-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Js3aBjB5t2EN7AssnJuuiGa4zDrmgX3gPNeONiDKJwTk/Chd9Rs+fhtilzEt0l5H rpucSnI7veMPNA8u7XrM8A== 0000853323-01-500022.txt : 20020410 0000853323-01-500022.hdr.sgml : 20020410 ACCESSION NUMBER: 0000853323-01-500022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAWGIBB GROUP INC CENTRAL INDEX KEY: 0000853323 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 580537111 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16657 FILM NUMBER: 1784145 BUSINESS ADDRESS: STREET 1: 1105 SANCTUARY PARKWAY STREET 2: SUITE 300 CITY: ALPHARETTA STATE: GA ZIP: 30004 BUSINESS PHONE: 7703600765 MAIL ADDRESS: STREET 1: 1105 SANCTUARY PARKWAY STREET 2: SUITE 300 CITY: ALPHARETTA STATE: GA ZIP: 30004 FORMER COMPANY: FORMER CONFORMED NAME: LAW COMPANIES GROUP INC DATE OF NAME CHANGE: 19951130 10-Q 1 c10q.txt 3RD QTR 2001 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 0-19239 Law Companies Group, Inc. ------------------------------------------------- (Exact name of Registrant as specified in its charter) Georgia 58-0537111 - ------------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1105 Sanctuary Parkway, Suite 300, Alpharetta, GA 30004 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (770) 360-0600 --------------------------------------------------- (Registrant's telephone number including area code) LawGibb Group, Inc. - -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| NO |_| The number of shares of Common Stock of the Company, par value $1.00 per share, outstanding at November 13, 2001 was 2,614,546. TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000.......................1 Condensed Consolidated Statements of Operations and Comprehensive Income for the Quarters and Nine-Month Periods Ended September 30, 2001 and 2000........................................................2 Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2001 and 2000.........4 . Notes to Condensed Consolidated Financial Statements..................5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.......................................8 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...10 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........10 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............................11 SIGNATURE.....................................................................12 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS LAW COMPANIES GROUP, INC. (unaudited - dollars in thousands, except per share data) Assets September 30, December 31, 2001 2000 ------------------ ------------------ Current assets: Cash and cash equivalents $ 13,317 $ 2,319 Billed fees receivable, net of allowance 40,372 41,571 Unbilled work in progress 18,934 15,279 Other current assets 5,256 5,079 Current assets of discontinued operations -- 48,020 ------------------ ------------------ Total current assets 77,879 112,268 Property and equipment, net 10,209 10,978 Equity investments 134 175 Goodwill, net 1,525 942 Other assets, net 11,548 5,558 Noncurrent assets of discontinued operations -- 15,783 ------------------ ------------------ Total Assets $ 101,295 $ 145,704 ================== ================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 11,400 $ 12,193 Billings in excess of costs and fees earned on contracts in progress 2,687 2,256 Current portion of long-term debt -- 3,955 Other accrued expenses 5,659 6,445 Other current liabilities 13,715 10,147 Current liabilities of discontinued operations -- 29,237 ------------------ ------------------- Total current liabilities 33,461 64,233 Long-term debt -- 10,941 Deferred income taxes 898 1,238 Noncurrent liabilities of discontinued operations -- 5,211 Cumulative convertible redeemable preferred stock; 963,398 shares issued and outstanding 9,945 9,929 Shareholders' equity: Common stock--$1 par value; authorized: 10,000,000 shares; issued and outstanding: 2,615,743 shares in 2001 and 2,613,878 shares in 2000 2,616 2,614 Additional paid-in capital 28,874 28,866 Retained earnings 25,519 33,580 Accumulated other comprehensive loss (18) (10,908) ------------------ ------------------- 56,991 54,152 ------------------ ------------------- Total Liabilities and Shareholders' Equity $ 101,295 $ 145,704 ================== =================== See accompanying notes.
1 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME LAW COMPANIES GROUP, INC. (unaudited - in thousands, except per share data)
For the Quarters For the Nine Months Ended September 30 Ended September 30 ---------------------------------- ----------------------------------- 2001 2000 2001 2000 --------------- --------------- --------------- --------------- Gross fees $ 56,713 $ 54,112 $ 165,309 $ 153,378 Less: Cost of outside services 9,575 9,601 27,294 23,812 --------------- --------------- --------------- --------------- Net fees 47,138 44,511 138,015 129,566 Direct costs and expenses: Payroll 14,235 13,200 42,792 38,658 Job related expenses 4,164 3,131 10,982 8,821 --------------- --------------- --------------- --------------- Gross profit 28,739 28,180 84,241 82,087 Indirect costs and expenses: Payroll 10,482 10,504 34,610 31,977 Other expenses 13,561 13,016 41,964 40,646 --------------- --------------- --------------- --------------- Operating income 4,696 4,660 7,667 9,464 Other: Interest income (expense) 495 (371) 125 (716) Deferred financing costs (14) (14) (43) (42) Other income (expense) (1) 19 18 (6) --------------- --------------- --------------- --------------- Income before income taxes and 5,176 4,294 7,767 8,700 equity investments Income tax provision (1,656) (1,343) (2,640) (2,558) Equity investments -- (4) -- 3 --------------- --------------- --------------- --------------- Income from continuing operations 3,520 2,947 5,127 6,145 Income from discontinued operations, net of tax -- 172 403 1,559 Loss from disposal of discontinued operations, net of tax (8) -- (12,689) -- --------------- --------------- --------------- --------------- Income (loss) from discontinued operations (8) 172 (12,286) 1,559 --------------- --------------- --------------- --------------- Net Income (Loss) $ 3,512 $ 3,119 $ (7,159) $ 7,704 =============== =============== =============== ===============
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME LAW COMPANIES GROUP, INC. (unaudited - in thousands, except per share data) For the Quarters For the Nine Months Ended September 30 Ended September 30 ---------------------------------------- ---------------------------------- 2001 2000 2001 2000 ----------------- ---------------- --------------- --------------- Income Available to Common Shareholders Income from continuing operations $ 3,520 $ 2,947 $ 5,127 $ 6,145 Less: Preferred stock dividend and accretion (282) (282) (846) (846) ----------------- ---------------- --------------- --------------- Income from continuing operations available to 3,238 2,665 4,281 5,299 common shareholders Income (loss) from discontinued operations (8) 172 (12,286) 1,559 ----------------- ---------------- --------------- --------------- Net income (loss) available to common shareholders $ 3,230 $ 2,837 $ (8,005) $ 6,858 ================= ================ =============== =============== Earnings per common share - basic: Continuing operations $ 1.24 $ 1.02 $ 1.64 $ 2.03 Discontinued operations (.01) .07 (4.70) .59 Net income (loss) 1.23 1.09 (3.06) 2.62 Earnings per common share - diluted: Continuing operations $ .94 $ .78 $ 1.25 $ 1.62 Discontinued operations (.01) .04 (3.59) .41 Net income (loss) .93 .82 (2.34) 2.03 Comprehensive Income Net income (loss) $ 3,512 $ 3,119 $ (7,159) $ 7,704 Other comprehensive income: Unrealized holding gains (losses) 11 (3) (10) 3 Foreign currency translation adjustment -- (2,322) -- (4,253) Reclassification adjustment due to foreign currency translation adjustment recognized -- -- 10,900 -- ----------------- ---------------- --------------- --------------- Comprehensive income $ 3,523 $ 794 $ 3,731 $ 3,454 ================= ================ =============== =============== See accompanying notes.
