-----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, L1sVKUV8agvc5xg28UunsnRwtfSMPdocIJ525Vdnyvaus2X4ZAIYy4/GzBOEo6e+ g+H90SvYTWiChI9TWxHhig== 0001021408-97-000055.txt : 19970326 0001021408-97-000055.hdr.sgml : 19970326 ACCESSION NUMBER: 0001021408-97-000055 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 21 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970325 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAW COMPANIES GROUP INC CENTRAL INDEX KEY: 0000853323 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT CONSULTING SERVICES [8742] IRS NUMBER: 580537111 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-19239 FILM NUMBER: 97562812 BUSINESS ADDRESS: STREET 1: 114 TOWNPARK DRIVE STE 500 CITY: KENNESAW STATE: GA ZIP: 30144 BUSINESS PHONE: 7704213400 MAIL ADDRESS: STREET 1: 114 TOWN PARK DRIVE CITY: KENNESAW STATE: GA ZIP: 30144 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange - --- Act of 1934 (Fee required) For the fiscal year ended December 31, 1996. ___ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No fee required) 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 (IRS Employer Identification No.) incorporated or organization 114 Townpark Drive, Kennesaw, GA 30144 - ---------------------------------------- --------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code 770-396-8000 Securities registered pursuant to Section 12(b) of the Act: None Securities pursuant to section 12(g) of the Act: Common Stock, par value $1.00 per share - --------------------------------------- (Title of class) 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 ___ --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Paragraph 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]. The aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 1, 1997. Common Stock, $1 par value - $20,815,806 The number of shares outstanding of the Registrant's class of common stock as of March 1, 1997. Common Stock, $1 par value - 1,894,829 DOCUMENTS INCORPORATED BY REFERENCE Portions of the Company's definite proxy statement for the annual meeting of shareholders are incorporated by reference into Part III. PART I ITEM 1 - BUSINESS OVERVIEW AND HISTORY Law Companies Group, Inc. (the "Company") is a worldwide professional service firm operating mainly in the engineering services industry. The Company provides consulting, design and management services in the water, environmental, transportation, buildings, and government sectors. Services range from feasibility studies, financial and economic appraisals through all stages of planning, design, contract administration, environmental and risk assessment, laboratory analysis, work site clean up, project and construction management to commissioning and hand over. These services are provided through the following market-focused groups of the Company: . United States (U.S.) Group - The services provided by this group include the Company's traditional business of geotechnical engineering, construction services and materials engineering and testing as well as environmental services such as regulatory compliance planning, field data collection, laboratory analysis, data evaluation and interpretation, engineering design, waste site cleanup and consultation services on environmental matters. . International Group - The Company is a major provider of multi- disciplinary consulting, design and management services for substantial infrastructure, engineering, environmental, industrial, and building projects at each stage from project conception to completion, with on- going follow-up in the operations and maintenance phases. These services are provided in Europe, Africa, Asia, the Middle East and Central and South America. The Company's U.S. and international operations are based in Atlanta, Georgia and Reading, Berkshire, UK, respectively, with approximately one hundred offices throughout the United States, and in Europe, Africa, Asia and the Middle East (see Notes to the Consolidated Financial Statements included in Item 8 herein, including Note 10 as to geographical area data). These offices employ approximately 4,000 people and serve in excess of 10,000 clients in a wide range of industries in both the private and public sectors. The Company was founded in 1946 as Law-Barrow-Agee to provide high quality independent testing services. As the Company evolved, the range of geotechnical and engineering consulting services offered expanded considerably, and in 1957 the Company changed its name to Law Engineering Testing Company. In the late 1970's the Company expanded its operations into international markets. To capitalize on the economic development in the Middle East and Europe, the Company established operations in Saudi Arabia, Iran, Spain and the United Kingdom. Each of these operations provided the same basic engineering services traditionally offered by the U.S. offices of the Company as well as more extensive design services. In 1982, the Company expanded its U.S. operations by acquiring LeRoy Crandall & Associates, a California-based company specializing in traditional geotechnical services. The Company's involvement in soil investigation and other environmentally related issues led to the 1987 formation of a new wholly-owned subsidiary, Law Environmental, Inc. The formation of the environmental subsidiary allowed the diversification of the Company's revenue base and expansion of the Company's market presence in a rapidly growing industry. This expansion also included the formation of a wholly-owned subsidiary, Law Associates, Inc., to provide asbestos assessment, remediation and consulting services to various public and private sector entities. In 1995, the Company formed a wholly-owned subsidiary, Law Environmental Consultants, Inc., which operates in support of various Company affiliated partnerships or professional corporations in states where it is required that the Company's engineering services be delivered through a partnership or professional corporation. 2 In 1989, the Company underwent a reorganization into a holding company structure. In addition, the Company acquired the businesses of Sir Alexander Gibb & Partners Ltd., now known as Gibb, Ltd. ("Gibb") in the United Kingdom in August 1989, and Gibb's Africa businesses in January 1990. Gibb's primary business is in the provision of consulting, design and management services for infrastructure, engineering, environmental, industrial, building projects and business initiatives worldwide. The Gibb acquisition significantly expanded both the Company's international and overall operations, and gave the Company new capabilities in general civil engineering planning, design, and project and construction management. In 1994, the Company acquired Hill Kaplan Scott, Inc. ("HKS"), a multidisciplinary South African development consultancy headquartered in Cape Town, South Africa and began to consolidate its operations elsewhere in Africa. HKS has a wholly owned subsidiary, Geoscience Laboratories (Pty) Ltd. which provides a complete site investigation and geotechnical testing service. During 1995, the Company completed the realignment of its U.S. operating units into Law Engineering and Environmental Services, Inc. to streamline the organization. The result of this realignment is that the Company's entire operations are now managed under two units: U.S. and International. The Company has owned approximately eighty percent of a Houston-based abatement/remediation firm known as IAM/Environmental, Inc. (IAM/E). In 1996, Philip Environmental Services Corporation purchased certain assets and assumed certain liabilities of IAM/E. In connection with the transaction, the Company became the owner of one hundred percent of all IAM/E stock. IAM/E is no longer an active subsidiary of the Company. Unless the context otherwise requires, "Law" and the "Company" refer to Law Companies Group, Inc., a Georgia corporation, and its consolidated subsidiaries. The Company's principal executive offices are located at 114 TownPark Drive, Kennesaw, Georgia 30144 and its telephone number is (770) 396-8000. U.S. GROUP SERVICES General The Company's U.S. Group consists of both engineering and environmental services now operating primarily as Law Engineering and Environmental Services, Inc. and a small number of miscellaneous professional corporations and/or partnerships as required under state laws governing the provision of engineering services. The Company's engineering services provide geotechnical engineering, construction services and materials engineering and testing services to public and private sector clients. The range and scope of services provided has expanded significantly since the Company's formation. The Company has maintained Law/Crandall as a unit operating under Law Engineering and Environmental Services, Inc. in order to maintain name recognition in the western United States. The Company's environmental services were established in order to diversify into an area of rapid growth and to better provide full service solutions to clients' environmental problems. The scope of environmental services the Company offers has expanded significantly, and now includes many aspects of engineering and earth science required for effective management and environmental protection of people, water, soil and air. The Company's environmental services provide a wide range of environmental related services, including regulatory compliance planning, field data collection, data evaluation and interpretation, engineering design, environmental impact statements, and a wide range of expert environmental consultation services. The U.S. Group net fees have decreased as a percentage of the Company's total net fees representing approximately 67%, 68%, and 74% in 1996, 1995 and 1994 respectively. The decrease from 68% in 1995 to 67% in 1996 was primarily the result of several weeks of inclement winter weather in the North and East regions of the United States, the effects of the Company's focus on its cost structure and competitiveness as opposed to growth, lack of regulatory pressure to drive environmental 3 markets, and overall competitiveness in the markets for the U.S. Group's services. In addition, the International Group had a decrease in fees due primarily to the runoff of existing projects combined with the delay in startup of other projects. See "International Group Services." The Company's services in the U.S. are divided into four major business segments: engineered construction, facilities, industrial, and environmental services. (a) Engineered Construction - The Company's skilled specialists include engineers, metallurgists, geologists, chemists, architects, and technicians. They are involved with virtually every phase and material that influence construction projects. The Company's experts play an integral part in the planning, designing, and construction of a project. They are on site early, assessing ground conditions so that they can design cost-effective foundation and retaining structures. As a project progresses, the Company's experienced construction specialists are involved with all phases of construction inspection and quality control. On all projects they are supported by laboratories which provide full-service testing capabilities for all types of building materials and products. The combination of professional consulting, contemporary testing techniques, quality control, and project management experience equips the Company to evaluate the capability, compatibility, and performance of virtually every constructed element. The Company's geotechnical engineers and earth scientists include established specialists in soils engineering, hydrology, geology, geophysics, seismology and rock mechanics. Through exploratory and laboratory techniques, the Company endeavors to determine the behavior of soil, rock and water as these media are affected by natural phenomena and construction activities. The Company also provides comprehensive site analysis and expertise in underground design and earthquake engineering. The Company designs building foundations, site improvements, tunnels, dams, impoundments and related structures, and evaluates the safety of existing structures. Geotechnical services commence with project planning and design, extend into construction, and often continue through the in-service life of the structure. The Company's construction services can assist in all types of engineered construction, and include quality assurance and control, construction specification reviews, test evaluation and performance, record keeping and problem solving. Through a construction quality control management program, the Company designs and manages a testing program that addresses the particular needs of a given project. (b) Facilities Engineering Services - The Company's facility experts assess the condition of all types of facility elements including: pavements; structures; asbestos; roofs; curtain walls; glazing; and mechanical, electrical, and plumbing systems. The Company's engineers and technicians use the latest equipment for testing and automated data collection. Advanced computer databases, computed-aided drafting, and geographic information systems are used to store, retrieve, process, and report facility assessment information. The Company's engineers prepare rehabilitation designs and related contract documents, and provide contract administration and quality control functions in accordance with the intent of the project. The Company's ability to model the probable performance and economic service life of facility components provides facility owners and managers the information necessary to plan, schedule, and budget for maintenance of their facilities with minimal disruption to business operations. This also allows prospective buyers or sellers of existing facilities to predict maintenance requirements and associated costs as part of potential transactions. The Company aids clients in the selection and evaluation of materials for new construction, as well as the repair, maintenance, rehabilitation and renovation of existing facilities. The Company provides extensive on-site and laboratory testing and evaluation of products, including construction materials and equipment products. The Company's investigative and problem-solving capabilities cover a wide range of materials including concrete, masonry, asphalt, steel, other metals, plastics, epoxies, sealants and asbestos. The Company's experience and expertise are used to evaluate and provide recommendations for roofing, pavements, curtain walls, asbestos situations, surveys of existing facilities and the analysis of failure of materials, products or facilities. 4 (c) Industrial Services - The Company's industrial manufacturing and process consultants assess the condition of manufacturing process equipment through destructive and non-destructive testing. Elements such as pressure vessels, storage tanks, boilers, control systems, conveyer systems, piping, and valves are evaluated to develop preventive maintenance programs, and to identify and to implement required actions to avoid repairs or minimize disruption to production processes. The Company's engineers and technicians use the latest test equipment and computer programs for automated data collection, modeling, simulation, and information management. The Company's experts assess the integrity of mechanical and electrical systems and recommend remedial solutions. The ability of the Company's personnel to track the condition and performance of equipment and to predict the useful service life of production and utility equipment allows owners and operators to maximize the benefits of properly scheduled maintenance and repair activities. The Company's process design and control systems capabilities combined with its project management services can result in higher productivity and lower overall operating costs with improved safety. (d) Environmental Services - The Company's environmental scientists, engineers, and other skilled specialists serve industrial, commercial ,and governmental clients dealing with all aspects of environmental siting, water and resource development, permitting, regulatory compliance, and remediation. The Company's experienced design engineers provide ready-to-bid design packages and independent cost estimates for facility closures, new construction, and all manner of remedial designs. The Company assists clients through its contractor procurement and provides continual consultation, field and laboratory testing, quality control, and project management support. Through application of its considerable resources, the Company creates cost effective solutions from inception through completion that better enable its clients to conduct their business while still protecting the environment in which everyone lives. The Company's environmental services encompass practice areas which include: remediation management and site cleanup, evaluations in connection with acquisitions and divestitures of industrial or commercial property, environmental siting and permitting, water resources and water quality management, occupational health and safety, tank management, and hazardous and solid waste management. The Company provides remediation management and site cleanup, offering varying levels of service that complement the client's desired degree of involvement in the remedial work. The Company's remediation management personnel are experienced professionals who make on-site decisions to control schedules and costs, maintain compliance with safety and waste handling protocols, and deal cost-effectively with changes encountered in site conditions. The Company typically does not act as a general contractor, but rather as an engineering consultant and/or construction manager. Hazardous waste laws, regulations and liability concerns have created significant financial exposure for those parties associated with the transfer of industrial or commercial properties. This liability can impact buyers, sellers, developers and lenders. The Company specializes in the independent evaluation of environmental conditions for facilities and property being bought or sold. On-site inspections and site history reviews are conducted by the Company's professionals who advise clients regarding the nature and extent of environmental problems and liabilities. Optimum siting for initial construction or expansion of industrial facilities requires careful attention to environmental conditions, natural resource limitations and regulatory compliance. The Company provides the technical services and permitting support to address siting and permit issues related to water supply, waste water management, meteorology and air quality, geology and soils, seismic hazards, aquatic and terrestrial ecology, wetlands and archaeology. 5 The Company's geologists, hydrologists and water resources engineers are experienced in all phases of water resources management, including development of ground-water and surface water supplies for industrial, agricultural, and municipal clients. Additionally, the Company's engineers have successfully designed and permitted waste water treatment and disposal systems for industrial concerns and municipalities. The Company assists clients in complying with regulations of the Occupational Safety and Health Administration, the Environmental Protection Agency ("EPA") and other agencies which regulate employee health and safety. The Company's certified industrial hygienists, scientists, and professional engineers are experienced in monitoring, assessing and controlling exposure to asbestos, particulates, fibers, welding fumes, metals, organic vapors, heat stress, and noise. Consulting and laboratory services are also provided in testing, sampling, analysis and risk assessment. The Company's storage tank management services include integrity testing, monitoring systems, leakage assessment and remedial action, tank removal and closure, responding to new regulatory requirements and designing of new installations. The Company's hazardous waste site experience spans from assessment and characterization to the selection, design and implementation of remedial actions. The Company's technical consultants work closely with clients and their legal counsel to develop cost effective compliance programs. The Company has extensive experience with soil and sub-surface designs including landfills, impoundments, ground-water recovery and treatment, waste removal and closure, cut-off walls, cover systems, in-place treatment and stabilization, grouting and land treatment. Process engineering studies are conducted to eliminate or minimize waste sources. INTERNATIONAL GROUP SERVICES The Company established limited operations internationally in 1977 to provide international clients with the Company's traditional engineering, testing and laboratory services. With the acquisition of Gibb in 1989, the International Group became a significant facet of the Company's overall operations. The International operations comprised 33% of consolidated net fees in 1996, and 32% and 26% in 1995 and 1994, respectively. The Gibb acquisition not only increased the International Group's portion of the Company's net fees since 1990, but also increased the Company's range of services to include multidisciplinary consulting engineering, management, environment, and architecture capabilities. The International Group's business encompasses practice areas which include: . Feasibility and preinvestment studies . Economic and financial appraisal . Strategic and master planning . Community co-ordination and development . Townships . Agricultural services . Environmental audits, assessments and management . Environmental modelling . Site investigations, surveys and models . Network analyses . Logistics studies . Business consulting . Design . Project and construction management . Contract administration . Value engineering and risk management . Cost engineering . Project planning . Tender documentation evaluation . Pollution control and remediation . Supervision of construction . Procurement . Commissioning . Technical assistance and training
6 Services are primarily performed in relation to infrastructure and business development, including but not limited to:. . Business consulting . Restructuring . Private finance initiatives . Engineering and construction . Logistics . Dams and hydroelectric . Water supply and wastewater . Irrigation and drainage . Tunnels and caverns . Landfill . Roads . Railways . Bridges . Airports . Docks and harbours . Public buildings and institutions . Commercial buildings . Industrial facilities . Residential . Leisure . Air bases . Naval bases . Army facilities
Thus, a significant portion of the International Group's work is performed for governmental clients in the United Kingdom and worldwide. Feasibility Studies and Site Investigations - The Company provides clients with advice on the technical and economic feasibility of potential projects based on detailed financial, economic, environmental and regional development studies and the assessment of technical and other potential risk factors associated with the project at the conceptual stage of a project. The Company will also assist in the project formulation and provide support in preparing funding applications to obtain project financing. Specialists in appropriate fields include, but are not limited to, civil, structural, mechanical, electrical and geotechnical engineers; geologists; hydrologists, hydrogeologists, transport planners/analysts; planners; logisticians and economists, financial analysts, project and construction managers; project planners; surveyors; contract engineers, architects and town planners, environmental scientists and engineers, and other specialists including those in information technology, quality and safety. Supported by technical and administrative personnel, these specialists provide the expertise for feasibility studies, site investigations and risk assessment for projects of varying sizes and complexities. The Company often makes use of physical and computer-based models to assist in its assessments and analysis. Bid and Contract Administration - The Company assists clients during the bid process through the preparation of detailed project specifications and drawings, identification and preparation of bills of materials, prequalification of prospective contractors, evaluation of actual bids submitted, and providing recommendations on the award of contracts. Upon completion of the bid process, the Company can provide the client with assistance in contract administration, including negotiation of the contract with the successful contractor, preparation of the contract documents, verification and certification of contractor applications for payment, and investigation and analysis of contract claims. Project Planning, Design, and Management - By establishing and understanding the client's project objectives, the Company's engineers, architects, environmental specialists, planners and other professionals develop a master plan which takes into consideration the project's sequencing, staffing needs, time and monetary budgets, and other factors which relate to a specific project's successful completion. The Company has a multidisciplinary design team, including, but not limited to, civil, structural, mechanical, electrical and geotechnical engineers; geologists; hydrologists, hydrogeologists, transport planners/analysts; planners; logisticians and economists, project and construction managers; project planners; surveyors; contract engineers, architects and town planners, environmental scientists and engineers, and other specialists including information technology, quality and safety. These and other professionals, together with technical personnel, perform services for environmental, marine and land based projects. Company management is the control applied to the whole project process from conception and planning, through Company implementation to completion. The Company works in partnership with the client and other parties including designers, financiers, lawyers, suppliers and contractors. The Company also undertakes development management as a total process which includes interpreting a community's needs and aspirations, obtaining funding and providing administrative support systems and engineering services for the 7 development of housing, water, sanitation and other community facilities in both rural and urban locations. The Company also provides project management consulting services in the areas of quality assurance, health and safety, budgetary control, monitoring and reporting on project progress, and the overall management and supervision of turnkey projects. Project and Construction Supervision and Management - The Company offers complete construction supervision and management services for both new construction and remedial projects of all sizes and complexities. Experienced engineers and project and construction managers act in a liaison capacity with the client and each of the contractors involved in the project, providing job- site instructions and project coordination on a day-to-day basis. In addition, these personnel perform inspections of project materials to endeavor to ensure that quality standards are met, are responsible for maintaining various construction records, and perform completion and maintenance inspections to endeavor to verify that work is performed in accordance with project specifications. Risk assessment and management, and value engineering are inherent elements of the project and construction management process. Private Finance Initiatives - The Company offers separate services to governments, financial institutions, concession and construction tenderers and their supporting banks to assist governments in meeting the international challenge of procurement of major infrastructure projects at a time of scarce financial resources in the public sector. Service elements vary from project to project but may be broadly summarized as follows: . Project viability studies for potential private finance involvement in projects, carried out principally for governments (and their agencies) and for the financial institutions. In both cases the main thrust of the project studies is to establish the financial viability of projects and/or to assemble data to allow future concessionaires and their financial supporters to form sound opinion upon which to tender. . Tender preparation assistance to potential concessionaires to prepare revenue forecasts and tender designs on which the potential concessionaire can base his tender. This includes the preparation of alternative strategies to both the client and construction tenderer through an innovative and/or radical approach on either client policy or on the technical detail of construction tenders. . Implementation of design services to the winning concessionaire or construction contractor. . Audit services to banks supporting concession tenders and subsequently further audits during the construction or implementation phase. . Transaction assistance services, predominantly further examples of audit services for the financial and commercial institutions and multinational investors in their proposed investment plans. A substantial part of the work falls into the category of due diligence services in the environmental sciences sector. MARKETING AND BUSINESS STRATEGY The Company's marketing strategy emphasizes its ability to offer a broad range of specialized services designed to meet the business requirements of its clients in a timely, cost-efficient, and business value-added manner. The Company has the organization and capabilities to undertake not only small tasks requiring a few professionals but also the management, staffing, design and implementation experience of major projects lasting several years, involving numerous Company personnel and occurring in diverse geographic locations worldwide. The Company is widely recognized for its professional competence, excellent client service, and ability to 8 understand and develop solutions to complex business requirements as the primary focus of its marketing strategy. In order to maintain its reputation and level of client service, the Company places great emphasis on the continual need for its professionals to stay abreast of current developments and changes within the engineering and environmental services market. The Company's marketing efforts rely on repeat customers, referrals and the development of new clients by the branch/office managers with the assistance of the Company's National Business Development Programs. These programs support our business operations through the development of marketing brochures, marketing training programs, and developing and maintaining accounts with potential major national clients. In addition to the national and local marketing personnel and branch/office managers, marketing efforts are coordinated by many of the Company's corporate executives, officers, and various other senior employees. The Company's clients include multinational companies, private investors, finance institutions, public sector bodies, newly privatized institutions, real estate developers, property owners, construction contractors, architectural firms, structural engineers, educational institutions, manufacturers, industrial facilities, agricultural entities, municipalities and a wide array of governmental organizations. The Company has performed work for thousands of clients in over 160 countries on six continents. The Company has strategically positioned itself to minimize the effects of major changes in economic or general business conditions in three general ways: 1) certain types of the Company's services have a degree of inherent protection from economic downswings due to the nature of the service itself, 2) through the diversity of geographical areas serviced, and 3) the Company's position in a broad cross section of market sectors. The firm's international business is principally engineering design concentrated in civil, environmental, and construction management services. The design phase of construction work has a long lead time and a comparatively long service period, and owners tend to continue the design of future projects even if current projects are slowed. To some extent, the engineering evaluation of in-place materials is actually counter-cyclical to the construction industry as owners seek to make existing buildings more serviceable in the face of reduced new construction. Since the Company provides services in a number of different foreign countries, spanning numerous diverse economic environments, it is unlikely that all such economic environments will be at the same phase in an economic cycle at any one time. This geographic diversity provides the Company with a relative degree of insulation from, and balancing of, economic cycles. The majority of the Company's services are not subject to seasonal factors with the exception of engineering services related to construction activities. To mitigate the impact of such seasonal factors on revenues, the Company has concentrated its office locations for this type of business in the Sunbelt and Coastal regions of the United States. Because of milder weather, these locations tend to have relatively longer construction seasons. The Company derived approximately 10% of its 1996 U.S. operations gross fees from agencies of the United States Federal Government (the "Government"). The majority of this business came from time and material and fixed price contracts which do not contain a renegotiation clause, unlike some contracts that are on a cost plus fixed fee or cost plus award fee basis and are renegotiable based on actual incurred costs. Virtually all Government contracts contain a standard clause which allows the Government to terminate any contract for its convenience. While the Government has the right to terminate contracts for its convenience, the Company does not expect that the Government will exercise the option to terminate any existing contracts. However, there can be no assurances that the Government will not exercise the right to terminate such contracts. During October 1995, the Defense Contract Audit Agency ("DCAA") division of the U.S. Department of Defense performed a financial capabilities audit on the Company. The results as outlined in the audit report were unfavorable due to the poor financial performance of the Company over the prior three years. The audit report, which was directed to the Administrative Contracting Officer ("ACO"), recommends that the ACO require the Company to provide a quarterly financial briefing to address sensitive program performance and provide a status report of the Company's actions to correct the adverse financial condition. The Company agreed with the audit findings and briefed the ACO and the DCAA during 1996. Financial performance improved during 1996, and the DCAA agreed to perform a financial capabilities audit on 1996 results when they become final. The Company's financial performance has improved over the last year and no terminations of contracts are anticipated; however, there are no assurances that the Company's financial performance will continue to improve or that the Government will not terminate any of its contracts based on the Company's financial situation. 9 BACKLOG At December 31, 1996, the Company's contracted backlog was approximately $190 million as compared to $164 million at December 31, 1995. The Company estimates that approximately $128 million of the December 31, 1996 backlog will be completed by the end of 1997. The majority of the Company's backlog consists of long-term contracts ranging from less than $20,000 to approximately $45 million and having remaining duration from less than one year up to eight years. The Company's backlog is subject to revision due to cancellations, modifications, and changes in the scope of work, design or scheduling with respect to particular projects. While management believes that the backlog estimates are accurate, there can be no assurances as to the amount of such backlog that will be realized. RAW MATERIALS AND INVENTORY Raw materials are not essential to the operation of the Company's business. Inventory similarly does not play a significant role in the Company's operations. TRADEMARKS The Company and its subsidiaries operate under several unregistered trademarks and trade names, but these are not significant to the Company's operations. CONTRACTS In general, the Company executes contracts for all services performed and is compensated under such contracts in one of three ways - hourly fee plus direct expenses, lump sum or cost plus fixed fee. Under an hourly fee plus direct expenses contract, the most prevalent type of contract entered into by the Company, hourly billing rates are established for various classifications of employees. The hourly rates are a multiple of the direct salary costs of the employees who provide services under the contract and are designed to reimburse the Company for direct salary costs and overhead and to provide the Company with a profit. In addition, the client is generally billed for direct expenses incurred by the Company in providing its services under the contract. Under a lump sum contract, the Company is paid a fixed dollar amount for a defined scope of services. Under a cost plus fixed fee contract, the Company is paid the cost of providing its services (primarily direct salary costs plus direct expenses and overhead) plus a fixed fee, which is generally a predetermined dollar amount. Cost plus fixed fee contracts and hourly fee plus direct expenses contracts are often subject to a dollar ceiling for work performed with respect to a designated scope of services. All contracts normally provide that ceilings or lump sums will be adjusted upward if the scope of services is expanded by the client. In accordance with industry practice, most of the Company's contracts are subject to termination at the discretion of the client. In such event, the Company is ordinarily reimbursed for costs incurred and paid for fees earned through the date of termination. The Company has not experienced any significant amount of discretionary client terminations. Regardless of the form of contract, the Company attempts to negotiate a basis of compensation which reflects the projects complexity and the degree of technical risk required to satisfactorily perform the services. COMPETITION The Company competes on a national and international basis. The markets in which the Company provides services are all highly competitive and the Company is subject to competition with respect to each of the services it provides. The Company competes primarily on the basis of quality of service, expertise, experience and reputation, availability of personnel, and, to a lesser extent, price. In all phases of the Company's business, it competes with many competitors, ranging from small local firms to major national and international companies. No single entity, however, including the Company, currently dominates any of the Company's principal areas of service although some competitors have greater financial resources and may have more public recognition than the Company. To 10 the best knowledge of the Company, no reliable data is available with respect to the total size of the market for engineering and consulting services for the full range of services which the Company and its subsidiaries provide. REGULATION Professional The practice of engineering and architecture is regulated by statute in all states of the United States and in most other countries. Substantially all such jurisdictions require an engineer or architect to be licensed by the jurisdictions registration board as a condition to rendering professional services in that jurisdiction. Some jurisdictions require persons providing geological services to be licensed. There are also numerous requirements for licenses or certifications involving asbestos consulting. In general, the Company has not experienced any material difficulty in complying with such licensing requirements. Environmental Public concern over health, safety and the environment has resulted in the enactment of an increasingly larger number and wider range of environmental laws. These laws and their implementing regulations affect nearly every industrial and commercial activity. The Company believes that the past trend toward increased regulation and enforcement at all levels of government, as well as a greater public awareness of environmental problems and health hazards posed by hazardous materials and toxic wastes, will be impacted by current political debate. With the complexity and ever-changing nature of the environmental regulations, the Company believes that the market for environmental services will continue to increase, but probably at a reduced rate as the market matures. There can be no assurances that future changes in the law will not have an adverse effect on the Company's business. The principal federal statutes (and regulations promulgated thereunder) affecting the business of the Company and its clients are: The Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("Superfund Act" or "CERCLA"). The Superfund Act addresses practices involving hazardous substances and imposes liability for cleaning up contamination in soil and groundwater. CERCLA imposes liability on persons responsible for disposal of hazardous substances that have been or are threatened to be released into the environment and allows the federal and state governments to require the cleanup of waste sites. The Company assists parties and potential responsible parties assess contamination, develop remedial plans and monitor remediation implementation. The Emergency Planning and Community Right-to-Know Act of 1986 ("EPCRA" or "SARA TITLE III"). EPCRA contains provisions relating to emergency planning, emergency release notification, and reporting on chemical use, storage and release. The emergency planning and community right-to-know provisions require subject industries to provide information on numerous hazardous materials that can affect a community and its residents through either accidental releases or routine emissions. The Company helps industries comply with these extensive reporting requirements. The Resource Conservation and Recovery Act of 1976 ("RCRA"). While Superfund seeks to remedy the damage caused by historically contaminated waste sites, RCRA imposes a comprehensive regulatory scheme on the management of newly-generated hazardous wastes at active facilities. RCRA, and the regulations thereunder, establish a comprehensive regulatory program applicable to hazardous waste from the time it is created by industry until it is properly disposed of, and imposes requirements for management of hazardous waste and record-keeping for any entity that generates, transports, treats, stores, or disposes of hazardous wastes. Another requirement for existing and new hazardous waste facilities is the procurement of detailed permits specifying construction, operating and closure standards, soil and groundwater corrective action, and post-closure monitoring and care for disposal facilities. RCRA provides for criminal and civil liability for violation of its provisions. RCRA is complex and difficult to implement. The Company assists its clients in complying with RCRA and its regulations. RCRA also regulates petroleum and hazardous substance underground storage tanks. The Company assists its 11 clients in investigating and cleaning up releases from such tanks and provides assistance to clients who must come into compliance with these regulations. RCRA Subtitle D regulates the disposal of solid waste. It requires that states or regions develop solid waste management plans, and also establishes criteria for sanitary landfills, requires closing or upgrading of open dumps, and provides for federal grants to improve solid waste facilities and for discarded tire disposal. The Company's work under the Subtitle D involves assessment, upgrading, and cleanup of landfills and open dumps. National Environmental Policy Act of 1970 ("NEPA"). NEPA requires an analysis of the environmental impact of any major federal action, including the issuance of federal environmental permits for industrial facilities that may significantly affect the quality of the environment. In each instance, a detailed statement must be prepared to address the environmental impact of the proposed action. In those cases where an environmental impact statement is required, the effects of the proposed activity on the environment must be thoroughly investigated and any adverse impacts must be avoided or minimized before a permit will be issued. Major energy and mineral developments, including pipelines, and large new industrial plants are examples of projects that require construction and operating permits, and which can therefore trigger the environmental impact statement process. The Company's principal activities under NEPA involve preparing, or assisting in the preparation of, such environmental impact statements. The Toxic Substances Control Act of 1976 ("TSCA"). TSCA authorized the EPA to gather information on the risks posed by chemicals and to regulate the use and disposal of polychlorinated biphenyls ("PCBs"). This statute addresses the use and handling of PCB transformers and the remediation of any release of PCBs into the environment. Portions of TSCA also deal with asbestos-related issues. The Company's principal work under TSCA involves field sampling, site reconnaissance, development of remedial programs and monitoring of construction activities at sites involving PCB contamination and asbestos materials. Clean Air Act of 1970, as amended in 1977 and 1990 ("Clean Air Act"). The Clean Air Act regulates the emission of air pollutants. Provisions of the Clean Air Act authorized the EPA to set maximum acceptable contaminant levels in the ambient air, to control emissions of certain toxic materials and to ensure compliance with air quality standards. The 1990 Amendments strengthen and expand the Clean Air Act to: facilitate attainment of health-based primary National Ambient Air Quality Standards; provide an accelerated, technology-based air toxics program; impose stricter motor vehicle controls; provide new acid rain provisions; provide ozone protection and strengthen permitting and enforcement. The Company's activities are expanding under the Clean Air Act and include sampling analysis, pre-construction permitting, impact assessments of air emissions on ambient air quality and assistance with the acquisition of Title V permits. The Clean Water Act of 1972, as amended in 1987 ("Clean Water Act"). The Clean Water Act generally requires every state to establish water quality standards for each significant body of water within its boundaries and to ensure attainment and/or maintenance of those standards. This Act generally requires industry and government facilities to apply for and obtain environmental permits to monitor pollutant discharges and, under certain conditions, to reduce pollution. The Company believes that the Clean Water Act is accelerating the market for municipal waste water treatment plant design and construction consulting services that the Company provides. The Safe Drinking Water Act, as amended in 1996 ("SDWA"). Under SDWA, the EPA is required to establish primary drinking water standards for numerous contaminants. The Company believes the standards will be further expanded under the EPA's evolving groundwater protection strategy, which is intended to establish levels of protection or cleanup of the nation's groundwater resources. The resulting groundwater quality requirements will then be applied to RCRA facilities and CERCLA sites requiring remedial action for releases of contaminants to groundwater. The Company's activities include sampling analysis and remedial activities. The Company provides services to assist clients in the location and development of groundwater supply sources. Occupational Safety and Health Administration Act ("OSHA"). Among other things, OSHA regulates exposure to toxic substances and other forms of pollution in the workplace and is administered by the Department of Labor. It specifies maximum levels of certain toxic substances, such as asbestos, to which employees may be 12 exposed and requires that workers be informed of the physical and health hazards posed by these materials. The Company's activities under OSHA include evaluation of client compliance with OSHA requirements and worker training, including the mandatory 40-hour training required for handling hazardous materials. Wetlands Regulations. The Company considers whether properties it investigates may be subject to regulation as wetlands under federal and state statutes and regulations and assists landowners in complying with the permit and mitigation requirements that may arise in wetlands regulations. Section 404 of the Clean Water Act, administered by the Army Corps of Engineers, requires permits for the discharge of dredged or fill material into waters of the United States, including wetlands. Technical analysis is required to determine whether an area falls within the jurisdictional definition of wetlands and to determine whether the activities proposed for the area are regulated under Section 404. Permits and other regulatory requirements (such as mitigation) must be addressed before the regulated activity may proceed on wetlands. EPA interaction with the Corps of Engineers in this area increases the complexities of the permitting process. The Company assists with all stages of this technical work. Stormwater Regulations. On November 16, 1990, the EPA issued final regulations that require the operators of certain industrial activities and municipal storm sewers to obtain permits for discharges of stormwater. Stormwater discharges were largely unregulated before the EPA issued these rules. Selected operations that the new rules affect include manufacturing facilities, transportation facilities, mining and exploration activities, some construction projects and storm sewers. The Company assists affected operators and contractors in achieving compliance with the stormwater regulations. State and Local Requirements. In addition to the federal environmental laws and regulations, there are numerous state and local statutes that roughly parallel the federal legislation and regulate the environment, some of which impose stricter environmental standards than federal laws and regulations. The Company works with clients to monitor compliance with such requirements. POTENTIAL LIABILITY AND INSURANCE The services the Company provides can involve significant risk of personal injury, property damage, and other financial losses related to such services, and the Company at times indemnifies its clients for losses and expenses incurred by them as a result of the Company's negligence. The Company maintains both a health and safety program and a quality assurance and quality control program to assist in minimizing the risk of damage to persons and property and the potential for resulting losses. In addition, the Company maintains professional liability, commercial general liability and property and casualty coverage when available at commercially reasonable rates in the insurance marketplace. Moreover, the Company often negotiates contractual terms and conditions and provides risk management and liability training to various of its employees. In the opinion of management, all claims which have been asserted against the Company are either adequately covered by insurance or have been provided for in the financial statements. (See Note 8 to the Consolidated Financial Statements). Management believes that any remaining uninsured or unreserved claims will not in the aggregate have a material adverse effect on the financial condition of the Company. There can be no assurance that all possible types of liabilities that may be incurred by the Company are covered by its insurance or that the dollar amount of such liabilities will not exceed the Company's policy limits. PERSONNEL As of December 31, 1996, the Company employed approximately 4,000 persons, including approximately 1,700 engineers and scientists, 900 technicians and production support staff, 200 construction management and support staff, and 1,000 management and administrative personnel. The Company's ability to remain competitive will depend on its ability to retain and attract qualified personnel. None of the Company's employees are represented by a labor union; however, certain foreign countries in which the Company has employees have specific statutes governing certain employee issues which place restrictions on the Company. In 1996, the Company continued the downsizing of its workforce to improve operating efficiency. Management considers relations with its employees to be satisfactory. See "Market for Registrants' Common Stock and Related Shareholder Matters - Stock Repurchases." 