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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_______________
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number: 1-5529
______________
Burns International Services Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-3408028
(State of incorporation) (I.R.S. Employer
Identification No.)
200 South Michigan Avenue
Chicago, Illinois 60604
(312) 322-8500
(Address and telephone number of principal executive offices)
__________________
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
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<S> <C>
Common Stock, par value $.01 per share New York Stock Exchange
9-5/8% Senior Subordinated Notes due 2007 New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
___________________
Indicate by check mark whether 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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No __
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock of the registrant held by
stockholders, not including voting stock held by directors and executive
officers of the registrant and affiliates of Merrill Lynch & Co., Inc. (the
exclusion of such stock shall not be deemed an admission by the registrant that
such person is an affiliate of the registrant), on March 6, 2000 was
approximately $182.9 million. As of March 6, 2000, the registrant had 19,910,642
shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated herein by reference into
the Part of the Form 10-K indicated.
Document Part of Form 10-K into which
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incorporated
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The Company's annual report to stockholders Parts I, II and IV
for the year ended December 31, 1999
The Company's proxy statement for the 2000 Part III
annual meeting of stockholders
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BURNS INTERNATIONAL SERVICES CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 1999
INDEX
Item Number Page
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<CAPTION>
PART I
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1. Business 3
2. Properties 7
3. Legal Proceedings 7
4. Submission of Matters to a Vote of Security Holders 9
</TABLE>
<TABLE>
<CAPTION>
PART II
<S> <C> <C>
5. Market for the Registrant's Common Stock
and Related Stockholder Matters 10
6. Selected Financial Data 10
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
7A. Quantitative and Qualitative Disclosures
About Market Risk 11
8. Financial Statements and Supplementary Data 11
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 11
</TABLE>
<TABLE>
<CAPTION>
PART III
<S> <C> <C>
10. Directors and Executive Officers of the Registrant 12
11. Executive Compensation 13
12. Security Ownership of Certain Beneficial
Owners and Management 13
13. Certain Relationships and Related Transactions 13
</TABLE>
<TABLE>
<CAPTION>
PART IV
<S> <C> <C>
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 14
</TABLE>
<PAGE>
PART I
Item 1. Business
The Company is North America's premier supplier of contract guard and
related security services. As a result of its significant market presence,
breadth of product offerings and strategic alliances, the Company is well
positioned to service local, multi-location and national accounts and provide
total security solutions to its customers.
The Company provides guard services, as well as background screening,
contract employment and investigative services, to approximately 14,000 clients
in the United States, Canada, England, Scotland, Ireland and Colombia. The
Company services these clients with approximately 75,000 employees in
approximately 320 offices under the Burns, Globe and other service marks.
The Company supplies contract uniformed and plainclothes security officers,
who may or may not be armed, to perform a wide variety of tasks. These security
officers patrol and monitor commercial, financial, industrial, residential and
governmental facilities providing deterrence against crime and breach of
governmental security regulations and detection of fire, accidents and other
casualties. The security officers also monitor electronic systems and control
public and employee access to facilities. Specialized assignments include
nuclear and conventional electric power plant security, pre-departure screening
of passengers and luggage at airports, access control at health care and
educational facilities, background screening, investigative services and
contract staffing services.
The Company employs approximately 68,000 security officers, 4,000 employees
in the temporary employee leasing operation and 3,000 executive and
administrative employees. Domestic security officers undergo a standardized pre-
employment screening program that features mandatory drug screening, criminal
record checks at the county and municipal court level and verification of
consumer credit reports, social security information and drivers' license
records. Security officers in foreign jurisdictions are screened according to
local requirements. Security officers receive classroom orientation and field
training in safety, first aid and security techniques and in the handling of
specific problems applicable to particular industries or situations.
The Company markets guard services through approximately 200 sales
representatives nationwide and in Canada, England, Scotland, Ireland and
Colombia. Sales personnel operate out of local branch and sales offices. The
Company also bids on contracts with governmental agencies.
Physical security service contracts generally provide for such services on
a continuing basis and generally are terminable by either party upon 30 to 60
days notice. Charges for services are negotiated with customers and are based
upon payment of a specified amount per service hour. Typically, such charges
are adjusted for any change in any law, ruling or collective bargaining
agreement causing a change in work hours, wage rates, working conditions or
other costs. Investigative services are generally provided under specific
arrangements, with charges varying according to the nature of the assignment.
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Financial information concerning the Company's segments, and information
concerning the revenues and identifiable assets of the Company is incorporated
herein by reference to Note 11 of the Notes to Consolidated Financial
Statements.
Loomis, Fargo & Co.
In January 1997, the Company's armored transport unit contributed
substantially all of its assets and assigned certain of its liabilities to
Loomis, Fargo & Co. ("Loomis Fargo"), a newly established corporation, in
exchange for 49% of Loomis Fargo's outstanding common stock and a cash payment
of approximately $105 million (net of transaction costs, but subject to certain
adjustments).
The Company and the former Loomis shareholders entered into a stockholders
agreement providing that Loomis Fargo's board of directors consists of seven
directors: three directors nominated by the Company; three directors nominated
by the former Loomis shareholders; and the Loomis Fargo chief executive officer.
The number of directors that may be designated pursuant to the stockholder
agreement may be adjusted if either the Company or the former Loomis
shareholders reduce their ownership stake in Loomis Fargo. The stockholder
agreement provides that the vote of five of the seven directors is required for
Loomis Fargo to engage in certain specified activities.
In addition, the stockholder agreement prohibits the transfer of Loomis
Fargo common stock by either party for three years following the closing without
the prior consent of the other party. After such period Loomis Fargo common
stock may be transferred only in accordance with the provisions of the
stockholder agreement, which include rights of first refusal and co-sale rights.
The current stockholders also have certain preemptive and registration rights
with respect to equity issuances by Loomis Fargo.
Loomis Fargo operates in all 50 states and Puerto Rico to provide armored
ground transportation services, ATM services and cash vault and related services
to financial institutions and commercial customers.
Employees
The Company's business is labor intensive and, accordingly, is affected by
the availability of qualified personnel and the cost of labor. Although the
protective services industry is characterized generally by high turnover, the
Company believes its experience compares favorably with that of the industry.
The Company has not experienced any material difficulty in employing suitable
numbers of qualified security guards and other employees. The Company considers
its relations with its employees to be generally satisfactory.
The Company is a party to collective bargaining agreements with various
local unions covering approximately 5,200 employees. The collective bargaining
agreements expire at various dates from 2000 to 2005 and relate, among other
things, to wages, hours and conditions of employment. Under section 9(b)(3) of
the National Labor Relations Act, if a union admits to membership, or is
affiliated directly or indirectly with a union that admits to membership of
4
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employees other than guards, an employer of guards can refuse to bargain with
such union and such union cannot be certified as the representative of a unit of
guards. As a result, the Company has in many instances refused to recognize or
withdrawn recognition of labor organizations that admit as members employees
other than guards.
Competition
The Company competes with major national and international firms and
numerous smaller regional and local companies providing similar services.
Competition in the security guard industry is based on price in relation to the
quality of service, the scope of services performed, the extent and quality of
guard supervision, recruiting and training and name recognition.
Regulation
Due to the nature of the Company's business, its operations are subject to
a variety of federal, state, county and municipal laws, regulations and
licensing requirements. In addition, many states have laws requiring training
and registration of security officers, regulating the use of badges,
identification cards and uniforms and imposing minimum bond surety and insurance
requirements. The Company believes that its operations are in substantial
compliance with those laws, regulations and requirements. Federal legislation
has been introduced relating to security officer qualification and training.
Similar legislation is pending in several states. The Company generally supports
the creation of standards for the industry and does not expect that the
establishment of such standards will have a material effect on its physical
security services operations.
From time to time, in the ordinary course of business, the Company is
subjected to penalties or fines as the result of licensing irregularities or the
misconduct of one or more of its agents or employees. In addition, under
principles of common law, the Company can generally be held liable for acts or
omissions of its agents or employees performed in the course and scope of their
employment. In addition, some states have statutes that expressly impose on the
Company legal responsibility for the conduct of its employees.
Risk Management
The nature of the services provided by the Company exposes it to
potentially greater risks of liability for employee acts, injuries (including
workers' compensation claims) or omissions than may be posed by other service
businesses.
The Company generally obtains customer indemnification or liability
limitations in its contracts to mitigate this risk exposure. The Company carries
insurance of various types, including workers' compensation, automobile and
general liability coverage. These policies include deductibles per occurrence
for which the Company is self-insured. The Company obtains its insurance at
rates and upon terms negotiated periodically with various underwriters. The loss
experience of the Company and, to some extent, other protective services
companies affects premium rates charged to the Company. The Company does not
believe that limitations on, or the uncertainty of, insurance coverage for
punitive damages in certain states in which it operates is
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likely to be material, based upon the Company's prior experience with punitive
damages claims. The Company also attempts to manage its risk liability through
analysis of customer facilities, customer profiles and employee screening,
training, supervision and evaluation.
In 1999, the Company combined efforts with a major insurance carrier and
transferred responsibility for the strategic management and administration of
certain of the Company's casualty risks to a newly formed subsidiary of the
Company. The Company remains liable for the casualty risk programs should the
new subsidiary be unable to satisfy its obligations.
Discontinued Operations
On May 29, 1998, the Company sold its electronic security services
business, Wells Fargo Alarm Services ("Alarm"), to ADT Security Services, a
subsidiary of Tyco International, Ltd. ("ADT"), for approximately $425 million
plus the assumption of approximately $6 million of debt by the buyer. The
Company recorded a net after-tax gain of $42.5 million for the transaction in
the second quarter. As a result of the sale, the division's results have been
restated and reflected as discontinued operations for all periods presented.
Through Alarm, the Company provided integrated electronic security systems,
including intrusion and fire detection, sprinkler and critical industrial
process monitoring, closed circuit television and access control. Alarm
designed, installed, monitored and serviced electronic security systems located
on the premises of commercial and residential customers in the United States and
Canada under the Wells Fargo(R) and Pony Express(R) service marks. Alarm also
provided, under the Bel-Air Patrol trade name, an integrated guard, patrol and
alarm service to customers in Bel-Air, Beverly Hills and other Los Angeles
communities. The unit had approximately 2,200 employees. The Company and ADT
have a strategic alliance agreement for the furnishing of electronic and
physical security services to their respective clients.
On May 29, 1998, the Company sold its courier services business, Pony
Express Delivery Services, Inc. In the first quarter of 1998, the Company
recorded a $15.9 million after-tax charge 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.
Since September 1996, the Company had treated its courier services unit as
a discontinued operation. The unit transported time-sensitive packages for
commercial businesses and non-negotiable financial documents for Federal Reserve
banks and financial institutions in 36 states under the Pony Express(R) service
mark. The unit employed approximately 3,600 persons and used a fleet of
approximately 3,000 vehicles, many of which were vehicles provided by the unit's
employees. The courier services unit operated both as a common and contract
carrier and used a combination of tariffs and shipping contracts to control the
terms, conditions and rates applicable to the transportation of shipments. Rates
were dependent upon many factors, including the weight and type of the shipped
item, the distance and urgency of the shipment and the geographical location.
6
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Trademarks and Patents
The Company maintains several service marks of importance to the Company's
business. The Company believes that its rights in these marks are adequately
protected and of unlimited duration. While the Company has patents it considers
to be important to the overall conduct of its business, it does not consider any
particular patent, or group of related patents, essential to its operations.
For both the United States and foreign patents, their expiration, individually
or in the aggregate, is not expected to have any material effect on the
Company's financial condition or results of operations.
The Company entered into an agreement with BorgWarner Inc. ("Automotive")
effective July 31, 1998 whereby the Company sold its rights to the "Borg-Warner"
name and mark in the security field. 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 July 2, 1999, shareholder approval was received to change the Company's
corporate name to Burns International Services Corporation. The change is part
of an overall strategy, announced May 4, 1999, to unify under one brand name the
broad range of services offered by the Company. The brand unification should
eliminate existing market confusion with Wells Fargo & Company ("Wells Fargo")
and Borg-Warner Automotive, Inc.
As part of its brand unification strategy, the Company entered into an
agreement on March 30, 1999 (the "Agreement") with Wells Fargo to relinquish a
royalty-free license to the Wells Fargo name in the security field. In addition,
Wells Fargo granted the Company a royalty-free license to use the Wells Fargo
name and mark for a two-year period commencing on the date of the Agreement.
Under the Agreement, Wells Fargo has reimbursed the Company for costs associated
with the brand unification.
Item 2. Properties
The Company and its subsidiaries maintain general offices in various cities
in the United States, Canada, England, Scotland, Ireland and Colombia. At
December 31, 1999, the Company had leased and occupied approximately 320 branch
and satellite offices. The Company owns and occupies an office building in
Parsippany, New Jersey, with approximately 160,000 square feet. The building is
used for executive, administrative and support functions. The Company leases
approximately 57,000 square feet of office space in Chicago, Illinois for its
executive offices. However, it currently subleases 23,000 square feet of such
office space to third parties. The Company believes that its properties are in
good condition and are adequate to meet its current and reasonably anticipated
needs.
Item 3. Legal Proceedings
The Company is presently, and is from time to time, subject to claims and
suits arising in the ordinary course of its business. In certain of such
actions, plaintiffs request punitive or other
7
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damages that may not be covered by insurance. In addition, the Company has been
subject to claims and suits relating to certain discontinued operations. The
most important of these legal proceedings are discussed below. The Company
believes that the various asserted claims and litigation in which it is
currently involved will not materially affect its financial position or future
operating results, although no assurance can be given with respect to the
ultimate outcome for any such claim or litigation. The Company believes that it
has established adequate provisions for litigation liabilities in its financial
statements in accordance with generally accepted accounting principles. These
provisions include both legal fees and possible outcomes of legal proceedings
(including the environmental matters discussed below).
Centaur Litigation
On April 28, 1999, the Mission Trust and the Company settled a lawsuit
against the Company related to the Company's discontinued property and casualty
insurance subsidiary, Centaur Insurance Company, which ceased writing insurance
in 1984. The suit had alleged damages in excess of $100 million against the
Company due to Centaur's failure to satisfy its reinsurance obligations to
Mission. As part of the settlement, the Company paid the Mission Trust $4
million in the second quarter of 1999, and agreed to pay one-third of any future
dividend or other distribution that may be paid to the Company after
rehabilitation of Centaur.
Environmental Proceedings
The Company and certain of its current and former subsidiaries have been
identified by the U.S. Environmental Protection Agency and certain state
environmental agencies as potentially responsible parties ("PRPs") at several
hazardous waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund") and equivalent state laws and, as
such, may be liable for the cost of cleanup and other remedial activities at
these sites. Responsibility for cleanup and other remedial activities at a
Superfund site is typically shared among PRPs based on an allocation formula.
The Company believes that none of these matters individually or in the aggregate
will have a material adverse effect on its financial position or future
operating results, generally either because the maximum potential liability at a
site is not large or because liability will be shared with other PRPs, although
no assurance can be given with respect to the ultimate outcome of any such
liability. Based on its estimate of allocations of liability among PRPs, the
probability that other PRPs, many of whom are large, solvent public companies,
will fully pay the costs allocated to them, currently available information
concerning the scope of contamination at such sites, estimated remediation costs
at such sites, indemnification obligations in favor of the Company from the
current owners of certain sold or discontinued operations, estimated legal fees
and other factors, the Company has made provisions for indicated environmental
liabilities in the aggregate amount of approximately $2 million. Additionally,
the Company will be indemnified by its former subsidiary, BorgWarner Inc.,
against certain future costs relating to environmental liabilities associated
with certain former automotive operations.
Loomis, Fargo Indemnification Claims
In November and December, 1998, Loomis, Fargo & Company ("Loomis, Fargo")
made various claims against the Company for indemnification, under the
Contribution Agreement dated
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November 28, 1996 under which Loomis, Fargo was formed, for certain cargo losses
and environmental losses. The Company and Loomis, Fargo resolved all such
matters in 1999 without a material adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to the security holders of the Company
during the fourth quarter of 1999.
9
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PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
As of March 6, 2000, there were approximately 188 holders of record of
Common Stock.
The Company has neither paid nor declared any cash dividends on its Common
Stock during the last two years. The payment of dividends by the Company is
prohibited under the terms of the Company's indebtedness. The Company currently
intends to retain earnings for acquisitions, working capital, capital
expenditures, general corporate purposes and reduction of outstanding
indebtedness. Accordingly, the Company does not expect to be able to nor does it
expect to pay cash dividends in the foreseeable future.
High and low sales prices (as reported on the New York Stock Exchange
composite tape) for the Common Stock for each quarter during 1998 and 1999 were:
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Quarter Ended High Low
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1998 March 31 $19 7/16 $15 5/16
June 30 24 3/4 17 7/8
September 30 23 1/16 13 1/4
December 31 20 1/16 13 1/16
1999 March 31 $20 11/16 $14 11/16
June 30 22 15 3/8
September 30 21 1/2 12 5/16
December 31 16 1/16 8 1/4
</TABLE>
Item 6. Selected Financial Data
The selected financial data for the five years ended December 31, 1999,
with respect to the following line items shown under the "Consolidated
Statistical Review" on page 21 of the Annual Report, are incorporated herein by
reference and made a part of this Report: net service revenues; earnings from
continuing operations; earnings from continuing operations per share; total
assets; total debt; and, a discussion of dispositions of business operations
that affect the comparability of information between years.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Management's Discussion and Analysis of Financial Condition and Results
of Operations (set forth on pages 22 through 25) in the Annual Report are
incorporated herein by reference and made a part of this Report.
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An anticipated amendment to certain financial covenants in the Company's
senior credit facility was discussed in Management's Discussion and Analysis of
Financial Condition and Results of Operations. The Company completed the
amendment, dated March 3, 2000 and effective March 15, 2000, to maintain
continued borrowing capacity.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Disclosures about market risk are contained within pages 24 and 25 of the
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the Annual Report, and are incorporated herein by reference and
made a part of this report.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements (including the notes thereto) of the
Company (set forth on pages 26 through 40) in the Annual Report are incorporated
herein by reference and made a part of this report. Supplementary financial
information regarding quarterly results of operations (unaudited) for the years
ended December 31, 1999 and 1998 is set forth in Note 17 of the Notes to
Consolidated Financial Statements. For a list of financial statements and
schedules filed as part of this report, see Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Inapplicable.
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PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to directors and nominees for election as
directors of the Company is incorporated herein by reference to the information
under the caption "Election of Directors" on pages 2 through 5 of the Company's
Proxy Statement for the 2000 Annual Meeting of Stockholders. Information
concerning compliance with Section 16(a) of the Exchange Act is incorporated by
reference to the information under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" on page 8 of the Company's Proxy Statement for
the 2000 Annual Meeting of Stockholders.
Executive Officers
Set forth below are the names, ages, positions and certain other
information concerning the executive officers of the Company as of March 6,
2000:
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<CAPTION>
Name Age Position With Company
<S> <C> <C>
John A. Edwardson 50 Chairman of the Board, President and Chief Executive Officer
John D. O'Brien 57 Senior Vice President
James M. Froisland 49 Vice President and Chief Financial Officer
Robert E. T. Lackey 51 Vice President, General Counsel and Corporate Secretary
James F. McNulty 50 Vice President and President, Total Security Solutions
Nancy E. Kittle 47 Vice President, Human Resources
</TABLE>
Mr. Edwardson has been Chairman of the Board since June 1999 and Chief
Executive Officer and President since March 1999. Mr. Edwardson was President
from 1994 to 1998 and Chief Operating Officer from 1995 to 1998 of United
Airlines, Inc. and was Executive Vice President and Chief Financial Officer from
1991 to 1994 of Ameritech Corp. Mr. Edwardson is also a director of Household
International and Focal Communications Corporation.
Mr. O'Brien has been Senior Vice President of the Company since 1993 and
was Vice President of the Company from 1987 to 1993. Mr. O'Brien is also
President of Burns International Security Services Corporation and a director of
Loomis, Fargo & Co.
Mr. Froisland joined the Company in February 2000 as Vice President and
Chief Financial Officer. Prior to that, and starting in 1996, Mr. Froisland was
Vice President, Corporate Controller of Anixter International, Inc. He served as
Vice President, Corporate Controller for Budget Rent A Car Corporation from 1992
to 1996, and Chief Financial Officer of Allsteel, Inc. from 1990 to 1992.
Mr. Lackey has been Vice President, General Counsel and Secretary of the
Company since 1997 and was Vice President, General Counsel and Secretary of
Transamerica Commercial Finance Corp. from 1991 to 1995.
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Mr. McNulty has been President of Burns International Total Security
Solutions since 1997, and was Executive Vice President of Burns International
Security Services Corporation from 1995 to 1997 and President, Burns
International Security Services North Central business unit from 1987 to 1995.
Ms. Kittle has been Vice President, Human Resources since 1996 and was
Senior Vice President, Human Resources for Forte Hotels, Inc. from 1991 to 1995.
Each of the executive officers named above was elected by the Board of
Directors to serve in the office indicated until his/her successor is elected
and qualified.
Item 11. Executive Compensation
Information with respect to compensation of executive officers and
directors of the Company is incorporated herein by reference to the information
under the captions "Executive Compensation" on pages 8 and 9, and "Compensation
of Directors" on pages 5 and 6, of the Company's Proxy Statement for the 2000
Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to security ownership by persons known to the
Company to beneficially own more than five percent of the Company's common
stock, by directors and nominees for director of the Company and by all
directors and executive officers of the Company as a group is incorporated
herein by reference to the information under the caption "Stock Ownership" on
pages 6 through 8 of the Company's Proxy Statement for the 2000 Annual Meeting
of Stockholders.
Item 13. Certain Relationships and Related Transactions
Information with respect to certain relationships and related transactions
is incorporated herein by reference to the information under the caption
"Certain Relationships and Related Transactions" on page 19 of the Company's
Proxy Statement for the 2000 Annual Meeting of Stockholders.
13
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) The following consolidated financial statements of the registrant
and its consolidated subsidiaries, set forth on pages 26 through 40 of the
Annual Report, and the Independent Auditors' Report, set forth on page 41 of the
Annual Report, are incorporated herein by reference:
Consolidated Statement of Operations--three years ended December 31, 1999
Consolidated Balance Sheet--December 31, 1999 and 1998
Consolidated Statement of Cash Flows--three years ended December 31, 1999
Consolidated Statement of Shareholders' Equity--three years ended
December 31, 1999
Notes to Consolidated Financial Statements
(a)(2) The following report of independent auditors and financial statement
schedule of the registrant and its consolidated subsidiaries are included
herein:
Report of Deloitte & Touche LLP, independent auditors
Schedule II - Valuation and Qualifying Accounts
Certain schedules for which provisions are made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.
(a)(3) The exhibits listed in the "Exhibit Index."
(b) Reports on Form 8-K:
The Company filed a Form 8-K on November 5, 1999, under Item 5, Other
Events, that reported the declaration of a dividend of preferred stock
purchase rights under a new Shareholder Rights Plan.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BURNS INTERNATIONAL SERVICES CORPORATION
By /s/ John A. Edwardson
----------------------
John A. Edwardson
Chairman of the Board, Chief Executive Officer
and President
Date: March 27, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on this day of March 27, 2000:
Signature Title
- --------- -----
/s/ John A. Edwardson Chairman of the Board, Chief Executive
- --------------------- Officer and President and Director
John A. Edwardson (Principal Executive Officer)
/s/ Brian S. Cooper Treasurer
- ------------------- (Principal Financial and
Brian S. Cooper Accounting Officer)
/s/ James .J. Burke, Jr. Director
- ------------------------
James J. Burke, Jr.
/s/ Albert J. Fitzgibbons, III Director
- ------------------------------
Albert J. Fitzgibbons, III
/s/ Arthur F. Golden Director
- ------------------------------
Arthur F. Golden
<PAGE>
/s/ Dale W. Lang Director
- ----------------
Dale W. Lang
/s/ Terry L. Lengfelder Director
- -----------------------
Terry L. Lengfelder
/s/ Robert A. McCabe Director
- --------------------
Robert A. McCabe
/s/ Andrew McNally, IV Director
- ----------------------
Andrew McNally IV
s/ Alexis P. Michas Director
- -------------------
Alexis P. Michas
/s/ H. Norman Schwarzkopf Director
- -------------------------
H. Norman Schwarzkopf
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Burns International Services Corporation
We have audited the consolidated financial statements of Burns International
Services Corporation and subsidiaries, ("the Company") as of December 31, 1999
and 1998, and for each of the three years in the period ended December 31, 1999,
and have issued our report thereon dated March 1, 2000; such consolidated
financial statements and report are included in your 1999 Annual Report to
Stockholders and are incorporated herein by reference. Our audits also included
the financial statement schedule of Burns International Services Corporation and
subsidiaries listed in Item 14 of this Annual Report on Form 10-K. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our opinion,
the financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 1, 2000
<PAGE>
SCHEDULE II
BURNS INTERNATIONAL SERVICES CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
($ MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------ ---------------- --------------------------------- ---------------- -----------------
Years Ended December 31,
Additions
----------------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other Close of
Description of Period Expenses Accounts Deductions Period
---------------- -------------------- ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C>
1997
Allowance for Doubtful Accounts $5.4 $3.1 $0.4 $4.9 $4.0
==== ==== ==== ==== ====
1998
Allowance for Doubtful Accounts $4.0 $5.1 $0.3 $2.4 $7.0
==== ==== ==== ==== ====
1999
Allowance for Doubtful Accounts $7.0 $5.4 $0.1 $4.5 $8.0
==== ==== ==== ==== ====
</TABLE>
The above table sets forth the valuation and qualifying accounts for the
previous three years. Previously reported amounts have been restated to reflect
the discontinued operations related to the May 29, 1998 sales of the Company's
electronic security unit and the Company's courier services unit.
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document Description
- ------- --------------------
3.1 Amended and Restated Certificate of Incorporation of the Company.
3.2 Amended and Restated Bylaws of the Company.
*4.1 Indenture dated as of May 3, 1993 by and between the Company and The
First National Bank of Chicago (incorporated by reference to Exhibit 4.1
to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 1993).
*4.2 Indenture dated as of March 24, 1997 by and between the Company and The
Bank of New York, as trustee (incorporated by reference to Exhibit 4.3
to Registration Statement No. 333-26573).
*4.3 Stockholder Rights Plan dated as of October 29, 1999 between the Company
and The Bank of New York, as Rights Agent (incorporated by reference to
Exhibit 1 to the Form 8-A filed November 5, 1999).
+*10.1 Borg-Warner Corporation Management Stock Option Plan, as amended through
January 19, 1993 (incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1988).
+*10.2 Borg-Warner Security Corporation Directors Stock Appreciation Rights
Plan (incorporated by reference to Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992).
+*10.3 Borg-Warner Security Corporation 1993 Stock Incentive Plan, conformed to
include amendments thereto (incorporated by reference to Exhibit 10.3 to
the Company's Annual Report on Form 10-K for the year ended December 31,
1997).
+*10.4 Borg-Warner Security Corporation Performance Share Plan, conformed to
include amendments thereto (incorporated by reference to Exhibit 10.4 to
the Company's Annual Report on Form 10-K for the year ended December 31,
1997).
+*10.5 Borg-Warner Security Corporation Executive Officer Incentive Plan.
(incorporated by reference to Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997).
+*10.6 Noncompetition Agreement dated as of September 5, 1997 by and between
the Company and J.J. Adorjan. (incorporated by reference to Exhibit 10.8
to the Company's Annual Report on Form 10-K for the year ended December
31, 1997).
+*10.7 Employment Agreement dated September 5, 1997 for J.D. O'Brien
(incorporated by
<PAGE>
reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997).
+*10.8 Noncompetition Agreement dated as of September 5, 1997 by and between
the Company and J.D. O'Brien (incorporated by reference to Exhibit 10.10
to the Company's Annual Report on Form 10-K for the year ended December
31, 1997)
+*10.9 Employment Agreement dated September 5, 1997 for T.M. Wood (incorporated
by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1997).
+*10.10 Noncompetition Agreement dated as of September 5, 1997 by and between
the Company and T.M. Wood (incorporated by reference to Exhibit 10.12 to
the Company's Annual Report on Form 10-K for the year ended December 31,
1997).
+*10.11 Borg-Warner Security Corporation Retirement Savings Excess Benefit Plan,
as amended and restated through January 1, 1995 (incorporated by
reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994).
+*10.12 Borg-Warner Security Corporation Supplemental Benefits Compensation
Program (incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994).
+*10.13 Consulting Agreement amended as of August 31, 1998 between the Company
and H. Norman Schwarzkopf. (incorporated by reference to Exhibit 10.15
to the Company's Annual Report on Form 10-K for the year ended December
31, 1998).
*10.14 Contribution Agreement dated as of November 28, 1996 by and among the
Company, Wells Fargo Armored Service Corporation, Loomis-Wells
Corporation (now known as Loomis, Fargo & Co.), Loomis Holding
Corporation and Loomis Stockholders Trust (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K dated February
7, 1997).
+10.15 Amended and Restated Employment Agreement dated March 26, 1999 for J. A.
Edwardson.
+10.16 Change in Control Agreement dated July 13, 1999 for R. E. T. Lackey.
*10.17 Stock Purchase Agreement, dated as of April 17, 1998, among ADT Security
Services, Inc., Tyco International (US) Inc. and the Company relating to
the purchase and sale of the common stock of Wells Fargo Alarm Services,
Inc., BW-Canada Alarm (Wells Fargo) Corporation and Wells Fargo Pyro
Technologies, Inc. (incorporated by reference to Exhibit 10.19 to the
Company's Annual Report on Form 10-K for the December 31, 1998).
<PAGE>
*10.18 Stock Purchase Agreement, dated as of April 22, 1998, by and between the
Company and Mustang Holdings, Inc. relating to the purchase and sale of
the common stock of Pony Express Delivery Services, Inc. (incorporated
by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1998).
*10.19 Amended and Restated Credit Agreement dated as of June 30, 1998 among
the Company, Lenders listed therein, Canadian Imperial Bank of Commerce,
as Documentation Agent, NationsBank N.A., as Syndication Agent, and
Bankers Trust Company, as Administrative Agent related to the Company's
receivables facility (incorporated by reference to Exhibit 4 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998).
10.20 Second Amendment, dated May 10, 1999, to the Amended and Restated Credit
Agreement and Consent dated as of June 30, 1998 among the Company,
Lenders listed therein, Canadian Imperial Bank of Commerce, as
Documentation Agent, Nations Bank, N.A., as Syndication Agent, and
Bankers Trust Company, as Administrative Agent related to the Company's
receivables facility
*10.21 Third Amendment, dated December 16, 1999, to the Amended and Restated
Credit Agreement dated as of June 30, 1998 among the Company, Lenders
listed therein, Canadian Imperial Bank of Commerce, as Documentation
Agent, Bank of America, N.A., as Syndication Agent, and Bankers Trust
Company, as Administrative Agent related to the Company's receivables
facility (incorporated by reference to Exhibit 10.1 to Form 8-K filed
January 10, 2000).
*10.22 Line of Credit Agreement dated January 3, 2000 between the Company and
Bankers Trust Company (incorporated by reference to Exhibit 10.2 to Form
8-K filed January 10, 2000).
10.23 Fourth Amendment, dated March 3, 2000, to the Amended and Restated
Credit Agreement dated as of June 30, 1998 among the Company, Lenders
listed therein, Canadian Imperial Bank of Commerce, as Documentation
Agent, Bank of America, N.A., as Syndication Agent, and Bankers Trust
Company, as Administrative Agent related to the Company's receivables
facility.
+10.24 Change in Control Agreement dated February 1, 2000 for James M.
Froisland.
+10.25 Change in Control Agreement dated July 13, 1999 for James F. McNulty.
+10.26 Change in Control Agreement dated July 13, 1999 for Nancy E. Kittle.
+*10.27 Borg-Warner Security Corporation's 1999 Stock Incentive Plan
(incorporated by reference to Appendix A of the Company's Proxy
Statement dated March 19, 1999).
13 Portions of the Annual Report to Stockholders.
21 Subsidiaries of the Company.
<PAGE>
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
99 Cautionary Statement.
_________
* Incorporated by reference.
+ Indicates a management contract or compensatory plan or arrangement required
to be filed pursuant to Item 14(c)
<PAGE>
Exhibit 3.1
- -----------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
BORG-WARNER SECURITY CORPORATION
Borg-Warner Security Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation").
DOES HEREBY CERTIFY:
FIRST: That an amendment to the Corporation's Restated Certificate of
Incorporation was approved by Unanimous Consent of the Executive Committee of
the Board of Directors, effective May 3, 1999 as follows:
"RESOLVED, that Article I of the Corporation's Restated Certificate of
Incorporation be amended by striking Article I in its entirety and
replacing it with the following:
ARTICLE I
The name of the Corporation (hereinafter called the "Corporation") is Burns
International Services Corporation."
SECOND: That at a special meeting and vote of the stockholders on July 2,
1999, the stockholders holding a majority of the outstanding stock of the
Corporation have approved said amendment and said amendment was duly adopted in
accordance with the applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware.
THIRD: That the capital of the Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS THEREOF, said Borg-Warner Security Corporation has caused this
Certificate to be signed by its Chairman and attested by its Secretary, this 2nd
day of July 1999.
BORG-WARNER SECURITY CORPORATION
By: __________________________
John A. Edwardson, Chairman
Attest:
By:__________________________
Robert E.T. Lackey, Secretary
<PAGE>
Exhibit 3.2
- -----------
BY-LAWS
OF
BURNS INTERNATIONAL SERVICES CORPORATION
------------------
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE.--The registered office of the
Corporation shall be established and maintained at the office of The Corporation
Trust Company, at 1209 West Orange Street in the City of Wilmington, County of
New Castle, State of Delaware, and said corporation shall be the registered
agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES.--The Corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS.--Annual meetings of stockholders for the
election of directors, and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without the
State of Delaware, and at such time and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting. In
the event the Board of Directors fails to so determine the time, date and place
of meeting, the annual meeting of stockholders shall be held at the registered
office of the corporation in Delaware on the first Tuesday in March. If the
date of the annual meeting shall fall upon a legal holiday, the meeting shall be
held on the next succeeding business day. At each annual meeting, the
stockholders entitled to vote shall elect a Board of Directors and they may
transact such other corporate business as shall be stated in the notice of the
meeting.
<PAGE>
SECTION 2. OTHER MEETINGS.--Meetings of stockholders for any purpose
other than the election of directors may be held at such time and place, within
or without the State of Delaware, as shall be stated in the notice of the
meeting.
SECTION 3. SPECIAL MEETINGS.--Subject to the rights of the holders of
any series of Preferred Stock, special meetings of the stockholders for any
purpose or purposes may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the total number of directors or by any
person or committee expressly so authorized by the Board of Directors pursuant
to a resolution approved by a majority of the total number of directors.
SECTION 4. VOTING.--Each stockholder shall be entitled to vote in
accordance with the terms of the Certificate of Incorporation and in accordance
with the provisions of these By-Laws, in person or by proxy, but no proxy shall
be voted after three years from its date unless such proxy provides for a longer
period.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by an
stockholder who is present.
