ITEM 1. BUSINESS
General Development of Business
Hudson General Corporation (the "Company" or "Registrant") was organized in Delaware in 1961. The Company is principally engaged in providing a broad range of services to the aviation industry. The services, which are conducted by the Company and its subsidiaries, include aircraft ground handling; aircraft deicing; aircraft fueling; ground transportation services; snow removal; fuel management; cargo warehousing; ramp sweeping and glycol recovery; the sale, leasing and maintenance of ground support equipment; specialized maintenance services and the leasing of hangar, office and tie-down space to private aircraft owners. On October 31, 1994, the Company ceased its fixed base operations in Canada (see Note 4 to Item 14(a)(1) Financial Statements). In addition to its aviation services, the Company is a 50% partner with Oxford First Corporation in a joint venture for the development and sale of land on the Island of Hawaii (see Note 6 to Item 14(a)(1) Financial Statements).
Narrative Description of Business
The Company's snow removal and aircraft deicing services are seasonal in nature. The results of these operations are normally reflected in the second and third quarters of the fiscal year, and fluctuate depending upon the severity of the winter season. Additional information required to be provided under this item is incorporated by reference from pages 3-8 of the Registrant's 1995 Annual Report to Shareholders.
General Information
The Company does not spend a material amount for research or development activities.
During the years ended June 30, 1995, 1994, and 1993, sources of
the Company's revenues which exceeded 10% of consolidated revenues in any year were: aircraft ground handling services (including deicing) $74,334,000, $68,291,000 and $67,811,000; aircraft fueling services (including fixed base operations) $22,923,000, $21,936,000 and $23,586,000; ground transportation services $23,802,000, $22,171,000 and $20,567,000; and snow removal services $3,706,000, $17,871,000 and $8,933,000, respectively (Note: Foreign revenues included above are translated at the average rates of exchange in their respective fiscal years).
No customer of the Company accounted for more than 10% of consolidated revenues during fiscal 1995.
The Company's services are generally subject to competitive bidding, and the Company competes principally with airlines and other aviation services companies, some of which are larger and have resources greater than the Company. The major bases of competition are the prices at which services are offered and the quality and efficiency in the performance of services.
The compliance with federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment has not to date had a material effect upon the Company's capital expenditures, results of operations or competitive position. However, the federal government and many state and local governments have enacted or proposed legislation and regulations with respect to storage facilities for fuel, petroleum-based products and chemicals, the disposal of hazardous waste materials, storm water discharges, and financial responsibility for possible liability exposures relating to fuel storage facilities. Compliance with such legislation and regulations has resulted in expenditures by the Company, including expenditures for the testing, decommissioning and/or replacement of certain of its fuel and deicing fluid storage facilities, and the clean-up of fuel spills. The Company is presently engaged in several such decommissioning, replacement and clean-up projects, and it is anticipated that additional such expenditures, the amount of which is presently not
expected to be material, will be required.
In addition, airport authorities are coming under increasing pressure to clean-up previous contamination at their facilities, and are seeking financial contributions from airport tenants and companies which operate at their airports. The Company cannot predict at this time, the amount, if any, that it may be required to pay in connection with such airport authority initiatives.
The Company employs an aggregate of approximately 3,700 persons.
Financial Information About Foreign and Domestic Operations and Export Sales
The Company operates in only one industry segment. For information as to foreign operations, see Note 4 to Item 14(a)(1) Financial Statements. For information relating to the Company's investment in a joint venture to develop and sell land in Hawaii (the Venture), see Note 6 to Item 14(a)(1) Financial Statements.
ITEM 2.

ITEM 2. PROPERTIES
The Company's executive offices at 111 Great Neck Road, Great Neck, New York contain approximately 13,000 square feet and are under lease through December 31, 2002.
The Company also leases office, warehouse, hangar and maintenance shop space as well as fuel storage facilities at various airport locations in the United States and Canada. These leases expire at various dates through 2005 and contain various renewal options through 2020. A portion of this leased space has been sublet to non-affiliated sublessees. The properties owned and leased by the Company are suitable and adequate to conduct its business.
For information relating to the Company's interest in land in Hawaii, see Note 6 to Item 14(a)(1) Financial Statements and page 8 of the Registrant's 1995 Annual Report to Shareholders.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
In 1988, Texaco Canada Inc. (Texaco) (now known as McColl- Frontenac Inc.) instituted a suit in the Supreme Court of Ontario, Canada against the Company and Petro-Canada, Inc., the corporation which supplied aviation fuel for the Company's Canadian fixed base operations. The suit's allegations, as amended in 1992, are that the defendants interfered with contractual and fiduciary relations and induced the breach of a fuel supply agreement between Texaco and Innotech Aviation Limited (Innotech) in connection with the purchase by the Company from Innotech in 1984 of certain assets of Innotech's airport ground services business. The suit seeks compensatory and punitive damages totaling $110,000,000 (Canadian) (approximately $80,000,000 (U.S.)) plus all profits earned by the defendants subsequent to the alleged breach. A trial date has been set for May 1996.
Innotech (which due to a name change is now called Aerospace Realties (1986) Limited) has agreed to defend and indemnify the Company against claims of whatever nature asserted in connection with, arising out of or resulting from the fuel supply agreement with Texaco, and is defending the Company in the suit by Texaco.
Company management believes, and counsel for the Company has advised based on available facts, that the Company will successfully defend this action.
In March 1994 a jury in New York State Supreme Court in Manhattan, New York rendered a verdict against the Company in a civil lawsuit for personal injuries and awarded the plaintiff a total of $21,436,000 in damages, of which $19,186,000 is covered by insurance. The suit arose from an accident involving a collision between a Company vehicle and another vehicle at JFK International Airport in New York. At March 31, 1994, the Company accrued a provision for the entire uninsured punitive damage amount of $2,250,000 in the Company's consolidated statements of operations. In
June 1994, as a result of a ruling by the judge in the case vacating the uninsured punitive damage award against the Company, the Company reversed the $2,250,000 provision which it had previously accrued. The judge also ruled that the jury's award of compensatory damages was excessive in several respects, and held that this award should be reduced to $9,600,000. The compensatory damages are fully covered by insurance. The Company's insurance carrier has appealed the judge's ruling, seeking to further reduce the jury's award. As a result, it is anticipated that the plaintiff will cross-appeal the judge's ruling, seeking to reinstate the jury award including punitive damages. Company management and appellate counsel for the Company believe that the Appellate Division is unlikely to award punitive damages to the plaintiff.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not Applicable
ADDITIONAL ITEM
EXECUTIVE OFFICERS OF THE COMPANY
No family relationships exist among the executive officers of the Company. Each of the executive officers holds office at the pleasure of the Board of Directors, except as noted below.
Mr. Langner has served as a Director of the Company since 1961 and as Chairman since 1977. He has served as President since 1989 and previously served in such capacity from 1961 until 1979. The Company has an employment contract with Mr. Langner pursuant to which Mr. Langner has agreed to render services to the Company as Chairman, President and Chief Executive Officer for a period ending January 31, 1998.
Mr. Pollack has served as Executive Vice President and Chief Operating Officer of the Company since 1990, and prior thereto as Senior Vice President since 1984. He has been employed in various capacities with the Company, including as a divisional officer, since 1968. Mr. Pollack is a Certified Public Accountant.
Mr. Rubin has served as Executive Vice President and Chief Financial Officer of the Company since 1990, and has been Treasurer of the Company since 1983. Previously, Mr. Rubin had been Vice President-Finance
since 1985. He has been employed in various capacities with the Company since 1971. Mr. Rubin is a Certified Public Accountant.
Mr. Rieder has served as Senior Vice President and Chief Marketing Officer of the Company since 1990, and prior thereto as Vice President - Marketing since 1984. He has been employed in various capacities with the Company, including as a divisional officer, since 1967.
Mr. DiBenedetto has served as Senior Vice President-Operations since July 26, 1994. Prior thereto he was Vice President- Operations since 1984. He has been employed in various capacities with the Company, including as a divisional officer, since 1970.
Mr. Croot has served as Vice President-Canadian Operations of the Company since 1989. He has been employed in various capacities with the Company, including as a divisional officer, since 1968.
Mr. Rockowitz has served as Vice President-General Counsel since 1985 and as Secretary since 1986. Prior to joining the Company in 1985, he had been Corporate Secretary and Assistant General Counsel of Belco Petroleum Corporation since 1978.
