<PAGE>

                                                                    EXHIBIT 10.2
 
                              SETTLEMENT AGREEMENT

     THIS SETTLEMENT AGREEMENT is entered into as of the 14th day of May, 1999
by and between Borg-Warner Security Corporation ("BWSC") and Loomis, Fargo & Co.
("LFC").  BWSC and LFC may be referred to collectively as the "Parties" or
either of them individually as the "Party."  Capitalized terms in this Agreement
which are not herein defined shall have the meaning ascribed to them in the
Contribution Agreement (as hereinafter defined).

     WHEREAS, BWSC and LFC, among other parties, entered into the Contribution
Agreement dated as of November 28, 1996 (as amended, the "Contribution
Agreement") whereby, among other things, the Parties agreed to defend and
indemnify each other for certain stated losses and liabilities;

     WHEREAS, under the Contribution Agreement, BWSC agreed to defend and
indemnify LFC for certain stated losses and liabilities related to the
operations of Wells Fargo Armored Service Corporation and its subsidiaries
("WFASC") and for breaches of the representations and warranties of BWSC and
WFASC in the Contribution Agreement, subject to the limitations set forth in the
Contribution Agreement;

     WHEREAS, LFC has submitted claims to BWSC for indemnification related to
the WFASC cargo losses and liabilities;

     WHEREAS, BWSC has objected to certain claims for indemnification made by
LFC related to the WFASC cargo losses and liabilities; and

     WHEREAS, the Parties desire to resolve and settle all actual or potential
cargo loss claims, liabilities and obligations that LFC has or may have in the
future against BWSC and its subsidiaries, together with the global resolution
and settlement of all other claims, liabilities and obligations related to or
arising in connection with the Contribution Agreement, other than as
specifically identified and reserved herein.

     NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants, undertakings and conditions herein, and for other good and valuable
consideration, the adequacy of which is hereby acknowledged, the Parties agree
as follows:

1.  Consideration.  Within thirty (30) days of the execution of this Settlement
Agreement, BWSC will pay to LFC, via wire transfer, one million six hundred
fifty thousand dollars and no cents ($1,650,000.00).


     
<PAGE>
 
2.  Releases and Indemnification.  Subject to Section 3 below, LFC, on behalf of
itself and its current and former officers, directors, employees, agents,
stockholders (other than BWSC), attorneys, subsidiaries, predecessors,
successors and assigns, or anyone claiming by, through, or under them, hereby
releases, relinquishes and forever discharges BWSC, its current and former
parents, subsidiaries (including, without limitation, WFASC), affiliated
companies (with the exception of LFC), and their respective predecessors,
successors, assigns, and all their respective current and former officers,
directors, employees, agents, stockholders, attorneys, heirs and
representatives, from and against any and all Indemnifiable Losses arising out
of or in any way connected with, directly or indirectly, any acts, omissions to
act, or any other form of obligation or omission by BWSC, or any of its
aforementioned privies, related to any claim, liability, or obligation arising
out of or related to the operations of WFASC or any claim, liability, or
obligation which has been or could be raised under the Contribution Agreement,
including, without limitation, all cargo claims, cargo liabilities and cargo
obligations (including, without limitation, any claims previously made under
notice letters from LFC to BWSC dated April 17, 1998, May 21, 1998, September
17, 1998 and November 20, 1998), which LFC or any of its aforementioned privies,
and their respective successors and assigns ever had, now have, or hereafter may
have, whether grounded in tort or contract or otherwise, in any and all courts
or other forums, of whatever kind or nature, whether known or unknown
(collectively, "Released Claims").  LFC agrees to defend and indemnify BWSC, and
all of its aforementioned privies, for any of the Released Claims made by any
third party and BWSC agrees to provide LFC with prompt written notice of any
such third party claim.  Furthermore, for any third party claim that LFC accepts
the obligation to defend and indemnify BWSC and all of its aforementioned
privies under this section, LFC has the right to control the defense or
settlement of such third party claim; provided, however, LFC will not agree to
settle any third party claim in a manner which would result in any additional
cost, expense, liability or loss to BWSC or the aforementioned privies.
Notwithstanding anything to the contrary herein, the foregoing release shall not
extend to or be construed to release the Parties' obligations under this
Settlement Agreement.