3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS LAW COMPANIES GROUP, INC. (unaudited - dollars in thousands) For the Nine Months Ended September 30 ------------------------------------ 2001 2000 ----------------- --------------- Operating activities Income from continuing operations $ 5,127 $ 6,145 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,348 3,401 Provision for losses on receivables 342 484 Deferred income taxes (1,040) (1,455) Undistributed losses from equity investments -- (3) Loss on disposal of property and equipment 14 81 Changes in operating assets and liabilities: Billed fees receivable 857 (8,531) Unbilled work in progress (3,655) (3,504) Other current assets 160 364 Accounts payable and accrued expenses 887 2,495 Billings in excess of costs and fees earned on contracts in progress 431 (30) ----------------- --------------- Net cash provided by (used in) continuing operations 6,471 (553) Net cash provided by (used in) discontinued operations 4,527 (454) ----------------- --------------- Net cash provided by (used in) operating activities 10,998 (1,007) Investing activities Business acquisitions, net of cash acquired (993) (338) Purchases of property and equipment (2,054) (2,954) Proceeds from disposal of property and equipment 32 74 Discontinued operations, net of cash sold 16,362 (580) Other, net (1,258) 71 ----------------- --------------- Net cash provided by (used in) investing activities 12,089 (3,727) Financing activities Net proceeds (payments) on revolving line of credit and long-term borrowings (14,896) 973 Proceeds from exercise of stock options 52 23 Repurchase and retirement of common stock (98) (191) Preferred dividends paid (600) (600) Discontinued operations 3,269 (540) ----------------- --------------- Net cash used in financing activities (12,273) (335) Increase in cash and cash equivalents from discontinued operations 184 1,523 ----------------- --------------- Increase (decrease) in cash and cash equivalents 10,998 (3,546) Cash and cash equivalents at beginning of period 2,319 4,676 ----------------- --------------- Cash and cash equivalents at end of period $ 13,317 $ 1,130 ================= =============== See accompanying notes.
4 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS LAW COMPANIES GROUP, INC. (unaudited - dollars in thousands, except per share data) NOTE 1 - There have been no significant changes in the accounting policies of Law Companies Group, Inc. (the "Company"), formerly LawGibb Group, Inc., during the periods presented. For a description of these policies, see Note 1 of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (the "Form 10-K"). NOTE 2 - The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and note disclosures required by generally accepted accounting principles required for complete financial statements. These statements should be read in conjunction with the Consolidated Financial Statements and Notes for the year ended December 31, 2000 included in the Form 10-K. The accompanying condensed consolidated financial statements for the quarter and nine months ended September 30, 2001 and 2000 have not been audited by independent auditors in accordance with auditing standards generally accepted in the United States, but in the opinion of the Company's management such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to summarize fairly the Company's consolidated financial position and results of operations. The results of operations for the quarter and nine months ended September 30, 2001 may not be indicative of the results that may occur during the year ending December 31, 2001. NOTE 3 - In June 2001, the Financial Accounting Standards Board issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also specifies the criteria applicable to intangible assets acquired in a purchase method business combination to be recognized and reported apart from goodwill. SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment, at least annually. SFAS 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and be reviewed for impairment. The Company does not expect the adoption of SFAS 141 and 142 to have a material impact on its results of operations or financial position. NOTE 4 - In January 2001, the Company acquired the Fort Worth, Texas operation of Maxim Technologies, Inc. ("Maxim") for a purchase price of approximately $1.0 million in cash. The Company received $0.4 million in property and equipment and recorded $0.6 million in goodwill which is being amortized over a period of 15 years. The results of operations of Maxim have been included in the accompanying condensed consolidated statements of operations and comprehensive income since the acquisition date. NOTE 5 - On May 3, 2001, the Company completed the sale of its turnkey engineering services segment for $26.8 million in cash plus an assumption of debt by the purchaser of approximately $7.7 million. The cash proceeds include a $5.0 million escrow for certain defined possible liabilities. These services were provided in the United Kingdom, Europe, Africa and in certain other international locations. This business was a provider of multidisciplinary design, consulting and management services for infrastructure, industrial, and building projects at each stage from project conception to completion, with on going follow-up in the operation and maintenance phases. These services were provided to the owner or general contractors associated with large construction projects. This segment of the business has been accounted for as a discontinued operation and accordingly the accompanying consolidated financial statements reflect the operating results, balance sheet and cash flows of the discontinued operations separately from continuing operations for all periods presented. The continuing operations are composed of engineering support services, which are located in the United States. This business is a provider of geotechnical and materials analysis and testing and environmental services such as regulatory compliance planning, field data collection, laboratory analysis, data evaluation and interpretation, and waste site cleanup planning. Engineering support services are generally provided as a specific service to owners, sub-contractors of a general contractor or a sub-contractor of a sub-contractor of construction and construction related projects. 5 The operating results of the discontinued operations were as follows with the 2001 results including operations through the date of sale:
As of and For the Quarters As of and For the Nine Months Ended September 30 Ended September 30 2001 2000 2001 2000 ------------------- -------------------- -------------------- ------------------- Net fees $ -- $ 21,770 $ 33,313 $ 67,319 Gross profit -- 10,178 15,079 31,864 Operating income -- 337 496 2,895 Net income -- 172 403 1,559
Net assets of the discontinued operations at December 31, 2000 were as follows: Cash $ 4,647 Billed fees receivable, net 25,062 Unbilled work in progress 15,103 Other current assets 3,208 Property, plant & equipment, net 3,553 Intangible assets, net 10,751 Other assets 1,479 Short term borrowings (2,051) Accounts payable and accrued expenses (11,967) Billings in excess of costs (15,219) Long term debt (4,400) Deferred income taxes (679) Minority interest in equity (132) --------------- $ 29,355 =============== 6