The Company has employment contracts with Messrs. Pollack, Rubin, Rieder, DiBenedetto and Rockowitz which currently extend until December 31, 1995 and are subject to extension for additional two year periods unless on or before the September 30th preceeding any then-existing expiration date, the Company notifies the executive that it elects not to so extend the term. The Company also has an employment contract with Mr. Croot which may be terminated by the Company as of any December 31st.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information required to be provided under Part II, Item 5(a) and (c) is incorporated by reference from page 13 of the Registrant's 1995 Annual Report to Shareholders under the caption "Selected Consolidated Financial Data". At June 30, 1995, there were 220 holders of record of the Company's common stock.
The Company's Revolving Credit Agreement, as amended (Credit Agreement), contains certain limitations on the payment of dividends (see Note 5 to Item 14(a)(1) Financial Statements) including limiting the payment of dividends (other than stock dividends) and the purchase, redemption or retirement by the Company of its stock to an annual amount not to exceed the lesser of (i) $1,200,000 or (ii) 50% of consolidated net income, as defined, for the most recently ended fiscal year. In addition, the Company is restricted from paying cash dividends or purchasing, redeeming or retiring its stock unless tangible net worth (TNW), as defined, is greater than $16,500,000. At June 30, 1995 TNW was $22,298,000. The Credit Agreement also permits the Company, until March 31, 1996, to expend up to an additional $3,000,000 to repurchase shares of its common stock so long as no proceeds from borrowings under the Credit Agreement are utilized for such purpose. The Board of Directors has approved the repurchase of up to 150,000 shares of the Company's common stock from time to time in either open market or privately negotiated transactions. As of August 25, 1995 the Company had repurchased 112,800 shares in the open market for an aggregate purchase price of approximately $2,000,000 pursuant to this authorization.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The information required to be provided under Part II, Item 6 is incorporated by reference from page 13 of the Registrant's 1995 Annual Report to Shareholders under the caption "Selected Consolidated Financial Data".
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required to be provided under Part II, Item 7 is incorporated by reference from pages 9-12 of the Registrant's 1995 Annual Report to Shareholders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations".
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and the independent auditors' report thereon of KPMG Peat Marwick LLP, independent certified public accountants, for the Company's fiscal years ended June 30, 1995, 1994 and 1993 are filed pursuant to Item 14(a)(1) of this Report. The financial statements and the required financial statement schedule of the Venture and the independent auditors' report thereon of KPMG Peat Marwick LLP, independent certified public accountants, for the fiscal years ended June 30, 1995, 1994 and 1993 are filed pursuant to Item 14(d) of this Report. All such financial statements and financial statement schedule are incorporated herein by reference.
Selected quarterly financial data of the Registrant for the fiscal years ended June 30, 1995 and 1994 appears in Note 12 to Item 14(a)(1) Financial Statements.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - Not Applicable
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required to be provided under Part III, Item 10, relative to Directors of the Registrant is incorporated by reference from the Registrant's 1995 definitive proxy statement to be filed with the Securities and Exchange Commission (the "Commission") pursuant to Regulation 14A no later than 120 days after the close of its fiscal year and, relative to executive officers, to Part I of this report under the caption "Executive Officers of the Company".
ITEM 11.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be provided under Part III, Items 11, 12 and 13 is incorporated by reference from the Registrant's 1995 definitive proxy statement to be filed with the Commission pursuant to Regulation 14A no later than 120 days after the close of its fiscal year.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1)
Financial Statements of the Registrant, all of which are incorporated herein by reference to the Registrant's 1995 Annual Report to Shareholders.
Independent Auditors' Report of KPMG Peat Marwick LLP, independent auditors, appearing on page 24 of the 1995 Annual Report to Shareholders.
Consolidated Balance Sheets of Hudson General Corporation and Subsidiaries at June 30, 1995 and 1994, appearing on page 15 of the 1995 Annual Report to Shareholders.
Consolidated Statements of Operations of Hudson General Corporation and Subsidiaries for the Years Ended June 30, 1995, 1994 and 1993, appearing on page 14 of the 1995 Annual Report to Shareholders.
Consolidated Statements of Cash Flows of Hudson General Corporation and Subsidiaries for the Years Ended June 30, 1995, 1994 and 1993, appearing on page 17 of the 1995 Annual Report to Shareholders.
Consolidated Statements of Stockholders' Equity of Hudson General Corporation and Subsidiaries for the Years Ended June 30, 1995, 1994 and 1993 appearing on page 16 of the 1995 Annual Report to Shareholders.
Notes to Consolidated Financial Statements appearing on pages 18-24 of the 1995 Annual Report to Shareholders.
(a)(3) Exhibits
EXHIBIT NO. EXHIBIT DESCRIPTION ------- ---------------------------------------------------------
3.1 Restated Certificate of Incorporation of the Registrant, as amended to date, filed as Exhibit 3.1 to Quarterly Report on Form 10-Q for the quarter ended December 31, 1986, incorporated herein by reference.
3.2 By-laws of the Registrant, as amended to date, filed as Exhibit 3.2(b) to Quarterly Report on Form 10-Q for the quarter ended December 31, 1991, incorporated herein by reference.
4.4(a) Revolving Credit and Term Loan Agreement dated as of November 25, 1992 among the Registrant, various banking institutions named therein and The First National Bank of Boston, as agent, filed as Exhibit 4.4(h) to Current Report on Form 8-K filed December 4, 1992, incorporated herein by reference.
4.4(b) First Amendment to the Revolving Credit and Term Loan Agreement dated as of November 25, 1992 among the Registrant, various banking institutions named therein and The First National Bank of Boston, as agent, dated as of August 31, 1993 filed as Exhibit 4.4(i) to Annual Report on Form 10-K for the fiscal year ended June 30, 1993, incorporated herein by reference.
4.4(c) Second Amendment to the Revolving Credit and Term Loan Agreement dated as of November 25, 1992 among the Registrant, various banking institutions named therein and The First National Bank of Boston, as agent, dated as of December 21, 1993 filed as Exhibit 4.4(j) to Quarterly Report on Form 10-Q for the quarter ended December 31, 1993, incorporated herein by reference.
4.4(d) Third Amendment to the Revolving Credit and Term Loan Agreement dated as of November 25, 1992 among Registrant, various banking institutions named therein and The First National Bank of Boston, as agent, dated as of March 15, 1995 filed as Exhibit 4.4(k) to Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, incorporated herein by reference.
4.4(e) Revolving Credit Agreement dated as of November 25, 1992 among Hudson General Aviation Services Inc., various banking institutions named therein and Bank of Boston Canada, as agent, filed as Exhibit 4.4(i) to Quarterly Report on Form 10-Q for the quarter ended March 31, 1993, incorporated herein by reference.
4.4(f) First Amendment to the Revolving Credit Agreement dated as of November 25, 1992 among Hudson General Aviation Services Inc., various banking institutions named therein and The Chase Manhattan Bank of Canada, as successor agent, dated as of March 15, 1995.
4.6 Indenture dated as of July 1, 1986 between the Registrant and Chemical Bank (Delaware), relating to the Registrant's 7% Convertible Subordinated Debentures Due 2011, filed as Exhibit 4.1 to Amendment No. 1 to Form S-2 Registration Statement under the Securities Act of 1933, Registration No. 33-6689, incorporated herein by reference.
10.1(a) Development Agreement dated April 29, 1981 between Kahua Ranch, Limited, and the Registrant, filed as Exhibit 3 to Quarterly Report on Form 10-Q for the quarter ended March 31, 1981, incorporated herein by reference.
10.1(b) Amended and Restated Joint Venture Agreement dated April 29, 1981 between Hudson Kohala Inc. and The Hilton Head Company of Hawaii, Inc. (now Oxford Kohala, Inc.), filed as Exhibit 4 to Quarterly Report on Form 10-Q for the quarter ended March 31, 1981, incorporated herein by reference.
10.1(c) First Amendment to the Joint Venture Agreement, Amendment and Restatement dated April 29, 1981, such Amendment being effective as of June 30, 1984, filed as Exhibit 10 to Quarterly Report on Form 10-Q for the quarter ended September 30, 1984, incorporated herein by reference.
10.1(d) Receivable Sales Agreement dated January 3, 1990, with amendment letters dated June 22, 1990 and August 2, 1990, between the Registrant and Oxford First Corporation and Oxford Kohala, Inc., filed as Exhibit 10.1(d) to Annual Report on Form 10-K for the fiscal year ended June 30, 1990, incorporated herein by reference.