3.   Other Indemnification Obligations and Excluded Liabilities.  This
Settlement Agreement shall have no effect on indemnification obligations under
the Contribution Agreement related to or arising in connection with the tax
matters specifically set forth on Annex A attached hereto ("Indemnifiable Tax
Matters") or the Excluded Liabilities, and each Party hereby specifically
reserves any claims or defenses thereto that such Party may have with respect to
such indemnification claims.  BWSC acknowledges that the $250,000 deductible set
forth in Section 12.4(a) of the Contribution Agreement has previously been met,
exclusive of the Indemnifiable Tax Matters, and that the Indemnifiable Tax
Matters shall not be subject to any deductible, basket or other setoff.  LFC
agrees that it will provide its commercially reasonable assistance to BWSC to
mitigate any losses that 

                                       2
<PAGE>
 
BWSC may incur by virtue of its continuing indemnification obligations with
respect to the Indemnifiable Tax Matters, provided that such assistance shall
not include any consent, election, concession, agreement or other action which
would result in any additional cost, expense, liability or loss to LFC or its
aforementioned privies. BWSC represents to LFC that the tax audits previously
conducted by the States of Texas, Pennsylvania and Ohio with respect to the
operations of WFASC have been entirely resolved and that LFC and its
subsidiaries shall not be subject to any liability relating to or arising in
connection with such audits. To the extent that any liability does exist or
arises in the future relating to such audits, such liability will constitute
"Indemnifiable Tax Matters" for purposes of this Settlement Agreement and will
continue to be subject to the indemnification provisions of Section 12.4 of the
Contribution Agreement.

4.   Covenants.  LFC will provide to BWSC in an expeditious manner all
information BWSC reasonably requests relating to WFASC's New York State sales
tax audit, but in no case will LFC provide said information later than ten (10)
days after LFC's receipt of such request (unless such requested information does
not exist and, using commercially reasonable efforts, cannot be produced within
such 10-day period).

5.   Miscellaneous.

(a)  This Settlement Agreement may be executed and delivered in multiple
     counterparts, each of which when so executed and delivered shall be an
     original, which collectively shall together constitute one and the same
     instrument and agreement.
(b)  This Settlement Agreement is solely for the benefit of the Parties and such
     other persons to the extent identified and provided herein, and no
     provision of this Settlement Agreement shall be deemed to confer upon other
     third parties any remedy, claim, liability, reimbursement, cause of action
     or other right.
(c)  This Settlement Agreement shall be binding upon and inure to the benefit of
     BWSC, its current and former parents, subsidiaries and affiliates, and
     their respective predecessors, successors and assigns, and the former and
     current officers, directors, employees, agents, attorneys, and stockholders
     of all such parties and LFC, its current and former parents, subsidiaries
     and affiliates, and their respective predecessors, successors and assigns,
     and the former and current officers, directors, employees, agents,
     attorneys, and stockholders of all such parties.
(d)  The Parties represent and warrant that they have entered into this
     Settlement Agreement based upon their own independent assessment of the
     rights and obligations of the Parties and not based upon any

                                       3
<PAGE>
 
     representations (other than as provided herein) made by the other Party to
     this Settlement Agreement.
(e)  Other than the Settlement Agreement between the Parties dated March 22,
     1999 (the "March Settlement Agreement") which will remain in effect, all
     understandings and agreements, written or oral, heretofore related to the
     subject matter addressed in this Settlement Agreement between and among
     BWSC and LFC are merged into this Settlement Agreement, which (together
     with the March Settlement Agreement) fully and completely expresses their
     agreement.  This Settlement Agreement (together with the March Settlement
     Agreement) constitutes the entire agreement between Parties related to the
     subject matter hereof.  This Settlement Agreement may not be amended or
     modified, except by a written amendment duly executed by the Parties.

                  (Remainder of page intentionally left blank)

                                       4
<PAGE>
 
     IN WITNESS WHEREOF, the Parties hereto have caused this Settlement
Agreement to be executed by their authorized representatives as of the day and
year first written above.

                         BORG-WARNER SECURITY CORPORATION


                         By:  /s/ John A. Edwardson
                              ---------------------
                              John A. Edwardson
                              President and Chief Executive Officer



                         LOOMIS, FARGO & CO.



                         By:  /s/ James K. Jennings, Jr.
                              --------------------------
                              James K. Jennings, Jr.
                              Executive Vice President and
                              Chief Financial Officer

                                       5
<PAGE>
 
                                    ANNEX A

Pending Tax Audits



1.  State of Alabama

2.  State of New York

3.  Multi-State Tax Commission

4.  State of South Dakota

                                       6