NOTE 6 - Computation of Earnings Per Common Share The following table sets forth the computation of basic and diluted earnings per common share: For the Quarters Ended For the Nine Months Ended September 30 September 30 --------------------------------------------------------------------- 2001 2000 2001 2000 ----------------------------------- --------------------------------- Numerator: Income from continuing operations $ 3,520 $ 2,947 $ 5,127 $ 6,145 Preferred stock dividends and accretion (282) (282) (846) (846) ----------------------------------- --------------------------------- Numerator for basic earnings per common share - Income from continuing operations available to common shareholders 3,238 2,665 4,281 5,299 Numerator for basic earnings per common share - Income (loss) from discontinued operations available to common shareholders (8) 172 (12,286) 1,559 ----------------------------------- --------------------------------- Numerator for basic earnings per common share - Net income (loss) available to common shareholders $ 3,230 $ 2,837 $ (8,005) $ 6,858 =================================== ================================= Effect of dilutive securities: Income from continuing operations $ 3,238 $ 2,665 $ 4,281 $ 5,299 Preferred stock dividends and accretion 282 282 -- 846 ----------------------------------- --------------------------------- Numerator for diluted earnings per common share - Income from continuing operations available to common shareholders 3,520 2,947 4,281 6,145 Numerator for diluted earnings per common share - Income (loss) from discontinued operations available to common shareholders (8) 172 (12,286) 1,559 ----------------------------------- --------------------------------- Numerator for diluted earnings per common share - Net income (loss) available to common shareholders $ 3,512 $ 3,119 $ (8,005) $ 7,704 =================================== ================================= Denominator: Denominator for basic earnings per common share - Weighted-average shares 2,616 2,611 2,616 2,614 Effect of dilutive securities: Employee Stock Options 131 147 148 154 Other Stock Options 51 66 57 68 Cumulative Convertible Redeemable Preferred Stock and associated Common Stock Warrants 963 963 594 963 ----------------------------------- --------------------------------- Dilutive potential common shares 1,145 1,176 799 1,185 ----------------------------------- --------------------------------- Denominator for diluted earnings per common share - Adjusted weighted-average shares 3,761 3,787 3,415 3,799 =================================== ================================= Earnings per common share - basic: Continuing operations $ 1.24 $ 1.02 $ 1.64 $ 2.03 Discontinued operations (.01) .07 (4.70) .59 Net income (loss) 1.23 1.09 (3.06) 2.62 Earnings per common share - diluted: Continuing operations $ .94 $ .78 $ 1.25 $ 1.62 Discontinued operations (.01) .04 (3.59) .41 Net income (loss) .93 .82 (2.34) 2.03
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following table sets forth, for the quarters and nine months indicated, (i) the percentage of net fees represented by certain items reflected in the Company's condensed consolidated statements of operations and (ii) the percentage increase or decrease in each of these items in the 2001 periods from the comparable periods in the prior year. The Company measures its operating performance on the basis of net fees since a substantial portion of gross fees flow through to clients as costs of subcontractors and other project-specific outside services. Net fees are determined by deducting the cost of these outside services from gross fees. The following table and the subsequent discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements contained elsewhere in this Form 10-Q. On May 3, 2001, the Company completed the sale of its turnkey engineering services segment provided by its International business to Jacobs Engineering Group, Inc. The transaction was consummated pursuant to a Stock Purchase Agreement dated April 28, 2001. These operations have been classified as discontinued operations in the condensed consolidated financial statements and in the following discussion.
Qtr to Qtr YTD Dollar Dollar Quarters Ended Increase Nine Month Periods Ended Increase September 30 (Decrease) September 30 (Decrease) ------------------------- ---------------- --------------------------- ---------------- 2001 2000 2001 vs. 2000 2001 2000 2001 vs. 2000 ----------- ----------- ---------------- ------------ ------------ ---------------- Net fees 100.0% 100.0% 5.9% 100.0% 100.0% 6.5% Gross profit 61.0% 63.3% 2.0% 61.0% 63.4% 2.6% Indirect costs and expenses 51.0% 52.8% 2.2% 55.5% 56.1% 5.4% Operating income from continuing operations 10.0% 10.5% 0.1% 5.6% 7.3% (19.0%) Income after tax from continuing operations 7.5% 6.6% 19.4% 3.7% 4.7% (16.6%) Income (loss) from discontinued operations -- 0.4% (104.7%) (8.9%) 1.2% (888.1%) Net income (loss) 7.5% 7.0% 12.6% (5.2%) 5.9% (192.9%)
RESULTS OF OPERATIONS For the first nine months of 2001, a $12.7 million loss on the disposal of discontinued operations (discussed below) lead to a net loss of $7.2 million. For the third quarter of 2001, the Company recorded net income of $3.5 million ($1.23 per common share - basic and $0.93 per common share - diluted) which is an increase from net income of $3.1 million in 2000 ($1.09 per common share - basic and $0.82 per common share- diluted). For the first nine months of 2001, the Company recorded a net loss of $7.2 million ($3.06 loss per common share - basic and $2.34 loss per common share - diluted) which is a decrease from net income of $7.7 million in 2000 ($2.62 per common share - basic and $2.03 per common share - diluted). Continuing Operations The Company continues to concentrate on growing its net fees and increasing project wins. Net fees increased 5.9% from $44.5 million for the third quarter of 2000 to $47.1 million for the same period in 2001. For the first nine months of 2001, net fees increased 6.5% from $129.6 million for the first nine months of 2000 to $138.0 million. 8 The gross profit margin of 61.0% for the third quarter of 2001 reflected a decrease compared to 63.3% for the same period of 2000. For the nine months ended September 30, 2001, the gross profit margin of 61.0% also reflected a decrease compared to 63.4% for the same period of 2000. Gross profit was adversely affected by project labor inefficiencies experienced on specific projects and in certain regions of the United States during the first nine months of 2001. Indirect costs and expenses, which includes the non-billable labor of professional staff, operations support personnel as well as administrative support functions, were $76.6 million, or 55.5% of net fees, for the first nine months of 2001, compared with $72.6 million, or 56.1% of net fees, for the same period in 2000. Indirect expenses for the first nine months of 2001 include $1.0 million of severance recorded to bring labor costs back into balance with current needs. Indirect costs and expenses were $24.0 million, or 51.0% of net fees, for the third quarter of 2001, compared with $23.5 million, or 52.8% of net fees, for the third quarter of 2000. The improvement in third quarter's indirect costs and expenses reflect management's efforts to maintain appropriate levels of labor and support expenses. Interest income was $0.5 million and $0.1 million for the third quarter and first nine months of 2001, respectively. This compares to interest expense of $0.4 million for the third quarter and $0.7 million for the first nine months of 2000. In the third quarter, the Company recorded interest income of $0.3 million from prior years' tax refunds generated from research and development tax credits and $0.1 million from the interest earned on cash maintained from the sale of the International business in the second quarter. Additionally, $0.1 million of deferred gain from the termination of an interest rate swap was recognized coincident with debt extinguishment at the beginning of the quarter. The company has had no debt, short term or long term, since the beginning of July, 2001. The average debt balance for the first nine months of 2001 decreased to $10.4 million compared to $22.7 million for the first nine months of 2000. The effective income tax rate was 32.0% and 34.0% for the third quarter and the first nine months of 2001, respectively. This compares to 31.3% and 29.4% for the third quarter and the first nine months of 2000, respectively. The annual effective income tax rates benefited from anticipated research and development credits and, in 2000, adjustments for balance sheet tax accruals that were deemed to be no longer necessary. For the third quarter of 2001, the Company