10.1(e) Commitment Agreement to Purchase Receivables dated January 3, 1990, with amendment letter dated August 2, 1990, between Kohala Joint Venture and The Oxford Finance Companies, Inc., filed as Exhibit 10.1(e) to Annual Report on Form 10-K for the fiscal year ended June 30, 1990, incorporated herein by reference.
10.1(f) Agreement constituting an amendment to the Joint Venture Agreement, Amendment and Restatement dated April 29, 1981, dated November 2, 1990 among the Registrant, Hudson Kohala Inc., Oxford Kohala, Inc. and Oxford First Corporation relating to receivables of the Kohala Joint Venture, filed as Exhibit 10.1(f) to Quarterly Report on Form 10-Q for the quarter ended September 30, 1990, incorporated herein by reference.
10.1(g) Agreement constituting an amendment to the Joint Venture Agreement, Amendment and Restatement dated April 29, 1981, dated September 5, 1991 among the Registrant, Hudson Kohala Inc., Oxford Kohala, Inc. and Oxford First Corporation relating to distributions from the Kohala Joint Venture, filed as Exhibit 10.1(g) to Annual Report on Form 10-K for the fiscal year ended June 30, 1991, incorporated herein by reference.
10.1(h) Agreement constituting an amendment to the Joint Venture Agreement, Amendment and Restatement dated April 29, 1981, dated September 26, 1991 among the Registrant, Hudson Kohala Inc., Oxford Kohala, Inc. and Oxford First Corporation relating to distributions from the Kohala Joint Venture, filed as Exhibit 10.1(h) to Quarterly Report on Form 10-Q for the quarter ended September 30, 1991, incorporated herein by reference.
10.1(i) Second Amendment to the Joint Venture Agreement, Amendment and Restatement dated April 29, 1981, such Amendment being effective as of October 1, 1994, filed as Exhibit 10.1(i) to Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, incorporated herein by reference.
10.2* 1981 Non-Qualified Stock Option and Stock Appreciation Rights Plan, filed as Exhibit 15.1 to Form S-8 Registration Statement under the Securities Act of 1933, Registration No. 2-75137, incorporated herein by reference.
10.3* 1981 Incentive Stock Option and Stock Appreciation Rights Plan, filed as Exhibit 15.2 to Form S-8 Registration Statement under the Securities Act of 1933, Registration No. 2-75137, incorporated herein by reference.
10.4(a)* Form of Severance Agreement, dated as of June 3, 1986, between the Registrant and Michael Rubin, filed as Exhibit 10.5(a) to Annual Report on Form 10-K for the fiscal year ended June 30, 1988, incorporated herein by reference.
10.4(b)* Amended schedule of executive officers entitled to benefits of Severance Agreements, filed as Exhibit 10.4(b) to Annual Report on Form 10-K for the fiscal year ended June 30, 1990, incorporated herein by reference.
10.5(a)* Employment Agreement dated July 28, 1988, between the Registrant and Jay B. Langner, filed as Exhibit 10.6(a) to Annual Report on Form 10-K for the fiscal year ended June 30, 1988, incorporated herein by reference.
10.5(b)* Amendment dated April 16, 1990, amending the Employment Agreement between the Registrant and Jay B. Langner dated as of July 28, 1988, filed as Exhibit 10.5(b) to Annual Report on Form 10-K for the fiscal year ended June 30, 1990, incorporated herein by reference.
10.5(c)* Amendment dated August 16, 1994, amending the Employment Agreement between the Registrant and Jay B. Langner dated as of July 28, 1988, as amended, filed as Exhibit 10.5(c) to Annual Report on Form 10-K for the fiscal year ended June 30, 1994, incorporated herein by reference.
10.5(d)* Severance Agreement dated April 16, 1990 between the Registrant and Jay B. Langner, filed as Exhibit 10.5(c) to Annual Report on Form 10-K for the fiscal year ended June 30, 1990, incorporated herein by reference.
10.7(a)* Form of Employment Agreement, dated February 8, 1990, between the Registrant and Michael Rubin, filed as Exhibit 10.7(a) to Annual Report on Form 10-K for the fiscal year ended June 30, 1990, incorporated herein by reference.
10.7(b)* Schedule of executive officers entitled to benefits of Employment Agreements, filed as Exhibit 10.7(b) to Annual Report on Form 10-K for the fiscal year ended June 30, 1990, incorporated herein by reference.
10.8* Employment Agreement dated September 21, 1990 between the Registrant and Donald S. Croot, filed as Exhibit 10.9 to Annual Report on Form 10-K for the fiscal year ended June 30, 1991, incorporated herein by reference.
10.9* Description of Executive Incentive Program adopted by the Compensation Committee of the Board of Directors on December 1, 1993, filed as Exhibit 10.9 to Quarterly Report on Form 10-Q for the quarter ended December 31, 1993, incorporated herein by reference.
11 Computation of Earnings (Loss) Per Share Information - primary and fully diluted.
13 The Registrant's 1995 Annual Report to Shareholders, which report, except for those portions thereof which are expressly incorporated by reference in this filing, is furnished for the information of the Commission and is not to be deemed to be filed as part of this filing.
21 Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP, the Company's independent auditors, to the incorporation by reference into the Company's Registration Statement on Form S-8, as amended, Registration No. 2-75137.
(b) No reports on Form 8-K have been filed by Registrant during the last quarter of the period covered by this report.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
* Denotes management contract for compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned Chief Executive, Chief Financial and Chief Accounting Officers, thereunto duly authorized on the 15th day of September 1995.
HUDSON GENERAL CORPORATION
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 their capacities as Directors on the 15th day of September 1995.
KOHALA JOINT VENTURE AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE (FORM 10-K)
JUNE 30, 1995, 1994 AND 1993
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
Independent Auditors' Report
The Board of Directors Hudson General Corporation
The Board of Directors Oxford First Corporation:
We have audited the accompanying consolidated balance sheets of the Kohala Joint Venture and subsidiary as of June 30, 1995 and 1994 and the related consolidated statements of operations and partners' deficit, and cash flows for each of the years in the three-year period ended June 30, 1995. We have also audited financial statement schedule II. These consolidated financial statements and the financial statement schedule are the responsibility of the Venture's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule 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.
For the years ended June 30, 1995, 1994 and 1993, the Venture incurred net losses of $5,495,300, $3,601,800 and $5,575,500, respectively, and at June 30, 1995 the amount of the partners' deficit was $9,331,900. Additionally, in 1995, 1994 and 1993 the partners advanced $2,346,100, $1,740,000 and $2,150,000, respectively, to the Venture. Unless land sales increase significantly, additional contributions from the partners will be required in fiscal 1996.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Kohala Joint Venture and subsidiary as of June 30, 1995 and 1994 and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Jericho, New York August 16, 1995
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1995 and 1994
See accompanying notes to consolidated financial statements.
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Statements of Operations and Partners' Deficit
Years ended June 30, 1995, 1994 and 1993
See accompanying notes to consolidated financial statements.
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended June 30, 1995, 1994 and 1993
See accompanying notes to consolidated financial statements.
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Kohala Joint Venture (the Venture) and its 99% owned subsidiary, the Kohala Ranch Water Company (KRWC)(note 7). All significant intercompany accounts and transactions have been eliminated in consolidation.
(b) Business
The Venture is a partnership which was formed to acquire, develop and sell approximately 4,000 contiguous acres of land in Hawaii (the Project). The Partners in the Venture are Hudson Kohala, Inc. (Hudson, a wholly-owned subsidiary of Hudson General Corporation) and Oxford Kohala, Inc. (Oxford, a wholly-owned subsidiary of Oxford First Corporation) (Oxford First)) (together, the Partners). The terms of the partnership are contained in the Restated Joint Venture Agreement dated April 29, 1981, as amended (the Agreement). The Project is being developed in four successive phases. The first two phases, containing approximately 2,100 acres, have been developed and substantially sold. The third phase, containing approximately 550 acres, has also been developed and has 86 parcels available for sale. The fourth phase has yet to be developed, except to the extent common improvements (main roadway, water wells, etc.) have been completed.
(c) Partners' Capital and Allocation of Profits and Losses
Partners' capital (deficit) includes the Partners' capital accounts in the Venture and the minority interest (the remaining 1%) of the Partners in KRWC.
In accordance with the Agreement, profits are shared equally by the Partners. Losses are shared by the Partners on a pro-rata basis, based first on their respective capital accounts and then on their respective combined advances to the Venture including accrued interest (note 5).