13 Mr. Robert B. Fooshee and Mr. Peter D. Brettell were elected Directors of the Company in July 1996. Mr. J. Richard Cottingham resigned as a director of the Company, effective January 6, 1997. On February 14, 1997, Mr. Frank B. Lockridge was nominated and elected as a director of the Company. EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth certain information with respect to those individuals who are Executive Officers of the Company. BRUCE C. COLES, age 52, joined the Company in September 1995 and is Chairman of the Board of Directors and Chief Executive Officer of the Company. Subsequently in 1996, Mr. Coles was elected President of the Company. Prior to joining the Company, Mr. Coles was Chairman, President and Chief Executive Officer of Stone & Webster Incorporated. Prior to August 1995, Mr. Coles held various technical and management positions with Stone & Webster Incorporated and its related affiliates since 1968. Mr. Coles also serves on the National Board of Directors of Junior Achievement, the Board of Councilors of The Carter Center, the Board of the Civil Engineering Research Foundation, the advisory council for the Accreditation Board for Engineering and Technology and the Civil Engineering Association of the University of Maine. ROBERT B. FOOSHEE, age 54, joined the Company in January 1996 as Executive Vice President and Chief Financial Officer. Mr. Fooshee also serves as Treasurer of the Company. In July 1996, Mr. Fooshee was elected director of the Company. Prior to joining the Company, Mr. Fooshee provided consulting services for RBF & Associates from February 1995 until joining the Company. From August 1994 through January 1995, Mr. Fooshee was Executive Vice President and Chief Financial Officer for Eddie Haggar Limited. From June 1992 until August 1994, Mr. Fooshee was Chief Financial Officer for The Fresh Market. From April 1986 until June 1992, Mr. Fooshee was Chief Financial Officer for Kayser-Roth Corporation. ANDREW J. YOUNG, age 65, is Co-Chairman of GoodWorks International, LLC, an international consulting firm. He served the Company from 1990 to April 1997 in various executive capacities. He has been a director of the Company since June 16, 1995 and on May 7, 1993, Mr. Young was appointed by the Board of Directors to be Vice Chairman of the Company. Prior thereto, he served as Mayor of the City of Atlanta from 1981 to 1989. Mr. Young serves as Chairman of the Southern Africa Enterprise Development Fund and, until recently, as Co-Chairman of the Atlanta Committee for the 1996 Olympic Games. Mr. Young also serves as a director of Delta Air Lines, Cox Communications, Host Marriott, Thomas Nelson Publishers, Film Fabricators, and Argus Newspaper. From May 1, 1996 to December 31, 1996, Mr. Young worked under a loaned executive agreement with the Atlanta Committee for the 1996 Olympic Games, but he resumed his duties with the Company in early 1997. W. ALLEN WALKER, age 46, joined Sir Alexander Gibb and Partners Ltd. in the United Kingdom as Finance Director in August 1989. He later served as Director of Administration and Finance beginning in August 1992. Mr. Walker returned to the United States and became Vice President of Finance for the Company in January 1994. Currently, Mr. Walker serves as an Executive Vice President of the Company for operations. Prior to joining the Company, Mr. Walker was a senior manager in the Audit Department for Ernst & Young LLP in Atlanta, Georgia. DARRYL B. SEGRAVES, age 45, joined one of the Company's affiliates in March 1989 as corporate counsel. Currently, Mr. Segraves serves as Executive Vice President, Secretary and General Counsel of the Company. ROBERT S. GNUSE, age 50, joined the Company in 1974. He has served in various technical and management positions with the Company and/or its related affiliates. Most recently, Mr. Gnuse serves as Senior Vice President-Marketing for the Company. LAWRENCE J. WHITE, age 50, joined the Company in 1994 as Chief Information Officer. He also serves as a 14 Senior Vice President of the Company. Prior to coming to the Company, Mr. White was the Chief Information Officer of Roy F. Weston, Inc. from 1989 until June 1994. JON A. McCARTHY, age 42, joined the Company in 1987 as Business Development Manager. He has since served in various technical and management positions with the Company and/or its related affiliates. Since January 27, 1997, Mr. McCarthy has served as Senior Vice President - Human Resources for the Company. ITEM 2 - PROPERTIES The Company and its U.S. subsidiaries lease offices in numerous cities throughout the United States for executive, administrative, engineering and environmental services, laboratory and warehouse activities. The Company also owns buildings located in Houston, Texas; Jacksonville, Florida; Raleigh, North Carolina; and Tampa, Florida. The Company maintains certain corporate offices at 3 Ravinia Drive, Suite 1830, Atlanta, Georgia. In 1996 the Company terminated leases in Springfield, VA; Moreno Valley, CA; Kansas City, MO; Harrisburg, PA; Tampa, FL; West Palm, FL; and Clarksville, TN. The Company relocated offices in Albany, NY; Baltimore, MD; Birmingham, AL; Ridgeland, MS; Sacramento, CA; and Austin, TX. The Company renewed office leases in Armor Place (Atlanta) GA; Greenville, SC; Greensboro, NC; Columbia, SC; and Richmond, VA. The Company's foreign subsidiaries lease offices in England, China, Czech Republic, Romania, Spain, Sri Lanka, Turkey, Indonesia, Kenya, Mauritius, Oman, Portugal, Scotland, United Arab Emirates, Wales, Zimbabwe, South Africa, Poland and Belgium. The Company believes that existing U. S. and international facilities are adequate to meet current requirements and that suitable additional or substitute space will be available as needed to accommodate any expansion of operations and offices. (See Note 4 of Notes to Consolidated Financial Statements included in Item 8 herein, as to the Company's lease obligations.) In the United States, the Company's operations have, during the year 1996, extended into new subleases on all or a portion of the following offices: Abernathy Road (Atlanta), GA; San Francisco, CA; and Chantilly, VA. ITEM 3 - LEGAL PROCEEDINGS The Company is a party to a number of lawsuits and claims (some of which are for substantial amounts) arising in the ordinary course of its business. In June of 1994, a judgment in the amount of $ 3.5 million was entered against the Company in connection with certain materials engineering services performed for Georgetown Steel Corporation. As a result of the judgment, the Company recorded a $ 2.9 million charge to 1994 earnings, which was net of expected proceeds from insurance coverage of approximately $0.75 million. The judgment was upheld on appeal. The Company paid $3.207 million plus insurance proceeds of $0.757 million to the plaintiff in January 1997. The Company recorded an additional $1.15 million in 1994, and an additional $ 2.35 million in 1995 for potential claims. While the ultimate results of lawsuits or other proceedings against the Company cannot be predicted with certainty, management does not believe the ultimate costs of such actions, if any, in excess of amounts reserved in the consolidated financial statements will have a material effect on the Company's consolidated financial position or results of operations. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS There is no regular market for the Company's common stock (the "Common Stock"). As mandated by the 15 Company's Third Restated Articles of Incorporation, as amended (the "Articles"), the Common Stock's fair market value is determined by independent appraisals conducted throughout the year. The appraised fair market value per share was determined to be $12.61 and $16.91 at December 31, 1996, and 1995, respectively. As of March 1, 1997, the fair market value per share was $ 12.61. As of March 1, 1997, there were 1,894,829 shares of Common Stock outstanding owned by 1,722 shareholders of record. In addition, as of March 1, 1997, stock options to acquire 315,000 shares of the Company's Common Stock were outstanding pursuant to the 1990 Stock Option Plan, 176,400 of which are currently exercisable. No dividends have been paid for each of the years ended December 31, 1996 and 1995. The Company's current amended and restated credit facilities (the "1997 Facilities") prohibit the payment of cash dividends through the term of the credit facilities. (See Management's Discussion and Analysis of Financial Condition and Result of Operations - Dividends). Stock Repurchases The Company's Common Stock is not listed on a national securities exchange or traded in any organized over-the-counter market. Since 1994, the Company conducted workforce reductions in order to reduce labor related expenses to make them consistent with the Company's level of business and to improve its overall operating performance. In the course of these efforts, over 220 employees left the Company, with severance and related costs aggregating approximately $0.8 million in 1995, and $0.4 million in 1996. The Company is entitled under its Articles to redeem shares of shareholders whose employment with the Company has ended, through either paying cash or issuing notes. The Company has historically repurchased all shares of Common Stock from employees exiting the Company through the issuance of such notes or cash payments; however, the 1995 credit facilities (the "1995 Facilities") and the 1996 credit facilities limited the Company from continuing the repurchases. Notwithstanding the significant number of departures, and the restrictions on share repurchases contained in the credit facilities, the Company continued to deem it appropriate to redeem or repurchase all of the shares of exiting employees in 1995 in order to continue to meet a required 95% employee ownership threshold required by certain Internal Revenue Service Regulations. Thus, subject to the condition subsequent of lender approval, the Company (i) exercised its right to redeem or repurchase all of the shares held by employee shareholders who exited the Company in 1995 and (ii) commenced negotiations with its lenders regarding the terms and conditions under which the Company could redeem or repurchase the shares without violating any covenants in its credit facilities. As a result of these efforts, the Company obtained approval from its lenders to make cash payments and to issue interest bearing notes in amounts aggregating approximately $3.9 million for employees who terminated in 1995. As of December 31, 1996, the Company's aggregate obligations to former employees of the Company arising from the repurchase or redemption of their shares was approximately $13.1 million. All notes issued to employees who left the Company in 1995 specify that the notes are subordinated to the Company's senior credit facilities. There can be no assurance that the Company will have either sufficient cash flow or permission of its senior lenders to pay any principal on such notes when due. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." In 1996, the Company elected to report taxable income for tax reporting purposes on an accrual basis rather than a cash basis, effective for the year beginning January 1, 1995. The conversion to accrual basis taxable income recognition eliminated the need for the Company to maintain at least 95% employee ownership of its capital stock since this requirement arose from an Internal Revenue Service Regulation for cash basis revenue recognition (governing engineering and other professional companies). In 1996, the Company's Board of Directors repealed the Bylaws provision requiring 95% employee ownership. The Articles continue to give the Company the right, but not the obligation, to redeem shares of Common Stock of employees exiting the Company, but the Company has not exercised that right since the beginning of 1996. There can be no assurance that the Company will, under the 16 terms of its existing credit facilities, be able to repurchase shares from employees exiting the Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data presented below under the captions "Income Statement Data" for each of the years in the five year period ended December 31, 1996 and "Balance Sheet Data" as of the end of each of such years is derived from the Audited Consolidated Financial Statements of Law Companies Group, Inc. This information should be read in conjunction with the Consolidated Financial Statements as of December 31, 1996, and for each of the years in the three year period ended December 31, 1996, included elsewhere in this Annual Report.
Year Ended December 31 1996 1995 1994 1993 1992 -------------------------------------------------------- (In thousands, except per share data) Income Statement Data: Net Fees $286,282 $314,873 $314,102 $312,971 $318,696 Net Income (Loss) $1,910 ($2,266) ($11,464) $4,069 $69 Earnings (Loss) Per Share $1.00 ($1.19) ($5.32) $1.66 $.02 Cash Dividends Per Share $.00 $.00 $.26 $.40 $.40 Balance Sheet Data: Working Capital $28,459 $30,384 $28,895 $39,803 $17,239 Total Assets $138,697 $148,304 $155,612 $159,671 $151,553 Long Term Liabilities $50,303 $59,915 $58,807 $52,732 $24,346 Shareholders' Equity $17,590 $15,826 $19,375 $38,763 $46,651
The table above includes the consolidation of IAM/E from April 1992 through May 1993. 17 ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth, for the years indicated, (i) the percentage of net fees represented by certain items reflected in the Company's consolidated statements of income and (ii) the percentage increase (decrease) in each of such items from the prior year. The Company measures its operating performance on the basis of net fees, since a substantial portion of gross fees are a pass- 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. This table and the subsequent discussion should be read in conjunction with the selected consolidated financial data and the Consolidated Financial Statements and notes to Consolidated Financial Statements contained elsewhere in this Annual Report.
Year to Year Percentage Year Ended December 31 Increase (Decrease) 1996 1995 1994 1996 vs 1995 1995 vs 1994 ---------------------------- ---------------------------- Net Fees 100.0% 100.0% 100.0% (9.1%) .2% Gross Profit 59.3% 60.7% 61.3% (11.1%) (.9%) Indirect Costs and Expenses 55.2% 58.3% 63.6% (13.9%) (8.1%) Operating Income (Loss) 4.1% 2.3% (2.3%) 58.9% 202.8% Net Income (Loss) 0.7% (.7%) (3.6%) 184.3% 80.0%
18 Results of Operations Comparison of 1996 and 1995 Consolidated net fees for 1996 decreased 9.1% to $286.3 million from $314.9 million in 1995. Net fees for the U.S. operations decreased to $190.4 million in 1996, or 11.6%, from $215.4 million in 1995. These decreases were due to the following reasons: several weeks of inclement winter weather conditions in the North and East regions of the U.S., the effects of the Company's focus on its cost structure and competitiveness as opposed to revenue growth, lack of regulatory pressure to drive environmental markets, and overall competitive pressures in markets served by the Company. The International Group's net fees decreased by 3.6% to $95.9 million for 1996 from $99.5 million in 1995. This decrease is largely the result of the runoff of existing projects combined with a delay in startup of new projects, and decreases in the average value of the dollar by 1.3% compared to 1995. The consolidated gross profit margin decreased to 59.3% in 1996 from 60.7% for 1995. The U.S. Group's gross profit margin decreased slightly from 65.3% for the year ended 1995 to 64.9% for the year ended 1996. The small change in margin reflects the Company's focus on improved operating procedures in response to difficult market conditions. The International Group's gross profit margin decreased from 50.5% in 1995 to 48.2% in 1996. This decrease was primarily due to project performance issues and increased expenses on several of the International Group's large projects. Indirect costs and expenses were $158.1 million in 1996 compared to $183.6 million in 1995. This decrease of $25.5 million, or 13.9%, is primarily the result of several programs initiated in late 1995 or early 1996, focused on improving the U.S. business. These initiatives were designed to maximize efficiency and profitability and to effect substantive change in the culture of the Company and to improve utilization. The activity that produced the greatest level of savings was re-aligning staffing levels and matching human resources to a lower level of revenue. The Company has also focused on improving procurement activities in order to reduce material and services costs by taking advantage of negotiated national contracts which leverage the Company's purchasing power for its U.S. operations. During the year, national contracts were implemented which consolidated the purchasing of office supplies, travel services, office equipment, telecommunications and cellular services, off-site data management, forms management, and vehicle leasing. The Company continues to review its overhead cost structure to analyze the functions provided by each department and the related value of these functions. The reductions in the corporate overhead functions during 1996 consisted primarily of departmental realignment and the resulting elimination of positions, as well as reducing staff through attrition. Interest expense decreased from $6.0 million in 1995 to $4.7 million in 1996. This decrease was a direct result of improved cash management efforts which lowered average bank borrowings in 1996 by $13.4 million compared to 1995. During 1996 and 1995, the Company expensed $2.6 million and $1.6 million, respectively, related to the amortization of costs associated with re- negotiating and securing its credit facilities. In 1996, the Company recorded net income of $1.9 million, or $1.00 per share. This compares to a net loss in 1995 of $2.3 million, or $1.19 per share. Comparison of 1995 and 1994: The Company realigned several of its operations both in the U.S. and internationally in 1994. The result of this realignment was to define two operational reporting units; U.S. and International. Whereas in the past, U.S. operations were divided into two groups - Engineering and Environmental, in 1995 they were combined into a single unit. The International Group remains an individual unit. Together, the U.S. and International operations comprise the Company's consolidated results discussed below. 19 Consolidated net fees of $314.9 million in 1995 showed little change over 1994 consolidated net fees of $314.1 million. While this change was not significant, the components of the increase indicated greater growth in international operations. The U.S. Group net fees decreased by 7.5% from $232.9 million in 1994 to $215.4 million in 1995. In 1995, work related to the January 1994 California earthquake was completed, resulting in a $10 million decline in fees on this single project compared to 1994. The International Group's net fees increased by $18.3 million or 22.5% from $81.2 million in 1994 to $99.5 million in 1995. A portion of this increase of International net fees is due to the increase in the average value of the dollar of 1.6% in 1995 compared to the average value of the dollar in 1994. Also included in 1995 are approximately $12.4 million in net fees from HKS, a South African engineering consulting firm which was acquired during 1994, while 1994 included approximately $4.0 million in net fees from HKS. The remainder of the increase was due to the addition of several large projects and overall strength in the European markets where the Company operates. The U.S. Group's gross profit margin was unchanged from 1994 to 1995, remaining at 65.3%. The International Group's gross profit margin increased slightly from 50.1% in 1994 to 50.5% in 1995 highlighting the growth and effectiveness of the International Group. The combined effect of the U.S. and International Groups was that the Company's gross profit margin decreased slightly to 60.7% for 1995 from 61.3% for 1994. This decrease was due to the growth of the International Group which earned a lower gross profit margin on its longer term projects. Indirect costs and expenses were $183.6 million in 1995 compared to $199.8 million in 1994. This decrease of $16.2 million, or 8.1%, reflected the Company's efforts during 1994 to realign and consolidate selected operations, both in the U.S. and internationally. The Company continued this strategy of realignment and consolidation during 1995. As a result, the Company recorded $2.5 million in lease termination costs and expected sublease shortfalls, approximately $.8 million in severance and related costs, and $1.5 million in charges to reduce investments to estimated net realizable value. Interest expense increased from $4.8 million in 1994 to $6.0 million in 1995. The increase was primarily related to higher interest rates on the Company's bank debt. During 1995, the Company also recorded a $1.6 million charge related to the amortization of costs associated with renegotiating the 1995 Facilities. In 1995, the Company recorded a net loss of $2.3 million, or $1.19 per share. This compares to a net loss of $11.5 million for 1994, or $5.32 per share. Currency Translation The translation of the Company's foreign subsidiaries' financial statements into U.S. dollars is done in multiple steps. First, all foreign operations are measured into the functional currencies of the foreign subsidiaries' economic environments by utilizing a combination of current, average, and historic exchange rates, with translation impacts being included in income. The foreign subsidiaries' functional currency financial statements are translated into U.S. dollars, the Company's reporting currency, utilizing current and average exchange rates, resulting in an adjustment to shareholders' equity. In addition, transactions denominated in different currencies result in exchange gains or losses which are included in income. The impact of foreign currency translation and exchange transactions included in income was not significant in 1996, 1995, or 1994. The translation of the Company's foreign subsidiaries' in 1996 resulted in a $0.4 million change in the Foreign Currency Translation Adjustment component of shareholders' equity. This change highlighted the relative stability of the dollar compared primarily to the pound sterling in 1996. Income Taxes For information regarding the effects of income taxes on the results of operations of the Company, see Notes 1 and 7 of the Notes to Consolidated Financial Statements included elsewhere in this Report and "Liquidity and Capital Resources". 20 Debt and Short-Term Borrowings The Company reported debt and short-term borrowings of $45.3 million at December 31, 1996, compared to $52.4 million at the end of 1995. This debt reduction of $7.1 million was achieved by a return to profitability ($1.9 million net income for 1996), non-cash expenses included in net income less than capital expenditures, and improved working capital management. Debt and short-term borrowings as a percentage of total capitalization amounted to 72% at December 31, 1996 compared to 77% at December 31, 1995. At December 31, 1995, the Company was not in compliance with all of the restrictive covenants in the 1995 Facilities. The Company had previously begun to renegotiate its bank credit facilities. On March 8, 1996, the Company received a waiver from its banks for the restrictive covenant violations. On April 30, 1996 the Company received from its banks a 10-day extension of the 1995 Facilities. On May 10, 1996, the Company received a Commitment from its banks to modify and extend its credit facilities to January 15, 1997 (the "1996 Facilities"). See Note 3 to the Consolidated Financial Statements. The 1996 Facilities were secured by substantially all assets of the Company and substantially all stock of its subsidiaries. The Company was in compliance with all financial covenants with respect to the 1996 Facilities as of December 31, 1996. See also "Liquidity and Capital Resources." On February 7 ,1997, the Company amended and restated its current credit facilities (the "1997 Facilities") with an extension to February 6, 1998. The 1997 Facilities include certain restrictions relating to, among other things, maintaining debt within approved limits, limitations on capital expenditures and share repurchases, achievement of certain fixed charge and interest coverage ratios, and other financial covenants, and are secured by substantially all assets of the Company and substantially all stock of its subsidiaries. Cash Provided by Operations Although cash provided by operations in 1996 of $15.0 million was virtually unchanged from $14.9 million in 1995, the Company made cash payments of $4.1 million in 1996 for deferred taxes from prior years as a result of changing from cash to accrual basis for tax reporting. The Company also realized improved cash flow in 1996 from profitable operations ($1.9 million net income versus $2.3 million net loss in 1995) and better working capital management ($4.6 million provided in 1996 versus $2.5 million provided in 1995). In 1995, cash provided from operations benefited from a level of certain non-cash charges ($6.1 million) which was higher than 1996 ($0.9 million). Capital Expenditures The Company's operations are primarily dependent upon professional services and as such are not capital intensive. The Company invested $4.0 million in capital spending in 1996. This amount compares to $6.8 million in 1995 and $9.4 million in 1994. During 1994, the Company began installing a new project and financial accounting system and also upgraded some other computers and related equipment, thus causing the relatively high capital expenditures in 1994. In order to continue to enhance productivity and potentially increase earnings, the Company has continued, and will continue, its capital spending programs, particularly for computer and other technology-related equipment. In 1995, the Company neared completion of the installation of the new project and financial accounting system and continued to upgrade existing computer equipment. The Company was required by the 1996 Facilities to limit capital spending to $6.0 million in 1996, and is required by the 1997 Facilities to limit such spending to approximately $9.6 million in 1997. The Company has no other material commitments for purchases of additional equipment. Dividends Dividends were prohibited by the 1995 and 1996 credit facilities and continue to be prohibited under the 1997 credit facilities. 21 Liquidity and Capital Resources Prior to 1995, certain of the Company's subsidiaries filed their federal income tax returns on the cash basis of accounting. Effective beginning January 1, 1995, these subsidiaries changed their method of accounting from the cash to the accrual method for federal income tax purposes. Accordingly, previously deferred income of approximately $47 million at January 1, 1995 was included in taxable income over a four year period beginning in 1995, resulting in an accelerated tax liability of $16 million. The Company made income tax payments of approximately $ 4.1 million in 1996 related to this change in income tax accounting and is required to make the remaining payments by the fourth quarter of 1998. The Company believes that its cash provided by operations and borrowings available under the 1997 Facilities will be sufficient to meet its base operating requirements, capital expenditures, and tax payment obligations through December 31, 1997. The Company's ability to fund growth, other than at minimum levels, will depend on continued profitability and continued focus on working capital management, primarily in the areas of accounts receivable and work in progress. The Company believes that a moderate shortfall in operating profits could be offset by more vigorous accounts receivable collection efforts and reductions in discretionary capital spending. Management believes that the Company's operating performance is improving, thus reducing the likelihood of both operating profit and working capital management falling below acceptable levels. 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 Company Common Stock fund 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. Subsequent Events In the second quarter of 1996, the Company engaged Alex. Brown & Sons Incorporated ("Alex. Brown") to provide investment banking and financial advisory services, to analyze the Company's capital structure and to evaluate both debt and equity options which would be consistent with the Company's strategic objectives and existing market conditions. A special committee of the Board of Directors was formed to receive, review, and recommend appropriate action to the full Board, based upon the findings and recommendations of Alex. Brown. The Company completed a refinancing of the 1996 Facilities on February 7, 1997. The 1997 Facilities in addition to customary restrictions normally contained in credit facilities of this type, also included certain restrictions relating to, among other things, maintaining debt within approved limits, limitations on capital spending and share repurchases, and achievement of certain financial ratios. The 1997 Facilities are secured by substantially all the assets of the Company and substantially all the stock of the Company's subsidiaries. On March 14, 1997, the Board of Directors approved a transaction whereby the Company would issue to Virgil R. Williams and James M. Williams for an aggregate of $10 million in cash, equity securities consisting of 8% redeemable preferred stock, (redeemable on or after the seventh anniversary of issuance) together with separate warrants exercisable for a period of 12 years and representing 33% of the Common Stock outstanding, plus options to acquire up to 900,000 shares of Common Stock through December 31, 2006. The closing of this transaction is conditioned upon shareholder approval and other customary conditions. On February 14, 1997, the Board of Directors approved a curtailment in the U.S. defined benefit pension plan effective March 28, 1997. No further employees will become eligible to participate in the plan and no additional benefits will accrue to vested participants after March 28, 1997. 22 Forward Looking Statements The above statements contained herein under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Market for the Registrant's Common Stock and Related Shareholder Matters" and elsewhere in this Annual Report on Form 10-K constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, business conditions and growth in the economy, including the construction sector in particular, competitive factors, including price pressures, the ability to control internal costs that are not passed on to the Company's clients, the ability to manage cash flow and working capital, the likelihood that the Williams transaction will be successfully completed, the ability to obtain longer term financing on acceptable terms to support the Company's operations and other factors referenced elsewhere herein. Effect of Inflation 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. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company commence at page F- 1. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information contained with respect to Directors and Executive Officers of the Company in the Company's definitive proxy statement is incorporated herein by reference in response to this item. ITEM 11 - MANAGEMENT COMPENSATION The information contained with respect to Management Compensation in the Company's definitive proxy statement, is incorporated herein by reference in response to this item. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information contained with respect to Security Ownership of Certain Beneficial Owners and Management in the Company's definitive proxy statement, is incorporated herein by reference in response to this item. 23 ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information contained with respect to Certain Relationships and Related Transactions in the Company's definitive proxy statement, is incorporated herein by reference in response to this item. ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K (a) List of Financial Statements and Financial Statement Schedule The following consolidated financial statements of Law Companies Group, Inc. and subsidiaries are included herein commencing on page F- 1: Financial Statements: Report of Independent Auditors Consolidated Statements of Operations for each of the three years in the period ended December 31, 1996 Consolidated Balance Sheets as of December 31, 1996 and 1995 Consolidated Statements of Shareholders' Equity for each of the three years in the period ended December 31, 1996 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1996 Notes to Consolidated Financial Statements Supplemental Financial Schedule: Schedule II - Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. (b) Reports on Form 8-K: On October 30, 1996, the Company filed a Form 8-K containing information relating to a preliminary agreement to merge with Professional Services Industries, Inc. ("PSI"), a Delaware corporation controlled by Bain Capital, Inc. On January 3, 1997, the Company filed a Form 8-K regarding the discontinuance of all discussions with PSI regarding a merger. (c) Exhibits 2.01 Agreement for sale and purchase of all the issued shares of Chulsavale Limited, Gablelane Limited, Grashurst Limited, Gibb Petermuller & Partners (Cyprus) Limited and Gibb Overseas Limited, dated July 26, 1989 (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 2.02 Agreement for sale and purchase of the business of Sir Alexander Gibb & Partners and related assets and companies, dated August 18, 1989 (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 24 2.03 Agreement for purchase of Gibb Africa International Limited and grant of options relating to certain Cypriot and African firms, dated August 18, 1989 (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 2.04 Agreement for sale and purchase of the partnership of Gibb Petermuller & Partners O.E., dated August 18, 1989. (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 2.05 Redemption Agreement dated August 31, 1995 by and between Material Analytical Services, Inc. and Law Engineering, Inc. (Incorporated by reference to Form 10-K filed June 11, 1996 File No. 0-19239). 2.06 Asset Purchase Agreement between IAM/Environmental, Inc. and Philip Environmental Services Corporation dated July 11, 1996. 2.07 Stock Purchase Agreement between Law Companies Group, Inc. and Roy G. Dispasquale, Jeffrey A. Stocks, John M. Jazesf and E. Bradford Clark dated July 10, 1996. 3.01 Third Restated Articles of Incorporation of the Company, as amended through February 21, 1996. (Incorporated by reference to Form 10-K filed June 11, 1996 File No. 0-19239). 3.02 Bylaws of the Company, as amended through October, 1996. 4.01 Form Of Stockholders' Agreement between the Company and each shareholder (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.01 Annual Executive Incentive Compensation Plan (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.02 Law Companies Group, Inc. 1990 Stock Option Plan, as amended (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.03 Law Companies Group, Inc. Employee Stock Ownership Plan (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.04 The Law Companies Group, Inc. 401(k) Savings Plan, as amended. (Incorporated by reference to Form 10-K filed June 11, 1996 File No. 0-19239). 10.05 Pension Plan, as amended, for Employees of Law Companies Group, Inc. and Adopting Subsidiaries, as amended and restated effective January 1, 1976 (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.06 Employee Stock Purchase Plan, as amended (Incorporated by reference to Form 10-K filed April, 1994, File No. 0-19239). 10.07 Variable Compensation Plan (Incorporated by reference to Form 10-K filed April, 1994, File No. 0-19239). 10.08 Revolving Credit and Term Loan Agreement dated October 8, 1993, between the Company and Trust Company Bank (Incorporated by reference to Form 10-K filed April, 1994, File No. 0-19239). 25 10.09 Facility Letter, dated October 1993, between Barclays Bank PLC and Sir Alexander Gibb & Partners Limited (Incorporated by reference to Form 10-K filed April, 1994, File No. 0-19239). 10.10 Forbearance Agreement dated March 14, 1995 as amended on April 17, 1995, May 10, 1995, and June 21, 1995 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.11 Commitment Letter dated June 15, 1995 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.12 Settlement agreement between the Company and R.K. Sehgal dated November 29, 1994 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.13 Consulting agreement between the Company and R.K. Sehgal dated December 1, 1994 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.14 Agreement between the Company and Walter T. Kiser dated May 21, 1993 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.15 Agreement between the Company and Richard G. Rosselot dated December 21, 1994 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.16 Amended and Restated Revolving Credit Agreement dated as of October 11, 1995 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank of Georgia, N.A. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.17 Amended and Restated Reimbursement and Guaranty Agreement dated as of October 11, 1995 by and among the Company and SunTrust Bank, Atlanta. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.18 Facility Agreement dated as of October 11, 1995 by and among Sir Alexander Gibb & Partners Limited, the Company and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.19 Waiver Letter dated January 12, 1996 by and among the Company and SunTrust Bank, Atlanta. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.20 Waiver Letter dated March 8, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky, SouthTrust Bank of Georgia, N.A. and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.21 Extension Agreement dated April 30, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank of Georgia N.A. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.22 Extension Agreement dated April 30, 1996 by and among the Company and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No.0-19239). 26 10.23 Second Extension Agreement dated May 10, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank of Georgia N.A. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.24 Second Extension Agreement dated May 10, 1996 by and among the Company and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.25 Extension of existing Credit Facilities dated May 10, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky, SouthTrust Bank of Georgia N.A. and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.26 Employment Agreement dated September 1, 1995 between the Company and Bruce C. Coles. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.27 Employment Agreement dated January 10, 1996 between the Company and Robert B. Fooshee. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.28 Employment Agreement dated December 12, 1995 between the Company and James I. Dangar. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.29 Employment Agreement dated January 10, 1996 between the Company and Robert S. Gnuse. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No.0-19239). 10.30 Second Amended and Restated Revolving Credit Agreement dated as of February 7, 1997 by and among the Company, SunTrust Bank, Atlanta and National Bank of Canada. 10.31 Amended and Restated Revolving Credit A Note dated December 24, 1996 by and among SunTrust Bank, Atlanta, National Bank of Canada and Barclays Bank PLC. 10.32 Facility Agreement dated February 7, 1997 by and among the Company and Barclays Bank PLC. 10.33 Commitment and Term Sheet dated December 24, 1996 by and among the Company and SunTrust Bank. 10.34 First Amendment to Waiver Agreement dated December 24, 1996 by and among the Company and SouthTrust Bank of Georgia, N.A. 10.35 Assignment and Acceptance Agreement dated December 24, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank Of Georgia, N.A. 10.36 Assignment and Acceptance Agreement dated December 24, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank of Georgia, N.A. 27 10.37 Joinder to Intercreditor Agreement dated December 24, 1996 by and among National Bank of Canada, SunTrust Bank, Atlanta and Barclays Bank PLC. 10.38 Second Amendment to the Law Companies Group, Inc. Pension Plan as Amended and Restated dated February 14, 1997. 10.39 First Amendment to the Law Companies Group, Inc. 401(k) Savings Plan dated May 10, 1996. 10.40 Second Amendment to the Law Companies Group, Inc. 401(k) Savings Plan dated August 14, 1996. 10.41 Third Amendment to the Law Companies Group, Inc. 401(k) Saving Plan dated December 21, 1996. 10.42 Fourth Amendment to the Law Companies Group, Inc. 401(k) Savings Plan dated February 14, 1997. 11.01 Computation of Earnings Per Share. 21.01 Subsidiaries of the Company. 23.01 Consent of Ernst & Young LLP. 27.00 Financial Data Schedule. 28 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. LAW COMPANIES GROUP, INC. Date: March 25, 1997 By: /s/ Bruce C. Coles ------------------------------ Bruce C. Coles Chairman of the Board of Directors, Chief Executive Officer, and President 29 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 and on the dates indicated.