SECTION 5. QUORUM.--Except as otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the presence, in person or by
proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote thereat, present in person or by proxy, shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.
SECTION 6. NOTICE OF MEETINGS.--Written notice, stating the place,
date and time of the meeting, and the nature of the business to be considered,
shall be given to each stockholder entitled to vote thereat at his address as it
appears on the records of the corporation, not less than ten nor more than sixty
days before the date of the meeting. No business other than that stated in the
notice shall be transacted at any meeting without the unanimous consent of all
the stockholders entitled to vote thereat.
2
<PAGE>
SECTION 7. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.--(A)
Annual Meetings of Stockholders. (1) Nominations of persons for election to
the Board of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (a) pursuant
to the Corporation's notice of meeting delivered pursuant to Section 6 of this
Article II (b) by or at the direction of the Chairman or the Board of Directors
or (c) by any stockholder of the Corporation who is entitled to vote at the
meeting, who complied with the notice procedures set forth in clauses (2) and
(3) of this paragraph (A) and this By-Law and who was a stockholder of record at
the time such notice is delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this By-Law, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than sixty days nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than twenty
days, or delayed by more than sixty days, from such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the ninetieth
day prior to such annual meeting and not later than the close of business on the
later of the sixtieth day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected; (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)
(2) of this By-Law to the contrary, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement naming all of the nominees for director or specifying
the size of the
3
<PAGE>
increased Board of Directors made by the Corporation at least seventy days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this By-Law shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, it if shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following the
day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting pursuant to Section
8 of this Article II. Nominations of persons for election to the Board of
Directors may be made at a special meeting of stockholders at which directors
are to be elected pursuant to the Corporation's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder of the
Corporation who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this By-Law and who is a stockholder of record at the
time such notice is delivered to the Secretary of the Corporation. Nominations
by stockholders of persons for election to the Board of Directors may be made at
such a special meeting of stockholders if the stockholder's notice as required
by paragraph (A) (2) of this By-Law shall be delivered to the Secretary at the
principal executive offices of the Corporation not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of the sixtieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(c) General. (1) Only persons who are nominated in accordance with the
procedures set forth in this By-Law shall be eligible to serve as director and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this By-Law. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this By-Law, and, if any proposed nomination or business is not in compliance
with this By-Law, to declare that such defective proposal or nomination shall be
disregarded.
(2) For purposes of this By-Law, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-Law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules
4
<PAGE>
and regulations thereunder with respect to the matters set forth in this By-Law.
Nothing in this By-Law shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 8. PROCEDURE FOR ELECTION OF DIRECTORS.--Election of
directors at all meetings of the stockholders at which directors are to be
elected shall be by written ballot, and, except as otherwise set forth in the
Certificate of Incorporation with respect to the right of the holders of any
series of Preferred Stock or any other series or class of stock to elect
directors under specified circumstances, a plurality of the votes cast thereat
shall elect. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, all matters other than the election of directors
submitted to the stockholders at any meeting shall be decided by a majority of
the votes cast with respect thereto.
SECTION 9. INSPECTORS OF ELECTIONS; OPENING AND CLOSING THE POLLS.--
(A) The Board of Directors by resolution shall appoint one or more inspectors,
which inspector or inspectors may include individuals who serve the Corporation
in other capacities, including, without limitation, as officers, employees,
agents or representatives of the Corporation, to act at the meeting and make a
written report thereof. One or more persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate has been appointed to act, or if all inspectors or alternates who have
been appointed are unable to act, at a meeting of stockholders, the chairman of
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall have the
duties prescribed by the General Corporation Law of the State of Delaware.
(B) The chairman of the meeting shall fix and announce at the meeting
the date and time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting.
SECTION 10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT.--Subject to the
rights of the holders of any series of Preferred Stock or any other series or
class of stock as set forth in the Certificate of Incorporation to elect
directors under specific circumstances, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at an annual or
special meeting of stockholders of the Corporation and may not be affected by
any consent in writing by such stockholders.
ARTICLE III
DIRECTORS
5
<PAGE>
SECTION 1. GENERAL POWERS.--The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Board of Directors may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by law or by the
Certificate of Incorporation or by these By-Laws required to be exercised or
done by the stockholders.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS.--Subject to the rights
of the holders of any series of Preferred Stock, or any other series or class of
stock as set forth in the Certificate of Incorporation, to elect directors under
specified circumstances, the number of directors shall be fixed from time to
time exclusively pursuant to a resolution adopted by a majority of the total
number of directors which the Corporation would have if there were no vacancies
(the "Whole Board"), but shall consist of not more than seventeen nor less than
three directors. The directors, other than those who may be elected by the
holders of any series of Preferred Stock, or any other series or class of stock
as set forth in the Certificate of Incorporation, shall be divided, with respect
to the time for which they severally hold office, into three classes, as nearly
equal in number as possible, with the term of office of the first class to
expire at the 1993 annual meeting of stockholders, the term of office of the
second class to expire at the 1994 annual meeting of stockholders and the term
of office of the third class to expire at the 1995 annual meeting of
stockholders. Each director shall hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders,
commencing with the 1993 annual meeting, (i) directors elected to succeed those
directors whose terms then expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election, with each director to hold office until his or her successor shall
have been duly elected and qualified, and (ii) if authorized by a resolution of
the Board of Directors, directors may be elected to fill any vacancy on the
Board of Directors, regardless of how such vacancy shall have been created.
SECTION 3. REGULAR MEETINGS.--A regular meeting of the Board of
Directors shall be held without other notice than this By-Law immediately after,
and at the same place as, each annual meeting of stockholders. The Board of
Directors may, by resolution, provide the time and place for the holding of
additional regular meetings without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS.--Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or any three members of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings.
SECTION 5. NOTICE.--Notice of any special meeting shall be given to
each director at his business or residence in writing or by telegram or by
telephone communication. If mailed, such notice shall be deemed adequately
delivered when deposited in the United States mails so addressed, with postage
thereon prepaid, at
6
<PAGE>
least five days before such meeting. If by telegram, such notice shall be
deemed adequately delivered when the telegram is delivered to the telegraph
company at least twenty-four hours before such meeting. If by facsimile
transmission, such notice shall be transmitted at least twenty-four hours before
such meeting. If by telephone, the notice shall be given at least twelve hours
prior to the time set for the meeting. Neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice of such meeting, except for amendments to these
By-Laws as provided under Article VI hereof. A meeting may be held at any time
without notice if all the directors are present or if those not present waive
notice of the meeting in writing, either before or after such meeting.
SECTION 6. QUORUM.--A majority of the directors shall constitute a
quorum for the transaction of business. If at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of the directors
present may adjourn the meeting from time to time until a quorum is obtained,
and no further notice thereof need be given other than by announcement at the
meeting which shall be so adjourned. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the Certificate of Incorporation or these By-Laws require
the vote of a greater number.
SECTION 7. VACANCIES.--Subject to the rights of the holders of any
series of Preferred Stock, or any other series or class of stock as set forth in
the Certificate of Incorporation, to elect directors under specified
circumstances, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors, and any director so chosen shall hold office
for a term expiring at the annual meeting of stockholders at which the term of
office of the class to which he or she has been elected expires and until such
director's successor shall have been duly elected and qualified. No decrease in
the number of authorized directors constituting the Whole Board shall shorten
the term of any incumbent director.
SECTION 8. REMOVAL.--Subject to the rights of the holders of any
series of Preferred Stock, or any other series or class of stock as set forth in
the Certificate of Incorporation, to elect directors under specified
circumstances, any director, or the entire Board of Directors, may be removed
from office at any time, but only for cause and only by the affirmative vote of
the holders of at least 80 percent of the voting power of the then outstanding
Voting Stock, voting together as a single class. For purposes of these By-Laws,
"Voting Stock" shall mean the shares of capital stock of the Corporation
entitled to vote generally in the election of directors.
SECTION 9. RESIGNATIONS.--Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in
writing, and
7
<PAGE>
shall take effect at the time specified therein, and if no time be specified, at
the time of its receipt by the President or Secretary. The acceptance of a
resignation shall not be necessary to make if effective.
SECTION 10. COMMITTEES.--The Board of Directors may, by resolution or
resolutions passed by a majority of the Whole Board, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, or in these By-Laws, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
By-Laws of the Corporation; and, unless the resolution, these By-Laws or the
Certificate of Incorporation expressly so provides, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock.
SECTION 11. COMPENSATION.--Directors shall not receive any stated
salary for their services as directors or as members of committees, but by
resolution of the board a fixed fee and expenses of attendance may be allowed
for attendance at each meeting. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity as an
officer, agent or otherwise, and receiving compensation therefor.
SECTION 12. ACTION WITHOUT MEETING.--Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting, if prior to such action a written
consent thereto signed by all members of the board or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the board or committee.
ARTICLE IV
OFFICERS
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SECTION I. OFFICERS.--The officers of the Corporation shall be a
Chief Executive Officer, a Chairman of the Board of Directors, a President, a
Treasurer, and a Secretary, all of whom shall be elected by the Board of
Directors and who shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect one or more Vice-
Presidents and such Assistant Secretaries and Assistant Treasurers as they may
deem proper. None of the officers of the Corporation need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same person.
SECTION 2. OTHER OFFICERS AND AGENTS.--The Board of Directors may
appoint such other officers and agents as it may deem advisable, who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN.--The Chairman of the Board of Directors, if one
be elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 4. CHIEF EXECUTIVE OFFICER.--The Chief Executive Officer
shall be the head of the Corporation and shall have the general powers and
duties of supervision and management usually vested in the office of Chief
Executive Officer of a corporation. He shall preside at all meetings of the
stockholders if present thereat, and in the absence or non-election of the
Chairman of the Board of Directors, at all meetings of the Board of Directors,
and shall have general supervision, direction and control of the business of the
Corporation. Except as the Board of Directors shall authorize the execution
thereof in some other manner, he shall execute bonds, mortgages and other
contracts in behalf of the Corporation, and shall cause the seal to be affixed
to any instrument requiring it and when so affixed the seal shall be attested by
the signature of the Secretary or the Treasurer or an Assistant Secretary or an
Assistant Treasurer.
SECTION 5. PRESIDENT.--The President shall have such powers and shall
perform such duties as shall be assigned to him by the Board of Directors and
the Chief Executive Officer.
SECTION 6. VICE-PRESIDENT.--Each Vice President shall perform such
duties and have such powers as may from time to time be prescribed by the Board
of Directors or may be delegated to him by the Chief Executive Officer.
A Vice President may be designated "Executive Vice President" and one
or more Vice Presidents may be designated "Senior Vice President". In the
absence or disability of the President, his duties shall be performed by the
Executive Vice President and in the absence or disability of both the President
and the Executive Vice President, the President's duties shall be performed by
the Senior Vice President with the greatest
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seniority, determined in accordance with the order of their election at the last
annual meeting of the Board of Directors or subsequent meeting.
Each Vice President shall have authority to execute contracts and any
other documents as specifically authorized by the Board of Directors or the
Executive Committee or which are within the ordinary course of the business of
the Corporation.
SECTION 7. TREASURER.--The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
Corporation in such depositaries as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation. If required by the Board of Directors, he shall give the
Corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the Board shall prescribe.
SECTION 8. SECRETARY.--The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders, upon
whose requisition the meeting is called as provided in these By-Laws. He shall
record all the proceedings of the meetings of the Corporation and of the
directors in a book to be kept for that purpose, and shall perform such other
duties as may be assigned to him by the directors or the President. He shall
have custody of the seal of the Corporation and shall affix the same to all
instruments requiring it, when authorized by the directors or the President, and
attest the same.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.--Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK.--A certificate of stock, signed by
the Chief Executive Officer, or the President or a Vice-President, and the
Secretary
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or an Assistant Secretary, shall be issued to each stockholder certifying the
number and class or series of shares owned by him in the Corporation. Any or
all of the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES.--A new certificate of stock may be
issued in the place of any certificate theretofore issued by the Corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the Corporation
against any claim that may be made against it on account of the alleged loss of
any such certificate, or the issuance of any such new certificate.
SECTION 3. TRANSFER OF SHARES.--The shares of stock of the
Corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the Corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other person as the directors may designate, by whom they
shall be cancelled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE.--In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Director may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 5. DIVIDENDS.--Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend there may be set apart, out of any funds of the Corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for such other purposes as the directors shall deem conducive
to the interests of the Corporation.
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SECTION 6. SEAL.--The corporate seal shall be circular in form and
shall contain the name of the Corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR.--The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS.--All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE.--Whenever any notice is
required by these By-Laws to be given to the stockholders of the Corporation,
personal notice is not meant unless expressly so stated, and any notice so
required shall be deemed to be sufficient if given by depositing the same in the
United States mail, postage prepaid, addressed to the person entitled thereto at
his address as it appears on the records of the Corporation, and such notice
shall be deemed to have been given on the day of such mailing. Stockholders not
entitled to vote shall not be entitled to receive notice of any meetings except
as otherwise provided by statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation of the Corporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
SECTION 10. VOTING OF SHARES IN OTHER CORPORATIONS.--Shares in other
corporations which are held by the Corporation may be represented and voted by
the Chairman, the Chief Executive Officer, the President, a Vice President or
the Treasurer, by proxy or proxies appointed by one of them. The Board of
Directors may, however, appoint some other person to vote the shares.
ARTICLE VI
AMENDMENTS
These By-Laws may be altered or repealed, and any By-Laws may be made,
at any annual meeting of the stockholders or at any special meeting thereof if
notice of the proposed alteration or repeal of the By-Laws or of the By-Laws to
be made is contained in the notice of such meeting, by the affirmative
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vote of the holders of at least 80% of the voting power of the then outstanding
Voting Stock, or by the affirmative vote of a majority of the total number of
directors, at any regular meeting of the Board of Directors, or at any special
meeting of the Board of Directors, if notice of the proposed alteration or
repeal, or of the By-Laws to be made, is contained in the notice of such special
meeting.
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Exhibit 10.15
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AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT by and between Borg-Warner
Security Corporation, a Delaware corporation (the "Company"), and John Edwardson
(the "Executive"), dated as of the 26th day of March, 1999.
WHEREAS, Executive and the Company are parties to an Employment Agreement
dated February 23, 1999 (the "Original Agreement"), providing for the Company's
employment of Executive pursuant to the terms therein stated; and
WHEREAS, Executive and the Board of Directors of the Company (the "Board")
deem it to be in Executive's and the Company's best interests to amend and
restate the Original Agreement in its entirety by substituting for all terms
thereof the terms set forth herein;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for the Employment Period. As used herein, the phrase "Employment
Period" shall mean the period beginning with the Executive's commencement of
employment with the Company on March 1, 1999 (the "Commencement Date"), and
ending three years from the Commencement Date; provided, however, that on any
anniversary of the Commencement Date at which time the then remaining Employment
Period is two years, the Employment Period shall automatically be extended by an
additional year so that as a result of such extension the then remaining
Employment Period will be three (3) years. Notwithstanding the foregoing, the
Employment Period shall terminate on the first to occur of any of the events
described in Section 4 of this Agreement.
2. Position and Duties.
(a) During the Employment Period , the Executive shall serve as President
and Chief Executive Officer of the Company, reporting to the Board, with such
duties and responsibilities as are customarily assigned to such positions, and
such other duties and responsibilities not inconsistent therewith as may be
assigned to him from time to time by the Board.
(b) During the Employment Period, the Executive shall be nominated to serve
as a member of the Board, subject to the Executive's election in accordance with
the By-Laws of the Company. The Executive shall be elected to serve as Chairman
of the Board not later than December 31, 1999.
(c) During the Employment Period, and excluding any periods of vacation and
sick leave
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to which the Executive is entitled, the Executive shall devote his full-time
efforts to the business and affairs of the Company and use his best efforts to
carry out such responsibilities faithfully and efficiently. It shall not be
considered a violation of the foregoing for the Executive to (i) serve on
corporate, civic or charitable boards or committees, (ii) deliver lectures or
fulfill speaking engagements and (iii) manage personal investments, so long as
such activities do not interfere with the performance of his responsibilities as
an executive employee of the Company in accordance with this Agreement or
violate the provisions of Section 8 of this Agreement.
(d) The Executive's services shall be performed primarily at the Company's
headquarters in Chicago, Illinois, and shall require business travel
commensurate with Executive's responsibilities.
3. Compensation.
(a) Base Salary. During the Employment Period, the Executive shall receive
a base salary (the "Annual Base Salary") at the annual rate of $750,000. The
Annual Base Salary shall be payable in accordance with the Company's payroll
practices for key executives as in effect from time to time. During the
Employment Period, the Annual Base Salary shall be reviewed for possible
increase at least annually. Any increase in the Annual Base Salary shall not
limit or reduce any other obligation of the Company under this Agreement. The
Annual Base Salary shall not be reduced after any such increase, and the term
"Annual Base Salary" shall thereafter refer to the Annual Base Salary as so
increased.
(b) Annual Bonus.
(i) In addition to the Annual Base Salary, for each calendar year or
portion of a calendar year during the Employment Period, the Executive
shall be eligible to earn an annual cash bonus (the "Annual Bonus")
pursuant to the Company's annual cash bonus program. The Annual Bonus for
each calendar year during the Employment Period shall be based on
achievement of performance goals established by the Compensation Committee
of the Board for senior management, as reflected in the minutes of the
Compensation Committee of the Board during 1998, such that (i) if the
minimum performance goals are achieved, the Annual Bonus shall be a total
of $300,000, (ii) if the targeted performance goals are achieved, the
Annual Bonus shall be increased by $300,000, for an aggregate of $600,000,
and (iii) if the maximum goals are achieved or exceeded, the Annual Bonus
shall be increased by an additional $200,000, for an aggregate of $800,000;
provided that Executive's Annual Bonus for the calendar year 1999 shall in
no event be less than $500,000.
(ii) Each Annual Bonus shall be paid in a single cash lump sum no
later than 60 days after the end of the period for which the Annual Bonus
is awarded or the achievement of the performance goals is determined by the
Compensation Committee of the Board, whichever is later. Except for any
Annual Bonus payable with respect to calendar year 1999, the Annual Bonus,
if any, payable to Executive for any period that is less than an entire
calendar year shall be prorated to reflect the portion of such calendar
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year in which Executive was employed by the Company. During the Employment
Period, the Annual Bonus shall be reviewed for possible increase at least
annually. Any increase in the Annual Bonus shall not limit or reduce any
other obligation of the Company under this Agreement. The Annual Bonus
shall not be reduced after any such increase, and the term "Annual Bonus"
shall thereafter refer to the Annual Bonus as so increased.
(iii) Notwithstanding Section 3(b)(ii) above, the Company shall have
the right to defer all or a portion of the $500,000 minimum Annual Bonus
payable to Executive under Section 3(b)(i) above with respect to calendar
year 1999 (the "Guaranteed Bonus") in accordance with the terms and
conditions set forth in this Section 3(b)(iii). If, after taking into
account Executive's "applicable employee remuneration" (as defined in
Internal Revenue Code Section 162(m)(4)) with respect to calendar year 1999
other than the Guaranteed Bonus, the Company shall determine that any
portion of the Guaranteed Bonus would, if paid at the time prescribed in
Section 3(b)(ii) above, not be deductible by the Company by reason of
Internal Revenue Code (S)162(m), the Company shall have the right to defer
payment of all or any part of such non-deductible portion (collectively the
"Deferred Bonus") in accordance with this Section 3(b)(iii). The Deferred
Bonus, together with interest thereon as prescribed by the last sentence of
this Section 3(b)(iii) (the "Deferred Amount"), shall be paid in
installments, commencing on December 31, 2001, and continuing on each
December 31 thereafter until the Deferred Amount has been paid in full.
Each installment payment of the Deferred Amount shall equal the positive
excess, if any, of (i) the annual deduction limitation under Internal
Revenue Code (S)162(m) with respect to the calendar year within which such
installment payment is to be made over (ii) Executive's "applicable
employee remuneration" (determined without regard to any payment under this
Section 3(b)(iii)) with respect to such calendar year. Notwithstanding the
above, the remaining unpaid balance of such Deferred Amount shall be paid
in full to the Executive (or to his designated beneficiary in the event of
his death) in a lump sum not later than sixty (60) days following the first
to occur of (A) the date on which Executive is no longer a "covered
employee" within the meaning of Internal Revenue Code (S)162(m); or (B) a
Change in Control of the Company. For purposes of this Section 3(b)(iii),
the Deferred Amount shall be credited with "interest" thereon during the
period beginning March 1, 2000, and ending on the date of payment, at a
rate equal to the Certificate Rate as defined in Section 4.1 of the
Company's Series 1998-1 Supplement to Pooling and Servicing Agreement dated
December 31, 1998, compounded quarterly; provided however that in the event
the Certificate Rate is no longer available, the Deferred Amount shall
thereafter be credited with "interest" at LIBOR plus __ basis points, or at
such other rate of return as shall be agreed between the Executive and the
Compensation Committee of the Board. The Company may, but shall not be
required to, set aside funds in a grantor trust or otherwise to provide for
such payment, but the Executive's rights to such deferred compensation
shall at all times be as a general creditor of the Company, and he shall
have no right to or other interest in any such funds set aside by the
Company.
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(c) Equity Compensation.
(i) Stock Option. Upon the execution of this Agreement, the Executive
shall be a granted a non-qualified stock option to purchase 400,000 shares
of the Company's common stock. The exercise price for such option shall be
based on the average of the opening and closing price of the Company's
common stock on such date. Such option shall have a term of thirteen (13)
years, and shall become exercisable in three equal annual installments on
each of the first three anniversaries of the date of this Agreement, and
shall include such other terms and conditions as are set forth in the
written stock option agreement to be entered into between the Company and
Executive. To the extent this option is granted other than pursuant to a
shareholder approved incentive plan, the Executive agrees not to exercise
such option, to the extent any such exercise would give rise to a deduction
limitation for the Company under Internal Revenue Code (S)162(m), prior to
the earliest to occur of (A) the Executive is no longer a "covered
employee" within the meaning of Internal Revenue Code (S)162(m); (B) a
Change in Control of the Company; or (C) the six (6) month period
immediately prior to the expiration of the term of the option. The Company
shall take such reasonable efforts as may be necessary to cause any shares
to be issued in connection with such option to be registered under the
Federal Securities Act of 1933, as amended, or under applicable state
securities laws, or to secure an appropriate exemption from such
registration.
(ii) Performance Shares. Upon the Commencement Date, the Company shall
award 100,000 Performance Shares to the Executive under the Company's 1999
Stock Incentive Plan (the "Plan"), which is subject to approval by the
Company's shareholders. The Performance Shares shall entitle the Executive
to a payment under the terms of the Plan upon the attainment of performance
targets previously set by the Compensation Committee of the Board for
senior management for the three-year period ending December 31, 2000, as
reflected in the minutes of the Compensation Committee of the Board during
1998, and shall include such other terms and conditions as are set forth in
the written Performance Share Award to be entered into between the Company
and Executive on the date of grant thereof. The Company agrees to award to
the Executive an additional 100,000 Performance Shares not later than the
end of the first quarter, March 31, 2000. Such additional Performance
Shares shall vest upon the attainment of the performance targets
established by the Compensation Committee of the Board for senior
management at the time of such award for the three-year period ending
December 31, 2002.
(iii) Restricted Shares. Upon the execution of this Agreement, the
Company shall award 100,000 shares of restricted stock to the Executive.
The restricted shares shall vest in five equal annual installments of
20,000 shares, commencing on the first anniversary of the date of this
Agreement, and shall include such other terms and conditions as are set
forth in the written Stock Award to be entered into between the Company and
Executive. The Company shall take such reasonable efforts as may be
necessary to cause any shares
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to be issued in connection with such award to be registered under the
Federal Securities Act of 1933, as amended, or under applicable state
securities laws, or to secure an appropriate exemption from such
registration.
(iv) In the event that (1) Executive's employment is terminated by
reason of his death or Disability, by the Company without Cause, or by
Executive for Good Reason, or (2) upon a Change in Control of the Company,
any unvested option shares, performance shares, or restricted shares
awarded under this Section 3(c) shall vest in full at the time of such
termination or Change in Control. In the event that Executive's employment
is terminated by the Company with Cause, or by Executive without Good
Reason, any unvested option shares, performance shares, or restricted
shares awarded under this Section 3(c) shall be forfeited by Executive for
no consideration. Following a termination of Executive's employment,
Executive's option shall be exercisable for a period of (1) two-years from
the date of termination in the event of a termination due to death,
Disability, by the Company without Cause, or by Executive with Good Reason,
and (2) 90-days from the date of termination in the event of a termination
by Executive without Good Reason or a upon a termination of employment by
the Company for Cause, in either case not beyond the original term of such
option.
(v) Executive shall be eligible to receive future grants under the
Company's stock incentive programs consistent with, and in a manner
appropriate to, awards made to other senior executives of the Company.
(d) Supplemental Benefit Compensation. The Company will make contributions,
at times consistent with normal Company practice, of not less than $165,000
annually, to a tax-deferred annuity for Executive of a type substantially
equivalent to those currently provided to senior executive's of the Company.
(e) Other Benefits. During the Employment Period:
(i) the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs of the
Company to the same extent as other senior management; and
(ii) the Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in, and shall receive all benefits
under, all welfare benefit plans, practices, policies and programs provided
by the Company and its affiliated companies (including, without limitation,
medical, prescription, dental, disability, salary continuance, employee
life insurance, group life insurance, accidental death and travel accident
insurance plans and programs) to the same extent as other senior
management.
(f) Expenses. During the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the
Executive in carrying out the Executive's duties under this Agreement, provided
that the Executive complies with the policies, practices and procedures of the
Company for submission of expense reports, receipts, or similar
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documentation of such expenses.
(g) Fringe Benefits. During the Employment Period, the Executive shall be
entitled to paid vacation, the use of a Company-provided car of the Executive's
choice, tax and financial planning services, and payment of annual dues,
assessments and expenses at one country club and one dinner club selected by the
Executive, in each case on the terms and conditions as are in effect for other
senior management of the Company from time to time or, if not made available to
other senior management, on terms and conditions that are determined by the
Compensation Committee of the Board to be fair and reasonable.
(h) Deferred Compensation. Notwithstanding anything to the contrary herein,
Executive may elect to defer the payment of all or any portion of his Annual
Base Salary or Annual Bonus for any calendar year during the Employment Period,
provided that before the first day of the calendar year with respect to which
such Annual Base Salary or Annual Bonus relates, he notifies the Company in
writing of his election to do so. Any compensation that is so deferred shall
accrue "interest" at the rate described in Paragraph 3(b)(iii) hereof, or at
such other rate of return as shall be agreed between the Executive and the
Compensation Committee of the Board at the time the deferral election is made.
Any such deferred compensation, together with the accrued interest or other
deemed earnings thereon, shall be paid to the Executive in cash upon the
termination of his employment with the Company in a single lump sum or, if so
specified in the deferral election, in up to five equal annual installments. The
Company may, but shall not be required to, set aside funds in a grantor trust or
otherwise to provide for such payment, but the Executive's rights to such
deferred compensation shall at all times be as a general creditor of the
Company, and he shall have no right to or other interest in any such funds set
aside by the Company. Notwithstanding the preceding sentence, in the event of a
Change in Control of the Company (as defined below), the Company shall pay to
Executive the aggregate amount of compensation deferred under this Paragraph
3(h) not later than thirty (30) days following the effective date of such Change
in Control.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. The
Company shall be entitled to terminate the Executive's employment because of the
Executive's Disability during the Employment Period. "Disability" means that (i)
the Executive has been unable, for a period of six months, or for a total of 180
days in any given period of twelve months, to perform the Executive's duties
under this Agreement, as a result of physical or mental illness or injury, and
(ii) a physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive's guardian or legal representative, has determined
that the Executive's incapacity is total and permanent. A termination of the
Executive's employment by the Company for Disability shall be communicated to
the Executive by written notice, and shall be effective on the 30th day after
receipt of such notice by the Executive (the "Disability Effective Date"),
unless the Executive is able to, and does, return to full-time performance of
the Executive's duties before the Disability Effective Date.
(b) By the Company.
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(i) The Company may terminate the Executive's employment during the
Employment Period for Cause or without Cause. "Cause" means Executive has
(A) been convicted of, or pleaded guilty or nolo contendere to, a felony
involving theft or moral turpitude, or (B) engaged in conduct that
constitutes willful gross neglect or willful gross misconduct with respect
to his employment duties, resulting, in either case, in material economic
harm to the Company; provided, however, that an act or failure to act on
the part of the Executive shall be considered "willful" if it is done, or
omitted to be done, by the Executive in bad faith and without reasonable
belief that Executive's action or omission was in the best interests of the
Company and in accordance with the policies of the Board, and no act or
omission will constitute Cause unless the Company has given reasonable
written notice thereof to Executive and he then fails to promptly remedy
the act or omission.
(ii) A termination of employment by the Company for Cause shall be
effectuated by giving the Executive written notice ("Notice of Termination
for Cause") of the termination, setting forth the conduct of the Executive
that constitutes Cause. Except as provided in clause A of Section 4(b)(i)
above, a termination of employment by the Company for Cause shall be
effective on the date when the Notice of Termination for Cause is given,
unless the notice sets forth a later date (which date shall in no event be
later than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the Company
without Cause shall be effected by giving the Executive written notice of
the termination.
(c) By the Executive.
(i) The Executive may terminate employment for Good Reason. "Good
Reason" means:
A. the assignment to the Executive of any duties inconsistent in
any respect with Executive's position, including status, offices,
titles and reporting relationships, authority, duties, or
responsibilities as contemplated by this Agreement, or any other
action by the Company which results in a significant diminution in
such position, authority, duties, or responsibilities, excluding any
isolated, immaterial, and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of a
reasonable written notice thereof given by Executive;
B. any failure by the Company to provide compensation and
benefits to the Executive as described in this Agreement, other than
isolated, immaterial, and inadvertent failure not taken in bad faith
and which is remedied by the Company promptly after receipt of a
reasonable written notice thereof given by Executive;
C. receipt by the Executive of notice of non-renewal of the
automatic
7
<PAGE>
evergreen feature of the Employment Period; or
D. failure by the Company to obtain the assumption in writing of
its obligations under this Agreement by any successor to all or
substantially all of the assets of the Company within 15 calendar days
after a Change in Control of the Company; or
E. failure of the Company to elect the Executive as a director of
the Company at its annual shareholder meeting scheduled for April 20,
1999; or
F. failure of the Board of Directors of the Company to elect the
Executive Chairman of the Board on or before December 31, 1999; or
G. the Executive being required to relocate to a principal place
of employment more than thirty-five (35) miles from his current place
of employment without his consent; or
H. any other material breach by the Company of its obligations to
Executive under this Agreement; or
I. should there be a Change in Control of the Company (as defined
below), a termination by the Executive, at his own initiative, for any
reason during the 30-day period immediately following the end of the
three (3) month period (or such shorter transition period to which the
Company may in its discretion consent) immediately following the date
of the Change in Control.
For purposes of this Agreement, "Change in Control" means the
happening of any of the following events:
(1) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either (A) the
then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power
of the then outstanding voting securities of the Company entitled to
vote generally in the election of directors (the "Outstanding Company
Voting Securities"); excluding, however, the following: (A) any
acquisition directly from the Company, other than an acquisition by
virtue of the exercise of a conversion privilege unless the security
being so converted was itself acquired directly from the Company, (B)
any acquisition by the Company, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (D) any acquisition by
any Person pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (3) of this Section 4(c)(i); or
8
<PAGE>
(2) A change in the composition of the Board such that the
individuals who, as of the first day of the Employment Period,
constitute the Board (such Board shall be hereinafter referred to as
the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, for purposes of this Section
4(c)(i), that any individual who becomes a member of the Board
subsequent to such date, whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a two-
thirds (2/3) of those individuals who are members of the Board and who
were also members of the Incumbent Board (or deemed to be such
pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided
further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board
shall not be so considered as a member of the Incumbent Board; or
(3) The approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company ("Corporate
Transaction"); excluding, however, such a Corporate Transaction
pursuant to which (A) all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined
voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of
the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be,
(B) no Person (other than the Company, any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or such corporation resulting
from such Corporate Transaction) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the
election of directors except to the extent that such ownership existed
with respect to the Company prior to the Corporate Transaction and (C)
individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
9
<PAGE>
(4) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(ii) A termination of employment by the Executive for Good Reason
shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth the conduct
of the Company that constitutes Good Reason. A termination of employment by
the Executive for Good Reason shall be effective on the fifth business day
following the date when the Notice of Termination for Good Reason is given,
unless the notice sets forth a later date (which date shall in no event be
later than 30 days after the notice is given).
(iii) Executive may, by at least 30 days prior written notice,
voluntarily terminate this Agreement, without liability by virtue of such
termination at any time without Good Reason.
(d) No Waiver. The failure to set forth any fact or circumstance in a
Notice of Termination for Cause or a Notice of Termination for Good Reason shall
not constitute a waiver of the right to assert, and shall not preclude the party
giving notice from asserting, such fact or circumstance in an attempt to enforce
any right under or provision of this Agreement; provided, that the foregoing
shall not mean that a notice purporting to be a Notice of Termination for Cause
pursuant to clause A of Section 4(b)(i) that fails to comply with said clause A
will be treated as a valid Notice of Termination for Cause.
(e) Date of Termination. The "Date of Termination" means the date of the
Executive's death, the Disability Effective Date, the date on which the
termination of the Executive's employment by the Company for Cause or by the
Executive for Good Reason is effective, or the date on which the Company gives
the Executive notice of a termination of employment without Cause or the
Executive gives the Company not less than thirty (30) days prior written notice
of a termination of employment without Good Reason, as the case may be.
5. Obligations of the Company upon Termination and/or a Change in Control.
(a) Termination by Company Other Than for Cause; Voluntary Termination for
Good Reason. If, during the Employment Period, the Company terminates the
Executive's employment other than for Cause, death, or Disability, or the
Executive terminates his employment for Good Reason, the Company shall pay the
amounts described in subparagraph (i) below to the Executive in a lump sum in
cash within 30 days after the Date of Termination and shall provide the
continuing benefits described in subparagraph (ii) below. The payments provided
pursuant to this Section 5(a) are intended as liquidated damages for a
termination of the Executive's employment by the Company other than for Cause or
Disability or for the actions of the Company leading to a termination of the
Executive's employment by the Executive for Good Reason, and shall be the sole
and exclusive remedy therefor.