(d) Revenue Recognition and Land Sales
All sales to date have been from the first, second and third phases of the Project. Revenue is being recognized under the full accrual method of accounting.
(e) Capitalization of Costs
Land and development costs (including interest) are initially capitalized and subsequently carried at the lower of average cost or net realizable value. These costs are charged to costs of sales when the corresponding land sale is recorded based upon the relative fair value of the parcel sold to the aggregate fair value of all parcels in the phase. Although the Venture believes its estimates are reasonable, there can be no assurance that the estimated future selling prices can be realized or that the actual costs for Phases III or IV will not exceed such estimates.
The Venture has capitalized interest costs, as appropriate, for each phase of the Project. During fiscal 1991, 1989 and 1987, the capitalization of interest costs relating to the third, second and first phases,
(Continued)
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
respectively, was discontinued, as these phases were substantially completed during the respective periods and ready for their intended use. Effective July 1, 1994, as a result of the lack of further development activity, capitalization of interest relating to the fourth phase has been discontinued (note 3).
(f) Estimated Costs to Complete
At June 30, 1995, the Venture estimated that $2,478,800 of additional costs were necessary to complete the development of Phase III. The portion of such amount relating to unsold parcels has been offset against land and development costs in the accompanying consolidated balance sheets.
(g) Property, Plant and Equipment
Property, plant and equipment is recorded at the lower of cost or net realizable value. Depreciation is provided on the straight-line method. The number of years over which major classes of assets are depreciated and the costs and related accumulated depreciation as of June 30, 1995 and 1994 are set forth:
Contributions in aid of construction represent contributions by customers for plant additions to be made for the benefit of the customer. Accordingly, such contributions are recorded as a reduction against property, plant and equipment.
During fiscal 1993, the Venture began depreciating the model home based upon an estimated residual value of $500,000, and a five year useful life. Included in both fiscal 1995 and 1994 depreciation expense was $93,600 relating to the model home.
Depreciation expense was $176,400, $177,400 and $180,200 for fiscal 1995, 1994 and 1993, respectively.
(h) Income Taxes
As a partnership, the Venture is not a taxable entity under the provisions of the Internal Revenue Code. The taxable results and available tax credits of the Venture and KRWC pass directly to the Partners' corporate income tax returns in the manner prescribed in the Agreement.
(Continued)
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(i) Statements of Cash Flows
For the purposes of presenting the consolidated statements of cash flows, the Venture considers all securities with an original maturity of three months or less at the date of acquisition to be cash equivalents.
A reconciliation of net loss to net cash provided by (used in) operating activities for fiscal 1995, 1994 and 1993 is as follows:
(2) Mortgage Notes Receivable
At June 30, 1995 and 1994, mortgage notes receivable from land sales consisted of the following:
The Venture typically provides financing in connection with the sale of land parcels. None of the Venture's mortgage notes receivable comprised more than 5% of the total mortgage notes receivable
(Continued)
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
balance at June 30, 1995. The collectibility of mortgage notes receivable is affected by general economic conditions.
Purchasers of land parcels are entitled to discounts if certain conditions are met. Discounts ranging from 10-20% are generally given if the purchase price is paid in cash at the closing. If the cash is paid within specified periods after the closing, a reduced sales discount is given. Reserves have been established for estimated discounts to be taken by purchasers under the various discount programs.
Stated interest rates on mortgage notes receivable outstanding at June 30, 1995 and 1994, range from 6% to 11% (averaging 9.6% as of June 30, 1995 and 9.8% as of June 30, 1994). Interest is not accrued on mortgage notes receivable in arrears 90 days or more. The minimum down payment for sales to unrelated parties is 10% (see note 8 for sales to related parties).
At June 30, 1995, mortgage notes receivable 90 days or more in arrears were comprised of 29 mortgage notes aggregating $5,174,200, of which $314,200 represents receivables from related parties (see note 8 for sales to related parties).
Scheduled collections of principal during the next five fiscal years and thereafter are as follows:
(3) Land and Development Costs
Land and development costs include all costs directly associated with the acquisition and development of the land parcels. The land was acquired by the Venture from Hudson and recorded at cost. Major components of land and development costs are the initial costs to acquire the land, roadways, water, drainage, electrical and telephone lines, and various project management expenditures, as well as unamortized capitalized interest of $6,706,300 and $6,736,000 as of June 30 1995 and 1994, respectively. Interest costs capitalized in fiscal 1994 approximated $502,900.
(4) Foreclosed Real Estate
Foreclosed real estate represents land parcels that were reacquired in connection with previously financed mortgages. Such parcels are valued at the lower of their remaining receivable balance outstanding, or their net estimated realizable value, as follows:
(Continued)
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(5) Partner Advances Payable
The Partners have agreed to make equal advances to the Venture for all costs necessary for the orderly development of the Project. Advances earn interest from the date of the advance compounded quarterly at the prime rate minus 1% (8% and 6% at June 30, 1995 and 1994, respectively).
On October 13, 1994, Oxford First filed for reorganization under Chapter 11 of the Bankruptcy Code. Pursuant to an order of the Bankruptcy Court dated November 28, 1994, Oxford First (through its subsidiary, the Oxford Finance Companies, Inc.) was permitted to transfer funds to Oxford in an aggregate amount not to exceed $375,800 with respect to the period October 1, 1994 through March 31, 1995, which amounts were intended to enable Oxford to make its share of advances required by the Venture. The amount so authorized by the Bankruptcy Court was not sufficient to allow Oxford to make its full share of required advances. To date, Hudson has opted to make additional advances (the Additional Advances) to cover Oxford's funding deficiency. As of June 30, 1995, the amount of the Additional Advances made by Hudson was $548,000. Hudson has filed a claim with the Bankruptcy Court in an amount equal to the Additional Advances. In addition, Oxford First has filed an amended reorganization plan with the Bankruptcy Court contemplating Oxford First's transfer of funds to Oxford in amounts set forth in the plan covering periods through December 31, 1997. The Venture, at present, is unable to determine whether the Bankruptcy Court will confirm Oxford First's reorganization plan so as to enable Oxford First to transfer additional funds to Oxford or whether any transfers authorized by the Bankruptcy Court will be sufficient in order for Oxford to make its share of future advances to the Venture. Unless land sales increase significantly, additional contributions from the Partners will be required in fiscal 1996. It is anticipated that Hudson will fund, subject to its right of reimbursement, any advances required in fiscal 1996 in the event Oxford is not able to make its share of advances. Hudson may be required to obtain approval from its banks before making additional advances.
During fiscal 1995, 1994 and 1993, advances accrued an average rate of interest of 7.2%, 5.2% and 7%, respectively.
(6) Notes Payable
During fiscal 1991, the Venture entered into agreements with banks pursuant to which $8,797,000 of the Venture's mortgage receivables were sold. An additional sale of $3,148,000 of mortgage receivables to a bank was completed during fiscal 1992. Since the Venture has accounted for these transactions as financing arrangements, the unpaid balances of the mortgage receivables in the amounts of $2,826,200 and $4,758,400 at June 30, 1995 and 1994, respectively, are shown as notes payable in the accompanying consolidated balance sheets. These notes are collateralized by $775,800 and $1,491,500 of other Venture owned mortgage receivables as of June 30, 1995 and 1994, respectively. The maximum amounts outstanding during fiscal 1995, 1994 and 1993 were $4,758,500, $8,031,800 and $9,851,000, respectively. The average amounts outstanding for fiscal 1995, 1994 and 1993, based upon month-end balances, were $3,860,100, $6,091,500 and $9,063,900, respectively. The agreements with the banks require that all payments received in connection with the underlying mortgage receivables be remitted to the banks until fiscal 1996 under the fiscal 1991 sales and until fiscal 1997 under the fiscal 1992 sale, when any unpaid balance due to the banks is to be paid by the Venture. In addition, the Venture is required to make additional payments to the banks should the yield to the banks be less than 11-3/4% for the fiscal 1991 sales, or
(Continued)
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
less than 2% over the prime rate (as defined) for the fiscal 1992 sale. The Venture remitted $96,600 and $129,000 during fiscal 1995 and 1994, respectively, for such purpose. The weighted average interest rates for fiscal 1995, 1994 and 1993 were 11.9%, 11.2%, 10.8%, respectively. The weighted average interest rates on borrowings outstanding as of June 30, 1995 and 1994, based upon month-end balances, were 11.6% and 11.2%, respectively.
