any of its Subsidiaries will amend, modify,
waive or supplement or otherwise change any of the terms of the Trade
Receivables Facility from those in effect on the Closing Date, without the prior
written consent of Requisite Lenders if such amendment, modification, waiver,
supplement or change would be less favorable to, or increase the obligations of,
Company or any of its Subsidiaries or would confer additional rights on any
other party to such agreement adverse to the Company or any of its Subsidiaries
or would be adverse to the Lenders under this Agreement. Company agrees to
deliver to Administrative Agent upon execution thereof copies of all program
documents (other than any fee or expense letters) for the Trade Receivables
Facility and any amendments, modifications, waivers, supplements or changes
thereto (without regard to whether the prior written consent of Requisite
Lenders is required thereto).
6.14 DESIGNATION OF SENIOR INDEBTEDNESS
----------------------------------
Neither Company nor any of its Subsidiaries will, without obtaining
the prior written consent of Requisite Lenders, enter into any agreements or
instruments creating or evidencing Indebtedness if such agreements or
instruments (other than this Agreement and the Notes) specifically designate
such Indebtedness to be "Specified Senior Indebtedness", "Designated Senior
----------------------------- -----------------
Indebtedness" or any similar characterization under any of the Subordinated
- ------------
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Indebtedness (or any comparable provision of any refinancing agreement entered
into in respect thereof). The Company acknowledges and agrees that its
Obligations under this Agreement are "Specified Senior Indebtedness" for
-----------------------------
purposes of the 9_% Subordinated Note Indenture and, to the extent required
under the terms of such indenture, hereby designates its Obligations under this
Agreement as "Specified Senior Indebtedness" for purposes of the 9_%
-----------------------------
Subordinated Note Indenture.
6.15 FISCAL YEAR
-----------
Company shall not change its Fiscal Year-end from December 31.
SECTION 7.
EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
-----------------
shall occur and be continuing:
7.1 FAILURE TO MAKE PAYMENTS WHEN DUE
---------------------------------
Failure to pay any installment of principal of any Loan when due,
whether at stated maturity, by acceleration, by declaration of acceleration, by
notice of prepayment or otherwise; or failure to pay any interest on any Loan or
any other amount due under this Agreement within five days after the date due;
or
7.2 DEFAULT IN OTHER AGREEMENTS
---------------------------
(i) Failure of Company or any of its Subsidiaries to pay when due (a)
any principal of or interest on any Indebtedness (other than Indebtedness
referred to in subsection 7.1) in an individual principal amount of $3,000,000
or more or any items of Indebtedness with an aggregate principal amount of
$6,000,000 or more or (b) any Contingent Obligation in an individual principal
amount of $3,000,000 or more or any Contingent Obligations with an aggregate
principal amount of $6,000,000 or more, in each case beyond the end of any grace
period provided therefor; or (ii) breach or default by Company or any of its
Subsidiaries with respect to any other material term of (a) any evidence of any
Indebtedness in an individual principal amount of $3,000,000 or more or any
items of Indebtedness with an aggregate principal amount of $6,000,000 or more
or any Contingent Obligation in an individual principal amount of $3,000,000 or
more or any Contingent Obligations with an aggregate principal amount of
$6,000,000 or more or (b) any loan agreement, mortgage, indenture or other
agreement relating to such Indebtedness or Contingent Obligation(s), if the
effect of such breach or default is to cause, or to permit the holder or holders
of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such
holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to
become or be declared due and payable prior to its stated maturity or the stated
maturity of any underlying obligation, as the case may be (upon the giving or
receiving of notice, lapse of time, both, or otherwise); or
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7.3 BREACH OF CERTAIN COVENANTS
---------------------------
Failure of Company to perform or comply with any term or condition
contained in clauses (i) and (ii) of the third paragraph of subsection 2.1A,
subsections 2.4A, 2.5, 5.2 or 5.6 or Section 6; or
7.4 BREACH OF WARRANTY
------------------
Any representation, warranty, certification or other statement made by
any Loan Party in any Loan Document or in any statement or certificate at any
time given by such Person in writing pursuant hereto or in connection herewith
shall be false in any material respect on the date as of which made; or
7.5 OTHER DEFAULTS UNDER AGREEMENT OR LOAN DOCUMENTS
------------------------------------------------
Company or any other Loan Party shall default in the performance of or
compliance with any term contained in this Agreement or the other Loan Documents
other than those referred to above in subsections 7.1, 7.3 or 7.4 and such
default shall not have been remedied or waived within 30 days after receipt by
Company of notice from any Agent or any Lender of such default; or
7.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
-----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a decree
or order for relief in respect of Company or any of its Material Subsidiaries in
an involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, which decree or
order is not stayed; or any other similar relief shall be granted under any
applicable federal or state law; or (ii) an involuntary case is commenced
against Company or any of its Material Subsidiaries under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect; or a
decree or order of a court having jurisdiction in the premises for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over Company or any of its Material Subsidiaries,
or over all or a substantial part of its property, shall have been entered; or
the involuntary appointment of an interim receiver, trustee or other custodian
of Company or any of its Material Subsidiaries for all or a substantial part of
its property; or the issuance of a warrant of attachment, execution or similar
process against any substantial part of the property of Company or any of its
Material Subsidiaries, and the continuance of any such event in clause (ii) for
60 days unless dismissed, bonded or discharged; or
7.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.