Signature Title Date - ------------------------- -------------------------------------- ----------------- /s/ Peter D. Brettell Director March 25, 1997 - ------------------------- -------- Peter D. Brettell /s/ Geoffrey J. Brice Director March 25, 1997 - ------------------------- -------- Geoffrey J. Brice /s/ Bruce C. Coles Chairman of the Board of Directors, March 25, 1997 - ------------------------- Chief Executive Officer, and President Bruce C. Coles Director ________, 1997 - ------------------------- James I. Dangar /s/ Robert B. Fooshee Director, Chief Financial Officer, March 25, 1997 - ------------------------- and Treasurer Robert B. Fooshee Director ________, 1997 - ------------------------- Walter T. Kiser /s/ Fredrick J. Krishon Director March 25, 1997 - ------------------------- -------- Frederick J. Krishon /s/ Frank B. Lockridge Director March 25, 1997 - ------------------------- Frank B. Lockridge /s/ Steven Muller Director March 25, 1997 - ------------------------- Steven Muller /s/ Clay E. Sams Director March 25, 1997 - ------------------------- Clay E. Sams
30
Signature Title Date - ------------------------- -------------------------------------- ----------------- /s/ Kendall H. Sherrill Corporate Controller March 25, 1997 - ------------------------- Kendall H. Sherrill /s/ John Y. Williams Director March 25, 1997 - ------------------------- John Y. Williams Director ________, 1997 - ------------------------- Andrew J. Young /s/ Clarence D. Zimmerman Director March 25, 1997 - ------------------------- Clarence D. Zimmerman
31 ITEM 14(a) FINANCIAL STATEMENTS Law Companies Group, Inc. Consolidated Audited Financial Statements For the years ended December 31, 1996 and 1995 Contents
Report of Independent Auditors......................................................1 Consolidated Audited Financial Statements Consolidated Balance Sheets.........................................................2 Consolidated Statements of Operations...............................................4 Consolidated Statements of Shareholders' Equity ....................................5 Consolidated Statements of Cash Flows...............................................6 Notes to Consolidated Financial Statements..........................................7
Report of Independent Auditors The Board of Directors and Shareholders Law Companies Group, Inc. We have audited the accompanying consolidated balance sheets of Law Companies Group, Inc. as of December 31, 1996 and 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1996. Our audits also include the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and 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. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Law Companies Group, Inc. at December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. March 14, 1997 Law Companies Group, Inc. Consolidated Balance Sheets
December 31 ------------------------------------------------------ 1996 1995 ------------------------------------------------------ (In thousands of dollars, except per share amounts) Assets Current assets: Cash and cash equivalents $ 8,097 $ 4,913 Billed fees receivable, less allowance for doubtful accounts of $4,465 in 1996 and $4,387 in 1995 57,015 58,399 Unbilled work in progress 29,961 32,863 Other receivables 805 1,970 Employee advances 586 560 Prepaid expenses 2,599 2,626 Deferred income taxes 200 1,616 ------------------------------------------------------ Total current assets 99,263 102,947 Property and equipment: Land and buildings 8,448 8,589 Equipment 34,656 34,621 Furniture and fixtures 12,329 14,028 Automobiles 3,674 4,345 Leasehold improvements 3,792 4,258 ------------------------------------------------------ 62,899 65,841 Less: Accumulated depreciation and amortization 40,263 39,786 ------------------------------------------------------ 22,636 26,055 Other assets: Equity investments 1,313 1,402 Goodwill, net of accumulated amortization of $3,499 in 1996 and $2,915 in 1995 14,136 13,938 Other assets 1,349 3,962 ------------------------------------------------------ 16,798 19,302 ------------------------------------------------------ Total assets $138,697 $148,304 ======================================================
2
December 31 ------------------------------------------------------ 1996 1995 ------------------------------------------------------ (In thousands of dollars, except per share amounts) Liabilities and shareholders' equity Current liabilities: Short-term borrowings $ 240 $ 1,201 Accounts payable 18,383 20,855 Billings in excess of costs and fees earned on contracts in progress 14,771 9,515 Accrued payroll and other employee benefits 11,584 9,455 Accrued professional liability reserve 4,367 6,349 Other accrued expenses 14,194 17,248 Income taxes payable 5,059 4,181 Current portion of long-term debt 2,206 3,759 ------------------------------------------------------ Total current liabilities 70,804 72,563 Long-term debt 42,847 47,463 Deferred income taxes 6,363 10,948 Minority interest in equity of subsidiaries 1,093 1,504 Shareholders' equity: Class A common stock - $10 par value; stated at $1.00; authorized: 5,000,000 shares; issued and outstanding: 0 shares in 1996, and 1,533,106 shares in 1995 0 1,533 Common stock - $1 par value; authorized: 10,000,000 shares; issued and outstanding: 1,905,422 shares in 1996, and 361,266 shares in 1995 1,905 361 Additional paid in capital 15,063 14,823 Retained earnings 5,683 3,794 Foreign currency translation adjustment (5,061) (4,685) ------------------------------------------------------ Total shareholders' equity 17,590 15,826 ------------------------------------------------------ Total liabilities and shareholders' equity $ 138,697 $ 148,304 ======================================================
See accompanying notes. 3 Law Companies Group, Inc. Consolidated Statements of Operations
Year ended December 31 1996 1995 1994 ------------------------------------------------------------------------- (In thousands of dollars, except per share amounts) Gross fees $ 323,179 $ 368,417 $ 361,653 Less: Cost of outside services 36,897 53,544 47,551 ------------------------------------------------------------------------- Net fees 286,282 314,873 314,102 Direct costs and expenses: Payroll 83,109 90,315 88,445 Job related expenses 33,402 33,579 33,025 ------------------------------------------------------------------------- Gross profit 169,771 190,979 192,632 Indirect costs and expenses: Payroll 61,527 70,364 74,308 Other expenses 96,570 113,270 125,466 ------------------------------------------------------------------------- Operating income (loss) 11,674 7,345 (7,142) Other income (expense): Interest expense (4,715) (6,038) (4,825) Deferred financing costs (2,553) (1,568) (68) Other income (expense) 12 (723) (802) ------------------------------------------------------------------------- Income (loss) before income taxes, minority interests, and equity investments 4,418 (984) (12,837) Income tax benefit (provision) (2,615) (1,027) 1,519 Minority interests 0 (86) (58) Equity investments 107 (169) (88) ========================================================================= Net income (loss) $ 1,910 $ (2,266) $ (11,464) ========================================================================= Net income (loss) per common share $ 1.00 $ (1.19) $ (5.32) ========================================================================= Weighted average shares outstanding 1,907 1,903 2,156 =========================================================================
See accompanying notes. 4 ITEM 14(a) Financial Statements Law Companies Group, Inc. Consolidated Statements of Shareholders' Equity
Foreign Class A Additional Currency Total Common Common Paid in Retained Translation Shareholders' Stock Stock Capital Earnings Adjustment Equity -------------------------------------------------------------------------------- (In thousands of dollars, except share amounts) Balance at December 31, 1993 $ 1,862 $ 324 $ 13,636 $ 28,087 $ (5,146) $ 38,763 Net loss for 1994 - - - (11,464) - (11,464) Cash dividends paid ($.26 per share) - - - (563) - (563) Conversion of 150,540 shares of Class A stock to common stock (151) 151 - - - - Repurchase and retirement of shares (88,089 shares of Class A stock and 243,970 of common stock) (88) (244) (2,072) (7,528) - (9,932) Issuance of 47,535 shares of common stock - 47 1,584 - - 1,631 Stock options exercised (as to 29,000 shares) - 29 520 - - 549 Foreign currency translation adjustment - - - - 391 391 -------------------------------------------------------------------------------- Balance at December 31, 1994 1,623 307 13,668 8,532 (4,755) 19,375 Net loss for 1995 - - - (2,266) - (2,266) Conversion of 78,210 shares of Class A stock to common stock (78) 78 - - - - Repurchase and retirement of shares (12,215 shares of Class A stock and 136,960 of common stock) (12) (137) (1,056) (2,472) - (3,677) Issuance of 113,326 shares of common stock - 113 2,211 - - 2,324 Foreign currency translation adjustment - - - - 70 70 -------------------------------------------------------------------------------- Balance at December 31, 1995 1,533 361 14,823 3,794 (4,685) 15,826 Net income for 1996 - - - 1,910 - 1,910 Conversion of 1,533,106 shares of Class A stock to common stock (1,533) 1,533 - - - - Repurchase and retirement of 7,804 shares of common stock - (8) (60) (21) - (89) Issuance of 18,854 shares of common stock - 19 300 - - 319 Foreign currency translation adjustment - - - - (376) (376) -------------------------------------------------------------------------------- Balance at December 31, 1996 $ 0 $1,905 $ 15,063 $ 5,683 $ (5,061) $ 17,590 ================================================================================
See accompanying notes. 5 Law Companies Group, Inc. Consolidated Statements of Cash Flows
Year ended December 31 --------------------------------------------------- 1996 1995 1994 --------------------------------------------------- (In thousands of dollars) Operating activities Net income (loss) $ 1,910 $ (2,266) $ (11,464) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 7,744 8,837 10,404 Financing costs amortization 2,553 1,568 68 Provision for losses on receivables 683 1,672 1,844 Benefit from deferred income taxes (3,169) (3,493) (2,423) Provision for losses on investments 0 1,458 3,672 Provision for losses on claims 919 1,885 3,689 Provision for other non-cash expenses 0 2,750 4,322 Undistributed (earnings) loss from equity investments (107) 169 88 Minority interest in income of subsidiaries 0 86 58 (Gain) loss on disposal of property and equipment (161) (306) 823 Changes in operating assets and liabilities, net of effects of business acquisitions: Billed fees receivable 1,473 8,590 (4,498) Unbilled work in progress 2,734 (8,335) (4,316) Other current assets 2,322 1,397 1,860 Accounts payable and accrued expenses (6,686) (399) 9,323 Billings in excess of costs and fees earned on contracts in progress 4,744 1,243 (1,071) --------------------------------------------------- Net cash provided by operating activities 14,959 14,856 12,379 Investing activities Business acquisitions, net of cash acquired 0 (1,191) (838) Purchases of property and equipment (3,992) (6,829) (9,374) Proceeds from disposal of property and equipment 494 2,376 1,487 Other, net (195) (11) 418 --------------------------------------------------- Net cash (used) in investing activities (3,693) (5,655) (8,307) Financing activities Net (payments) proceeds on short-term borrowings (855) 653 (395) Net (payments) on revolving line of credit and long-term borrowings (6,573) (10,422) (4,819) Deferred financing costs (921) (3,216) 0 Dividends paid 0 0 (563) Issuance of common stock 319 2,124 2,180 Repurchase and retirement of shares (89) (254) (5,039) --------------------------------------------------- Net cash (used) by financing activities (8,119) (11,115) (8,636) Effect of exchange rate changes on cash 37 11 218 --------------------------------------------------- Increase (decrease) in cash and cash equivalents 3,184 (1,903) (4,346) Cash and cash equivalents at beginning of year 4,913 6,816 11,162 --------------------------------------------------- Cash and cash equivalents at end of year $ 8,097 $ 4,913 $ 6,816 ===================================================
See accompanying notes. 6 Law Companies Group, Inc. Notes to Consolidated Financial Statements December 31, 1996 (In thousands of dollars) 1. Accounting Policies Description of Business Law Companies Group, Inc. and its subsidiaries (collectively, the Company) provide comprehensive environmental and specialized engineering consulting services to governmental, commercial and industrial entities. During 1996, 1995 and 1994, the Company derived approximately 10%, 11% and 10%, respectively, of gross fees from various agencies of the United States Government. Basis of Presentation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions are eliminated. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Revenue Recognition Fees from professional service contracts are recognized as the services are rendered and direct costs are incurred. Fees on long-term contracts are recognized using the percentage of completion method on technical units of production or labor hours as well as the portion of the total contract price that the costs expended to date bear to the anticipated final costs, based on current estimates of costs to complete. Estimates of losses on contracts are recognized when information indicating the loss becomes known. Fees earned on contracts in progress in excess of billings are included in current assets. Amounts billed in excess of fees earned on contracts in progress are included in current liabilities. Consolidated Statements of Cash Flows The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. 7 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are provided over estimated useful lives using both straight-line and accelerated methods. Useful lives range as follows: buildings 40 years; equipment 3-6 years; furniture and fixtures 5-10 years; automobiles 3-6 years; and leasehold improvements utilizing the shorter of the lease term or the remaining useful life of the asset. Depreciation and amortization expense was $7,165, $8,050, and $8,236 in 1996, 1995, and 1994, respectively. Income Taxes The liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the tax rates and laws that will be in effect when the differences are expected to reverse. Other Assets Goodwill, representing amounts paid in excess of the fair values of the net assets acquired in acquisition transactions, is amortized using the straight-line method over periods of 10-40 years. Included in Other assets are other intangible assets, primarily debt financing costs and trademarks, which are amortized on a straight-line basis over the terms of the related agreement. Accumulated amortization approximated $4,755 and $1,955 at December 31, 1996 and 1995 respectively. The Company adopted Financial Accounting Standards Board Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121), on January 1, 1996. The adoption of SFAS 121 did not have any effect on the financial statements. Stock Based Compensation The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company has elected to account for stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and, accordingly, recognizes no compensation expense for the stock option grants. (See Note 6.) Net Income (Loss) Per Share Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares and common share equivalents, if dilutive, outstanding during each year. Reclassification Certain prior year amounts have been reclassified to conform to the 1996 presentation. 8 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) 2. Acquisitions On August 1, 1994, the Company acquired Hill Kaplan Scott, Inc. (HKS), an engineering consulting firm in Cape Town, South Africa for a purchase price of approximately $4,200, net of approximately $500 cash acquired. The purchase price consisted of $1,700 in cash, 37,040 shares of preferred stock in a wholly-owned subsidiary of the Company valued at approximately $1,300, and a note for $1,200 which was paid in March 1995. The stock issued in this transaction is included in minority interest in equity of subsidiaries in the accompanying consolidated balance sheet. The acquisition has been recorded using the purchase method of accounting and is not significant to the Company's results of operations for the year ended December 31, 1994. 3. Debt
December 31 ------------------------------ 1996 1995 ------------------------------ Revolving lines of credit: United States, interest at prime rate plus 2.5% (10.75% at December 31, 1996) $22,539 $29,800 International, interest at local prime rate plus associated costs (generally 10.375% at December 31, 1996) 4,947 6,108 Notes payable to former shareholders, bearing interest at prime, 8%, and 8.5% 13,065 13,843 Note payable, interest at 7.5% 3,076 -- Various notes payable, bearing interest at rates ranging from 5.4% to 17.5% due in installments through the year 2001 1,426 1,471 ------------------------------ 45,053 51,222 Less: Current portion 2,206 3,759 ------------------------------ $42,847 $47,463 ==============================
At December 31, 1996, the Company had provided guarantees of $3,347 under United States letters of credit and $8,907 under international bonds, guarantees, and indemnities. In addition, the Company has guaranteed approximately $3,515 of a lessor's indebtedness to one of the Company's banks for a facility the Company occupies under an operating lease. On February 7, 1997, the Company obtained an amendment to its credit facilities from its banks, extending the maturity date through February 6, 1998. The terms and conditions are as follows: 9 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars)
Amended Credit Facilities (1) - ----------------------------- Maximum Nature Amount (4) Interest Rate (6) Expiration Date (8) - ------ ---------- ----------------- ------------------- Revolving Line of Credit (2) $ 40,000 Prime + 0% to 1.5% February 6, 1998 Revolving Line of Credit (2) (pound) 4,500 (5) LIBOR + 2.0% to 3.5% February 6, 1998 Letters of Credit sub-facility (3) $ 5,000 1.0% to 1.5% Per Annum February 6, 1998 Bonds, Guarantees, and Indemnities (pound) 6,000 (5) (7) February 6, 1998
1) Fees of 1% of the total commitment amount of these amended credit facilities are payable upon closing. Additionally, a commitment fee of 0.25% to 0.5% is payable on the average daily unused amounts of the amended credit facilities. 2) Amounts shown are maximum amounts available. The pounds sterling facility will be reduced by $100 per month beginning in July 1997. 3) Letters of credit can be issued under a sub-facility of the domestic facility and reduce, on a dollar-for-dollar basis, amounts available for revolving line of credit borrowing. 4) Amounts available under the amended credit facilities will be subject to a borrowing base limitation based upon the Company's billed fees receivable and unbilled work in progress, measured on a monthly basis. 5) Denominated in pounds sterling. 6) Prime rate is the lending agent's prime rate; LIBOR is the London Inter-Bank Offering Rate. The facilities bear interest based upon a specified debt coverage ratio. 7) Fees are 2.5% per annum on first (pound)50; 2.0% per annum on the next (pound)200; and 1.75% per annum on the remainder. 8) The amended credit facilities may be extended by the banks for up to two additional years. The amended credit facilities, including the Company's guarantee of $1,023 of shareholder loans made by a bank (as discussed in Note 8), are collateralized and secured by substantially all assets of the Company and substantially all the stock of its subsidiaries. The revised credit facilities contain certain restrictions relating to, among other things: maintaining debt within approved limits; a minimum specified net worth; limitations on capital expenditures; minimum earnings before interest, taxes, depreciation and amortization; and achieving certain ratios (fixed charge, debt to total capitalization, interest coverage and debt to earnings before interest, taxes, depreciation and amortization.) In addition, cash dividends are prohibited. The repurchase of shares for cash or notes is restricted and no payments are permitted on existing or future notes payable to shareholders as long as any amounts remain outstanding to the banks. Accordingly, these notes payable have been classified as long-term debt in the financial statements. The Company believes that the fair value of financial instruments approximates carrying value. 10 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) Future maturities of long-term debt, after giving effect to the revised credit facilities, are as follows: 1997 $ 2,206 1998 36,751 1999 2,771 2000 1,861 2001 1,223 Thereafter 241 ----------- $45,053 ===========
Interest payments totaled $5,212, $5,943 and $4,605 in 1996, 1995 and 1994, respectively. 4. Leases The Company leases certain office space, equipment, automobiles, and furniture under noncancellable operating leases. The following is a schedule of future minimum lease payments required under those leases which have initial or remaining noncancellable terms of one year or more: 1997 $16,084 1998 13,470 1999 10,637 2000 7,497 2001 5,809 Thereafter 29,651 ----------- $83,148 ===========
Rent expense aggregated $17,079, $24,278 and $21,046 in 1996, 1995 and l994, respectively. 5. Benefit Plans Pension Plans The Company has a noncontributory, defined benefit pension plan covering substantially all of its United States employees over the age of 21. The benefits are based on each eligible employee's years of service and compensation during the last ten years of employment. The Company's funding policy is to contribute amounts annually to the plan sufficient to meet minimum funding requirements as set forth in the Employee Retirement Income Security Act of 1974, plus additional amounts, if any, as may be determined to be appropriate by the Company's Board of Directors. (See Note 12 regarding a curtailment in the defined benefit pension plan approved by the Company's Board of Directors on February 14, 1997.) 11 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) Net periodic pension costs consist of the following components:
Year ended December 31 ------------------------------------------------------------------------------ 1996 1995 1994 ------------------------------------------------------------------------------ Service cost $ 2,898 $ 2,760 $ 2,575 Interest cost 2,859 1,787 1,517 Actual return on plan assets (4,511) (4,073) (355) Net amortization and deferral 2,656 2,574 (921) ------------------------------------------------------------------------------ $ 3,902 $ 3,048 $ 2,816 ==============================================================================
The following table sets forth the funded status and net liability recognized for the plan:
December 31 --------------------------------------------------- 1996 1995 --------------------------------------------------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $29,465 in 1996 and $18,764 in 1995 $ (30,481) $ (19,641) =================================================== Projected benefit obligation for service rendered to date $ (41,099) $ (28,238) Plan assets at fair value, primarily insurance contracts, fixed income and equity securities 27,319 22,056 --------------------------------------------------- Projected benefit obligation in excess of plan assets (13,780) (6,182) Unrecognized prior service cost (1,855) (2,013) Unrecognized net gain 11,073 4,475 Unrecognized net transition obligation (799) (958) --------------------------------------------------- Net pension liability $ (5,361) $ (4,678) ===================================================
Actuarial assumptions used to determine net periodic pension costs are as follows:
December 31 --------------------------------------------------------------- 1996 1995 1994 --------------------------------------------------------------- Weighted average discount rate 7.8% 8.0% 8.0% Rate of increase in future compensation levels 4.0% 4.5% 4.5% Expected long-term rate of return on plan assets 10.0% 9.5% 9.5%
12 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) Effective January 1, 1996, the Company revised each of the assumptions used for calculation of net periodic pension cost and the projected benefit obligation to better reflect current economic and market conditions. The net effect of the changes in these assumptions, as indicated above, was to decrease net periodic pension cost by approximately $210 in 1996. The Company also has a defined contribution savings plan which qualifies under section 401(k) of the Internal Revenue Code, covering substantially all United States employees, in which Company stock is one of several elective investment options. As of May 10, 1996, the Board of Directors of the Company decided to terminate the option 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. Employees may transfer funds out of this option quarterly (transfers out are limited to 25% per quarter of the employee's balance if the employee's balance in this option is greater than $5), resulting in the sale or repurchase of stock by the Company. At December 31, 1996, the Plan holds 114,949 shares of the Company's stock with a value of $1,450. The Company's international subsidiaries have defined contribution pension plans covering substantially all full-time employees over the age of 21. Eligible employees can elect contributory or noncontributory status, with contributions related to compensation. Expenses related to these plans aggregated $1,782 in 1996, $1,904 in 1995 and $1,718 in 1994. Employee Stock Ownership Plan (ESOP) Effective January 1, 1991, the Company's shareholders approved the establishment of an ESOP, to provide substantially all of the Company's full-time United States employees an additional opportunity to share in the ownership of the Company's common stock. The ESOP is intended to be a "qualified" stock bonus plan, as defined in the Internal Revenue Code. Contributions to the ESOP's trust fund are discretionary based upon the operating performance of the Company and will be used to purchase shares of Common Stock (see Note 6). The Company reserves the right to amend, modify or terminate the Plan, but in no event will any portion of the contributions made revert to the Company. No contributions were made for 1996, 1995, or 1994. 6. Shareholders' Equity Plan of Recapitalization Under the terms of the Company's Recapitalization Plan, all shareholders holding Class A Stock were eligible to convert their shares, on a one for one basis, into shares of newly authorized Common Stock in increments of 20% per year, commencing in 1992. During 1995 and 1994, 78,210, and 150,540 shares, respectively, of Class A Stock were so converted. All of the remaining outstanding shares of Class A Stock (1,533,106 shares) automatically converted into Common Stock on January 1, 1996. 13 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) Transactions involving Common Stock are valued at fair market value, as determined by independent appraisal. Transactions involving the Class A Stock are valued at net book value as of the previous December 31, based on the Company's consolidated financial statements. On February 2, 1996, the shareholders approved an amendment to the Company's bylaws allowing for stock valuations other than annually. Stock Option Plan The 1990 Stock Option Plan (the "Plan") has authorized the issuance of up to 375,000 shares of Common Stock to key employees. All options granted have 10 year terms and vest and become fully exercisable at the end of 5 years of continued employment. The option price per share and the date of exercise are determined by the Compensation Committee of the Board of Directors at the time of grant. However, the option price per share may not be less than the fair market value of the Company's Common Stock on the grant date, with the options expiring ten years or less from the grant date. At December 31, 1996, options to acquire 144,250, 6,000, 45,000, 60,500 and 75,000 shares of the Company's Common Stock at $17.80, $29.63, $26.31, $16.91 and $11.64 per share, respectively, were outstanding under this Plan. At that date, 177,250 had become exercisable. In 1995 the Company issued 9,751 shares of Restricted Stock to an executive of the Company. The restrictions require that the executive remain employed with the Company during the restriction period. The Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related Interpretations, in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, Accounting for Stock-Based Compensation (SFAS 123), requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Minimum Value option pricing model with the following weighted-average assumptions for 1996 and 1995, respectively: risk-free interest rates of 6.4% and 6.5%; dividend yields of 0%; and a weighted-average expected life of the option of 7 years. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. 14 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows (in thousands except for earnings per share information):
1996 1995 ---------------------------------- Pro forma net income (loss) $1,768 $(2,275) Pro forma earnings per share: Primary and fully diluted $0.93 $(1.20)
Because SFAS 123 is applicable only to options granted subsequent to December 31, 1994, its pro forma effect will not be fully reflected until December 31, 1999. A summary of the Company's stock option activity, and related information for the years ended December 31 follows:
1996 1995 1994 ----------------------------------------------------------------------------------------------------- Weighted-average Weighted-average Weighted-average Options exercise price Options exercise price Options exercise price ----------------------------------------------------------------------------------------------------- Outstanding- 274,500 $20.20 280,850 $21.04 332,100 $20.80 beginning of year Granted 136,500 14.01 50,000 20.51 - - Exercised - - - - (29,000) 18.95 Forfeited and cancelled (80,250) 20.33 (56,350) 24.69 (22,250) 20.20 --------- ------- -------- Outstanding-end of year 330,750 $17.61 274,500 $20.20 280,850 $21.04 Exercisable at end of year 177,250 $19.50 191,500 $19.04 176,580 $19.51 Weighted-average fair value of options granted during $5.08 $8.27 NA the year
Exercise prices for options outstanding as of December 31, 1996 ranged from $11.64 to $29.63. The weighted-average remaining contractual life of those options is 6.7 years. Share Repurchases As described in Note 5, Company Common Stock was previously an investment option in the Company's 401(k) plan. In accordance with plan provisions, 7,804 shares were repurchased during 1996 for $89 related to transfers out of this investment option. During 1995, the Company exercised its right to repurchase shares of all employees who offered their stock for sale or employees who left the Company during 1995. As a result, the Company repurchased 2,725 shares of Class A Stock and 18,965 shares of Common Stock for total consideration of approximately $570, comprised of $254 in cash and $316 in notes payable with interest rates from prime to 8.5% over periods from two to three 15 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) years. Due to violations of certain covenants in the Company's bank credit facilities, the Company was unable to repurchase additional shares during 1995. On March 8, 1996, the Company received a waiver from its banks which permitted the Company to repurchase for cash and notes up to approximately $3.9 million of shares of Class A Stock, Common Stock, Preferred Stock in wholly-owned subsidiaries, and to pay other amounts to employees or former employees who offered their stock for sale or left the Company in 1995. As a result, for those employees, or former employees who tendered their shares to the Company in 1995, the Company recorded in 1995 the repurchase of 117,995 additional shares of Common Stock, of which 69,960 were converted from Class A Stock, 9,490 additional shares of Class A Stock, and 17,745 shares of preferred stock in wholly-owned subsidiaries for total consideration of approximately $3,107, comprised of notes payable at prime over periods from one to five years. During 1994, the Company exercised its right to repurchase shares of all employees who offered their stock for sale. As a result, the Company repurchased 88,089 shares of Class A Stock and 243,970 shares of Common Stock for total consideration of approximately $9,932, comprised of $5,039 in cash and notes payable of $4,893 at interest rates from prime to 8.5% over periods from one month to six years. Shares repurchased included 50,104 shares of Class A Stock and 97,156 shares of Common Stock which were repurchased from executive officers and directors for approximately $4,222. Shares repurchased with notes payable are considered non-cash financing activities for statement of cash flow purposes. 7. Income Taxes The provision (benefit) for income taxes is comprised of the following:
1996 1995 1994 -------------------------------------------------------------------- Current: $ 5,784 $ 4,520 $ 904 Deferred: Current 1,417 (3,367) (2,872) Non-current (4,586) (126) 449 -------------------------------------------------------------------- $ 2,615 $ 1,027 $ (1,519) ====================================================================
The federal, state and foreign components of the provision (benefit) for income taxes are as follows:
1996 1995 1994 --------------------------------------------------------- Federal $ 730 $ (1,696) $ (810) State 7 (270) (336) Foreign 1,878 2,993 (373) --------------------------------------------------------- $ 2,615 $ 1,027 $ (1,519) =========================================================
16 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) The foreign provision (benefit) for income taxes is based on pre-tax earnings (losses) from foreign operations of $5,005 in 1996, $5,630 in 1995, and ($5,757) in 1994. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:
December 31 -------------------------------------------------- 1996 1995 -------------------------------------------------- Deferred tax liabilities: Cash basis of accounting for income tax purposes $ 9,002 $13,504 Software capitalization 2,161 1,487 Depreciation 0 1,038 Other - net 1,467 2,056 ------------------------------------------------- Total deferred tax liabilities 12,630 18,085 Deferred tax assets: AMT credit carryforward 0 1,925 Depreciation 789 0 Employee benefits 1,363 1,484 Non-deductible reserves 2,524 4,530 Loss carryforwards 4,418 2,847 Other - net 380 299 -------------------------------------------------- 9,474 11,085 Valuation allowance for deferred tax assets (3,007) (2,332) -------------------------------------------------- Total deferred tax assets 6,467 8,753 -------------------------------------------------- Net deferred tax liabilities $ 6,163 $ 9,332 ==================================================
Prior to 1995, certain of the Company's subsidiaries filed their federal income tax returns on the cash basis of accounting. Effective January 1, 1995, these subsidiaries changed their method of accounting from the cash to the accrual method for federal income tax purposes. Accordingly, previously deferred income of approximately $47 million at January 1, 1995 was included in taxable income over a four year period beginning in 1995. As of December 31, 1996, $4.5 million of deferred income taxes previously attributable to the cash basis of accounting are classified as non-current liabilities as such amounts are attributable to income which will be reported as taxable income in 1998. 17 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) Because the Company plans to continue to finance foreign expansion and operating requirements by reinvestment of undistributed earnings of its foreign subsidiaries, United States income taxes have not been provided on such earnings. The amount of undistributed earnings which are considered to be indefinitely reinvested is approximately $17,265 at December 31, 1996. A reconciliation of the statutory U.S. income tax rate to the Company's effective income tax rate is as follows:
1996 1995 1994 ---------------------------------------------------------------- Statutory U.S. income tax rate 34.0% 34.0% 34.0% State taxes, net of federal benefit 0.1% 36.8% 3.5% Income tax in jurisdictions other than 34% (4.5)% 5.7% 0.6% Permanent differences between book and taxable income 21.7% (137.8)% (11.6)% Losses for which no benefit recognized 8.5% (54.4)% (13.0)% Other (0.6)% 11.3% (1.7)% ---------------------------------------------------------------- Effective income tax rate 59.2% (104.4)% 11.8% ================================================================
At December 31, 1996 the Company had $1,737 of operating loss carryforwards related to foreign subsidiaries; $1,211 can be carried forward indefinitely. Of the remaining $526, $505 will expire in 1999 and $21 will expire in 2002. The Company has $3,151 of capital loss carryforwards in foreign jurisdictions that can be carried forward indefinitely. A valuation allowance has been provided for deferred tax assets related to loss carryforwards, and other reserves, which, if realized, would likely result in capital loss carryforwards. The valuation allowance as of January 1, 1995 and 1994 was $2,378 and $523, respectively. Income tax payments amounted to $4,906, $2,005, and $2,278 in 1996, 1995, and 1994, respectively. 8. Commitments and Contingencies The Company is a party to a number of lawsuits and claims (some of which are for substantial amounts) arising in the ordinary course of its business. In June of 1994, a judgment in the amount of $3,500 was entered against the Company in connection with certain materials engineering services. As a result of the judgment, the Company recorded a 1994 charge to earnings of $2,900, which was net of expected proceeds from insurance coverage of approximately $750. The judgment was upheld on appeal in November 1996, and in January 1997, the Company paid $3,207 plus insurance proceeds of $757 to the plaintiff. While the ultimate results of lawsuits or other proceedings against the Company cannot be predicted with certainty, management does not believe the ultimate costs of such actions, if any, in excess of amounts provided in the consolidated financial statements will have a material effect on the Company's consolidated financial position or results of operations. 18 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) The Company is contingently liable as guarantor or accommodation co-maker of stock purchase money notes to a bank with respect to loans made to 226 shareholder-employees by the bank to finance purchases of the Company's Common Stock. The remaining unpaid balances, totaling approximately $1,023 at December 31, 1996, are payable monthly over varying remaining terms not exceeding 60 months. Under its Articles of Incorporation, the Company has a right of first refusal to repurchase its outstanding shares, from employees who wish to sell such shares, of Common Stock at a price equal to the appraisal value per share, and preferred stock in wholly-owned subsidiaries of the Company (recorded as minority interest) at a price equal to the appraisal value per share, all as of the most recent appraised price. In addition, beginning August 1, 1995, the holders of preferred stock of a wholly-owned subsidiary issued in connection with the acquisition of HKS, described in Note 2, have the option to require the Company to redeem their shares at any time at a price equal to the appraised value per share as of the preceding December 31. In 1996, the Company redeemed 10,580 of these shares as discussed in Note 6. 9. Nonrecurring Charges to Operations In 1994, the Company undertook a strategy, which was continued in 1995, to realign and consolidate several of its operations, both domestically and internationally, with the intention of producing ongoing savings in future years. A major component of this strategy was a domestic reduction in force program initiated in the fourth quarter of 1994 designed to increase productivity and reduce future years' labor costs. During 1996, 1995 and 1994, the Company recorded a $410, $3,205, and $4,500 charge respectively, against operations to cover severance and related benefits costs, early termination of leases and expected sublease shortfalls, disposition of leasehold improvements and selected real estate, office relocation costs, and other corporate charges. In early 1994 the Company initiated a program to install a single world-wide project and financial accounting system. The Company recorded a $500 charge in the fourth quarter of 1994 to reduce the useful life of existing project and financial accounting systems. During the fourth quarter of 1994, a French environmental consultancy practice, in which the Company has a 50% investment, filed a petition for bankruptcy protection. As a result, the Company recorded a $2,400 charge to write off its investment and related advances. Certain past financial representations by others, on which the Company relied in its investment and funding decisions, are believed to have been materially false. The Company has engaged legal counsel to represent its interests in France. The Company is advised that legal recourse likely exists against those who may have defrauded it and others upon whom it relied, but there can be no assurance that any remedy will be realized. The Company reduced its investment in IAM, accounted for on the cost basis, by $1,000 during 1995, and by $1,500 during 1994. The Company recorded $2,350 and $4,050 as a charge against 1995 and 1994 earnings respectively related to various litigation; $1,150 of the 1994 amount was recorded in the fourth quarter of 1994. 19 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) 10. Geographic Area Data The Company's operations are conducted principally in the United States and Europe. Financial information for these areas is summarized in the following table.