(i) The amounts to be paid in a lump sum as described above are:
10
<PAGE>
A. The Executive's accrued but unpaid cash compensation (the
"Accrued Obligations"), which shall equal the sum of (l) any portion
of the Executive's Annual Base Salary and supplemental benefit
compensation payable pursuant to Section 3(d) of this Agreement
through the Date of Termination that has not yet been paid; (2) an
amount equal to the product of the Annual Bonus the Executive would
have received for the year of termination if all goals had been
achieved at the targeted level (as such term is used in clause (ii) of
Section 3(b) above to calculate bonuses under the Company's annual
bonus plan) multiplied by a fraction, the numerator of which is the
number of days in the current calendar year through the Date of
Termination and the denominator of which is 365; (3) any accrued but
unpaid vacation pay; and (4) any accrued but unpaid Annual Bonus
relating to the calendar year prior to the year in which such
termination occurs; and
B. Severance pay equal to the sum of (1) the Annual Base Salary,
(2) the Annual Bonus and (3) the annual supplemental benefit
compensation which, absent termination, that would have been payable
to Executive pursuant to Sections 3(a), (b) and (d) of this Agreement
as if Executive were still employed hereunder during the period
commencing on the Date of Termination and ending on the last day of
the then current Employment Period (as determined under Section 1
hereof without regard to any further automatic extensions occurring
after the effective date of such termination (the "Severance Pay
Period"). For purposes of this Section 5(a)(i)(B), the amounts payable
under the preceding sentence shall be based on the amounts in effect
as of the Date of Termination, prorated to reflect any partial years
during the Severance Pay Period; provided that the Annual Bonus shall
be based on the Annual Bonus that would otherwise have been paid to
Executive under Section 3(b) for the year of termination if all goals
had been achieved at the targeted level (as such term is used in
clause (ii) of Section 3(b) above).
(ii) During the Severance Pay Period, Executive and/or the Executive's
family shall be provided with benefits at least as favorable as those that
would have been provided to them under clause (ii) of Section 3(e) of this
Agreement if the Executive's employment had continued through the end of
Severance Pay Period; provided, however, that during any period when the
Executive is eligible to receive such benefits under another employer-
provided plan, the benefits provided by the Company under this Section
5(a)(ii) may be made secondary to those provided under such other plan.
(b) Death or Disability. If the Executive's employment is terminated by
reason of the Executive's death or Disability during the Employment Period , the
Company shall pay the amounts described in subparagraph (i) below to the
Executive in a lump sum in cash within 30 days after the Date of Termination and
shall provide the benefits described in subparagraph (ii) below.
(i) The amounts to be paid in a lump sum as described above are:
11
<PAGE>
A. The Company shall pay the Accrued Obligations to the Executive
or the Executive's estate or legal representative, as applicable; and
B. Severance pay equal to the sum of (1) the Annual Base Salary,
(2) the Annual Bonus and (3) the annual supplemental benefit
compensation which, absent termination, that would have been payable
to Executive pursuant to Sections 3(a), (b) and (d) of this Agreement
as if Executive were still employed hereunder during the period
commencing on the Date of Termination and ending on the first
anniversary thereof. For purposes of this Section 5(b)(i)(B), the
amounts payable under the preceding sentence shall be based on the
amounts in effect as of the Date of Termination, prorated to reflect
any partial years during the Severance Pay Period; provided that the
Annual Bonus shall be based on the Annual Bonus that would otherwise
have been paid to Executive under such Section 3(b) for the year of
termination if all goals had been achieved at the targeted level (as
such term is used in clause (ii) of Section 3(b) above).
(ii) During the one year period following the Executive's termination
of employment due to death or Disability, Executive and/or the Executive's
family, as the case may be, shall be provided with benefits at least as
favorable as those that would have been provided to them under clause (ii)
of Section 3(e) of this Agreement if the Executive's employment had
continued through the end of such one year period; provided, however, that
during any period when the Executive is eligible to receive such benefits
under another employer-provided plan, the benefits provided by the Company
under this Section 5(b)(ii) may be made secondary to those provided under
such other plan.
(c) Cause; Other than for Good Reason. If the Executive's employment is
terminated by the Company for Cause during the Employment Period, or if the
Executive terminates his employment during the Employment Period other than for
Good Reason, the Company shall pay the Executive the sum of (i) the Annual Base
Salary through the Date of Termination, and (ii) any accrued but unpaid Annual
Bonus relating to the calendar years prior to the year in which such termination
occurs, in each case to the extent not yet paid, and the Company shall have no
further obligations under this Agreement.
(d) Change in Control. If, during the two (2) year period following a
Change in Control of the Company, either the Company terminates the Executive's
employment other than for Cause, death, or Disability, or the Executive
terminates his employment for Good Reason, the Company shall pay the amounts and
provide the benefits described in Sections 5(a)(i) and (ii) above to the
Executive at the time and in the amounts determined under Section 5(a), provided
that the Severance Pay Period as used in subparagraphs 5(a)(i)(A) and 5(a)(ii)
shall, for purposes of this Section 5(d), be a period of three (3) years.
(e) In the event that the Executive becomes entitled to the payments and
benefits provided under this Section 5 and/or any other payments or benefits in
connection with a Change
12
<PAGE>
in Control or termination of the Executive's employment with the Company
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person) (collectively,
the "Payments"), if any of the Payments will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code, the Company shall pay the Executive,
at least 30 days prior to the time payment of any such Excise Tax is due, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax and any federal and state and
local income tax imposed on the Gross-Up Payment, shall be equal to the Excise
Tax imposed on the Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(A) the Payments shall be treated as "parachute payments" within the meaning of
Section 280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to the Executive the Payments (in whole or
in part) do not constitute parachute payments or excess parachute payments or
are otherwise not subject to the Excise Tax, (B) the amount of the Payments
which shall be treated as subject to the Excise Tax shall be equal to the lesser
of (i) the total amount of the Payments or (ii) the amount of excess parachute
payments within the meaning of Section 280G(b)(1) (after applying clause (A)
above), and (C) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in accordance
with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the Date of Termination, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of termination of employment, the Executive shall repay to the Company at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax). In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time of the termination of employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally determined. The
Executive shall notify the Company of any audit or review by the Internal
Revenue Service of the Executive's federal income tax return for the year in
which a payment under this Agreement is made within ten (10) days of the
Executive's receipt of notification of such audit or review. In addition, the
Executive shall also notify the Company of the final resolution of such audit or
review within ten (10) days of such resolution.
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
for which the Executive may qualify, nor shall
13
<PAGE>
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Vested benefits and other amounts that the Executive
is otherwise entitled to receive under any plan, policy, practice or program of,
or any contract or agreement with, the Company or any of its affiliated
companies on or after the Date of Termination shall be payable in accordance
with such plan, policy, practice, program, contract or agreement, as the case
may be, except as explicitly modified by this Agreement.
7. No Mitigation. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and,
except as specifically provided in Section 5(a)(ii) and 5(b)(ii) of this
Agreement, such amounts shall not be reduced, regardless of whether the
Executive obtains other employment.
8. Confidential Information; Noncompetition.
(a) The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies and their respective businesses
that the Executive obtains during the Executive's employment by the Company or
any of its affiliated companies and that is not public knowledge (other than as
a result of the Executive's violation of this Section 8(a)) ("Confidential
Information"). The Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's employment
with the Company, except with the prior written consent of the Company or as
otherwise required by law or legal process.
(b) During the Noncompetition Period (as defined below), the Executive
shall not, without the prior written consent of the Board, engage in or become
associated with a Competitive Activity. For purposes of this Section 8(b): (i)
the "Noncompetition Period" means the period beginning with the Commencement
Date and ending on the last day of the Employment Period (as determined under
Section 1 hereof without regard to any automatic extensions occurring after the
effective date of the termination of Executive's employment), plus, if the
Executive's employment is terminated by the Company for Cause or voluntarily by
the Executive other than with Good Reason, plus two years after the end of the
Employment Period; (ii) a "Competitive Activity" means any business or other
endeavor whose primary business is to provide guard, alarm or armored transport
protective services or courier services, or related security or staffing
services; and (iii) the Executive shall be considered to have become "associated
with a Competitive Activity" if he becomes directly or indirectly involved as an
owner, employee, officer, director, independent contractor, agent, partner,
advisor, or in any other capacity calling for the rendition of the Executive's
personal services, with any individual, partnership, corporation or other
organization that is engaged in a Competitive Activity. Notwithstanding the
foregoing, the Executive may make and retain investments during the Employment
Period and thereafter in not more than five percent of the equity of any entity
engaged in a Competitive Activity, if such equity is listed on a national
securities exchange or regularly traded in an over-the-counter market.
14
<PAGE>
9. Arbitration; Attorneys' Fees. Any dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by arbitration
in the State of Illinois, in accordance with the rules of the American
Arbitration Association then in effect, and judgment may be entered on the
arbitrator's award in any court having jurisdiction. The Company agrees to pay,
as incurred, to the fullest extent permitted by law, all legal fees and expenses
that the Executive may reasonably incur as a result of any contest (regardless
of the outcome) by the Company, the Executive or others of the validity or
enforceability of or liability under, or otherwise involving, any provision of
this Agreement; provided, that in the case of any contest in which the Executive
seeks to obtain any relief from the Company pursuant to this Agreement, such
fees and expenses shall be paid by the Company only if the Executive obtains a
substantial portion of the relief he seeks; and provided, further, that in the
case of any action brought by the Company to enforce any provision of Section 8
of this Agreement, such fees and expenses shall be paid by the Company only if
it fails to obtain a substantial portion of the relief it seeks. The Company
further agrees to reimburse Executive for reasonable professional fees and
related expenses incurred in the negotiation and preparation of this Agreement,
but not in excess of the amount of legal fees paid by the Company to its outside
counsel in the preparation and negotiation of this Agreement.
10. Successors.
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
have been required to perform it if no such succession had taken place. As used
in this Agreement, "Company" shall mean both the Company as defined above and
any such successor that assumes and agrees to perform this Agreement, by
operation of law or otherwise.
11. Miscellaneous.
(a) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and
15
<PAGE>
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
-------------------
John Edwardson
747 Sheridan Road
Wilmette, IL 60091
If to the Company:
-----------------
Borg-Warner Security Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this Section 11(b). Notices and communications shall be
effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the Company may
withhold from amounts payable under this Agreement all federal, state, local and
foreign taxes that are required to be withheld by applicable laws or
regulations.
(e) The failure of the Executive or the Company to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 4(c) of this Agreement) shall not
be deemed to be a waiver of such provision or right or of any other provision of
or right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof, including but not limited to the Original Agreement.
(g) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and which together shall constitute one
instrument.
16
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
EXECUTIVE:
---------------------------------
BORG-WARNER SECURITY CORPORATION
By
-------------------------------
Name:
Title:
17
<PAGE>
Exhibit 10.16
- -------------
CHANGE IN CONTROL AGREEMENT
---------------------------
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") is entered into effective
July 13, 1999 by and between Burns International Services Corporation, a
Delaware corporation (the "Company") and Robert E.T. Lackey (the "Executive").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Schedule A hereto.
In consideration of the mutual promises and agreements herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, both parties intending to be legally bound hereby, the
Company and Executive hereby agree as follows:
1. Term of Agreement. This Agreement shall terminate, except to the
-----------------
extent that any obligation of the Company hereunder remains unpaid as of such
time, upon the first to occur of (a) the termination of Executive's employment
with the Company or (b) the second anniversary of the date of a Change in
Control of the Company if Executive is employed by the Company upon such second
anniversary.
2. Severance Benefits Upon Termination Following Change in Control.
---------------------------------------------------------------
(a) If a Change in Control of the Company shall have occurred while
Executive is still an employee of the Company, and Executive's employment with
the Company is terminated during the two (2) year period following the date of
such Change in Control by reason of a termination (1) by the Company without
Cause, or (2) by Executive with Good Reason, Executive shall be entitled to the
following severance benefits:
(i) Within five (5) business days after the date of Executive's
termination, the Company shall make a lump sum payment to Executive in an
amount equal to the sum of (A) his accrued but unpaid annual base salary
through the date of termination at the greater of the rate in effect at the
time the Change in Control occurred or the rate in effect when the notice
of termination was given, (B) an amount equal to 100% of Executive's Target
Annual Bonus multiplied by a fraction, the numerator of which is the number
of days in the fiscal year of the Company to which such Target Annual Bonus
relates during
<PAGE>
which Executive was employed by the Company, and the denominator of which
is 365, and (C) an amount equal to Executive's supplemental benefit
compensation accrued but unpaid through the date of termination.
(ii) Within thirty (30) days after the date of Executive's
termination, the Company shall make a lump sum payment to Executive in an
amount equal to two (2) times the sum of (A) Executive's annual base salary
at the greater of the rate in effect at the time the Change in Control
occurred or the rate in effect when the notice of termination was given,
plus (B) Executive's Target Annual Bonus.
(iii) Any outstanding options to purchase stock of the Company held by
Executive as of the date of termination shall immediately vest and become
exercisable in full.
(iv) The restrictions on any shares of restricted stock held by
Executive which have not yet terminated will terminate immediately.
(v) Until the earlier of the second anniversary of the date of
termination or the date on which Executive becomes employed by a new
employer, the Company shall pay the reasonable costs of a reasonable
outplacement service selected by Executive.
(vi) Until the earlier of the second anniversary of the date of
termination or the date on which Executive becomes employed by a new
employer, the Company shall, at its expense, provide Executive and
Executive's family members with medical, dental, life insurance, disability
and accidental death and dismemberment benefits at the highest level
provided to Executive and Executive's family members during the period
beginning immediately prior to the Change of Control and ending on the date
of termination, provided, however, that if Executive becomes employed by a
-------- -------
new employer which maintains a major medical plan that either (i) does not
cover Executive and Executive's family members with respect to a pre-
existing condition which was covered under the Company's major medical
plan, or (ii) does not cover Executive and Executive's family members for a
designated waiting period, Executive's coverage under the Company's major
medical plan shall continue (but shall be limited in the event of
noncoverage due to a preexisting condition, to the preexisting condition
itself) until the earlier of the end of the applicable period of
noncoverage under the new employer's plan or the second anniversary of the
date of termination.
-2-
<PAGE>
(vii) The Company shall pay any amounts previously deferred by
Executive pursuant to any deferred compensation plan or arrangement
maintained by the Company.
(b) The payments provided for under this Section 2 shall be in addition to
any non-severance compensation and benefits provided for under any of the
Company's employee benefit plans, policies and practices or under the terms of
any other contracts, but in lieu of any severance pay under any Company employee
benefit plan, policy and practice or under the terms of any other contract
including any employment contract.
3. Termination for Cause, Disability, and without Good Reason. No
----------------------------------------------------------
compensation shall be payable under this Agreement in the event Executive's
employment with the Company is terminated by reason of (1) a termination by the
Company for Cause or for Disability, or (2) a termination by Executive without
Good Reason. For purposes of this Agreement:
(a) Disability. The Company may terminate Executive's employment for
----------
"Disability" if, due to physical or mental illness or incapacity, Executive
shall not have performed his duties with the Company on a substantially full-
time basis for (i) six (6) consecutive months, or (ii) for a total of 180 days
in any given period of twelve (12) consecutive months, but only if Executive
shall not have returned to the full-time performance of his duties with the
Company during the thirty (30) day period following the delivery by the Company
of a written notice of termination for Disability.
(b) Cause. The Company may terminate Executive's employment for any reason
-----
whatsoever at any time during the term of this Agreement, with or without Cause.
Any purported termination of employment by the Company for Cause shall be
communicated by a written notice of termination to Executive setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination. If Executive disputes the existence of Cause for any such
termination, such termination shall not be considered effective and Executive's
rights under this Agreement (excluding his right to terminate with Good Reason
---------
under Section 3(c) hereof) shall continue until such dispute is finally
determined, whether by mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
(c) Good Reason. Executive may terminate his employment at any time
-----------
during the term of this Agreement, with or without a Good Reason; provided
--------
however that Executive may not
- -------
-3-
<PAGE>
terminate this Agreement for Good Reason during any period in which Executive is
contesting a termination of Executive's employment by the Company for Cause.
Executive's continued employment after the expiration of sixty (60) days from
any action that would otherwise constitute Good Reason shall constitute a waiver
of rights with respect to such action constituting Good Reason under this
Agreement.
4. No Obligation To Seek Further Employment; Confidential Information.
------------------------------------------------------------------
(a) Executive shall not be required to seek other employment, nor shall
the amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date of termination, or otherwise. Payments to Executive pursuant to
this Agreement shall constitute the entire obligation of the Company for
severance pay and full settlement of any claim for severance pay under law or in
equity that Executive might otherwise assert against the Company or any of its
employees, officers or directors on account of Executive's termination. In
consideration for the protection and benefits provided for under this Agreement,
Executive hereby agrees to execute a release, substantially in the form of
Exhibit B hereto, of any claims for severance pay under law or in equity that
Executive might otherwise assert as described in the preceding sentence.
(b) Following the date of termination, Executive shall not disclose to any
person, or use to the significant disadvantage of the Company or any of its
affiliates, any Confidential Information; provided that nothing contained in
this Section 4(b) shall prevent Executive from being employed by a competitor of
the Company or utilizing Executive's general skills, experience, and knowledge,
including those developed while employed by the Company.
5. Successors. The Company will require any successor or assign (whether
----------
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession or assignment
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 5 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law,
-4-
<PAGE>
or otherwise. This Agreement shall inure to the benefit of and be enforceable by
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts are still payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's estate.
6. Excise Taxes.
------------
(a) In the event it shall be determined that any payment or benefit
provided under Section 2 of this Agreement, together with any other payments or
benefits Executive is entitled to receive by reason of a Change in Control of
the Company or a termination of his employment with the Company (collectively,
the "Payments") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986 ("Code") or any successor provision, or any
interest or penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay Executive,
at least 30 days prior to the time payment of any such Excise Tax is due, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
Executive, after deduction of any Excise Tax and any federal and state and local
taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed
on the Payments.
(b) For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (1) the Payments
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to Executive the Payments (in whole or in part) do not
constitute parachute payments or excess parachute payments or are otherwise not
subject to the Excise Tax, (2) the amount of the Payments which shall be treated
as subject to the Excise Tax shall be equal to the amount of "excess parachute
payments" within the meaning of Section 280G(b)(1) (after applying clause (1)
above), and (3) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in accordance
with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of
determining the amount
-5-
<PAGE>
of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executive's
residence on the Date of termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(c) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
employment, Executive shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax). In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the termination
of employment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest and penalties payable with respect to such excess) at the time that the
amount of such excess is finally determined. Executive shall notify the Company
of any audit or review by the Internal Revenue Service of Executive's federal
income tax return for the year in which a payment under this Agreement is made
within ten (10) days of Executive's receipt of notification of such audit or
review. In addition, Executive shall also notify the Company of the final
resolution of such audit or review within ten (10) days of such resolution.
7. Miscellaneous.
-------------
(a) Amendments, Waivers. No provisions of this Agreement may be modified,
-------------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and the Company. Except as otherwise provided in
Section 3(c) hereof, no waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
-6-
<PAGE>
(b) Validity. The invalidity or unenforceability of any provisions of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Confidentiality. Executive agrees that unless Executive is otherwise
---------------
required by law to disclose this Agreement, Executive will keep the existence
and terms of this Agreement completely confidential, and will not discuss the
terms, amount, or existence of this Agreement with anyone other than Executive's
spouse, attorneys or tax advisors, provided that these individuals also keep the
existence, terms, and amount of this Agreement completely confidential.
(d) Fees and Expenses. Company shall pay all reasonable legal fees and
-----------------
related expenses (including the reasonable costs of experts, evidence and
counsel), when and as incurred by Executive, as a result of contesting or
disputing any termination of employment of Executive following a Change in
Control, or enforcing the terms of this Agreement whether or not such contest or
dispute is resolved in Executive's favor but only if Executive was seeking in
good faith to obtain or enforce any right or benefit provided by this Agreement
or by any other plan or arrangement maintained by the Company under which
Executive is or may be entitled to receive benefits.
(e) Survival of Obligations. The obligations of Company under Sections 2
-----------------------
and 6 hereof shall survive the expiration of the term of this Agreement.
(f) Governing Law. The laws of Illinois shall be controlling in all
-------------
matters relating to this Agreement.
(g) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement and this
Agreement shall supersede any and all prior agreements, understandings or
negotiations with respect to the subject matter hereof.
(h) Non-Exclusivity of Rights. Except as explicitly modified by Section
-------------------------
2(b) of this Agreement, nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plan or program provided by Company and
-7-
<PAGE>
for which Executive may qualify, nor shall anything herein limit or reduce such
rights as Executive may have under any other agreements with Company. Amounts
which are vested benefits or which Executive is otherwise entitled to receive
under any plan or program of Company shall be payable in accordance with such
plan or program,.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
EXECUTIVE:
_____________________________________
Robert E. T. Lackey
BURNS INTERNATIONAL SERVICES CORPORATION
By___________________________________
Name: John A. Edwardson
Title: Chairman, President and
Chief Executive Officer
-8-
<PAGE>
EXHIBIT A
---------
DEFINITIONS
-----------
"Cause" shall mean Executive's:
(i) fraud, misappropriation, embezzlement or other act of material
misconduct against the Company or any of its affiliates thereof;
(ii) substantial and wilful failure to render services in accordance
with the terms of this Agreement, provided that (A) a demand for
performance of services has been delivered to the Executive by the Board of
Directors of the Company at least 30 days prior to termination identifying
the manner in which such Board of Directors believes that the Executive has
failed to perform and (B) the Executive has thereafter failed to remedy
such failure to perform within thirty (30) days after delivery of such
demand for performance;
(iii) willful and knowing violation of any rules or regulations of
any governmental or regulatory body material to the business of the
Company; or
(iv) conviction of or plea of nolo contendere to a felony.
"Change in Control" of the Company shall mean:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) (a "Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Securities Exchange Act of 1934) of 50% or more of
either (A) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (1) any acquisition
directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company, or (4) any acquisition by any Person pursuant to a
transaction which complies with items (1), (2) and (3) of clause (iii) of
this definition; or
(ii) A change in the composition of the Board of Directors of the
Company (the "Board") such that the individuals who, as of the effective
date of this Agreement, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual who becomes a member of the Board subsequent to such date
(including the individuals who replace Donald Trauscht and J. Joe Adorjan
in 1999
-9-
<PAGE>
and the other two members of the Incumbent Board expected to resign in
2000), whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds (2/3) of those
individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered a member of the Incumbent Board; but, provided further, that any
such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act
of 1934) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered
as a member of the Incumbent Board; or
(iii) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly, more
than 60%, respectively, of the outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (other than the Company, any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company or such corporation resulting
from such Corporate Transaction) will beneficially own, directly or
indirectly, 20% or more, respectively, of the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except
to the extent that such ownership existed with respect to the Company prior
to the Corporate Transaction, and (3) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Confidential Information" means any non-public information relating to the
business plans, marketing plans, customers or employees of the Company or any of
its subsidiaries or affiliates other than information the disclosure of which
cannot reasonably be expected to adversely affect the business of the Company or
its subsidiaries or affiliates.
-10-
<PAGE>
"Good Reason" shall mean any of the following which occurs subsequent to a
-------------
Change in Control of the Company without Executive's prior consent:
(i) any adverse change in Executive's authorities, duties,
responsibilities (including reporting responsibilities); the assignment to
Executive of any duties or work responsibilities which are inconsistent
with such authorities or responsibilities; or any removal of Executive
from, or failure to reappoint or reelect him to any of such positions;
(ii) a reduction in or failure to pay any portion of Executive's
Annual Base Salary as in effect on the date of the Change in Control or as
the same may be increased from time to time thereafter;
(iii) the failure by Company to provide Executive with compensation
and benefits (including, without limitation, incentive, bonus and other
compensation plans and any vacation, medical, hospitalization, life
insurance, dental or disability benefit plan), or cash compensation in lieu
thereof, which are, in the aggregate, no less favorable than those provided
by Company to Executive immediately prior to the occurrence of the Change
in Control, other than an isolated, immaterial, and inadvertent failure not
taken in bad faith and which are remedied by the Company promptly after
receipt of a reasonable written notice thereof given by Executive;
(iv) any material breach by Company of any provision of this
Agreement;
(v) Executive being required to relocate to a principal place of
employment more than fifty (50) miles from his current place of employment;
or
(vi) the failure of Company to obtain a satisfactory agreement from
any successor or assign of Company to assume and agree to perform this
Agreement, as required in Section 5 hereof; or
Notwithstanding the above, a termination by Executive, at his own initiative,
for any reason during the 30-day period immediately following the first
anniversary of the Change in Control shall be deemed for all purposes of this
Agreement to constitute a termination by Executive for Good Reason.
"Target Annual Bonus" shall mean the bonus Executive could have earned under
the Company's bonus program for [senior management] for the fiscal year of the
Company in which his Date of termination occurs if the goals established in
connection with such bonus program had been achieved at the "expected" level.
-11-
<PAGE>
EXHIBIT B
---------
SEPARATION AND GENERAL RELEASE AGREEMENT
----------------------------------------
This Separation and General Release Agreement ("Agreement") is made by
and between Burns International Services Corporation, a Delaware corporation
(the "Company"), and ___________________ ("Executive") on the ____ day of
__________.
WHEREAS, Executive and the Company are parties to a Change in Control
Agreement (the "CIC Agreement") dated July 13, 1999; and
WHEREAS, in consideration for the protection and benefits provided for
under the CIC Agreement, Executive agreed to execute this release of any claims
under law or in equity that Executive might otherwise assert against the Company
or any of its employees, officers or directors on account of Executive's
termination of employment;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, both parties intending to be
legally bound hereby, the Company and the Executive hereby agree as follows:
1. Executive's employment in all positions and offices of the
Company shall terminate effective as of ________________ ("Separation Date").
2. Without limiting the scope of the releases contained in paragraph
5 below, Executive releases and discharges the Company from any
claim for, and waives any further claim for, any bonus or other
compensation in any form from the Company (including without
limitation any base compensation, incentive compensation,
discretionary incentive compensation, deferred compensation,
severance compensation or any other form of compensation), except
as provided in the CIC Agreement.
3. Executive agrees that he will do nothing to impede a smooth
transition to employees or other individuals designated by the
Company of his responsibilities and shall provide the details
concerning the projects and assignments in which he is and was
involved. Executive will not disrupt the morale or productive
working relationships of the employees, customers, vendors, and
independent contractors of the Company.
4. Executive represents that he has delivered to the Company all
property of the Company and its customers, vendors, and
independent contractors, including without limitation all money,
checks, credit cards, papers, books, records, computer programs,
data, keys, equipment, hardware, software, file back-up
materials, diskettes, tapes, electronic databases and files,
passwords or like materials in his possession or control and all
copies thereof. The ownership and right of control of all
reports, records,
-12-
<PAGE>
programs, data bases, processes and supporting documents prepared
by, for or on behalf of Executive in connection with the
performance of Executive's duties during his employment are
vested exclusively in the Company and remain the exclusive
property of the Company.
5. For good and valuable consideration (including, but not limited
to, the payments made or to be made under the CIC Agreement), the
receipt and sufficiency of which is hereby acknowledged:
a. Executive hereby releases and forever discharges the Company and
any parent, subsidiary, affiliate or other entity related to the
Company, as well as its or their predecessors, successors and
assigns, shareholders, directors, officers, agents,
representatives, servants, and employees, past, present and
future, individually and collectively ("Released Parties"), from
any and all claims, demands, causes of action or liabilities,
that Executive ever had, or now has, or that his heirs, executors
or administrators hereafter can, shall or may have upon or by
reason of any matter, cause or thing whatsoever, whether known or
unknown, suspected or unsuspected, arising out of or in any way
connected with his employment and/or separation from the Company.
Without limiting the generality of the foregoing and to the
extent permitted by law, this release applies to any right that
Executive has or may have to commence or maintain a charge or
action or to recover pursuant to such a charge (regardless of the
identity of the individual or entity commencing or maintaining
such charge or action) alleging discrimination under any federal,
state or local statute (whether before a court or an
administrative agency), including without limitation, the Age
Discrimination in Employment Act of 1967, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act, the Family and Medical Leave Act, and the
Employee Retirement Income Security Act of 1974, and any right
that Executive has or may have to commence or maintain a claim or
action alleging wrongful termination, breach of contract,
commission of tort, or any combination thereof, whether based in
law or in equity. Executive agrees not to make, assert or
maintain any charge, claim, demand or action that would be
covered by this release.
b. Executive understands that by releasing employment
discrimination claims against the Released Parties, he also
forever releases and discharges any right he may have to
file or recover in a lawsuit he may bring himself on the
same claims and also any right he may have to any relief
that he might otherwise be entitled to as a result of any
proceedings instituted by the Equal Employment Opportunity
Commission or any other comparable enforcement authority.
c. This release shall run to and be for the benefit of the
Released Parties. This release shall run to and be binding
upon Executive and his heirs and assigns.
-13-
<PAGE>
d. To the maximum extent permitted by law, Executive covenants
not to sue or to institute or cause to be instituted any
action in any federal, state or local agency or court
against the Company regarding the matters covered by the
release contained in this paragraph.
e. This release and covenant not to sue shall not apply to (i)
those continuing obligations, if any, of the Company under
the CIC Agreement; (ii) any vested benefits provided under
any retirement plan, 401(k), profit sharing plan and related
ERISA excess plans, welfare benefit plans or other plans or
arrangements to which Executive would otherwise be entitled
pursuant to the terms of such plans or arrangements; (iii)
any rights the undersigned may have solely as a security
holder of any Released Party; and (iv) any rights to
indemnification the undersigned may have under applicable
law, the by-laws or certificate of incorporation of any
Released Party, or as an insured under any D&O or liability
insurance policy now, hereafter or previously in force.
6. In the event Executive breaches any provision of this Agreement,
it shall be deemed to constitute a failure of consideration, and
the Company shall be relieved of all its obligations hereunder
and under the CIC Agreement. Executive agrees to indemnify the
Company from and against all liability, costs and expenses,
including reasonable attorneys' fees, arising out of a breach of
this Agreement. In view of the difficulty of determining damages
in the event of any such breach, it is agreed that the Company
will be entitled to liquidated damages in the amount of all
payments made by the Company under this Agreement, plus
reasonable attorneys' fees and court costs, if any, incurred by
the Company in enforcing this clause.
7. In the event the Company breaches any provision of this
Agreement, it shall be deemed to constitute a failure of
consideration, and Executive shall be relieved of all his
obligations hereunder. The Company agrees to indemnify Executive
from and against all liability, costs and expenses, including
reasonable attorneys' fees, arising out of a breach of this
Agreement.
8. Executive agrees that neither this Agreement nor performance
hereunder constitutes an admission by the Company of any
violation of any federal, state or local law, regulation, common
law, of any breach of any contract or any other wrongdoing of any
type.
9. This Agreement and the CIC Agreement constitutes the entire
agreement between the parties. No modification of this Agreement
or further modification of the CIC Agreement shall be valid
unless signed by the party against whom such modification is
sought to be enforced.
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<PAGE>
10. Executive represents and agrees that (a) he fully understands his
right to discuss all aspects of this Agreement with legal counsel
and, to the extent he deems appropriate, he has fully availed
himself of this right; and (b) he has carefully read and fully
understands all the provisions of this Agreement and is
voluntarily entering into the same.
11. Executive acknowledges that this Agreement includes a waiver of
any rights and claims arising under the Age Discrimination in
Employment Act. Executive understands he is not waiving rights or
claims that may arise after the date this Agreement is executed.
Employee acknowledges that the consideration he is receiving in
exchange for his waiver of the rights and claims specified herein
exceeds anything of value to which he already is entitled.
Executive acknowledges that he was advised in writing on
__________ __, ____, to consult with an attorney prior to
executing this Agreement. Executive acknowledges that he has
entered into this Agreement knowingly and voluntarily with full
understanding of its terms and after having had the opportunity
to seek and receive advice and counsel from his personal and/or
legal counsel. Executive acknowledges that he was given a period
of at least twenty-one (21) days within which to consider this
Agreement and was so advised in writing on __________ __, ____.
Executive understands that he may revoke this Agreement during
the seven (7) days following the execution of this Agreement and
that the Agreement shall not become effective or enforceable
until that seven (7) day revocation period has expired.
12. The provisions of this Agreement shall be construed in accordance
with the internal laws, but not the laws of conflicts, applicable
to agreements made in Illinois.
IN WITNESS WHEREOF, the parties have executed this Separation and
General Release Agreement on the date first written above.
Burns International Services Corporation
By: ____________________________________
Its ____________________________________
________________________________________
Executive
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<PAGE>
Exhibit 10.20
- -------------
BORG-WARNER SECURITY CORPORATION
SECOND AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
AND CONSENT
This SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND
CONSENT (this "Amendment") is dated as of May 10, 1999 and entered into by and
among Borg-Warner Security Corporation, a Delaware corporation ("Company"), the
financial institutions listed on the signature pages hereof ("Lenders"),
Canadian Imperial Bank of Commerce, as Documentation Agent (the "Documentation
Agent"), NationsBank, N.A., as Syndication Agent (the "Syndication Agent") and
Bankers Trust Company, as Administrative Agent for Lenders ("Agent"), and, for
purposes of Section 5 hereof, the Credit Support Party (as defined in Section 5
hereof) listed on the signature pages hereof, and is made with reference to that
certain Amended and Restated Credit Agreement dated as of June 30, 1998 (as
heretofore amended, the "Credit Agreement"), by and among Company, Lenders,
Documentation Agent, Syndication Agent and Administrative Agent. Capitalized
terms used herein without definition shall have the same meanings herein as set
forth in the Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement to
(i) release amounts held in a blocked account pursuant to Section 5.13 of the
Credit Agreement on the terms and conditions described herein, (ii) permit the
making of certain Restricted Junior Payments, (iii) amend certain defined terms,
(iv) amend Section 2.2A of the Credit Agreement to change the basis on which the
rate of interest payable on the Loans is determined and (v) make certain other
amendments as set forth below;
WHEREAS, Company has been released from indemnity obligations owing to
Mustang Holdings, Inc. and Company desires to exchange those certain Mustang
Holdings, Inc. promissory notes (the "Mustang Notes"), which were delivered to
the Collateral Agent to secure the Loans under the Credit Agreement, for 312,500
shares of the stock of the purchaser (the "Purchaser") of Pony Express, Inc.;
WHEREAS, Lenders desire to release without replacement the Mustang
Notes held by the Collateral Agent pursuant to the Company Pledge Agreement to
secure the Loans under the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
<PAGE>
Section 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendments to Section 1: Certain Defined Terms
A. The definition of "Commitment Fee Percentage" is hereby amended by
deleting such definition in its entirety and replacing such definition with the
following:
"(Commitment Fee Percentage) means the per annum Commitment Fee
Percentage set forth in the table below opposite Company's Pro Forma
Consolidated Leverage Ratio as set forth in the Margin Determination
Certificate delivered pursuant to subsection 5.1(xvii) 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 Margin Determination Certificate:
Pro Forma Consolidated Leverage Ratio Commitment Fee
------------------------------------- Percentage
--------------
Equal to or greater than 3.00:1.00 0.50%
Equal to or greater than 2.50:1.00 but less than 0.375%
3.00:1.00
Equal to or greater than 2.00:1.00 but less than 0.325%
2.50:1.00
Less than 2.00:1.00 0.25%
; provided however for the period (i) from March 25, 1999 until the
Second Amendment Effective Date, the Commitment Fee Percentage shall
be the rate in effect under the Credit Agreement immediately prior to
the Second Amendment Effective Date and (ii) commencing on the Second
Amendment Effective Date through the date on which Company delivers
the first Margin Determination Certificate pursuant to subsection
5.1(xvii) of the Credit Agreement, the Commitment Fee Percentage shall
be the rate determined in accordance with the Margin Determination
Certificate delivered on the Second Amendment Effective Date.