--------------------------------------------------
(i) Company or any of its Material Subsidiaries shall have an order
for relief entered with respect to it or commence a voluntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall consent to the entry of an order for relief
in an involuntary case, or to the conversion of an involuntary
79
<PAGE>
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; the making by Company or any of
its Material Subsidiaries of any assignment for the benefit of creditors; or
(ii) the inability or failure of Company or any of its Material
Subsidiaries, or the admission by Company or any of its Material Subsidiaries in
writing of its inability, to pay its debts as such debts become due; or the
Board of Directors of Company or any of its Material Subsidiaries (or any
committee thereof) adopts any resolution or otherwise authorizes action to
approve any of the actions referred to in clause (i) or this clause (ii); or
7.8 JUDGMENTS AND ATTACHMENTS
-------------------------
(i) One or more judgments or decrees shall be entered against Company
or any of its Material Subsidiaries involving in the aggregate a liability of
$1,000,000 or more (to the extent not covered by insurance) and all such
judgments or decrees shall not have been vacated, discharged, stayed or bonded
pending appeal within 60 days from the entry thereof or (ii) Company or any of
its Material Subsidiaries shall settle or otherwise resolve any litigation or
proceeding, and the aggregate liability in connection therewith, whether current
or prospective, shall exceed $5,000,000, and in the case of clause (ii) such
aggregate liability could reasonably be expected to result in a Material Adverse
Effect; or
7.9 DISSOLUTION
-----------
Any order, judgment or decree shall be entered against Company or any
of its Material Subsidiaries decreeing the dissolution or split up of Company or
that Material Subsidiary and such order shall remain undischarged or unstayed
for a period in excess of 30 days; or
7.10 EMPLOYEE BENEFIT PLANS
----------------------
There occurs one or more ERISA Events (determined without regard to
any materiality standard in that definition) which individually or in the
aggregate results in or is reasonably expected to result in liability of a Loan
Party or any of its ERISA Affiliates in excess of $10,000,000 (or $5,000,000 if
as a result of any such ERISA Event a Lien has been or is reasonably likely to
be imposed) during the term of this Agreement; or there exists an excess of
aggregated accumulated benefit obligations, as defined in Statement of Financial
Accounting Standards No. 87 (the "ABO"), over the aggregate total fair market
---
value for all Pension Plans (excluding for purposes of such computation each
Pension Plan with respect to which the fair market value of the assets exceeds
the ABO) which exceeds $40,000,000; or
7.11 INVALIDITY OF GUARANTIES
------------------------
Any of the Loan Guaranties for any reason, other than the
satisfaction in full of all Obligations and termination of this Agreement,
ceases to be in full force and effect or is declared to be null and void, or
Company or any Borg-Warner Guarantor Subsidiary denies that it has any further
liability under the Loan Guaranty to which it is party, or gives notice to such
effect; or
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7.12 FAILURE OF SECURITY
-------------------
Any Pledge Agreement or any other Collateral Document shall, at any
time, cease to be in full force and effect or shall be declared null and void,
or the validity or enforceability thereof shall be contested by any Loan Party
or the Collateral Agent shall not have or shall cease to have a valid and
perfected first priority security interest in the Collateral in each case for
any reason other than the failure of Collateral Agent or any Lender to take any
action within its control; or
7.13 CHANGE IN CONTROL
-----------------
(i) A change shall occur in the Board of Directors of Company so
that a majority of the Board of Directors of Company ceases to consist of
the individuals who constituted the Board of Directors of Company on the
Closing Date (or individuals whose election or nomination for election was
approved by a vote of at least 75% of the directors then in office who
either were directors on the Closing Date or whose election or nomination
for election was previously so approved); or
(ii) Any Person or group (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission) other than ML & Co. and its Affiliates
and members of Company's management on the Closing Date shall become or be
the owner, directly or indirectly, beneficially or of record, of shares
representing more than 30% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Company on a
fully diluted basis, unless ML & Co. and its Affiliates shall own and
continue to so own a majority of such capital stock; or
7.14 TRADE RECEIVABLES FACILITY
--------------------------
(i) Any condition or event shall occur under the Trade Receivables
Facility that constitutes an Early Amortization Event (as such term is defined
in the Trade Receivables Facility as of the Closing Date) or an event or
condition which, after notice or lapse of time or both, would constitute an
Early Amortization Event if that event or condition were not cured or removed
within any applicable grace or cure period (an "Unmatured Early Amortization
----------------------------
Event"); (ii) any condition or event shall occur, or any breach or default by
- -----
Company or any of its Subsidiaries shall occur, under the Trade Receivables
Facility if the effect of such condition, event, breach or default is to cause,
or to permit any purchaser or other investor under the Trade Receivables
Facility to cause, upon the giving or receiving of notice, lapse of time, both
or otherwise, any commitment to purchase receivables or to advance or invest
funds for the purchase of receivables under the Trade Receivables Facility in
whole or in part to be suspended or terminated or any principal repayment or
amortization or accumulation period to commence prior to January 1, 1999; (iii)
Company or any of its Subsidiaries shall optionally redeem, retire, prepay,
purchase for value or make any similar optional payment of the principal of, any
Receivables Certificates (as defined in subsection 9.18) issued to finance the
purchase of receivables under the Trade Receivables Facility;
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THEN (i) upon the occurrence of any Event of Default described in the
foregoing subsections 7.6 or 7.7(i), each of (a) the unpaid principal amount of
and accrued interest on the Loans, (b) an amount equal to the maximum amount
that may at any time be drawn under all Letters of Credit then outstanding
(whether or not any beneficiary under any Letter of Credit shall have presented
or be entitled to present, the drafts and other documents required to draw under
the Letter of Credit), and (c) all other Obligations shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by Company
and the obligation of each Lender to make any Loan and the obligation of any
Lender to issue any Letter of Credit shall thereupon terminate and (ii) upon the
occurrence and during the continuance of any other Event of Default, Requisite
Lenders may, by written notice to Company, declare all or any portion of the
amounts described in clauses (a) through (c) above to be, and the same shall
forthwith become, immediately due and payable, together with accrued interest
thereon, and the obligation of each Lender to make any Loan and the obligation
of any Lender to issue any Letter of Credit shall thereupon terminate; provided,
--------
that the foregoing shall not affect in any way the obligations of Lenders to
make Loans to reimburse drawings under Letters of Credit as provided in
subsection 2.9C. So long as any Letter of Credit shall remain outstanding, any
amounts described in clause (b) above with respect to Letters of Credit, when
received by the Issuing Lender, shall be held by the Issuing Lender, pursuant to
such documentation as the Issuing Lender shall request, as cash collateral for
the obligation of Company to reimburse the Issuing Lender in the event of any
drawing under such Letters of Credit, and so much of such funds shall at all
times remain on deposit as cash collateral as aforesaid as shall equal the
maximum amount available at any time for drawing under all Letters of Credit
(the "Maximum Available Amount"); provided that in the event of cancellation or
------------------------
expiration of any Letter of Credit or any reduction in the Maximum Available
Amount, the Issuing Lender shall apply the difference between the cash
collateral held by the Issuing Lender immediately prior to such cancellation,
expiration or reduction and the Maximum Available Amount immediately after such
cancellation, expiration or reduction first to the payment of any outstanding
-----
Obligations, and second to the payment to whomsoever shall be lawfully entitled
------
to receive such funds.