For the year ended December 31 ---------------------------------------------------------------- 1996 1995 1994 ---------------------------------------------------------------- Net fees: United States $ 190,401 $ 215,418 $ 232,913 Europe 73,601 76,185 68,968 Africa 17,018 18,057 7,081 Other 5,262 5,213 5,140 ================================================================ $ 286,282 $ 314,873 $ 314,102 ================================================================ Operating income (loss): United States $ 4,797 $ 1,392 $ (1,423) Europe 5,536 5,154 (4,271) Africa 1,166 933 (775) Other 175 (134) (673) ================================================================ $ 11,674 $ 7,345 $ (7,142) ================================================================ Identifiable assets: United States $ 72,530 $ 90,892 $ 95,569 Europe 46,130 40,053 49,367 Africa 15,420 12,348 6,758 Other 4,617 5,011 3,918 ================================================================ $ 138,697 $ 148,304 $ 155,612 ================================================================
11. Financial Instruments The Company's financial instruments at December 31, 1996 and 1995, consist primarily of cash and cash equivalents and loans payable. Due to the short maturities of the cash, cash equivalents and loans payable, carrying amounts approximate the respective fair values. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash investments and trade accounts receivable. Concentrations of credit risk with respect to trade accounts receivable are limited, due to the large number of entities comprising the Company's customer base. The Company performs ongoing credit evaluations of its customers' financial condition. 20 Law Companies Group, Inc. Notes to Consolidated Financial Statements (In thousands of dollars) 12. Subsequent Events On February 14, 1997, the Board of Directors approved a curtailment in the United States defined benefit pension plan effective March 28, 1997. Benefits will no longer accrue to vested participants after March 28, 1997. Additionally, based on current estimates the Company will recognize a gain of approximately $1,800 in 1997 related to an unrecognized prior service cost asset. On March 14, 1997, the Board of Directors approved a letter of intent to issue to an investor $10,000 of 8% redeemable preferred stock (redeemable on or after the seventh anniversary of issuance), together with separate warrants exercisable for a period of 12 years and representing 33% of the Common Stock outstanding plus options to acquire up to 900,000 shares of Common Stock through December 31, 2006. The closing of this transaction is conditioned upon shareholder approval. 21 ITEM 14(a) SUPPLEMENTAL FINANCIAL SCHEDULE SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS LAW COMPANIES GROUP, INC. AND SUBSIDIARIES (Dollars in 000's)
COL. A COL. B COL. C COL. D COL. E Beginning Additions Ending Description Balance Expense Other (1) Deductions (2) Balance -------------------------------------------------------------------------------------------------------------------------- Year Ending December 31, 1996 Billed fees receivable: Allowance for doubtful accounts $4,388 $683 $275 ($881) $4,465 Valuation allowance for deferred tax assets 2,332 675 3,007 --------------------------------------------------------------------------------- $6,720 $1,358 $275 ($881) $7,472 ================================================================================= Year Ending December 31, 1995 Billed fees receivable: Allowance for doubtful accounts $4,003 $1,672 $438 ($1,725) $4,388 Valuation allowance for deferred tax assets 2,378 (46) 2,332 --------------------------------------------------------------------------------- $6,381 $1,672 $438 ($1,771) $6,720 ================================================================================= Year Ending December 31, 1994 Billed fees receivable: Allowance for doubtful accounts $2,756 $2,193 $1,201 ($2,147) $4,003 Valuation allowance for deferred tax assets 523 1,855 2,378 --------------------------------------------------------------------------------- $3,279 $4,048 $1,201 ($2,147) $6,381 =================================================================================
(1) Principally recoveries of previously written-off receivables and effects of foreign currency exchange adjustments. (2) Principally write-offs of receivables. Exhibit Index 2.01 Agreement for sale and purchase of all the issued shares of Chulsavale Limited, Gablelane Limited, Grashurst Limited, Gibb Petermuller & Partners (Cyprus) Limited and Gibb Overseas Limited, dated July 26, 1989 (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 2.02 Agreement for sale and purchase of the business of Sir Alexander Gibb & Partners and related assets and companies, dated August 18, 1989 (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 2.03 Agreement for purchase of Gibb Africa International Limited and grant of options relating to certain Cypriot and African firms, dated August 18, 1989 (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 2.04 Agreement for sale and purchase of the partnership of Gibb Petermuller & Partners O.E., dated August 18, 1989. (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 2.05 Redemption Agreement dated August 31, 1995 by and between Material Analytical Services, Inc. and Law Engineering, Inc. (Incorporated by reference to Form 10-K filed June 11, 1996 File No. 0-19239). 2.06 Asset Purchase Agreement between IAM/Environmental, Inc. and Philip Environmental Services Corporation dated July 11, 1996. 2.07 Stock Purchase Agreement between Law Companies Group, Inc. and Roy G. Dispasquale, Jeffrey A. Stocks, John M. Jazesf and E. Bradford Clark dated July 10, 1996. 3.01 Third Restated Articles of Incorporation of the Company, as amended through February 21, 1996. (Incorporated by reference to Form 10-K filed June 11, 1996 File No. 0-19239). 3.02 Bylaws of the Company, as amended through October, 1996. 4.01 Form Of Stockholders' Agreement between the Company and each shareholder (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.01 Annual Executive Incentive Compensation Plan (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.02 Law Companies Group, Inc. 1990 Stock Option Plan, as amended (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.03 Law Companies Group, Inc. Employee Stock Ownership Plan (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.04 The Law Companies Group, Inc. 401(k) Savings Plan, as amended. (Incorporated by reference to Form 10-K filed June 11, 1996 File No. 0-19239). 10.05 Pension Plan, as amended, for Employees of Law Companies Group, Inc. and Adopting Subsidiaries, as amended and restated effective January 1, 1976 (Incorporated by reference to Form 10 filed April 26, 1991, as amended August 13, 1991, File No. 0-19239). 10.06 Employee Stock Purchase Plan, as amended (Incorporated by reference to Form 10-K filed April, 1994, File No. 0-19239). 10.07 Variable Compensation Plan (Incorporated by reference to Form 10-K filed April, 1994, File No. 0-19239). 10.08 Revolving Credit and Term Loan Agreement dated October 8, 1993, between the Company and Trust Company Bank (Incorporated by reference to Form 10-K filed April, 1994, File No. 0-19239). 10.09 Facility Letter, dated October 1993, between Barclays Bank PLC and Sir Alexander Gibb & Partners Limited (Incorporated by reference to Form 10-K filed April, 1994, File No. 0-19239). 10.10 Forbearance Agreement dated March 14, 1995 as amended on April 17, 1995, May 10, 1995, and June 21, 1995 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.11 Commitment Letter dated June 15, 1995 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.12 Settlement agreement between the Company and R.K. Sehgal dated November 29, 1994 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.13 Consulting agreement between the Company and R.K. Sehgal dated December 1, 1994 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.14 Agreement between the Company and Walter T. Kiser dated May 21, 1993 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.15 Agreement between the Company and Richard G. Rosselot dated December 21, 1994 (Incorporated by reference to Form 10-K filed July 10, 1995, File No. 0-19239). 10.16 Amended and Restated Revolving Credit Agreement dated as of October 11, 1995 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank of Georgia, N.A. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.17 Amended and Restated Reimbursement and Guaranty Agreement dated as of October 11, 1995 by and among the Company and SunTrust Bank, Atlanta. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.18 Facility Agreement dated as of October 11, 1995 by and among Sir Alexander Gibb & Partners Limited, the Company and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.19 Waiver Letter dated January 12, 1996 by and among the Company and SunTrust Bank, Atlanta. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.20 Waiver Letter dated March 8, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky, SouthTrust Bank of Georgia, N.A. and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.21 Extension Agreement dated April 30, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank of Georgia N.A. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.22 Extension Agreement dated April 30, 1996 by and among the Company and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No.0-19239). 10.23 Second Extension Agreement dated May 10, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank of Georgia N.A. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.24 Second Extension Agreement dated May 10, 1996 by and among the Company and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.25 Extension of existing Credit Facilities dated May 10, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky, SouthTrust Bank of Georgia N.A. and Barclays Bank PLC. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.26 Employment Agreement dated September 1, 1995 between the Company and Bruce C. Coles. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.27 Employment Agreement dated January 10, 1996 between the Company and Robert B. Fooshee. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.28 Employment Agreement dated December 12, 1995 between the Company and James I. Dangar. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No. 0-19239). 10.29 Employment Agreement dated January 10, 1996 between the Company and Robert S. Gnuse. (Incorporated by reference to Form 10-K, as amended, filed June 11, 1996 File No.0-19239). 10.30 Second Amended and Restated Revolving Credit Agreement dated as of February 7, 1997 by and among the Company, SunTrust Bank, Atlanta and National Bank of Canada. 10.31 Amended and Restated Revolving Credit A Note dated December 24, 1996 by and among SunTrust Bank, Atlanta, National Bank of Canada and Barclays Bank PLC. 10.32 Facility Agreement dated February 7, 1997 by and among the Company and Barclays Bank PLC. 10.33 Commitment and Term Sheet dated December 24, 1996 by and among the Company and SunTrust Bank. 10.34 First Amendment to Waiver Agreement dated December 24, 1996 by and among the Company and SouthTrust Bank of Georgia, N.A. 10.35 Assignment and Acceptance Agreement dated December 24, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank Of Georgia, N.A. 10.36 Assignment and Acceptance Agreement dated December 24, 1996 by and among the Company, SunTrust Bank, Atlanta, National City Bank, Kentucky and SouthTrust Bank of Georgia, N.A. 10.37 Joinder to Intercreditor Agreement dated December 24, 1996 by and among National Bank of Canada, SunTrust Bank, Atlanta and Barclays Bank PLC. 10.38 Second Amendment to the Law Companies Group, Inc. Pension Plan as Amended and Restated dated February 14, 1997. 10.39 First Amendment to the Law Companies Group, Inc. 401(k) Savings Plan dated May 10, 1996. 10.40 Second Amendment to the Law Companies Group, Inc. 401(k) Savings Plan dated August 14, 1996. 10.41 Third Amendment to the Law Companies Group, Inc. 401(k) Saving Plan dated December 21, 1996. 10.42 Fourth Amendment to the Law Companies Group, Inc. 401(k) Savings Plan dated February 14, 1997. 11.01 Computation of Earnings Per Share. 21.01 Subsidiaries of the Company. 23.01 Consent of Ernst & Young LLP. 27.00 Financial Data Schedule. EX-2.06 2 ASSET PURCHASE AGREEMENT EXHIBIT 2.06 THIS ASSET PURCHASE AGREEMENT dated the 11th day of July, 1996. BETWEEN: IAM/ENVIRONMENTAL, INC., a corporation incorporated under the ---------------------- laws of the State of Texas (hereinafter called the "Vendor") -and- PHILIP ENVIRONMENTAL SERVICES CORPORATION, a corporation ----------------------------------------- incorporated pursuant to the laws of the State of Missouri (hereinafter called the "Purchaser") WHEREAS the Vendor carries on the business of lead and asbestos removal, site remediation, industrial services, and related activities; AND WHEREAS the Vendor, as part of such business, operates warehouses and offices which capabilities include remediation of lead and asbestos contamination; AND WHEREAS the Purchaser wishes to purchase from the Vendor and the Vendor wishes to sell to the Purchaser, certain property and assets pertaining to the lead and asbestos removal and site remediation and industrial services division of such business located in Texas and Florida upon the terms and conditions herein contained; AND WHEREAS, the Purchaser wishes to acquire and assume the benefits, burdens and obligations under customer contracts of the Business (as defined below); NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of these presents, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and promise and agree with each other as follows: ARTICLE 1 --------- DEFINITIONS ----------- 1.1 In this Agreement and in any amending or supplemental agreement hereto, unless the subject matter or context is inconsistent therewith, the following words and phrases shall have the meanings set forth below: (a) "Act" means the Texas Business Corporations Act as amended from time to time, and all regulations thereunder; (b) "Accounts Payable" shall mean the accounts payable as listed in Schedule 1.1(b); (c) "Accounts Receivable" shall have the meaning attributed hereto in Paragraph 2.1(m); (d) "Agreement", "this Agreement", "hereto", "herein", "hereof", "hereby", "hereunder" and similar expressions refer to this Agreement as amended from time to time; (e) "Bonds" means those bonds which are assumed by the Purchaser as more particularly set out in Schedule 1.1(e); (f) "Business" means the business of operating two (2) lead and asbestos removal, site remediation and industrial services facilities presently carried on by the Vendor in Houston, Texas and Tampa, Florida; (g) "Change of Control Financial Statements" means financial statements of the Business prepared by the Vendor which include a schedule of the cash flow effect of the excluded assets and excluded liabilities from the Effective Date through the Closing Date, dated as of the Effective Date and based on information as at the Closing Date, which are prepared under generally accepted accounting principles on a basis consistent with the Financial Statements within on hundred and twenty (120) days of the Closing Date; (h) "Closing" means the completion of the sale and purchase by the Purchaser of the Purchased Assets under this Agreement; (i) "Closing Date" means the 11th day of July, 1996 or such earlier or later date as may be mutually agreed upon in writing by the parties hereto; (j) "Contracts" shall have the meaning attributed hereto in Paragraph 2.1(o) hereof; (k) "Current Assets" means the Accounts Receivable, inventories and prepaid expenses and other current assets as more particularly set out in Schedule 1.1(k); 2 (l) "Current Liabilities" means the Accounts Payable, insurance premiums financed and taxes and other current liabilities and accrued expenses as more particularly set out in Schedule 1.1(l); (m) "Customer Contracts" means all customer contracts, whether or not in writing, of the Business, and whether at the bid preparation, bid submitted, contract awarded, work commenced or work completed stage, as listed in Schedule 1.1(m); (n) "Effective Date" means April 30, 1996; (o) "Emcumbrances" means mortgages, charges, pledges, security interests, liens, encumbrances, actions, claims, demands and equities of any nature whatsoever or howsoever arising and any rights or privileges capable of becoming any of the foregoing; (p) "Environmental Laws" means all laws in force and effective as at the date hereof relating in full or in part to the protection of the environment, and includes, without limitation, those Environmental Laws relating to the storage, generation, use, handling, manufacture, processing, labeling, advertising, sale, display, transportation, treatment, Release and disposal of Hazardous Substances; (q) "Equipment" means the equipment beneficially owned by the Vendor and used in the Business, including the equipment more particularly set out in Schedule 1.1(t); (r) "Equipment Leases" means those leases for equipment used in the Business by the Vendor as more particularly set out in Schedule 1.1(r); (s) "Financial Statements" means the unaudited financial statements of the Business dated December 31, 1995 and the unaudited financial statements for the fiscal period ended April 30, 1996, consisting of the balance sheet and the statement of earnings and retained earnings and changes in financial position and all notes thereto as prepared by the Vendor copies of which are attached as Schedule 1.1(s); (t) "Fixed Assets" means the machinery, equipment, computer equipment, tools, furniture, furnishings and other miscellaneous items used in or relating to the Business including, without limitation, all those listed in Schedule 1.1(t); (u) "Hazardous Substance" means any pollutant, contaminant, waste of any nature, hazardous substance, hazardous material, toxic substance, 3 dangerous substance or dangerous good as defined, judicially interpreted or identified in any Environmental Law as at the date hereof; (v) "Leases" means the real property leases for the premises located at 2525 McAllister, Houston, Texas, 77092, and at 4613 Clark Avenue, Tampa, Florida, 33614, as more particularly set out in copies of the Leases attached hereto as Schedule 1.1(v); (w) "Leased Premises" means the premises leased by the Vendor for the operation of the Business pursuant to the Leases; (x) "Net Assets" means the book value of the Current Assets plus the Fixed Assets being purchased minus the Current Liabilities being assumed by the Purchaser; (y) "Permits" shall have the meaning attributed hereto in Paragraph 2.1(j), copies of which are more particularly set out in Schedule 1.1(y); (z) "Person" includes an individual, partnership, corporation, trust or unincorporated organization, a government agency or political subdivision thereof, a regulatory body or agency or any combination of the foregoing; (aa) "Purchase Price" shall have the meaning attributed thereto in Paragraph 3.1; (bb) "Purchased Assets" means the undertakings and assets of the Business, which are to be sold by the Vendor to the Purchaser pursuant to Paragraph 2.1 hereof; (cc) "Release" has the meaning prescribed in any Environmental Law and includes, without limitation, any release, spill, leak, pumping, pouring, emission, emptying, discharge, injection, escape, leaching, disposal, dumping, deposit, spraying, burial, abandonment, incineration, seepage, or placement; (dd) "Time of Closing" means 10:00 o'clock in the morning (local time) on the Closing Date, or such earlier or later time on the Closing Date as may be agreed upon by the parties hereto or their respective solicitors. 1.2 Best of Knowledge: Any reference herein to "the best of the knowledge" of ----------------- the Vendor will mean the actual knowledge of the Vendor and the knowledge which it would have had if it had conducted a diligent inquiry into the relevant subject matter of Roy G. DiPasquale and Jeffrey A Stocks, the principal executive officers of the Vendor, and onsite managers for each facility of the Business. 4 1.3 Currency of funds: Unless otherwise indicated all dollar amounts referred ----------------- to in this Agreement are in United States funds. 1.4 Interpretation Not Affected by Headings or Party Drafting: The division of --------------------------------------------------------- this Agreement into articles, sections, paragraphs, subparagraphs and clauses and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms "this Agreement", "hereof", "herein", "hereunder" and similar expressions refer to this Agreement and the schedules hereto and not to any particular article, section, paragraph, subparagraph, clause or other portion hereof and include any agreement or instrument supplementary or ancillary hereto. Each party hereto acknowledges that it and its legal counsel have reviewed and participated in settling the terms of this Agreement. 1.5 Number and Gender: When calculating the period of time within or following ----------------- which any act is to be done or step taken pursuant to this Agreement, the date which is the reference date in calculating such period shall be excluded. If the last day of such period is not a Business Day, the period in question shall end on the next Business Day. 1.7 Schedules: The following are the schedules attached to and incorporated in --------- this Agreement by reference and deemed to be part hereof: Schedule 1.1(b)- Accounts Payable Schedule 1.1(e)- Bonds Schedule 1.1(k)- Current Assets Schedule 1.1(l)- Current Liabilities Schedule 1.1(m)- Customer Contracts Schedule 1.1(r)- Equipment Leases Schedule 1.1(s)- Financial Statements Schedule 1.1(t)- Fixed Assets Schedule 1.1(v)- Leases Schedule 1.1(y)- Permits Schedule 2.1(e)- Customer List Schedule 2.1(g)- Inventory Schedule 2.1(h)- Excluded Business Records Schedule 2.1(m)- Accounts Receivable Schedule 2.1(n)- Supply Contracts Schedule 2.1(o)- Contracts Schedule 2.2- Claims Receivable Schedule 3.6- Retainages Schedule 3.8- Allocation of Purchase Price Schedule 4.1(t)- Litigation Schedule 4.1(v)- Employee Matters 5 Schedule 4.1(xy)- Exceptions to Representations and Warranties Schedule 6.2(e)- Non-Competition Agreement Schedule 6.2(n)- Assignment and Assumption of Contracts Schedule 6.2(o)- Management Services Agreement ARTICLE 2 --------- AGREEMENT OF PURCHASE AND SALE ------------------------------ 2.1 Purchased Assets: Subject to the terms and conditions hereof, the Vendor ---------------- hereby agrees to sell, assign, transfer and convey to the Purchaser and the Purchaser hereby agrees to purchase from the Vendor all of the property, assets and undertakings (other than the property and assets described in Paragraph 2.2) used in the operation of the Business, including, without limiting the generality of the foregoing: (a) Machinery, Equipment and Furniture: all machinery, equipment, computer equipment, tools, furniture, furnishings and other miscellaneous items used in or relating to the Business including, without limitation, all those listed in Schedule 1.1(t) attached hereto; (b) Leased Equipment and Vehicles: to the extent transferable and in accordance with the terms thereof, all right, title and interest of the Vendor in and under leases of equipment and vehicles used in or relating to the Business including, without limitation, all leases and other agreements listed in Schedule 1.1(r) attached hereto; (c) Prepaid Expenses: all prepaid expenses which are usable and consumable in the ordinary course of the business relating to the business as of the Time of Closing; (d) Leased Premises and Leasehold Improvements: all right, title and interest of the Vendor in and to the Leased Premises and under the Leases (all of which are described in Schedule 1.1(v) attached hereto) including, without limitation, any prepaid rent and security deposits thereunder and all leasehold improvements owned by the Vendor and forming part of the Leased Premises; (e) Customer Lists and Information: all customer lists, files, data and information relating to customers and prospective customers of the Business as of the Time of Closing including, without limitation, the customer list which has been delivered by the Vendor to the Purchase prior to the date hereof, which most current customer list is attached hereto as Schedule 2.1(e); 6 (f) Warranty Rights and Maintenance Contracts: the full benefit, to the extent transferable, of all warranties and warranty rights (express and implied) against manufacturers or sellers which apply to any of the Purchased Assets and all maintenance contracts on machinery, equipment and the other Purchased Assets; (g) Inventories: all inventories of or relating to the Business as of the Time of Closing including those described on Schedule 2.1(g); (h) Business Records: all books, records, files and documents relating to the Business, including without limitation, books of account, ledgers, journals, sales and purchase records, lists of suppliers, credit information, cost and pricing information, business reports, plans and projections and all other correspondence, data and information, financial or otherwise, in any format and media whatsoever, related to the Business except those records described in Schedule 2.2(h); (i) Goodwill: the goodwill of the Business, together with the exclusive right of the Purchaser to represent itself as carrying on the Business in continuation of and in succession to the Vendor; (j) License Rights and Permits: all licenses, permits and other rights and privilege, to the extent transferable, owned or held by the Vendor including those described in Schedule 1.1(y); (k) Regulatory Licenses: all licenses, registrations and qualifications of the Business required by any governmental or regulatory authority, to the extent transferable, including those described in Schedule 1.1(y); (l) Insurance Benefits: any benefits payable under the insurance policy which is assumed by the Purchaser pursuant to Paragraph 4.1(v)(aa) in respect of claims based on occurrences prior to the Time of Closing as included in assets and balance sheets contained in the Financial Statements and the Change of Control Financial Statements; (m) Accounts Receivable: the accounts receivable as listed in Schedule 2.1(m) attached hereto plus the account receivable generated by the Business from the Effective Date to the Time of Closing, less such accounts receivable as were collected by the Vendor to the Time of Closing; (n) Supply Contracts: the full benefit of all contracts, to the extent transferable, providing for the supply of goods and services to the Business which are referred to in Schedule 2.1(n); 7 (o) Contract: all right, title and interest of the Vendor in, to and under, and the full benefit of, all other contracts and agreements of or pertaining to the Business, to the extent transferable, to which the Vendor is party, including the Customer Contracts and those set out in Schedule 2.1(o) attached hereto; (p) Other Agreements: all of the Vendor's right, title and interest to and under all contracts and agreements (written or oral) relating directly or indirectly to the Business, to the extent transferable, as required for the operation of the Business, subject to the Purchaser's review and acceptance of such contracts and agreements prior to the Closing Date. (all of which property and assets are herein collectively referred to as the "Purchased Assets"). 2.2 Excluded Assets: There shall be specifically excluded from the Purchased --------------- Assets the following property and assets of the Vendor pertaining to the Business: (i) all cash, bank balances, money in possession of banks and other depositories, term or time deposits and similar cash items of, owned or held by or for the account of the Vendor, as set out in the Balance Sheet for the fiscal period ended April 30, 1996 contained in the Financial Statements; (ii) the assets and liabilities for a joint venture between the Vendor and RMA Environmental Inc.; and (iii) the claims receivable set out in Schedule 2.2. 2.3 Assumed Liabilities: Subject to the terms and conditions hereof, the ------------------- Purchaser shall assume the following obligations of the Vendor pertaining to the Business upon Closing: (a) the Current Liabilities as at the Effective Date, a complete and accurate list of which is attached hereto as Schedule 1.1(l), together with all current liabilities incurred in the ordinary course of business through the Closing Date; (b) all remaining obligations under the Equipment Leases, the Leasings, the Bonds, and all Contracts to be assigned to the Purchaser as at the Effective Date, it being agreed that any obligations under such leases and contracts which occurred or arose prior to the Effective Date are not being assumed by the Purchaser and shall remain the liability of the Vendor, unless such liability is contained in Schedule 1.1(e) or Schedule 1.1(l); and (c) completion of the Customer Contracts in accordance with Paragraph 5.3(b). 2.4 Retained Liabilities and Indemnity: The Purchaser will not assume and will ---------------------------------- not be liable for, and the Vendor will indemnify and save harmless the Purchaser, its officers, directors, employees, agents and shareholders from and against, all obligations, 8 commitments, expenses, costs and liabilities of and claims against the Vendor (whether absolute, accrued or contingent) relating to the Business, except for the assumed liabilities outlined in paragraph 2.3 above or to the extent accrued for on the Financial Statements and assumed by the Purchaser or covered by insurance continued by the Purchaser pursuant to Paragraph 4.1(v)(aa). Without limiting the generality of the foregoing, it is agreed that the Purchaser will have no liability for any of the following obligations and liabilities (with the exception of those outlined in Paragraph 2.3 above): (a) all liabilities in respect of all indebtedness of the Vendor to all persons; (b) all product liability claims and liabilities for product claims relating to any product or service of the Business produced, sold, performed or delivered prior to the Closing Date that will not be covered by any insurance pertaining to the Business; (c) all liabilities for all taxes, duties, levies, assessments and other such charges, including any penalties, interests and fines with respect thereto, payable by the Vendor to any federal, state, local or other governmental agency, authority, board, bureau or commission, domestic or foreign, including, without limitation, any taxes in respect of or measured by the sale, consumption or performance by the Vendor of any product or service prior to the Effective Date and pursuant to any legislation in respect of all remuneration payable to all persons employed in the Business prior to the Effective Date, except that the Purchaser shall be liable for timely payment in respect of two-thirds of the 1996 property tax bills of the Business. (d) all liabilities for salary, bonus, vacation pay and other compensation and all liabilities under employee benefit plans of the Vendor relating to employment of all persons in the Business prior to the Effective Date; (e) all severance payments, damages for wrongful dismissal and all related costs in respect of the termination by the Vendor of the employment of any employee of the Business who does not accept the Purchaser's offer of employment made in accordance with Paragraph 5.1(a) and in respect of any employee of the Business who is not offered permanent employment by the Purchaser; (f) all liabilities for claims for injury, disability, death or workers' compensation (except for claims in respect of which there is coverage pursuant to the Workers' Compensation insurance Plan assumed by the Purchaser pursuant to Paragraph 4.1(v)(aa)) arising from or related to employment in the Business prior to the Effective Date; 9 (g) all obligations and liabilities and any claims against third parties which arise pursuant to any bonds which are not specifically assumed by the Purchaser pursuant to Paragraph 2.3(b); and (h) all liabilities which existed or arose prior to the Time of Closing as a result of non-compliance with any Environmental Law. 2.5 Payment of Taxes: The Purchaser shall be liable for and shall pay all ---------------- applicable federal and state sales tax, excise taxes and all other taxes (other than income taxes of the Vendor), duties and other like charges properly payable upon and in connection with the conveyance and transfer of the Purchased Assets to the Purchaser. The Vendor will do and cause to be done such things as are reasonably requested to enable the Purchaser to comply with such obligation in an efficient manner. 2.6 Sales Tax Clearance: The vendor hereby represents and warrants to the ------------------- Purchaser that all sales taxes and related interest and penalties in respect of the Business have been fully paid or accrued. The Vendor shall provide, within one-hundred & twenty (120) days of the Closing Date, tax clearances from both the Florida Department of Revenue and the Texas State Comptroller to such effect. ARTICLE 3 --------- PURCHASE PRICE, ALLOCATION AND ADJUSTMENTS ------------------------------------------ 3.1 Purchase Price: Subject to the adjustments provided for in this -------------- Agreement, the Purchase Price payable by the Purchaser to the Vendor for the Purchased Assets shall be the sum of: (a) One Million, Five Hundred Thousand Dollars ($1,500,000.00); plus (b) the value of the Net Assets, in the amount of One Million, Six Hundred & Thirty-Six Thousand, Four Hundred & Seventy-Five Dollars ($1,636,475.00), subject to adjustment under Paragraph 3.3 hereof. 3.2 Effective Date: The sale and purchase contemplated under this Agreement -------------- shall, when completed on the Closing Date, take effect as of the close of business on the Effective Date and from such time to the Closing Date the Business shall be carried on by the Vendor in the ordinary course for the account of the Purchaser. 3.3 Adjustments to Purchase Price: Within 120 days of the Closing Date, the ----------------------------- Vendor shall deliver to the Purchaser a copy of the Change of Control Financial Statements. The Change of Control Financial Statements shall be prepared in accordance with generally accepted accounting principles, consistently applied. The balance sheet contained in the Change of Control Financial Statements shall be based upon the unaudited balance sheet for the period ended April 30, 1996 contained in the Financial Statements, subject to such 10 adjustments as may result based on such information as becomes available during the period from April 30, 1996 to the close of business the day prior to the Closing Date. Based upon the Change of Control Financial Statements, the parties shall determine any adjustments necessary to the Purchase Price in accordance with the following: (a) If the Net Assets reflected on the Change of Control Financial Statements are in excess of One Million, Six Hundred & Thirty-Six Thousand, Four Hundred & Seventy-Five Dollars ($1,636,475.00), then the threshold amount referred to in Paragraph 4.5 shall be increased by such amount. (b) If the Net Assets reflected on the Change of Control Financial Statements are less than One Million, Six Hundred & Thirty-Six Thousand, Four Hundred & Seventy-Five Dollars ($1,636,475.00), then the portion of the Purchase Price specified in Paragraph 3.1(b) shall be decreased by an amount equal to One Million, Six Hundred & Thirty-Six Thousand, Four Hundred & Seventy-Five Dollars ($1,636,475.00), minus the value of the Net Assets reflected on the Change of Control Financial Statements. Any difference which is determined and results from the calculation made in accordance with Paragraph 3.3(b) shall be payable by the Vendor to the Purchaser as an adjustment to the Purchase Price. All adjustments to the Purchase Price shall be made in accordance with Paragraph 3.5 below. Payment of any adjustments to be made by the Vendor shall be satisfied by offsetting and deducting such amount against the amount held back by the Purchaser in accordance with Paragraph 3.5 below. 3.4 Settlement for Net Cash Disbursed: If the schedule of cash flow effects --------------------------------- contained in the Change of Control Financial Statements establish that the cash disbursed in settlement of liabilities of the Business which were not assumed by the Purchaser exceeds the cash generated on account of assets of the Business which were not purchased by the Purchaser, the difference shall be credited to the Purchaser and settled in accordance with Paragraph 3.5 below. 3.5 Holdback: -------- (a) The Purchaser shall hold back the sum of THREE HUNDRED THOUSAND DOLLARS ($300,000.00) (the "Holdback") from the Purchase Price, and the Holdback shall be dealt with in accordance with the provisions of this paragraph. If the Change of Control Financial Statements vary from the estimate of the Net Assets provided pursuant to Paragraph 3.1(b), any net credit in favour of the Purchaser shall be subtracted from the Purchase Price. If the amount of the net credit is less than the amount of the Holdback, the Purchaser shall be entitled to retain the amount of the net credit from the Holdback, and shall by certified cheque pay, subject to any set-off made pursuant to Paragraph 7.3 determined as of the Settlement Date (as hereinafter defined), the balance 11 of the Holdback to the Vendor within thirty (30) days of the date upon which the Change of Control Financial Statements were delivered (the "Settlement Date"). If the Change of Control Financial Statements establish that cash disbursements in settlement of unassumed liabilities exceed cash generated on account of non-purchased assets in accordance with Paragraph 3.4, any such net credit in favor of the Purchaser shall be payable by the Vendor to the Purchaser and the Purchaser shall be entitled to retain the amount of the net credit from the Holdback. If the amount of the net credits in favour of the Purchaser in respect of the adjustments and settlement made in accordance with Paragraphs 3.3(b) and 3.4 exceed the amount of the Holdback, the Purchaser shall be entitled to retain the full amount of the Holdback, and the Vendor shall pay to the Purchaser by certified cheque the amount by which such net credits exceed the amount of the Holdback. On or prior to the Settlement Date, the parties jointly shall prepare an allocation of the Purchase Price with respect to the Purchased Assets which may be different from the allocations set out in Schedule 3.8 by virtue of the adjustments provided for in this paragraph. (b) In the event the Purchaser objects in good faith to any aspect of the Change of Control Financial Statements, the Purchaser shall so advise the Vendor by delivery to the Vendor of a written notice (the "Objection Notice") within fifteen (15) days after the delivery to the Purchaser of the Change of Control Financial Statements. The Objection Notice shall set out the reasons for the Purchaser's objection as well as the amount under dispute and the reasonable details of the calculation of such amount. In the event that the parties agree on a resolution of the dispute set out in the Objection Notice, the parties shall confirm this resolution in writing and shall thereafter be bound by such resolution. In the event that the parties are unable to settle any dispute with respect to the Change of Control Financial Statements within fifteen (15) days after the delivery by the Purchaser to the Vendor of the Objection Notice, the auditor for the Purchaser and the auditor for the Vendor shall choose a third accountant (the "Accountant") to make a binding decision as to the generally accepted accounting standards and principles (subject to any adjustments and valuations as provided for in this Agreement). The party against whom the Accountant finds shall bear the cost and expenses incurred by the Accountant. The determination of the Accountant shall be final and binding on all parties. The Change of Control Financial Statements and the Purchase Price shall be adjusted in accordance with the determination of the Accountant. In the event of an Objection Notice, upon resolution of the dispute or a determination by the Accountant, the payment of the Holdback or part thereof, if any, shall be made forthwith by certified cheque to the Vendor. 12 3.6 Acounts Receivable: On the date being 120 days after the Closing Date, the ------------------ Purchaser will re-assign to the Vendor all Accounts Receivable, save and except the retainages set out in Schedule 3.6 as of the Effective Date still outstanding prior to the Closing Date transferred by the Vendor to the Purchaser which the Purchaser has not collected. Such re-assignment shall be dollar-for-dollar, without any set-off or reduction whatsoever. Without limiting the foregoing, it is understood that such re-assignment of Accounts Receivable shall not be reduced or set-off pursuant to the adjustment under Paragraph 3.3, nor shall the Indemnification Threshold (as hereinafter defined) referred to in Paragraph 4.5 be applicable thereto. Upon such assignment, the amount equal to the amount by which the gross amount of such Accounts Receivable less the allowance for doubtful accounts receivable that was reflected in Schedule 2.1(m) exceeds the amount of the Accounts Receivable collected by the Purchaser shall be deducted from the Holdback. It is understood that any payments from customers which are not designated for specific invoices will be applied to the oldest invoices first, regardless of whether the invoices had been issued by the Vendor or are issued by the Purchaser subsequent to Closing. It is further agreed that prior to any re-assignment of Accounts Receivable to the Vendor, the Purchaser will use reasonable best efforts (except that it will have no obligation to bring legal or other proceedings) to collect such Accounts Receivable, and the Purchaser shall take no action which results in the collectibility of such accounts receivable being impaired or compromised. The Vendor may take any reasonable actions after Closing to effect the collection of Accounts Receivable. 3.7 Payment: Subject to the adjustments and Holdback set out in Paragraphs 3.3, ------- 3.4 and 3.5, the Purchase Price shall be paid by the Purchaser to the Vendor by cash, bank draft or certified cheque at the Time of Closing in the amount of Three Million, One Hundred and Thirty-Six Thousand, Four Hundred & Seventy-Five Dollars ($3,136,475.00). 