If Company fails to deliver a Margin Determination Certificate by
the time required by subsection 5.1(xvii), from such time the Margin
Determination Certificate was required to be delivered until delivery
of such Margin Determination Certificate, the Commitment Fee
Percentage shall be automatically adjusted to the highest rate
provided in the above table."
<PAGE>
B. Subsection 1.1 of the Credit Agreement is hereby amended by adding
the definition of "Margin Determination Certificate" in appropriate alphabetical
order as follows:
" 'Margin Determination Certificate' means a certificate substantially
in the form annexed hereto as Exhibit XV delivered to Lenders by
Company pursuant to subsection 5.1(xvii)."
C. Subsection 1.1 of the Credit Agreement is hereby amended by adding
the definition of "Pro Forma Consolidated Leverage Ratio" in appropriate
alphabetical order as follows:
" 'Pro Forma Consolidated Leverage Ratio' means the ratio of Net
Funded Debt, after giving effect to any Restricted Junior Payment
made, and any Funded Debt incurred in connection with any such
Restricted Junior Payment, pursuant to clauses (iv) or (v) of
subsection 6.5, as of the date of the Margin Determination
Certificate, to Consolidated Adjusted EBITDA as set forth in Company's
most recent Compliance Certificate."
D. Subsection 1.1 of the Credit Agreement is hereby amended by adding
the definition of "Second Amendment Effective Date" in appropriate alphabetical
order as follows:
" 'Second Amendment Effective Date' means the date the Second
Amendment to Amended and Restated Credit Agreement dated as of May 10,
1999 became effective pursuant to the terms thereunder."
1.2 Amendments to Section 2: Amounts and Terms of Commitments and
Loans; Notes; Letters of Credit
A. Subsection 2.2A of the Credit Agreement is hereby amended by
deleting such subsection in its entirety and replacing such subsection with the
following:
"A. Rate of Interest. Subject to the provisions of subsection 2.6,
each Loan shall bear interest on the unpaid principal amount thereof
from the date made through maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate or the
Adjusted Eurodollar Rate; provided that nothing herein shall entitle
any Lender to charge or receive interest in excess of the maximum rate
allowed by applicable law. The applicable basis for determining the
rate of interest shall be selected by Company initially at the time a
Notice of Borrowing is given pursuant to subsection 2.1B. The basis
for determining the interest rate with respect to any Loan may be
changed from time to time pursuant to subsection 2.2D. If on any day
a Loan is outstanding with respect to which notice has not been
delivered to Administrative Agent in accordance with the terms of this
Agreement specifying the basis for determining the rate of interest,
then for that day that Loan shall bear interest determined by
reference to the Base Rate.
<PAGE>
On or after the Second Amendment Effective Date 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:
Pro Forma Consolidated Base Rate Eurodollar
Leverage Ratio Margin Rate Margin
---------------------- --------- -----------
Equal to or greater than 3.00:1:00 1.00% 2.00%
Equal to or greater than 2.50:1.00 0.75% 1.75%
but less than 3.00:1.00
Equal to or greater than 2.00:1.00 0.50% 1.50%
but less than 2.50:1.00
Less than 2.00:1.00 0.00% 1.00%
; provided however for the period (i) from March 25, 1999 until the
Second Amendment Effective Date, the Loans shall bear interest at the
rate in effect under the Credit Agreement immediately prior to the
Second Amendment Effective Date and (ii) commencing on the Second
Amendment Effective Date through the date on which Company delivers
the first Margin Determination Certificate pursuant to subsection
5.1(xvii) of the Credit Agreement, the Loans shall bear interest
determined in accordance with the Margin Determination Certificate
delivered on the Second Amendment Effective Date.
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 Pro
Forma Consolidated Leverage Ratio as set forth in the Margin
Determination Certificate delivered pursuant to subsection 5.1(xvii)
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 Margin Determination
Certificate. If Company fails to deliver a Margin Determination
Certificate by the time required by subsection 5.1(xvii), from such
time the Margin Determination Certificate was required to be delivered
until delivery of such Margin Determination Certificate, the Base Rate
Margin and the Eurodollar Rate Margin shall automatically be adjusted
to the highest rate provided in the above table."
<PAGE>
1.3 Amendment to Section 5: Company's Affirmative Covenants
A. Subsection 5.1 of the Credit Agreement is hereby amended by
deleting the word "and" from the end of clause (xv) thereof, by deleting the
period and adding "; and" at the end of clause (xvi) thereof, and by adding a
new clause (xvii) as follows:
"(xvii) a Margin Determination Certificate (a) together with each
delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (ii) and (iii) above and (b) in the event
that Company or any of its Subsidiaries shall, directly or indirectly,
make a Restricted Junior Payment in excess of $10,000,000 pursuant to
clauses (iv) or (v) of subsection 6.5, by noon of the third succeeding
Business Day."
B. Section 5.13 of the Credit Agreement is hereby amended by deleting
such section in its entirety and by replacing such text with the phrase
"Intentionally Omitted."
1.4 Amendments to Section 6: Company's Negative Covenants
A. Subsection 6.5 of the Credit Agreement is hereby amended by
deleting the word "and" at the end of clause (iii) thereof, by adding the word
"and" at the end of clause (iv) thereof and by adding a new clause (v) as
follows:
"(v) in addition to the number of shares of Common Stock permitted to
be repurchased pursuant to subsection 6.5(ii) above, Company may make
Restricted Junior Payments to repurchase 4,350,000 shares of Common
Stock from MLCP and its affiliates at a repurchase price which does
not exceed $18.375 per share plus declared and unpaid dividends
thereon;"
B. Subsection 6.6A of the Credit Agreement is hereby amended by
deleting such subsection in its entirety and replacing such subsection with the
following:
"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 3.00:1.00."
1.5 Amendments to Exhibits: Margin Determination Certificate
A. The Credit Agreement is hereby amended by adding an Exhibit XV to
the Credit Agreement in the form of Exhibit A to this Amendment.
Section 2. CONSENT
Subject to the terms and conditions set forth herein and in reliance
on the representations and warranties of Company herein contained and
notwithstanding anything to the contrary contained in subsections 6.7(iii) and
6.9 of the Credit Agreement, Lenders hereby consent to (i) the transfer of the
Mustang Notes in exchange for 312,500 shares of the Purchaser's stock and (ii)
the release without replacement of the Mustang Notes held by the
<PAGE>
Collateral Agent pursuant to the Company Pledge Agreement to secure the Loans
under the Credit Agreement.
Section 3. CONDITIONS TO EFFECTIVENESS
Section 1 and 2 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Second
Amendment Effective Date"):
A. On or before the Second Amendment Effective Date, Company shall
deliver to Lenders (or to Administrative Agent for Lenders) the following, each,
unless otherwise noted, dated the Second Amendment Effective Date:
1. Signature and incumbency certificates of its officers executing
this Amendment;
2. Executed copies of this Amendment;
3. Executed Officers' Certificate stating that as of the Second
Amendment Effective Date and after giving effect on a pro forma
basis to (i) the repurchase of 4,350,000 shares of the Company's
Common Stock at a repurchase price of up to $18.375 per share
plus declared but unpaid dividends thereon and (ii) the tender of
all of the Company's outstanding Senior Subordinated Notes at a
tender price which does not exceed 116% of the principal amount
thereof, plus accrued and unpaid interest thereon, and in each
case, any debt incurred or fees and expenses paid in connection
therewith, the Company is in pro forma compliance with its
financial covenants;
4. A Margin Determination Certificate for the fiscal period ending
March 31, 1999;
5. Receipt by the Company of any necessary consents from the holders
of Senior Subordinated Notes that permit the repurchase of 4.35
million shares of the Company's Common Stock and Senior
Subordinated Notes; and
6. Receipt by each of the Lenders executing this Amendment of an
amendment fee in an amount equal to % of such Lender's
Commitment.
B. On or before the Second Amendment Effective Date, all corporate
and other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel
shall be satisfactory in form and substance to Administrative Agent and such
counsel, and Administrative Agent and such counsel shall have received all such
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.
<PAGE>
C. Requisite Lenders shall have executed and delivered copies of this
Amendment to Administrative Agent.
Section 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. Corporate Power and Authority. Company has all requisite corporate
power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement").
B. Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of Company.
C. No Conflict. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Company or any of its Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Company or any of its Subsidiaries.
D. Governmental Consents. The execution and delivery by Company of
this Amendment and the performance by Company of the Amended Agreement do not
and will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other governmental
authority or regulatory body.
E. Binding Obligation. This Amendment and the Amended Agreement have
been duly executed and delivered by Company and are the legally valid and
binding obligations of Company, enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Section 4 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Second Amendment Effective Date to the same extent as
though made on and as of that date,
<PAGE>
except to the extent such representations and warranties specifically relate to
an earlier date, in which case they were true, correct and complete in all
material respects on and as of such earlier date.
G. Absence of Default. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
Section 5. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Pledge Agreement, pursuant to which
Company has created Liens in favor of Administrative Agent on certain Collateral
to secure the Obligations. Borg-Warner Protective Services Corporation (the
"Credit Support Party") has (i) guarantied the Obligations pursuant to the Borg-
Warner Subsidiary Guaranty and (ii) pledged certain Collateral to Administrative
Agent to secure the obligations of such subsidiary under such guaranty pursuant
to the Borg-Warner Subsidiary Pledge Agreement. Company and such subsidiary are
collectively referred to herein as the "Credit Support Parties", and the Borg-
Warner Subsidiary Guaranty and/or the Borg-Warner Subsidiary Pledge Agreement
and Company Pledge Agreement are collectively referred to herein as the "Credit
Support Documents".
Each Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Amendment and consents to
the amendment of the Credit Agreement effected pursuant to this Amendment. Each
Credit Support Party hereby confirms that each Credit Support Document to which
it is a party or otherwise bound and all Collateral encumbered thereby will
continue to guaranty or secure, as the case may be, to the fullest extent
possible the payment and performance of all "Obligations," "Guarantied
Obligations" and "Secured Obligations," as the case may be (in each case as such
terms are defined in the applicable Credit Support Document), including without
limitation the payment and performance of all such "Obligations," "Guarantied
Obligations" or "Secured Obligations," as the case may be, in respect of the
Obligations of Company now or hereafter existing under or in respect of the
Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the Second Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
<PAGE>
Each Credit Support Party (other than Company) acknowledges and agrees
that (i) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms of the Credit
Agreement or any other Loan Document to consent to the amendments to the Credit
Agreement effected pursuant to this Amendment and (ii) nothing in the Credit
Agreement, this Amendment or any other Loan Document shall be deemed to require
the consent of such Credit Support Party to any future amendments to the Credit
Agreement.
Section 6. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other Loan
Documents.
(i) On and after the Second Amendment Effective Date, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement,
and each reference in the other Loan Documents to the "Credit
Agreement", "thereunder", "thereof" or words of like import referring
to the Credit Agreement shall mean and be a reference to the Amended
Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under, the Credit Agreement or any
of the other Loan Documents.
B. Fees and Expenses. Company acknowledges that all costs, fees and
expenses as described in subsection 9.2 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
<PAGE>
E. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORG-WARNER SECURITY CORPORATION
By:
-----------------------------
Title:
--------------------------
BORG-WARNER PROTECTIVE SERVICES CORPORATION, (for
purposes of Section 5 only) as a Credit Support Party
By:
-----------------------------
Title:
--------------------------
BANKERS TRUST COMPANY, Individually and as
Administrative Agent
By:
-----------------------------
Title:
--------------------------
CIBC INC.,
individually and as Documentation Agent
By:
-----------------------------
Title:
--------------------------
NATIONSBANK, N.A.,
individually and as Syndication Agent
By:
-----------------------------
Title:
--------------------------
<PAGE>
ABN AMRO BANK, N.V., CHICAGO BRANCH
By:
-----------------------------
Title:
--------------------------
ARAB BANKING CORPORATION
By:
-----------------------------
Title:
--------------------------
BANK OF HAWAII
By:
-----------------------------
Title:
--------------------------
THE BANK OF NEW YORK
By:
-----------------------------
Title:
--------------------------
BANQUE PARIBAS
By:
-----------------------------
Title:
--------------------------
<PAGE>
CREDIT AGRICOLE INDOSUEZ
By:
-----------------------------
Title:
--------------------------
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
THE FUJI BANK, LIMITED
CHICAGO BRANCH
By:
-----------------------------
Title:
--------------------------
IMPERIAL BANK
By:
-----------------------------
Title:
--------------------------
THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By:
-----------------------------
Title:
--------------------------
<PAGE>
MERCANTILE BANK NATIONAL ASSOCIATION
By:
-----------------------------
Title:
--------------------------
MERITA BANK
By:
-----------------------------
Title:
--------------------------
UNITED WORLD CHINESE COMMERCIAL BANK, LOS ANGELES AGENCY
By:
-----------------------------
Title:
--------------------------
TORONTO DOMINION (TEXAS), INC.
By:
-----------------------------
Title:
--------------------------
<PAGE>
Exhibit 10.23
- -------------
BURNS INTERNATIONAL SERVICES CORPORATION
FOURTH AMENDMENT
TO AMENDED AND RESTATED CREDIT AGREEMENT
This FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is dated as of March 3, 2000 and entered into by and among Burns
International Services Corporation (formerly named Borg-Warner Security
Corporation), a Delaware corporation ("Company"), the financial institutions
listed on the signature pages hereof ("Lenders"), Canadian Imperial Bank of
Commerce, as Documentation Agent (the "Documentation Agent"), Bank of America,
N.A., as Syndication Agent (the "Syndication Agent") and Bankers Trust Company,
as Administrative Agent for Lenders ("Agent"), and, for purposes of Section 5
hereof, the Credit Support Party (as defined in Section 5 hereof) listed on the
signature pages hereof, and is made with reference to that certain Amended and
Restated Credit Agreement dated as of June 30, 1998 (as heretofore amended, the
"Credit Agreement"), by and among Company, Lenders, Documentation Agent,
Syndication Agent and Administrative Agent. Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit Agreement to
increase the Consolidated Leverage Ratio for the fiscal quarters ending March
31, 2000 and June 30, 2000 as set forth below;
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
Section 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendments to Section 1: Certain Defined Terms
-----------------------------------------------
Subsection 1.1 of the Credit Agreement is hereby amended by adding the
definition of "Fourth Amendment Effective Date" in appropriate alphabetical
order as follows:
"Fourth Amendment Effective Date" means the date the Fourth Amendment
-------------------------------
to Amended and Restated Credit Agreement dated as of March 3, 2000
(the "Fourth Amendment") becomes effective in accordance with its
terms."
1.2 Amendments to Section 2: Amounts and Terms of Commitments and
--------------------------------------------------------------
Loans; Notes; Letters of Credit
- -------------------------------
<PAGE>
Subsection 2.3 of the Credit Agreement is hereby amended by adding a
new paragraph at the end thereof as follows:
"D. Fourth Amendment Fees. Company agrees to pay to each
Consenting Lender (as defined in the Fourth Amendment) (x) on May 15,
2000, a fee in an amount equal to .025% of such Lender's Commitment in
the event that Company's Consolidated Leverage Ratio for the fiscal
quarter ended March 31, 2000 exceeds 3.70:1.00, and (y) on August 15,
2000 a fee in an amount equal to .05% of such Lender's Commitment in
the event that Company's Consolidated Leverage Ratio for the fiscal
quarter ended June 30, 2000 exceeds 3.25:1.00, in each case as set
forth in Company's Compliance Certificate delivered with respect to
such fiscal quarter."
1.3 Amendment to Section 6: Company's Negative Covenants
-----------------------------------------------------
A. Subsection 6.6B of the Credit Agreement is hereby amended by
deleting such subsection in its entirety and replacing such subsection with the
following:
"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; provided however that for the fiscal quarters ending
-------- -------
December 31, 1999, March 31, 2000 and June 30, 2000, such Consolidated
Leverage Ratio shall not exceed 3.90:1.00, 3.90:1.00 and 3.55:1.00,
respectively."
Section 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Fourth
Amendment Effective Date"):
A. On or before the Fourth Amendment Effective Date, Company shall
deliver to Lenders (or to Administrative Agent for Lenders) the following, each,
unless otherwise noted, dated the Fourth Amendment Effective Date:
1. Signature and incumbency certificates of its officers executing
this Amendment; and
2. Executed copies of this Amendment.
B. Company shall pay to each of the Lenders executing this Amendment
prior to March 14, 2000 (a "Consenting Lender") an amendment fee in an amount
equal to .05% of such Lender's Commitment.
C. On or before the Fourth Amendment Effective Date, all corporate
and other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all documents incidental thereto not previously found
acceptable by Administrative Agent, acting on behalf of Lenders, and its counsel
shall be satisfactory in form and substance to Administrative Agent and such
counsel, and Administrative Agent and such counsel shall have received all such
<PAGE>
counterpart originals or certified copies of such documents as Administrative
Agent may reasonably request.
D. Requisite Lenders shall have executed and delivered copies of
this Amendment to Administrative Agent.
Section 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender that the following statements are true, correct and
complete:
A. Corporate Power and Authority. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "Amended Agreement").
B. Authorization of Agreements. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of Company.
C. No Conflict. The execution and delivery by Company of this
Amendment and the performance by Company of the Amended Agreement do not and
will not (i) violate any provision of any law or any governmental rule or
regulation applicable to Company or any of its Subsidiaries, the Certificate or
Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any
order, judgment or decree of any court or other agency of government binding on
Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any of the properties or
assets of Company or any of its Subsidiaries or (iv) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Company or any of its Subsidiaries.
D. Governmental Consents. The execution and delivery by Company of
this Amendment and the performance by Company of the Amended Agreement do not
and will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other governmental
authority or regulatory body.
E. Binding Obligation. This Amendment and the Amended Agreement have
been duly executed and delivered by Company and are the legally valid and
binding obligations of Company, enforceable against Company in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or limiting creditors'
rights generally or by equitable principles relating to enforceability.
F. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Section 4 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Fourth
<PAGE>
Amendment Effective Date to the same extent as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true, correct and complete in
all material respects on and as of such earlier date.
G. Absence of Default. No event has occurred and is continuing or
will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
Section 4. ACKNOWLEDGEMENT AND CONSENT
Company is a party to the Company Pledge Agreement, pursuant to which
Company has created Liens in favor of Administrative Agent on certain Collateral
to secure the Obligations. Burns International Security Services Corporation
(formerly named Borg-Warner Protective Services Corporation) (the "Credit
Support Party") has (i) guarantied the Obligations pursuant to the Borg-Warner
Subsidiary Guaranty and (ii) pledged certain Collateral to Administrative Agent
to secure the obligations of such subsidiary under such guaranty pursuant to the
Borg-Warner Subsidiary Pledge Agreement. Company and such subsidiary are
collectively referred to herein as the "Credit Support Parties", and the Borg-
Warner Subsidiary Guaranty and/or the Borg-Warner Subsidiary Pledge Agreement
and Company Pledge Agreement are collectively referred to herein as the "Credit
Support Documents".
Each Credit Support Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Amendment and consents to
the amendment of the Credit Agreement effected pursuant to this Amendment. Each
Credit Support Party hereby confirms that each Credit Support Document to which
it is a party or otherwise bound and all Collateral encumbered thereby will
continue to guaranty or secure, as the case may be, to the fullest extent
possible the payment and performance of all "Obligations," "Guarantied
Obligations" and "Secured Obligations," as the case may be (in each case as such
terms are defined in the applicable Credit Support Document), including without
limitation the payment and performance of all such "Obligations," "Guarantied
Obligations" or "Secured Obligations," as the case may be, in respect of the
Obligations of Company now or hereafter existing under or in respect of the
Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the Fourth Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party (other than Company) acknowledges and agrees
that (i) notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms of the Credit
Agreement or any other Loan Document to
<PAGE>
consent to the amendments to the Credit Agreement effected pursuant to this
Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other
Loan Document shall be deemed to require the consent of such Credit Support
Party to any future amendments to the Credit Agreement.
Section 5. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the Other
Loan Documents.
(i) On and after the Fourth Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to the
Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under, the Credit Agreement or any
of the other Loan Documents.
B. Fees and Expenses. Company acknowledges that all costs, fees and
expenses as described in subsection 9.2 of the Credit Agreement incurred by
Administrative Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. Headings. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
D. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BURNS INTERNATIONAL SERVICES CORPORATION
By: ____________________________________________
Title:____________________________________________
BURNS INTERNATIONAL SECURITY SERVICES CORPORATION,
(for purposes of Section 5 only) as a Credit
Support Party
By: ____________________________________________
Title:____________________________________________
BANKERS TRUST COMPANY, Individually and as
Administrative Agent
By: ____________________________________________
Title:____________________________________________
<PAGE>
CIBC INC.,
individually and as Documentation Agent
By: ____________________________________________
Title:____________________________________________
BANK OF AMERICA, N.A.,
individually and as Syndication Agent
By: ____________________________________________
Title:____________________________________________
ABN AMRO BANK, N.V., CHICAGO BRANCH
By: ____________________________________________
Title:____________________________________________
By: ____________________________________________
Title:____________________________________________
ARAB BANKING CORPORATION
By: ____________________________________________
Title:____________________________________________
BANK OF HAWAII
By: ____________________________________________
Title:____________________________________________
THE BANK OF NEW YORK
By: ____________________________________________
Title:____________________________________________
<PAGE>
PARIBAS
By: ____________________________________________
Title:____________________________________________
By: ____________________________________________
Title:____________________________________________
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
CREDIT AGRICOLE INDOSUEZ
By: ____________________________________________
Title:____________________________________________
By: ____________________________________________
Title:____________________________________________
THE FUJI BANK, LIMITED
CHICAGO BRANCH
By: ____________________________________________
Title:____________________________________________
GENERAL ELECTRIC CAPITAL CORPORATION
By: ____________________________________________
Title:____________________________________________
<PAGE>
IMPERIAL BANK
By: ____________________________________________
Title:____________________________________________
MERCANTILE BANK NATIONAL ASSOCIATION
By: ____________________________________________
Title:____________________________________________
MERITA BANK
By: ____________________________________________
Title:____________________________________________
TORONTO DOMINION (TEXAS), INC.
By: ____________________________________________
Title:____________________________________________
UNITED WORLD CHINESE COMMERCIAL BANK, LOS ANGELES
AGENCY
By: ____________________________________________
Title:____________________________________________
<PAGE>
Exhibit 10.24
- -------------
CHANGE IN CONTROL AGREEMENT
---------------------------
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") is entered into effective
February 1, 2000 by and between Burns International Services Corporation, a
Delaware corporation (the "Company") and James M. Froisland (the "Executive").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Schedule A hereto.
In consideration of the mutual promises and agreements herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, both parties intending to be legally bound hereby, the
Company and Executive hereby agree as follows:
1. Term of Agreement. This Agreement shall terminate, except to the
-----------------
extent that any obligation of the Company hereunder remains unpaid as of such
time, upon the first to occur of (a) the termination of Executive's employment
with the Company or (b) the second anniversary of the date of a Change in
Control of the Company if Executive is employed by the Company upon such second
anniversary.
2. Severance Benefits Upon Termination Following Change in Control.
---------------------------------------------------------------
(a) If a Change in Control of the Company shall have occurred while
Executive is still an employee of the Company, and Executive's employment with
the Company is terminated during the two (2) year period following the date of
such Change in Control by reason of a termination (1) by the Company without
Cause, or (2) by Executive with Good Reason, Executive shall be entitled to the
following severance benefits:
(i) Within five (5) business days after the date of Executive's
termination, the Company shall make a lump sum payment to Executive in an
amount equal to the sum of (A) his accrued but unpaid annual base salary
through the date of termination at the greater of the rate in effect at the
time the Change in Control occurred or the rate in effect when the notice
of termination was given, (B) an amount equal to 100% of Executive's Target
Annual Bonus multiplied by a fraction, the numerator of which is the number
of days in the fiscal year of the Company to which such Target Annual Bonus
relates during
<PAGE>
which Executive was employed by the Company, and the denominator of which
is 365, and (C) an amount equal to Executive's supplemental benefit
compensation accrued but unpaid through the date of termination.
(ii) Within thirty (30) days after the date of Executive's
termination, the Company shall make a lump sum payment to Executive in an
amount equal to two (2) times the sum of (A) Executive's annual base salary
at the greater of the rate in effect at the time the Change in Control
occurred or the rate in effect when the notice of termination was given,
plus (B) Executive's Target Annual Bonus.
(iii) Any outstanding options to purchase stock of the Company held
by Executive as of the date of termination shall immediately vest and
become exercisable in full.
(iv) The restrictions on any shares of restricted stock held by
Executive which have not yet terminated will terminate immediately.
(v) Until the earlier of the second anniversary of the date of
termination or the date on which Executive becomes employed by a new
employer, the Company shall pay the reasonable costs of a reasonable
outplacement service selected by Executive.
(vi) Until the earlier of the second anniversary of the date of
termination or the date on which Executive becomes employed by a new
employer, the Company shall, at its expense, provide Executive and
Executive's family members with medical, dental, life insurance, disability
and accidental death and dismemberment benefits at the highest level
provided to Executive and Executive's family members during the period
beginning immediately prior to the Change of Control and ending on the date
of termination, provided, however, that if Executive becomes employed by a
-------- -------
new employer which maintains a major medical plan that either (i) does not
cover Executive and Executive's family members with respect to a pre-
existing condition which was covered under the Company's major medical
plan, or (ii) does not cover Executive and Executive's family members for a
designated waiting period, Executive's coverage under the Company's major
medical plan shall continue (but shall be limited in the event of
noncoverage due to a preexisting condition, to the preexisting condition
itself) until the earlier of the end of the applicable period of
noncoverage under the new employer's plan or the second anniversary of the
date of termination.
-2-
<PAGE>
(vii) The Company shall pay any amounts previously deferred by
Executive pursuant to any deferred compensation plan or arrangement
maintained by the Company.
(b) The payments provided for under this Section 2 shall be in addition to
any non-severance compensation and benefits provided for under any of the
Company's employee benefit plans, policies and practices or under the terms of
any other contracts, but in lieu of any severance pay under any Company employee
benefit plan, policy and practice or under the terms of any other contract
including any employment contract.
3. Termination for Cause, Disability, and without Good Reason. No
----------------------------------------------------------
compensation shall be payable under this Agreement in the event Executive's
employment with the Company is terminated by reason of (1) a termination by the
Company for Cause or for Disability, or (2) a termination by Executive without
Good Reason. For purposes of this Agreement:
(a) Disability. The Company may terminate Executive's employment for
----------
"Disability" if, due to physical or mental illness or incapacity, Executive
shall not have performed his duties with the Company on a substantially full-
time basis for (i) six (6) consecutive months, or (ii) for a total of 180 days
in any given period of twelve (12) consecutive months, but only if Executive
shall not have returned to the full-time performance of his duties with the
Company during the thirty (30) day period following the delivery by the Company
of a written notice of termination for Disability.
(b) Cause. The Company may terminate Executive's employment for any reason
-----
whatsoever at any time during the term of this Agreement, with or without Cause.
Any purported termination of employment by the Company for Cause shall be
communicated by a written notice of termination to Executive setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination. If Executive disputes the existence of Cause for any such
termination, such termination shall not be considered effective and Executive's
rights under this Agreement (excluding his right to terminate with Good Reason
---------
under Section 3(c) hereof) shall continue until such dispute is finally
determined, whether by mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
(c) Good Reason. Executive may terminate his employment at any time
-----------
during the term of this Agreement, with or without a Good Reason; provided
--------
however that Executive may not
- -------
-3-
<PAGE>
terminate this Agreement for Good Reason during any period in which Executive is
contesting a termination of Executive's employment by the Company for Cause.
Executive's continued employment after the expiration of sixty (60) days from
any action that would otherwise constitute Good Reason shall constitute a waiver
of rights with respect to such action constituting Good Reason under this
Agreement.
4. No Obligation To Seek Further Employment; Confidential Information.
------------------------------------------------------------------
(a) Executive shall not be required to seek other employment, nor shall
the amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date of termination, or otherwise. Payments to Executive pursuant to
this Agreement shall constitute the entire obligation of the Company for
severance pay and full settlement of any claim for severance pay under law or in
equity that Executive might otherwise assert against the Company or any of its
employees, officers or directors on account of Executive's termination. In
consideration for the protection and benefits provided for under this Agreement,
Executive hereby agrees to execute a release, substantially in the form of
Exhibit B hereto, of any claims for severance pay under law or in equity that
Executive might otherwise assert as described in the preceding sentence.
(b) Following the date of termination, Executive shall not disclose to any
person, or use to the significant disadvantage of the Company or any of its
affiliates, any Confidential Information; provided that nothing contained in
this Section 4(b) shall prevent Executive from being employed by a competitor of
the Company or utilizing Executive's general skills, experience, and knowledge,
including those developed while employed by the Company.
5. Successors. The Company will require any successor or assign (whether
----------
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession or assignment
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 5 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law,
-4-
<PAGE>
or otherwise. This Agreement shall inure to the benefit of and be enforceable by
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts are still payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's estate.
6. Excise Taxes.
------------
(a) In the event it shall be determined that any payment or benefit
provided under Section 2 of this Agreement, together with any other payments or
benefits Executive is entitled to receive by reason of a Change in Control of
the Company or a termination of his employment with the Company (collectively,
the "Payments") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986 ("Code") or any successor provision, or any
interest or penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay Executive,
at least 30 days prior to the time payment of any such Excise Tax is due, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
Executive, after deduction of any Excise Tax and any federal and state and local
taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed
on the Payments.
(b) For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (1) the Payments
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and acceptable to Executive the Payments (in whole or in part) do not
constitute parachute payments or excess parachute payments or are otherwise not
subject to the Excise Tax, (2) the amount of the Payments which shall be treated
as subject to the Excise Tax shall be equal to the amount of "excess parachute
payments" within the meaning of Section 280G(b)(1) (after applying clause (1)
above), and (3) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in accordance
with the principles of Section 280G(d)(3) and (4) of the Code. For purposes of
determining the amount
-5-
<PAGE>
of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executive's
residence on the Date of termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(c) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
employment, Executive shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax). In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the termination
of employment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest and penalties payable with respect to such excess) at the time that the
amount of such excess is finally determined. Executive shall notify the Company
of any audit or review by the Internal Revenue Service of Executive's federal
income tax return for the year in which a payment under this Agreement is made
within ten (10) days of Executive's receipt of notification of such audit or
review. In addition, Executive shall also notify the Company of the final
resolution of such audit or review within ten (10) days of such resolution.
7. Miscellaneous.
-------------
(a) Amendments, Waivers. No provisions of this Agreement may be modified,
-------------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and the Company. Except as otherwise provided in
Section 3(c) hereof, no waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
-6-
<PAGE>
(b) Validity. The invalidity or unenforceability of any provisions of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Confidentiality. Executive agrees that unless Executive is otherwise
---------------
required by law to disclose this Agreement, Executive will keep the existence
and terms of this Agreement completely confidential, and will not discuss the
terms, amount, or existence of this Agreement with anyone other than Executive's
spouse, attorneys or tax advisors, provided that these individuals also keep the
existence, terms, and amount of this Agreement completely confidential.
(d) Fees and Expenses. Company shall pay all reasonable legal fees and
-----------------
related expenses (including the reasonable costs of experts, evidence and
counsel), when and as incurred by Executive, as a result of contesting or
disputing any termination of employment of Executive following a Change in
Control, or enforcing the terms of this Agreement whether or not such contest or
dispute is resolved in Executive's favor but only if Executive was seeking in
good faith to obtain or enforce any right or benefit provided by this Agreement
or by any other plan or arrangement maintained by the Company under which
Executive is or may be entitled to receive benefits.
(e) Survival of Obligations. The obligations of Company under Sections
-----------------------
2 and 6 hereof shall survive the expiration of the term of this Agreement.
(f) Governing Law. The laws of Illinois shall be controlling in all
-------------
matters relating to this Agreement.
(g) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement and this
Agreement shall supersede any and all prior agreements, understandings or
negotiations with respect to the subject matter hereof.
(h) Non-Exclusivity of Rights. Except as explicitly modified by Section
-------------------------
2(b) of this Agreement, nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plan or program provided by Company and
-7-
<PAGE>
for which Executive may qualify, nor shall anything herein limit or reduce such
rights as Executive may have under any other agreements with Company. Amounts
which are vested benefits or which Executive is otherwise entitled to receive
under any plan or program of Company shall be payable in accordance with such
plan or program.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
EXECUTIVE:
_____________________________
James M. Froisland
BURNS INTERNATIONAL SERVICES CORPORATION
By___________________________________
Name: John A. Edwardson
Title: Chairman, President and
Chief Executive Officer
-8-
<PAGE>
EXHIBIT A
---------
DEFINITIONS
-----------
"Cause" shall mean Executive's:
(i) fraud, misappropriation, embezzlement or other act of material
misconduct against the Company or any of its affiliates thereof;
(ii) substantial and wilful failure to render services in accordance
with the terms of this Agreement, provided that (A) a demand for
performance of services has been delivered to the Executive by the Board of
Directors of the Company at least 30 days prior to termination identifying
the manner in which such Board of Directors believes that the Executive has
failed to perform and (B) the Executive has thereafter failed to remedy
such failure to perform within thirty (30) days after delivery of such
demand for performance;
(iii) willful and knowing violation of any rules or regulations of any
governmental or regulatory body material to the business of the Company; or
(iv) conviction of or plea of nolo contendere to a felony.
"Change in Control" of the Company shall mean:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) (a "Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Securities Exchange Act of 1934) of 50% or more of
either (A) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (1) any acquisition
directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company, or (4) any acquisition by any Person pursuant to a
transaction which complies with items (1), (2) and (3) of clause (iii) of
this definition; or
(ii) A change in the composition of the Board of Directors of the
Company (the "Board") such that the individuals who, as of the effective
date of this Agreement, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual who becomes a member of the Board subsequent to such date
(including the individuals who replace Donald Trauscht and J. Joe Adorjan
in 1999
-9-
<PAGE>
and the other two members of the Incumbent Board expected to resign in
2000), whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds (2/3) of those
individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered a member of the Incumbent Board; but, provided further, that any
such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act
of 1934) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered
as a member of the Incumbent Board; or
(iii) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly, more
than 60%, respectively, of the outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (other than the Company, any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company or such corporation resulting
from such Corporate Transaction) will beneficially own, directly or
indirectly, 20% or more, respectively, of the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except
to the extent that such ownership existed with respect to the Company prior
to the Corporate Transaction, and (3) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Confidential Information" means any non-public information relating to the
business plans, marketing plans, customers or employees of the Company or any of
its subsidiaries or affiliates other than information the disclosure of which
cannot reasonably be expected to adversely affect the business of the Company or
its subsidiaries or affiliates.