Notwithstanding anything contained in the foregoing paragraph, if at
any time within 60 days after acceleration of the maturity of any Loan, Company
shall pay all arrears of interest and all payments on account of the principal
which shall have become due otherwise than by acceleration (with interest on
principal and, to the extent permitted by law, on overdue interest, at the rates
specified in this Agreement or the Notes) and all Events of Default and
Potential Events of Default (other than non-payment of principal of and accrued
interest on the Loans and the Notes and payments of amounts referred to in
clause (b) above, in each case which is due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to subsection 9.6, then
Requisite Lenders, by written notice to Company, may at their option rescind and
annul the acceleration and its consequences and any Issuing Lender shall return
to Company any amounts held as cash collateral in respect of the amounts
described in clause (b) above; but such action shall not affect any subsequent
Event of Default or Potential Event of Default or impair any right consequent
thereon.
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SECTION 8.
AGENTS
8.1 APPOINTMENT
-----------
Bankers is hereby appointed Administrative Agent and Collateral Agent
hereunder by each Lender, CIBC is hereby appointed Documentation Agent and
NationsBank is hereby appointed Syndication Agent. Each Lender hereby authorizes
each Agent to act hereunder and under the other instruments and agreements
referred to herein (including, without limitation, the Collateral Documents) as
its agent hereunder and thereunder. Each Agent agrees to act as such upon the
express conditions contained in this Section 8 and in the Collateral Documents.
The provisions of this Section 8 are solely for the benefit of Agents and
Lenders, and Company shall not have any rights as a third party beneficiary of
any of the provisions hereof. In performing its functions and duties under this
Agreement, each Agent shall act solely as agent of Lenders and does not assume
and shall not be deemed to have assumed any obligation towards or relationship
of agency or trust with or for Company or any of its Subsidiaries.
8.2 POWERS; GENERAL IMMUNITY
------------------------
A. DUTIES SPECIFIED. Each Lender irrevocably authorizes each Agent
to take such action on such Lender's behalf and to exercise such powers
hereunder and under the other instruments and agreements referred to herein
(including, without limitation, the Collateral Documents) as are specifically
delegated to such Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. Each Agent shall have only those
duties and responsibilities that are expressly specified in this Agreement and
the Collateral Documents and it may perform such duties by or through its agents
or employees. The duties of each Agent shall be mechanical and administrative
in nature; each Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon any Agent
any obligations in respect of this Agreement or the other instruments and
agreements referred to herein except as expressly set forth herein or therein.
B. NO RESPONSIBILITY FOR CERTAIN MATTERS. Each Agent shall not be
responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectability or sufficiency of this Agreement, any
other Loan Document or the Notes or Letters of Credit, or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents in connection herewith
or therewith furnished or made by any Agent to Lenders or by or on behalf of
Company to any Agent or any Lender or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or Letters of Credit or of the existence or possible
existence of any Event of Default or Potential Event of Default. Anything
contained in this Agreement to the contrary notwithstanding Agent shall not have
any liability arising from confirmations of the amount of outstanding Loans.
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C. EXCULPATORY PROVISIONS. No Agent and none of their respective
officers, directors, employees or agents shall be liable to Lenders for any
action taken or omitted hereunder or in connection herewith (including, without
limitation, any act or omission under the Collateral Documents) unless caused by
its or their gross negligence or willful misconduct. If any Agent shall request
instructions from Lenders with respect to any act or action (including the
failure to take an action) in connection with this Agreement, such Agent shall
be entitled to refrain from such act or taking such action unless and until such
Agent shall have received instructions from Requisite Lenders or, to the extent
such action requires the consent of all Lenders pursuant to the express terms of
this Agreement, from all Lenders. Without prejudice to the generality of the
foregoing, (i) each Agent shall be entitled to rely, and shall be fully
protected in relying, upon any communication, instrument or document believed by
it to be genuine and correct and to have been signed or sent by the proper
person or persons, and shall be entitled to rely and shall be protected in
relying on opinions and judgments of attorneys (who may be attorneys for
Company), accountants, experts and other professional advisors selected by it;
and (ii) no Lender shall have any right of action whatsoever against any Agent
as a result of such Agent acting or (where so instructed) refraining from acting
under this Agreement or the other instruments and agreements referred to herein
in accordance with the instructions of Requisite Lenders or all Lenders, as
applicable. Each Agent shall be entitled to refrain from exercising any power,
discretion or authority vested in it under this Agreement or the other
instruments and agreements referred to herein unless and until it has obtained
the instructions of Requisite Lenders or all Lenders, as applicable.
D. AGENTS ENTITLED TO ACT AS LENDERS. The agency hereby created
shall in no way impair or affect any of the rights and powers of, or impose any
duties or obligations upon, any Agent in its individual capacity as a Lender
hereunder. With respect to its participation in the Loans and Letters of
Credit, each Agent shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not performing the duties and
functions delegated to it hereunder and the term "Lender" or "Lenders" or any
similar term shall, unless the context clearly otherwise indicates, include each
Agent in its individual capacity. Each Agent and each of their respective
Affiliates may accept deposits from, lend money to and generally engage in any
kind of banking, trust, financial advisory or other business with Company or any
Affiliate of Company as if it were not performing the duties specified herein,
and may accept fees and other consideration from Company for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
8.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF
------------------------------------------------------------------
CREDITWORTHINESS
----------------
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company in
connection with the making of the Loans hereunder and has made and shall
continue to make its own appraisal of the creditworthiness of Company. No Agent
shall have any duty or responsibility either initially or on a continuing basis
to make any such investigation or any such appraisal on behalf of Lenders or,
unless expressly required hereunder, to provide any Lender with any credit or
other information with respect thereto whether coming into its possession before
the making of the Loans or any
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time or times thereafter and no Agent shall further have any responsibility with
respect to the accuracy of or the completeness of the information provided to
Lenders.
8.4 RIGHT TO INDEMNITY
------------------
Each Lender, proportionately to its Commitment, severally agrees to
indemnify each Agent to the extent such Agent shall not have been reimbursed by
Company, for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, counsel fees and disbursements) or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against such
Agent in performing its duties hereunder in its capacity as Administrative
Agent, Collateral Agent, Documentation Agent or Syndication Agent, as
applicable, in any way relating to or arising out of this Agreement; provided
--------
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Agent's gross negligence or willful
misconduct. If any indemnity furnished to such Agent for any purpose shall, in
the opinion of such Agent, be insufficient or become impaired, such Agent may
call for additional indemnity and cease, or not commence, to do the acts
indemnified against until such additional indemnity is furnished.