recorded income from continuing operations of $3.5 million ($1.24 per common share - basic and $0.94 per common share - diluted) which is an increase from $2.9 million in 2000 ($1.02 per common share - basic and $0.78 per common share- diluted). For the first nine months of 2001, the Company recorded income from continuing operations of $5.1 million ($1.64 per common share - basic and $1.25 per common share - diluted) which is a decrease from $6.1 million in 2000 ($2.03 per common share - basic and $1.62 per common share - diluted). Discontinued Operations In the second quarter of 2001, the Company recognized a loss of $12.7 million on the sale of its International operations. The loss consisted of $12.5 million from the reclassification of the accumulated foreign currency translation losses previously included as a separate component of shareholders' equity and $0.2 million loss on the sale. The proceeds from the sale of $26.8 million, less $5.0 million held in escrow, were used to liquidate all outstanding debt obligations. Discontinued operations net fees in 2001 were $33.3 million with net income of $0.4 million. For the third quarter of 2001, the Company recorded an additional $8 thousand of expense due to the transaction ($0.01 loss per common share - basic and $0.01 loss per common share - diluted) which is a decrease from income of $0.2 million in 2000 ($0.07 per common share - basic and $0.04 per common share- diluted). For the first nine months of 2001, the Company recorded a loss from discontinued operations of $12.3 million ($4.70 loss per common share - basic and $3.59 loss per common share - diluted) which is a decrease from income of $1.6 million in 2000 ($0.59 per common share - basic and $0.41 per common share - diluted). FINANCIAL CONDITION Cash provided by continuing operations over the first nine months of 2001 was $6.5 million as compared to cash used by operations of $0.6 million during the first nine months of 2000. This increase was primarily due to improved working capital management. Capital expenditures during the first nine months of 2001 and the first nine months of 2000 were $2.1 million and $3.0 million, respectively. In order to continue to enhance productivity the Company has continued, and will continue, its capital spending programs, particularly for computers and other technology-related equipment. The Company believes that the capital spending amount allowed by its credit facility ($7.0 million per year) is sufficient to meet foreseeable requirements. 9 Cash balances increased significantly to $13.3 million at September 30, 2001 from $2.3 million at December 31, 2000 as a result of the net proceeds from the sale of the International business. A portion of the proceeds from the sale of discontinued operations was used to repay outstanding debt. As a result, the Company reported no short-term borrowings or debt at September 30, 2001, compared to $14.9 million at December 31, 2000. The Company believes that, in addition to strengthening its balance sheet, the sale and resulting cash balances position the Company to invest in higher return opportunities. While the Company anticipates continuing capital requirements to support growth, expansion of services, and capital expenditures, the Company believes that its cash balances, cash provided by operations and borrowings available under its credit facility will be sufficient to meet its requirements for the foreseeable future. The Company's 401(k) Savings Plan (the "Plan") permitted employees to elect to invest their Plan contributions in Company Common Stock, and provided that the Company's matching contributions, if any, under the Plan be made in the form of Company Common Stock. As of May 10, 1996, the Board of Directors of the Company decided to terminate the use of Company Common Stock under the Plan, whether as employee contributions or as Company matching contributions. Consistent with that decision, employees are allowed to trade out of (but not into) shares of the Company's Common Stock held in their individual 401(k) accounts, in accordance with Plan provisions. Over the first nine months of 2001, 3,504 shares were traded out of the Plan totaling approximately $98,500. Cash dividends on Common Stock have been and continue to be prohibited under the current and previous bank credit facilities. As required by the terms of the Company's outstanding Cumulative Convertible Redeemable Preferred Stock and permitted by the credit facility, the Company paid dividends to the holders of the Preferred Stock. For the third quarter, dividends totaled $0.2 million, or $0.21 per preferred share. For the nine months ended September 30, 2001, dividends totaled $0.6 million, or $0.62 per preferred share. General economic inflation had the effect of increasing the Company's basic costs of operations. These increased costs were generally recovered through increases in contract prices. Forward Looking Statements - This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 which represent the Company's expectations or beliefs. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company's control. The Company cautions that various factors, including, but not limited to, the factors described in the Company's filings with the Securities and Exchange Commission, the uncertain timing of awards and contracts, increasing competition by foreign and domestic competitors, general economic and regulatory conditions in each of the geographic regions served by the Company, industry trends, and other risks could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to various types of market risks in the normal course of business, including the impact of interest rate changes. For a description of these market risks, see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Form 10-K. At the end of the third quarter 2001, however, the Company has no debt recorded on its balance sheet. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Shareholders was held July 30, 2001 in Atlanta, Georgia for the purpose of considering and voting on a proposal (the "Proposal") to elect six (6) directors to serve on the Board of Directors of the Company until the 2002 Annual Meeting and until their successors are duly elected and qualified. The votes for the Proposal are detailed below: Directors For Withheld - --------- --- -------- Bruce C. Coles 1,579,732 140,485 Robert B. Fooshee 1,582,210 138,007 Walter T. Kiser 1,652,295 67,922 Steven Muller 1,641,643 78,574 Clay E. Sams 1,658,014 62,203 John Y. Williams 1,647,437 72,780 10 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.28 Second Amendment to Credit Agreement dated March 10, 2000 by and among the Company, Bank of America National Trust and Savings Association, and Bank of America, FSB. 10.29 Third Amendment to Credit Agreement dated May 3, 2001 by and among the Company, Bank of America National Trust and Savings Association, and Bank of America, FSB. (b) Reports on Form 8-K Current Report on Form 8-K, filed September 7, 2001, reporting under Item 5 the announcement of the change of the name of the Company from LawGibb Group, Inc. to Law Companies Group, Inc. 11 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Law Companies Group, Inc., has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LAW COMPANIES GROUP, INC. /s/ Robert B. Fooshee - ------------------------------------------------------------ Robert B. Fooshee Executive Vice President, Chief Financial Officer and Treasurer Dated: November 13, 2001 12 EX-10 3 exh1028.txt SECOND AMENDMENT TO CREDIT AGREEMENT AMENDMENT NO. 2 TO CREDIT AGREEMENT PREAMBLE: THIS AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of March 10, 2000 ("the Amendment"), is made by and among LAWGIBB GROUP, INC., formerly known as Law Companies Group, Inc., a corporation organized under the laws of the State of Georgia, United States ("LCGI"), as Borrowers' Representative and as a Guarantor; LAW ENGINEERING AND ENVIRONMENTAL SERVICES, INC., a corporation organized under the laws of the State of Georgia, United