-10-
<PAGE>
"Good Reason" shall mean any of the following which occurs subsequent to a
-------------
Change in Control of the Company without Executive's prior consent:
(i) any adverse change in Executive's authorities, duties,
responsibilities (including reporting responsibilities); the assignment to
Executive of any duties or work responsibilities which are inconsistent
with such authorities or responsibilities; or any removal of Executive
from, or failure to reappoint or reelect him to any of such positions;
(ii) a reduction in or failure to pay any portion of Executive's
Annual Base Salary as in effect on the date of the Change in Control or as
the same may be increased from time to time thereafter;
(iii) the failure by Company to provide Executive with compensation
and benefits (including, without limitation, incentive, bonus and other
compensation plans and any vacation, medical, hospitalization, life
insurance, dental or disability benefit plan), or cash compensation in lieu
thereof, which are, in the aggregate, no less favorable than those provided
by Company to Executive immediately prior to the occurrence of the Change
in Control, other than an isolated, immaterial, and inadvertent failure not
taken in bad faith and which are remedied by the Company promptly after
receipt of a reasonable written notice thereof given by Executive;
(iv) any material breach by Company of any provision of this
Agreement;
(v) Executive being required to relocate to a principal place of
employment more than fifty (50) miles from his current place of employment;
or
(vi) the failure of Company to obtain a satisfactory agreement from
any successor or assign of Company to assume and agree to perform this
Agreement, as required in Section 5 hereof; or
Notwithstanding the above, a termination by Executive, at his own initiative,
for any reason during the 30-day period immediately following the first
anniversary of the Change in Control shall be deemed for all purposes of this
Agreement to constitute a termination by Executive for Good Reason.
"Target Annual Bonus" shall mean the bonus Executive could have earned
under the Company's bonus program for [senior management] for the fiscal year of
the Company in which his Date of termination occurs if the goals established in
connection with such bonus program had been achieved at the "expected" level.
-11-
<PAGE>
EXHIBIT B
---------
SEPARATION AND GENERAL RELEASE AGREEMENT
----------------------------------------
This Separation and General Release Agreement ("Agreement") is made by
and between Burns International Services Corporation, a Delaware corporation
(the "Company"), and ___________________ ("Executive") on the ____ day of
__________.
WHEREAS, Executive and the Company are parties to a Change in Control
Agreement (the "CIC Agreement") dated February 1, 2000; and
WHEREAS, in consideration for the protection and benefits provided for
under the CIC Agreement, Executive agreed to execute this release of any claims
under law or in equity that Executive might otherwise assert against the Company
or any of its employees, officers or directors on account of Executive's
termination of employment;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, both parties intending to be
legally bound hereby, the Company and the Executive hereby agree as follows:
1. Executive's employment in all positions and offices of the
Company shall terminate effective as of ________________ ("Separation Date").
2. Without limiting the scope of the releases contained in paragraph
5 below, Executive releases and discharges the Company from any
claim for, and waives any further claim for, any bonus or other
compensation in any form from the Company (including without
limitation any base compensation, incentive compensation,
discretionary incentive compensation, deferred compensation,
severance compensation or any other form of compensation), except
as provided in the CIC Agreement.
3. Executive agrees that he will do nothing to impede a smooth
transition to employees or other individuals designated by the
Company of his responsibilities and shall provide the details
concerning the projects and assignments in which he is and was
involved. Executive will not disrupt the morale or productive
working relationships of the employees, customers, vendors, and
independent contractors of the Company.
4. Executive represents that he has delivered to the Company all
property of the Company and its customers, vendors, and
independent contractors, including without limitation all money,
checks, credit cards, papers, books, records, computer programs,
data, keys, equipment, hardware, software, file back-up
materials, diskettes, tapes, electronic databases and files,
passwords or like materials in his possession or control and all
copies thereof. The ownership and right of control of all
reports, records,
-12-
<PAGE>
programs, data bases, processes and supporting documents prepared
by, for or on behalf of Executive in connection with the
performance of Executive's duties during his employment are
vested exclusively in the Company and remain the exclusive
property of the Company.
5. For good and valuable consideration (including, but not limited
to, the payments made or to be made under the CIC Agreement), the
receipt and sufficiency of which is hereby acknowledged:
a. Executive hereby releases and forever discharges the Company and
any parent, subsidiary, affiliate or other entity related to the
Company, as well as its or their predecessors, successors and
assigns, shareholders, directors, officers, agents,
representatives, servants, and employees, past, present and
future, individually and collectively ("Released Parties"), from
any and all claims, demands, causes of action or liabilities,
that Executive ever had, or now has, or that his heirs, executors
or administrators hereafter can, shall or may have upon or by
reason of any matter, cause or thing whatsoever, whether known or
unknown, suspected or unsuspected, arising out of or in any way
connected with his employment and/or separation from the Company.
Without limiting the generality of the foregoing and to the
extent permitted by law, this release applies to any right that
Executive has or may have to commence or maintain a charge or
action or to recover pursuant to such a charge (regardless of the
identity of the individual or entity commencing or maintaining
such charge or action) alleging discrimination under any federal,
state or local statute (whether before a court or an
administrative agency), including without limitation, the Age
Discrimination in Employment Act of 1967, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act, the Family and Medical Leave Act, and the
Employee Retirement Income Security Act of 1974, and any right
that Executive has or may have to commence or maintain a claim or
action alleging wrongful termination, breach of contract,
commission of tort, or any combination thereof, whether based in
law or in equity. Executive agrees not to make, assert or
maintain any charge, claim, demand or action that would be
covered by this release.
b. Executive understands that by releasing employment
discrimination claims against the Released Parties, he also
forever releases and discharges any right he may have to
file or recover in a lawsuit he may bring himself on the
same claims and also any right he may have to any relief
that he might otherwise be entitled to as a result of any
proceedings instituted by the Equal Employment Opportunity
Commission or any other comparable enforcement authority.
c. This release shall run to and be for the benefit of the
Released Parties. This release shall run to and be binding
upon Executive and his heirs and assigns.
-13-
<PAGE>
d. To the maximum extent permitted by law, Executive covenants
not to sue or to institute or cause to be instituted any
action in any federal, state or local agency or court
against the Company regarding the matters covered by the
release contained in this paragraph.
e. This release and covenant not to sue shall not apply to (i)
those continuing obligations, if any, of the Company under
the CIC Agreement; (ii) any vested benefits provided under
any retirement plan, 401(k), profit sharing plan and related
ERISA excess plans, welfare benefit plans or other plans or
arrangements to which Executive would otherwise be entitled
pursuant to the terms of such plans or arrangements; (iii)
any rights the undersigned may have solely as a security
holder of any Released Party; and (iv) any rights to
indemnification the undersigned may have under applicable
law, the by-laws or certificate of incorporation of any
Released Party, or as an insured under any D&O or liability
insurance policy now, hereafter or previously in force.
6. In the event Executive breaches any provision of this Agreement,
it shall be deemed to constitute a failure of consideration, and
the Company shall be relieved of all its obligations hereunder
and under the CIC Agreement. Executive agrees to indemnify the
Company from and against all liability, costs and expenses,
including reasonable attorneys' fees, arising out of a breach of
this Agreement. In view of the difficulty of determining damages
in the event of any such breach, it is agreed that the Company
will be entitled to liquidated damages in the amount of all
payments made by the Company under this Agreement, plus
reasonable attorneys' fees and court costs, if any, incurred by
the Company in enforcing this clause.
7. In the event the Company breaches any provision of this
Agreement, it shall be deemed to constitute a failure of
consideration, and Executive shall be relieved of all his
obligations hereunder. The Company agrees to indemnify Executive
from and against all liability, costs and expenses, including
reasonable attorneys' fees, arising out of a breach of this
Agreement.
8. Executive agrees that neither this Agreement nor performance
hereunder constitutes an admission by the Company of any
violation of any federal, state or local law, regulation, common
law, of any breach of any contract or any other wrongdoing of any
type.
9. This Agreement and the CIC Agreement constitutes the entire
agreement between the parties. No modification of this Agreement
or further modification of the CIC Agreement shall be valid
unless signed by the party against whom such modification is
sought to be enforced.
-14-
<PAGE>
10. Executive represents and agrees that (a) he fully understands his
right to discuss all aspects of this Agreement with legal counsel
and, to the extent he deems appropriate, he has fully availed
himself of this right; and (b) he has carefully read and fully
understands all the provisions of this Agreement and is
voluntarily entering into the same.
11. Executive acknowledges that this Agreement includes a waiver of
any rights and claims arising under the Age Discrimination in
Employment Act. Executive understands he is not waiving rights or
claims that may arise after the date this Agreement is executed.
Employee acknowledges that the consideration he is receiving in
exchange for his waiver of the rights and claims specified herein
exceeds anything of value to which he already is entitled.
Executive acknowledges that he was advised in writing on
__________ __, ____, to consult with an attorney prior to
executing this Agreement. Executive acknowledges that he has
entered into this Agreement knowingly and voluntarily with full
understanding of its terms and after having had the opportunity
to seek and receive advice and counsel from his personal and/or
legal counsel. Executive acknowledges that he was given a period
of at least twenty-one (21) days within which to consider this
Agreement and was so advised in writing on __________ __, ____.
Executive understands that he may revoke this Agreement during
the seven (7) days following the execution of this Agreement and
that the Agreement shall not become effective or enforceable
until that seven (7) day revocation period has expired.
12. The provisions of this Agreement shall be construed in accordance
with the internal laws, but not the laws of conflicts, applicable
to agreements made in Illinois.
IN WITNESS WHEREOF, the parties have executed this Separation and
General Release Agreement on the date first written above.
Burns International Services Corporation
By: ___________________________
Its ___________________________
_______________________________
Executive
-15-
<PAGE>
Exhibit 10.25
- -------------
CHANGE IN CONTROL AGREEMENT
---------------------------
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") is entered into effective
July 13, 1999 by and between Burns International Services Corporation, a
Delaware corporation (the "Company") and James F. McNulty (the "Executive").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Schedule A hereto.
In consideration of the mutual promises and agreements herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, both parties intending to be legally bound hereby, the
Company and Executive hereby agree as follows:
1. Term of Agreement. This Agreement shall terminate, except to the
-----------------
extent that any obligation of the Company hereunder remains unpaid as of such
time, upon the first to occur of (a) the termination of Executive's employment
with the Company or (b) the second anniversary of the date of a Change in
Control of the Company if Executive is employed by the Company upon such second
anniversary.
2. Severance Benefits Upon Termination Following Change in Control.
---------------------------------------------------------------
(a) If a Change in Control of the Company shall have occurred while
Executive is still an employee of the Company, and Executive's employment with
the Company is terminated during the two (2) year period following the date of
such Change in Control by reason of a termination (1) by the Company without
Cause, or (2) by Executive with Good Reason, Executive shall be entitled to the
following severance benefits:
(i) Within five (5) business days after the date of Executive's
termination, the Company shall make a lump sum payment to Executive in an
amount equal to the sum of (A) his accrued but unpaid annual base salary
through the date of termination at the greater of the rate in effect at the
time the Change in Control occurred or the rate in effect when the notice
of termination was given, (B) an amount equal to 100% of Executive's Target
Annual Bonus multiplied by a fraction, the numerator of which is the number
of days in the fiscal year of the Company to which such Target Annual Bonus
relates during
<PAGE>
which Executive was employed by the Company, and the denominator of which
is 365, and (C) an amount equal to Executive's supplemental benefit
compensation accrued but unpaid through the date of termination.
(ii) Within thirty (30) days after the date of Executive's
termination, the Company shall make a lump sum payment to Executive in an
amount equal to two (2) times the sum of (A) Executive's annual base salary
at the greater of the rate in effect at the time the Change in Control
occurred or the rate in effect when the notice of termination was given,
plus (B) Executive's Target Annual Bonus.
(iii) Any outstanding options to purchase stock of the Company held
by Executive as of the date of termination shall immediately vest and
become exercisable in full.
(iv) The restrictions on any shares of restricted stock held by
Executive which have not yet terminated will terminate immediately.
(v) Until the earlier of the second anniversary of the date of
termination or the date on which Executive becomes employed by a new
employer, the Company shall pay the reasonable costs of a reasonable
outplacement service selected by Executive.
(vi) Until the earlier of the second anniversary of the date of
termination or the date on which Executive becomes employed by a new
employer, the Company shall, at its expense, provide Executive and
Executive's family members with medical, dental, life insurance, disability
and accidental death and dismemberment benefits at the highest level
provided to Executive and Executive's family members during the period
beginning immediately prior to the Change of Control and ending on the date
of termination, provided, however, that if Executive becomes employed by a
-------- -------
new employer which maintains a major medical plan that either (i) does not
cover Executive and Executive's family members with respect to a pre-
existing condition which was covered under the Company's major medical
plan, or (ii) does not cover Executive and Executive's family members for a
designated waiting period, Executive's coverage under the Company's major
medical plan shall continue (but shall be limited in the event of
noncoverage due to a preexisting condition, to the preexisting condition
itself) until the earlier of the end of the applicable period of
noncoverage under the new employer's plan or the second anniversary of the
date of termination.
-2-
<PAGE>
(vii) The Company shall pay any amounts previously deferred by
Executive pursuant to any deferred compensation plan or arrangement
maintained by the Company.
(b) The payments provided for under this Section 2 shall be in addition to
any non-severance compensation and benefits provided for under any of the
Company's employee benefit plans, policies and practices or under the terms of
any other contracts, but in lieu of any severance pay under any Company employee
benefit plan, policy and practice or under the terms of any other contract
including any employment contract.
3. Termination for Cause, Disability, and without Good Reason. No
----------------------------------------------------------
compensation shall be payable under this Agreement in the event Executive's
employment with the Company is terminated by reason of (1) a termination by the
Company for Cause or for Disability, or (2) a termination by Executive without
Good Reason. For purposes of this Agreement:
(a) Disability. The Company may terminate Executive's employment for
----------
"Disability" if, due to physical or mental illness or incapacity, Executive
shall not have performed his duties with the Company on a substantially full-
time basis for (i) six (6) consecutive months, or (ii) for a total of 180 days
in any given period of twelve (12) consecutive months, but only if Executive
shall not have returned to the full-time performance of his duties with the
Company during the thirty (30) day period following the delivery by the Company
of a written notice of termination for Disability.
(b) Cause. The Company may terminate Executive's employment for any reason
-----
whatsoever at any time during the term of this Agreement, with or without Cause.
Any purported termination of employment by the Company for Cause shall be
communicated by a written notice of termination to Executive setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination. If Executive disputes the existence of Cause for any such
termination, such termination shall not be considered effective and Executive's
rights under this Agreement (excluding his right to terminate with Good Reason
---------
under Section 3(c) hereof) shall continue until such dispute is finally
determined, whether by mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
(c) Good Reason. Executive may terminate his employment at any time
-----------
during the term of this Agreement, with or without a Good Reason; provided
--------
however that Executive may not
- -------
-3-
<PAGE>
terminate this Agreement for Good Reason during any period in which Executive is
contesting a termination of Executive's employment by the Company for Cause.
Executive's continued employment after the expiration of sixty (60) days from
any action that would otherwise constitute Good Reason shall constitute a waiver
of rights with respect to such action constituting Good Reason under this
Agreement.
4. No Obligation To Seek Further Employment; Confidential Information.
------------------------------------------------------------------
(a) Executive shall not be required to seek other employment, nor shall
the amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date of termination, or otherwise. Payments to Executive pursuant to
this Agreement shall constitute the entire obligation of the Company for
severance pay and full settlement of any claim for severance pay under law or in
equity that Executive might otherwise assert against the Company or any of its
employees, officers or directors on account of Executive's termination. In
consideration for the protection and benefits provided for under this Agreement,
Executive hereby agrees to execute a release, substantially in the form of
Exhibit B hereto, of any claims for severance pay under law or in equity that
Executive might otherwise assert as described in the preceding sentence.
(b) Following the date of termination, Executive shall not disclose to any
person, or use to the significant disadvantage of the Company or any of its
affiliates, any Confidential Information; provided that nothing contained in
this Section 4(b) shall prevent Executive from being employed by a competitor of
the Company or utilizing Executive's general skills, experience, and knowledge,
including those developed while employed by the Company.
5. Successors. The Company will require any successor or assign (whether
----------
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession or assignment
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 5 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law,
-4-
<PAGE>
or otherwise. This Agreement shall inure to the benefit of and be enforceable by
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts are still payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's estate.
6. Excise Taxes.
------------
(a) In the event it shall be determined that any payment or benefit
provided under Section 2 of this Agreement, together with any other payments or
benefits Executive is entitled to receive by reason of a Change in Control of
the Company or a termination of his employment with the Company (collectively,
the "Payments") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986 ("Code") or any successor provision, or any
interest or penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay Executive,
at least 30 days prior to the time payment of any such Excise Tax is due, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
Executive, after deduction of any Excise Tax and any federal and state and local
taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed
on the Payments.
(b) For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (1) the Payments shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent auditors and
acceptable to Executive the Payments (in whole or in part) do not constitute
parachute payments or excess parachute payments or are otherwise not subject to
the Excise Tax, (2) the amount of the Payments which shall be treated as subject
to the Excise Tax shall be equal to the amount of "excess parachute payments"
within the meaning of Section 280G(b)(1) (after applying clause (1) above), and
(3) the value of any non-cash benefits or any deferred payment or benefit shall
be determined by the Company's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code. For purposes of
determining the amount
-5-
<PAGE>
of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executive's
residence on the Date of termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(c) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
employment, Executive shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax). In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the termination
of employment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest and penalties payable with respect to such excess) at the time that the
amount of such excess is finally determined. Executive shall notify the Company
of any audit or review by the Internal Revenue Service of Executive's federal
income tax return for the year in which a payment under this Agreement is made
within ten (10) days of Executive's receipt of notification of such audit or
review. In addition, Executive shall also notify the Company of the final
resolution of such audit or review within ten (10) days of such resolution.
7. Miscellaneous.
-------------
(a) Amendments, Waivers. No provisions of this Agreement may be modified,
-------------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and the Company. Except as otherwise provided in
Section 3(c) hereof, no waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
-6-
<PAGE>
(b) Validity. The invalidity or unenforceability of any provisions of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Confidentiality. Executive agrees that unless Executive is otherwise
---------------
required by law to disclose this Agreement, Executive will keep the existence
and terms of this Agreement completely confidential, and will not discuss the
terms, amount, or existence of this Agreement with anyone other than Executive's
spouse, attorneys or tax advisors, provided that these individuals also keep the
existence, terms, and amount of this Agreement completely confidential.
(d) Fees and Expenses. Company shall pay all reasonable legal fees and
-----------------
related expenses (including the reasonable costs of experts, evidence and
counsel), when and as incurred by Executive, as a result of contesting or
disputing any termination of employment of Executive following a Change in
Control, or enforcing the terms of this Agreement whether or not such contest or
dispute is resolved in Executive's favor but only if Executive was seeking in
good faith to obtain or enforce any right or benefit provided by this Agreement
or by any other plan or arrangement maintained by the Company under which
Executive is or may be entitled to receive benefits.
(e) Survival of Obligations. The obligations of Company under Sections
-----------------------
2 and 6 hereof shall survive the expiration of the term of this Agreement.
(f) Governing Law. The laws of Illinois shall be controlling in all
-------------
matters relating to this Agreement.
(g) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement and this
Agreement shall supersede any and all prior agreements, understandings or
negotiations with respect to the subject matter hereof.
(h) Non-Exclusivity of Rights. Except as explicitly modified by Section
-------------------------
2(b) of this Agreement, nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plan or program provided by Company and
-7-
<PAGE>
for which Executive may qualify, nor shall anything herein limit or reduce such
rights as Executive may have under any other agreements with Company. Amounts
which are vested benefits or which Executive is otherwise entitled to receive
under any plan or program of Company shall be payable in accordance with such
plan or program.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
EXECUTIVE:
_____________________________
James F. McNulty
BURNS INTERNATIONAL SERVICES CORPORATION
By___________________________________
Name: John A. Edwardson
Title: Chairman, President and
Chief Executive Officer
-8-
<PAGE>
EXHIBIT A
---------
DEFINITIONS
-----------
"Cause" shall mean Executive's:
(i) fraud, misappropriation, embezzlement or other act of material
misconduct against the Company or any of its affiliates thereof;
(ii) substantial and wilful failure to render services in accordance
with the terms of this Agreement, provided that (A) a demand for
performance of services has been delivered to the Executive by the Board of
Directors of the Company at least 30 days prior to termination identifying
the manner in which such Board of Directors believes that the Executive has
failed to perform and (B) the Executive has thereafter failed to remedy
such failure to perform within thirty (30) days after delivery of such
demand for performance;
(iii) willful and knowing violation of any rules or regulations of any
governmental or regulatory body material to the business of the Company; or
(iv) conviction of or plea of nolo contendere to a felony.
"Change in Control" of the Company shall mean:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) (a "Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Securities Exchange Act of 1934) of 50% or more of
either (A) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (1) any acquisition
directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company, or (4) any acquisition by any Person pursuant to a
transaction which complies with items (1), (2) and (3) of clause (iii) of
this definition; or
(ii) A change in the composition of the Board of Directors of the
Company (the "Board") such that the individuals who, as of the effective
date of this Agreement, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual who becomes a member of the Board subsequent to such date
(including the individuals who replace Donald Trauscht and J. Joe Adorjan
in 1999
-9-
<PAGE>
and the other two members of the Incumbent Board expected to resign in
2000), whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds (2/3) of those
individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered a member of the Incumbent Board; but, provided further, that any
such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act
of 1934) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered
as a member of the Incumbent Board; or
(iii) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly, more
than 60%, respectively, of the outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (other than the Company, any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company or such corporation resulting
from such Corporate Transaction) will beneficially own, directly or
indirectly, 20% or more, respectively, of the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except
to the extent that such ownership existed with respect to the Company prior
to the Corporate Transaction, and (3) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Confidential Information" means any non-public information relating to the
business plans, marketing plans, customers or employees of the Company or any of
its subsidiaries or affiliates other than information the disclosure of which
cannot reasonably be expected to adversely affect the business of the Company or
its subsidiaries or affiliates.
-10-
<PAGE>
"Good Reason" shall mean any of the following which occurs subsequent to a
-------------
Change in Control of the Company without Executive's prior consent:
(i) any adverse change in Executive's authorities, duties,
responsibilities (including reporting responsibilities); the assignment to
Executive of any duties or work responsibilities which are inconsistent
with such authorities or responsibilities; or any removal of Executive
from, or failure to reappoint or reelect him to any of such positions;
(ii) a reduction in or failure to pay any portion of Executive's
Annual Base Salary as in effect on the date of the Change in Control or as
the same may be increased from time to time thereafter;
(iii) the failure by Company to provide Executive with compensation
and benefits (including, without limitation, incentive, bonus and other
compensation plans and any vacation, medical, hospitalization, life
insurance, dental or disability benefit plan), or cash compensation in lieu
thereof, which are, in the aggregate, no less favorable than those provided
by Company to Executive immediately prior to the occurrence of the Change
in Control, other than an isolated, immaterial, and inadvertent failure not
taken in bad faith and which are remedied by the Company promptly after
receipt of a reasonable written notice thereof given by Executive;
(iv) any material breach by Company of any provision of this
Agreement;
(v) Executive being required to relocate to a principal place of
employment more than fifty (50) miles from his current place of employment;
or
(vi) the failure of Company to obtain a satisfactory agreement from
any successor or assign of Company to assume and agree to perform this
Agreement, as required in Section 5 hereof; or
Notwithstanding the above, a termination by Executive, at his own initiative,
for any reason during the 30-day period immediately following the first
anniversary of the Change in Control shall be deemed for all purposes of this
Agreement to constitute a termination by Executive for Good Reason.
"Target Annual Bonus" shall mean the bonus Executive could have earned
under the Company's bonus program for [senior management] for the fiscal year of
the Company in which his Date of termination occurs if the goals established in
connection with such bonus program had been achieved at the "expected" level.
-11-
<PAGE>
EXHIBIT B
---------
SEPARATION AND GENERAL RELEASE AGREEMENT
----------------------------------------
This Separation and General Release Agreement ("Agreement") is made by
and between Burns International Services Corporation, a Delaware corporation
(the "Company"), and ___________________ ("Executive") on the ____ day of
__________.
WHEREAS, Executive and the Company are parties to a Change in Control
Agreement (the "CIC Agreement") dated July 13, 1999; and
WHEREAS, in consideration for the protection and benefits provided for
under the CIC Agreement, Executive agreed to execute this release of any claims
under law or in equity that Executive might otherwise assert against the Company
or any of its employees, officers or directors on account of Executive's
termination of employment;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, both parties intending to be
legally bound hereby, the Company and the Executive hereby agree as follows:
1. Executive's employment in all positions and offices of the
Company shall terminate effective as of ________________ ("Separation Date").
2. Without limiting the scope of the releases contained in paragraph
5 below, Executive releases and discharges the Company from any
claim for, and waives any further claim for, any bonus or other
compensation in any form from the Company (including without
limitation any base compensation, incentive compensation,
discretionary incentive compensation, deferred compensation,
severance compensation or any other form of compensation), except
as provided in the CIC Agreement.
3. Executive agrees that he will do nothing to impede a smooth
transition to employees or other individuals designated by the
Company of his responsibilities and shall provide the details
concerning the projects and assignments in which he is and was
involved. Executive will not disrupt the morale or productive
working relationships of the employees, customers, vendors, and
independent contractors of the Company.
4. Executive represents that he has delivered to the Company all
property of the Company and its customers, vendors, and
independent contractors, including without limitation all money,
checks, credit cards, papers, books, records, computer programs,
data, keys, equipment, hardware, software, file back-up
materials, diskettes, tapes, electronic databases and files,
passwords or like materials in his possession or control and all
copies thereof. The ownership and right of control of all
reports, records,
-12-
<PAGE>
programs, data bases, processes and supporting documents prepared
by, for or on behalf of Executive in connection with the
performance of Executive's duties during his employment are
vested exclusively in the Company and remain the exclusive
property of the Company.
5. For good and valuable consideration (including, but not limited
to, the payments made or to be made under the CIC Agreement), the
receipt and sufficiency of which is hereby acknowledged:
a. Executive hereby releases and forever discharges the Company and
any parent, subsidiary, affiliate or other entity related to the
Company, as well as its or their predecessors, successors and
assigns, shareholders, directors, officers, agents,
representatives, servants, and employees, past, present and
future, individually and collectively ("Released Parties"), from
any and all claims, demands, causes of action or liabilities,
that Executive ever had, or now has, or that his heirs, executors
or administrators hereafter can, shall or may have upon or by
reason of any matter, cause or thing whatsoever, whether known or
unknown, suspected or unsuspected, arising out of or in any way
connected with his employment and/or separation from the Company.
Without limiting the generality of the foregoing and to the
extent permitted by law, this release applies to any right that
Executive has or may have to commence or maintain a charge or
action or to recover pursuant to such a charge (regardless of the
identity of the individual or entity commencing or maintaining
such charge or action) alleging discrimination under any federal,
state or local statute (whether before a court or an
administrative agency), including without limitation, the Age
Discrimination in Employment Act of 1967, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act, the Family and Medical Leave Act, and the
Employee Retirement Income Security Act of 1974, and any right
that Executive has or may have to commence or maintain a claim or
action alleging wrongful termination, breach of contract,
commission of tort, or any combination thereof, whether based in
law or in equity. Executive agrees not to make, assert or
maintain any charge, claim, demand or action that would be
covered by this release.
b. Executive understands that by releasing employment
discrimination claims against the Released Parties, he also
forever releases and discharges any right he may have to
file or recover in a lawsuit he may bring himself on the
same claims and also any right he may have to any relief
that he might otherwise be entitled to as a result of any
proceedings instituted by the Equal Employment Opportunity
Commission or any other comparable enforcement authority.
c. This release shall run to and be for the benefit of the
Released Parties. This release shall run to and be binding
upon Executive and his heirs and assigns.
-13-
<PAGE>
d. To the maximum extent permitted by law, Executive covenants
not to sue or to institute or cause to be instituted any
action in any federal, state or local agency or court
against the Company regarding the matters covered by the
release contained in this paragraph.
e. This release and covenant not to sue shall not apply to (i)
those continuing obligations, if any, of the Company under
the CIC Agreement; (ii) any vested benefits provided under
any retirement plan, 401(k), profit sharing plan and related
ERISA excess plans, welfare benefit plans or other plans or
arrangements to which Executive would otherwise be entitled
pursuant to the terms of such plans or arrangements; (iii)
any rights the undersigned may have solely as a security
holder of any Released Party; and (iv) any rights to
indemnification the undersigned may have under applicable
law, the by-laws or certificate of incorporation of any
Released Party, or as an insured under any D&O or liability
insurance policy now, hereafter or previously in force.
6. In the event Executive breaches any provision of this Agreement,
it shall be deemed to constitute a failure of consideration, and
the Company shall be relieved of all its obligations hereunder
and under the CIC Agreement. Executive agrees to indemnify the
Company from and against all liability, costs and expenses,
including reasonable attorneys' fees, arising out of a breach of
this Agreement. In view of the difficulty of determining damages
in the event of any such breach, it is agreed that the Company
will be entitled to liquidated damages in the amount of all
payments made by the Company under this Agreement, plus
reasonable attorneys' fees and court costs, if any, incurred by
the Company in enforcing this clause.
7. In the event the Company breaches any provision of this
Agreement, it shall be deemed to constitute a failure of
consideration, and Executive shall be relieved of all his
obligations hereunder. The Company agrees to indemnify Executive
from and against all liability, costs and expenses, including
reasonable attorneys' fees, arising out of a breach of this
Agreement.
8. Executive agrees that neither this Agreement nor performance
hereunder constitutes an admission by the Company of any
violation of any federal, state or local law, regulation, common
law, of any breach of any contract or any other wrongdoing of any
type.
9. This Agreement and the CIC Agreement constitutes the entire
agreement between the parties. No modification of this Agreement
or further modification of the CIC Agreement shall be valid
unless signed by the party against whom such modification is
sought to be enforced.
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<PAGE>
10. Executive represents and agrees that (a) he fully understands his
right to discuss all aspects of this Agreement with legal counsel
and, to the extent he deems appropriate, he has fully availed
himself of this right; and (b) he has carefully read and fully
understands all the provisions of this Agreement and is
voluntarily entering into the same.
11. Executive acknowledges that this Agreement includes a waiver of
any rights and claims arising under the Age Discrimination in
Employment Act. Executive understands he is not waiving rights or
claims that may arise after the date this Agreement is executed.
Employee acknowledges that the consideration he is receiving in
exchange for his waiver of the rights and claims specified herein
exceeds anything of value to which he already is entitled.
Executive acknowledges that he was advised in writing on
__________ __, ____, to consult with an attorney prior to
executing this Agreement. Executive acknowledges that he has
entered into this Agreement knowingly and voluntarily with full
understanding of its terms and after having had the opportunity
to seek and receive advice and counsel from his personal and/or
legal counsel. Executive acknowledges that he was given a period
of at least twenty-one (21) days within which to consider this
Agreement and was so advised in writing on __________ __, ____.
Executive understands that he may revoke this Agreement during
the seven (7) days following the execution of this Agreement and
that the Agreement shall not become effective or enforceable
until that seven (7) day revocation period has expired.
12. The provisions of this Agreement shall be construed in accordance
with the internal laws, but not the laws of conflicts, applicable
to agreements made in Illinois.
IN WITNESS WHEREOF, the parties have executed this Separation and
General Release Agreement on the date first written above.
Burns International Services Corporation
By: ___________________________
Its ___________________________
_______________________________
Executive
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<PAGE>
Exhibit 10.26
- -------------
CHANGE IN CONTROL AGREEMENT
---------------------------
THIS CHANGE IN CONTROL AGREEMENT ("Agreement") is entered into effective
July 13, 1999 by and between Burns International Services Corporation, a
Delaware corporation (the "Company") and Nancy E. Kittle (the "Executive").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Schedule A hereto.
In consideration of the mutual promises and agreements herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, both parties intending to be legally bound hereby, the
Company and Executive hereby agree as follows:
1. Term of Agreement. This Agreement shall terminate, except to the
-----------------
extent that any obligation of the Company hereunder remains unpaid as of such
time, upon the first to occur of (a) the termination of Executive's employment
with the Company or (b) the second anniversary of the date of a Change in
Control of the Company if Executive is employed by the Company upon such second
anniversary.
2. Severance Benefits Upon Termination Following Change in Control.
---------------------------------------------------------------
(a) If a Change in Control of the Company shall have occurred while
Executive is still an employee of the Company, and Executive's employment with
the Company is terminated during the two (2) year period following the date of
such Change in Control by reason of a termination (1) by the Company without
Cause, or (2) by Executive with Good Reason, Executive shall be entitled to the
following severance benefits:
(i) Within five (5) business days after the date of Executive's
termination, the Company shall make a lump sum payment to Executive in an
amount equal to the sum of (A) his accrued but unpaid annual base salary
through the date of termination at the greater of the rate in effect at the
time the Change in Control occurred or the rate in effect when the notice
of termination was given, (B) an amount equal to 100% of Executive's Target
Annual Bonus multiplied by a fraction, the numerator of which is the number
of days in the fiscal year of the Company to which such Target Annual Bonus
relates during
<PAGE>
which Executive was employed by the Company, and the denominator of which
is 365, and (C) an amount equal to Executive's supplemental benefit
compensation accrued but unpaid through the date of termination.
(ii) Within thirty (30) days after the date of Executive's
termination, the Company shall make a lump sum payment to Executive in an
amount equal to two (2) times the sum of (A) Executive's annual base salary
at the greater of the rate in effect at the time the Change in Control
occurred or the rate in effect when the notice of termination was given,
plus (B) Executive's Target Annual Bonus.
(iii) Any outstanding options to purchase stock of the Company held
by Executive as of the date of termination shall immediately vest and
become exercisable in full.
(iv) The restrictions on any shares of restricted stock held by
Executive which have not yet terminated will terminate immediately.
(v) Until the earlier of the second anniversary of the date of
termination or the date on which Executive becomes employed by a new
employer, the Company shall pay the reasonable costs of a reasonable
outplacement service selected by Executive.
(vi) Until the earlier of the second anniversary of the date of
termination or the date on which Executive becomes employed by a new
employer, the Company shall, at its expense, provide Executive and
Executive's family members with medical, dental, life insurance, disability
and accidental death and dismemberment benefits at the highest level
provided to Executive and Executive's family members during the period
beginning immediately prior to the Change of Control and ending on the date
of termination, provided, however, that if Executive becomes employed by a
-------- -------
new employer which maintains a major medical plan that either (i) does not
cover Executive and Executive's family members with respect to a pre-
existing condition which was covered under the Company's major medical
plan, or (ii) does not cover Executive and Executive's family members for a
designated waiting period, Executive's coverage under the Company's major
medical plan shall continue (but shall be limited in the event of
noncoverage due to a preexisting condition, to the preexisting condition
itself) until the earlier of the end of the applicable period of
noncoverage under the new employer's plan or the second anniversary of the
date of termination.
-2-
<PAGE>
(vii) The Company shall pay any amounts previously deferred by
Executive pursuant to any deferred compensation plan or arrangement
maintained by the Company.