The Company also has a note payable outstanding for $576,200 relating to certain development costs. The note matures in December 1996 and bears interest at the prime rate plus 1%.
(7) Kohala Ranch Water Company
KRWC provides water to the Project and is owned by the Venture (99%), Hudson (.5%), and Oxford (.5%). The assets of KRWC are comprised principally of property, plant and equipment. KRWC recorded revenues of $250,975, $248,500 and $238,500 and incurred net losses of $487,000, $512,200 and $498,800 for fiscal 1995, 1994 and 1993, respectively.
(8) Related Party Transactions
During years prior to fiscal 1993, certain directors and officers of the Partners and certain employees of the Venture purchased parcels in the Project at discounts from prices generally offered to the general public. The Venture provided mortgage financing on all such sales pursuant to which the Venture received a down payment equal to 5% of the gross sales price before discounts and a purchase money mortgage. The purchase money mortgages bear interest at a rate of 8% or 9% per annum and provide for monthly principal payments based on a 30 year amortization schedule with a balloon payment due after seven years. Certain balloon payments on such mortgages have been extended for one year. At June 30, 1995 and 1994, mortgages receivable of $1,073,600 and $1,508,700, respectively, were due from such related parties. As of June 30, 1995, two of the remaining eight outstanding balances were delinquent.
During fiscal 1993, an officer of one of the Partners exchanged his previously purchased parcel for a new parcel with no additional consideration.
(9) Contingencies
During fiscal 1992, the County of Hawaii passed an ordinance pursuant to which the Venture, after subdivision approvals are obtained, would be able to develop and subdivide the fourth phase of the project into 1,490 units. Shortly after passage of the ordinance, a lawsuit against the County of Hawaii was filed by two local residents of Hawaii (Plaintiffs) seeking to invalidate such ordinance on various grounds including that the ordinance was adopted without following State of Hawaii procedure relating to the preparation of an Environmental Impact Statement. During fiscal 1993, the judge in this action granted Plaintiffs' motion for partial summary judgment without indicating any effect on zoning of the fourth phase. The County and the Venture have appealed this ruling. The appeal was heard before the Hawaii Supreme Court in March 1994, and the Court has taken the matter under advisement. The Venture cannot, at this time, determine the impact of the Court's ruling on the timing of the development of the fourth phase or the expenditures related thereto.
During fiscal 1993, the Venture made a $600,000 provision for a 4% Hawaii excise tax relating to the collection of interest on mortgage notes receivable. The Venture recorded an additional $224,000 during fiscal 1994. The Venture has paid $530,400 relating to this matter through June 30, 1995.
(Continued)
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(10) Impact of New Accounting Standards
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" (SFAS No. 114). SFAS No. 114 addresses the accounting by creditors for impairment of a loan by specifying how allowances for credit losses related to certain loans should be determined. In October 1994, the FASB issued Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan -- Income Recognition and Disclosures", (SFAS No. 118) which amends SFAS No. 114 by expanding disclosure requirements and permitting use of existing methods for recognizing interest income on impaired loans. SFAS Nos. 114 and 118 are effective for fiscal years beginning after December 15, 1994.
In March 1995, the FASB issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets to Be Disposed Of" (SFAS No. 121). SFAS No. 121 addresses accounting for the impairment of long-lived assets (including real estate), certain identifiable intangibles, and goodwill relating to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of.
The Venture believes that the adoption of these new standards will not have a material effect on the Venture's financial position and/or results of operations.
Schedule II
KOHALA JOINT VENTURE AND SUBSIDIARY
Valuation and Qualifying Accounts
Years ended June 30, 1995, 1994 and 1993
___________________
(A) Transfers (B) Recoveries and other adjustments (C) Write-offs
HUDSON GENERAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX


ITEM 1. BUSINESS
The Company provides a broad line of protective services for its customers, including guard, alarm, armored and courier services. The Company believes that, based on revenues and the variety of services offered, it is the largest and broadest-based supplier in the protective services industry in the United States.
COMPANY'S BUSINESS UNITS
The Company's protective services business is divided into four business units: guard services, alarm services, armored services and courier services. Information concerning the revenues, operating profit or loss and identifiable assets attributable to each of the Company's business units is incorporated herein by reference to Note 9 of the Notes to Consolidated Financial Statements.
GUARD SERVICES
The guard services unit provides a variety of guard and related security services under the Wells Fargo(R), Burns(R), Globe(R) and other service marks to approximately 14,000 government and business customers from approximately 281 locations throughout the United States, and in Canada, Colombia and the United Kingdom. The Company believes that its guard services unit is the largest contract guard services operation in the world, measured by revenues.
The Company's guard services unit supplies contract uniformed and plainclothes security officers, who may or may not be armed, to perform a wide variety of tasks. These security officers patrol and monitor commercial, financial, industrial, residential and governmental facilities providing deterrence against crime and breach of governmental security regulations and detection of fire, accidents and other casualties. The security officers also monitor electronic systems and control public and employee access to facilities. Specialized assignments include nuclear and conventional electric power plant security, pre-departure screening of passengers and luggage at airports, mailroom services and investigative services, including background investigations of prospective employees.
The guard services unit employs approximately 70,000 security officers. Security officers undergo a standardized pre-employment screening program that features mandatory drug screening, criminal record checks at the county and municipal court level and verification of consumer credit reports, Social Security information and drivers' license records. Security officers receive classroom orientation and field training in safety, first aid and security techniques and in the handling of specific problems applicable to particular industries or situations.
The guard services unit markets guard services through approximately 150 sales representatives nationwide and in Canada, Colombia and the United Kingdom. Sales personnel operate out of local branch and sales offices. The guard services unit also bids on contracts with governmental agencies.
Guard services contracts generally provide for such services on a continuing basis and generally are terminable by either party upon 30 to 60 days notice. Charges for guard services are negotiated with customers and are based upon payment of a specified amount per guard 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.
ALARM SERVICES
The alarm services unit provides electronic security services in the United States and Canada under the Wells Fargo(R) service mark for its commercial customers and under the Pony Express(R) service mark for its residential customers. In addition, this unit provides an integrated guard, patrol and alarm service to Bel Air, Beverly Hills and other suburbs of Los Angeles under the trade name Bel-Air Patrol. The Company believes that its alarm services unit is one of the largest electronic security service operations in the United States, measured by revenues. The unit has approximately 2,440 employees.
Commercial. The alarm services unit designs, installs, monitors and services electronic detection systems located at customers' premises. These systems are tailored to customers' needs and may include intrusion and fire detection, critical process and sprinkler monitoring, access control and closed-circuit television monitoring systems. The Company's alarm systems and devices may be monitored on the premises of the customer by the customer's own personnel or linked through telephone lines or long range radio to one of 12 central stations operated by the Company in the United States and Canada. The Company also services its installed systems.
The alarm services unit services approximately 109,000 security systems in financial institutions, industrial and commercial businesses and complexes, warehouses, facilities of federal, state and local governments, defense installations, and health care and educational facilities.
The majority of the Company's monitoring contracts are for an initial five- year period with automatic renewal for additional one-year terms, unless terminated by either party. Upon installation, a customer pays an installation fee and agrees to pay an annual service charge for ordinary maintenance and monitoring during the life of the contract. It has been the unit's experience that its customers generally continue the service after expiration of the initial term of the contract and enter into new five-year monitoring contracts.
The alarm services unit conducts its sales, installation and service operations from 37 branch offices in the United States and Canada, some of which are on the same premises as a monitoring station, and additional satellite offices. The alarm services unit has a nationwide sales force that is separated into broad-based commercial groups, as well as specialized sales teams that address the specific needs of the financial community, engineered systems market and other high growth segments of the industry. One group, for example, focuses on multi-location companies such as national retail chains and fast food outlets that require a single point of control for planning, servicing, monitoring and reporting for all locations.
The alarm services unit also makes direct sales of security equipment to government and commercial users (including other companies in the alarm business) and designs, assembles and sells engineered systems for commercial fire suppression.
Residential. The alarm services unit also installs fire and intrusion protection systems for residential customers under the Pony Express(R) service mark. Residential customer sales and service are generally performed from the same facilities as for commercial accounts. Residential systems are installed by the Company with monitoring agreements and often with maintenance agreements. The majority of the residential monitoring contracts are for an initial period of three to five years with automatic renewal for additional one-year terms, unless terminated by either party. The unit services approximately 25,600 residential security systems.