8.5 REGISTERED PERSONS TREATED AS OWNER
-----------------------------------
Administrative Agent may deem and treat the Persons listed as Lenders
in the Register as the owner of the corresponding Loan listed therein for all
purposes hereof unless and until a written notice of the assignment or transfer
thereof shall have been filed with Administrative Agent and recorded in the
Register. Any request, authority or consent of any person or entity who, at the
time of making such request or giving such authority or consent, is listed in
the Register as a Lender shall be conclusive and binding on any subsequent
holder, transferee or assignee of the corresponding Loan.
8.6 SUCCESSOR AGENTS
----------------
Any Agent may resign at any time by giving 30 days' prior written
notice thereof to Lenders and Company, and any Agent may be removed at any time
with or without cause by an instrument or concurrent instruments in writing
delivered to Company and such Agent and signed by Requisite Lenders. Upon any
such notice of resignation or any such removal, Requisite Lenders shall have the
right, upon five days' notice to Company, to appoint a successor Agent. Upon
the acceptance of any appointment as an Agent hereunder by a successor Agent,
that successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Agent, and the
retiring or removed Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring or removed Agent's resignation or
removal hereunder as Agent, the provisions of this Section 8 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.
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8.7 LOAN GUARANTIES AND COLLATERAL DOCUMENTS
----------------------------------------
A. AUTHORIZATION OF AGENTS. Each Lender hereby authorizes the
Collateral Agent to enter into the Loan Guaranties and the Collateral Documents;
provided that Collateral Agent shall not enter into or consent to any amendment,
- --------
modification, termination or waiver of any provision contained in any Loan
Guaranty or Collateral Document without the prior consent of Requisite Lenders
or, to the extent required by subsection 9.6A(ii), all of the Lenders. Each
Lender agrees that no Lender shall have any right individually to seek or to
enforce any Loan Guaranty or to realize upon the security granted by any
Collateral Documents, it being understood and agreed that such rights and
remedies may be exercised by Collateral Agent for the benefit of Lenders upon
the terms of the Loan Guaranties and the Collateral Documents. Each Lender and
Agent hereby authorizes Collateral Agent to release Collateral as permitted or
required under this Agreement or the Collateral Documents, and agrees that a
certificate executed by Collateral Agent evidencing such release of Collateral
shall be conclusive evidence of such release as to any third party.
B. CONFLICT IN LOAN DOCUMENTS. If there is any conflict between
this Agreement and any other Loan Document, this Agreement and such other Loan
Document shall be interpreted and construed, if possible, so as to avoid or
minimize such conflict but, to the extent (and only to the extent) of such
conflict, this Agreement shall prevail and control.
SECTION 9.
MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT.
-------------------------------------------------------------
A. GENERAL. Subject to subsection 9.1B, each Lender shall have the
right at any time to (i) sell, assign or transfer to any Eligible Assignee, or
(ii) sell participations to any Person in, all or any part of its Commitment or
any Loan or Loans made by it or its Letters of Credit or participations therein
or any other interest herein or in any other Obligations owed to it; provided
--------
that no such sale, assignment, transfer or participation shall, without the
consent of Company, require Company to file a registration statement with the
Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided,
--------
further that no such sale, assignment or transfer described in clause (i) above
- -------
shall be effective unless and until an Assignment Agreement substantially in the
form of Exhibit XII annexed hereto effecting such sale, assignment or transfer
shall have been accepted by Administrative Agent and recorded in the Register as
provided in subsection 9.1B(ii); and provided, further that no such sale,
-------- -------
assignment, transfer or participation of any Letter of Credit or any
participation therein may be made separately from a sale, assignment, transfer
or participation of a corresponding interest in the Commitment and the Loans of
the Lender effecting such sale, assignment, transfer or participation. Except
as otherwise provided in this subsection 9.1, no Lender shall, as between
Company and such Lender, be relieved of any of its obligations hereunder as a
result of any sale, assignment or transfer of, or any granting of participations
in, all or any part of its Commitment or the Loans, the Letters of Credit or
participations therein, or the
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other Obligations owed to such Lender.
B. ASSIGNMENTS.
(i) Amounts and Terms of Assignments. Each Commitment, Loan,
--------------------------------
Letter of Credit or participation therein, or other Obligation may (a) be
assigned by any Lender in an amount not less than $5,000,000 or the entire
remaining amount of its Loans and Commitments and Letters of Credit if less
than $5,000,000, provided that assignments by any Lender to an Affiliate of
--------
such Lender or to any other Lender shall not be subject to the limitations
of this clause (a) so long as such assignments to Affiliates are made in
accordance with clause (b) below, or (b) be assigned to any other Eligible
Assignee with the giving of notice to Company and Administrative Agent and
with the prior consent of Company and, in the case of assignments by
Lenders other than the Administrative Agent, consent of Administrative
Agent (which consent of Company and Administrative Agent shall not be
unreasonably withheld or delayed). To the extent of any such assignment in
accordance with either clause (a) or (b) above, the assigning Lender shall
be relieved of its obligations with respect to its Commitment, Loans,
Letters of Credit or participations therein, or other Obligations or the
portion thereof so assigned. The parties to each such assignment shall
execute and deliver to Administrative Agent, for its acceptance and
recording in the Register, an Assignment Agreement, together with a
processing and recordation fee of $3,500 and such forms, certificates or
other evidence, if any, with respect to United States federal income tax
withholding matters as the assignee under such Assignment Agreement may be
required to deliver to Administrative Agent pursuant to subsection 2.8B.
Upon such execution, delivery, and acceptance and recordation, from and
after the effective date specified in such Assignment Agreement, (y) the
assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and (z) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights (other than any rights which
survive the termination of this Agreement under subsection 9.9B) and be
released from its obligations under this Agreement (and, in the case of an
Assignment Agreement covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall
cease to be a party hereto but shall not relinquish its rights which
survive the termination of this Agreement under subsection 9.9B; provided
--------
that, anything contained in any of the Loan Documents to the contrary
notwithstanding, if such Lender is the Issuing Lender with respect to any
outstanding Letters of Credit such Lender shall continue to have all rights
and obligations of an Issuing Lender with respect to
such Letters of Credit until the cancellation or expiration of such Letters
of Credit and the reimbursement of any amounts drawn thereunder). The
Commitments hereunder shall be modified to reflect the Commitment of such
assignee and any remaining Commitment of such assigning Lender and, if any
such assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall, upon the effectiveness of such assignment or as
promptly thereafter as practicable, surrender its Note to Administrative
Agent for cancellation, and thereupon Company shall issue and deliver to
Administrative Agent new Notes, substantially in the form of Exhibit III
annexed hereto with appropriate insertions,
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to be delivered to the assignee and, if applicable, to the assigning
Lender, which new Notes will reflect the new Commitments of the assignee
and, if applicable, the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register.