(b) The payments provided for under this Section 2 shall be in addition to
any non-severance compensation and benefits provided for under any of the
Company's employee benefit plans, policies and practices or under the terms of
any other contracts, but in lieu of any severance pay under any Company employee
benefit plan, policy and practice or under the terms of any other contract
including any employment contract.
3. Termination for Cause, Disability, and without Good Reason. No
----------------------------------------------------------
compensation shall be payable under this Agreement in the event Executive's
employment with the Company is terminated by reason of (1) a termination by the
Company for Cause or for Disability, or (2) a termination by Executive without
Good Reason. For purposes of this Agreement:
(a) Disability. The Company may terminate Executive's employment for
----------
"Disability" if, due to physical or mental illness or incapacity, Executive
shall not have performed his duties with the Company on a substantially full-
time basis for (i) six (6) consecutive months, or (ii) for a total of 180 days
in any given period of twelve (12) consecutive months, but only if Executive
shall not have returned to the full-time performance of his duties with the
Company during the thirty (30) day period following the delivery by the Company
of a written notice of termination for Disability.
(b) Cause. The Company may terminate Executive's employment for any reason
-----
whatsoever at any time during the term of this Agreement, with or without Cause.
Any purported termination of employment by the Company for Cause shall be
communicated by a written notice of termination to Executive setting forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination. If Executive disputes the existence of Cause for any such
termination, such termination shall not be considered effective and Executive's
rights under this Agreement (excluding his right to terminate with Good Reason
---------
under Section 3(c) hereof) shall continue until such dispute is finally
determined, whether by mutual agreement by the parties or upon final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
(c) Good Reason. Executive may terminate his employment at any time
-----------
during the term of this Agreement, with or without a Good Reason; provided
--------
however that Executive may not
- -------
-3-
<PAGE>
terminate this Agreement for Good Reason during any period in which Executive is
contesting a termination of Executive's employment by the Company for Cause.
Executive's continued employment after the expiration of sixty (60) days from
any action that would otherwise constitute Good Reason shall constitute a waiver
of rights with respect to such action constituting Good Reason under this
Agreement.
4. No Obligation To Seek Further Employment; Confidential Information.
------------------------------------------------------------------
(a) Executive shall not be required to seek other employment, nor shall
the amount of any payment provided for under this Agreement be reduced by any
compensation earned by Executive as the result of employment by another employer
after the date of termination, or otherwise. Payments to Executive pursuant to
this Agreement shall constitute the entire obligation of the Company for
severance pay and full settlement of any claim for severance pay under law or in
equity that Executive might otherwise assert against the Company or any of its
employees, officers or directors on account of Executive's termination. In
consideration for the protection and benefits provided for under this Agreement,
Executive hereby agrees to execute a release, substantially in the form of
Exhibit B hereto, of any claims for severance pay under law or in equity that
Executive might otherwise assert as described in the preceding sentence.
(b) Following the date of termination, Executive shall not disclose to any
person, or use to the significant disadvantage of the Company or any of its
affiliates, any Confidential Information; provided that nothing contained in
this Section 4(b) shall prevent Executive from being employed by a competitor of
the Company or utilizing Executive's general skills, experience, and knowledge,
including those developed while employed by the Company.
5. Successors. The Company will require any successor or assign (whether
----------
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession or assignment
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor or assign to its business and/or assets
as aforesaid which executes and delivers the agreement provided for in this
Section 5 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law,
-4-
<PAGE>
or otherwise. This Agreement shall inure to the benefit of and be enforceable by
Executive's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts are still payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's estate.
6. Excise Taxes.
------------
(a) In the event it shall be determined that any payment or benefit
provided under Section 2 of this Agreement, together with any other payments or
benefits Executive is entitled to receive by reason of a Change in Control of
the Company or a termination of his employment with the Company (collectively,
the "Payments") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986 ("Code") or any successor provision, or any
interest or penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, hereinafter
collectively referred to as the "Excise Tax"), the Company shall pay Executive,
at least 30 days prior to the time payment of any such Excise Tax is due, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
Executive, after deduction of any Excise Tax and any federal and state and local
taxes imposed on the Gross-Up Payment, shall be equal to the Excise Tax imposed
on the Payments.
(b) For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (1) the Payments shall be
treated as "parachute payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax counsel selected by the Company's independent auditors and
acceptable to Executive the Payments (in whole or in part) do not constitute
parachute payments or excess parachute payments or are otherwise not subject to
the Excise Tax, (2) the amount of the Payments which shall be treated as subject
to the Excise Tax shall be equal to the amount of "excess parachute payments"
within the meaning of Section 280G(b)(1) (after applying clause (1) above), and
(3) the value of any non-cash benefits or any deferred payment or benefit shall
be determined by the Company's independent auditors in accordance with the
principles of Section 280G(d)(3) and (4) of the Code. For purposes of
determining the amount
-5-
<PAGE>
of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of Executive's
residence on the Date of termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(c) In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of termination of
employment, Executive shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax). In the event that the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the termination
of employment (including by reason of any payment the existence or amount of
which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest and penalties payable with respect to such excess) at the time that the
amount of such excess is finally determined. Executive shall notify the Company
of any audit or review by the Internal Revenue Service of Executive's federal
income tax return for the year in which a payment under this Agreement is made
within ten (10) days of Executive's receipt of notification of such audit or
review. In addition, Executive shall also notify the Company of the final
resolution of such audit or review within ten (10) days of such resolution.
7. Miscellaneous.
-------------
(a) Amendments, Waivers. No provisions of this Agreement may be modified,
-------------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by Executive and the Company. Except as otherwise provided in
Section 3(c) hereof, no waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
-6-
<PAGE>
(b) Validity. The invalidity or unenforceability of any provisions of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
(c) Confidentiality. Executive agrees that unless Executive is otherwise
---------------
required by law to disclose this Agreement, Executive will keep the existence
and terms of this Agreement completely confidential, and will not discuss the
terms, amount, or existence of this Agreement with anyone other than Executive's
spouse, attorneys or tax advisors, provided that these individuals also keep the
existence, terms, and amount of this Agreement completely confidential.
(d) Fees and Expenses. Company shall pay all reasonable legal fees and
-----------------
related expenses (including the reasonable costs of experts, evidence and
counsel), when and as incurred by Executive, as a result of contesting or
disputing any termination of employment of Executive following a Change in
Control, or enforcing the terms of this Agreement whether or not such contest or
dispute is resolved in Executive's favor but only if Executive was seeking in
good faith to obtain or enforce any right or benefit provided by this Agreement
or by any other plan or arrangement maintained by the Company under which
Executive is or may be entitled to receive benefits.
(e) Survival of Obligations. The obligations of Company under Sections
-----------------------
2 and 6 hereof shall survive the expiration of the term of this Agreement.
(f) Governing Law. The laws of Illinois shall be controlling in all
-------------
matters relating to this Agreement.
(g) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement and this
Agreement shall supersede any and all prior agreements, understandings or
negotiations with respect to the subject matter hereof.
(h) Non-Exclusivity of Rights. Except as explicitly modified by Section
-------------------------
2(b) of this Agreement, nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any benefit, bonus, incentive
or other plan or program provided by Company and
-7-
<PAGE>
for which Executive may qualify, nor shall anything herein limit or reduce such
rights as Executive may have under any other agreements with Company. Amounts
which are vested benefits or which Executive is otherwise entitled to receive
under any plan or program of Company shall be payable in accordance with such
plan or program,.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
EXECUTIVE:
_____________________________
Nancy E. Kittle
BURNS INTERNATIONAL SERVICES CORPORATION
By___________________________________
Name: John A. Edwardson
Title: Chairman, President and
Chief Executive Officer
-8-
<PAGE>
EXHIBIT A
---------
DEFINITIONS
-----------
"Cause" shall mean Executive's:
(i) fraud, misappropriation, embezzlement or other act of material
misconduct against the Company or any of its affiliates thereof;
(ii) substantial and wilful failure to render services in accordance
with the terms of this Agreement, provided that (A) a demand for
performance of services has been delivered to the Executive by the Board of
Directors of the Company at least 30 days prior to termination identifying
the manner in which such Board of Directors believes that the Executive has
failed to perform and (B) the Executive has thereafter failed to remedy
such failure to perform within thirty (30) days after delivery of such
demand for performance;
(iii) willful and knowing violation of any rules or regulations of
any governmental or regulatory body material to the business of the
Company; or
(iv) conviction of or plea of nolo contendere to a felony.
"Change in Control" of the Company shall mean:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934) (a "Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Securities Exchange Act of 1934) of 50% or more of
either (A) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); excluding, however, the following: (1) any acquisition
directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company, or (4) any acquisition by any Person pursuant to a
transaction which complies with items (1), (2) and (3) of clause (iii) of
this definition; or
(ii) A change in the composition of the Board of Directors of the
Company (the "Board") such that the individuals who, as of the effective
date of this Agreement, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual who becomes a member of the Board subsequent to such date
(including the individuals who replace Donald Trauscht and J. Joe Adorjan
in 1999
-9-
<PAGE>
and the other two members of the Incumbent Board expected to resign in
2000), whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds (2/3) of those
individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered a member of the Incumbent Board; but, provided further, that any
such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act
of 1934) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so considered
as a member of the Incumbent Board; or
(iii) The approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, such a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals and entities who are
the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly, more
than 60%, respectively, of the outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (other than the Company, any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company or such corporation resulting
from such Corporate Transaction) will beneficially own, directly or
indirectly, 20% or more, respectively, of the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except
to the extent that such ownership existed with respect to the Company prior
to the Corporate Transaction, and (3) individuals who were members of the
Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate
Transaction; or
(iv) The approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
"Confidential Information" means any non-public information relating to the
business plans, marketing plans, customers or employees of the Company or any of
its subsidiaries or affiliates other than information the disclosure of which
cannot reasonably be expected to adversely affect the business of the Company or
its subsidiaries or affiliates.
-10-
<PAGE>
"Good Reason" shall mean any of the following which occurs subsequent to a
-------------
Change in Control of the Company without Executive's prior consent:
(i) any adverse change in Executive's authorities, duties,
responsibilities (including reporting responsibilities); the assignment to
Executive of any duties or work responsibilities which are inconsistent
with such authorities or responsibilities; or any removal of Executive
from, or failure to reappoint or reelect him to any of such positions;
(ii) a reduction in or failure to pay any portion of Executive's
Annual Base Salary as in effect on the date of the Change in Control or as
the same may be increased from time to time thereafter;
(iii) the failure by Company to provide Executive with compensation
and benefits (including, without limitation, incentive, bonus and other
compensation plans and any vacation, medical, hospitalization, life
insurance, dental or disability benefit plan), or cash compensation in lieu
thereof, which are, in the aggregate, no less favorable than those provided
by Company to Executive immediately prior to the occurrence of the Change
in Control, other than an isolated, immaterial, and inadvertent failure not
taken in bad faith and which are remedied by the Company promptly after
receipt of a reasonable written notice thereof given by Executive;
(iv) any material breach by Company of any provision of this
Agreement;
(v) Executive being required to relocate to a principal place of
employment more than fifty (50) miles from his current place of employment;
or
(vi) the failure of Company to obtain a satisfactory agreement from
any successor or assign of Company to assume and agree to perform this
Agreement, as required in Section 5 hereof; or
Notwithstanding the above, a termination by Executive, at his own initiative,
for any reason during the 30-day period immediately following the first
anniversary of the Change in Control shall be deemed for all purposes of this
Agreement to constitute a termination by Executive for Good Reason.
"Target Annual Bonus" shall mean the bonus Executive could have earned under
the Company's bonus program for [senior management] for the fiscal year of the
Company in which his Date of termination occurs if the goals established in
connection with such bonus program had been achieved at the "expected" level.
-11-
<PAGE>
EXHIBIT B
---------
SEPARATION AND GENERAL RELEASE AGREEMENT
----------------------------------------
This Separation and General Release Agreement ("Agreement") is made by
and between Burns International Services Corporation, a Delaware corporation
(the "Company"), and ___________________ ("Executive") on the ____ day of
__________.
WHEREAS, Executive and the Company are parties to a Change in Control
Agreement (the "CIC Agreement") dated July 13, 1999; and
WHEREAS, in consideration for the protection and benefits provided for
under the CIC Agreement, Executive agreed to execute this release of any claims
under law or in equity that Executive might otherwise assert against the Company
or any of its employees, officers or directors on account of Executive's
termination of employment;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, both parties intending to be
legally bound hereby, the Company and the Executive hereby agree as follows:
1. Executive's employment in all positions and offices of the Company
shall terminate effective as of ________________ ("Separation Date").
2. Without limiting the scope of the releases contained in paragraph
5 below, Executive releases and discharges the Company from any
claim for, and waives any further claim for, any bonus or other
compensation in any form from the Company (including without
limitation any base compensation, incentive compensation,
discretionary incentive compensation, deferred compensation,
severance compensation or any other form of compensation), except
as provided in the CIC Agreement.
3. Executive agrees that he will do nothing to impede a smooth
transition to employees or other individuals designated by the
Company of his responsibilities and shall provide the details
concerning the projects and assignments in which he is and was
involved. Executive will not disrupt the morale or productive
working relationships of the employees, customers, vendors, and
independent contractors of the Company.
4. Executive represents that he has delivered to the Company all
property of the Company and its customers, vendors, and
independent contractors, including without limitation all money,
checks, credit cards, papers, books, records, computer programs,
data, keys, equipment, hardware, software, file back-up materials,
diskettes, tapes, electronic databases and files, passwords or
like materials in his possession or control and all copies
thereof. The ownership and right of control of all reports,
records,
-12-
<PAGE>
programs, data bases, processes and supporting documents prepared
by, for or on behalf of Executive in connection with the
performance of Executive's duties during his employment are vested
exclusively in the Company and remain the exclusive property of
the Company.
5. For good and valuable consideration (including, but not limited
to, the payments made or to be made under the CIC Agreement), the
receipt and sufficiency of which is hereby acknowledged:
a. Executive hereby releases and forever discharges the Company and
any parent, subsidiary, affiliate or other entity related to the
Company, as well as its or their predecessors, successors and
assigns, shareholders, directors, officers, agents,
representatives, servants, and employees, past, present and
future, individually and collectively ("Released Parties"), from
any and all claims, demands, causes of action or liabilities, that
Executive ever had, or now has, or that his heirs, executors or
administrators hereafter can, shall or may have upon or by reason
of any matter, cause or thing whatsoever, whether known or
unknown, suspected or unsuspected, arising out of or in any way
connected with his employment and/or separation from the Company.
Without limiting the generality of the foregoing and to the extent
permitted by law, this release applies to any right that Executive
has or may have to commence or maintain a charge or action or to
recover pursuant to such a charge (regardless of the identity of
the individual or entity commencing or maintaining such charge or
action) alleging discrimination under any federal, state or local
statute (whether before a court or an administrative agency),
including without limitation, the Age Discrimination in Employment
Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil
Rights Act of 1991, the Americans with Disabilities Act, the
Family and Medical Leave Act, and the Employee Retirement Income
Security Act of 1974, and any right that Executive has or may have
to commence or maintain a claim or action alleging wrongful
termination, breach of contract, commission of tort, or any
combination thereof, whether based in law or in equity. Executive
agrees not to make, assert or maintain any charge, claim, demand
or action that would be covered by this release.
b. Executive understands that by releasing employment
discrimination claims against the Released Parties, he also
forever releases and discharges any right he may have to file
or recover in a lawsuit he may bring himself on the same
claims and also any right he may have to any relief that he
might otherwise be entitled to as a result of any proceedings
instituted by the Equal Employment Opportunity Commission or
any other comparable enforcement authority.
c. This release shall run to and be for the benefit of the
Released Parties. This release shall run to and be binding
upon Executive and his heirs and assigns.
-13-
<PAGE>
d. To the maximum extent permitted by law, Executive covenants
not to sue or to institute or cause to be instituted any
action in any federal, state or local agency or court against
the Company regarding the matters covered by the release
contained in this paragraph.
e. This release and covenant not to sue shall not apply to (i)
those continuing obligations, if any, of the Company under the
CIC Agreement; (ii) any vested benefits provided under any
retirement plan, 401(k), profit sharing plan and related ERISA
excess plans, welfare benefit plans or other plans or
arrangements to which Executive would otherwise be entitled
pursuant to the terms of such plans or arrangements; (iii) any
rights the undersigned may have solely as a security holder of
any Released Party; and (iv) any rights to indemnification the
undersigned may have under applicable law, the by-laws or
certificate of incorporation of any Released Party, or as an
insured under any D&O or liability insurance policy now,
hereafter or previously in force.
6. In the event Executive breaches any provision of this Agreement,
it shall be deemed to constitute a failure of consideration, and
the Company shall be relieved of all its obligations hereunder and
under the CIC Agreement. Executive agrees to indemnify the Company
from and against all liability, costs and expenses, including
reasonable attorneys' fees, arising out of a breach of this
Agreement. In view of the difficulty of determining damages in the
event of any such breach, it is agreed that the Company will be
entitled to liquidated damages in the amount of all payments made
by the Company under this Agreement, plus reasonable attorneys'
fees and court costs, if any, incurred by the Company in enforcing
this clause.
7. In the event the Company breaches any provision of this Agreement,
it shall be deemed to constitute a failure of consideration, and
Executive shall be relieved of all his obligations hereunder. The
Company agrees to indemnify Executive from and against all
liability, costs and expenses, including reasonable attorneys'
fees, arising out of a breach of this Agreement.
8. Executive agrees that neither this Agreement nor performance
hereunder constitutes an admission by the Company of any violation
of any federal, state or local law, regulation, common law, of any
breach of any contract or any other wrongdoing of any type.
9. This Agreement and the CIC Agreement constitutes the entire
agreement between the parties. No modification of this Agreement
or further modification of the CIC Agreement shall be valid unless
signed by the party against whom such modification is sought to be
enforced.
-14-
<PAGE>
10. Executive represents and agrees that (a) he fully understands his
right to discuss all aspects of this Agreement with legal counsel
and, to the extent he deems appropriate, he has fully availed
himself of this right; and (b) he has carefully read and fully
understands all the provisions of this Agreement and is
voluntarily entering into the same.
11. Executive acknowledges that this Agreement includes a waiver of
any rights and claims arising under the Age Discrimination in
Employment Act. Executive understands he is not waiving rights or
claims that may arise after the date this Agreement is executed.
Employee acknowledges that the consideration he is receiving in
exchange for his waiver of the rights and claims specified herein
exceeds anything of value to which he already is entitled.
Executive acknowledges that he was advised in writing on
__________ __, ____, to consult with an attorney prior to
executing this Agreement. Executive acknowledges that he has
entered into this Agreement knowingly and voluntarily with full
understanding of its terms and after having had the opportunity to
seek and receive advice and counsel from his personal and/or legal
counsel. Executive acknowledges that he was given a period of at
least twenty-one (21) days within which to consider this Agreement
and was so advised in writing on __________ __, ____. Executive
understands that he may revoke this Agreement during the seven (7)
days following the execution of this Agreement and that the
Agreement shall not become effective or enforceable until that
seven (7) day revocation period has expired.
12. The provisions of this Agreement shall be construed in accordance
with the internal laws, but not the laws of conflicts, applicable
to agreements made in Illinois.
IN WITNESS WHEREOF, the parties have executed this Separation and
General Release Agreement on the date first written above.
Burns International Services Corporation
By: __________________________
Its ___________________________
______________________________
Executive
-15-
<PAGE>
Exhibit 13
Management's Responsibility for Consolidated Financial Statements
Burns International Services Corporation
The information in this report is the responsibility of management. Burns
International Services Corporation has in place reporting guidelines and
policies designed to ensure that the statements and other information contained
in this report present a fair and accurate financial picture of the Company. In
fulfilling this management responsibility, we make informed judgments and
estimates conforming with generally accepted accounting principles.
The accompanying financial statements have been audited by Deloitte & Touche
LLP, independent auditors. Management has made available all of the Company's
financial records and related information deemed necessary by Deloitte & Touche
LLP. Furthermore, management believes that all representations made by it to
Deloitte & Touche LLP during their audit were valid and appropriate.
Management is responsible for maintaining a comprehensive system of internal
control through its operations that provides reasonable assurance that assets
are protected from improper use, that material errors are prevented or detected
within a timely period and that records are sufficient to produce reliable
financial reports. The system of internal control is supported by written
policies and procedures that are updated by management as necessary. The system
is reviewed and evaluated regularly by the Company's internal auditors, as well
as by the independent auditors in connection with their annual audit of the
financial statements.
The independent auditors conduct their audit in accordance with generally
accepted auditing standards and perform such tests of transactions and balances
as they deem necessary. Management considers the recommendations of its
internal auditors and independent auditors concerning the Company's system of
internal control and takes the necessary actions that are cost effective in the
circumstances. Management believes the Company's system of internal control is
adequate to accomplish the objectives set forth in the previous paragraph.
An audit committee composed entirely of directors of the Company, who are not
employees, meets periodically with the Company's management and independent
auditors to review financial results and procedures, internal financial
controls, and internal and external audit plans and recommendations. To
guarantee independence, the audit committee and the independent auditors have
unrestricted access to each other with or without the presence of management
representatives.
/s/ John A. Edwardson /s/ Robert E. T. Lackey /s/ Brian S. Cooper
John A. Edwardson Robert E. T. Lackey Brian S. Cooper
Chairman, President and Vice President, General Counsel Treasurer
Chief Executive Officer and Corporate Secretary
<PAGE>
Consolidated Statistical Review
The following table sets forth selected financial information for Burns
International Services Corporation ("the Company"). The information is derived
from the audited financial statements of the Company. Previously reported
results have been restated to reflect the May 29, 1998 sales of the Company's
electronic security unit and the Company's courier services unit. As a result,
Wells Fargo Alarm Services Company and Pony Express Delivery Services are
reflected in discontinued operations for all years presented. In addition, the
Company's armored security services unit entered into a business combination
with Loomis Armored in January 1997. The combined company, known as Loomis,
Fargo & Co., is accounted for under the equity method. The armored security
services unit was included in the Company's results of operations for 23 days in
1997 and full years 1996 and 1995. The selected financial data should be read
in connection with the 1999 Consolidated Financial Statements and accompanying
notes.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
- ----------------------------
(millions of dollars, except per share)
Net service revenues $ 1,378.6 $1,323.4 $1,304.6 $1,470.1 $1,453.8
Earnings before interest and taxes 56.2 40.4 57.6 61.0 55.4
Earnings before taxes 39.8 24.9 40.9 33.8 29.1
Provision for income taxes 14.6 9.8 15.1 13.6 13.1
Earnings from continuing operations 25.2 15.1 25.8 20.2 16.0
Earnings from continuing operations
per share - basic $ 1.16 $ 0.64 $ 1.10 $ 0.87 $ 0.69
Earnings from continuing operations
per share - diluted $ 1.14 $ 0.64 $ 1.07 $ 0.86 $ 0.68
Average common shares outstanding -
basic (in thousands) 21,634 23,575 23,475 23,266 23,097
Average common shares and
equivalents outstanding - diluted
(in thousands) 22,002 23,958 24,075 23,517 23,399
Balance Sheet Data
- ------------------
(at end of year)
Total assets $ 343.7 $ 431.9 $ 625.9 $ 728.9 $ 808.6
Balance sheet debt 137.2 126.7 338.7 437.1 479.0
Cash and cash equivalents available (10.4) (105.7) (8.0) (15.4) (17.3)
_________ ________ ________ ________ ________
Net balance sheet debt 126.8 21.0 330.7 421.7 461.7
Accounts receivable sold, net 115.0 82.4 102.4 110.2 88.9
Shareholders' equity 30.7 96.9 65.0 41.2 49.7
Net assets of discontinued operations -- -- $ 327.0 $ 327.5 $ 369.7
</TABLE>
<TABLE>
<CAPTION>
Stock Prices
- ------------
First Second Third Fourth
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
1999 Quarters
- -------------
High $20 11/16 $ 22 $21 1/2 $16 1/16
Low $14 11/16 $ 15 3/8 $12 5/16 $ 8 1/4
1998 Quarters
- -------------
High $ 19 7/16 $ 24 3/4 $23 1/16 $20 1/16
Low $ 15 5/16 $ 17 7/8 $13 1/4 $13 1/16
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SIGNIFICANT EVENTS
- ------------------
On February 3, 2000, the Company announced that James M. Froisland was appointed
Vice President and Chief Financial Officer. He will be responsible for all
finance and accounting functions as well as information technology and risk
management. Mr. Froisland replaces the former Vice President and Chief
Financial Officer, Timothy M. Wood, who announced his resignation on October 28,
1999 to pursue other interests.
On January 7, 2000, the Company announced that it had amended its senior credit
facility to provide for additional borrowing capacity, and had arranged for a
short-term additional credit facility in an amount up to $15 million for working
capital purposes during the transition to its new accounting and invoicing
system.
On October 28, 1999, the Company announced that Merrill Lynch Capital Partners,
Inc., ("MLCP"), intended to distribute to its partners the remaining shares of
the Company's common stock owned by the fund. The distribution was completed by
year-end 1999. MLCP owned 3,217,532 shares on October 28, 1999, representing
approximately 16.4% of the outstanding shares. The general partner of the fund
received approximately 412,300 shares in the distribution, and has agreed,
subject to certain conditions, to hold the shares until at least April 15, 2000.
Other Merrill Lynch affiliates, not part of the distribution, directly own
1,843,576 shares of the Company. Of these shares, affiliates owning 788,892
shares agreed to comply with the holdback arrangement.
On October 26, 1999, the Board of Directors approved a Stockholder Rights Plan
designed to enhance the Board's ability to protect the Company's shareholders.
The plan was adopted to protect against unsolicited attempts to acquire control
of the Company when adequate price is not offered to all shareholders or the
offer is not in the best interest of the Company and its shareholders. The
rights were distributed as a dividend at the rate of one right for each share of
common stock, par value $0.01 per share ("Voting Common Stock"), and Series I
Non-Voting Common Stock, par value $0.01 per share (together with the Voting
Common Stock, the "Common Stock") held by stockholders of record at the close of
business on November 8, 1999. Each right entitles the holder to purchase, upon
the occurrence of certain events, one unit of a share of preferred stock for
$55.00, or an aggregate 196,318 shares of preferred stock. The rights generally
are exercisable only if a person or group acquires beneficial ownership of 15%
or more of Burns International Services Corporation's Common Stock or commences
a tender or exchange offer that, upon consummation, would result in a person or
group owning 15% or more of Burns International Services Corporation's Common
Stock. Under certain circumstances, the rights are redeemable at a price of
$0.01 per right. The rights will expire on November 8, 2009.
On July 2, 1999, shareholder approval was received to change the Company's
corporate name to Burns International Services Corporation. The change is part
of an overall strategy, announced May 4, 1999, to unify under one brand name the
broad range of services offered by the Company. The brand unification should
eliminate existing market confusion with Wells Fargo & Company ("Wells Fargo")
and Borg-Warner Automotive, Inc. The NYSE ticker symbol remains as BOR.
On June 14, 1999, the Company repurchased 4,350,000 shares of its common stock
from a group of Merrill Lynch affiliated entities (the "ML Group"). The $18.375
per share purchase price totaled approximately $80 million and represented a
$0.50 per share discount to the closing market price on April 19, 1999. The
shares repurchased represented approximately 43% of ML Group's stock ownership
in the Company.
On June 11, 1999, the Company announced that the ML Group intended to sell up to
4,790,136 shares of their remaining interest in the Company. A preliminary
prospectus was filed outlining the offering. The offering was subsequently
postponed upon the Company's receipt of an unsolicited expression of a
preliminary interest in a business combination from another company. On August
3, 1999, the Company announced that discussions with that party had been
terminated.
On June 10, 1999, the Company repurchased $124.8 million gross principal amount
of 9 5/8% senior subordinated notes due 2007 at a premium of 12.35%. Total
consideration paid plus related fees were $140.9 million, including a $3.1
million consent payment. Associated with the repurchase, the Company recorded a
$12.1 million extraordinary loss (net of $7.8 million tax benefit) to capture
the call premium paid, cash fees paid on the transaction and the associated
write-off of unamortized finance charges.
On April 28, 1999, the Mission Trust and the Company settled a lawsuit against
the Company related to the Company's discontinued property and casualty
insurance subsidiary, Centaur Insurance Company, which ceased writing insurance
in 1984. The suit had alleged damages in excess of $100 million against the
Company due to Centaur's failure to satisfy its reinsurance obligations to
Mission. As part of the settlement, the Company paid the Mission Trust $4
million in the second quarter of 1999, and agreed to pay one-third of any future
dividend or other distribution that may be paid to the Company after
rehabilitation of Centaur.
As part of its brand unification strategy, the Company entered into an agreement
on March 30, 1999 (the "Agreement") with Wells Fargo to relinquish a royalty-
free license to the Wells Fargo name in the security field. In addition, Wells
Fargo granted the Company a royalty-free
<PAGE>
license to use the Wells Fargo name and mark for a two-year period commencing on
the date of the Agreement. Under the Agreement, Wells Fargo has reimbursed the
Company for costs associated with the brand unification.
BUSINESS DESCRIPTION
- --------------------
The Company is North America's premier provider of contract security personnel
and related services with approximately 75,000 employees serving 14,000
customers in the United States, Canada, England, Scotland, Ireland and Colombia.
RESULTS OF OPERATIONS
- ---------------------
Revenues
<TABLE>
<CAPTION>
1999 vs 1998 1998 vs 1997
Percent Percent
(millions of dollars) 1999 1998 1997 Change Change
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Core Revenues $1,378.6 $1,323.4 $1,289.3 4.2% 2.6%
Armored Security
Revenues -- -- 15.3 -- NM
- ---------------------------------------------------------------------------------------------------------------------------------
Total Revenues $1,378.6 $1,323.4 $1,304.6 4.2% 1.4%
=================================================================================================================================
</TABLE>
Revenue grew $55.2 million in 1999 through higher sales of new business,
improved client retention, higher billing rates achieved on new business and
existing customer contracts and acquisitions. In 1998, core revenues grew by
$34.1 million, primarily from business acquisitions and improvements in customer
retention and customer billing rates. Offsetting the 1998 growth was the impact
of withdrawal from certain low-margin businesses. Excluding the effect of
acquisitions in 1999, 1999 revenue was approximately $1,372.2 million. Excluding
the effect of acquisitions in 1998, 1998 revenue was approximately $1,310.9
million. International operations revenues for 1999 were $130.4 million
compared with $121.1 million in 1998 and $116.9 million in 1997. Operations are
located in Canada, England, Scotland, Ireland and Colombia.
Operating Income
Total operating income was $79.8 million in 1999, $82.7 million in 1998, and
$85.3 million in 1997. The $2.9 million decline in 1999 resulted from lower
profitability in the Foreign segment and Other segments group, which decreased
by $4.8 million and $7.1 million, respectively. The Foreign segment suffered
from poor management and cost controls in England, Scotland and Ireland
operations. The Other segments group experienced contract pricing problems at
Globe Aviation and loss of business at Energy/Government. These declines were
partially offset by improvements of $2.9 million in the Domestic Industrial
segment and $6.1 million in pension operations, risk management and other costs.
The $2.6 million decline in 1998 similarly resulted from lower profitability in
the Foreign segment and Other segments group that more than offset increased
income in the Domestic Industrial segment. Operating margins were 5.8% in 1999,
6.3% in 1998 and 6.5% in 1997.
Costs and Expenses
Cost of services, expressed as a percentage of revenues, were 84.2%, 84.4% and
84.4% in 1999, 1998, and 1997, respectively. The 1999 improvement was due to
better performance in risk management that was partially offset by labor cost
increases. Gross profit margins were 15.8%, 15.6% and 15.6% over the same three
year period.
Selling, general and administrative expenses (SG&A), expressed as a percentage
of revenues, were 11.0%, 11.8%, and 10.3% for the years 1999, 1998, and 1997
respectively. Year-to-year comparisons are impacted by various items of a non-
recurring nature that were recorded in 1999. These items include $8.8 million
of income related to legal settlements and $6.7 million related to the reversals
of excess legal reserves on litigation settled in the current year and excess
reimbursement of brand transition costs. These income items were offset by non-
recurring expenses of approximately $9.0 million related to organizational
changes, planned system upgrades and installations, costs related to the
modification of the Company's receivables securitization facility and
establishment of a casualty risk management subsidiary. The above income items
were further offset by $8.0 million of costs related to the write-down of
intangible assets, provisions related to the Globe Aviation operations,
restructuring actions and provisions related to the United Kingdom operations.
Excluding the non-recurring items, SG&A expenses were 10.9% of 1999 revenue.
Year-to-year comparisons are also impacted by a $14.4 million charge in the
second quarter of 1998 to record severance and lease termination costs resulting
from the reorganization of administrative operations, the adjustment of certain
intangible assets to their realizable value, the adjustment of certain other
asset valuation allowances, and other matters. Excluding the $14.4 million
charge, SG&A expenses were 10.7% of 1998 revenue.
Depreciation expense was $5.7 million, $4.2 million, and $5.0 million for the
years 1999, 1998, and 1997, respectively. The 1999 increase reflects investments
in computer technology and financial systems.
<PAGE>
Other expense, net, includes the results from the Company's share of the Loomis,
Fargo joint venture. The Company recorded $1.9 million for its share of Loomis,
Fargo earnings in 1999, compared with $0.1 million in 1998 and $1.1 million in
1997 (which included an after-tax gain of $2.2 million relating to the business
combination that formed Loomis, Fargo). Also included in other expense, net, is
excess purchase price amortization of $5.4 million, $6.5 million and $8.1
million for the years 1999, 1998, and 1997, respectively. The 1999 and 1998
decreases are principally due to the revaluation of certain intangibles in 1998.
Net Interest Expense and Finance Charges
Interest expense attributed to continuing operations was $16.4 million in 1999,
$15.5 million in 1998 and $16.7 million in 1997. The 1999 increase of $0.9
million reflects higher average debt levels and rising interest rates,
particularly toward year-end. During the fourth quarter, borrowings increased
to finance a sharp increase in receivables that resulted from delays in customer
invoicing and collections, and from delays in the sale of receivables, due to
the implementation of new financial and invoicing systems and software. The
$1.2 million decrease in 1998 is principally due to lower average debt levels
after the sale of Wells Fargo Alarm.
Earnings from Discontinued Operations
Refer to Note 4 for a detailed explanation.
Extraordinary Item
On June 10, 1999, the Company repurchased $124.8 million gross principal amount
of 9 5/8% senior subordinated notes due 2007 at a premium of 12.35%. Total
consideration paid plus related fees was $140.9 million, including a $3.1
million consent payment. Associated with the repurchase, the Company recorded a
$12.1 million extraordinary loss (net of a $7.8 million tax benefit) to capture
the call premium paid, cash fees paid on the transaction and the associated
write-off of unamortized finance charges.
The Company recorded a $6.3 million extraordinary charge (net of a $4.1 million
tax benefit) in the second quarter of 1998 that resulted from 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
Cash and cash equivalents decreased $95.3 million and net debt increased $105.8
million in 1999, primarily as a result of the Company's second-quarter stock
repurchase and 9 5/8% senior subordinated debt buyback.