3.8 Allocation: The Vendor and the Purchaser covenant and agree that the ---------- Purchase Price shall be allocated among the Purchased Assets in the manner set out in Schedule 3.8 which allocation shall be prepared by the Purchaser within 45 days of the Closing Date and presented to the Vendor for its prior review and approval, such approval not to be unreasonably withheld. ARTICLE 4 --------- REPRESENTATIONS AND WARRANTIES ------------------------------ 4.1 Representations and Warranties of the Vendor: To induce the Purchaser to -------------------------------------------- enter into this Agreement and to consummate the transaction of purchase and sale herein contemplated, the Vendor hereby represents and warrants, except as set forth on Schedule 4.1(xy), to the Purchaser as follows and hereby acknowledges and confirms that the Purchaser is relying on such representations and warranties in connection with the purchase by it of the Purchased Assets: 13 (i) as to the Vendor: - --------------------- (a) the Vendor is a corporation duly incorporated and organized pursuant to the laws of the State of Texas and is a validly subsisting corporation under the laws of the State of Texas with full corporate capacity, power and authority (i) to own, lease and operate the Purchased Assets, (ii) to carry on the Business as heretofore conducted by it, (iii) to execute and deliver this Agreement, and all other agreements, documents and instruments to be executed and delivered pursuant hereto, (iv) to sell, assign, transfer, convey and deliver the Purchased Assets to the Purchaser as herein contemplated, and (v) to otherwise observe, perform, satisfy and carry out its obligations hereunder. Except as otherwise provided herein, to the best knowledge of the Vendor it is duly authorized, qualified and licensed under all applicable laws, regulations, ordinances or orders of public authorities to carry on the Business at the locations and in the manner in which such Business is now being conducted; (b) the execution and delivery of this Agreement and all other agreements, documents and instruments to be executed and delivered by the Vendor pursuant hereto or in connection with the completion of the transaction contemplated herein will have been duly authorized and approved by all necessary action of the board of directors of the Vendor on or prior to the Closing Date and by any other necessary corporate action on the part of the Vendor to comply with applicable law; (c) no suit, action or any other legal proceedings of any nature, kind or description whatsoever are pending or are threatened against the Vendor which would restrain or otherwise prevent, in any manner, the Vendor from effectually and legally transferring good and marketable title to the Purchased Assets to the Purchaser hereunder, nor are any suits, actions or any other legal proceedings relative to the Vendor, the effect of which would be to cause a lien to attach such property or assets or to divest title to such property or assets from the Vendor hereunder, pending or threatened, and in particular, and without restricting the generality of the foregoing, the Vendor: (i) has not had any petition or application for a receiving order in bankruptcy filed against it; (ii) has not filed a proposal under any applicable insolvency, bankruptcy or creditor's rights legislation or otherwise taken any proceedings with respect to a compromise or arrangement with its creditors; (iii) has not made a voluntary assignment in bankruptcy; 14 (iv) has not taken any proceedings, nor has any person instituted proceedings, to have the Vendor wound up or to have its charters canceled or its corporate existence terminated; (v) has not taken any proceedings, nor have any proceedings been filed or taken against it, to have a receiver appointed to all or any part of its property or assets; which petition, application, proposal, compromise, arrangement or other proceeding is presently pending and no execution has become enforceable against the Vendor or become levied upon any of its property or assets nor has any encumbrancer taken possession of any of the property or assets of the Vendor; (d) to the best of the knowledge of the Vendor, no governmental or regulatory authorization, approval, order, consent or filing is required on the part of the Vendor in connection with the execution, delivery and performance of this Agreement or any other documents and agreements to be delivered under this Agreement or the performance of the Vendor's obligations under this Agreement save and except pursuant to the Permits, the rights under which the Purchaser shall have secured pursuant to the terms of the Management Services Agreement referred to in Paragraph 6.2(o); (e) nothing prevents the Vendor from fully and timely fulfilling its obligations pursuant to the terms of the Assignment and Assumption of Contracts and the Management Services Agreement referred to in Paragraph 6.2(n) and 6.2(o); (f) the Financial Statements have been prepared in accordance with generally accepted accounting principles applied on a basis consistent with that of the preceding period and present fairly all of the assets, liabilities and financial position of the Business as at December 31, 1995 and April 30, 1996 and the sales, earnings, results of operation and changes in financial position of the Business for the periods ended December 31st, 1995 and April 30, 1996; (g) since the date of the balance sheet of the Business as at April 30, 1996, there has not been: (i) any material change in the financial condition, operations or prospects of the Business or the Purchased Assets other than changes in the ordinary and usual course of business, none of which has been materially adverse; 15 (ii) any damage, destruction, loss, labour, concerns or other event, development or condition of any character (whether or not covered by insurance) materially and adversely affecting the assets, properties or future prospects of the Business; or (iii) any material charge in the level of the inventories; (h) the Accounts Receivable of the Business reflected in the Financial Statements arose from bona fide transactions in the ordinary course of the Business and are valid and fully collectible and enforceable, subject to a reasonable allowance, consistent with past practice, for doubtful accounts as reflected in the Financial Statements. Such Accounts Receivable are not subject to any set-off or counterclaim save and except for any set-off by the bonding company or a customer pursuant to a Customer Contract arising from Purchaser's improper completion of a job subsequent to the Closing Date; (i) this Agreement has been duly and validly executed and delivered by the Vendor and constitutes a valid and legally binding obligation of the Vendor enforceable against it in accordance with the terms hereof, subject to the qualification that enforceability may be limited by bankruptcy, insolvency or other laws affecting the enforceability of creditors' rights and by general equitable principles; (ii) as to the Purchased Assets: -------------------------- (j) the Vendor, at the Time of Closing will be the sole unconditional owner of, and have good, valid and marketable title to, all of the Purchased Assets free and clear of all Encumbrances, subject to payment of the Current Liabilities and the terms of all leases, conditional sale or other title retention agreements, restrictions, demands, equities, encumbrances and rights of any Persons or every nature, kind and description whatsoever, including without limitation, rights of any Person (other than the Purchaser hereunder) to acquire any ownership interest in or right to possess or occupy any of the Purchased Assets, and the Vendor has the exclusive right and full power and authority to sell, assign, transfer, convey and deliver good and marketable title to such assets to the Purchaser as herein contemplated; (k) to the best of the knowledge of the Vendor, all of the Equipment and Leased Equipment used in the operation of the Business are in good condition, repair and proper working order for their intended purposes, and age and such assets have been properly and regularly maintained and are not obsolete unless valued at a nominal value, net of depreciation, on the Financial Statements; 16 (l) to the best of the knowledge of the Vendor, the Leases are in good standing with the respective landlords; (m) each of the Equipment Leases are in good standing and the Vendor is not in breach of any material terms of each of the Equipment Leases nor has the Vendor received any notice of breach of any terms of each of the Equipment Leases; (n) all of the Accounts Receivable are, net of any allowance on the Financial Statements, valid and fully collectible; (o) all inventories are in good condition and repair, fit for their intended purpose and not obsolete, or have a nominal value on the Financial Statement; (p) the Contracts, true and complete copies of which (or, in the case of oral arrangements, brief and accurate summaries of which) have been delivered to the Purchaser are in good standing and in full force and effect and have not been modified or supplemented in any way and constitute the entire agreement between the Vendor, on the one hand, and the lessee or other co-contractant on the other hand, such that there are no understandings, representations, warranties, allowances, concessions or promises affecting the Vendor's rights or obligations thereunder except as set forth in the said agreements; (q) the Vendor, the operation of the Business, the property and assets owned or used by the Vendor, including the Purchased Assets, and the use, maintenance and operation thereof have been and are in compliance with all federal, state and local laws, by-laws, statutes and regulations in force and effective as of the Closing Date, including but not limited to Environmental Laws. Any Release by the Vendor of any Hazardous Substance from the Business or the Purchased Assets into the environment complied and complies with all Environmental Laws. There are no outstanding or potential liabilities relating to the Vendor or the operation of the Business in respect of the transport, disposal or Release of asbestos or lead paint to any third party sites pursuant to the Comprehensive Environmental Response, Compensation and Liability Act 1980, or any other Environmental Laws. The Vendor has complied with all reporting and monitoring requirements under all Environmental Laws. The Vendor has not received any notice of any non- compliance with any Environmental Laws, and the Vendor has never been convicted of an offense for non-compliance with any Environmental Laws or been fined or otherwise sentenced or settled such prosecution short of conviction. The Vendor has no knowledge of any Hazardous Substance in, on or under any 17 Purchased Assets other than such Hazardous Substances which may be present in the ordinary course of the Business. Sewer use by the Vendor in the operation of the Business has been and is in compliance with all Environmental Laws, including but not limited to by-law compliance; (r) there are no material outstanding work orders, non-compliance orders, deficiency notices or other such notices relative to the Leased Premises, the Purchased Assets or the Business which have been issued by any regulatory authority, police or fire department, sanitation, environment, labour, health or other governmental authorities or agencies. There are no matters under discussion with any such department or authority relating to work orders, non-compliance orders, deficiency notices or other such notices. The Business is not being carried on, and none of the Leased Premises or the other Purchased Assets are being operated, in a manner which is in contravention of any statute, regulation, rule, code, standard or policy. No amounts are owing by the Vendor in respect of the Leased Premises to any governmental authority or public utility, other than current accounts which are not in arrears; (s) intentionally deleted (iii) as to the Condition of the Business: ----------------------------------- (t) except as disclosed in Schedule 4.1(t) attached hereto there are no claims, actions, suits, proceedings (including arbitration proceedings), or investigations (whether or not purportedly on behalf or the Vendor) pending or, to the best of its knowledge, information and belief, threatened at law or in equity or before or by any federal, provincial, municipal or other governmental department, commission, bureau, agency or instrumentality, domestic or foreign, which involves the possibility of materially and adversely affecting the Purchased Assets or the Business; and the Vendor is not aware of any existing ground on which any claim, action, suit, proceeding or investigation might be commenced with any reasonable likelihood of success: (u) during the period between the Effective Date to the Time of Closing, (i) the Business was operated in the ordinary course thereof, consistent with past practices; (ii) no obligation or liability (fixed or contingent) was incurred except normal trade or business obligations incurred in the ordinary course of the Business, none of which is materially adverse to the Business; 18 (iv) as to Employee matters; ---------------------- (v) Schedule 4.1 (v) annexed hereto sets forth: (i) the names, current annual salaries, job positions, length of employment and date and amounts of the most recent increases in salaries of all Persons who are employed by the Vendor on a full-time or part-time basis in connection with the Business and including all independent commission agents; (ii) particulars of any contracts, commitments, arrangements or understandings, written or oral, with any such employees or agents outstanding on the Closing Date; (iii) particulars of any agreements with any labour union or employee associations; and (iv) particulars of all employee insurance, hospital or medical expense program, pension, retirement, profit sharing, stock options or other employee benefit plans, programs or arrangements or any executive or key personnel incentives or other special compensation arrangements to which the Vendor is a party or is bound in respect of the employees or agents contemplated in (i) above; (w) save as disclosed in Schedule 4.1(v), the Vendor does not have any agreements with any labour union or employee association nor has it made commitments to or conducted negotiations with any union or employee association with respect to any future agreements, and the Vendor is not aware of any current attempts to organize or establish any labour union or employee association for the employees of Vendor; (x) the Vendor is not engaged in any material dispute with any of the employees identified in Schedule 4.1(v) annexed hereto and there is not, to the best of the knowledge of the Vendor, now pending or threatened any labour dispute or work stoppage which affects or may affect the Business or may interfere with its continued operations and there are no outstanding breaches of any collective agreement or outstanding or potential grievances; (y) the terms and conditions of employment of all such employees of the Business conform with the minimum employment and labour standards requirements laid down by the States of Texas and Florida, as applicable; 19 (z) all salaries, workers compensation assessments and surcharges, unemployment insurance assessments, pension remittances, employer health tax remittances, sick day credits, vacation pay including the monetary value of lieu days and associated payroll costs thereof, and similar charges or amounts with respect to all of the employees owing by the Vendor to those of its employees identified in Schedule 4.1(v) annexed hereto will have been paid or accrued up to the Closing Date or adjusted for at the Closing Date; (v) as to Insurance: --------------- (aa) all insurance policies relating to the Business are valid and in full force and effect up to the Time of Closing and the Vendor shall retain the benefits and burdens of such policies save and except Zurich-American Worker's Compensation Plan Policy No. WC365224400, which shall continue in full force and effect and be assumed by the Purchaser on Closing; (vi) Miscellaneous: ------------- (bb) the computer systems, including hardware and software are to the best of the Vendor's knowledge free from viruses; (cc) at the Time of Closing, all remittances with respect to state retail sales tax will have been made or accrued up to and including the Closing Date; (dd) no representation or warranty of the Vendor contained in the Agreement or contained in any statement, document, certificate or list made, delivered or furnished by or on behalf of the Vendor pursuant to this Agreement or in connection with the consummation of the transaction herein contemplated contains or will contain any untrue statement of a material fact or omits or will omit to state any fact necessary to make the statements herein and therein not misleading other than those facts as discovered by the Purchaser while performing its due diligence of the Business. 4.2 Representations and Warranties of the Purchaser: The Purchaser hereby ----------------------------------------------- represents and warrants to the Vendor as follows and hereby acknowledges and confirms that the Vendor is relying on such representations and warranties in connection with the sale of the Purchased Assets: (a) the Purchaser is a corporation duly incorporated and organized pursuant to the laws of the State of Missouri and is a validly subsisting corporation with full corporate capacity, power and authority to enter into this Agreement and carry out its obligations hereunder; 20 (b) the execution and delivery of the Agreement, and all other agreements, documents and instruments to be executed and delivered by the Purchaser pursuant hereto or in connection with the completion of the transaction contemplated herein have been duly authorized and approved by all necessary action of the board of directions of the Purchaser on or prior to the Closing Date and by any other necessary corporate action on the part of the Purchaser to comply with applicable law; (c) the execution and delivery of the Agreement and all other agreements, documents and instruments to be executed and delivered by the Purchaser pursuant hereto or in connection with the completion of the transaction contemplated herein, and the performance of this Agreement or any other such agreement by the Purchaser will not: (i) violate any provision of the Purchaser's Articles of Incorporation or by-laws, or (ii) result in the breach of violation of any provision of or constitute a default under any indenture, agreement or other instrument to which the Purchaser is a party or by which the Purchaser or any of its properties may be bound, or (iii) to the best knowledge of the Purchaser violate any law, rules or regulations to which the Purchaser is subject. 4.3 Non-Waiver: No investigations made by or on behalf of either the ---------- Purchaser or the Vendor at any time shall have the effect of waiving, diminishing the scope of or otherwise affecting or mitigating any representation or warranty made herein or pursuant hereto or the right of the party or parties to whom such representation or warranty is made to reply on such representation and warranty. 4.4 Nature and Survival of Representations and Warranties: The representations ----------------------------------------------------- and warranties of the parties hereto contained in this Agreement shall survive the Closing and notwithstanding such or any investigation made by or on behalf of either party, shall continue in full force and effect for the following periods: (a) for three (3) years after the Closing Date with respect to the representations made in Paragraphs 4.1(i) and 4.1(iii); (b) for one (1) year after the Closing Date with respect to the representations made in Paragraph 4.1(ii), except for Paragraph 4.1(ii)(q) relating to Environmental Laws, which representations shall survive for five (5) years after the Closing Date; 21 (c) for one (1) year after the Closing Date with respect to the representations made in Paragraphs 4.1(iv) and 4.1(v); and (d) For one (1) year after the Closing Date with respect to the representations made in Paragraph 4.1(vi), except for Paragraph 4.1(vi)(dd), which representation shall survive the period from the Closing Date to which the particular representation relates. 4.5 Threshold for Violation of Representations and Warranties. Save and except --------------------------------------------------------- in respect of the operation of Paragraph 3.6, the Vendor shall only be liable to the Purchaser for any violation of any representation or warranty to the extent the net damages suffered by the Purchaser exceed Seventy-Five Thousand Dollars ($75,000.00) plus such amount as is calculated in accordance with Paragraph 3.3(a). Net damages for purposes of this Section 4.5 shall mean any cost or claim of any nature whatsoever including any demand, liability, obligation, debt, cause of action, suit, proceeding, judgment, award, assessment or re-assessment as reduced and/or offset by any net benefit in the relevant Purchased Assets or Assumed Liabilities realized by the Purchaser or accrued on the Change of Control Financial Statements. ARTICLE 5 --------- OTHER COVENANTS OF THE PARTIES ------------------------------ 5.1 Employees --------- (a) Offer of Employment. Upon Closing, the Purchaser shall offer ------------------- employment to all employees of the Business, save and except Roy DiPasquale and Jeff Stocks, by way of a letter reasonably acceptable to the Vendor on terms and conditions which are substantially equivalent to those upon which such persons are presently employed by the Vendor. The Purchaser shall not succeed to any rights under any employment agreements between the Vendor and any of its employees. (b) Services, Credits, etc. The Purchaser shall accord to the employees of ---------------------- the Business the service credits and seniority accumulated by such employees while in the employment of the Vendor. (c) Other Benefits. Until Closing, the Vendor shall be responsible for all -------------- wages, bonuses, earned vacations, sick leave, severance pay, and other remuneration benefits for all of the employees of the Business. Thereafter, the Purchaser shall be responsible for all such benefits of such employees. 5.2 Bulk Sales. The Vendor and the Purchaser hereby waive compliance with the ---------- provisions of applicable bulk sales legislation. Notwithstanding the foregoing, the Vendor shall indemnify and hold harmless the Purchaser from and against any and all 22 claims which may be made or brought against the Purchaser or which the Purchaser may suffer or incur as a result of, or arising out of such non-compliance unless such non-compliance is a result of the Purchaser's non-satisfaction of assumed liabilities as described herein. 5.3 Other Purchaser's Covenants. The Purchaser: --------------------------- (a) shall discharge in accordance with their terms in the timely and usual course of business the Current Liabilities; (b) shall complete all Customer Contracts in a timely manner in the ordinary course of business in accordance with their terms; (c) can and will, provided the Vendor fulfills all of its obligations, conditions, representations and warranties pursuant to this Agreement, qualify as successor and replacement for the Vendor on all Customer Contracts; and (d) shall cause Law Companies Group, Inc. and its affiliates to be released from all indemnities on Bonds for the Vendor which are assumed by the Purchaser within fourteen (14) days of the Closing Date. 5.4 Other Vendor's Covenants. The Vendor: ------------------------ (a) can and will fulfill all of its obligations, conditions, representations and warranties pursuant to the Assignment and Assumption of Contracts and the Management Services Agreement referred to in Paragraphs 6.2(n) and 6.2(o); and (b) shall co-operate sully with and use its best efforts to assist the Purchaser in obtaining assignments of and filing applications for the Permits under its own name. 5.5 Covenant of Philip Environmental Inc. Philip Environmental Inc. ("PEN") ------------------------------------ covenants that should the Purchaser fail to fulfill its covenants contained in Paragraphs 5.3(b) or (d), PEN shall cause the prompt performance of such obligations and shall be liable for and save the Vendor harmless in respect thereof. ARTICLE 6 --------- CLOSING ARRANGEMENTS AND CONDITIONS AND RISK OF LOSS ---------------------------------------------------- 6.1 Place of Closing: The closing of the transaction contemplated hereto shall ---------------- take place at the Time of Closing, on the Closing Date at the Purchaser's offices in Hamilton, Ontario, or at such other place as may be mutually agreed upon by the parties hereto or their respective solicitors and attorneys. 23 6.2 Conditions of Closing: Except as otherwise set forth in this Agreement, --------------------- completion of the purchase and sale of the Purchased Assets contemplated hereto is subject to the following conditions having been satisfied. The conditions contained in Paragraphs 6.2(a) to (o), both inclusive, are for the exclusive benefit of the Purchaser. The conditions contained in Paragraphs 6.2 (p) to (r) both inclusive, are for the exclusive benefit of the Vendor. All conditions referred to herein are to be satisfied at the Time of Closing. The following are the conditions: (a) all of the representations and warranties of the Vendor contained in the Agreement or contained in any certificate or other document delivered to the Purchaser pursuant hereto shall be true and correct on and as of the Closing Date, with the same force and effect as if those representations and warranties had been made on and as of such date, regardless of the date as of which the information in this agreement or in any such certificate or document is given, and there shall have been compliance with the covenants and obligations on the part of the Vendor contained herein which were to have been complied with by the Vendor at or prior to the Time of Closing and the Vendor shall have delivered to the Purchaser a certificate executed by the president or chief executive officer of the Vendor to that effect. The acceptance of such certificate and the completion of the transaction of purchase and sale herein contemplated shall not be a waiver of the covenants, representations and warranties contained herein or in any certificate or other document given pursuant to this Agreement, which covenants, representations and warranties shall continue in full force and effect as provided in Paragraph 4.4 hereof; (b) the Vendor shall deliver to the Purchaser all necessary deeds, conveyances, bills of sale, assurances, transfers, assignments, consents, releases, discharges and other documents, necessary or reasonably required in the opinion of the Purchaser, to transfer effectively to the Purchaser good and marketable title to the Purchased Assets free and clear of all mortgages, liens, charges, security interests, pledges, adverse claims, conditional sale or other title retention agreements, restrictions, demands, equities, encumbrances and rights of any Person of every nature, kind and description whatsoever (save and except such encumbrances, claims or defects in title as are specifically scheduled or otherwise referenced in this Agreement as being consented to or assumed by the Purchaser); (c) the Vendor shall have delivered to the Purchaser possession of the Purchased Assets including documents relating to the Business contemplated in Paragraph 2.1 hereof; (d) save and except the Permits, the rights under which the Purchaser shall have secured pursuant to the terms of the Management Services Agreement referred to in Paragraph 6.2(o), the Purchaser shall have 24 obtained or received all material licenses, permits, consents, approvals and authorizations from all appropriate federal, state, local or other governmental or administrative bodies under all applicable laws, regulations, rules and ordinances as may be necessary and appropriate to enable the Purchaser to carry on the Business in the same manner in which such Business in now being carried on by the Vendor or as may be required to permit the change of ownership of the Purchased Assets herein provided for to be completed, without affecting or resulting in the cancellation or termination of any Permit or of any license or permit held by the Purchaser; (e) Law Companies Group, Inc. ("Law Group") shall execute a non- competition agreement whereby Law Group agrees to refrain from engaging in any similar business to the Business within Canada or the United States for a period of five (5) years from the Closing Date, which agreement shall be in substantially the form as set forth in Schedule 6.2(e); (f) on the Closing Date, and except as otherwise contemplated hereunder, title to the Purchased Assets shall be free and clear of all mortgages, liens, charges, security interest, pledges, adverse claims, conditional sale or other title retention agreements, restrictions, description whatsoever and there shall have been no material change to the Purchased assets; (g) the Vendor shall not have made from the Effective Date to Closing any capital expenditure, or dispose of any single capital asset, in excess or valued at $5,000.00, except with the Purchaser's prior written consent; (h) from the Effective Date to Closing, the Vendor shall not erode the working capital of the Business and, in particular, shall not make any cash outlays or draws other than the collection and settlement of commercial transactions in the normal course of business; (i) the Vendor shall provide to the Purchaser within thirty (30) days of the Closing Date the written consent of each lessor or third party under the Equipment Leases and Contracts to the assignment of same to the Purchaser and each of the lessors' and third party's acknowledgments that the Vendor is not in breach of any terms of each of the Equipment Leases and Contracts; (j) the Vendor shall assign to the Purchaser as of the Closing Date its interest in two Leases in regard to the properties located 2525 McAllister, Houston, Texas, 77092 and 4613 Clark Avenue, Tampa, Florida, 33614; (k) the Vendor shall provide to the Purchaser on the Closing Date, an acknowledgment and consent from each of the landlords under the Leases: 25 (i) acknowledging that the Vendor shall not be in breach of any terms of the Leases and that each Lease is in good standing as at the Closing Date; and (ii) consenting to the assignments of the Leases as contemplating in Paragraph 6.2(j) above. (l) the Vendor shall have performed or complied with all of its obligations, covenants and agreements hereunder; (m) the Purchaser shall have secured the approval of the board of directors of Philip Environmental Inc., authorizing and approving the transaction of purchase and sale herein contemplated, and shall have delivered to the Vendor a copy of such resolution of the board of directors evidencing the due authorization of the Purchaser to enter into this Agreement, to consummate the transaction of purchase and sale herein contemplated and to otherwise perform its obligations hereunder; (n) the Vendor shall deliver to the Purchaser an executed Assignment and Assumption of Contracts in substantially the form set out in Schedule 6.2(n); (o) the Vendor shall deliver to the Purchaser an executed Management Services Agreement in substantially the form set out in Schedule 6.2(o); (p) all of the representations and warranties of the Purchaser contained in this Agreement or contained in any certificate or other document delivered to the Vendor pursuant hereto shall be true and correct on and as of the Closing Date with the same force and effect as if such representations and warranties have been made on and as such date, regardless of the date as of which the information in this Agreement or in any such certificate or document is given, and there shall have been compliance with the covenants and obligations on the part of the Purchaser contained herein which were to have been complied with at or prior to Closing and the Purchaser shall have delivered to the Vendor a certificate executed by the president or chief executive officer of the Purchaser to that effect. The acceptance of such certificate and the compliance of the transaction of purchase and sale herein contemplated shall not be a waiver of the covenants, representations and warranties contained herein or in any certificate or document given pursuant to this Agreement, which covenants, representations and warranties shall continue in full force and effect as provided in Paragraph 4.4 hereof; 26 (q) the Purchaser shall have paid to the Vendor the amount payable at Closing pursuant to Paragraph 3.6 hereof; (r) the Purchaser shall have performed or complied with all its obligations, covenants and agreements hereunder. 6.3 Risk of Loss: If, at or prior to the Closing, all or any part of the ------------ Purchased Assets are lost, destroyed or damaged by fire or any other casualty, event or circumstance or are expropriated or otherwise seized by governmental or other lawful authority the Vendor shall immediately advise the Purchaser thereof in writing and the Purchaser shall have the option, exercisable by notice in writing to be given by the Purchaser to the Vendor within five (5) business days of the Purchaser receiving the aforesaid notice from the Vendor to either: (a) reduce the Purchase Price by the book value of all or any part of the Purchased Assets so lost, destroyed or damaged, or (b) in regard to circumstances in which a material part of the Purchased Assets is so lost destroyed or damaged, refuse to complete the transaction contemplated herein by notice to the Vendor and in such event all parties hereto shall be released from all obligations hereunder. ARTICLE 7 --------- INDEMNIFICATION --------------- 7.1 Indemnification by Vendor: Subject to Paragraph 4.5, the Vendor covenants ------------------------- and agrees to indemnify and save harmless the Purchaser, its officers, directors, employees, agents and shareholders from and against any and all losses, damages, liabilities, costs and expenses (including reasonable legal fees and disbursements) suffered or incurred by the Purchaser or any such other Person as a result of, in consequence of or arising out of, under or by reason of: (a) any representations or warranty of the Vendor contained in this Agreement or contained in any document or certificate delivered by the Vendor pursuant hereto or in connection with the completion of the transaction herein contemplated being untrue, inaccurate or misleading in any material respect; (b) a breach by the Vendor in any respect of any of its covenants or obligations contained herein or contained in any document or instrument delivered by the Vendor pursuant hereto or in connection with completion of the transaction contemplated herein; or 27 (c) any liability pertaining to the Business which occurred or arose prior to the Time of Closing except for the liabilities the Purchaser is assuming pursuant to Paragraph 2.3 herein. 7.2 Indemnification by Purchaser: The Purchaser covenants and agrees to --------------------------- indemnify and save harmless the Vendor from and against any and all losses, damages, liabilities, costs and expenses (including reasonable legal fees and disbursements) suffered or incurred by the Vendor or any such other Person as a result of, in consequence of or arising out of, under or by reason of: (a) any representation or warranty of the Purchaser contained in this Agreement or contained in any document or certificate delivered by the Purchaser pursuant hereto or in connection with the completion of the transaction herein contemplated being untrue, inaccurate or misleading in any material respect; (b) the failure of the Purchaser to offer employment to employees of the Business in accordance with Paragraph 5.1(a) on terms and conditions which are substantially equivalent to those upon which such persons are presently employed by the Vendor; (c) any other breach by the Purchaser in any respect of any of its covenants or obligations contained herein or contained in any document or instrument delivered by the Purchaser pursuant hereto or in connection with the completion of the transactions contemplated herein; or (d) any failure by the Purchaser or PEN to fully and timely complete the obligations set forth in Paragraphs 5.3 and 5.4 respectively. 7.3 Right of Set-Off: The Vendor acknowledges that the Purchaser shall have ---------------- the right to set any amounts owing by the Vendor to the Purchaser under Paragraph 7.1 against the Holdback referred to in Paragraph 3.5 Such amount shall be determined from the Change of Control Financial Statements as prepared and agreed upon pursuant to Paragraphs 3.3 and 3.4. ARTICLE 8 --------- GENERAL CONTRACT PROVISIONS --------------------------- 8.1 Notice: ------ (1) Any notice, designation, communication, request, demand or other document, required or permitted to be given or sent or delivered hereunder to any party hereto shall be in writing and shall be sufficiently given or sent or delivered if it is: 28 (a) delivered personally to an officer or director of such party; (b) sent to the party entitled to receive it by registered mail, postage prepaid, or (c) sent by telecopy machine. (2) Notices shall be sent to the following addresses or telecopy numbers: (a) in the case of the Vendor: IAM/Environmental, Inc. c/o Law Companies Group, Inc. 3 Ravinia Drive Suite 1830 Atlanta, Georgia 30346 Attention: Mr. Darryl B. Segraves, Esq. General Counsel, Executive Vice President & Secretary Fax No.: (770) 390-3289 with a copy to: Porter & Hedges, L.L.P. 700 Louisiana, 36th Floor Houston, Texas 77002-2764 Attention: John M. Ransom Fax No.: (713) 228-1331 (b) in the case of the Purchaser: Philip Environmental Services Corporation c/o 100 King Street West P.O. Box 2440 LCD 1 Hamilton, Ontario L8N 4J6 Attention: Colin Soule, Corporate Secretary Fax No.: (905) 521-9160 or to such other address or telecopier number as the party entitled to or receiving such notice, designation, communication, request, demand or other document shall, by a notice given in accordance with this section, have communicated to the party giving or sending or delivering such notice, designation, communication, request, demand or other document. 29 Any notice, designation, communication, request, demand or other document given or sent or delivered as aforesaid shall (c) if delivered as aforesaid, be deemed to have been given, sent, delivered and received on the date of delivery; (d) if sent by mail as aforesaid, be deemed to have been given, sent, delivered and received (but not actually received) on the fourth Business Day following the date of mailing, unless at any time between the date of mailing and the fourth Business day thereafter is a discontinuance or interruption of regular postal service, whether due to strike or lockout or work slowdown affecting postal service at the point of dispatch or delivery or any intermediate point, in which case the same shall be deemed to have been given, sent, delivered and received in the ordinary course of the mails, allowing for such discontinuance of interruption of regular postal service, and, (e) if sent by telecopy machine, be deemed to have been given, sent, delivered and received on the date the sender receives the telecopy answer back confirming receipt by the recipient. 8.2 Time of Essence: Time shall be of the essence of this Agreement and of --------------- every part hereof and no extension or variation of this Agreement shall operate as a waiver of this provision. 8.3 Further Assurances: The parties hereto shall, with reasonable diligence ------------------ do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated hereby and each party shall provide such further documents or instruments required by any other party as may be reasonably necessary or desirable to effect the purpose of this Agreement and to carry out its provisions, whether before or after the consummation of the transaction contemplated herein. 8.4 Expenses: Each of the parties hereto shall bear its own respective -------- expenses (including, but not limited to, all compensation and expenses of counsel, financial advisors, consultants, actuaries and auditors) incurred in connection with the negotiations, preparation and execution of this Agreement, the consummation of the transaction contemplated hereto and any post-closing matters. 8.5 Governing Law: This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of Texas, which shall be deemed to be the proper law hereof. The Courts of Texas shall have jurisdiction to entertain and determine all dispute and claims, both at law and in equity, arising out of or in any way connected with the construction, breach or alleged, threatened or anticipated breach of this Agreement, 30 and shall have jurisdiction to hear and determine all questions as to the validity, existence or enforceability thereof. The prevailing party shall recover attorneys' fees. THE PARTIES HEREBY UNCONDITIONALLY WAIVE THEIR RIGHT TO A JURY TRIAL IN RESPECT OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, ANY RELATED DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 8.6 Entire Agreement: This Agreement shall constitute the entire agreement ---------------- among the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties hereto, and there are no representations, warranties or agreements between the parties hereto except as set forth or contemplated herein or in any document or instrument delivered pursuant hereto. This Agreement shall not be amended except by a memorandum in writing signed by all of the parties hereto and any amendment hereof shall be null and void and shall not be binding upon any party which has not given its consent as aforesaid. 8.7 Assignment: Neither this Agreement nor any rights or obligations hereunder ---------- shall be assignable by any party hereto without the prior written consent of the other parties hereto, except that the Purchaser shall, without any prior consent required, be entitled to assign this Agreement to a related or affiliated company to be incorporated in the State of Texas or Florida. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, legal representative, successors and permitted assigns. 8.8 Publicity: Save as required by law or by any stock exchange, neither the --------- Purchaser nor the Vendor shall issue any press release or make any other public statement or announcement relating to or connected with or arising out of this Agreement or the matters contained herein, without obtaining the prior written approval of the other party hereto on the contents and the manner of presentation and publication thereof. If disclosure is required by law or by any stock exchange, the disclosing party shall consult in advance with the other party hereto and attempt in good faith to reflect such other party's concerns in the required disclosure. 8.9 Counterparts: This Agreement may be executed by the parties in separate ------------ counterparts, each of which when so executed and delivered shall be deemed to be an original and such counterparts together shall constitute one and the same instrument, which shall be sufficiently evidenced by any such counterpart, or longer as required by law. 8.10 Storage and Access to Records: The Purchaser agrees to provide the Vendor ----------------------------- (as well as the Vendor's accountants, auditors or other representatives) reasonable use of the Purchaser's (and Vendor's former) employee to gain access to the books and records forming part of the Purchased Assets and otherwise provide reasonable access to such 31 books and records during normal business hours at the premises of the Business, to the extent necessary to complete any financial statements required for this Agreement or otherwise required by the Vendor, to collect any accounts receivable re-assigned by the Purchaser to the Vendor, to prosecute or defend claims or lawsuits, to prepare tax returns and to comply with audits by taxing authorities. The Purchaser will not dipose of any such books and records that were compiled by the Vendor without prior written notice to the Vendor and providing the Vendor with a reasonable opportunity to re-possess such books and records. The provisions of this paragraph shall not merge but shall survive the closing of all transactions contemplated in this Agreement and shall continue in full force and effect for a period of ten (10) years, or longer as required by law. IN WITNESS WHEREOF the parties hereto have hereunto set their respective hands and seals. PHILIP ENVIRONMENTAL SERVICES CORPORATION Per: /s/ J. A. Woockroff --------------------------- A.S.O. IAM/ENVIRONMENTAL INC. Per: /s/ R. S. [ILLEGIBLE LAST NAME] ---------------------------- A.S.O. RM As to the covenant contained in Paragraph 5.5 hereof, agreed to by: PHILIP ENVIRONMENTAL INC. Per: /s/ J. A. Woockroff --------------------------- A.S.O. 32 EX-2.07 3 STOCK PURCHASE AGREEMENT EXHIBIT 2.07 STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into as of the 10th day of July, 1996, by and among LAW COMPANIES GROUP, INC., a Georgia corporation (the "Purchaser"), and certain owners of stock in IAM/ENVIRONMENTAL, INC., a Texas corporation ("IAM/E, the "Company"), being: ROY G. DIPASQUALE, JEFFREY A. STOCKS, JOHN M. JAZESF AND E. BRADFORD CLARK (hereinafter individually referred to as "Seller," and collectively the "Sellers"). WHEREAS, the Sellers desire to sell, and the Purchaser desires to Purchase all of the shares of stock owned or held by the Sellers in the Company and as identified on Exhibit A (the "Stock"), on the terms and subject to the --------- conditions set forth below, which would result in the Purchaser owning, as of Closing (as hereinafter defined), one hundred percent (100%) of the stock owned or held by Sellers in the Company; and WHEREAS, the Purchaser and Sellers wish to supersede any written or implied Shareholders' Agreements (if any) as to the purchase or sale of Stock by Sellers in the Company by the terms and conditions hereof; NOW, THEREFORE, in consideration of the mutual promises, covenants, and agreements herein contained, the adequacy and sufficiency of which are hereby acknowledged, and $1.00 in hand paid to each Seller by Purchaser, the parties to this Agreement do hereby promise, covenant, and agree as follows: ARTICLE 1. THE TRANSACTION. 