-----------------------------------------------------------
Upon its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with
the processing and recordation fee referred to in subsection 9.1B(i) and
any forms, certificates or other evidence with respect to United States
federal income tax withholding matters that such assignee may be required
to deliver to Administrative Agent pursuant to subsection 2.8B,
Administrative Agent shall, if Administrative Agent and Company have
consented to the assignment evidenced thereby (to the extent such consent
is required pursuant to subsection 9.1B(i)), (a) accept such Assignment
Agreement by executing a counterpart thereof as provided therein (which
acceptance shall evidence any required consent of Administrative Agent to
such assignment), (b) record the information contained therein in the
Register, and (c) give prompt notice thereof to Company. Administrative
Agent shall maintain a copy of each Assignment Agreement delivered to and
accepted by it as provided in this subsection 9.1B(ii).
C. PARTICIPATIONS. The amount and number of participations shall
not be limited. The holder of any participation, other than an Affiliate of the
Lender granting such participation, shall not be entitled to require such Lender
to take or omit to take any action hereunder except action directly affecting
(i) the extension of the scheduled final maturity date of or interest on any
Loan allocated to such participation or (ii) the reduction of any fees related
thereto allocated to such participation, or (iii) a reduction of the principal
amount of or the rate of interest payable on any Loan allocated ed to such
participation or any fees related thereto, and all amounts payable by Company
hereunder (including amounts payable to such Lender pursuant to subsections
2.6B, 2.6E, 2.6H, 2.7, 2.8 and 2.9G) shall be determined as if such Lender had
not sold such participation. Company and each Lender hereby acknowledge and
agree that, solely for purposes of subsections 2.6, 2.7, 9.4 and 9.5, (a) any
participation will give rise to a direct obligation of Company to the
participant and (b) the participant shall be considered to be a "Lender".
D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the
assignments and participations permitted under the foregoing provisions of this
subsection 9.1, any Lender may assign and pledge all or any portion of its
Loans, the other Obligations owed to such Lender, and its Note to any Federal
Reserve Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued by
such Federal Reserve Bank; provided that (i) no Lender shall, as between Company
--------
and such Lender, be relieved of any of its obligations hereunder as a result of
any such assignment and pledge and (ii) in no event shall such Federal Reserve
Bank be considered to be a "Lender" or be entitled to require the assigning
Lender to take or omit to take any action hereunder.
E. INFORMATION. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants); provided, that each Lender shall
--------
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obtain the agreement of such prospective assignees and participants to maintain
confidentiality of such confidential information in accordance with subsection
5.5B.
F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature
pages hereof hereby represents and warrants (i) that it is an Eligible Assignee
described in clause (A) of the definition thereof; (ii) that it has experience
and expertise in the making of loans such as the Loans; and (iii) that it will
make its Loans for its own account in the ordinary course of its business and
without a view to distribution of such Loans within the meaning of the
Securities Act or the Exchange Act or other federal securities laws (it being
understood that, subject to the provisions of this subsection 9.1, the
disposition of such Loans or any interests therein shall at all times remain
within its exclusive control). Each Lender that becomes a party hereto pursuant
to an Assignment Agreement shall be deemed to agree that the representations and
warranties of such Lender contained in Section 2(c) of such Assignment Agreement
are incorporated herein by this reference.
9.2 EXPENSES
--------
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and expenses of preparation of the Loan Documents and all the costs of
furnishing all opinions by counsel for Company (including without limitation any
opinions requested by Lenders as to any legal matters arising hereunder), and of
Company's performance of and compliance with all agreements and conditions
contained herein on its part to be performed or complied with; (ii) the
reasonable fees, expenses and disbursements of counsel to Administrative Agent,
in connection with the negotiation, preparation, execution and administration of
the Loan Documents, the Loans and Letters of Credit hereunder, and any
amendments and waivers hereto or thereto; (iii) all the actual costs and
expenses of creating and perfecting Liens in favor of Lenders pursuant to any
Loan Document, including filing and recording fees and expenses, title
insurance, fees and expenses of counsel for providing such opinions as Lenders
may reasonably request and reasonable fees and expenses of legal counsel to
Administrative Agent; (iv) all other actual and reasonable costs and expenses
incurred by Agents in connection with the syndication of the Loans and Letters
of Credit and the negotiation, preparation and execution of the Loan Documents
and the transactions contemplated hereby; and (v) after the occurrence of an
Event of Default, all costs and expenses (including reasonable attorneys' fees,
including allocated costs of internal counsel, and costs of settlement) incurred
by Lenders in enforcing any Obligations of or in collecting any payments due
from Company or any Guarantor hereunder or under the Letters of Credit or the
Notes or any of the other Loan Documents by reason of such Event of Default or
in connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a "work-out" or of any insolvency
or bankruptcy proceedings.
9.3 INDEMNITY
---------
In addition to the payment of expenses pursuant to subsection 9.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to indemnify, pay and hold harmless Lenders and any holder of any
of the Notes, and the officers, directors, employees, agents, and affiliates of
Lenders and such holders (collectively called the
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"Indemnitees") from and against, any and all other liabilities, obligations,
-----------
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including, without
limitation, the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto), that may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of this
Agreement or the other Loan Documents, the statements contained in the
commitment letters delivered by any Lender, Lenders' agreement to make the Loans
and to issue Letters of Credit hereunder and Lenders' agreements to purchase
participations therein as provided herein, or the use or intended use of the
Letters of Credit or the proceeds of any of the Loans hereunder (the
"indemnified liabilities"); provided that Company shall have no obligation to an
----------------------- --------
Indemnitee hereunder with respect to indemnified liabilities arising from the
gross negligence or willful misconduct of that Indemnitee. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, Company shall contribute the maximum portion that it is permitted to pay
and satisfy under applicable law, to the payment and satisfaction of all
indemnified liabilities incurred by the Indemnitees or any of them.