Operating activities resulted in a net cash outflow of $28.8 million in 1999.
Working capital needs increased $74.2 million due primarily to a sharp increase
in receivables levels and an expected recovery of income taxes paid in prior
periods. The receivables increase resulted from delays in customer invoicing
and collections, and from delays in receivable sales, due to the implementation
of new financial and invoicing systems and software. Discontinued operations
required a net $1.8 million, as retained liability payments were partially
offset by funds from a legal settlement.
Investing activities absorbed $13.6 million in 1999. Capital expenditures
totaling $11.0 million exceeded normal operating requirements primarily as a
result of investments in information systems and technology.
The Company used $52.9 million for financing activities during 1999.
Approximately $223 million was expended to repurchase 4.4 million shares of the
Company's stock and buy back $124.8 million face value of the Company's 9 5/8%
senior subordinated notes. Cash balances remaining from the 1998 sale of Wells
Fargo Alarm and borrowings under the senior credit facility financed the
transactions.
In 1998, cash and cash equivalents increased $97.7 million and net debt
decreased $309.7 million. The increased cash and related debt reduction
reflects proceeds from the Wells Fargo Alarm sale and the offsetting retirement
of the Company's 9 1/8% senior subordinated notes due 2003.
<PAGE>
Liquidity
The Company's liquidity is provided by its operations and financial resources,
including the facility for sale of receivables. Net funding, which includes
accounts receivable sold through this facility, was as follows:
<TABLE>
<CAPTION>
December 31, December 31,
(millions of dollars) 1999 1998
------------ ------------
<S> <C> <C>
Short-term borrowings $ 3.6 $ 2.3
Long-term debt 133.6 124.4
Securitized accounts receivables sold 115.0 82.4
Less: Cash and cash equivalents (10.4) (105.7)
-------- -------
Total net funding $ 241.8 $ 103.4
======== =======
</TABLE>
The Company's net funding requirements increased $138.4 million from its
December 31, 1998 level. Available cash and cash equivalents and increased
funding provided under the Company's accounts receivable and revolving credit
facilities were used primarily to fund the Company's second-quarter 1999 stock
repurchase and 9 5/8% senior subordinated notes buyback, as well as to fund
increases in total accounts receivable.
The Company has access to a number of financing sources, including a $120
million revolving accounts receivable securitization facility and a $225 million
senior credit facility. As of December 31, 1999, the Company had sold $115.0
million of securitized accounts receivable and had borrowed $133.4 million under
the senior credit facility. At December 31, 1999, $0.2 million of 9 5/8% senior
subordinated notes remained outstanding.
The Company's senior credit facility, which carries a $225 million maximum
commitment from a group of financial institutions, provides for revolving
borrowings and bank letters of credit. Up to $125 million of the facility is
available for letters of credit. Borrowing availability under the facility
commitment is reduced by the total dollar amount of letters of credit issued and
outstanding under the facility, which totaled $47.1 million and $93.2 million
at December 31, 1999 and 1998, respectively. The entire bank facility is
available through March 31, 2002. The Company established an additional $12.5
million letter of credit in the fourth quarter of 1999 that was issued outside
of the senior credit facility and does not utilize the facility's borrowing
capacity.
On January 7, 2000, the Company announced it had amended its credit facility to
allow potential additional borrowing, and had arranged for a short-term
additional credit facility in an amount up to $15 million for potential working
capital requirements during the transition to new financial and invoicing
systems and software. The additional credit facility was not utilized and was
cancelled by the Company on February 14, 2000.
The Company has experienced delays in customer invoicing and collection of
receivables during implementation of its new financial and invoicing software.
As a result, the Company is arranging an amendment to certain financial
covenants in its senior credit facility that may be required to maintain
continued borrowing capacity. The Company believes that its invoicing timelines
and receivables levels will return to normal in the second quarter of 2000.
Following the 1999 repurchase of the 9 5/8% senior subordinated notes,
substantially all of the Company's funding carries variable rates of interest.
To diversify the inherent interest rate exposure, the Company entered into two
interest rate swap agreements in 1999. See Disclosures about Market Risk for
more information.
The Company believes that cash flow from operations, together with existing cash
and borrowing capacity, is adequate to meet its capital needs.
DISCLOSURES ABOUT MARKET RISK
- -----------------------------
Interest Rate Risk
The Company has limited financial markets risk exposures that are primarily
related to changes in interest rates. The Company's policy is to balance its
interest rate exposure, which it may manage with interest rate swap agreements
that hedge outstanding borrowings. Following the repurchase of the Company's
fixed-rate senior subordinated notes in June 1999, substantially all of the
Company's funding carries variable rates of interest. As of December 31, 1999,
approximately $133 million was financed through the senior credit facility,
which carries interest rates based on LIBOR and the prime rate. Approximately
$115 million was funded from the accounts receivable securitization facility,
which is discounted at rates based on short-term commercial paper.
<PAGE>
Under current and expected market conditions, the Company believes near-term
interest rate movements will not have a material negative impact on its results
of operations. To reduce exposure to market interest rate volatility, the
Company entered into two interest rate swap agreements effective June 15, 1999.
The agreements protect the Company from rising market interest rates by
effectively fixing payment rates on a total of $75.0 million of its net funding.
In both swap agreements, the Company receives variable rate payments based on 3-
month LIBOR and pays fixed rate payments based on the terms of each swap. The
differential paid or received on the swap agreements is recognized as an
adjustment to interest expense in the period earned or incurred. Both swaps
call for settlement payments on a quarterly basis. The contract terms are as
follows:
Swap I Swap II
- --------------------------------------------------------------------------------
Termination date June 15, 2000 June 15, 2001
Notional amount US $25,000,000 US $50,000,000
Fixed payment rate 5.638% 6.015%
Floating rate 3-Month LIBOR 3-Month LIBOR
The Company does not use derivative instruments for speculative purposes.
Foreign Currency Risk
Currently, the Company does not use foreign currency forward contracts and
believes it does not have material foreign currency exposures.
Labor Market Risk
The Company's business is labor intensive and is exposed to the availability of
qualified personnel and the cost of labor. United States labor market
contractions caused by high economic growth or other factors may increase the
Company's direct costs through higher wages and increased amounts of unbilled
overtime. To help manage labor market fluctuations, the Company's customer
agreements typically allow for billing rate adjustments based on law changes,
rulings or collective bargaining agreements that increase the Company's wage
rates. However, competitive pricing conditions in the industry may constrain
the Company's ability to increase its billing rates to cover such increased
costs.
YEAR 2000
- ---------
General
Since the inception of computers, software applications were programmed to
identify a year as a two-digit data field. Certain computer applications and
software recognize the year 2000 as two zeros (00) or 1900. This incorrect date
recognition could cause systems and software malfunctions that could have a
material effect on business operations.
Company's Approach
The Company performed a review of all its software and computer applications for
the Year 2000 entry. Both "IT systems" and "non-IT systems" were reviewed. IT
systems refer to all pre-packaged and internally developed software applications
and programs.
The Company's approach to system date remediation was conducted in phases.
First, all relevant IT systems and non-IT systems were assessed as to
functionality and to determine Year 2000 impact. Second, for those systems and
software found to be non-compliant or in need of upgrading, corrective steps
were taken, such as the reprogramming or purchasing of replacement system
software. Finally, systems and software modifications were tested and then
implemented at all necessary levels.
Each of the Company's crucial systems was either remediated, upgraded or
replaced with compliant purchased software. All upgrades, remediations and
installations were completed by year-end.
No single customer or third party vendor of the Company could likely generate a
material adverse impact on Company operations. Critical third party vendors
were queried by the Company and responded with no warnings or indications of
non-compliance.
As a direct result of the Company's Year 2000 preparation, the date change from
1999 to 2000 had no material impact on the Company's IT systems and non-IT
systems. No system or software failure related to Year 2000 issues was noted
within the Company and no material problems were encountered with third-party
vendor systems. The Company also expects no future business interruption due to
the Year 2000 issue. However, the Company did experience some difficulties
which were unrelated to the Year 2000 in the implementation of its new financial
and invoicing systems and software. The impact of such implementation
difficulties is discussed above under the Net Interest Expense and Finance
Charges and Cash Flow sections.
Cost of Compliance
To date, the Company has spent approximately $1.1 million for its Year 2000
preparation, which includes computer consultant costs. Independent of the Year
2000 issue, the Company has had in process both upgrading and replacement of
certain systems and obsolete hardware to enhance their functionality.
<PAGE>
The Company's Year 2000 analysis and disclosure contains "forward looking"
statements about matters that are inherently difficult to predict. Such
statements include statements regarding the intent, opinion and current
expectations of the Company and its management. Such "forward looking"
statements involve risks and uncertainties that may affect future developments,
such as, the inability to deal with a Year 2000 issue due to a problem arising
on the part of a third party or vendor. While the Company believes that it has
implemented methodologies to address the Year 2000 issue so that it should not
materially affect its financial position, future operating results or cash
flows, no assurance can be given with respect to the ultimate outcome.
<PAGE>
Burns International Services Corporation
Consolidated Statement of Operations and Comprehensive Income
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
(millions of dollars, except per share) 1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net service revenues $1,378.6 $1,323.4 $1,304.6
Cost of services 1,161.3 1,116.7 1,100.7
Selling, general and administrative expenses 151.9 155.7 134.3
Depreciation 5.7 4.2 5.0
Other expense, net 3.5 6.4 7.0
Interest expense and finance charges 16.4 15.5 16.7
------------- ------------- -------------
Earnings before income taxes 39.8 24.9 40.9
Provision for income taxes-Note 13 14.6 9.8 15.1
------------- ------------- -------------
Earnings from continuing operations 25.2 15.1 25.8
Gain (loss) from discontinued operations, net of income
taxes-Note 4 -- 20.3 (6.8)
------------- ------------- -------------
Earnings before extraordinary item 25.2 35.4 19.0
Extraordinary item:
Loss from early extinguishment of debt, net of $7.8 tax
benefit in 1999 and $4.1 million tax benefit in 1998 (12.1) (6.3) --
------------- ------------- -------------
Net earnings $ 13.1 $ 29.1 $ 19.0
============= ============= =============
Earnings (loss) per common share - basic:
Continuing operations $ 1.16 $ 0.64 $ 1.10
Discontinued operations -- 0.87 (0.29)
Extraordinary item (0.56) (0.27) --
------------- ------------- -------------
Net earnings per share $ 0.60 $ 1.24 $ 0.81
============= ============= =============
Earnings (loss) per common share - diluted:
Continuing operations $ 1.14 $ 0.64 $ 1.07
Discontinued operations -- 0.83 (0.28)
Extraordinary item (0.55) (0.26) --
------------- ------------- -------------
Net earnings per share $ 0.59 $ 1.21 $ 0.79
============= ============= =============
Comprehensive income
Net earnings $ 13.1 $ 29.1 $ 19.0
Other comprehensive income (loss):
Currency translation adjustment, net of tax ($0.1
expense in 1999, $1.0 benefit in 1998, $0.3
benefit in 1997) 0.2 (1.5) (0.5)
Minimum pension liability adjustment, net of tax ($1.0
expense in 1997) -- -- 2.1
------------- ------------- -------------
Comprehensive income $ 13.3 $ 27.6 $ 20.6
============= ============= =============
</TABLE>
(See accompanying notes to consolidated financial statements)
<PAGE>
Burns International Services Corporation
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31,
-----------------------------
(millions of dollars, except share data) 1999 1998
------------ ------------
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 10.4 $ 105.7
Receivables, net 59.9 55.9
Income tax receivable 32.1 --
Other current assets 71.9 68.9
------------ ------------
Total current assets 174.3 230.5
Property, plant and equipment
Land and buildings 13.9 18.5
Equipment 29.4 25.2
------------ ------------
43.3 43.7
Less accumulated depreciation 19.7 25.6
------------ ------------
Net property, plant and equipment 23.6 18.1
Net excess purchase price over net assets acquired 107.1 111.1
Deferred tax asset, net 5.7 42.4
Other assets 33.0 29.8
------------ ------------
Total other assets 145.8 183.3
------------ ------------
Total assets $ 343.7 $ 431.9
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Overdraft facility $ 3.6 $ 2.3
Accounts payable and accrued expenses 125.1 130.5
------------ ------------
Total current liabilities 128.7 132.8
Long-term debt 133.6 124.4
Other long-term liabilities 50.7 77.8
Capital stock:
Common stock, issued 24,096,849 shares in
1999 and 23,879,092 shares in 1998 0.2 0.2
Series I non-voting common stock, issued
2,720,000 shares in 1999 and 1998 - -
Capital in excess of par value 37.6 35.2
Retained earnings 83.9 70.8
Accumulated other comprehensive income:
Currency translation adjustment (1.3) (1.5)
------------ ------------
120.4 104.7
Treasury common stock, at cost, 7,148,207 shares
in 1999 and 2,768,339 shares in 1998 (89.7) (7.8)
Total shareholders' equity 30.7 96.9
------------ ------------
Total liabilities and shareholders' equity $ 343.7 $ 431.9
============ ============
</TABLE>
(See accompanying notes to consolidated financial statements)
<PAGE>
Burns International Services Corporation
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------
(millions of dollars) 1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING:
Continuing operations:
Earnings from continuing operations $ 25.2 $ 15.1 $ 25.8
Adjustments to reconcile net earnings to net cash
provided by continuing operations:
Non-cash charges to earnings:
Depreciation and amortization 11.1 10.7 13.1
Provision for losses on receivables 5.4 5.1 3.1
Deferred income taxes 36.7 (5.5) 7.7
Adjustment to excess purchase price 1.1 5.5 --
Other, net (0.1) 0.8 --
Changes in assets and liabilities:
Increase in receivables (52.2) (16.9) (17.0)
(Increase) decrease in other current assets (31.5) 3.3 6.5
Increase (decrease) in accounts payable and accrued expenses 9.5 42.6 (23.1)
Net change in other long-term assets and liabilities (32.2) (30.0) (0.9)
Gain on sale of assets of armored services unit -- -- (2.2)
----------- ------------ ------------
Net cash (used in) provided by continuing operations (27.0) 30.7 13.0
Discontinued operations:
Net loss, excluding gain on Wells Fargo Alarm sale -- (22.2) (6.8)
Other cash related to discontinued operations (1.8) (17.5) (0.3)
----------- ------------ ------------
Net cash used in discontinued operations (1.8) (39.7) (7.1)
----------- ------------ ------------
Net cash (used in) provided by operating activities (28.8) (9.0) 5.9
INVESTING:
Capital expenditures (11.0) (6.9) (4.3)
Proceeds from sale of subsidiaries, net of tax paid ($58.5
million in 1998) -- 362.9 92.9
Proceeds from assets sales 0.7 6.7 --
Net cash paid for acquisitions (3.3) (11.5) --
Other, net -- 0.2 0.1
----------- ------------ ------------
Net cash (used in) provided by investing activities (13.6) 351.4 88.7
FINANCING:
Increase (decrease) in overdraft facility and notes payable 1.3 1.1 (1.5)
Increase (decrease) in debt outstanding under senior credit
facility 133.4 (63.9) (22.9)
Increase (decrease) in receivables sold 32.6 (20.0) (7.8)
Issuance of long-term debt -- -- 125.0
Retirement of long-term debt (124.2) (150.0) (197.8)
Treasury shares (acquired) sold (81.9) (0.1) 1.1
Repurchase of old BW Corporation shares -- (7.9) --
Premium on extinguishment of debt (16.7) (6.8) --
Other, net 2.6 2.9 1.9
----------- ------------ ------------
Net cash used in financing activities (52.9) (244.7) (102.0)
Net (decrease) increase in cash and cash equivalents (95.3) 97.7 (7.4)
Cash and cash equivalents at beginning of year 105.7 8.0 15.4
----------- ------------ ------------
Cash and cash equivalents at end of year $ 10.4 $ 105.7 $ 8.0
=========== ============ ============
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Supplemental cash flow information:
Interest paid $ 19.2 $ 34.6 $ 40.8
Income taxes paid 3.0 60.4 9.4
</TABLE>
(See accompanying notes to consolidated financial statements)
<PAGE>
Burns International Services Corporation
Consolidated Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------
1999 1998 1997
------------------------- -------------------------- ---------------------------
(millions of dollars, except share data) Shares Amount Shares Amount Shares Amount
------------ ---------- ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Common Stock Issued
Beginning balance 26,599,092 $ 0.2 26,082,806 $ 0.2 25,166,100 $ 0.2
Shares issued under stock option and
related plans 217,757 -- 266,686 -- 16,706 --
Conversion of Series I non-voting shares
to common shares -- -- 249,600 -- 900,000 --
------------ ---------- ------------ ---------- ------------ -----------
Balance at December 31 26,816,849 0.2 26,599,092 0.2 26,082,806 0.2
------------ ---------- ------------ ---------- ------------ -----------
Capital in Excess of Par Value
Beginning balance 35.2 30.8 29.0
Shares issued under stock option and
related plans 2.2 3.2 1.0
Tax benefit from trust distribution and
exercise of stock options 0.2 1.2 0.8
---------- ---------- -----------
Balance at December 31 37.6 35.2 30.8
---------- ---------- -----------
Retained Earnings
Beginning balance 70.8 41.7 20.6
Net earnings 13.1 29.1 19.0
Adjustment for deferred pension
experience loss -- -- 2.1
---------- ---------- -----------
Balance at December 31 83.9 70.8 41.7
---------- ---------- -----------
Notes Receivable-Management Stock Purchase
Beginning balance -- -- (0.3)
Net activity -- -- 0.3
---------- ---------- -----------
Balance at December 31 -- -- --
---------- ---------- -----------
Accumulated Other Comprehensive Income-
Currency Translation Adjustment
Beginning balance (1.5) -- 0.5
Current year adjustment 0.2 (1.5) (0.5)
---------- ---------- -----------
Balance at December 31 (1.3) (1.5) --
---------- ---------- -----------
Treasury Stock
Beginning balance 2,768,339 (7.8) 2,506,400 (7.7) 1,862,311 (8.8)
Shares issued under stock
option and related plans (14,950) 0.2 -- -- (255,911) 1.1
Shares acquired 4,394,818 (82.1) 12,339 (0.1) -- --
Conversion of Series I non-voting
shares to common shares -- 249,600 900,000
------------ ---------- ------------ ---------- ------------ -----------
Balance at December 31 7,148,207 (89.7) 2,768,339 (7.8) 2,506,400 (7.7)
============ ========== ============ ========== ============ ===========
Total shareholders' equity $ 30.7 $ 96.9 $ 65.0
========== ========== ===========
</TABLE>
(See accompanying notes to consolidated financial statements)
<PAGE>
Note 1-Summary of Significant Accounting Policies
The following paragraphs briefly describe significant accounting policies.
Certain amounts in the Consolidated Financial Statements have been reclassified
to conform to the 1999 presentation.
Principles of Consolidation
The consolidated financial statements include all significant subsidiaries. Due
to the May 29, 1998 sales of the electronic security and courier services units,
the assets, liabilities, results of operations and cash flows of such units have
been segregated and reported as discontinued operations for all periods
presented. Previously reported results have been restated (see Note 4). The
Company's 49% investment in Loomis, Fargo is accounted for under the equity
method (see Note 3).
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and use assumptions that affect the reported amounts and related disclosures.
Actual results may differ from those estimates. Specifically, the allowance for
doubtful accounts is a reasonable estimate based on historic trends and
information currently available to management.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash and short-term investments
in money market funds.
Property, Plant and Equipment and Depreciation
Property, plant and equipment is carried at cost less accumulated depreciation.
Expenditures for maintenance, repairs and renewals of relatively minor items are
generally charged to expense as incurred. Renewals of significant items are
capitalized. Depreciation is computed generally on the straight-line method
over the following estimated useful lives:
Buildings and improvements 40 years
Equipment 3 to 5 years
Capitalized software 5 years
Amortization of Excess Purchase Price Over Net Assets Acquired
The excess of purchase price over net assets acquired is amortized on a
straight-line basis over 5 to 40 years, with the majority being amortized over
35 to 40 years. The Company periodically reviews its operations to determine
whether there has been a diminution in value of its excess purchase price over
net assets acquired. As a result of such review, based on anticipated future
cash flows, the Company adjusted the carrying value of such excess purchase
price related to certain security services acquisitions by $1.1 million in 1999
and $5.5 million in 1998. The charges are included in selling, general and
administrative expenses in the Consolidated Statement of Operations and
Comprehensive Income.
Derivative Financial Instruments
The Company periodically uses off-balance-sheet interest rate swap agreements to
manage exposure to interest rate fluctuations. The Company does not use
derivative instruments for speculative purposes. The differential paid or
received on interest rate swap agreements is recognized as an adjustment to
interest expense in the period incurred or earned. Two interest rate swap
agreements were outstanding as of December 31, 1999. None were outstanding at
December 31, 1998.
Casualty Insurance Liabilities
The Company has accrued a discounted liability for the retained portion of
insurance costs related to its various deductible policies. This insurance
liability is determined by the Company based on claims filed and an estimate of
claims incurred but not yet reported (see Note 2).
Revenue Recognition
Revenue is recognized at the time services are provided. In certain
circumstances this can result in revenue recognition prior to customer billing.
<PAGE>
Retirement Benefit Plans
A number of eligible salaried and hourly employees participate in contributory
or noncontributory defined benefit or defined contribution plans. Funding policy
is based upon independent actuarial valuations and is within the limits required
by ERISA for U.S. defined benefit plans.
The benefits provided to certain salaried employees covered under various
defined benefit plans are based on years of service and final average pay and
utilize the projected unit credit method for cost allocation. The benefits
provided to certain hourly employees under various defined benefit plans are
based on years of service and utilize the unit credit method for cost
allocation.
Under the defined contribution plans, contributions by the Company or its
subsidiaries sponsoring the plans are based on the employees' salary, age, years
of service, and/or a fixed schedule. These contributions are charged to
earnings as they are made to the various plans (see Note 9).
Stock Options
The Company uses the intrinsic value method of accounting for stock-based
compensation expense under APB 25. The impact of using the fair value method is
included in the notes to the financial statements (see Note 10).
Income Taxes
Income taxes are determined using the liability method, under which deferred tax
assets and liabilities are determined based on the differences between the
financial accounting and tax bases of assets and liabilities. Deferred tax
assets or liabilities at the end of each period are determined using the
currently enacted tax rate expected to apply to taxable income in the periods in
which the deferred tax asset or liability is expected to be settled or realized
(see Note 13).
Earnings Per Common Share (EPS)
Earnings per share is presented on a basic and a fully diluted basis in the
financial statements. Basic EPS is based on average outstanding common shares.
Diluted EPS is based on average outstanding common shares and common share
equivalents. Common share equivalents recognize the dilutive effects of common
shares which may be issued in the future upon exercise of certain stock options
(see Note 15).
Comprehensive Income
Comprehensive income includes all changes in equity during a period except those
resulting from investments by or distributions to shareholders. For the
Company, comprehensive income consists of net income, foreign currency
translation adjustments and adjustments from any minimum pension liability.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133
will require the Company, to the extent it makes use of derivative financial
instruments, to record them on the balance sheet at fair value. Changes of the
fair value of derivatives will be recognized to earnings or other comprehensive
income, depending on whether the derivative is designated as part of a hedge
transaction. In June 1999, FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement 133," which postponed the effective date of SFAS 133 until calendar
year 2001. The Company has not yet determined the impact SFAS 133 will have
upon its financial position or results of operations.
<PAGE>
Note 2-Balance Sheet Information
Detailed balance sheet data are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------------
(millions of dollars) 1999 1998
------------ ----------
<S> <C> <C>
Receivables
Customers $ 67.8 $ 53.5
Other 0.1 9.4
----------- -----------
67.9 62.9
Less allowance for losses 8.0 7.0
----------- -----------
Net receivables $ 59.9 $ 55.9
=========== ===========
Other current assets
Retained interest in receivables $ 51.9 $ 15.7
Restricted interest-bearing cash deposits 5.0 37.6
Other 15.0 15.6
----------- -----------
Total other current assets $ 71.9 $ 68.9
=========== ===========
Other assets
Investment in joint venture $ 9.0 $ 7.1
Deferred pension asset 20.2 15.8
Other 3.8 6.9
----------- -----------
Total other assets $ 33.0 $ 29.8
=========== ===========
Accounts payable and accrued expenses
Trade payables $ 19.6 $ 21.8
Payroll and related 39.0 36.4
Casualty insurance 35.5 31.0
Other 31.0 41.3
----------- -----------
Total accounts payable and accrued expenses $ 125.1 $ 130.5
=========== ===========
</TABLE>
The Company has an agreement to sell a revolving pool of trade accounts
receivable to a special purpose subsidiary of the Company. Under the facility
the subsidiary can sell up to a $120 million undivided interest in such accounts
receivable. At December 31, 1999, the subsidiary had purchased $171.9 million
of the Company's accounts receivable and sold a $120.0 million undivided
interest in such receivables. At December 31, 1998, the subsidiary had
purchased $135.7 million of the Company's accounts receivable and had sold an
undivided interest therein equal to $120.0 million. The subsidiary's unsold
interest in such receivables is considered an interest in a security and is
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 $5.0 million and $37.6 million at
December 31, 1999 and 1998, 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.
Selling, general and administrative expenses include provisions for losses on
receivables of $5.4 million, $5.1 million and $3.1 million in 1999, 1998 and
1997, respectively.
Accumulated amortization related to excess purchase price over net assets
acquired amounted to $17.9 million and $53.7 million at December 31, 1999 and
1998, respectively.
Trade payables include checks outstanding in excess of bank deposits in the
Company's central disbursement accounts, since
<PAGE>
arrangements with the banks generally do not call for reimbursement until checks
are presented for payment. Such amounts were $19.1 million and $21.1 million at
December 31, 1999 and 1998, respectively.
The non-current portion of the casualty insurance liability, included in other
long-term liabilities, was $32.4 million and $47.9 million at December 31, 1999
and 1998, respectively. The total discounted insurance accrual, including the
portion reflected in accounts payable and accrued liabilities after allowing for
discounting of future liabilities, was $67.9 million and $78.9 million at
December 31, 1999 and 1998, respectively. The estimated aggregate undiscounted
insurance liability was $76.4 million and $85.2 million at December 31, 1999 and
1998, respectively. The discount rate used to value the future obligation was
6.3% and 4.5% at December 31, 1999 and 1998, respectively.
<PAGE>
Note 3-Investment in Affiliates
On January 24, 1997, the Company's armored security services unit entered into a
business combination with Loomis Armored. The combined company, known as
Loomis, Fargo & Co., is owned 51 percent by the former Loomis shareholders and
49 percent by the Company. The Company's armored services unit contributed
substantially all of its assets and assigned certain of its liabilities to
Loomis, Fargo in exchange for (i) 4,900,000 shares of Loomis, Fargo common stock
and (ii) a cash payment of approximately $105 million which includes amounts
paid to satisfy intercompany indebtedness assumed by Loomis, Fargo. The cash
proceeds received were net of transaction costs and subject to certain
adjustments.
The business combination impacts the comparison of the Company's 1999 and 1998
results to prior periods because the armored services unit was included in the
Company's results of consolidated operations for 23 days in 1997. Armored
security revenues were $15.3 million and operating profit was $0.9 million in
1997.
The Company accounts for its interest in Loomis, Fargo as an equity investment.
The Company recorded net income related to Loomis, Fargo of $1.9 million in
1999, $0.1 million in 1998, and $1.1 million in 1997, including a $2.2 million
gain recognized in the combination. The Company does not guarantee the
indebtedness of Loomis, Fargo nor is it required to fund Loomis, Fargo's future
operations.
<PAGE>
Note 4-Discontinued Operations
On May 29, 1998, the Company sold its electronic security services unit to ADT
Security Services, a subsidiary of Tyco International, Ltd., for approximately
$425 million plus the assumption of approximately $6 million of debt by the
buyer. The Company recorded a net after-tax gain of $42.5 million in the second
quarter of 1998.
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 unit, to provide for
costs associated with its disposition, and for anticipated further losses prior
to sale. No gain or loss was recorded as a result of completing the sale.
Courier services had been carried as a discontinued operation since September
1996, when the Company reduced the assets to realizable value and provided for
anticipated future operating losses.
The assets, liabilities, results of operations and cash flows have been
segregated and reported as discontinued operations for all periods presented.
Previously reported discontinued operations have been restated to reflect the
discontinued presentation of both units.
<TABLE>
<CAPTION>
Year ended December 31,
- -------------------------------------------------------------------------------------
(millions of dollars, except per share) 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net service revenues :
Electronic security services unit $ 81.2 $243.4
Courier services unit 56.0 142.2
- -------------------------------------------------------------------------------------
Total net service revenue $137.2 $385.6
- -------------------------------------------------------------------------------------
Net income (loss) from discontinued operations:
Electronic security services loss from operations before $(10.3) $(10.8)
income taxes
Income tax benefit 4.0 4.0
- -------------------------------------------------------------------------------------
Loss from operations (6.3) (6.8)
Adjustment of courier assets to realizable value and
provision for future losses (net of $11.0 million tax (15.9) --
benefit in 1998)
Gain on sale of electronic security services unit (net of
$59.8 million tax expense) 42.5 --
- -------------------------------------------------------------------------------------
Net income (loss) from discontinued operations $ 20.3 $ (6.8)
- -------------------------------------------------------------------------------------
Discontinued operations income (loss) per common share
(fully diluted):
Loss from operations $(0.27) $(0.28)
Gain on sale and net asset adjustment 1.10 --
- -------------------------------------------------------------------------------------
Income (loss) per common share $ 0.83 $(0.28)
- -------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Note 5-Overdraft Facility and Long-Term Debt
The following is a summary of all borrowings of the Company and its consolidated
subsidiaries:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------------------- -----------------------------
(millions of dollars) Current Long-Term Current Long-Term
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
9-5/8% senior subordinated notes due 2007 $--- $ 0.2 $--- $124.4
Senior credit facility (at an average rate
of 7.7% in 1999) --- 133.4 --- ---
Overdraft facilities (at an average rate
of 6.9% in 1999 and 8.8% in 1998) 3.6 --- 2.3 ---
--------- ----------- --------- -----------
Total overdraft facility and long-term debt $3.6 $133.6 $2.3 $124.4
========= =========== ========= ===========
</TABLE>
Included in long-term debt at December 31, 1999 and 1998 were obligations of
$0.2 million and $124.4 million, respectively, with fixed interest rates. At
December 31, 1999 there was $133.4 million of long-term debt with variable
interest rates (generally based on LIBOR or bank prime rates).
In 1999, the Company tendered for early redemption of $124.8 million gross
principal amount of its 9 5/8% senior subordinated notes. The Company recorded a
$12.1 million extraordinary charge (net of a $7.8 million tax benefit) in the
second quarter of 1999 associated with the costs of early redemption and the
write-off of certain deferred financing fees. Prior to the tender, the Company
amended its existing senior credit facility to provide flexibility for a
subsequent repurchase of common stock.
In 1998, the Company called the entire $150 million gross principal amount of
its 9 1/8% senior subordinated notes for early redemption. The Company recorded
a $6.3 million extraordinary charge (net of a $4.1 million tax benefit) in the
second quarter of 1998 associated with its early redemption and the write-off of
certain deferred financing fees.
The Company's senior credit facility, which carries a $225 million maximum
commitment from a group of financial institutions, provides for revolving
borrowings and bank letters of credit. Up to $125 million of the facility is
available for letters of credit. Borrowing availability under the facility
commitment is reduced by the total dollar amount of letters of credit issued and
outstanding under the facility, which totaled $47.1 million and $93.2 million at
December 31, 1999 and 1998, respectively. The entire facility is available
through March 31, 2002. The Company established an additional $12.5 million
letter of credit in the fourth quarter of 1999 that was issued outside of the
senior credit facility and does not utilize the facility's borrowing capacity.
On January 7, 2000, the Company announced it had amended its credit facility to
allow potential additional borrowing, and had arranged for a short-term
additional credit facility in an amount up to $15 million for potential working
capital requirements during the transition to new financial and invoicing
systems and software. The additional credit facility was not utilized and was
cancelled by the Company on February 14, 2000.
The Company has experienced delays in customer invoicing and collection of
receivables during implementation of its new financial and invoicing software.
As a result, the Company is arranging an amendment to certain financial
covenants in its senior credit facility that may be required to maintain
continued borrowing capacity. The Company believes that its invoicing timelines
and receivables levels will return to normal in the second quarter of 2000.
The credit facilities contain numerous financial and operating covenants
including, among others, covenants requiring the Company to maintain certain
financial ratios and restricting its ability to incur additional indebtedness,
to create or permit to exist certain liens, to pay dividends, or to make certain
other restricted payments. To secure its obligations under these facilities, the
Company has pledged the stock of certain of its subsidiaries.
<PAGE>
Note 6-Fair Value of Financial Instruments
The methods and assumptions used to estimate the fair value of each class of
financial instrument are as follows:
Cash and cash equivalents, receivables, notes payable and accounts payable
The carrying amounts approximate fair value because of the short maturity of
these instruments.
Long-term debt
The fair values of the Company's long-term debt are estimated based on quoted
market prices of the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities. The carrying amounts and
fair values of long-term debt at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
(millions of dollars) 1999 1998
-------- --------
<S> <C> <C>
Carrying amount $133.6 $124.4
Fair value 133.6 134.0
</TABLE>
Interest rate swaps
There were two interest rate swap agreements outstanding at December 31, 1999,
in the amounts of $50.0 million maturing June 15, 2001 with a fixed rate of
6.015% and $25.0 million maturing June 15, 2000 with a fixed rate of 5.6375%.
In both swap agreements, the Company receives variable rate payments based on 3-
month LIBOR and pays fixed rate payments based on the terms of each swap. Both
swaps call for settlement on a quarterly basis. The aggregate fair value of the
two swap agreements is estimated at a $0.4 million asset.
Letters of credit
The Company utilizes third-party letters of credit to guarantee certain casualty
insurance activities. The letters of credit reflect fair value as a condition
of their underlying purpose and are subject to fees competitively determined in
the marketplace. The contract value and fair value of the letters of credit
were $59.6 million at December 31, 1999 and $93.2 million at December 31, 1998.
Letters of credit of $12.5 million outstanding at December 31, 1999 are issued
outside of the Company's senior credit facility, and do not utilize the
facility's borrowing capacity. To assure the ability of counter-parties to
perform, these letters of credit are only executed with major financial
institutions.
<PAGE>
Note 7-Commitments
The Company is committed to pay rents on non-cancelable operating leases with
terms exceeding one year. Future rental commitments are summarized at December
31, 1999 as follows:
Fiscal year (millions of dollars)
----------- ---------------------
2000 $11.2
2001 8.1
2002 5.2
2003 2.8
2004 1.7
2005 and after 4.6
---------------------
Total $33.6
=====================
Total rental expense amounted to $15.7 million, $14.3 million and $12.3 million
in 1999, 1998 and 1997, respectively.