1.1 PURCHASE OF SHARES. Upon the terms of and subject to the conditions of ------------------ this Agreement, the Purchaser shall purchase from the Sellers, and the Sellers shall sell to the Purchaser, at the Closing (as hereinafter defined), the Stock, in exchange for the Consideration (as hereinafter defined), subject in all instances to each of the terms, conditions, provisions, and limitations contained in this Agreement. At the Closing, (i) the Purchaser shall deliver to the Sellers the Consideration; (ii) the Sellers shall deliver to the Purchaser all required certificates representing the stock, duly executed and accompanied by a stock power executed in blank; (iii) the Sellers shall execute and deliver to the Purchaser a Bill of Sale evidencing each transfer of Stock in substantially the form attached hereto as Exhibit B. --------- 1.2 CLOSING. The closing hereunder shall take place at such place and time ------- as the Purchaser and Seller may reasonable agree (the "Closing") but in no event later than July 12, 1996. 1.3 CONSIDERATION. The aggregate purchase price for the Stock (the ------------- "Consideration") shall be ONE DOLLAR AND NO CENTS ($1.00) per Seller, which shall be paid by the Purchaser. 1.4 PHILIP ENVIRONMENTAL TRANSACTION. This Agreement is contingent upon -------------------------------- completion and execution of the Asset Purchase Agreement by and between IAM/E and Philip Environmental Services, Inc. In the event the Asset Purchase Agreement is not consummated this Agreement shall be null and void and without further effect. 1 ARTICLE 2. CONSENT TO TRANSFER. Each party hereto, by signing below, expressly consents to each disposition of the Stock as described herein. ARTICLE 3. INVESTMENT MATTERS. (a) The Purchaser has sufficient knowledge and experience in business and financial matters to evaluate the Company, to evaluate the risk of an investment in the Company, to make an informed investment decision with respect thereto, and to protect the Purchaser's interest in connection with its purchase of the Stock. (b) The Purchaser, as majority and controlling shareholder of the Company, has had complete access to, and has received and reviewed, such financial information and records of the Company as the Purchaser deemed necessary, and the Company has made available to the Purchaser the opportunity to ask questions of, and to receive answers from, representatives of the Company and to obtain additional information relative to the Company and the Purchaser's investment therein. All such materials and information requested by the Purchaser have been made available and examined by the Purchaser. ARTICLE 4. REPRESENTATIONS & WARRANTIES. Each of the Sellers represents and warrants to the Purchaser that the Stock represents all of their ownership interest in IAM/E, is fully paid and nonassessable and is owned by such Sellers free and clear of any lien, pledge, security interest or claim. ARTICLE 5. RELEASE. In consideration of the mutual benefits to each party in connection with this Agreement, the Purchaser and the Sellers hereby release and forever discharge, and agree to hold harmless, each other, with respect to any claim, loss, liability, cost (including reasonable attorney fees) or damage arising on or prior to the date hereof and arising under or relating to the sale of Stock described herein, except for any such claim, loss, liability, cost (including reasonable attorney fees) or damage arising out of a breach of this Agreement. ARTICLE 6. TERMINATION OF SHAREHOLDERS' AGREEMENT. Any Shareholders' Agreement as to Sellers (if any) is hereby automatically terminated effective as of the date of this Agreement as a result of this Transaction. ARTICLE 7. NOTICES. Any notice, request, instruction or any other document to be given hereunder by any party hereto to any other party shall be in writing and delivered personally (including overnight courier or express mail service) or sent by facsimile, telecopier or registered or certified mail, return receipt requested, postage or fees prepaid, 2 if to Purchaser to: Law Companies Group, Inc. Attention: Mr. Darryl B. Segraves, Esq. General Counsel and Executive Vice President 3 Ravinia Drive, Suite 1830 Atlanta, Georgia 30346 Facsimile number: (770) 390-3289 if to the Sellers to: Mr. Roy G. DiPasquale 5222 Royal Walk Houston, Texas 77069 Mr. Jeffrey A. Stocks 5064 Augusta Street Houston, Texas 77007 Mr. John M. Jazesf 3906 Yellow Finch Lane Tampa, Florida 33549 Mr. E. Bradford Clark 9602 Godstone Spring, Texas 77379 or at such address for a party as shall be specified by like notice. ARTICLE 8. AMENDMENTS AND WAIVERS. This Agreement may not be amended or otherwise modified without the written consent of the parties hereto. ARTICLE 9. MISCELLANEOUS. This Agreement is being delivered and is intended to be performed in the State of Georgia and shall be construed and enforced in accordance with and governed by the laws of such state, without giving effect to the principles of conflicts of laws. All disputes arising under or relating to this Agreement shall be submitted to arbitration at Atlanta, Georgia, United States of America, pursuant to the Commercial Arbitration Rules of the American Arbitration Association (the "AAA") and each party hereto consents to the jurisdiction of the AAA. All the terms of this Agreement shall be binding upon and inure to the benefit of and enforceable by the respective successors and assigns of the parties hereto. This Agreement is the entire agreement and understanding and supersedes all prior agreements and understandings between the Purchaser, the Sellers and the Company with respect to the subject matters hereof. The headings in this Agreement are for convenience of reference only, and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be signed and sealed on the date first written above by their respective officer duly authorized. 3 PURCHASER: LAW COMPANIES GROUP, INC. (SEAL) By: /s/ Signature Appears Here --------------------------- Its: EVP --------------------------- Attest: /s/ Signature Appears Here -------------------------------- Its: Secretary SELLERS: /s/ Roy G. DiPasquale -----------------------------(SEAL) Roy G. DiPasquale /s/ Jeffery A. Stocks -----------------------------(SEAL) Jeffrey A. Stocks -----------------------------(SEAL) John M. Jazosf /s/ E. Bradford Clark -----------------------------(SEAL) E. Bradford Clark 4 PURCHASER: LAW COMPANIES GROUP, INC. {SEAL} By: ------------------------------- Its: ------------------------------- Attest: -------------------------------- Its: Secretary SELLERS: /s/ Roy G. DiPasquale -----------------------------------{SEAL} Roy G. DiPasquale /s/ Jeffery A. Stocks -----------------------------------{SEAL} Jeffery A. Stocks -----------------------------------{SEAL} John M. Jazesf /s/ E. Bradford Clark -----------------------------------{SEAL} E. Bradford Clark PURCHASER: LAW COMPANIES GROUP, INC. {SEAL} By: ------------------------------- Its: ------------------------------- Attest: -------------------------------- Its: Secretary SELLERS: -----------------------------------{SEAL} Roy G. DiPasquale -----------------------------------{SEAL} Jeffery A. Stocks /s/ John M. Jazesf -----------------------------------{SEAL} John M. Jazesf -----------------------------------{SEAL} E. Bradford Clark EX-3.02 4 BYLAWS OF LAW COMPANIES GROUP, INC. EXHIBIT 3.02 BYLAWS OF LAW COMPANIES GROUP, INC. A GEORGIA CORPORATION AS AMENDED THROUGH OCTOBER, 1996 ARTICLE ONE OFFICES 1.1 The Corporation shall maintain a registered office and shall appoint a registered agent at such office. The registered office of the corporation and the registered agent of the corporation at such office may be changed from time to time by the Board of Directors in the manner specified by law. 1.2 The Corporation may have offices at such place or places (within or without the State of Georgia) as the Board of Directors may from time to time appoint or the business of the Corporation may require or make desirable. ARTICLE TWO SHAREHOLDERS' MEETINGS 2.1 All meetings of the shareholders shall be held at the principal offices of the Company, or at such place as may be fixed from time to time by the Board of Directors. 2.2 An annual meeting of the shareholders shall be held on the last Thursday of March in each year at 4:30 P.M. at the principal office of the Company or at such place and time as may be fixed from time to time by the Board of Directors. At such meeting, or at a substitute annual meeting of shareholders or at a special meeting of shareholders, the shareholders shall elect by a plurality vote a Board of Directors and transact such other business as may properly be brought before the meeting. Unless a shareholder so demands, the election of directors need not be by written ballot. 2.3 Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute or the Articles of Incorporation, may be called by the Chairman of the Board or the President, and shall be called by the Chairman of the Board or the President or the Secretary when so directed by the Board of Directors, or at the request in writing of any four or more directors, or at the request in writing of shareholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. 2.4 Except as otherwise required by statute or the Articles of Incorporation, written notice of each meeting of the shareholders, whether annual or special, shall be served, either personally or by mail, upon each shareholder of record entitled to vote at such meeting, not less than ten, nor more than fifty days, before such meeting. If mailed, such notice shall be directed to a shareholder at his post office address last shown on the records of the corporation. Notice of any special meeting of shareholders shall state the purpose or purposes for which the meeting is called. Notice of any meeting of shareholders shall not be required to be given to any shareholder who, in person or by his attorney thereunto authorized, either before or after such meeting, shall waive such notice. Attendance of a shareholder at a meeting, either in person or by proxy, shall of itself constitute waiver of notice and waiver of any and all objections to the place of the meeting, the time of the meeting, and to the manner in which it has been called or convened, except when a shareholder attends a meeting solely for the purpose of stating, at the beginning of the meeting, any such objection or objections to the transactions of business. The notice of any adjourned meeting need not be given otherwise than by announcement at the meeting at which the adjournment is taken. 2.5 The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented in proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by law, by the Articles of Incorporation or by these Bylaws. If. however, such majority shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of voting stock shall be present. At such adjourned meeting at which a quorum shall be present in person or by proxy, any business may be transacted that might have been transacted at the meeting as originally called. 2.6 At every meeting of the shareholders, including (but without limitation of the generality of the foregoing language) meetings of shareholders for the election of directors, any shareholder having the right to vote shall be entitled to vote in person or by proxy, but no proxy shall be voted after eleven months from its date unless said proxy provides for a longer period. Each shareholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, except as otherwise provided by law, by the Articles of Incorporation or by these Bylaws. 2.7 Whenever the vote of shareholders at a meeting thereof is required or permitted to be taken in connection with any corporate action, the meeting and vote of the shareholders may be dispensed with, if all of the shareholders who would have been entitled to vote upon the action if such meeting were held shall consent in writing to such corporate action being taken. 2 ARTICLE THREE DIRECTORS 3.1 Except as may be otherwise provided by any legal agreement among shareholders, the property, business and affairs of the corporation shall be managed by its Board of Directors. In addition to the powers and authority by these Bylaws expressly conferred upon it, the Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by law, by any legal agreement among shareholders, by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. 3.2 The Board of Directors shall consist of not less than six nor more than thirteen members, the precise number to be fixed by resolution of the shareholders from time to time. Each director (whether elected at an annual meeting of shareholders or otherwise) shall hold office until the annual meeting of shareholders held next after his election and until a qualified successor shall be elected, or until his earlier death, resignation, incapacity to serve or removal. Directors need not be shareholders. Outside directors shall not be considered to be employees even though they are compensated for their services. Outside directors may be compensated as determined from time to time by resolution of the Board of Directors. No person shall serve as a director until he reaches the age of 25 or after he reaches the age of 75. 3.3 If any vacancy shall occur among the directors by reason of death, resignation, incapacity to serve, increase in the authorized number of directors, or otherwise, the remaining directors shall continue to act, and such vacancies may be filled, for the unexpired term, by a majority vote of the directors then in office, though less than a quorum, and, if not theretofor filled by action of the directors, may be filled by the shareholders at any meeting held during the existence of such vacancy. A director may resign at any time and acceptance of his resignation shall not be necessary to make it effective. Such resignation shall take effect at the time stated. 3.4 The Board of Directors may hold its meetings at such place or places (within or without the State of Georgia) as it may from time to time determine. 3.5 Directors who are also employees of the corporation shall not be allowed compensation for attendance at regular or special meetings of the Board of Directors and of any special or standing committees thereof. 3.6 Action by Consent. Any action required or permitted to be taken at a meeting of the Board of Directors or of any committee thereof may be taken without a meeting if written consent setting forth the action so taken, shall be signed by all the Directors, or all the members of the committee, as the case may be, and be filed with the minutes of the 3 proceedings of the Board of Directors or such committee. Such consent shall have the same force and effect as a unanimous vote. 3.7 Action by Telephone Conference Call. Members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to this section shall constitute presence in person at such meeting. ARTICLE FOUR COMMITTEES 4.1(a) The Board of Directors, by resolution adopted by a majority of the entire Board, may designate an Executive Committee of no fewer than three nor more than seven directors, and shall designate a chairman. The Executive Committee shall include the Chairman of the Board and the President, if the President is a director, and such other directors as may be selected by majority vote of the Board of Directors. 4.1(b) The Board shall have power at any time to remove any member of the Executive Committee, with or without cause, and to fill vacancies in and to dissolve the Executive Committee. 4.1(c) Each member of the Executive Committee shall hold office until the first meeting of the Board of Directors after the annual meeting of shareholders next following his election and until his successor member of the Executive Committee is elected, or until his death, resignation or removal, or until he shall cease to be a director. 4.1(d) During the intervals between the meetings of the Board of Directors, the Executive Committee may exercise all of the powers of the Board of Directors in the management of property, business, and affairs of the corporation, including all powers herein or in the Articles of Incorporation specifically granted to the Board of Directors, and may authorize the seal of the corporation to be affixed to all papers which may require it; provided, however, that the Executive Committee shall not have authority as to the following matters: (1) The voluntary dissolution of the corporation or a revocation of any such voluntary dissolution; (2) The merger or consolidation of the corporation; 4 (3) The sale, lease or exchange of all or substantially all of the property of the corporation; (4) The recommendation to the shareholders of any amendment to the Articles of Incorporation; (5) The removal of Directors or the filling of vacancies in the Board; (6) The designation of any committee of Directors or the filling of any vacancies in any such committee; (7) The fixing of compensation of the Directors for serving on the Board or any committee of Directors; (8) The amendment or repeal of the Bylaws, or the adopting of new Bylaws; (9) The amendment or repeal of any resolution of the Board which by its terms shall not be so amendable or repealable; (10) The declaration or authorization of the payment of any dividend in cash, property or stock. 4.1(e) The Executive Committee shall meet from time to time on call of the Chairman of the Board or the President or of any two or more members of the Executive Committee. Meetings of the Executive Committee may be held at such place or places within or without the State of Georgia, as the Executive Committee shall determine or as may be specified or fixed in the respective notices or waivers of such meetings. The Executive Committee may fix its own rules of procedure including provision for notice of its meetings. It shall keep a record of its proceedings and shall report these proceedings to the Board of Directors at the meeting thereof held next after they have been taken, and all such proceedings shall be subject to revision or alteration by the Board of Directors, except where action shall have been taken by the corporation or third parties have relied upon such proceedings before such revision or alteration. 4.1(f) The Executive Committee shall act by majority vote of its members. 4.1(g) The Board of Directors, by resolution adopted in accordance with paragraph (a) of this section, may designate one or more directors as alternate members of any such committee, who may act in the place and stead of any absent member or members at any meeting of such committee. 4.2(a) The Board of Directors, by resolution adopted by a majority of the entire Board, may designate one or more additional committees, each committee to consist of three or more of the directors of the corporation, which shall 5 have such name or names and shall have and may exercise such powers as delegated to it by the Board of Directors in the management of the property, business, and affairs of the corporation, except the powers denied to the Executive Committee by the Bylaws of the corporation. 4.2(b) The Chairman of the Board and the President shall be ex-officio members of such committees. 4.2(c) The Board of Directors shall have power at any time to remove any member of any Board committee, with or without cause, and to fill vacancies in and to dissolve any such committee. ARTICLE FIVE MEETINGS OF THE BOARD OF DIRECTORS 5.1 The Board of Directors shall hold four regular meetings each year. 5.2 Regular meetings of the Board of Directors may be held without notice at such time and place (within or without the State of Georgia) as shall from time to time be determined by the Board of Directors. 5.3 Special meetings of the Board of Directors may be called by the Chairman of the Board or the President on not less than two days notice by mail, telegram, cablegram or personal delivery to each director and shall be called by the Chairman of the Board, the President or the Secretary in like manner and on like notice on the written request of any four or more directors. Any such special meeting shall be held at such time and place (within or without the State of Georgia) as shall be stated in the notice of the meeting. 5.4 Notice of any special meeting of the Board of Directors shall state the purposes thereof. 5.5 At all meetings of the Board of Directors, the presence of a majority of the authorized number of directors shall be necessary and sufficient to constitute a quorum for the transaction of business. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law, by the Articles of Incorporation or by these Bylaws. In the absence of a quorum, a majority of the directors present at any meeting may adjourn the meeting from time to time until a quorum be present. Notice of any adjourned meeting need only be given by announcement at the meeting at which the adjournment is taken. 6 5.6 Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if, prior to such action, a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with minutes of the proceedings of the Board or committee. 5.7 Directors may not vote by proxy at a meeting of the Board, and each director shall have one vote on each question. ARTICLE SIX OFFICERS 6.1 The Board of Directors at its first meeting after each annual meeting of shareholders shall elect by a majority vote a Chairman of the Board, a President, a Secretary and a Treasurer. The Board at its first such meeting shall also designate by a majority vote a Chief Executive Officer. The Chief Executive Officer shall be either the Chairman of the Board or the President. The Executive Committee or any member of the Board may from time to time nominate to the Board of Directors other officers including one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Treasurers, and one or more Assistant Secretaries and such other officers as the Executive Committee or members of the Board shall deem necessary. The Board of Directors shall elect any or all of such other officers from nominations made by the Executive Committee and such other officers shall hold their offices for such terms as shall be determined by the Board of Directors and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Officers may be elected and any vacancies may be filled by election at any meeting of the Board. 6.2 Any person may hold any two or more offices, except that no person may hold both the offices of President and Secretary. No officer need be a shareholder. 6.3 The total compensation of all the officers of the corporation shall be fixed by the Board of Directors. The Board may delegate to a committee of directors the power to fix or approve the total compensation of officers. No person who is also a director shall vote as a director or member of a committee in the determination of the amount of compensation payable to him. 6.4 Each officer of the corporation shall hold office until his successor is chosen or until his earlier resignation, death or removal, or the termination of his office. Notwithstanding any powers or authority given to the Executive Committee, the Chairman of the Board, the Chief Executive Officer, the President, the Secretary and the Treasurer may be removed only by the Board of Directors. Any other officer may be removed 7 by the Board or by the Executive Committee. Any such removal by the Board or by the Executive Committee may be with or without cause. An officer may resign at any time and acceptance of the resignation shall not be necessary to make it effective. Such resignation shall take effect at the time stated. CHAIRMAN OF THE BOARD 6.5 The Board shall elect a Chairman of the Board by a majority vote from their members at the first board meeting subsequent to the annual meeting of shareholders. He shall call all regular meetings of the Board and shareholders and shall preside at such meetings and perform such other duties as these Bylaws or the Board may prescribe. He shall be ex- officio a member of all Board committees. The Board of Directors at any time and from time to time may elect by a majority vote an Acting Chairman or a Temporary Chairman of the Board. The Acting Chairman or Temporary Chairman shall have the powers and perform the duties of the Chairman while acting in that capacity. DUTIES OF THE CHIEF EXECUTIVE OFFICER 6.6(a) The Chief Executive Officer shall have general and active supervision and control of the property, business and affairs of the corporation. 6.6(b) Without limiting the generality of the foregoing, the Chief Executive Officer shall: (1) Have authority to designate, appoint, and remove, with or without cause, any agent or employee of the Corporation, but he shall have no authority to appoint or remove any director or any officer elected by the Board of Directors; (2) See that all resolutions, orders and directives of the Board are carried into effect; (3) Be an ex-officio member of all committees of the Board; (4) Keep the Board and any committees of the Board fully informed as to the affairs of the corporation and shall freely consult them concerning the affairs of the corporation; (5) Have authority to sign, execute and deliver, with any other appropriate officer, corporate instruments of conveyance, instruments of indebtedness and obligation (including bonds), and contracts and other instruments and documents which may be authorized by the Board, except in cases where the signing, execution, or delivery thereof shall have been delegated by these Bylaws or by the Board to some other officer or agent of the corporation, or shall be required by law otherwise to be signed, executed or delivered; and 8 (6) Perform all duties incident to the office of the Chief Executive Officer as are specifically imposed upon him by law and such other duties as the Board may prescribe from time to time. DUTIES OF THE PRESIDENT 6.7(a) The President shall be the chief operating officer of the corporation. In the event of the death or disability of the Chairman of the Board or when specifically authorized by the Board of Directors, the President shall have the powers and perform the duties of the Chairman of the Board and the Chief Executive Officer. 6.7(b) Without limiting the generality of the foregoing, the President shall: (1) Direct, administer and coordinate the activities of the Corporation in accordance with policies, goals, and objectives established by the Chief Executive Officer and the Board of Directors, and assist the Chief Executive Officer in the development of cooperate policies and goals that cover Company operations, personnel, financial performance and growth; (2) Direct corporate operations to achieve budgeted profit results and other financial criteria; (3) Direct the development and preparation of short-term plans and budgets based upon the broad corporate goals and growth objectives and recommends their adoption to the Chief Executive Officer and Board of Directors; (4) Develop and maintain a sound plan of Corporate organization and establish policies to insure adequate management development and to provide for capable management successions; (5) Direct the development and installation of corporate procedures and controls to maintain communication and adequate flow of information and to maintain adequate management control and direction of the enterprise; (6) Develop and establish corporate operating policies consistent with the Chief Executive Officer's broad policies and objectives and ensure the adequate execution thereof; (7) Appraise and evaluate the results of overall operations regularly and systematically and report these results to the Chief Executive Officer and Board of Directors; 9 (8) Direct the development and establishment of adequate and equitable personnel policies, salary administration policies, and employee benefit plans throughout the Corporation; (9) Assume other special activities and responsibilities from time to time as directed by the Chief Executive Officer; and (10) Perform all duties incident to the office of President as are specifically imposed upon him by law and such other duties the Board may prescribe from time to time. VICE PRESIDENTS 6.8(a) The Vice Presidents shall perform such duties as are generally performed by vice presidents. The Vice Presidents shall perform such other duties and exercise such other powers as the Board of Directors or the President shall request or delegate. The Assistant Vice Presidents shall have such powers, and shall perform such duties, as may be prescribed from time to time by the Board of Directors or the President. 6.8(b) In the absence of the President, or in the event of his death or inability to act, the powers, duties and functions of his office shall be temporarily performed and exercised by the Chairman of the Board if the office is filled. Otherwise one or more of the Vice Presidents as prescribed or directed by the Board shall assume such powers, duties and functions and when acting in such capacity the Chairman or the Vice President shall be subject to all restrictions upon the President. SECRETARY 6.9(a) The Secretary shall attend all sessions of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in books to be kept for that purpose and shall perform like duties for the Board committee when required. He shall give, or cause to be given, any notice required to be given, or cause to be given, any notice required to be given of any meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President. The Assistant Secretary or Assistant Secretaries shall, in the absence or disability of the Secretary, or at his request, perform his duties and exercise his powers and authority. 6.9(b) He shall assure that minutes of all Board, committee or shareholders meetings shall be reported as outlined above and submitted in final form to the proper parties not less than fifteen days after meetings of the Board, committees or shareholders. 6.9(c) He shall maintain custody of the seal of the corporation and see that it is affixed to all corporate documents required to be executed under seal. 10 6.9(d) He shall have custody of the general records and documents of the corporation other than those required to be kept in the custody of the Treasurer and/or the Controller, pursuant to any directive of the Board or the President consistent with these Bylaws. TREASURER 6.10(a) The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the corporation and shall deposit, or cause to be deposited, in the name of the corporation, all monies or other valuable effects, in such banks, trust companies or other depositories as shall, from time to time, be selected by the Board. 6.10(b) He shall keep accurate records of same and keep the President and the Board fully informed as to all matters relating to the business and affairs of the corporation for which he is responsible. 6.10(c) He shall render to the President and to the Board of Directors, whenever requested, an account of the financial condition of the corporation. 6.10(d) In general, he shall perform all duties incident to the office of a Treasurer of a corporation, and such other duties as may be assigned to him by the Board of Directors or the President. ABSENCE OF OFFICER 6.11 In case of the absence of any officer of the corporation, or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may by a majority vote delegate, for the time being, any or all of the powers or duties of such officer to any officer or to any director pursuant to the requirements of these Bylaws. ARTICLE SEVEN CAPITAL STOCK 7.1 The interest of each shareholder shall be evidenced by certificate or certificates representing shares of stock of the corporation which shall be in such form as the Board of Directors may from time to time adopt and shall be numbered and shall be entered in the books of the corporation as they are issued. Each certificate shall exhibit the holder's name, the number of shares and class of shares and series, if any represented thereby, a statement that the corporation is organized under the laws of the State of Georgia, and the par value of each share or a statement that the shares are without par value. Each certificate shall be signed by the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary and shall be sealed 11 with the seal of the corporation; provided, however that where such certificate is signed by a transfer agent, or by a transfer clerk acting on behalf of the corporation, and a registrar, the signature of any such officer and such seal may be facsimile. In case any officer or officers who shall have signed, or whose signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be delivered as though the person or persons who signed such certificates or whose facsimile signatures shall have been used thereon had not ceased to be such officer or officers. 7.2 The corporation shall keep a record of the shareholders of the corporation which readily shows, in alphabetical order or by alphabetical index, and by classes of stock, if there be more than one class, the names of the shareholders entitled to vote, with the address of, and the number of shares held by each, the date on which the certificate was issued and the date on which the certificate was canceled, if such be the case. Said record shall be presented at all meetings of the shareholders. 7.3(a) Transfers of stock shall be made on the books of the corporation only by the person named in the certificate or by his legal representative, or by an agent or his attorney duly constituted in writing, and upon surrender of the certificate therefore, or in the case of a certificate alleged to have been lost, stolen or destroyed, upon compliance with the provisions of Section 7.7 of these Bylaws. 7.3(b) The Board may make or authorize the making of additional rules and regulations consistent with law and these Bylaws, which it may deem expedient for the issue, transfer and registration or transfer of securities of the corporation. 7.4(a) For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period but not to exceed fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. 7.4(b) In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date to be not more than fifty days, and in case of a meeting of shareholders, not less than ten days, prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. 12 7.5 The corporation shall be entitled to treat the holder of any share of stock of the corporation as the person entitled to vote such share, to receive any dividend or other distribution with respect to such share, and for all other purposes and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. 7.6 The Board of Directors may appoint one or more transfer agents and one or more registrars and may require each stock certificate to bear the signature or signatures of a transfer agent or a registrar or both. 7.7 Any person claiming a certificate of stock to be lost, stolen or destroyed shall make an affidavit or affirmation of the fact in such manner as the Board of Directors may require and shall, if the directors so require, give the corporation a bond of indemnity in form and amount and with one or more sureties satisfactory to the Board of Directors, whereupon an appropriate new certificate may be issued in lieu of the one alleged to have been lost, stolen or destroyed. ARTICLE EIGHT MISCELLANEOUS SEAL 8.1 The corporate seal shall be in such form as the Board of Directors may from time to time determine. ANNUAL STATEMENTS 8.2 Not later than four months after the close of each fiscal year, and in any case prior to the next annual meeting of shareholders, the corporation shall prepare: (1) A balance sheet showing in reasonable detail the financial condition of the corporation as of the close of its fiscal year; and (2) A profit and loss statement showing the results of its operation during its fiscal year. Upon written request, the corporation promptly shall mail to any shareholder of record a copy of the most recent such balance sheet and profit and loss statement. 13 INDEMNIFICATION 8.3(a) Definitions. As used in Section 8.3 of this Article, the term (1) "Corporation" or "corporation" includes any domestic or foreign predecessor entity of the corporation in a merger or other transaction in which the predecessor's existence ceased upon consummation of the transaction. (2) "director" means an individual who is or was a director of the corporation or an individual who, while a director of the corporation, is or was serving at the corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. A director is considered to be serving an employee benefit plan at the corporation's request if his duties to the corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. Director includes, unless the context requires otherwise, the estate or personal representative of a director. (3) "expenses" include attorneys' fees. (4) "liability" means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding. (5) "party" includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. (6) "proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal. 8.3(b) Indemnification of Directors and Officers - General. (1) Except as provided under subsection (3) of this Section 8.3(b), and subject to the limitations in Section 8.3(d) of this Article, the corporation shall indemnify an individual made a party to a proceeding because he is or was a director or officer of the corporation against liability incurred in a proceeding if: (A) he acted in a manner he believed in good faith to be in or not opposed to the be interests of the corporation; 14 (B) he acted with respect to an employee benefit plan for a purpose he believed to be in the interests of the participants in and beneficiaries of the plan; and (C) in the case of any criminal proceeding, he had no reasonable cause to believe his conduct was unlawful. (2) The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director or officer did not meet the standard of conduct set forth in subsection (1) above. (3) To the extent that a director or officer has been successful, on the merits or otherwise, in the defense of any proceeding to which he was a party, or in defense of any claim, issue, or matter therein, because he is or was a director or officer of the corporation, the corporation shall indemnify the director or officer against reasonable expenses incurred by him in connection therewith regardless of whether the director or officer has met the standards set forth in subsection (1) of this Section 8.3(b) and without any action or determination under Section 8.3(d)(1)(A) of this Article 8. 8.3(c) Advances for Expenses. (1) The corporation shall pay for or reimburse the reasonable expenses incurred by a director or officer who is a party to a proceeding in advance of final disposition of the proceeding if: (A) The director or officer furnishes the corporation a written affirmation of his good faith belief that he has met the standard of conduct set forth in Section 8.3(b)(1) of this Article; and (B) The director or officer furnishes the corporation a written undertaking, executed personally or an his behalf, to repay any advances if it is ultimately determined that he is not entitled to indemnification under this Article. (2) The undertaking required by paragraph (B) of subsection (1) of this Section 8.3(c) must be an unlimited general obligation of the director or officer but need not be secured and may be accepted without reference to financial ability to make repayment. 15 8.3(d) Limitations on Indemnification. (1) The corporation shall not indemnify a director or officer under Section 8.3(b) of this Article: (A) In connection with a proceeding by or in the right of the corporation in which the director was adjudged to be liable to the corporation; or (B) In connection with any other proceeding in which he was adjudged liable on the basis that improper benefit was improperly received by him. (2) The corporation shall not indemnify a director or officer under Section 8.3(b) of this Article unless a determination has been made in the specific case that indemnification of the director or officer is permissible in the circumstances because he has met the standard of conduct set forth in Section 8.3(b)(1). Such determination shall be made: (A) By the Board of Directors by majority vote of a quorum consisting of directors not at the time parties to the proceeding; (B) If a quorum cannot be obtained under paragraph (ii) of this subsection, by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate), consisting solely of two or more directors not at the time parties to the proceeding; (C) By special legal counsel: (i) Selected by the Board of Directors or its committee in the manner prescribed in paragraph (A) or (B) of this subsection; or (ii) If a quorum of the Board of Directors cannot be obtained under paragraph (A) of this subsection and a committee cannot be designated under paragraph (B) of this subsection, selected by majority vote of the full Board of Directors (in which selection directors who are parties may participate); or (D) By the shareholders, but the shares owned by or voted under the control of the officers and directors who are at the time parties to the proceeding may not be voted on the determination. 16 (3) Authorization of indemnification or an obligation to indemnify and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under paragraph (2)(C) of this Section to select counsel. (4) Indemnification permitted under Section 8.3(b) of this Article in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding. FAIR PRICE REQUIREMENTS 8.4 The provisions of Title 14, Chapter 2, Article 11, Part 2 of the Code, as amended, shall apply to the business and affairs of the Corporation unless and until this provision is repealed in accordance with the Code and these Bylaws. BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS 8.5 The provisions of Title 14, Chapter 2, Article 11, Part 3 of the Code, as amended, shall apply to the business and affairs of the Corporation unless and until this provision is repealed in accordance with the Code and these Bylaws. ARTICLE NINE NOTICES; WAIVERS OF NOTICE 9.1 Except as otherwise specifically provided in these Bylaws, whenever under the provisions of these Bylaws notice is required to be given to any shareholder, director or officer, it shall not be construed to mean personal notice, but such notice may be given either by personal notice or by cable or telegram, or by mail by depositing the same in the post office or letter box in a postpaid sealed envelope, addressed to such shareholder, officer or director at such address as appears on the books of the corporation, and such notice shall be deemed to be given at the time when the same shall be thus sent or mailed. 9.2 When any notice whatsoever is required to be given by law, by the Articles of Incorporation or by these Bylaws, a waiver thereof by the person or persons entitled to said notice given before or after the time stated therein, in writing, which shall include a waiver given by telegraph, or cable, shall be deemed equivalent thereto. No notice of any meeting need be given to any person who shall attend such meeting. 17 ARTICLE TEN AMENDMENTS 10.1 The Bylaws of the Corporation may be altered, amended or repealed and new Bylaws may be adopted by majority vote of the Board of Directors at any regular or special meeting of the Board of Directors. Such power and authority of the Board of Directors to alter, amend, repeal or adopt Bylaws shall extend to any and all subject matter contained in the Bylaws at any time, subject only to the limitations contained in the Georgia Business Corporation Code. The Shareholders may also alter, amend or repeal the Corporation's Bylaws, or adopt new Bylaws, by a majority vote of all shares voting, even though the Bylaws may also be amended or repealed by the Board of Directors. ARTICLE ELEVEN ENGINEER IN RESPONSIBLE CHARGE 11.1 Where required by state law, the corporation shall maintain a currently registered Civil Engineer or other registered Professional Engineer in each branch office or state where such practice is performed who shall be designated in responsible charge of all practice of Professional Engineering. The registrant shall have full authority for the corporation with regard to all Professional Engineering decisions and projects performed in said branch office or state. 