9.4 SET OFF
-------
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence and
during the continuation of any Event of Default, each Lender and each subsequent
holder of any Note is hereby authorized by Company at any time or from time to
time, without notice to Company, or to any other Person, any such notice being
hereby expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured but not
including trust accounts) and any other Indebtedness at any time held or owing
by that Lender or that subsequent holder to or for the credit or the account of
Company, against and on account of the obligations and liabilities of Company to
that Lender or that subsequent holder under this Agreement and such Note or with
respect to the Letters of Credit, including, but not limited to, all claims of
any nature or description arising out of or connected with this Agreement or
with respect to the Letters of Credit, the Notes or any other Loan Document,
irrespective of whether or not (a) that Lender or that subsequent holder shall
have made any demand hereunder or (b) the principal of or the interest on the
Loans, Notes or any Obligations with respect to the Letters of Credit, and other
amounts due hereunder shall have become due and payable pursuant to Section 7
and although said obligations and liabilities, or any of them, may be contingent
or unmatured.
9.5 RATABLE SHARING
---------------
Each Lender and each subsequent holder by acceptance of a Note agree
among themselves that if any of them shall, through the exercise of any right of
counterclaim, set-off, banker's lien or otherwise or as adequate protection of a
deposit treated as cash collateral under the Bankruptcy Code, receive payment or
reduction of a proportion of the aggregate amount of principal and interest then
due with respect to the Notes held by that Lender or holder, the amount then due
to that Lender or holder with respect to any Letter of Credit or any
participation
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therein or amounts due to that Lender or holder in respect of facility fees or
commitment fees hereunder (collectively, the "Aggregate Amounts Due" to such
---------------------
Lender or holder), which is greater than the proportion received by any other
Lender or holder of the Notes in respect to the Aggregate Amounts Due to such
other Lender or holder, then the Lender or holder of the Notes receiving such
proportionately greater payment shall (y) notify each other Lender and
Administrative Agent of such receipt and (z) purchase participations (which it
shall be deemed to have done simultaneously upon the receipt of such payment) in
the Aggregate Amounts Due to the other Lenders and holders so that all such
recoveries of Aggregate Amounts Due shall be shared by the Lenders and holders
of the Notes in proportion to the Aggregate Amounts Due them; provided that if
--------
all or part of such proportionately greater payment received by such purchasing
Lender or holder is thereafter recovered from such Lender or holder, those
purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to that Lender or holder to the extent of such
recovery, but without interest. Company expressly consents to the foregoing
arrangement and agrees that any holder of a participation so purchased and any
other subsequent holder of a participation in any Note or Letter of Credit
otherwise acquired may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Company to that holder
as fully as if that holder were a holder of such a Note or Letter of Credit in
the amount of the participation held by that holder.
9.6 AMENDMENTS AND WAIVERS
----------------------
A. No amendment, modification, termination or waiver of any
provision of this Agreement or of the Notes, and no consent to any departure by
Company therefrom, shall in any event be effective without the written
concurrence of Requisite Lenders; provided that no such amendment, modification,
--------
termination, waiver or consent shall, without the consent of each Lender (with
Obligations directly affected in the case of the following clause (i)): (i)
extend the scheduled final maturity of any Loan or Note, or extend the stated
expiration date of any Letter of Credit beyond the Maturity Date, or reduce the
rate of interest (other than any waiver of any increase in the interest rate
applicable to any of the Loans pursuant to subsection 2.2E) or fees thereon, or
extend the time of payment of interest or fees thereon, or reduce the principal
amount thereof, (ii) release all or substantially all of the Collateral or all
or substantially all of the Borg-Warner Guarantor Subsidiaries from the Borg-
Warner Subsidiary Guaranty except as expressly provided in the Loan Documents,
(iii) amend, modify, terminate or waive any provision of this subsection 9.6,
(iv) reduce the percentage specified in the definition of Requisite Lenders (it
being understood that, with the consent of the Requisite Lenders, additional
extensions of credit pursuant to this Agreement may be included in the
determination of the Requisite Lenders on substantially the same basis as the
extensions of Commitments are included on the Closing Date) or (v) consent to
the assignment or transfer by Company of any of its rights and obligations under
this Agreement; provided further that no such amendment, modification,
-------- -------
termination or waiver shall (1) increase the Commitments of any Lender over the
amount thereof then in effect without the consent of such Lender (it being
understood that amendments, modifications or waivers of conditions precedent,
covenants, Potential Events of Default or Events of Default or of a mandatory
reduction in the Commitments shall not constitute an increase of the Commitment
of any Lender, and that an increase in the available portion of any Commitment
of any Lender shall not constitute an increase in the Commitment of such
Lender); (2) no amendment, modification, termination or waiver relating to the
obligations of Lenders relating to the purchase of
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participations in Letters of Credit shall be effective without the written
concurrence of each Issuing Lender having a Letter of Credit then outstanding or
which has not been reimbursed for a drawing under a Letter of Credit issued by
Administrative Agent and of Administrative Agent; or (3) without the consent of
Agents, amend, modify, terminate or waive any provision of Section 8 as the same
applies to Agents or of any other provision of this Agreement as the same
applies to the rights or obligations of Agents.
B. If, in connection with any proposed amendment, modification,
termination or waiver of any of the provisions of this Agreement or the Notes as
contemplated by clauses (i) through (v) of the first proviso of subsection 9.6A,
the consent of the Requisite Lenders is obtained but the consent of one or more
of such other Lenders whose consent is required is not obtained, then Company
shall have the right, so long as all non-consenting Lenders whose individual
consent is required are treated as described in either clause (i) or (ii) below,
to either (i) replace each such non-consenting Lender or Lenders with one or
more Replacement Lenders pursuant to subsection 2.10 so long as at the time of
such replacement, each such Replacement Lender consents to the proposed
amendment, modification, termination or waiver, or (ii) terminate such non-
consenting Lender's Commitments and repay in full its outstanding Loans in
accordance with subsections 2.4A(i)(b) and 2.4G(ii); provided that unless the
--------
Commitments that are terminated and the Loans that are repaid pursuant to the
preceding clause (ii) are immediately replaced in full at such time through the
addition of new Lenders or the increase of the Commitments and/or outstanding
Loans of existing Lenders (who in each case must specifically consent thereto),
then in the case of any action pursuant to the preceding clause (ii), the
Requisite Lenders (determined before giving effect to the proposed action) shall
specifically consent thereto; provided further that Company shall not have the
-------- -------
right to terminate such non-consenting Lender's Commitment and repay in full its
outstanding Loans pursuant to clause (ii) of this subsection 9.6B if,
immediately after the termination of such Lender's Commitment in accordance with
subsection 2.4G(ii), the aggregate principal amount of outstanding Loans of all
Lenders plus the Letter of Credit Usage would exceed the Commitments of all
----
Lenders; provided still further that Company shall not have the right to replace
-------- ----- -------
a Lender solely as a result of the exercise of such Lender's rights (and the
withholding of any required consent by such Lender) pursuant to the second
proviso to subsection 9.6A.