Bel-Air Patrol. The Company also provides a complete protective package, including central station alarm service and surveillance systems, security guards and day and night patrols, to residents in Bel Air and Beverly Hills and other nearby communities of Los Angeles. The Company provides these services to approximately 12,000 customers under the trade name Bel-Air Patrol.
The alarm services unit purchases electronic equipment and component parts for systems from a number of suppliers, and is not dependent upon any single source for such equipment or parts.
ARMORED SERVICES
The armored services unit is a security-related cash services business that provides traditional armored transport services, automatic teller machine ("ATM") services and cash management services in the United States under the Wells Fargo(R) service mark. The unit employs approximately 6,100 employees at approximately 136 facilities throughout the United States and Puerto Rico. The Company's armored and ATM businesses use a fleet of approximately 1,770 vehicles to transport approximately $5 billion of currency and securities each business day. The Company believes it is the second largest armored transportation operation in the United States, measured by revenues.
Armored Transport. The Company provides vault storage and specialized, secure transportation services using armed guards in carrying currency, securities and other valuables for banks and national and local retail customers.
The Company provides armored transport services for over 14,000 customers. Most of the customer contracts are for a multi-year term with automatic renewal for additional one-year terms, unless terminated by either party. It has been the unit's experience that its customers generally continue the service after the initial term of the contract.
The armored transport services operation has a sales force of approximately 40 people dedicated to the solicitation of transportation-related accounts and a separate sales force that focuses solely on transportation-related accounts for national retail customers. In recent years the Company has expanded its armored express service, which offers deposit pick-up services in small to medium sized markets for retailers who have not traditionally used armored transport services.
Generally, the Company assumes responsibility for the safe arrival at the destination of transported commodities. The armored transport unit maintains a risk management department that is responsible for loss prevention, security investigation, employee safety and training and coordination with local and federal law enforcement personnel.
ATM Servicing. The armored transport unit also provides special services to approximately 25,000 ATMs on a national basis. The Company believes it is the leading servicer of ATMs in the United States, measured by both revenues and the number of ATMs serviced.
The Company controls its ATM services through an automated national dispatching center located in Columbia, Maryland. The dispatch center coordinates all customer requests and directs field technicians throughout the country. The automation system provides detailed service confirmation data both internally and to the customer. ATM servicing is a time-critical business and the Company guarantees a response time of 90 minutes or less to its major accounts.
The Company offers financial institutions a complete range of management and maintenance services for ATM networks. The Company provides cash preparation and replenishment, deposit collection and verification, on-site balancing of ATM funds, preventive maintenance and first and second line maintenance services, including necessary hardware maintenance. The Company also sells refurbished ATM equipment.
The Company's ATM servicing unit has a sales force of approximately five persons. Most of the customer contracts are for a multi-year term with automatic renewal for additional one-year terms, unless terminated by either party.
Cash Management Services. The armored transport unit also provides cash management services to approximately 500 financial institutions and retail customers. These highly automated services include currency storage and preparation, micro-encoding of checks, deposit verification and consolidation, coin wrapping and storage and food stamp processing. Most of the customer contracts are for a multi-year term with automatic renewal for additional one- year terms, unless terminated by either party.
COURIER SERVICES
The courier services unit transports time-sensitive packages for commercial businesses and non-negotiable financial documents for Federal Reserve banks and financial institutions through 34 branch and 82 satellite offices in 32 states under the Pony Express(R) service mark. The unit provides ground courier services through a fleet of approximately 3,300 vehicles and commercial and charter air service for longer distance or extremely time-critical shipments.
Although the Pony Express service mark traces its roots to the Pony Express of Old West fame, the present courier operation began as a financial commodity courier transporting cancelled checks and other non-negotiable financial documents among financial institutions as a part of the armored transportation unit. While shipments of non-negotiable financial documents are still a substantial part of the unit's business, the courier services unit also delivers small packages, particularly business-to-business shipments of parts, extremely urgent mail, film, medical and pharmaceutical supplies and other commodities. The primary focus of the courier service unit is same-day or next-day service by ground transportation in intrastate and regional interstate markets. The typical customer ships multiple, time-critical, small shipments on a daily or weekly basis from one or more locations to one or more other locations within a 500- mile radius. The Company may design a customized distribution system initially for one or two large customers and make available to smaller customers the excess capacity on such system.
The courier services unit attempts to meet customer needs for secure transportation through flexible and customized services. Shipments are picked up and delivered by uniformed courier guards who are trained in security measures. The unit has developed sophisticated information systems that provide automated billing, computer-assisted routing and package tracking and other programs that enhance customer service. The unit is expanding its use of PonyTrak/TM/, an electronic tracking system that uses a hand-held scanner to record pickup and delivery times, dates and locations by reading package bar codes. The Company offers services outside of normal business hours that sometimes require couriers to unlock and enter customer premises and secure premises when leaving.
The unit employs approximately 4,800 persons. The unit leases approximately 60 percent of its vehicles from its employees. The Company believes such lease arrangements provide a competitive advantage because such employees tend to provide
better customer service, drive more safely and have a more vested interest in the success of the business.
The courier services unit operates both as a common and contract carrier and uses a combination of tariffs and shipping contracts to control the terms, conditions and rates applicable to the transportation of shipments. Rates are dependent upon many factors, including the weight and type of the shipped item, the distance and urgency of the shipment and the geographical location.
COMPETITION
The guard services unit competes with major national firms and numerous smaller regional and local companies providing similar services. Competition in the security guard industry is based on price in relation to the quality of service, the scope of services performed, the extent and quality of guard supervision, recruiting and training and name recognition.
The alarm services unit competes with major national firms and numerous smaller regional and local companies. Competition in the alarm services industry is based on price in relation to the quality of service, the scope of alarm installation and service, and the level of technological and engineering sophistication.
The armored services unit competes with major national firms and numerous smaller regional and local companies. Competition in the armored transport industry is based primarily on price in relation to quality of service, the scope of services performed, quality of cargo insurance and name recognition.
The courier services unit competes with numerous regional and local courier companies. Competition in the courier industry is based primarily on price in relation to quality of service and size and configuration of distribution routes. Because of low barriers to entry in some areas, smaller local competitors with substantially lower overhead expenses are often able to compete effectively with the Company for local shipments.
REGULATION
Due to the nature of the Company's business, its operations are subject to a variety of federal, state, county and municipal laws, regulations and licensing requirements. The Company believes that its operations are in substantial compliance with those laws, regulations and requirements.
The Company's guard services operations are subject to a variety of city, county and state firearm and occupational licensing laws. In addition, many states have laws requiring training and registration of security officers, regulating the use of badges, identification cards and uniforms and imposing minimum bond surety and insurance requirements.
Federal legislation has been introduced relating to security officer qualification and training. Similar legislation is pending in several states. The Company generally supports the creation of standards for the industry and does not expect that the establishment of such standards will have a material affect on its guard services operations.
The Company's alarm services operations are subject to regulatory requirements of federal, state and local authorities. In addition, this unit relies upon the use of telephone lines to transmit signals, and the cost of such lines and the type of equipment which may be used are currently regulated by both federal and state governments. In some instances, the Company contracts with the local government to permit it to link a customer's business or home directly into the local police or fire department station for which it may pay a fee to such local government. As a result of a high incidence of false alarms in some communities, some local governments have imposed assessments, fines and penalties on customers based on the number of false alarms reported, or have restricted police response to systems producing excessive false alarms.
Federal legislation became effective in 1995 that abolished all intrastate regulatory control over prices, routes and services to which the Company's armored and courier units had previously been subject. Such operations are subject to regulation by federal and state agencies with respect to safety of employees, operations and equipment, vehicle emissions and underground fuel storage tanks.
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 potentially exposes it to greater risks of liability for employee acts, injuries (including workers' compensation claims) or omissions than may be posed by other service businesses.
The Company often obtains customer indemnification or liability limitations in its contracts to mitigate this risk exposure. In addition to self-insurance reserves, the Company carries insurance of various types, including general liability coverage. The Company obtains such 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 generally maintains insurance coverage for punitive damages, although the laws of many states limit or prohibit insurance coverage for liability for punitive damages. The Company does not believe that limitations on, or the uncertainty of, insurance
coverage for punitive damages in certain states in which it operates is likely to be material, based upon the Company's prior experience with punitive damages claims. The Company also attempts to manage its risk liability through analysis of customer facilities and transportation routes and employee screening, training, supervision and evaluation.