States ("U.S. Borrower"), and GIBB LTD, a company organized under the laws of the United Kingdom ("International Borrower"; the International Borrower and the U.S. Borrower sometimes hereinafter called, collectively, herein the "Borrowers" or, individually, a "Borrower"), as Borrowers; LAW ENVIRONMENTAL CONSULTANTS, INC., a corporation organized under the laws of the State of Georgia, United States ("LECI"), LAW INTERNATIONAL, INC., a corporation organized under the laws of the State of Georgia, United States ("LII"), GIBB INTERNATIONAL HOLDINGS, INC., a corporation organized under the laws of the State of Delaware ("GIH"), and GIBB HOLDINGS LTD., a corporation organized under the laws of the United Kingdom ("GHL"; GHL, GIH, LII and LECI, together with other Subsidiaries becoming Guarantors hereafter pursuant to the operation and effect of Section 7.15, are sometimes hereinafter called, collectively, the "Subsidiary Guarantors" and, individually, a "Subsidiary Guarantor"), as additional Guarantors; BANK OF AMERICA, N.A., a national banking association organized under the laws of the United States ("BOA") (the successor to Bank of America National Trust and Savings Association), acting individually and through its London Branch (in such latter capacity, BOA is sometimes called herein, "BOAL"), as Issuing Bank, Overdraft Bank, International Agent and a Lender; BOA (the successor to Bank of America, FSB), as U.S. Agent and a Lender; and any other financial institutions party hereto from time to time (herein sometimes called, collectively, together with BOA and BOAL, the "Lenders" or, individually, a "Lender"), as Lenders; for the purpose of setting forth certain modifications and amendments to that certain Credit Agreement, dated as January 15, 1998, among the above-named parties (as amended pursuant to an Amendment No. 1 to Credit Agreement dated as of October 16, 1998 ("First Amendment"), hereinafter referred to herein as the "Credit Agreement"), to which said parties have agreed. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Definitions. Capitalized terms used herein, but not otherwise expressly defined herein, shall have the meanings given to such terms in the Credit Agreement. 2. Amendments. (a) Maturity Date. Responsive to the request of Borrowers' Representative, made in writing to the U.S. Agent on a timely basis in accordance with the procedures set forth in the definition of "Maturity Date" in Section 1.1 of the Credit Agreement, the Lenders hereby extend the Maturity Date by one (1) year, that is, to January 15, 2003. (b) Revolving Loan Amount. The "Revolving Loan Amount" definition, set forth in Section 1.1 of the Credit Agreement, is hereby deleted, and the following revised definition of "Revolving Loan Amount" is set forth in lieu thereof: "Revolving Loan Amount" means the sum of Fifty-Eight Million Dollars ($58,000,000), reducing to Forty-Eight Million Dollars ($48,000,000), effective on January 1, 2001; and reducing further to Forty-Three Million Dollars ($43,000,000), effective on January 1, 2002. (c) Mandatory Reduction of Commitments. The dates "January 1, 2000" and "January 1, 2001," set forth in Section 2.7 of the Credit Agreement (as amended pursuant to the First Amendment), at clauses (i) and (ii), respectively, thereof, in the first sentence thereof, shall be amended to read, instead, "January 1, 2001" and "January 1, 2002," respectively. (d) Acquisitions. The words and figures "Two Million Dollars ($2,000,000)" and "Seven Million Five Hundred Thousand Dollars ($7,500,000)" set forth in Section 8.5 of the Credit Agreement, at subclauses (iv)(A) and (B), respectively, thereof, shall be amended to read, instead, "Ten Million Dollars ($10,000,000)" and "Twenty Million Dollars ($20,000,000)". (e) Indebtedness. (i) The words and figure "Five Hundred Thousand Dollars ($500,000)" set forth in Section 8.6 of the Credit Agreement, at clause (h) thereof, shall be amended to read, instead, "Three Million Dollars ($3,000,000)". (ii) The word "and" is hereby deleted at the end of subsection (h) of Section 8.6, subsection (i) of Section 8.6 is hereby re-lettered to become subsection (j), the reference to subsection (h) in re-lettered subsection (j) is hereby changed to a reference to subsection (i) and the following subsection (i) is inserted therein: (i) Indebtedness evidenced by the "Dividend Note", as defined in the Amendment No.2 to Credit Agreement, dated as of March 10, 2000, among the parties to the Credit Agreement; and (f) Contingent Obligations. The words and figure "Five Hundred Thousand Dollars ($500,000)" set forth in Section 8.9 of the Credit Agreement, at subsection (c) thereof, shall be amended to read instead "Five Million Dollars ($5,000,000)". (g) Restricted Payments. Section 8.11 of the Credit Agreement is hereby amended by adding the following new clauses (d) and (e) at the end of such Section: (d) LCGI may purchase or redeem shares of its Capital Stock as required to maintain compliance with ERISA and pursuant to provisions of the Law Companies Group, Inc. 401k Savings Plan. (e) Provided no Event of Default exists or would result therefrom, LCGI may make payment for the vested portion of terminated employees' "in-the-money" options to acquire Capital Stock of LCGI pursuant to provisions of options granted under the Law Companies Group, Inc. Stock Option Plan. 3. Cancellation of CAPEX Dollar Loan Commitments. Effective as of the date hereof, the CAPEX Dollar Loan Commitments are hereby cancelled such that the U.S. Borrower shall have no further right to obtain CapEx Dollar Loans under the Credit Agreement. On the date hereof the outstanding principal balance of the CAPEX Dollar Loans is zero. 4. Finance Company Transaction. Borrowers' Representative has notified the U.S. Agent that Borrowers intend to consummate the following transaction: (a) LCGI will form LawGibb Capital, Inc., a Delaware corporation ("Finance Company"), (b) LCGI will contribute all of the capital stock of the U.S. Borrower to Finance Company, such that the U.S. Borrower will be the wholly-owned Subsidiary of Finance Company and (c) the U.S. Borrower will declare a dividend payable to Finance Company as its sole shareholder in the amount of eighty percent (80%) of the U.S. Borrower's net equity (expected to be approximately $34,000,000) and will evidence its obligations in respect of such dividend by issuing to Finance Company its unsecured promissory note in the amount of such dividend (the "Dividend Note"), bearing interest at a rate of eight and one-half percent (8.5%) per annum, and with principal thereunder payable quarterly in installments followed by a balloon payment due at maturity. Pursuant to Borrowers' Representative's request, Lenders hereby consent to such transactions, notwithstanding the restrictions and prohibitions contained in the Credit Agreement, including, without limitation, in Section 8.2 of the Credit Agreement (restricting transfers of assets), Section 8.4 of the Credit Agreement (restricting Investments), Section 8.6 of the Credit Agreement (restricting Indebtedness), Section 8.7 of the Credit Agreement (restricting transactions with Affiliates) and Section 8.11 of the Credit Agreement (restricting dividends), subject, however, to satisfaction of the following conditions precedent: (a) In accordance with the requirements of Sections 7.15 and 8.2 of the Credit Agreement, (i) Finance Company shall execute and deliver to the U.S. Agent a Joinder Agreement in substantially the form of Exhibit O to the Credit Agreement, (ii) LCGI shall cause all of the capital stock of Finance Company to be delivered to the Collateral Agent (together with undated stock powers in blank) and pledged to the Collateral Agent pursuant to a pledge agreement in substantially the form of the Pledge Agreement and otherwise in form reasonably acceptable to the Collateral Agent, (iii) Finance Company shall grant to the Collateral Agent a security interest in all of its assets pursuant to a security agreement in substantially the form of the Security