C. Administrative Agent may, but shall have no obligation to, with
the concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Company in any case shall entitle Company to
any other or further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this subsection 9.6 shall be binding upon each Lender at the time
outstanding, each future Lender and, if signed by Company, on Company.
9.7 INDEPENDENCE OF COVENANTS
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitations of, another covenant shall not avoid the
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occurrence of an Event of Default or Potential Event of Default if such action
is taken or condition exists.
9.8 NOTICES
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in person,
receipt of telecopy or telex or four Business Days after depositing it in the
United States mail, registered or certified, with postage prepaid and properly
addressed; provided that notices to any Agent shall not be effective until
--------
received. For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this subsection 9.8)
shall be as set forth under each party's name on the signature pages hereof.
9.9 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS
---------------------------------------------
A. All agreements, representations and warranties made herein shall
survive the execution and delivery of this Agreement, the making of the Loans
hereunder and the execution and delivery of the Notes.
B. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of Company set forth in subsections 2.6B, 2.6C,
2.6E, 2.6H, 2.7, 2.8, 2.9E, 2.9G, 2.9H, 4.13, 5.5B, 9.2, 9.3 and 9.4 and the
agreements of Lenders set forth in subsections 8.2C, 8.4, 9.4 and 9.5 shall
survive the payment of the Loans and the Notes, the expiration of the Letters of
Credit, the termination of a non-consenting Lender's Commitment pursuant to
subsection 9.6B, and the termination of this Agreement.
9.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE
-----------------------------------------------------
No failure or delay on the part of any Lender or any holder of any
Note in the exercise of any power, right or privilege hereunder or under the
Notes shall impair such power, right or privilege or be construed to be a waiver
of any default or acquiescence therein, nor shall any single or partial exercise
of any such power, right or privilege preclude other or further exercise thereof
or of any other right, power or privilege. All rights and remedies existing
under this Agreement, the Notes or the Letters of Credit are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
9.11 SEVERABILITY
------------
In case any provision in or obligation under this Agreement, the Notes
or the Letters of Credit shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
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9.12 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS
----------------------------------------------------------
The obligation of each Lender hereunder is several, and no Lender
shall be responsible for the obligation or commitment of any other Lender
hereunder. Nothing contained in this Agreement and no action taken by Lenders
pursuant hereto shall be deemed to constitute Lenders to be a partnership, an
association, a joint venture or any other kind of entity. The amounts payable at
any time hereunder to each Lender shall be a separate and independent debt, and
each Lender shall be entitled to protect and enforce its rights arising out of
this Agreement and it shall not be necessary for any other Lender to be joined
as an additional party in any proceeding for such purpose.
9.13 HEADINGS
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
9.14 APPLICABLE LAW
--------------
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.15 SUCCESSORS AND ASSIGNS; SUBSEQUENT HOLDERS OF NOTES
---------------------------------------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders. The terms and provisions of
this Agreement shall inure to the benefit of any assignee or transferee of the
Notes, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Lenders shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof. Company's rights or any interest therein hereunder may not be assigned
without the written consent of all Lenders. Lenders' rights of assignment are
subject to subsection 9.1.
9.16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL
--------------------------------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY NOTE OR ANY OBLIGATION MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID
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COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND ANY OBJECTION TO THE
VENUE OF ANY SUCH PROCEEDING, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH NOTE OR SUCH
OBLIGATION. ALL PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY JUDICIAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
ANY NOTE OR ANY OBLIGATION. COMPANY DESIGNATES AND APPOINTS MLCP, ATTENTION:
PRESIDENT, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY COMPANY
IRREVOCABLY AGREEING IN WRITING TO SO SERVE, AS ITS AGENT TO RECEIVE ON ITS
BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH
SERVICE BEING HEREBY ACKNOWLEDGED BY COMPANY TO BE EFFECTIVE AND BINDING SERVICE
IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY
REGISTERED MAIL TO COMPANY AT ITS ADDRESS PROVIDED IN THE APPLICABLE SIGNATURE
PAGE HERETO, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS.
IF ANY AGENT APPOINTED BY COMPANY REFUSES TO ACCEPT SERVICE, COMPANY HEREBY
AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF ANY LENDER TO BRING PROCEEDINGS AGAINST COMPANY
IN THE COURTS OF ANY OTHER JURISDICTION.
COMPANY, EACH AGENT AND EACH LENDER HEREBY MUTUALLY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION
AND THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of
this waiver is intended to be all-encompassing of any and all disputes that may
be filed in any court and that relate to the subject matter of this transaction,
including without limitation, contract claims, tort claims, breach of duty
claims, and all other common law and statutory claims. Company, each Agent and
each Lender each acknowledge that this waiver is a material inducement to enter
into a business relationship, that each has already relied on the waiver in
entering into this Agreement, and that each will continue to rely on the waiver
in their related future dealings. Company, each Agent and each Lender further
warrant and represent that each has reviewed this waiver with its legal counsel,
and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
THE LOAN DOCUMENT OR ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS OR
THE LETTERS OF CREDIT. In the event of litigation, this Agreement may be filed
as a written consent to a trial by the court.
95
<PAGE>
9.17 COUNTERPARTS; EFFECTIVENESS
---------------------------
This Agreement and any amendments, waivers, consents, or supplements
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts, together shall constitute but one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart hereof by each of the parties hereto and written or
telephonic notification of such execution and authorization of delivery thereof
has been received by Company and Administrative Agent.