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 8,100 employees. The collective bargaining agreements expire at various dates from 1996 to 1999 and relate, among other things, to wages, hours and conditions of employment. Under section 9(b)(3) of the National Labor Relations Act, if a union admits to membership, or is affiliated directly or indirectly with a union that admits to membership, employees other than guards, an employer of guards can refuse to bargain with such union and such union cannot be certified as the representative of a unit of guards. As a result, the Company has in many instances refused to recognize or withdrawn recognition of labor organizations that admit as members employees other than guards.
The NLRB has certified various locals of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America as the exclusive collective bargaining representative of certain of its courier services employees. The unit is engaged in contract negotiations with such representative.
TRADEMARKS AND PATENTS
The Wells Fargo(R), Pony Express(R) and Burns(R) service marks are especially important to the Company's business. The Company believes that its rights in these marks are adequately protected and of unlimited duration. While the Company has patents it considers to be important to the overall conduct of its business, it does not consider any particular patent, or group of related patents, essential to its operations. The Company's 13 United States patents, which generally relate to the Company's alarm services unit, expire between 1997 and 2008, and the Company's 18 foreign patents, which generally relate to the Company's alarm services unit, expire between 1995 and 2009. For both the United States and the foreign patents, their expiration, individually, and in the aggregate, is not expected to have any material effect on the Company's financial condition or results of operations.
EXECUTIVE OFFICERS
Set forth below are the names, ages, positions and certain other information concerning the executive officers of the Company as of March 1, 1996.
Mr. Adorjan has been a director of the Company since 1993, Chairman of the Board (since January 1996), Chief Executive Officer (since October 1995) and President (since April 1995). Mr. Adorjan was President of Emerson Electric Co. from 1992 to 1995 and Chairman and Chief Executive Officer of ESCO Electronics Corporation from 1990 to 1992. Mr. Adorjan is also a director of California Microwave, Inc. and ESCO Electronics 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. Wood has been Vice President, Finance of the Company since 1994 and was Vice President and Controller of the Company from 1987 to 1994.
Each of the executive officers named above was elected by the Board of Directors to serve in the office indicated until his successor is elected and qualified.
ITEM 2.

ITEM 2. PROPERTIES
The Company and its subsidiaries maintain armored and courier terminals, central alarm stations, plants and general offices in various cities in the United States, Puerto Rico, Canada, the United Kingdom and Colombia. At December 31, 1995, the guard services unit occupied approximately 281 branch and satellite offices, all but one of which were leased. At December 31, 1995, the alarm services unit operated 12 central stations, of which 4 were leased and 37 additional branch and 15 separate satellite offices, all of which were leased. At December 31, 1995, the armored services unit occupied 136 facilities, of which 100 were leased, and 61 of which contained vaults. At December 31, 1995, the courier services unit occupied approximately 116 branches and satellites, of
which all but three were leased. The Company leases approximately 57,000 square feet of office space in Chicago, Illinois for its executive offices. The Company believes that its properties are in good condition and are adequate to meet its current and reasonably anticipated needs.
ITEM 3.

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 damages that may not be covered by insurance. In addition, the Company has been subject to claims and suits relating to certain discontinued operations. The most important of these legal proceedings are discussed below. The Company believes that the various asserted claims and litigation in which it is currently involved will not materially affect its financial position or future operating results, although no assurance can be given with respect to the ultimate outcome for any such claim or litigation. The Company believes that it has established adequate provisions for litigation liabilities in its financial statements in accordance with generally accepted accounting principles. These provisions include both legal fees and possible outcomes of legal proceedings (including the environmental matters discussed below).
Centaur Litigation
Centaur Insurance Company ("Centaur"), a discontinued property and casualty insurance subsidiary, ceased writing insurance in 1984 and has been operating under rehabilitation since September 1987. Rehabilitation is a process supervised by the Illinois Director of Insurance to attempt to compromise liabilities at an aggregate level that is not in excess of Centaur's assets. In rehabilitation, Centaur's assets are currently being used to satisfy claim liabilities under direct insurance policies written by Centaur. Any remaining assets will be applied to Centaur's obligations to other insurance companies under reinsurance contracts. The foregoing has resulted in one pending lawsuit against the Company for recovery of alleged damages from the failure of Centaur to satisfy its reinsurance obligations. Certain former officers and directors of the Company's current and former subsidiaries have been named as defendants in such lawsuit and the Company has agreed to indemnify such individuals. Centaur is not a defendant in this lawsuit against the Company. Although the Illinois Director of Insurance has not made any claims against the Company for any of Centaur's liabilities, the Illinois Director of Insurance has requested, and the Company has agreed to, an extension of the statute of limitations for any such claims.
As of December 31, 1993, Centaur's total liabilities were $135 million and its deficit in net worth was $54.7 million, according to financial statements submitted on behalf of the Illinois Director of Insurance. Such financial statements were presented on a liquidating basis with assets carried at their market value or estimated realizable value
and liabilities carried at their present value through the provision of a present value discount. Although Centaur is a subsidiary of the Company, the Company does not operate Centaur and has no responsibility for, nor does it participate in the preparation of, such financial statements. Centaur's financial results, assets and liabilities are not reflected in the Company's financial statements.
In June 1988, the Insurance Commissioner of the State of California as trustee of Mission Insurance Trust and four other affiliated insurance companies filed a complaint in the Superior Court of the State of California, County of Los Angeles, against the Company and certain of its current and former subsidiaries alleging damages resulting from the failure of Centaur to satisfy its reinsurance obligations. This lawsuit alleges damages to plaintiff, as Trustee of Mission Insurance Company, Mission National Insurance Company, Enterprise Insurance Company, Holland-America Insurance Company and Mission Reinsurance Corporation, based on (i) conduct justifying piercing the corporate veil, (ii) fraud and (iii) negligent misrepresentation. Plaintiff seeks judgment in the amount of the insurance companies' current losses, which allegedly total approximately $14.2 million, plus a declaratory order that the Company pay future losses alleged to exceed $66 million. The complaint was amended in 1989 to add 11 former officers and directors of the Company's current and former subsidiaries as defendants and to allege additional causes of action based on (i) breach of fiduciary duty and imposition of personal liability, (ii) fraudulent conveyance, (iii) constructive trust and (iv) conspiracy and additional current losses totalling more than $9.8 million and to add a claim for punitive damages in the amount of $270 million.
In 1989, the Company filed a motion to dismiss or stay the action, pending resolution of Centaur's rehabilitation in Illinois. The court declined to dismiss the action, but entered an order staying the action until the rehabilitation proceeding is resolved, except that the parties may pursue discovery to preserve evidence. In 1992, the Centaur rehabilitator filed a motion to intervene and dismiss the complaint on the grounds that the plaintiff lacked standing and that its claims were not ripe for adjudication. The motion is pending. In 1993, six of the 11 individual defendants were dismissed from the lawsuit. In September 1994, the court effectively lifted its stay. Active discovery is now being pursued. The Company intends to defend this lawsuit vigorously.
The Company believes that any damages for failure to satisfy reinsurance obligations are solely the responsibility of Centaur and that the resolution of the lawsuit relating to Centaur, including the Company's indemnification obligations to former officers and directors, will not have a material adverse effect on its financial position or future operating results; however, no assurance can be given as to the ultimate outcome with respect to such lawsuit.
Environmental Proceedings
The Company and certain of its current and former subsidiaries have been identified by the U.S. Environmental Protection Agency and certain state environmental agencies as potentially responsible parties ("PRPs") at a number of 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 affect on its financial position or future operating results, generally either because the maximum potential liability at a site is not large or because liability will be shared with other PRPs, although no assurance can be given with respect to the ultimate outcome of any such liability. Based on its estimate of allocations of liability among PRPs, the probability that other PRPs, many of whom are large, solvent public companies, will fully pay the costs allocated to them, currently available information concerning the scope of contamination at such sites, estimated remediation costs at such sites, estimated legal fees and other factors, the Company has made provisions for indicated environmental liabilities in its financial statements in the aggregate amount of approximately $10 million (relating to environmental matters with respect to discontinued operations of the Company). The Company believes that such provisions for indicated environmental liabilities have been established on a basis consistent with generally accepted accounting principles. If any environmental liability claim relating to the Company's former chemical and plastics business is made, the Company is indemnified by the purchaser of such business, General Electric Company. Since the disposition, the Company has notified General Electric Company of various claims made with respect to the Company's former chemical and plastics business and General Electric Company has assumed all of such claims and has not contested its indemnification obligations. There is no dollar limitation on the General Electric Company's indemnification obligations and there are no other material limitations or exclusions with respect thereto. If any environmental liability claim relating to the operations of Borg-Warner Automotive, Inc. is made, the Company will be indemnified by Borg-Warner Automotive. There is no dollar limitation on such indemnification obligations and there are no other material limitations or exclusions with respect thereto.