<PAGE>
Note 8-Contingent Liabilities
On April 28, 1999, the Mission Trust and the Company settled a lawsuit against
the Company related to the Company's discontinued property and casualty
insurance subsidiary, Centaur Insurance Company, which ceased writing insurance
in 1984. The suit had alleged damages in excess of $100 million against the
Company due to Centaur's failure to satisfy its reinsurance obligations to
Mission. As part of the settlement, the Company paid the Mission Trust $4
million in the second quarter of 1999, and agreed to pay one-third of any future
dividend or other distribution that may be paid to the Company after
rehabilitation of Centaur.
The Company and certain of its current and former subsidiaries have been
identified by the U.S. Environmental Protection Agency and certain state
environmental agencies as potentially responsible parties ("PRPs") at several
hazardous waste disposal sites under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund") and equivalent state laws and, as
such, may be liable for the cost of cleanup and other remedial activities at
these sites. Responsibility for cleanup and other remedial activities at a
Superfund site is typically shared among PRPs based on an allocation formula.
The Company believes that none of these matters individually or in the aggregate
will have a material adverse effect on its financial position or future
operating results, generally either because the maximum potential liability at a
site is not large or because liability will be shared with other PRPs, although
no assurance can be given with respect to the ultimate outcome of any such
liability. Based on its estimate of allocations of liability among PRPs, the
probability that other PRPs, many of whom are large, solvent public companies,
will fully pay the costs allocated to them, currently available information
concerning the scope of contamination at such sites, estimated remediation costs
at such sites, indemnification obligations in favor of the Company from the
current owners of certain sold or discontinued operations, estimated legal fees
and other factors, the Company has made provisions for indicated environmental
liabilities in the aggregate amount of approximately $2 million. Additionally,
the Company will be indemnified by its former subsidiary, BorgWarner Inc.,
against certain future costs relating to environmental liabilities associated
with certain former automotive operations.
In November and December, 1998, Loomis, Fargo & Company ("Loomis, Fargo") made
various claims against the Company for indemnification, under the Contribution
Agreement dated November 28, 1996 under which Loomis, Fargo was formed, for
certain cargo losses and environmental losses. The Company and Loomis, Fargo
resolved all such matters in 1999 without a material adverse effect on 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.
<PAGE>
Note 9-Retirement Benefits
The Company provides various defined benefit and contribution plans as well as
other post-retirement benefit plans to employees. The following provides a
reconciliation of benefit obligations, plan assets, and funded status of plans.
<TABLE>
<CAPTION>
------------------------------- --------------------------------
Pension Benefits Other Post-retirement Benefits
------------------------------- --------------------------------
(millions of dollars) 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at January 1 $108.6 $106.6 $ 11.2 $ 10.8
Service cost 0.6 1.4 -- --
Interest cost 7.1 7.5 0.3 0.3
Actuarial (gain) loss (8.6) 3.3 2.9 1.2
Curtailment gain -- (0.9) -- --
Benefits paid from plan assets (8.6) (9.3) (1.1) (1.1)
------------------------------- --------------------------------
Benefit obligation at December 31 $ 99.1 $108.6 $ 13.3 $ 11.2
=============================== ================================
Change in plan assets
Fair value of plan assets at January 1 $139.4 $124.4
Actual return on plan assets 13.5 24.3
Company contributions 0.1 --
Benefits paid from plan assets (8.6) (9.3)
-------------------------------
Fair value of plan assets at December 31 $144.4 $139.4
===============================
Funded status of the plans $ 45.3 $ 30.8 $(13.3) $(11.2)
Unrecognized actuarial (gain) loss (25.3) (15.2) 2.6 (0.3)
Unrecognized prior service cost 0.2 0.2 -- --
------------------------------- --------------------------------
Prepaid (accrued) benefit cost $ 20.2 $ 15.8 $(10.7) $(11.5)
=============================== ================================
Assumptions as of December 31
Discount rate 8.00% 7.00% 8.00% 7.00%
Expected return on plan assets 10.00% 10.00% n/a n/a
Rate of compensation increase 4.00% 4.00% n/a n/a
Medical trend for valuation year n/a n/a 8.00-10.00% 7.00%
Medical cost escalation, long-term n/a n/a 5.25% 5.25%
</TABLE>
For measurement purposes, an 8.00% and 10.00% annual rate of increase in the per
capita cost of covered health care benefits for pre-medicare and post-medicare,
respectively, was assumed for 2000. The rate was assumed to decrease gradually
to 5.25% for 2005, and remain at that level thereafter.
Assumed health care cost trend rates have an effect on the amounts reported for
the other post-retirement benefit plans. A 1% change in assumed health care
cost trend rates would have the following effects:
<TABLE>
<CAPTION>
(millions of dollars) 1% Increase 1% Decrease
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components in 1999 $0.1 ($0.1)
Effect on post-retirement benefit obligation as of December 31, 1999 1.0 (0.9)
</TABLE>
<PAGE>
Net periodic pension and other post-retirement benefit costs include the
following components:
<TABLE>
<CAPTION>
Pension Benefits Other Post-retirement Benefits
--------------------------------------- --------------------------------------
(millions of dollars) 1999 1998 1997 1999 1998 1997
--------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 0.6 $ 1.4 $ 2.4 $ -- $ -- $ --
Interest cost 7.1 7.5 7.6 0.3 0.3 0.3
Return on plan assets (expected) (12.0) (10.8) (9.4) -- -- --
Amortization and deferrals -- 0.1 0.5 0.1 -- --
--------------------------------------- --------------------------------------
Subtotal (4.3) (1.8) 1.1 0.4 0.3 0.3
Curtailment gain -- (0.5) (3.7) -- -- --
--------------------------------------- --------------------------------------
Net periodic (benefit) cost $ (4.3) $ (2.3) $(2.6) $ 0.4 $ 0.3 $ 0.3
======================================= ======================================
</TABLE>
Defined contribution plan expenses were $1.1 million, $1.2 million, and $1.5
million in 1999, 1998, and 1997, respectively.
Under the provisions of SFAS No. 88, "Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits,"
benefit freezes resulted in the recognition of gains in 1998 and 1997. These
gains resulted from the net decrease in the Company's benefit obligation for
employees affected by the armored unit combination with Loomis Armored and other
benefit freezes. Assets held in trust for the defined benefit plans are
comprised primarily of marketable equity and fixed income securities.
<PAGE>
Note 10 - Stock Incentive Plans
The Company's stock incentive plans authorize the grant of options to purchase
shares of the Company's common stock. The options are granted to key employees
and directors at the market price on the date of grant and carry ten year lives.
Vesting periods vary among individual grants, ranging from less than one year to
seven years. Certain options granted in 1999 accelerate their vesting periods
from seven years to three years or less if preset Company performance goals are
reached.
Under other stock incentive programs, the Company granted 100,000 shares of
restricted stock in 1999. The shares vest in equal installments over the next
five years. Under the Company's Performance Share plan, approximately 111,400
previously granted performance shares vested to key employees during 1999.
Total compensation expense recorded for stock incentive programs was $1.3
million in 1999 and $0.1 million 1998.
Common shares under option for the years ended December 31, 1999, 1998, and 1997
are summarized as follows:
<TABLE>
<CAPTION>
Number of Shares (thousands of shares) Weighted-Average Exercise Price
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares under option at January 1 1,547 1,972 1,545 $12.49 $12.38 $12.20
Granted 1,467 39 843 16.86 18.90 11.30
Exercised (71) (267) (273) 12.79 11.04 6.12
Cancelled -- (104) -- -- 14.83 --
Forfeited (98) (93) (143) 17.35 14.29 16.03
- --------------------------------------------------------------------------------------------------------------------------
Shares under option at end of year 2,845 1,547 1,972 $14.57 $12.49 $12.38
- --------------------------------------------------------------------------------------------------------------------------
Options exercisable 1,061 820 917
- ------------------------------------------------------------------------------------
Shares available for future grant 622 713 664
- ------------------------------------------------------------------------------------
Weighted-average fair value of options
granted during the year $ 8.69 $ 7.12 $ 4.39
- ------------------------------------------------------------------------------------
</TABLE>
Additional information regarding options outstanding as of December 31, 1999 is
as follows (thousands of shares):
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------------------- -----------------------------------
Weighted-Average
Range of Number Remaining Weighted-Average Number Weighted-Average
Exercise Prices Outstanding Contractual Life (yrs) Exercise Price Exercisable Exercise Price
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8.44-8.91 326 5.7 $ 8.52 300 $ 8.49
10.22-15.94 1,131 7.3 11.60 536 12.38
16.03-18.83 1,312 8.1 18.30 175 17.83
19.88-21.59 76 5.9 20.47 50 20.02
- --------------------------------------------------------------------------------------------------------------------------
$ 8.44-21.59 2,845 7.5 14.57 1,061 12.54
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Approximately 1,784,000 options outstanding are not presently exercisable.
The Company has retained the "intrinsic value" method of accounting for stock-
based compensation expense under APB 25. Accordingly, no compensation expense is
recorded for stock option awards given to employees. Had the Company elected
"fair value" presentation under SFAS 123, net income and earnings per share
would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------
(millions of dollars, except per share) 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income As reported $ 13.1 $ 29.1
Pro forma 10.7 28.5
Earnings per share-basic As reported $ 0.60 $ 1.24
Pro forma 0.49 1.21
Earnings per share-diluted As reported $ 0.59 $ 1.21
Pro forma 0.48 1.18
</TABLE>
<PAGE>
The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option-pricing model. The following weighted-average
assumptions were used in valuing grants in 1999 and 1998, respectively: expected
volatility of 47% and 40%; risk-free interest rates of 6.33-6.61% and 4.54-
4.72%; and expected lives of 5-8 years and 4 years.
<PAGE>
Note 11 - Business Segment Information
General Information - The Company provides security officers to deter crime,
monitor electronic security systems and control public and private access to
facilities, and it performs general investigative services and background
screening of individuals, primarily upon their consideration for employment by a
client. The Company also offers non-security related services to customers
through its temporary employee leasing operation, Burns International Staffing.
The Company's largest segment, Domestic Industrial, provides security services
to clients in a wide variety of industries across the United States. Industrial
security segments in Canada, Europe and Colombia serve similar industries abroad
and are aggregated into the Foreign Industrial segment. The unique security
needs of the aviation industry, and the regulated and governmental sectors of
the economy are serviced by the Company's Globe Aviation and Energy/Government
segments. These two segments, along with the Investigative Services,
Information Services (background screening) and Burns International Staffing
segments, are grouped together and reported as "Other".
The Company has changed the format under which it reviews segment operating
performance. The segments are currently evaluated based primarily on operating
income before interest expense, finance charges and taxes, and exclusive of bad
debt provisions and corporate expense allocations. Prior period disclosures
have been changed to conform to the current presentation. The Company does not
allocate assets to individual segments because asset deployment is not material
for management of the business. The accounting policies for the segments are
the same as those described in Note 1. Unallocated amounts include: year-end
calendar accrual adjustments to revenue, depreciation and amortization not
allocated to operating segments, consolidated benefits from risk management and
pension operations and other costs not allocated to operating segments, and
$15.3 million revenue and $0.9 million operating income from the armored
security services unit for 23 days in 1997. Information concerning the segments
is set forth below:
<TABLE>
<CAPTION>
Domestic Foreign Unallocated
(millions of dollars) Industrial Industrial Other Amounts Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
- ----------------------------------------------------------------------------------------------------------------------------
Revenue $1,031.6 $130.4 $211.5 $ 5.1 $1,378.6
Depreciation and amortization 3.1 1.6 0.7 1.8 7.2
Operating income 71.6 (1.9) 3.2 6.9 79.8
1998
- ----------------------------------------------------------------------------------------------------------------------------
Revenue $ 981.0 $121.1 $219.0 $ 2.3 $1,323.4
Depreciation and amortization 2.0 1.2 0.9 4.9 9.0
Operating income 68.7 2.9 10.3 0.8 82.7
1997
- ----------------------------------------------------------------------------------------------------------------------------
Revenue $ 974.0 $116.9 $197.5 $16.2 $1,304.6
Depreciation and amortization 1.8 1.1 0.9 5.2 9.0
Operating income 66.2 4.5 12.3 2.3 85.3
</TABLE>
The following reconciles combined segment operating income to consolidated
earnings before income taxes:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Combined segment operating income $ 79.8 $ 82.7 $ 85.3
Unallocated items, net (21.6) (40.7) (24.7)
Amortization of excess purchase price not included in operating income (2.1) (0.4) (2.1)
Depreciation not included in operating income (1.8) (1.3) (2.0)
Equity income in joint venture 1.9 0.1 1.1
Interest expense (16.4) (15.5) (16.7)
- ----------------------------------------------------------------------------------------------------------------------------
Consolidated earnings before income taxes $ 39.8 $ 24.9 $ 40.9
</TABLE>
Unallocated items include corporate administrative expense and operating charges
not used in evaluating segment performance. Included in 1998 is a $14.4 million
charge from the reorganization of administrative support operations, the
reduction of certain intangible assets and other provisions.
Information about Major Customers - The Company has no individual customer from
whom it derives 10% or more of its revenues.
Information on Long-Lived Assets - The Company's long-lived assets include
plant, property and equipment, and intangibles. Long-lived assets in the United
States were $119.7 million and $119.0 million in 1999 and 1998, respectively.
Long-lived foreign assets were $11.0 million and $10.2 million in 1999 and 1998,
respectively. No assets attributed to an individual foreign country exceed 10%
or more of consolidated assets.
<PAGE>
Note 12 - Other Expense
Other expense, net is comprised of the following:
<TABLE>
<CAPTION>
December 31,
(millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Excess purchase price amortization $ 5.4 $ 6.5 $ 8.1
Loomis, Fargo income (1.9) (0.1) (1.1)
- --------------------------------------------------------------------------------------------------
Total other expense, net $ 3.5 $ 6.4 $ 7.0
==================================================================================================
</TABLE>
<PAGE>
Note 13 - Income Taxes
Earnings before income taxes from continuing operations and provision for income
taxes consist of:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
(millions of dollars) U.S. Non-U.S. Total U.S. Non-U.S. Total U.S. Non-U.S. Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings before income taxes $ 46.6 ($6.8) $ 39.8 $22.6 $2.3 $24.9 $37.5 $3.4 $40.9
============================================================================================================================
Income taxes:
Current:
Federal/Foreign ($23.5) $ 0.5 ($23.0) $ 9.0 $1.2 $10.2 $ 4.9 $1.0 $ 5.9
State 0.9 -- 0.9 1.5 -- 1.5 1.5 -- 1.5
- ----------------------------------------------------------------------------------------------------------------------------
(22.6) 0.5 (22.1) 10.5 1.2 11.7 6.4 1.0 7.4
Deferred 39.2 (2.5) 36.7 (1.9) -- (1.9) 7.7 -- 7.7
- ----------------------------------------------------------------------------------------------------------------------------
Provision for income taxes $ 16.6 ($2.0) $ 14.6 $ 8.6 $1.2 $ 9.8 $14.1 $1.0 $15.1
============================================================================================================================
</TABLE>
The analysis of the variance of income taxes as reported from income taxes
computed at the U.S. statutory federal income tax rate for continuing operations
is as follows:
<TABLE>
<CAPTION>
(million of dollars) 1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income taxes at U.S. statutory rate of 35% $13.9 $ 8.7 $14.3
Increases (decreases) resulting from:
State income taxes 0.5 1.0 1.0
Non-temporary differences 0.8 0.2 0.1
Other, net (0.6) (0.1) (0.3)
- ------------------------------------------------------------------------------------------
Income taxes reported $14.6 $ 9.8 $15.1
==========================================================================================
</TABLE>
The following are the components of the deferred tax asset as of December 31,
1999 and 1998:
<TABLE>
<CAPTION>
(millions of dollars) 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Liabilities for casualty insurance $ -- $32.0
Liabilities related to discontinued operations -- 5.1
Liabilities for other post-retirement benefits 4.7 5.1
Fixed assets 1.1 --
Net operating loss carryforward 13.8 --
Other, net -- 3.4
General business credit 6.9 --
Minimum tax credit 24.3 5.5
- -----------------------------------------------------------------------------------------------
Subtotal deferred tax assets 50.8 51.1
- -----------------------------------------------------------------------------------------------
Deferred tax liabilities:
Risk management subsidiary (31.0) --
Investments (12.7) (7.0)
Net excess purchase price over net assets acquired (1.3) (1.7)
Other, net (0.1) --
- -----------------------------------------------------------------------------------------------
Subtotal deferred tax liabilities (45.1) (8.7)
- -----------------------------------------------------------------------------------------------
Net deferred tax asset $ 5.7 $42.4
===============================================================================================
</TABLE>
Responsibility for the strategic management and administration of certain of the
Company's casualty risks was transferred to a newly formed subsidiary in 1999.
As a result of this new structure, a capital loss was recognized by the Company
which may be carried back to recover taxes paid in prior years.
<PAGE>
Note 14 - Capital Stock
The following table summarizes the Company's capital stock at December 31, 1999
and 1998:
<TABLE>
<CAPTION>
December 31,
(thousands of shares) 1999 1998
---------- ----------
<S> <C> <C>
Common stock, $.01 par value:
Authorized 50,000.0 50,000.0
Issued 24,096.8 23,879.1
Outstanding 19,668.6 23,830.8
Series I non-voting common stock, $.01 par value:
Authorized 25,000.0 25,000.0
Issued 2,720.0 2,720.0
Outstanding --- ---
Preferred stock, $.01 par value:
Authorized 5,000.0 5,000.0
Issued and Outstanding --- ---
</TABLE>
On October 26, 1999, the Board of Directors approved a Stockholder Rights Plan
designed to enhance the Board's ability to protect the Company's shareholders.
The plan was adopted to protect against unsolicited attempts to acquire control
of the Company when adequate price is not offered to all shareholders or the
offer is not in the best interest of the Company and its shareholders. The
rights were distributed as a dividend at the rate of one right for each share of
common stock, par value $0.01 per share ("Voting Common Stock"), and Series I
Non-Voting Common Stock, par value $0.01 per share (together with the Voting
Common Stock, the "Common Stock") held by stockholders of record at the close of
business on November 8, 1999. Each right entitles the holder to purchase, upon
the occurrence of certain events, one unit of a share of preferred stock for
$55.00, or an aggregate 196,318 shares of preferred stock. The rights generally
are exercisable only if a person or group acquires beneficial ownership of 15%
or more of Burns International Services Corporation's Common Stock or commences
a tender or exchange offer that, upon consummation, would result in a person or
group owning 15% or more of Burns International Services Corporation's Common
Stock. Under certain circumstances, the rights are redeemable at a price of
$0.01 per right. The rights will expire on November 8, 2009.
<PAGE>
Note 15 - Earnings Per Share
<TABLE>
<CAPTION>
1999 1998 1997
Per Share Per Share Per Share
(millions of dollars, except per share) Earnings Shares Amount Earnings Shares Amount Earnings Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings from continuing operations $25.2 $15.1 $25.8
Basic EPS
Earnings available to common
shareholders 25.2 21.6 $1.16 15.1 23.6 $0.64 25.8 23.5 $1.10
- -----------------------------------------------------------------------------------------------------------------------------------
Effect of Dilutive Securities
Outstanding stock options -- 0.4 -- 0.4 -- 0.6
Diluted EPS
Earnings available to common
shareholders plus assumed conversions
$25.2 22.0 $1.14 $15.1 24.0 $0.64 $25.8 24.1 $1.07
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Note 16 - Acquisition of Businesses
The Company purchased two security services businesses in 1999, one in the
United States and one in Canada, for purchase prices totaling $3.3 million.
Three security services businesses were purchased in 1998, two located in the
United States and one with operations in England, Scotland and Ireland. The
purchase prices totaled $11.5 million. The results of operations of these
acquired businesses are included from the respective dates of acquisition. The
acquisitions were accounted for under the purchase method. Substantially all of
the purchase price amounts represent the excess of purchase price over net
assets acquired and are being amortized on a straight-line basis over 5 to 10
years. None of the acquisitions individually, or in the aggregate, had a
significant effect on revenues or the results of operations in 1999 or 1998.
Approximately $6.4 million was contributed to 1999 revenue from 1999
acquisitions, and approximately $12.5 million was contributed to 1998 revenue
from 1998 acquisitions.
<PAGE>
Note 17-Interim Financial Information (Unaudited)
<TABLE>
<CAPTION>
1999 Quarter Ended
(millions of dollars, except per share) Mar. 31 June 30 Sept. 30 Dec. 31 Year 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net service revenues $330.5 $338.6 $349.4 $360.1 $1,378.6
Cost of services 277.4 284.9 295.0 304.0 1,161.3
Selling, general and administrative (1)(2) 36.2 36.4 37.5 41.8 151.9
Depreciation 1.2 1.3 1.5 1.7 5.7
Other expense, net (1) 1.3 1.0 0.8 0.4 3.5
Interest expense and finance charges 3.8 3.9 4.0 4.7 16.4
------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 10.6 11.1 10.6 7.5 39.8
Provision for income taxes 4.1 4.3 3.9 2.3 14.6
------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations 6.5 6.8 6.7 5.2 25.2
Gain from discontinued operations, net of taxes --- --- --- --- ---
Extraordinary loss, early extinguishment of debt --- (12.1) --- --- (12.1)
------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 6.5 $ (5.3) $ 6.7 $ 5.2 $ 13.1
==================================================================================================================
Earnings (loss) per common share - basic:
Continuing operations $ 0.27 $ 0.30 $ 0.34 $ 0.26 $ 1.16
Discontinued operations --- --- --- --- ---
Extraordinary loss, early extinguishment of debt --- (0.53) --- --- (0.56)
------------------------------------------------------------------------------------------------------------------
Net earnings (loss) per share $ 0.27 $(0.23) $ 0.34 $ 0.26 $ 0.60
==================================================================================================================
Earnings (loss) per common share - diluted:
Continuing operations $ 0.27 $ 0.29 $ 0.33 $ 0.26 $ 1.14
Discontinued operations --- --- --- --- ---
Extraordinary loss, early extinguishment of debt --- (0.52) --- --- (0.55)
------------------------------------------------------------------------------------------------------------------
Net earnings (loss) per share $ 0.27 $(0.23) $ 0.33 $ 0.26 $ 0.59
==================================================================================================================
<CAPTION>
1998 Quarter Ended
(millions of dollars, except per share) Mar. 31 June 30 Sept. 30 Dec. 31 Year 1998
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net service revenues $318.6 $323.9 $336.6 $344.3 $1,323.4
Cost of services 269.1 273.0 284.2 290.4 1,116.7
Selling, general and administrative 35.7 50.0 35.5 34.5 155.7
Depreciation 1.0 1.0 1.0 1.2 4.2
Other expense, net 2.4 2.1 1.2 0.7 6.4
Interest expense and finance charges 4.2 4.2 3.4 3.7 15.5
------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes 6.2 (6.4) 11.3 13.8 24.9
Provision (benefit) for income taxes 2.3 (2.4) 4.5 5.4 9.8
------------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations 3.9 (4.0) 6.8 8.4 15.1
Loss (gain) from discontinued operations, net of taxes (19.1) 39.4 --- --- 20.3
Extraordinary loss, early extinguishment of debt --- (6.3) --- --- (6.3)
------------------------------------------------------------------------------------------------------------------
Net (loss) earnings $(15.2) $ 29.1 $ 6.8 $ 8.4 $ 29.1
==================================================================================================================
Earnings (loss) per common share - basic:
Continuing operations $ 0.17 $(0.17) $ 0.29 $ 0.35 $ 0.64
Discontinued operations (0.81) 1.68 --- --- 0.87
Extraordinary loss, early extinguishment of debt --- (0.27) --- --- (0.27)
------------------------------------------------------------------------------------------------------------------
Net (loss) earnings per share $(0.64) $ 1.24 $ 0.29 $ 0.35 $ 1.24
==================================================================================================================
Earnings (loss) per common share - diluted:
Continuing operations $ 0.16 $(0.16) $ 0.29 $ 0.35 $ 0.64
Discontinued operations (0.79) 1.62 --- --- 0.83
Extraordinary loss, early extinguishment of debt --- (0.26) --- --- (0.26)
------------------------------------------------------------------------------------------------------------------
Net (loss) earnings per share $(0.63) $ 1.20 $ 0.29 $ 0.35 $ 1.21
==================================================================================================================
</TABLE>
(1) Other expense, net, included $1.5 million of insurance settlement
proceeds in Form 10-Q filed May 17, 1999. Settlement proceeds are
reclassified to SG&A expenses for the current presentation.
(2) Included in SG&A expenses for quarter ended December 31, 1999, are
expenses totaling $3.6 million for severance costs and other provisions.
<PAGE>
Independent Auditors' Report
To the Board of Directors and Shareholders,
Burns International Services Corporation
We have audited the consolidated balance sheets of Burns International
Services Corporation and subsidiaries ("the Company") as of December 31, 1999
and 1998, and the related consolidated statements of operations and
comprehensive income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Burns International Services
Corporation and subsidiaries at December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Chicago, Illinois
March 1, 2000
<PAGE>
Directors, Officers and Shareholder Information
<TABLE>
Officers
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John A. Edwardson James M. Froisland Robert E.T. Lackey Craig J. Bollinger
Chairman, President Vice President Vice President, General Counsel Vice President, Risk
and Chief Executive Officer and Chief Financial Officer and Corporate Secretary Management
John D. O'Brien Nancy E. Kittle James F. McNulty Brian S. Cooper
Senior Vice President Vice President, Human Vice President Treasurer
and President, Burns International Resources and President, Total Security
Security Services Solutions
Directors
- -----------------------------------------------------------------------------------------------------------------------------------
John A. Edwardson /1/ James J. Burke, Jr. /2/ Albert J. Fitzgibbons, III /3, 4/ Arthur F. Golden /1, 2/
Chairman, President Partner Partner Partner
and Chief Executive Officer Stonington Partners Stonington Partners Davis Polk & Wardwell
Dale W. Lang /3, 4/ Terry L. Lengfelder /2/ Robert A. McCabe /3, 4/ Andrew McNally IV /1, 3, 4/
President Retired Managing Partner Chairman Retired Chairman
KX Acquisition Corporation Arthur Andersen LLP Pilot Capital Corporation and Chief Executive Officer
Rand McNally & Company
Alexis P. Michas /1, 2, 3/ H. Norman Schwarzkopf /4/
Managing Partner General
Stonington Partners U.S. Army, Retired
Committees of the Board
1 - Executive Committee 2 - Finance & Audit 3 - Compensation Committee 4 - Nominating Committee
Business Unit Presidents
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Guard David Cairns Richard H. Chenoweth John D. Donohue
Peter D. Boulais Managing Director President President
President UK Business Unit Canadian Business Unit Northeast Business Unit
Northwest Business Unit London, England Markham, Ontario Parsippany, NJ
Campbell, CA
William C. Ewing John D. Howard Frederick L. Kohnke Patrick O. McNulty
President President President President
Southwest Business Unit Gulf States Business Unit Midwest Business Unit Southeast Business Unit
Houston, TX Altamonte Springs, FL Chicago, IL Atlanta, GA
Energy & Government Globe Aviation Information Services Investigative Services
John D. Decker William J. Andres Larry E. White John D. Donohue
President President General Manager President
Parsippany, NJ Irving, TX Oldsmar, FL Parsippany, NJ
National Accounts Staffing
Brian A. O'Connell Joseph W. Arwady
Vice President President
Chicago, IL Parsippany, NJ
- ------------------------------------------------------------------------------------------------------------------------------------
Company Headquarters Investor Contact Securities Information Shareholder inquiries to:
Burns International Anne B. Ireland The common stock of Shareholder Relations
Services Corporation Director of Investor Relations Burns International Services Department - 11E
200 South Michigan Avenue 312-322-8550 Corporation is listed on the P.O. Box 11258
Chicago, IL 60604 New York Stock Exchange. Church Street Station
312-322-8800 The ticker symbol is BOR. New York, NY 10286-1258
Form 10-K Report
Web Site A copy of the Company's Annual
www.burnsinternational.com Report on Form 10-K is Send certificates of
available to shareholders Independent Accountants transfer and address
Shareholder Information without charge upon request Deloitte & Touche LLP changes to:
The 2000 annual meeting of to the Investor Relations 180 North Stetson Receive and Deliver
Shareholders will be held on Department. Chicago, IL 60601 Department - 11W
Monday, April 24, at 10:00 a.m. P.O. Box 11002
at the Company headquarters, Transfer Agent Church Street Station
200 South Michigan Avenue, The Bank of New York New York, NY 10286-1002
Chicago, IL. 1-800-524-4458
</TABLE>
<PAGE>
Exhibit 21
- ----------
SUBSIDIARY HIERARCHY REPORT
---------------------------
<TABLE>
<CAPTION>
State of Owned By
Subsidiary Incorporation Parent
- ---------- -------------- --------
<S> <C> <C>
BI - Armored Services Corporation Delaware 100%
BI - Canadian Guard Corporation Delaware 100%
Burns International Security Services Limited Ontario 100%
398367 Alberta Ltd. Alberta 100%
Danfield Security Services Ltd. Alberta 100%
Burns International Liability Management Company Delaware 20.83%
Les Services de Protection Burns International Ltee. Quebec 100%
BI - Colombia Guard Corporation Delaware 100%
Newerco, Inc. Delaware 100%
BII, Inc. Delaware 100%
Seguridad Burns de Colombia, S.A. Colombia 94%
The William J. Burns International Detective
Agency, Inc. Delaware 100%
Seguridad Burns de Colombia, S.A. Colombia 5.9%
BI - Equities Corporation Delaware 100%
BI - Equities Corporation of California California 100%
BI - Insurance Holding Corporation Delaware 100%
Borg-Warner Equities of Monterey, Inc. California 100%
NAL II, Ltd. Delaware 100%
BI - U.K. Guard Corporation Delaware 100%
Burns International Security Services (U.K.) Limited United Kingdom 100%
Air Security Limited United Kingdom 100%
Burns International Security Services (Ireland) Limited Republic of Ireland 100%
BIS-Chemicals Corporation Delaware 100%
BPS Financial Services, Inc. Delaware 100%
Baker Insurance Company Illinois 100%
Burns International Security Services Corporation Delaware 100%
Burns International SafeToHire.com, Inc. Delaware 100%
Burns International Security Services Inc. of Florida Florida 100%
Burns International Security Services, Inc. American Samoa 100%
Hall Security Services, Inc. Maine 100%
Oak Ridge Security Associates, LLC Delaware 51%
Globe Aviation Services Corporation Delaware 100%
Globe Airport Security Services, Inc. Delaware 100%
Globe Aviation Services Corporation of Puerto Rico Delaware 100%
Globe Aviation Services of Canada, Limited Ontario 100%
</TABLE>
<PAGE>
Exhibit 23
- ----------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Burns International Services
Corporation's Registration Statement on Form S-8 No. 333-34877 of our reports
dated March 1, 2000 appearing in and incorporated by reference in the Annual
Report on Form 10-K of Burns International Services Corporation for the year
ended December 31, 1999.
DELOITTE & TOUCHE LLP
Chicago, Illinois
March 28, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 68
<ALLOWANCES> 8
<INVENTORY> 0
<CURRENT-ASSETS> 174
<PP&E> 43
<DEPRECIATION> 19
<TOTAL-ASSETS> 344
<CURRENT-LIABILITIES> 129
<BONDS> 134
0
0
<COMMON> 0
<OTHER-SE> 31
<TOTAL-LIABILITY-AND-EQUITY> 344
<SALES> 0
<TOTAL-REVENUES> 1,379
<CGS> 0
<TOTAL-COSTS> 1,161
<OTHER-EXPENSES> 156
<LOSS-PROVISION> 5
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> 40
<INCOME-TAX> 15
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> (12)
<CHANGES> 0
<NET-INCOME> 13
<EPS-BASIC> 0.60
<EPS-DILUTED> 0.59
</TABLE>
<PAGE>
EXHIBIT 99
- ----------
Information provided by the Company from time to time may contain "forward-
looking statements" as defined by the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements are subject to risks and uncertainties
including, but not limited to, those discussed below, which could cause actual
results to differ materially from those projected in the forward-looking
statement.
1. The Company's business is labor intensive and is affected by the
availability of qualified personnel and the cost of labor. United States
labor market contractions caused by high economic growth or other factors
may increase the Company's direct costs through higher wages and increased
amounts of unbilled overtime. Employee turnover can result in increased
recruiting, screening and training costs and affect the quality of service
performed by the Company. In addition, the Company's customer agreements
typically allow for billing rate adjustments based on law changes, rulings
or collective bargaining agreements that increase the Company's wage rates.
However, competitive pricing conditions in the industry may constrain the
Company's ability to increase its billing rates to cover such increased
costs.
2. The Company continues to remain responsible for certain liabilities of
businesses that the Company has discontinued or disposed of in prior years.
These liabilities consist primarily of environmental liabilities and
indemnity obligations under contracts for sale of businesses. Although the
Company believes that any liabilities with respect to the discontinued
operations (including any potential environmental liabilities) will not have
a material adverse effect on its financial position or operating results, no
assurance can be given as to the ultimate outcome with respect to such
liabilities.
3. Due to the nature of the Company's security services business, its
operations are subject to a variety of federal, state, county and municipal
laws, regulations and licensing requirements. Changes in such laws,
regulations and licensing requirements may constrain the Company's ability
to provide services to customers or increase the costs of such services.
Competitive pricing conditions in the industry may constrain the Company's
ability to adjust its billing rates to reflect such increased costs.
4. The nature of the Company's services exposes it to potentially greater risks
of liability for employee acts, injuries (including worker's compensation
claims) or omissions that may be imposed by other service businesses. The
Company carries insurance of various types, including worker's compensation,
automobile and general liability coverage. These policies include
deductibles per occurrence for which the Company is self-insured. While the
Company seeks to maintain appropriate levels of insurance, there can be no
assurance the Company will avoid significant future catastrophic claims or
adverse publicity related thereto. There can be no assurance that the
Company's insurance will be adequate to cover the Company's liabilities or
that such insurance coverage will remain at acceptable costs. A successful
claim brought against the Company for which the coverage is denied or which
is in excess of its insurance coverage could have a material, adverse effect
on the Company's business, financial condition and results of operations.
<PAGE>
5. The Company intends to grow by pursuing acquisitions when attractive
opportunities arise. However, there can be no assurance that the Company
will complete acquisitions at favorable prices, that such acquisitions will
be fully integrated into the Company's existing operations or that such
acquisitions will not be dilutive to earnings. In addition, the need to
focus management's attention on integration of acquired businesses may limit
the Company's ability to pursue other opportunities related to the business.
6. The protective services industry generally is highly fragmented and very
competitive. The Company competes in a business environment with low
barriers to entry. Consequently, the Company's business is subject to
additional competition. Some of the Company's competitors have greater
financial and other resources available to them.
7. The Company's Year 2000 analysis and disclosure contains "forward looking"
statements about matters that are inherently difficult to predict. Such
statements include statements regarding the intent, opinion and current
expectations of the Company and its management. Such "forward looking"
statements involve risks and uncertainties that may affect future
developments, such as, the inability to deal with a Year 2000 issue due to a
problem arising on the part of a third party or vendor. While the Company
believes it has implemented methodologies to address the Year 2000 issue so
that it should not materially affect its financial position, future
operating results or cash flows, no assurance can be given with respect to
the ultimate outcome.