9.18 CERTAIN AGREEMENTS
------------------
Lenders agree, for the benefit of the holders from time to time of
trade receivables backed certificates issued in connection with the Trade
Receivables Facility (the "Receivables Certificates"), not to:
------------------------
(a) challenge the transfers of receivables and related assets from
the sellers under such Trade Receivables Facility (the "Sellers") to BPS
-------
Financial Services, Inc. (the "Transferor"), whether on the grounds that
----------
such sales were disguised financings or fraudulent conveyances or
otherwise, so long as such transfers are carried out in all material
respects in accordance with the Trade Receivables Facility;
(b) assert that the Transferor and any Seller should be
substantively consolidated; or
(c) institute or join any other Person in instituting any bankruptcy
or other insolvency proceeding against the Transferor so long as any of the
Receivables Certificates shall be outstanding or there shall not have
lapsed one year plus one day since the last day on which any of the
Receivables Certificates shall have been outstanding.
[Remainder of page intentionally left blank]
96
<PAGE>
Witness the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.
BORG-WARNER SECURITY CORPORATION
By: __________________________________
Title: _______________________________
Notice Address:
Borg-Warner Security Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: Chief Financial Officer
S-1
<PAGE>
LENDERS:
BANKERS TRUST COMPANY,
individually and as Administrative Agent
By: __________________________________
Title: _______________________________
Notice Address:
Bankers Trust Company
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Attention: Ariana Boer
with a copy to
Bankers Trust Company
300 South Grand Avenue
41st Floor
Los Angeles, CA 90071
Attention: Keith Bernstein
S-2
<PAGE>
CIBC INC.,
individually and as Documentation Agent
By: ___________________________________
Title: ________________________________
Notice Address:
CIBC Inc.
425 Lexington Avenue
New York, New York 10017
Attention: Bill Koslo
With a copy to:
CIBC Inc.
200 West Madison Street
Suite 2300
Chicago, Illinois 60606
Attention: John Kunkle
S-3
<PAGE>
NATIONSBANK, N.A., individually and as Syndication
Agent
By: ___________________________________
Title: ________________________________
Notice Address:
NationsBank, N.A.
NC 1-001-15-05
101 N. Tryon Street
Charlotte, North Carolina 28255
Attention: Carole Greene
S-4
<PAGE>
ABN AMRO BANK, N.V., CHICAGO BRANCH
By: ___________________________________
Title: ________________________________
By: ___________________________________
Title: ________________________________
Notice Address:
ABN AMRO Bank, N.V., Chicago Branch
135 S. LaSalle Street, Suite 625
Chicago, Illinois 60674
Attention: Nancy Capecci
S-5
<PAGE>
ARAB BANKING CORPORATION
By: __________________________________
Title: _______________________________
Notice Address:
Arab Banking Corporation
277 Park Avenue - 32nd Floor
New York, New York 10172
Attention: Grant McDonald
S-6
<PAGE>
BANK OF HAWAII
By: __________________________________
Title: ________________________________
Notice Address:
Bank of Hawaii
1850 North Central Avenue, Suite 400
Phoenix, Arizona 85004
Attention: Donna Parker
S-7
<PAGE>
THE BANK OF NEW YORK
By: __________________________________
Title: _______________________________
Notice Address:
The Bank of New York
One Wall Street, 19th Floor
New York, New York 10286
Attention: John Lokay
S-8
<PAGE>
BANQUE PARIBAS
By: ___________________________________
Title: ________________________________
Notice Address:
Banque Paribas
277 West Monroe Street
Suite 3300
Chicago, Illinois 60606
Attention: Joli Bruns
S-9
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By: ___________________________________
Title: ________________________________
By: ___________________________________
Title: ________________________________
Notice Address:
Credit Agricole Indosuez
55 East Monroe Street, Suite 4700
Chicago, Illinois 60603
Attention: Lynn Rosinsky
S-10
<PAGE>
COMMERCIAL LOAN FUNDING TRUST I
By: Lehman Commercial Paper Inc., not in its
individual capacity but solely as administrative
agent.
By: ___________________________________
Name: Michele Swanson
Title: Authorized Signatory
Notice Address:
Lehman Commercial Paper Inc.
3 World Financial Center
New York, New York 10028
Attention: Michele Swanson
S-11
<PAGE>
THE FUJI BANK, LIMITED
CHICAGO BRANCH
By: ___________________________________
Title: ________________________________
Notice Address:
The Fuji Bank, Limited
Chicago Branch
225 West Wacker Drive, Suite 2000
Chicago, Illinois 60606
Attention: James Fayen
S-12
<PAGE>
IMPERIAL BANK
By: ___________________________________
Title: ________________________________
Notice Address:
S-13
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., CHICAGO BRANCH
By: ___________________________________
Title: ________________________________
Notice Address:
The Long-Term Credit Bank of Japan, Ltd.,
Chicago Branch
190 South LaSalle Street, Suite 800
Chicago, Illinois 60603
Attention: Brady S. Sadek
S-14
<PAGE>
MERCANTILE BANK NATIONAL ASSOCIATION
By: ___________________________________
Title: ________________________________
Notice Address:
Mercantile Bank National Association
1 Mercantile Center, 12th Floor
St. Louis, Missouri 63101
Attention: David Higbee
S-15
<PAGE>
MERITA BANK
By: ___________________________________
Title: ________________________________
Notice Address:
Merita Bank
437 Madison Avenue - 22nd Floor
New York, New York 10022
Attention: Chip Carstensen
S-16
<PAGE>
UNITED WORLD CHINESE COMMERCIAL BANK,
LOS ANGELES AGENCY
By: ___________________________________
Title: ________________________________
Notice Address:
S-17
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: ___________________________________
Title: ________________________________
Notice Address:
Toronto Dominion
31 West 52nd Street
New York, New York 10019
Attention: Cecile Martin
With a copy to:
Toronto Dominion
Houston Agency
909 Fannin Street
Houston, Texas 77010
Attention: Dave Parker
S-18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 349
<SECURITIES> 0
<RECEIVABLES> 39
<ALLOWANCES> 5
<INVENTORY> 0
<CURRENT-ASSETS> 443
<PP&E> 38
<DEPRECIATION> 22
<TOTAL-ASSETS> 639
<CURRENT-LIABILITIES> 332
<BONDS> 124
0
0
<COMMON> 0
<OTHER-SE> 80
<TOTAL-LIABILITY-AND-EQUITY> 639
<SALES> 0
<TOTAL-REVENUES> 643
<CGS> 0
<TOTAL-COSTS> 542
<OTHER-EXPENSES> 7
<LOSS-PROVISION> 2
<INTEREST-EXPENSE> 8
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 20
<EXTRAORDINARY> (6)
<CHANGES> 0
<NET-INCOME> 14
<EPS-PRIMARY> .60
<EPS-DILUTED> .57
</TABLE>