ITEM 4.

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 1995.
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
On January 20, 1993, the Company's Common Stock was listed for trading on the New York Stock Exchange. Prior to that date, there was no established public trading market for shares of Common Stock. As of March 5, 1996, there were approximately 217 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 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 1994 and 1995 were:
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended December 31, 1995, with respect to the following line items shown under the "Consolidated Statistical Review" (set forth on page 12) in the Annual Report is incorporated herein by reference and made a part of this report: Net service revenues; earnings (loss) from continuing operations; earnings (loss) from continuing operations per share; total assets and total debt.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Management's Discussion and Analysis of Results of Operations and Financial
Condition (set forth on pages 14 through 19) in the Annual Report are incorporated herein by reference and made a part of this report.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements (including the notes thereto) of the Company (set forth on pages 20 through 38) 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, 1995 and 1994 is set forth in Note 14 of the Notes to Consolidated Financial Statements. For a list of financial statements and schedules filed as part of this report, see the "Index to Financial Statements and Financial Statement Schedules."
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Inapplicable.
ITEM 10.

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 1 through 3 of the Company's proxy statement for the 1996 annual meeting of stockholders. Information with respect to executive officers of the Company is set forth in part I of this report. Information concerning compliance with Section 16(a) of the Exchange Act is incorporated by reference to the information under the caption "Section 16(a) Compliance" on page 6 of the Company's proxy statement for the 1996 annual meeting of stockholders.
ITEM 11.

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 6 through 9, and "Compensation of Directors" on page 4, of the Company's proxy statement for the 1996 annual meeting of stockholders.
ITEM 12.

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 5 and 6 of the Company's proxy statement for the 1996 annual meeting of stockholders.
ITEM 13.

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 pages 13 and 14 of the Company's proxy statement for the 1996 annual meeting of stockholders.
PART IV
ITEM 14.

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 20 through 38 of the Annual Report, and the report of Deloitte & Touche set forth on page 39 of the Annual Report, are incorporated herein by reference:
Consolidated Balance Sheet--December 31, 1995 and 1994
Consolidated Statement of Operations--three years ended December 31,
Consolidated Statement of Cash Flows--three years ended December 31,
Consolidated Statement of Stockholders' Equity--three years ended December 31, 1995
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
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.
No reports on Form 8-K were filed by the Company during the three-month period ended December 31, 1995.
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.
BORG-WARNER SECURITY CORPORATION
By /s/ J. Joe Adorjan -------------------- J. Joe Adorjan Chairman of the Board, Chief Executive Officer and President
Date: March 18, 1996
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 18, 1996.
Signature Title - --------- ------
/s/ J. Joe Adorjan Chairman of the Board, Chief - ------------------------------- Executive Officer and President and J. Joe Adorjan Director (Principal Executive Officer)
/s/ Timothy M. Wood Vice President, Finance - ------------------------------- (Principal Financial and Accounting Timothy M. Wood Officer)
/s/ James J. Burke, Jr. Director - ------------------------------- James J. Burke, Jr.
/s/ Albert J. Fitzgibbons, III Director - ------------------------------- Albert J. Fitzgibbons, III
Director - ------------------------------- Arthur F. Golden
/s/ Dale W. Lang Director - ------------------------------- Dale W. Lang Director - ------------------------------- Robert A. McCabe
- ------------------------------- Andrew McNally IV Director
/s/ Alexis P. Michas Director - ------------------------------- Alexis P. Michas
/s/ H. Norman Schwarzkopf Director - ------------------------------- H. Norman Schwarzkopf
/s/ Donald C. Trauscht Director - ------------------------------- Donald C. Trauscht
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders Borg-Warner Security Corporation
We have audited the consolidated financial statements of Borg-Warner Security Corporation as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated February 5, 1996; such consolidated financial statements and report are included in your 1995 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Borg- Warner Security Corporation listed in Item 14 of this Annual Report on Form 10- K. This financial statement schedule is the responsibility of the Corporation'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.
DELOITTE & TOUCHE LLP
Chicago, Illinois February 5, 1996
SCHEDULE II
BORG-WARNER SECURITY CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(dollars in millions)
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT DESCRIPTION ------ --------------------
*3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992).
*3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992).
*4.1 Credit Agreement dated as of January 27, 1993 ("Credit Agreement") among the Company, the lenders party thereto and the administrative agent named therein (incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992), as amended by the First Amendment thereto (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ending June 30, 1994), as amended by the Second Amendment and Consent to Credit Agreement dated as of March 15, 1995 (incorporated by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994), and as amended by the Third Amendment to Credit Agreement and Consent dated as of October 16, 1995 (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
*4.2 Credit Agreement dated as of January 27, 1993 ("L/C Agreement") among the Company, the banks party thereto and the agent named therein (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992), as amended by the First Amendment thereto (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ending June 30, 1994), as amended by the Fifth Amendment to L/C Agreement dated as of March 15, 1995 (incorporated by reference to Exhibit 4.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994), and as amended by Amendment No. 6 dated as of October 16, 1995 (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
B-1
EXHIBIT NUMBER DOCUMENT DESCRIPTION ------ --------------------
*4.3 Credit Agreement dated as of October 16, 1995 ("Term Loan Agreement") among the Company, various lenders and Bankers Trust Company, as agent (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
*4.4 Indenture dated as of January 15, 1983 by and between Borg-Warner and Harris Trust & Savings Bank, Trustee, entered into in connection with the registration of up to $150 million of debt securities and under which Borg-Warner issued 8% Notes due April 1, 1996 (incorporated by reference to Exhibit 9(d) to Registration Statement No. 2-81437).
*4.5 Supplemental Indenture dated as of December 31, 1987 to the Indenture dated as of January 15, 1983 by and between the Company and Harris Trust and Savings Bank (incorporated by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the Ten Months ended October 31, 1987).
*4.6 Form of Security for 8% Notes due April 1, 1996 (incorporated by reference to Exhibit 4.8 to Registration Statement No. 33-53480).
*4.7 Indenture dated as of April 1, 1986 by and between Borg-Warner and Harris Trust and Savings Bank, entered into in connection with the registration of up to $150,000,000 of Debt Securities and Warrants to Purchase Debt Securities for issuance under a shelf registration on Form S-3 (incorporated by reference to Registration Statement No. 33-4670).
*4.8 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).
+*10.1 Borg-Warner Security Corporation Directors Stock Appreciation Rights Plan (incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988).
+*10.2 Borg-Warner Corporation Management Stock Option Plan, as amended through January 19, 1993 (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992).
+*10.3 Borg-Warner Security Corporation 1993 Stock Incentive Plan
B-2
EXHIBIT NUMBER DOCUMENT DESCRIPTION ------ --------------------
(incorporated by reference to Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992).
+*10.4 Employment Agreement dated as of March 28, 1995 for J.J. Adorjan (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).
+*10.5 Form of Employment Agreement for Messrs. O'Brien and Wood (incorporated by reference to Exhibit 10.26 to Registration Statement No. 33-15419), as amended by Form of Amendment of Employment Agreement dated January 19, 1989 (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1988).
*10.6 Form of Indemnification Agreement dated September 23, 1986 between the Company and Messrs. O'Brien and Wood (incorporated by reference to Exhibit 10.17 to Borg-Warner's Annual Report on Form 10-K for the year ended December 31, 1986).
+*10.7 Agreement dated as of March 28, 1995 with D.C. Trauscht (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995).
+*10.8 Borg-Warner Retirement Savings Plan, as amended through January 1, 1995 (incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994).
+*10.9 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).
+*10.10 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).
*10.11 Consulting Agreement dated as of September 1, 1993 between the Company and H. Norman Schwarzkopf (incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993).
B-3
EXHIBIT NUMBER DOCUMENT DESCRIPTION ------ --------------------
10.12 Consulting Agreement dated as of January 1, 1996 between the Company and D.C. Trauscht.
11 Computation of earnings per share.
13 1995 Annual Report to Stockholders.
21 Subsidiaries of the Company.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule. - --------------------
* Incorporated by reference. + Indicates a management contract or compensatory plan or arrangement required to be filed pursuant to Item 14(c).
B-4