Agreement and otherwise in form reasonably acceptable to the Collateral Agent, and (iv) LCGI and Finance Company shall deliver to the Collateral Agent such other documentation as the Collateral Agent may reasonably request in connection with the foregoing, including, without limitation, UCC-1 financing statements, certified resolutions and legal opinions, all in form, content and scope reasonably satisfactory to the Collateral Agent. (b) The stock of the U.S. Borrower shall be transferred by LCGI to Finance Company subject to the Lien of the Collateral Agent therein arising pursuant to the applicable Pledge Agreement, and, further, Finance Company shall pledge such stock to the Collateral Agent pursuant to a pledge agreement in substantially the form of the Pledge Agreement and otherwise in form and substance reasonably satisfactory to the Collateral Agent. (c) The Dividend Note and any other documentation pertaining to the transactions described in this Section 4 shall be in form and substance satisfactory to the Agent. (d) The Dividend Note shall have been assigned to the Collateral Agent pursuant to an assignment agreement in form and substance satisfactory to the Collateral Agent. (e) Finance Company and each other Obligor shall have executed and delivered to the Agent such other documents, instruments and agreements as the Agent may request in connection with the transactions contemplated hereby. The consent set forth in this Section 4 is limited to the matters set forth expressly herein and shall not be, or be deemed to be, a waiver of any Default or Event of Default or a consent to any matter not expressly set forth in this Section 4. 5. Intellectual Property. Borrowers' Representative has further notified the U.S. Agent that Borrowers intend to consummate the following transaction: (a) the U.S. Borrower will form Law Asset Management, Inc., a Delaware corporation ("Royalty Company No.2"), and GIH will form LawGibb Management, Inc., a Delaware corporation ("Royalty Company No.1; Royalty Company No. 1 and Royalty Company No. 2, collectively, the "Royalty Companies"), (b) in exchange for the stock of Royalty Company No. 2, the U.S. Borrower will transfer to Royalty Company No. 2 all of its trademarks and other intellectual property, (c) in exchange for the stock of Royalty Company No. 1, GIH will transfer to Royalty Company No. 1 all of its trademarks and other intellectual property, (d) LCGI will form LawGibb Licensing, Inc., a Delaware corporation ("Licensing Company"), (e) Licensing Company and each of the Royalty Companies will enter into license agreements pursuant to which the Royalty Companies will license the trademarks and other intellectual property owned by them to Licensing Company in exchange for a fixed royalty fee and (f) Licensing Company will enter into sublicense agreements with those Obligors which use such intellectual property in their businesses pursuant to which it will license such intellectual property to such Obligors in exchange for an arms-length royalty fee (all of the licenses described in clauses (e) and (f), collectively, the "License Agreements"). Pursuant to Borrowers' Representative's request, Lenders hereby consent to such transactions, notwithstanding the restrictions and prohibitions contained in the Credit Agreement, including, without limitation, in Sections 8.2, 8.6 and 8.7 of the Credit Agreement, subject, however, to the satisfaction of the following conditions precedent: (a) In accordance with the requirements of Sections 7.15 and 8.2 of the Credit Agreement, (i) each of the Royalty Companies and the Licensing Company shall execute and deliver to the U.S. Agent a Joinder Agreement in substantially the form of Exhibit O to the Credit Agreement, (ii) each Obligor owning stock of a Royalty Company or the Licensing Company shall cause all of such capital stock to be delivered to the Collateral Agent (together with undated stock powers in blank) pursuant to a pledge agreement in substantially the form of the Pledge Agreement and otherwise in form reasonably acceptable to the Collateral Agent, (iii) each Royalty Company and the Licensing Company shall grant to the Collateral Agent a security interest in all of its assets pursuant to a security agreement in substantially the form of the Security Agreement and otherwise in form reasonably acceptable to the Collateral Agent and (iv) each Royalty Company and the Licensing Company shall deliver to the Collateral Agent such other documentation as the Collateral Agent may reasonably request in connection with the foregoing, including, without limitation, UCC-1 financing statements, certified resolutions and legal opinions, all in form, content and scope reasonably satisfactory to the Collateral Agent. (b) All of the intellectual property shall be transferred to the Royalty Companies subject to the Lien of the Collateral Agent therein, and each Royalty Company shall execute and deliver to the Collateral Agent such intellectual property security agreements and collateral assignments as the Collateral Agent shall request in form and substance satisfactory to the Collateral Agent, in form for recording in the United States Patent and Trademark Office. (c) The License Agreements (including, without limitation, the royalties payable thereunder) and all other documents pertaining to the transactions contemplated hereby shall be in form and substance satisfactory to the Agent. The rights of the Obligors under the License Agreements shall have been assigned to the Collateral Agent as additional Collateral. (d) The Royalty Companies, the Licensing Company and each other Obligor shall have executed and delivered to the Agent such other documents, instruments and agreements as the Agent may request in connection with the transactions contemplated hereby. The consent set forth in this Section 5 is limited to the matters set forth expressly herein and shall not be, or be deemed to be, a waiver of any Default or Event of Default or a consent to any matter not expressly set forth in this Section 5. 6. MISCELLANEOUS (a) Effect of Amendment. Except as set forth expressly herein, all terms of the Credit Agreement and the other Loan Documents, as amended hereby, shall be and remain in full force and effect and shall constitute the legal, valid, binding and enforceable obligations of Obligors. To the extent any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified and amended accordingly to reflect the terms and conditions of the Credit Agreement as modified and amended hereby. (b) Reaffirmation of Representatives and Warranties. Obligors hereby ratify and reaffirm all of the representations and warranties set forth in the Credit Agreement and the other Loan Documents, except to the extent that such representations and warranties relate to an earlier date or may be untrue or incorrect solely as a result of occurrences permitted under the Credit Agreement, and subject to the updates thereto set forth on Annex I hereto. (c) Ratification. Obligors hereby restate, ratify and reaffirm each and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents effective as of the date hereof. (d) Estoppel. Obligors hereby acknowledge and agree that, as of the date hereof, and after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing. (e) Governing Law. This Amendment shall be governed by Georgia law, and shall constitute a Loan Document. (f) Costs and Expense. Obligors agree to pay all reasonable costs and expenses of Lenders, Issuers and Agents incurred in connection with the preparation, execution, delivery and enforcement of this Amendment and all other Loan Documents executed in connection herewith, the closing hereof, and any other transactions contemplated hereby, including the reasonable fees and out-of-pocket expenses of counsel. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered and have hereunto affixed their respective seals by, through and in the presence of their respective proper and duly authorized officers as of the day and year first above written. U.S. Agent: BANK OF AMERICA, N.A., (SEAL) as successor to Bank of America, FSB By: ---------------------------------------------- Title: ---------------------------------------------- U.S. Lender: BANK OF AMERICA, N.A. (SEAL) as successor to Bank of America, FSB By: ---------------------------------------------- Title: ---------------------------------------------- International Lender: BANK OF AMERICA, N.A., (SEAL) successor to Bank of America National Trust and Savings Association By: ---------------------------------------------- Title: ---------------------------------------------- International Agent: BANK OF AMERICA, N.A., (SEAL) successor to Bank of America National Trust and Savings Association By: ---------------------------------------------- Title: ---------------------------------------------- Issuing Bank (International): BANK OF AMERICA, N.A., (SEAL) successor to Bank of America National Trust and Savings Association By: ---------------------------------------------- Title: ---------------------------------------------- Overdraft Bank: BANK OF AMERICA, N.A., (SEAL) successor to Bank of America National Trust and Savings Association By: ---------------------------------------------- Title: ---------------------------------------------- Issuing Bank (U.S.): BANK OF AMERICA, N.A., (SEAL) as successor to Bank of America National Trust and Savings Association By: ---------------------------------------------- Title: ---------------------------------------------- Borrowers' Representative and LAWGIBB GROUP, INC., (SEAL) Guarantor: f/k/a Law Companies Group, Inc. By: ---------------------------------------------- Title: ---------------------------------------------- Borrowers: LAW ENGINEERING AND ENVIRONMENTAL SERVICES, INC. (SEAL) By: ---------------------------------------------- Title: ---------------------------------------------- Attest: ---------------------------------------------- Title: ---------------------------------------------- GIBB LTD. (SEAL) By: ---------------------------------------------- Title: ---------------------------------------------- Attest: ---------------------------------------------- Title: ---------------------------------------------- Guarantors: LAW ENVIRONMENTAL CONSULTANTS, INC. (SEAL) By: ---------------------------------------------- Title: ---------------------------------------------- LAW INTERNATIONAL, INC. (SEAL) By: ---------------------------------------------- Title: ---------------------------------------------- GIBB INTERNATIONAL HOLDINGS, INC. (SEAL) By: ---------------------------------------------- Title: ---------------------------------------------- GIBB HOLDINGS LTD. (SEAL) By: ---------------------------------------------- Title: ---------------------------------------------- EX-10 4 exh1029.txt THIRD AMENDMENT TO CREDIT AGREEMENT AMENDMENT NO. 3 TO CREDIT AGREEMENT PREAMBLE: THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT, dated as of May 3, 2001 (the "Amendment"), is made by and among LAWGIBB GROUP, INC., formerly known as Law Companies Group, Inc., a corporation organized under the laws of the State of Georgia, United States ("LCGI"), as Borrowers' Representative and as a Guarantor; LAW ENGINEERING AND ENVIRONMENTAL SERVICES, INC., a corporation organized under the laws of the State of Georgia, United States ("U.S. Borrower"), and GIBB LTD, a company organized under the laws of the United Kingdom ("International Borrower"; the International Borrower and the U.S. Borrower sometimes hereinafter called, collectively, herein the "Borrowers" or, individually, a "Borrower"), as Borrowers; LAW ENVIRONMENTAL CONSULTANTS, INC., a corporation organized under the laws of the State of Georgia, United States ("LECI"), LAW INTERNATIONAL, INC., a corporation organized under the laws of the State of Georgia, United States ("LII"), GIBB INTERNATIONAL HOLDINGS, INC., a corporation organized under the laws of the State of Delaware ("GIH"), and GIBB HOLDINGS LTD., a corporation organized under the laws of the United Kingdom ("GHL"; GHL, GIH, LII and LECI, together with other Subsidiaries becoming Guarantors hereafter pursuant to the operation and effect of Section 7.15 of the Credit Agreement (as defined below), are sometimes hereinafter called, collectively, the "Subsidiary Guarantors" and, individually, a "Subsidiary Guarantor"), as additional Guarantors; BANK OF AMERICA, N.A., a national banking association organized under the laws of the United States ("BOA") (the successor to Bank of America National Trust and Savings Association), acting individually and through its London Branch (in such latter capacity, BOA is sometimes called herein, "BOAL"), as Issuing Bank, Overdraft Bank, International Agent and a Lender; BOA (the successor to Bank of America, FSB), as U.S. Agent and a Lender; and any other financial institutions party hereto from time to time (herein sometimes called, collectively, together with BOA and BOAL, the "Lenders" or, individually, a "Lender"), as Lenders; for the purpose of setting forth certain modifications and amendments to that certain Credit Agreement, dated as January 15, 1998, among the above-named parties (as amended pursuant to an Amendment No. 1 to Credit Agreement dated as of October 16, 1998, and as further amended pursuant to an Amendment No. 2 to Credit Agreement dated as of March 10, 2000, hereinafter referred to herein as the "Credit Agreement"), to which said parties have agreed. WHEREAS, LCGI, as Borrowers' Representative, has notified the U.S. Agent that it intends to consummate a transaction in which GIH would sell all of the issued and outstanding capital stock of certain of its subsidiaries and LII would sell all of the issued and outstanding capital stock of GIH (the "Jacobs Transaction"), pursuant to a Stock Purchase Agreement dated as of April 28, 2001, by and among LCGI, LII and GIH, on the one hand, and Jacobs Engineering Group Inc., Jacobs Engineering, Inc., Jacobs Engineering UK Limited and Jacobs Engineering France SAS, on the other hand; and WHEREAS, pursuant to Sections 8.2 and 8.3 of the Credit Agreement, the consummation of the Jacobs Transaction requires the consent of the Lenders, and the Lenders desire to consent thereto and to further amend the Credit Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. DEFINITIONS. Capitalized terms used herein, but not otherwise expressly defined herein, shall have the meanings given to such terms in the Credit Agreement. 2. CONSENT TO JACOBS TRANSACTION. Upon receipt by BOAL of all amounts owed by International Borrower under the Credit Agreement, Lenders hereby consent to the Jacobs Transaction, and hereby waive any defaults under the Credit Agreement that would otherwise result from the consummation of the Jacobs Transaction, including any defaults that would arise under Sections 8.1 and 8.2 thereof. 3. AMENDMENTS TO CREDIT AGREEMENT. (a) Definition of "Borrower". The definition of "Borrower" in Article I of the Credit Agreement is hereby amended to read in its entirety as follows: " 'Borrower' shall mean U.S. Borrower"; and all references to "Borrowers" in the Credit Agreement are hereby deemed to be references to "Borrower." (b) International Facility. Effective immediately upon the consummation of the Jacobs Transaction, Sections 2.1(b), 2.2(b) and 2.18 of the Credit Agreement are hereby deleted from the Credit Agreement in their entirety. 4. RELEASE FROM OBLIGATIONS AND LIENS. Effective immediately upon the consummation of the Jacobs Transaction, the Lenders hereby release the International Borrower, GHL and GIH, and all of their Subsidiaries, from all Obligations under the Credit Agreement and the other Loan Documents, and release all Liens granted by International Borrower, GHL and GIH, and all of their Subsidiaries, under any of the Loan Documents. 5. TERMINATION OF CERTAIN AGREEMENTS. The parties hereby acknowledge and agree that the following documents shall be cancelled and terminated, effective immediately upon the consummation of the Jacobs Transaction: (a) Revolving Pound Loan Note dated January 15, 1998, granted by International Borrower in favor of BOAL in the original principal amount of Eleven Million Pounds Sterling (f11,000,000); (b) Security Agreement dated as of January 15, 1998, made by GIH in favor of BOA (as successor to Bank of America, FSB) and granting to BOA a security interest in GIH's Collateral (as defined therein); (c) Debenture dated January 15, 1998, made by International Borrower in favor of BOAL and granting to BOAL a fixed and floating charge on International Borrower's Assets (as defined therein); (d) Pledge Agreement dated as of January 15, 1998, between GHL and BOAL, pursuant to which GHL pledged 2,217,800 shares of capital stock of International Borrower to BOAL; (e) Pledge Agreement dated as of January 15, 1998, between GIH and BOAL, pursuant to which GIH pledged 2,217,800 shares of capital stock of GHL to BOAL; (f) Pledge Agreement dated as of January 15, 1998, between LII and BOA (as successor to Bank of America, FSB), pursuant to which LII pledged 1,000 shares of capital stock of GIH to BOA; (g) each of the intercompany notes dated February 7, 1997 in the principal amount of $57,700,000 and issued in favor of LCGI by GIH, GHL, International Borrower and Hill-Kaplan-Scott Law Gibb (Pty) Ltd.; (h) each of the intercompany notes dated February 7, 1997 in the principal amount of $57,700,000 and issued in favor of Law Engineering and Environmental Services, Inc., a wholly-owned subsidary of LCGI, by International Borrower and Gibb Anglian Ltd.; (i) each of the intercompany notes dated February 7, 1997 in the principal amount of $57,700,000 and issued in favor of LII by GIH, GHL, International Borrower and Hill-Kaplan-Scott Law Gibb (Pty) Ltd.; (j) Collateral Assignment of Intercompany Notes dated as of January 15, 1998, granted by GIH in favor of BOA (as successor to Bank of America, FSB); (k) Collateral Assignment of Intercompany Notes dated as of January 15, 1998, granted by GHL in favor of BOA (as successor to Bank of America, FSB); and (l) Collateral Assignment of Intercompany Notes dated as of January 15, 1998, granted by International Borrower in favor of BOA (as successor to Bank of America, FSB). In furtherance of the cancellation and termination of the foregoing documents and the release of the Obligations and Liens described in Section 4 above, the Lenders agree to deliver to LCGI executed UCC-3 termination statements prepared by LCGI terminating the UCC-1 financing statements naming GIH as the debtor and BOA (as successor to Bank of America, FSB) as the secured party, together with the original stock certificates, promissory notes and intercompany notes pledged as collateral and security as noted in this Section 5. The Lenders also agree to execute and deliver to LCGI, at LCGI's request and expense, such additional documents, instruments or agreements (all of which shall be prepared by LCGI) as LCGI may reasonably request to further evidence the cancellation and termination of the Obligations and Liens described in Section 4 and the documents described in this Section 5. 6. GENERAL ACKNOWLEDGEMENT. Notwithstanding anything to the contrary in this Amendment, the parties acknowledge and agree that the intent of this Amendment, among other things, is to amend the Credit Agreement such that GIH, GHL and International Borrower are no longer parties thereto and such that International Borrower may no longer borrow funds pursuant thereto. Notwithstanding anything to the contrary in the Credit Agreement, the parties agree to read and interpret the amended Credit Agreement, in all respects, to give effect to the foregoing. 7. MISCELLANEOUS. (a) Effect of Amendment. Except as set forth expressly herein, all terms of the Credit Agreement and the other Loan Documents, as amended hereby, shall be and remain in full force and effect and shall constitute the legal, valid, binding and enforceable obligations of Obligors. To the extent any terms and conditions in any of the Loan Documents shall contradict or be in conflict with any terms or conditions of the Credit Agreement, after giving effect to this Amendment, such terms and conditions are hereby deemed modified and amended accordingly to reflect the terms and conditions of the Credit Agreement as modified and amended hereby. (b) Ratification. Obligors hereby restate, ratify and reaffirm each and every term and condition set forth in the Credit Agreement, as amended hereby, and the Loan Documents, effective as of the date hereof. (c) Estoppel. Obligors hereby acknowledge and agree that, as of the date hereof, and after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing. (d) Governing Law. This Amendment shall be governed by Georgia law, and shall constitute a Loan Document. (e) Costs and Expense. Obligors agree to pay all reasonable costs and expenses of Lenders, Issuers and Agents incurred in connection with the preparation, execution, delivery and enforcement of this Amendment and all other Loan Documents executed in connection herewith, the closing hereof, and any other transactions contemplated hereby, including the reasonable fees and out-of-pocket expenses of counsel. (f) Counterparts. This Amendment may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. (Signatures appear on following pages.) IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered and have hereunto affixed their respective seals by, through and in the presence of their respective proper and duly authorized officers as of the day and year first above written. U.S. Agent: BANK OF AMERICA, N.A., (SEAL) as successor to Bank of America, FSB By:_______________________________________ Title: _____________________________________ U.S. Lender: BANK OF AMERICA, N.A. (SEAL) as successor to Bank of America, FSB By:_______________________________________ Title: _____________________________________ International Lender: BANK OF AMERICA, N.A., (SEAL) successor to Bank of America National Trust and Savings Association By:_______________________________________ Title: _____________________________________ International Agent: BANK OF AMERICA, N.A., (SEAL) successor to Bank of America National Trust and Savings Association By:_______________________________________ Title: _____________________________________ Issuing Bank (International): BANK OF AMERICA, N.A., (SEAL) successor to Bank of America National Trust and Savings Association By:_______________________________________ Title: _____________________________________ Overdraft Bank: BANK OF AMERICA, N.A., (SEAL) successor to Bank of America National Trust and Savings Association By:_______________________________________ Title: _____________________________________ Issuing Bank (U.S.): BANK OF AMERICA, N.A., (SEAL) as successor to Bank of America National Trust and Savings Association By:_______________________________________ Title: _____________________________________ Borrowers' Representative and LAWGIBB GROUP, INC., (SEAL) Guarantor: f/k/a Law Companies Group, Inc. By:_______________________________________ Title: _____________________________________ Borrowers: LAW ENGINEERING AND ENVIRONMENTAL SERVICES, INC. (SEAL) By:_______________________________________ Title: _____________________________________ Attest:____________________________________ Title:_____________________________________ GIBB LTD. (SEAL) By:______________________________________ Title: ____________________________________ Attest: ___________________________________ Title: ____________________________________ Guarantors: LAW ENVIRONMENTAL CONSULTANTS, INC. (SEAL) By:___________________________________________ Title: _______________________________________ LAW INTERNATIONAL, INC. (SEAL) By:___________________________________________ Title: _______________________________________ GIBB INTERNATIONAL HOLDINGS, INC. (SEAL) By:___________________________________________ Title: _______________________________________ GIBB HOLDINGS LTD. (SEAL) By:___________________________________________ Title: _______________________________________ -----END PRIVACY-ENHANCED MESSAGE-----