18 EX-10.30 5 SECOND AMENDED REVOLVING CREDIT AGREEMENT EXHIBIT 10.30 SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ------------------------------------------------------ THIS SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of February 7, 1997 (the "Agreement") by and among (a) LAW COMPANIES GROUP, --------- INC., a Georgia corporation (the "Company"), (b) the Persons named on the ------- signature pages hereto as "Guarantors", together with all other Persons which hereafter become Guarantors as provided in Section 5.13 hereof (collectively, the "Guarantors"), (c) SUNTRUST BANK, ATLANTA, a Georgia banking corporation ---------- ("SunTrust") and NATIONAL BANK OF CANADA, a federal banking corporation -------- chartered under the laws of Canada ("Canada") (collectively, the "Banks" and ------ ----- individually, a "Bank") and (d) SUNTRUST BANK, ATLANTA, as agent for the Banks ---- (in such capacity, the "Agent"). ----- WITNESSETH: ---------- WHEREAS, SunTrust and Canada, as assignee of National City Bank, Kentucky and SouthTrust Bank of Georgia, N.A., previously made certain revolving credit facilities available to the Company, which facilities were guaranteed by certain of the Guarantors, pursuant to that certain Revolving Credit and Term Loan Agreement, dated as of October 8, 1993, as amended and restated by that certain Amended and Restated Revolving Credit Agreement, dated as of October 11, 1995, as heretofore amended or modified (the "Original Credit Agreement"); ------------------------- and WHEREAS, SunTrust previously issued certain letters of credit for the account of the Company and certain of the Guarantors, and all obligations of the Company and Guarantors thereunder were guaranteed by the Company and the Guarantors, pursuant to that certain Amended and Restated Reimbursement and Guaranty Agreement dated as of October 11, 1995, as heretofore amended or modified (the "Original Reimbursement Agreement"); and -------------------------------- WHEREAS, SunTrust, Canada, the Company and such Guarantors desire to amend and restate the Original Credit Agreement and the Original Reimbursement Agreement to consolidate the facilities thereunder and to increase revolving credit and letter of credit facilities thereunder, all as more particularly evidenced herein; NOW, THEREFORE, for and in consideration of the sum of $10.00 in hand paid by the Banks to the Company and the Guarantors, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree to amend and restate the Original Credit Agreement and the Original Reimbursement Agreement as follows: ARTICLE I DEFINITIONS ----------- SECTION 1.01 Definitions. In addition to the other terms ----------- defined herein, the following terms used herein shall have the meanings herein specified (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Account Instructions Agreement" shall mean that certain Account ------------------------------ Instructions (Automatic Incurrence/Payment of Loans) Agreement, dated as of the date hereof, between the Company and SunTrust Bank, Atlanta, in the form of Schedule 1.01(a) hereto. ---------------- "Account Party" shall mean the Company or any Guarantor in whose ------------- account a Letter of Credit is to be or has been issued. "Additional Guarantor" shall have the meaning assigned to such -------------------- term in Section 5.13(b) "Additional Pledgor" shall have the meaning assigned to such term ------------------ in Section 5.13(b). "Advance" shall mean any advance by a Bank under the Commitments. ------- "African Subsidiary" shall mean Gibb Africa International ------------------ Limited. "Agent" shall mean SunTrust Bank, Atlanta, as agent for the Banks ----- hereunder and under the other Loan Documents, and each successor agent. "Agent Fee" shall mean the "Agency Fee" as defined in the Fee --------- Letter, payable annually in advance to the Agent during the period prior to the Commitment Termination Date. "Affiliate" shall mean, with respect to any Person, any other --------- Person that, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such first Person. A Person shall be deemed to -2- control another Person if such first Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" shall mean this Second Amended and Restated Revolving --------- Credit Agreement, either as originally executed or as hereafter amended, restated, renewed, extended, supplemented or otherwise modified from time to time. "Applicable Commitment Fee Percentage" shall mean, with respect to ------------------------------------ Commitment Fees through March 31, 1997, one-half of one percent (0.50%) per annum, and with respect to Commitment Fees during each fiscal quarter thereafter, the percentage determined for such fiscal quarter from Schedule -------- 1.01(b) under the column "Commitment Fee Percentage" based upon the ------- Company's Senior Debt Coverage Ratio determined as of the end of each fiscal quarter, with any change to the Applicable Commitment Fee Percentage to be effective on the first day of the second fiscal quarter thereafter. By way of example, as of the first day of the second fiscal quarter of the Company, the Applicable Commitment Fee Percentage shall be calculated based on the ratio of the Company's Senior Debt Coverage Ratio reported for the fourth fiscal quarter of the prior fiscal year of the Company. "Applicable LC Fee Percentage" shall mean, with respect to Letter of ---------------------------- Credit Fees through March 31, 1997, one and one-quarter percent (1.25%) per annum, and with respect to Letter of Credit Fees during each fiscal quarter thereafter, the percentage determined for such fiscal quarter from Schedule -------- 1.01(b) under the column "Letter of Credit Fee Percentage" based on the ------- Company's Senior Debt Coverage Ratio determined as of the end of each fiscal quarter, with any change to the Applicable LC Fee Percentage to be effective on the first day of the second fiscal quarter thereafter. By way of example, as of the first day of the second fiscal quarter of the Company, the Applicable LC Fee Percentage shall be calculated based on the ratio of the Company's Senior Debt Coverage Ratio reported for the fourth fiscal quarter of the prior fiscal year of the Company. "Application Law" shall mean, anything in Section 11.05 --------------- notwithstanding, (i) all applicable common law and principles of equity and (ii) all applicable provisions of all (a) constitutions, statutes, rules, regulations and orders of governmental bodies, (b) Governmental Approvals and (c) orders, decisions, judgments and decrees of all courts and arbitrators. "Applicable Margin" shall mean, with respect to all outstanding ----------------- Advances through March 31, 1997, one percent (1.0%) per annum, and with respect to all outstanding Advances during each fiscal quarter thereafter, the percentage determined -3- for such fiscal quarter from Schedule 1.01(b) under the column "Advance ---------------- Margin" based on the Company's Senior Debt Coverage Ratio determined as of the end of each fiscal quarter, with any change to the Applicable Margin to be effective on the first day of the second fiscal quarter thereafter. By way of example, as of the first day of the second fiscal quarter of the Company, the Applicable Margin shall be calculated based upon the ratio of the Company's Senior Debt Coverage Ratio reported for the fourth fiscal quarter of the prior fiscal year of the Company. "Arrangement Fee" shall mean the "Arrangement Fee/Upfront Fee" as --------------- defined in the Fee Letter, less any portion thereof previously paid by the Company to SunTrust Capital Markets, Inc. upon the Company's acceptance of the Commitment Letter. "Asset Value" shall mean, with respect to any property or asset of the ----------- Company or any of its Subsidiaries as of any particular date, an amount equal to the greater of (i) the then book value of such property or asset as established in accordance with GAAP, and (ii) the then fair market value of such property or asset as determined in good faith by the board of directors of the Company or such Subsidiary. "Assignment Agreement" shall mean an agreement in the form of Exhibit -------------------- ------- A. - "Availability" shall mean, with respect to any Commitment, at any ------------ time, the amount by which such Commitment exceeds all Advances made under such Commitment. "Avoidance Provisions" shall have the meaning set forth in Section -------------------- 10.01(b)(iii) hereof. "Bankruptcy Code" shall have the meaning set forth in Section --------------- 10.01(b)(i) hereof. "Bankruptcy Law" shall mean laws governing bankruptcy, suspension of -------------- payments, reorganization, arrangement, adjustment of debts, relief of debtors, dissolution, or other similar laws relating to the enforcement of creditors' rights generally. "Banks" shall have the meaning set forth in the first paragraph of ----- this Agreement. -4- "Barclays Agreement" shall mean the Facility Agreement, dated as of ------------------ the date hereof, by and among Barclays Bank PLC, individually, as agent thereunder and as International Collateral Agent, Gibb Limited, Gibb Holdings Limited and certain of its Subsidiaries, Gibb Africa International Limited and certain of its Subsidiaries and the Company, as hereafter amended, restated, renewed, extended, supplemented or otherwise modified from time to time, pursuant to which Barclays Bank PLC has made available the Barclays Revolver and certain other facilities to Gibb Limited, Gibb Holdings Limited and the African Subsidiary. "Barclays Bank PLC" shall mean Barclays Bank PLC, an English banking ----------------- corporation, any of its local affiliates and their respective successors and assigns. "Barclays Guaranties" shall mean, collectively, (1) that certain ------------------- Guaranty Agreement, dated as of the date hereof, executed by the Company, Law International, Inc, and Gibb International Holdings, Inc. in favor of Barclays Bank PLC, and (2) that certain Guaranty Agreement, dated as of the date hereof, executed by certain other U.S. Subsidiaries of the Company in favor of Barclays Bank PLC, in each case as hereafter amended, restated, renewed, extended, supplemented or otherwise modified from time to time. "Barclays Revolver" shall mean, collectively, (1) the short-term ----------------- revolving loan facility made available by Barclays Bank PLC to Gibb Limited under the Barclays Agreement in a principal amount not to exceed (Pounds) 4,474,940, less the Committed Amount of Local Facilities (as defined in clause (2) below) established by Barclays in favor of the African Subsidiary, of which short-term revolving loan facility up to (Pounds) 298,329 (or such higher amount as all Banks may agree) may be borrowed by Gibb Limited and (2) the local facilities requested by the African Subsidiary from time to time and established at the discretion of Barclays in an aggregate principal amount not to exceed (Pounds) 1,551,313 (or its equivalent in other currencies), less the outstanding obligations of Gibb ---- Limited and Gibb Holdings Limited to Barclays under the short-term revolving loan facility described in clause (1) above in excess of (Pounds) 2,923,627 (the "Local Facilities"), as such Barclays Revolver may be ---------------- permanently reduced from time to time, and to the extent provided in Section 4.1(4) of the Intercreditor Agreement, the Barclays Revolver shall mean the Replacement Facility (as defined in the Intercreditor Agreement). "BGI Exposure" shall have the meaning assigned to such term in the ------------ Intercreditor Agreement. -5- "BGI Facility" shall mean the multi-currency guaranty facility made ------------ available by Barclays Bank PLC to Gibb Limited under the Barclays Agreement in a principal amount not to exceed pounds 5,966,587. "Borrowing" shall mean a borrowing under the Commitments consisting of --------- simultaneous Advances by the Banks. "Borrowing Base" shall mean as at any time the sum of (a) eighty -------------- percent (80%) of the U.S. Billed Fees Receivable, measured in a manner reasonably acceptable to the Agent as of the most recently ended month of the Company as determined from the most recently delivered Borrowing Base Certificate, plus (b) the lesser of (i) eighty percent (80%) of the U.S. ---- Unbilled Work in Process, measured in a manner reasonably acceptable to the Agent as of the most recently ended month of the Company as determined from the most recently delivered Borrowing Base Certificate, and (ii) $12,000,000, plus (c) $2,000,000 at any time during the Company's fiscal ---- months of September, October, November and December of 1997. "Borrowing Base Certificate" shall mean a certificate of the Chief -------------------------- Executive Officer, the Chief Financial Officer or Corporate Controller of the Company in the form of Schedule 5.02(b)(2) delivered pursuant to ------------------- Section 5.02(b)(2) hereof. "Borrowing Base Reporting Date" shall mean the 15th day of each ----------------------------- fiscal month of each fiscal year of the Company. "Business Day" shall mean a day of the year other than Saturday, ------------ Sunday or any other day on which commercial banks are required to close in the city in the United States in which each Revolving Credit Bank maintains its principal place of business, or a day of the year on which commercial banks are required to close in London, England. "California Guaranty Supplement" shall mean that certain Amended and ------------------------------ Restated California Guaranty Supplement, dated as of the date hereof, executed by Leroy Crandall & Associates, a California corporation, and Law Engineering and Environmental Services, Inc., a Georgia corporation, in favor of the Banks and Barclays Bank PLC. "Capitalization" shall mean, at any time, the sum of (a) Consolidated -------------- Net Worth plus (b) Funded Debt. ---- -6- "CERCLA" shall mean the Comprehensive Environmental Response ------ Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (42 U.S.C. (S) 9601 et seq.). -- --- "Change of Control" shall mean any entity or related groups of ----------------- entities shall obtain the beneficial ownership, or the power to vote, more than 25% of the outstanding securities (of any class or type) of the Company with the right to vote for the election of the Board of Directors of the Company. "Change of Management" shall mean a change in any officers of the -------------------- Company and each of its Subsidiaries listed on Schedule 1.01(c) to a person ---------------- not having equal or better qualifications, financial acumen, management skills and standing in the industry as such officer has within 90 days after such officer no longer holds such office. "Closing Date" shall mean February 7, 1997. ------------ "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time, and the regulations promulgated and the rulings issued thereunder. "Collateral" shall mean all real and personal property and assets, ---------- now or hereafter existing, of the Company and its Subsidiaries over which the Company or such Subsidiary has granted a Lien to the U.S. Collateral Agent or the International Collateral Agent pursuant to the Security Documents, and all proceeds and products thereof, provided, however, that -------- ------- the term Collateral shall not include cash collateral securing bonds, guaranties and indemnities under the BGI Facility issued for periods of five years or longer or with no expiry date. "Collateral Agent" shall mean the U.S. Collateral Agent or the ---------------- International Collateral Agent, as the case may be. "Commitment" shall mean, for any Bank at any time, the revolving ---------- credit facility severally established by such Bank in favor of the Company pursuant to Section 2.01, including, without duplication, such Bank's Pro Rata Share of the Letter of Credit Subfacility and, in the case of SunTrust, the Swing Line, as the same may be increased or decreased from time to time as a result of any reduction thereof pursuant to Section 2.08, ------------ any assignment thereof pursuant to Section 11.08, or any amendment ------------- thereof pursuant to Section 11.02. ------------- "Commitment Fee" shall have the meaning set forth in Section 2.13(c). -------------- -7- "Commitment Letter" means that certain Letter Agreement, dated as of ----------------- December 24, 1996, executed by the Banks and Barclays Bank PLC and accepted and agreed to by the Company and certain of its Subsidiaries. "Commitment Termination Date" shall have the meaning set forth in --------------------------- Section 2.01. "Committed Amount" shall mean, with respect to any Facility, the ---------------- maximum principal amount of such Facility committed by the Banks or any of them, including any portion of the Committed Amount of such Facility in which such Bank has purchased a participation and excluding any portion of the Committed Amount of such Facility in which such Bank has sold a participation, as such amount may be reduced from time to time. "Company Pledge Agreement" shall mean that certain Amended and ------------------------ Restated Stock and Notes Pledge Agreement (Borrower), dated as of the date hereof, executed by the Company in favor of the U.S. Collateral Agent, as hereafter amended, restated, supplemented or otherwise modified from time to time. "Company Security Agreement" shall mean that certain Amended and -------------------------- Restated Security Agreement (Borrower), dated as of the date hereof, executed by the Company in favor of the U.S. Collateral Agent, as hereafter amended, restated, supplemented or otherwise modified from time to time. "Company Trademark Security Agreement" shall mean that certain ------------------------------------ Amended and Restated Trademark Security Agreement (Borrower), dated as of the date hereof, executed by the Company in favor of the U.S. Collateral Agent, as hereafter amended, restated, supplemented or otherwise modified from time to time. "Consolidated EBIT" shall mean, for any fiscal period of the Company, ----------------- an amount equal to the sum of (a) Consolidated Net Income (Loss), plus (b) ---- to the extent deducted in determining Consolidated Net Income (Loss), (i) provisions for taxes based on income of the Company and its Subsidiaries (unless otherwise noted) determined on a consolidated basis in accordance with GAAP and (ii) Interest Expense. "Consolidated Net Income (Loss)" shall mean, for any fiscal period ------------------------------ of the Company, the net income (or loss) of the Company and its Subsidiaries (unless otherwise noted) determined on a consolidated basis for such period (taken as a single accounting period), in accordance with GAAP. -8- "Consolidated Net Worth" shall mean, as of the date of determination, ---------------------- the Company's total shareholders' equity, determined in accordance with GAAP, but measured at the currency exchange rates in effect as of December 31 of the immediately preceding fiscal year, but measured at the currency exchange rates as in effect as of December 31, 1996. "Contractual Obligations" of any Person shall mean any provision of ----------------------- any security issued by such Person or of any agreement, instrument or undertaking under which such Person is obligated or by which it or any of its property is bound. "Contributing Guarantor" shall have the meaning set forth in Section ---------------------- 10.01(e) hereof. "Controlled Disbursements Account" shall mean the controlled -------------------------------- disbursements account maintained by the Company with SunTrust governed by the Account Instructions Agreement. "Default" shall mean any event that, with notice or lapse of time or ------- both, would constitute an Event of Default. "Dollar Equivalent" shall mean, with respect to any monetary amount ----------------- denominated in a currency other than U.S. Dollars, at any time for the determination thereof, the amount of U.S. Dollars obtained by converting such foreign currency involved in such computation into U.S. Dollars at the spot rate for the purchase of U.S. Dollars with the applicable foreign currency as quoted by the Agent at approximately 11:00 a.m. (Atlanta, Georgia time) on the day of determination thereof specified herein or, if the day of determination thereof is not otherwise specified herein, on the date two Business Days prior to such determination. "Domestic Interest Coverage Ratio" shall mean, for any fiscal period -------------------------------- of the Company, the ratio of (a) Consolidated EBIT of the Company and the U.S. Subsidiaries for such fiscal period to (b) Interest Expense of the Company and the U.S. Subsidiaries for such fiscal period. "Domestic Senior Debt Coverage Ratio" shall mean, for any fiscal ----------------------------------- period of the Company, the ratio of (a) Senior Funded Debt of the Company and the U.S. Subsidiaries as of the last day of such fiscal period to (b) EBITDA of the Company and the U.S. Subsidiaries for the rolling four- quarter period ending on the last day of such fiscal period. -9- "EBITDA" shall mean, for any period of the Company, an amount equal to ------ the sum of (a) Consolidated EBIT, plus (b) depreciation and amortization ---- expenses (as determined on a consolidated basis in accordance with GAAP) to the extent deducted in determining such Consolidated EBIT. "Enforcement Event" shall have the meaning assigned to such term in ----------------- the Intercreditor Agreement. "Environmental Laws" shall mean all federal, state, local and foreign ------------------ statutes and codes or regulations, rules or ordinances issued, promulgated, or approved thereunder, now or hereafter in effect (including, without limitation, those with respect to asbestos or asbestos containing material or exposure to asbestos or asbestos containing material), relating to pollution or protection of the environment and relating to public health and safety, relating to (i) emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or industrial toxic or hazardous constituents, substances or wastes, including without limitation, any Hazardous Substance (as such term is defined under CERCLA), petroleum including crude oil or any fraction thereof, any petroleum product or other waste, chemicals or substances regulated by any Environmental Law into the environment (including without limitation, ambient air, surface water, ground water, land surface or subsurface strata), or (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of any Hazardous Substance (as such term is defined under CERCLA), petroleum including crude oil or any fraction thereof, any petroleum product or other waste, chemicals or substances regulated by any Environmental Law, and (iii) underground storage tanks and related piping, and emissions, discharges and releases or threatened releases therefrom, such Environmental Laws to include, without limitation (i) the Clean Air Act (42 U.S.C. (S) 7401 et seq.), (ii) the Clean Water Act (33 U.S.C. (S) -- --- 1251 et seq.), (iii) the Resource Conservation and Recovery Act (42 U.S.C. -- --- (S) 6901 et seq), (iv) the Toxic Substances Control Act (15 U.S.C. (S) 2601 -- --- et seq.) and (v) CERCLA. -- --- "ERISA" shall mean the Employee Retirement Income Security Act of 1974 ----- and all rules and regulations promulgated pursuant thereto, as the same may from time to time be supplemented or amended. "ERISA Affiliate" shall mean any trade or business (whether --------------- incorporated or unincorporated) which together with the Company is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code. "ESOP" shall mean the Law Companies Group, Inc. Employee Stock ---- Ownership Plan to be sponsored by and maintained by the Company, the terms and -10- provisions of which shall have been approved in writing by the Banks in their reasonable discretion. "Event of Default" shall have the meaning set forth in Article VIII. ---------------- "Executive Officer" shall mean, collectively, each of the officers of ----------------- the Company and each of its Subsidiaries listed on Schedule 1.01(c) hereto ---------------- and any Person hereafter holding any office or offices which individually or collectively are assigned substantially similar duties. "Existing Letters of Credit" shall mean, collectively, the letters of -------------------------- credit described on Schedule 1.01(d) which were previously issued by ---------------- SunTrust for the account of the Company or any of its U.S. Subsidiaries pursuant to the Original Reimbursement Agreement. "Facilities" shall mean, collectively, the First Tier Facilities and ---------- the Second Tier Facilities. "Federal Funds Rate" shall mean, for any period, a fluctuating ------------------ interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fee Letter" means that certain Letter Agreement, dated as of December ---------- 23, 1996, executed by SunTrust Capital Markets, Inc. and SunTrust Bank, Atlanta and agreed to by the Company, setting forth certain fees payable by the Company in connection with proposed financing contemplated by the Commitment Letter. "Fees" shall mean, collectively, the Arrangement Fee, the Agent's Fee, ---- the Commitment Fee and the Letter of Credit Fee. "First Tier Facilities" shall mean, collectively and without --------------------- duplication, the Commitments, the Barclays Revolver and the BGI Facility. "Fixed Charge Coverage Ratio" shall mean, for any fiscal period of the --------------------------- Company, the ratio of (a)(1) EBITDA for the rolling four-quarter period ending on the last day of such period, minus (2) capital expenditures ----- (determined on a -11- consolidated basis in accordance with GAAP) made by the Company and its Subsidiaries during the rolling four-quarter period ending on the last day of such period, to the extent permitted by Section 7.09, to (b) Fixed Charges for the rolling four-quarter period ending on the last day of such period. "Fixed Charges" shall mean, for any fiscal period of the Company, (i) ------------- Interest Expense for such period plus (ii) current maturities of long-term ---- indebtedness of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP, plus (iii) taxes paid by the ---- Company and its Subsidiaries in cash during such period, determined on a consolidated basis in accordance with GAAP, plus (iv) any payments made ---- during such period by the Company in connection with the Georgetown Steel Litigation. "FLECBOA" shall mean the $3,589,000 loan and lease arrangements ------- evidenced by that certain Participation Agreement, dated as of November 2, 1994, among Law Engineering and Environmental Services, Inc., formerly known as Law Environmental, Inc., FLECBOA, Inc., the Company and SouthTrust Bank of Georgia, N.A. and other related documents executed in connection therewith, as amended or modified prior to the date hereof. "401(k) Plan" shall mean, collectively, the Law Companies Group, Inc. ----------- 401(k) Savings Plan sponsored by and maintained by the Company, as in effect on the date hereof, together with the Law Companies Group, Inc. Puerto Rico 401(k) Savings Plan sponsored by and maintained by the Company. "Foreign Corporation States" shall mean the States of Alabama, -------------------------- Arkansas, Indiana, Mississippi, New Hampshire, Texas and Vermont. "Funded Debt" shall mean (i) all indebtedness for borrowed money of ----------- the Company and its Subsidiaries on a consolidated basis, including, without limitation, current maturities of indebtedness for borrowed money, but excluding reimbursement obligations relating to the Letters of Credit and bonds, guaranties and indemnitees issued under the BGI Facility. "Funding Guarantor" shall have the meaning set forth in Section ----------------- 10.01(e) hereof. "GAAP" shall mean generally accepted accounting principles set forth ---- in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other -12- entity as may be approved by a significant segment of the accounting profession in the United States of America, which are applicable to the circumstances as of the date of determination. "Georgetown Steel Litigation" shall mean the obligation of the Company --------------------------- and its Subsidiaries under the judgment rendered by the United States District Court for the District of South Carolina in Georgetown Steel ---------------- Corporation v. Union Carbide Corporation et al. ---------------------------------------------- "Gibb Holdings Limited" shall mean Gibb Holdings Limited, a United --------------------- Kingdom corporation and an indirect Subsidiary of the Company. "Gibb Limited" shall mean Gibb Limited, a United Kingdom corporation ------------ and an indirect Subsidiary of the Company. "Governmental Approval" shall mean any order, permission, --------------------- authorization, consent, approval, license, franchise, permit or validation of, exemption by, registration or filing with, or report or notice to, any governmental agency or unit, or any public commission, board or authority. "Guarantor Pledge Agreement" shall mean, collectively, that certain -------------------------- Amended and Restated Stock and Notes Pledge Agreement (Guarantors), dated as of the date hereof, executed by each Guarantor in favor of the U.S. Collateral Agent, and that certain Membership Interest Pledge Agreement, dated as of the date hereof, executed by Law Engineering and Environmental Services, Inc. in favor of the U.S. Collateral Agent, in each case as hereafter amended, restated, supplemented or otherwise modified from time to time. "Guarantors" shall have the meaning set forth in the first paragraph ---------- of this Agreement, and "Guarantor" shall mean any of the Guarantors. --------- "Guarantor Security Agreement" shall mean that certain Amended and ---------------------------- Restated Security Agreement (Guarantors), dated as of the date hereof, executed by each Guarantor in favor of the U.S. Collateral Agent, as hereafter amended, restated, supplemented or otherwise modified from time to time. "Guarantor Trademark Security Agreement" shall mean that certain -------------------------------------- Amended and Restated Trademark Security Agreement (Guarantors), dated as of the date hereof, executed by each Guarantor in favor of the U.S. Collateral Agent, as hereafter amended, restated, supplemented or otherwise modified from time to time. -13- "Guaranty" shall have the meaning set forth in Section 10.01(a). -------- "Guaranty Obligations" shall have the meaning set forth in Section -------------------- 10.01(a). "HKS" shall mena Hill Kaplan Scott Law Gibb (Pty) Limited, a South --- African company. "HKS Synthetic Stock" shall mean the synthetic stock issued by HKS ------------------- Trust and remaining outstanding as of the Closing Date which tracks the value of the common stock of the Company. "HKS Trust" shall mean HKS Law Gibb Share Trust (Pty) Limited, a --------- South African trust. "Indebtedness" shall mean (i) indebtedness for borrowed money or for ------------ the deferred purchase price of property or services (other than trade accounts payable on customary terms in the ordinary course of business), (ii) financial obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) financial obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (iv) financial obligations as the issuer of capital stock redeemable in whole or in part at the option of any Person other than such issuer, at a fixed and determinable date or upon the occurrence of an event or condition not solely within the control of such issuer, (v) all obligations (contingent or otherwise) with respect to interest rate and currency leasing agreements, (vi) reimbursement obligations (contingent or otherwise) with respect to amounts under letters or credit, bankers acceptances and similar instruments, (vii) financial obligations under purchase money mortgages, (viii) financial obligations under asset securitization vehicles, (ix) conditional sale contracts and similar title retention instruments, and (x) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or financial obligations of others of the kinds referred to in clauses (i) through (ix) above. "Intercompany Note" shall mean (1) a promissory note in the form of ----------------- Exhibit B-1 hereto, executed by the Company in favor of any of its U.S. ----------- Subsidiaries evidencing intercompany indebtedness and expressly subordinated to the Indebtedness owed to the Banks and Barclays, (2) a promissory note in the form of Exhibit B-2 hereto, executed by a U.S. ----------- Subsidiary in favor of the Company or a promissory note in the form of Exhibit B-3 hereto, executed by a U.S. Subsidiary in favor of another U.S. ----------- Subsidiary, in each case evidencing intercompany indebtedness -14- and secured by a second priority lien (subordinated to the lien of the U.S. Collateral Agent) on the accounts receivable, work in progress, inventory, equipment, general intangibles and other personal property assets of the Person executing such promissory note, together with UCC-1 financing statements executed by the borrower under such promissory note as debtor and the lender under such promissory note as secured party and assigned by the lender under such promissory note to the U.S. Collateral Agent and (3) a promissory note in the form of Exhibit B-4 hereto, executed by an ----------- International Subsidiary in favor of the Company or a promissory note in the form of Exhibit B-5 hereto, executed by International Subsidiary in ----------- favor of any Domestic Subsidiary of the Company, in each case evidencing unsecured intercompany indebtedness. "Intercreditor Agreement" shall mean that certain Intercreditor ----------------------- Agreement, dated as of the date hereof, among the Banks and Barclays Bank PLC, and acknowledged and agreed to by the Company and certain of its Subsidiaries, as hereafter amended, restated, renewed, extended, supplemented or otherwise modified from time to time. "Intercreditor Agreement Agent" shall mean SunTrust and its ----------------------------- successors and assigns, as agent for the Banks, Barclays Bank PLC, the U.S. Collateral Agent and the International Collateral Agent under the Intercreditor Agreement. "Interest Expense" shall mean, for any fiscal period of the Company, ---------------- total interest expense (including, without limitation, interest expense attributable to capitalized leases in accordance with generally accepted accounting principles) of the Company and its Subsidiaries (unless otherwise noted), on a consolidated basis, for such period. "International Collateral Agent" shall mean Barclays Bank PLC and its ------------------------------ successors and assigns, as collateral agent and trustee for the benefit of Barclays Bank PLC under the International Security Documents. "International Pledgors" shall mean, collectively, each of the ---------------------- International Subsidiaries executing any of the International Security Documents. "International Security Documents" shall mean, collectively, all -------------------------------- Guaranties and Debentures, Security Agreements, Share Charges, Hypothecation Agreements and all other documents and instruments listed in Part B(II) of Exhibit B to the Intercreditor Agreement, as amended, restated, supplemented or otherwise modified from time to time. -15- "International Subsidiary" shall mean any Subsidiary of the Company ------------------------ incorporated or otherwise organized in a country or state other than the United States. "Investment" shall mean, when used with respect to any Person, any ---------- direct or indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or of a beneficial interest in, capital stock, partnership interests, bonds, notes, debentures or other securities issued by any other Person. "Judgement Currency" shall have the meaning assigned to such term in ------------------ Section 11.10(b). "Judgment Currency Conversion Date" shall have the meaning assigned --------------------------------- to such term in Section 11.10(b). "Law Companies Group, Ltd." shall mean Law Companies Group, Ltd. a ------------------------ Jersey corporation and wholly owned subsidiary of Gibb Limited. "Letter of Credit Application." shall mean an "Application and ---------------------------- Agreement for Irrevocable Standby Letter of Credit" duly executed and delivered by the Company or any of its Subsidiaries substantially in the form of Exhibit C attached hereto, including, without limitation, any such --------- application and agreement executed and delivered prior to the date of this Agreement in respect of any Existing Letter of Credit. "Letter of Credit Exposure" shall mean the Letter of Credit ------------------------- Obligations, less the aggregate amount of cash collateral securing the Letters of Credit in a manner satisfactory to the Banks. "Letter of Credit Fee" shall have the meaning set forth in Section -------------------- ------- 2.13(d). ------- "Letter of Credit Obligations" shall mean, with respect to Letters of ---------------------------- Credit, as at any date of determination, the sum of (a) the maximum aggregate amount which at such date of determination is available to be drawn by the beneficiaries thereof (assuming the conditions for drawing thereunder have been met) under all Letters of Credit then outstanding, plus (b) the aggregate amount of all drawings under Letters of Credit ---- honored by the Agent not theretofore reimbursed by the Company. -16- "Letter of Credit Subfacility" shall mean the $5,000,000 letter of credit ---------------------------- facility established by the Banks pursuant to which the Agent will issue Letters of Credit for the account of an Account Party pursuant to Sections 2.04 and 2.05 hereof. "Letters of Credit" shall mean the Existing Letters of Credit and any other ----------------- letters of credit issued pursuant to Article II hereof after the Closing Date by ---------- the Agent for the account of the Company pursuant to the Commitments. "Lex Insurance" shall mean, collectively, Lex International Insurance ------------- Company, Limited and Carriber Insurance Company Limited, each a Bermuda corporation. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, ---- lien or charge of any kind or description and shall include, without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof including any lease or similar arrangement with a public authority executed in connection with the issuance of industrial development revenue bonds or pollution control revenue bonds, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction. "Loan Documents" shall mean this Agreement, each Exhibit and Schedule to -------------- this Agreement, the Notes, all Letter of Credit Applications, the Intercreditor Agreement, the U.S. Security Documents, the Supplemental Documents hereafter executed and delivered to the Banks and the Agent and each other document, instrument, certificate and opinion executed and delivered in connection with the foregoing, each as amended, restated, supplemented or otherwise modified from time to time as provided in Section 11.02. "Material U.S. Subsidiaries" shall mean, collectively, Ensite, Inc., Gibb -------------------------- International Holdings, Inc., Law Engineering and Environmental Services, Inc., Law Environmental Consultants, Inc., Law International, Inc,. Leroy Crandall and Associates, together with each other U.S. Subsidiary of the Company now or hereafter existing which either (1) has assets comprising five percent (5%) or more of the assets of the Company and its Subsidiaries, taken as a whole or (2) has revenues comprising five percent (5%) or more of the revenues of the Company and its Subsidiaries, taken as a whole. "Materially Adverse Effect" shall mean a materially adverse change in the ------------------------- operations, business, property or assets of, or in the condition (financial or otherwise) or prospects of, the Company and its Subsidiaries, taken as a whole. -17- "Maximum Permissible Rate" shall mean, with resect to interest ------------------------ payable on any amount, the rate of interest on such amount that, if exceeded, could, under Applicable Law, result in (i) civil or criminal penalties being imposed on any Bank or (ii) any Bank being unable to enforce payment of (or if collected, to retain) all or part of such amount to interest payable thereon. "Mortgaged Property" shall mean, collectively, all parcels of real ------------------ property owned or leased by the Company or any of its Subsidiaries which is subject to a Mortgage. "Mortgages" shall mean, collectively, the North Carolina Mortgage, --------- together with all of the mortgages, deeds of trust or deeds to secure debt hereafter executed in favor of the U.S. Collateral Agent by the Company or any U.S. Subsidiary, including without limitation, (when executed and delivered) the deed of trust to be executed by Law Engineering and Environmental Services, Inc. for the benefit of the U.S. Collateral Agent with respect to the real property located in Escambia County, Florida now securing FLECBOA, as the same may be hereafter amended, restated, renewed, extended, supplemented or otherwise modified from time to time. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in ------------------ Section 4001(a)(3) of ERISA. "Net Fees" shall mean, for the Company and its Subsidiaries on a -------- consolidated basis, gross fees less costs related to subcontracts. ---- "Net Fees Budgeted" means, with respect to any fiscal year of the ----------------- Company, the Net Fees reasonably budgeted by the Company and its Subsidiaries for such fiscal year, the amount of which shall be reasonably satisfactory to the Required Banks. If no Bank objects to such budgeted fees within 45 days of receipt by it of the annual budget required to be delivered pursuant to Section 5.02(d), such budget shall be deemed satisfactory to the Required Banks. "Net Issuance Proceeds" shall mean the net cash proceeds received by --------------------- the Company or any of its Subsidiaries upon the issuance by the Company of any of its capital stock to any Person. "Net Redemption Costs" shall mean all cash, notes and other -------------------- consideration paid by the Company or any of its Subsidiaries for the purchase or redemption of shares of capital stock of the Company. -18- "Nonpayment Default" shall have the meaning assigned to such term in ------------------ the Intercreditor Agreement. "North Carolina Mortgage" shall mean that certain Amended and ----------------------- Restated Revolving Credit Deed of Trust and Security Agreement, dated as of the date hereof, executed by the Company in favor of David R. Dorton as trustee for the benefit of the U.S. Collateral Agent with respect to the Mortgaged Property located in North Carolina, as hereafter amended, restated, renewed, extended, supplemented or otherwise modified from time to time. "Note" shall mean a promissory note of the Company payable to the ---- order of any Bank, in substantially the form of Exhibit D hereto, --------- evidencing the maximum aggregate principal indebtedness of the Company to such Bank under such Bank's Commitment, either as originally executed or as it may be from time to time supplemented, modified, amended, renewed or extended. "Notice of Borrowing" shall have the meaning set forth in Section ------------------- 2.02 hereof. "Obligations" shall mean all amounts owning to the Agent or any Bank ----------- pursuant to the terms of this Agreement or any other Loan Document, including without limitation, all Advances (including all principal and interest payments due thereunder), all Letter of Credit Obligations, Fees, expenses, indemnification and reimbursement payments, indebtedness, liabilities, and obligations of the Company and the Guarantors, covenants and duties of the Company to the Banks, the Agent and the U.S. Collateral Agent of every kind, nature and description, direct or indirect, absolute or contingent, due or not due, in contract or tort, liquidated or unliquidated, arising under this Agreement or under the other Loan Documents, by operation of law or otherwise, now existing or hereafter arising or whether or not for the payment of money or the performance or the nonperformance of any act, including, but not limited to, all debts, liabilities and obligations owning by the Company to others which the Banks may have obtained by assignment or otherwise, and all damages which the Company may owe to the Banks, the Agent and the U.S. Collateral Agent by reason of any breach by the Company of any representation, warranty, covenant, agreement or other provision of this Agreement or of any other Loan Document. "Original Credit Agreement" shall have the meaning set forth in the ------------------------- first recital clause to this Agreement. "Original Reimbursement Agreement" shall have the meaning set forth -------------------------------- in the first recital clause to this Agreement. -19- "Other Claim" shall have the meaning set forth in Section 5.06 hereof. ----------- "Other Debtor Relief Law" shall have the meaning set forth in Section ----------------------- 10.01(b)(iii) hereof. "Partially Owned Subsidiaries" shall mean, collectively, Law/Sundt, ---------------------------- Inc., a California corporation, Envirosource Incorporated, a Georgia corporation, and Law/Spear, LLC, a Georgia limited liability company. "Payment Default" shall have the meaning assigned to such term in the --------------- Intercreditor Agreement. "PBGC" shall mean the Pension Benefit Guaranty Corporation and any ---- successor thereto. "Permitted Preferred Stock" shall mean preferred stock of the Company ------------------------- which either (1) has a divided rate of no more than 8% per annum and does not require any return of capital or equity prior to May 1, 2000 or (2) is on terms and conditions to which the Banks have otherwise given their prior written consent. "Person" shall mean an individual, corporation, partnership, trust or ------ unincorporated organization, a government or any agency or political subdivision thereof. "Petermuller Subsidiaries" shall mean, collectively, Gibb Petermuller ----------------------- & Partners (Guernsey) Limited, a Guernsey corporation, and Gibb Petermuller & Partners (Cyprus) Limited, a Cypriot corporation. "Plan" shall mean any employee benefit plan, program, arrangement, ---- practice or contact, maintained by or on behalf of the Company or an ERISA Affiliate, which provides benefits or compensation to or on behalf of employees or former employees, whether formal or informal, whether or not written, including but not limited to the following types of plans: (i) Executive Arrangements - any bonus, incentive compensation, ---------------------- stock option, deferred compensation, commission, severance, "golden parachute", "rabbi trust", or other executive compensation plan, program, contract, arrangement or practice; (ii) ERISA Plans - any "employee benefit plan" as defined in ----------- ERISA, including but not limited to, any defined benefit pension plan, profit -20- sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits; (iii) Other Employee Fringe Benefits - any stock purchase, ------------------------------ vacation, scholarship, day care, prepaid legal services, severance pay or other fringe benefit plan, program, arrangement, contract or practice. "Prime Rate" shall mean the greater of (a) the per annum rate of ---------- interest designated from time to time by the Agent to be its prime rate, as in effect from time to time, or (b) a per annum rate equal to the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%), with any change in the rate of interest resulting from a change in the Prime Rate or the Federal Funds Rate to be effective as of the opening of business of the day of such change. The prime rate designated from time to time by the Agent is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Agent may make commercial loans or other loans at rate of interest at, above or below the prime rate designated from time to time by the Agent. "Pro Rata Share" shall mean, for any Bank, with respect to the -------------- Facilities (whether one or more), the proportion expressed as a percentage equal to (1) the sum of such Bank's portion of the Committed Amounts of such Facilities (including, without duplication, any portion of the Committed Amounts of such Facilities in which such Bank has purchased a participation and excluding, without duplication, any portion of the Committed Amounts of such Facilities in which such Bank has sold a participation), divided by (2) the sum of the Committed Amounts of such Facilities; provided, however, that after the occurrence of a Sale Event or -------- ------- an Enforcement Event, unless otherwise provided in the Intercreditor Agreement, the Committed Amount of the BGI Facility for purposes of this definition of Pro Rata Share shall be deemed to be the BGI Exposure immediately prior to the Sale Event or on the date of the Enforcement Event, respectively, rather than the Committed Amount of the BGI Facility. "Regulation U" shall mean Regulation U of the Board of Governors of ------------ the Federal Reserve System, as in effect from time to time, and any Regulation successor thereto. -21- "Regulation X" shall mean Regulation X of the Board of Governors of ------------ the Federal Reserve System, as in effect from time to time, and any regulation successor thereto. "Required Banks" shall mean Banks and Barclays Bank PLC whose combined -------------- Pro Rata Shares as of the Closing Date of the First Tier Facilities are at least seventy-two percent (72%) of the Committed Amounts of such First Tier Facilities. "Sale Event" shall have the meaning assigned to such term in the ---------- Intercreditor Agreement. "Second Amendment to SunTrust Interest Rate Swap Agreement" shall mean --------------------------------------------------------- that certain Second Amendment to Master Agreement, dated as of the date hereof, between SunTrust and the Company. "Second Tier Facilities" shall have the meaning assigned to such term ---------------------- in the Intercreditor Agreement. "Security Documents" shall mean, collectively, the U.S. Security ------------------ Documents and the International Security Documents. "Senior Debt Coverage Ratio" shall mean, for any fiscal period of the -------------------------- Company, the ratio of (a) Senior Funded Debt as of the last day of such fiscal period to (b) EBITDA for the rolling four-quarter period ending on the last day of such fiscal period. "Senior Debt Leverage Ratio" shall mean, for any fiscal period of the -------------------------- Company, the ratio of (a) Senior Funded Debt as of the last day of such fiscal period to (b) Capitalization as of the last day of such fiscal period. "Senior Funded Debt" shall mean, at any time, (a) Funded Debt minus ------------------- ----- (b) Subordinated Indebtedness, minus (c) $3,589,000 for the fiscal quarter ----- of the Company ending March 31, 1997 if and only if the Company refinances FLECBOA pursuant to Section 5.18 hereof on or prior to March 31, 1997. "Shareholder Notes" shall mean all promissory notes now or hereafter ----------------- issued by the Company to any shareholder in connection with the repurchase of such shareholder's common stock of the Company or issued by Law Companies Group Limited or HKS in connection with the repurchase of any synthetic stock issued by Law Companies Group Limited or HKS. -22- "Subordinated Indebtedness" shall mean any Indebtedness of the Company ------------------------- or any "Obligor" as defined under the Barclays Agreement that is Subordinated in certain instances in right of payment to the prior payment in full in cash of the Obligations and the "Barclays Obligations" as defined in the Intercreditor Agreement on terms and conditions satisfactory to the Required Banks, including, without limitation, those Intercompany Notes executed by the Company and the Shareholder Notes. "Subsidiary" of any Person shall mean any corporation, partnership or ---------- other Person of which a majority of all the outstanding capital stock (including director's qualifying shares) or other securities or ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions is, at the time as of which any such determination is being made, directly or indirectly owned by such Person, or by one or more of the Subsidiaries of such Person, and which corporation, partnership or other Person is consolidated with such Person for financial reporting purposes. Unless otherwise specified, "Subsidiaries" and "Subsidiary" shall mean the Subsidiaries and a Subsidiary, respectively, of the Company. "SunTrust Interest Rate Contracts" shall mean all interest rate swap -------------------------------- agreements, interest rate cap agreements, interest rates collar agreements, interest rate insurance and other agreements and arrangements designed to provide protection against fluctuations in interest rates in each case between the Company and SunTrust Bank, Atlanta, including, without limitation, the SunTrust Interest Rate Swap Agreement, together with all interest rate swap confirmations made pursuant thereto, in each case as the same may be from time to time supplemented, modified, amended, renewed or extended. "SunTrust Interest Rate Swap Agreement" shall mean the Master ------------------------------------- Agreement, dated as of October 8, 1993, between SunTrust and the Company, as amended by the First Amendment to Master Agreement, dated as of October 11, 1995, between SunTrust and the Company, and by the Second Amendment to SunTrust Interest Rate Swap Agreement and as further amended, restated, supplemented or otherwise modified from time to time. "Swap Guaranty" shall mean that certain Guaranty Agreement, dated as ------------- of the date hereof, executed by the Guarantors in favor of SunTrust, pursuant to which the Guarantors have guaranteed the obligations of the Company under the SunTrust Interest Rate Swap Agreement. "Swing Line" shall have the meaning assigned to such term in Section ---------- 2.03. -23- "Supplemental Documents" shall mean, collectively, all documents ---------------------- described on Schedule 5.13 hereto. ------------- "Tax" shall mean, with respect to any person or entity, any federal, --- state or foreign tax, assessment, customs duties, or other governmental charge, levy or assessment (including any withholding tax) upon such person or entity or upon such person's or entity's assets, revenues, income or profits, other than income and franchise taxes imposed upon any Bank by the jurisdictions (or any political subdivision thereof) in which such Bank has its principal office or office from which its Advances are made, or in which such Bank is incorporated. "United States" or "U.S." means the United States of America, its ------------- ---- fifty (50) States and the District of Columbia. "U.S. Billed Fees Receivable" shall mean accounts receivable of the --------------------------- Company and its U.S. Subsidiaries, on a consolidated basis, for which a bill or invoice has been issued to the account debtor and which is not more than 90 days delinquent past the date due as stated on such bill or invoice. "U.S. Collateral Agent" shall mean SunTrust and its successors and --------------------- assigns, as collateral agent and trustee for the benefit of the Banks and Barclays Bank PLC under the U.S. Security Documents. "U.S.Dollar" "Dollar" and "$" shall mean lawful money of the United ---------- ------ - States of America. "U.S. Security Documents" shall mean, collectively, the Mortgage, the ----------------------- Company Pledge Agreement, the Company Security Agreement, the Company Trademark Security Agreement, the Guarantor Pledge Agreement, the Guarantor Security Agreement, the Guarantor Trademarks Security Agreement, the U.S. Share Charges, all UCC financing statements and fixture filings naming the Company or any of its Subsidiaries as debtor and the U.S. Collateral Agent as secured party, all stock certificates evidencing shares of stock pledge to the U.S. Collateral Agent, together with undated stock powers or other appropriate instruments of transfer executed in blank, all filings in the U.S. Patent and Trademark Office which are required to be made under the Loan Documents and all Intercompany Notes pledged to the U.S. Collateral Agent, together with appropriate instruments of transfer executed in blank. "U.S. Share Charges" shall mean, collectively, all Charges over ------------------ Shares, Deeds of Rectification, Security Agreements, Pledges of Shares, Pledge Agreements and all other documents and instruments listed in Part B(I) of Exhibit B to the Intercreditor -24- Agreement, as amended, restated, supplemented or otherwise modified from time to time. "U.S. Subsidiary" shall mean any Subsidiary of the Company that is --------------- incorporated or otherwise organized in the United States. "U.S. Unbilled Work in Process" shall mean work in process of the ----------------------------- Company and its U.S. Subsidiaries (excluding the Partially Owned Subsidiaries), on a consolidated basis, performed under a contract or agreement and for which no bill or invoice has been issued, including, without limitation, any payments that have been received prior to the completion of the related work in process and deposited into an identifiable account, with amounts to be drawn down from such account as work is performed and which is not more than 60 days past the date the revenue related to such work was recognized. SECTION 1.02. Calculations; Accounting Terms. Calculations of all ------------------------------ financial data herein shall be on a consolidated basis for the Company and all Subsidiaries; and all accounting terms used herein shall, unless otherwise expressly indicated, be in reference to the Company and its Subsidiaries, on a consolidated basis (excluding the Partially Owned Subsidiaries), which may be accounted for in accordance with the entity investment method to the extent such method is in accordance with GAAP), and shall have the meanings ascribed thereto under and be interpreted in accordance with GAAP. All calculations and determinations under Article VII shall be made in accordance with accounting principles consistent with those followed in the preparation of the annual or interim financial statements, as applicable, referred to in Section 5.02. SECTION 1.03. Other Definitional Provisions. ----------------------------- (a) Except as otherwise specified herein, all references herein (A) to any Person, other than the Company or any Guarantor, shall be deemed to include such Person's successors, transferees and assignees, (B) to the Company or any Guarantor shall be deemed to include such Person's successors, (C) to any Applicable Law specifically defined or referred to herein shall be deemed references to such Applicable Law as the same may be amended or supplemented from time to time, and (D) to any contract defined or referred to herein shall be deemed references to such contract (and, in the case of any instrument, any other instrument issued in substitution therefor) as the terms thereof may have been or may be amended, supplemented, waived or otherwise modified from time to time. (b) When used in this Agreement, the words "herein", "hereof" and "hereunder" and words of similar import shall refer to this Agreement as a whole and not to any provision of this Agreement, and "Section", "Subsection", "Schedule" and "Exhibit" shall -25- refer to Sections and Subsections of, and Schedules and Exhibits to, this Agreement unless otherwise specified. (c) Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa. (d) All terms defined in this Agreement shall have the defined meanings when used in any Note or, except as otherwise expressly stated therein, any certificate, opinion or other Loan Document. SECTION 1.04. Captions. Article and Section captions in this Agreement -------- are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. ARTICLE II AMOUNT AND TERMS OF LOANS AND LETTER OF CREDIT ---------------------------------------------- SECTION 2.01. Commitments and Notes. Subject to and upon the terms and --------------------- conditions set forth in this Agreement, each of the Banks severally establishes until February 6, 1998, unless otherwise extended pursuant to Section 2.16 below (February 6, 1998, or such later date as the Commitments have been extended pursuant to Section 2.16, is hereinafter referred to as the "Commitment ---------- Termination Date") a revolving credit facility in favor of the Company in - ---------------- aggregate principal at any one time outstanding not to exceed the sum set forth opposite such Bank's name below, as the same may be reduced from time to time pursuant to the terms hereof: SunTrust Bank, Atlanta $20,000,000 50% National Bank of Canada $20,000,000 50% TOTAL: $40,000,000 100% === Within the limits of the Commitments, the Company may borrow, repay and reborrow under the terms of this Agreement; provided, however, that (i) the aggregate -------- ------- principal amount of each Borrowing shall not be less than $250,000 and shall be in integral multiples of $50,000, (ii) the Company may neither borrow nor reborrow should there exist a Default or an Event of Default and (iii) the aggregate outstanding amount of Advances after giving effect to each Borrowing plus the Letter of Credit Exposure shall not exceed the lesser of (A) Committed Amount of the Commitments and (B) the Borrowing Base. Borrowings under the -26- Commitments shall be made through simultaneous Advances by the Banks, and the amount of each such Borrowing shall be prorated among such Banks based on the percentages set forth above. All Advances by each Bank shall be evidenced by a single Note payable to such Bank in the form of Exhibit D attached hereto with --------- appropriate insertions. Each Note shall be dated the date hereof, shall be payable to the order of the respective Bank in a principal amount equal to the amount set forth opposite such Bank's name above, shall bear interest as hereinafter provided and shall mature on the Commitment Termination Date or sooner should the principal and accrued interest thereon be declared immediately due and payable as provided for hereinafter. No Bank shall have any obligation to advance funds in excess of an amount equal to the percentage set forth opposite such Bank's name above multiplied by the lesser of (1)(A) the Committed Amount of the Commitments, less (B) the Letter of Credit Exposure, and (2)(A) ---- the Borrowing Base, less (B) the Letter of Credit Exposure. ---- SECTION 2.02. Method of Borrowing Under the Commitments. (a) The ----------------------------------------- Company shall give the Agent written or telephonic notice (promptly confirmed in writing) of any requested Borrowing under the Commitments (a "Notice of --------- Borrowing") specifying (i) the amount of the Borrowing, and (ii) the date the - --------- proposed Borrowing is to be made (which shall be a Business Day). Each Notice of Borrowing shall be given to the Agent not later than 11:00 a.m. (Atlanta, Georgia time) on the date of such requested Borrowing. The Agent shall be entitled to rely on any telephonic Notice of Borrowing which it believes in good faith to have been given by a duly authorized officer or employee of the Company, and any Advances made by the Banks based on such telephonic notice shall, when deposited by the Agent to the Company's Account No. 88-01771018 at SunTrust be Advances for all purposes hereunder. (b) In addition, the Company may borrow through the Controlled Disbursement Account and shall be deemed to have given the Agent a Notice of Borrowing on each Business Day for which any funds in the Controlled Disbursements Account are insufficient to cover the checks, drafts and other items presented against the Controlled Disbursements Account, measured no later than 11:00 a.m on such Business Day, in which case (i) the amount of the Borrowing shall be the amount required in addition to any funds already in the Controlled Disbursements Account to cover in full such checks, drafts and other items presented against the Controlled Disbursements Account and (ii) the Borrowing shall be made on such Business Day. (c) Upon receipt of a Notice of Borrowing from the Company, the Agent shall notify the Banks by telephone, which notice shall be promptly confirmed in writing (including by telecopier) by the Agent to such Banks, of such Notice of Borrowing and of each such Bank's pro rata portion of the requested Borrowing. --- ---- Not later than 1:00 p.m. (Atlanta, Georgia time) on the date specified for the Borrowing in the Notice of Borrowing and in the notice to such Bank provided by the Agent, each Bank shall promptly make its -27- portion of the Borrowing available to the Agent in immediately available funds, and the Agent shall make available to the Company the amount so received by the Agent from the Banks not later than 2:00 p.m. (Atlanta, Georgia time) on such date. In the event any Bank shall fail to make any Advance available to the Agent in immediately available funds by 1:00 p.m. (Atlanta, Georgia time) on the date specified, and provided no Default or Event of Default shall have occurred and be continuing, the Agent may advance such Bank's portion of the Borrowing on behalf of such Bank, in which event such Bank shall promptly reimburse the Agent for the amount thereof plus (i) if the amount of such Bank's Advance is reimbursed to the Agent on or prior to the calendar day next succeeding the date of the Borrowing, interest on such amount at the rate equal to the Federal Funds Rate, or (ii) if the amount of such Bank's Advance is reimbursed to the Agent after the calendar day next succeeding the day of the Borrowing, interest on such amount at the Prime Rate. The amount of interest payable as a result of any Bank's failure to make any Advance available shall be calculated on the basis of a year of 360 days and paid for the actual number of days such failure has continued (including the date of payment). SECTION 2.03. Swingline Subfacility. (a) Notwithstanding anything --------------------- contained herein to the contrary, SunTrust hereby establishes a subfacility within its Commitment of up to an aggregate of $1,000,000 (the "Swing Line"), and Borrowings under the Swing Line shall be made by the Company through the Controlled Disbursement Account. Sections 3.01 and 3.02 shall apply equally to Borrowings made through the Swing Line and Borrowings requested or made through Section 2.02. The aggregate amount of all Borrowings under the Swingline Facility shall not at any time exceed $1,000,000, and to the extent any Borrowing under the Swingline Facility would cause such a result after giving effect thereto, the Company shall be required to request such Borrowing under Section 2.02(a) hereof. (b) Each Borrowing under the Swing Line shall deemed to be made under SunTrust's Commitment to the extent of any Availability thereunder on the date such Borrowing is made. (c) The Company shall have the right to prepay Borrowings made under the Swing Line, in whole at any time or in part from time to time, without premium or penalty (i) in accordance with the terms of the Account Instructions Agreement, (ii) by giving notice to SunTrust at least one Business Day prior to the date of such prepayment, or (iii) with the proceeds of a Borrowing under the Commitments in accordance with the provisions set forth herein. The Company irrevocably authorizes the Agent, at the sole discretion of the Agent, from time to time and at any time, to request a Borrowing under the Commitments (to the extent of Availability thereunder) in the name of the Company in an amount sufficient to prepay in whole or in part outstanding principal amount of Borrowings made under the -28- Swing Line, and the Banks hereby agree to fund such Borrowing as if it were requested pursuant to Section 2.02 hereof. SECTION 2.04. Letter of Credit Subfacility. Subject to, and upon the ---------------------------- terms and conditions set forth herein, the Company may request, in accordance with the provisions of this Section 2.04 and Section 2.05 and the other terms of this Agreement, that on and after the Closing Date but prior to the Commitment Termination Date, the Agent issue a Letter of Credit or Letters of Credit for the account of the Company or any Guarantor; provided that the Company or such -------- Guarantor executes and delivers to the Agent a Letter of Credit Application, provided further that (i) no Letter of Credit shall have an expiration date that - -------- ------- is later than one year after the date of issuance thereof (provided that a Letter of Credit may provide that it is extendible for consecutive one year periods); (ii) the Company shall not request that the Agent issue any Letter of Credit, if, after giving effect to such issuance, the sum of the aggregate Letter of Credit Obligations plus the aggregate outstanding principal amount of ---- the Advances would exceed the lesser of (A) the Committed Amount of the Commitments and (B) the Borrowing Base; and (iii) the Company shall not request that the Agent issue any Letter of Credit if after giving effect to such issuance, the aggregate Letter of Credit Obligations would exceed the Committed Amount of the Letter of Credit Subfacility. To the extent of any conflict between the terms of this Agreement and any Letter of Credit Application, the Letter of Credit Application shall control. SECTION 2.05. Notice of Issuance of Letter of Credit; Agreement to ---------------------------------------------------- Issue. - ----- (a) Whenever the Company desires the issuance of a Letter of Credit, it shall, in addition to any application and documentation procedures reasonably required by the Agent for the issuance of such Letter of Credit, deliver to the Agent a written notice no later than 11:00 AM (local time for the Agent) at least two (2) Business Days in advance of the proposed date of issuance and the Agent shall promptly forward a copy of such notice to each Bank. Each such notice shall specify (i) the Account Party, (ii) the proposed date of issuance (which shall be a Business Day); (iii) the face amount of the Letter of Credit; (iv) the expiration date of the Letter of Credit; and (v) the name and address of the beneficiary with respect to such Letter of Credit and shall attach a precise description of the documentation and a verbatim text of any certificate to be presented by the beneficiary of such Letter of Credit which would require the Agent to make payment under the Letter of Credit, provided that the Agent -------- may require reasonable changes in any such documents and certificates in accordance with its customary letter of credit practices, and provided further, -------- ------- that no Letter of Credit shall require payment against a conforming draft to be made thereunder on the same Business Day that such draft is presented if such presentation is made after 11:00 AM (Atlanta, Georgia time). In determining whether to pay any draft under any Letter of Credit, the Agent shall be responsible only to determine that the documents and certificate required to be delivered under its Letter of Credit have been delivered, and that -29- they comply on their face with the requirements of the Letter of Credit. Promptly after receiving the notice of issuance of a Letter of Credit, the Agent shall notify each Bank of such Bank's respective participation therein, determined in accordance with its respective Pro Rata Share of the Commitments. (b) The Agent agrees, subject to the terms and conditions set forth in this Agreement, to issue for the account of such Account Party a Letter of Credit in a face amount equal to the face amount requested under paragraph (a) above, following its receipt of a notice required by Section 2.05(a). Immediately upon the issuance of each Letter of Credit, each Bank shall be deemed to, and hereby agrees to, have irrevocably purchased from the Agent a participation in such Letter of Credit and any drawing thereunder in an amount equal to such Bank's Pro Rata Share of the Commitments multiplied by the face amount of such Letter of Credit. Upon issuance and amendment or extension of any Letter of Credit, the Agent shall provide a copy of each such Letter of Credit issued, amended or extended hereunder to each Bank. (c) As of the Closing Date, each of the Existing Letters of Credit shall be deemed to have been issued by the Agent in accordance with the terms hereof, each Bank shall be deemed to have purchased a participation in the Existing Letters of Credit in an amount equal to such Bank's Pro Rata Share of the Commitments multiplied by the face amount thereof, and the Existing Letters of Credit shall be governed by the terms hereof. SECTION 2.06. Payment of Amounts drawn under Letters of Credit. ------------------------------------------------- (a) In the event of any request for a drawing under any Letter of Credit by the beneficiary thereof, the Agent shall notify the Company and the Banks on or before the date on which the Agent intends to honor such drawing, and the Company and the Account Party (if other than the Company) jointly and severally agree to reimburse the Agent on the day on which such drawing is honored in an amount, in same day funds, equal to the amount of such drawing. (b) Notwithstanding any provision of this Agreement to the contrary, to the extent that any Letter of Credit or portion thereof remains outstanding on the Commitment Termination Date, for any reason whatsoever, the Company, the Guarantors and the Banks hereby agree that the beneficiary or beneficiaries thereof shall be deemed to have made a drawing of all available amounts pursuant to such Letters of Credit on the Commitment Termination Date which amount shall be held by the Agent as cash collateral for its remaining obligations pursuant to such Letters of Credit. (c) As between the Company, any Account Party and the Agent, the Company and such Account Party assume all risk of the acts and omissions of, or misuse of, -30- the Letters of Credit issued by the Agent, by the respective beneficiaries of such Letters of Credit, other than losses resulting from the gross negligence or willful misconduct of the Agent. In furtherance and not in limitation of the foregoing but subject to the exception for the Agent's gross negligence or willful misconduct set forth above, the Agent shall not be responsible (i) for the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of such Letters of Credit, even if it should in fact prove to be in any or all respects insufficient, inaccurate, fraudulent or forged or otherwise invalid; (ii) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part which may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any such Letter of Credit to comply fully with the conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, telecopy or otherwise; (v) for good faith errors in interpretation of technical terms; (vi) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or the proceeds thereof; (vii) for the misapplication by the beneficiary of any such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Agent. SECTION 2.07. Payment of Letter of Credit Draws by Banks. In the event ------------------------------------------ that the Company or the Account Party shall fail to reimburse the Agent as provided in Section 2.06, the Agent shall promptly notify each Bank of the unreimbursed amount of such drawing and of such Bank's respective participation therein. Each Bank shall make available to the Agent an amount equal to its respective participation, in Dollars and in immediately available funds, at the office of the Agent specified in such notice not later than 1:00 P.M. (Atlanta, Georgia time) on the Business Day after the date notified by the Agent and such amount shall be deemed to be outstanding hereunder as an Advance. Each Bank shall be obligated to make such Advance hereunder regardless of whether the conditions precedent in Article III are satisfied and regardless of whether such Advance complies with the minimum borrowing requirements hereunder. In the event that any such Bank fails to make available to the Agent the amount of such Bank's participation in such Letter of Credit, the Agent shall be entitled to recover such amount on demand from such Bank together with interest as provided for in Section 2.02(c). The Agent shall distribute to each Bank which has paid all amounts payable under this Section with respect to any Letter of Credit, such Bank's Pro Rata Share of all payments received by the Agent from the Account Party in reimbursement of drawings honored by the Agent under such Letter of Credit when such payments are received. SECTION 2.08. Prepayment of Borrowings Under the Commitments. The ---------------------------------------------- Company shall have the right to prepay Borrowings under the Commitments, in whole at any -31- time or in part from time to time, without premium or penalty, provided that (i) the Company gives the Agent prior written notice of such prepayment, specifying the date such prepayment will occur, (ii) each partial prepayment shall be in an amount of at least $250,000 and integral multiples of $50,000 and (iii) prepayments shall be applied to repay Borrowings under the Commitments in the order set forth in Section 2.10 hereof. SECTION 2.09. Voluntary Reduction of Commitments. Upon at least three ---------------------------------- (3) Business Days' prior written notice (or telephonic notice promptly confirmed in writing) to the Agent, which notice shall specify (1) the amount by which such Commitments are to be terminated and (2) the date such termination is to occur, the Company shall have the right, without premium or penalty, to terminate the Commitments, in whole or in part, provided that (a) any partial -------- termination pursuant to this Section 2.09 shall be in an amount of least $500,000 and integral multiples of $50,000 and (b) any such termination shall apply to reduce proportionately and permanently the Commitments. If the sum of (i) the aggregate principal amount of Advances plus (ii) the aggregate Letter of Credit Obligations exceeds the amount of the Commitments as so reduced, the Company shall immediately repay Borrowings under such Commitments by an amount equal to such excess, together with accrued but unpaid interest on such excess. SECTION 2.10. Allocation of Payments. ---------------------- (a) All principal and interest payments and prepayments made with respect to Advances and payments in respect of Letter of Credit Fees and Commitment Fees shall be allocated among all outstanding Commitments, Letter of Credit Obligations and Advances to which such payments relate, proportionately based on the Banks' Pro Rata Shares of the Commitments. (b) Except to the extent otherwise provided in the Intercreditor Agreement, all payments made to the Agent by the Company or any Account Party shall be applied in the following order; (a) first, to the reimbursement of any ----- fees which are due and payable, and expenses incurred by and then due and payable to, the Agent in connection with the administration of the Commitments and otherwise (to the extent any such fees are payable by the Company pursuant to the terms of this Agreement or the Fee Letter); (b) second, to the payment of ------ any accrued and unpaid interest and Fees which are due and payable, pro rata to --- ---- the Banks based upon their respective Pro Rata Shares of the Commitments; (c) third, to the payment of outstanding Advances; and finally, to cash - ----- ------- collateralize the Letter of Credit Obligations to the extent of any Letter of Credit Exposure. SECTION 2.11. Termination of Commitments. The unpaid principal -------------------------- balance and all accrued and unpaid interest on the Notes will be due and payable upon the first of the following dates or events to occur: (i) acceleration of the maturity of any Note in accordance -32- with the remedies contained in Section 8.02 of this Agreement; or (ii) upon the Expiration of the Commitments on the Commitment Termination Date. SECTION 2.12. Use of Proceeds. The proceeds of each Borrowing under --------------- the Commitments will be used by the Company solely for the following purposes: (a) On the Closing Date (i) all amounts outstanding under the "Revolving Credit A Commitments" (as defined the Original Credit Agreement), shall be deemed outstanding under the Commitments, (ii) all Existing Letters of Credit and all letter of credit applications and agreements executed in connection with such Existing Letters of Credit shall be deemed to be outstanding hereunder as Letters of Credit and Letters of Credit Applications, respectively, (iii) the Banks shall make and receive such payments as the Agent shall direct to adjust each Bank's respective pro rata share of the outstandings under the Commitments to reflect the terms of this Agreement, and (iv) Canada shall be deemed to have purchased, and SunTrust shall be deemed to have sold, a participation in the Existing Letters of Credit equal to fifty percent (50%) of the amount thereof; (b) The Company may further borrow under this Agreement to refinance all outstanding indebtedness under FLECBOA; and (c) All other Advances shall be used as working capital and for other general corporate purposes. SECTION 2.13. Fees. ---- (a) On the Closing Date, the Company shall pay to SunTrust Capital Markets, Inc. the Arrangement Fee, which fee shall be fully earned and nonrefundable when paid and shall be distributed to the Banks and Barclays as follows: (1) $191,290 to Canada, (2) $167,420 to Barclays and $191,290 to SunTrust; provided, however, that the Company may pay Barclays its share of the Arrangement Fee ($167,420) directly from the Barclays Revolver in which case it shall pay SunTrust Capital Markets, Inc. a portion of the Arrangement Fee equal to $382,580, of which $191,290 will be distributed to each Bank. (b) On the Closing Date and on each anniversary thereof, if the Commitments are extended pursuant to Section 2.16, the Company shall pay to the Agent the Agent's Fee, which fee shall be fully earned and nonrefundable when paid. (c) The Company shall pay to the Agent, for the account of and distribution of the respective Pro Rata Share to each Bank (subject to the last sentence hereof), a commitment fee (the "Commitment Fee") for the period -------------- commencing on the Closing Date -33- to and including the Commitment Termination Date, computed at a rate equal to the Applicable Commitment Fee Percentage multiplied by the average daily unused portion of the Commitments of the Banks, such fee being payable quarterly in arrears on the last day of each calender quarter, commencing on March 31, 1997, and on the Commitment Termination Date. For purposes of calculating the Commitment Fee, Outstanding Letter of Credit Obligations shall be considered usage of the Commitments. (d) The Company agrees to pay, annually in advance upon the issuance or renewal of each Letter of Credit, (1) to the Agent, for the account of the Banks, a letter of credit fee equal to the Applicable LC Fee Percentage multiplied by the stated face amount of such Letter of Credit and (2) to the Agent, for its own account, a letter of credit fronting fee equal to one-eighth of one percent (0.125%) multiplied by the stated face amount of such Letter of Credit (collectively, the "Letter of Credit Fee"). -------------------- (e) The Company and Gibb Limited hereby authorize the Agent and Barclays to withdraw an amount equal to the fees which are due and payable under clauses (a), (b), (c) or (d) above from any of their accounts with the Agent and Barclays. SECTION 2.14. Interest. Except as set forth in Section 2.17, interest ------- shall accrue on the unpaid principal amount of the Notes at a fluctuating per annum rate of interest equal to the Prime Rate plus the Applicable Margin. Interest on the Notes shall be payable to the Banks monthly in arrears (i) on the last day of each calender month, commencing February 28, 1997 and continuing thereafter, and (ii) on the Commitment Termination Date. SECTION 2.15. Borrowing Base Deficiency. On any date that the sum of ------------------------- (i) the aggregate Advances, plus (ii) the Letter of Credit Exposure shall exceed ---- the Borrowing Base, as most recently reported by the Company pursuant to Section 5.02(b)(2), the Company shall pay an amount equal to such excess to the Agent, for the benefit of the Banks, which shall be applied in the order set forth in Section 2.10(b). SECTION 2.16. Extension of Commitments. No earlier than 120 days but ------------------------ no later than 90 days prior to the then applicable Commitment Termination Date, the Company may request that the Commitment Termination Date be extended by the Banks for an additional 364-days or longer period. The Banks may agree or not agree to such extension in the exercise of their sole discretion, provided, -------- however, that the Agent shall inform the Company no later than 60 days prior to - ------- the then applicable Commitment Termination Date of the Banks' decision as to whether to extend the Commitment Termination Date. Notwithstanding anything herein to the contrary, (i) no extension shall be granted unless Barclays agrees to extend the Barclays Revolver and BGI Facility for the same period of time and (ii) the Commitment Termination Date may only be extended for up to an additional two-year period pursuant to this Section 2.16. If the Banks agree, in their sole discretion, to -34- extend the Commitment Termination Date, then the applicable Commitment Termination Date shall automatically be so extended upon written notice thereof being delivered by the Banks to the Company and completion by the Company and its Subsidiaries of any conditions to such extension required by the Banks. SECTION 2.17. Capital Adequacy. (a) If, after the date of this ---------------- Agreement, any Bank shall have determined that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank with any request or directive regarding capital adequacy not currently in effect or fully applicable as of the Closing Date (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's capital as a consequence of its obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy) by an amount deemed by such Bank to be material; or (b) if, by reason of (x) after the date hereof, the introduction of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation, or (y) the compliance with any guideline or request from any central bank or other governmental authority or quasi-governmental authority exercising control over banks or financial institutions generally (whether or not having force of law) (1) any Bank shall be subject to any tax, duty or other charge with respect to its Letter of Credit Obligations or its obligation to issue Letters of Credit, or the basis of taxation of payments to any Bank on its obligation to issue Letters of Credit shall have changed (except for changes in the tax on the overall net income of such Bank imposed by the jurisdiction in which such Bank's principal executive office or applicable lending office is located); or (2) any reserve (including, without limitation, any imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank's applicable lending office shall be imposed or deemed applicable or any other condition affecting its Letter of Credit Obligations or its obligation to issue Letters of Credit shall be imposed on any Bank or its applicable lending office; and as a result thereof there shall be any increase in the cost to such Bank of agreeing to issue or issuing, purchasing participations, funding or maintaining Letters of Credit, or there shall be a reduction in the amount received or receivable by such Bank or its applicable lending office; then, from time to time, promptly upon demand by such Bank (with a copy to the Agent), the Company shall pay such Bank such additional amount or amounts as will compensate such Bank for such reduction. A certificate of any Bank claiming compensation under this -35- Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive absent manifest error. In determining any such amount, such Bank may use any reasonable averaging and attribution methods. Each Bank will promptly notify the Company of any such adoption, change or compliance of which it has knowledge which will entitle such Bank to compensate pursuant to this Section, but the failure to give such notice shall not affect such Bank's right to such compensation provided such Bank gives such notice within 90 days after an officer of such Bank having responsibility for the administration of this Agreement shall have received actual notice of such adoption, change or compliance. SECTION 2.18. Making of Payments. The Fees and all payments of ------------------ principal of, or interest on, the Notes shall be made in immediately available funds to the Agent at its principal office in Atlanta, Georgia, for the accounts of the respective Banks. All such payments shall be made not later than 12:00 noon (Atlanta, Georgia time) and funds received after that hour shall be deemed to have been received by the Agent on the next following Business Day. Payments to the Agent shall, as to the Company, constitute payment to the applicable Banks hereunder. On the Business Day that a payment is received or deemed to have been received hereunder, the Agent shall remit in immediately available funds to each Bank its share, based on the percentages set forth in Section 2.01, of all payments received by the Agent on the Notes. SECTION 2.19. Default Rate of Interest. Upon the occurrence and ------------------------ during the continuance of an Event of Default set forth in Section 8.01(a), (b) or (d), to the extent permitted by law, all unpaid amounts hereunder shall, on such date and thereafter, accrue the then applicable interest rate plus an additional two percent (2.0%) per annum until payment in full. Interest accruing pursuant to this Section 2.19 will be due and payable upon demand. SECTION 2.20. Proration of Payments. Subject to the terms of the --------------------- Intercreditor Agreement, if any Bank shall obtain any payment or other recovery (whether voluntary, involuntary, through exercise of any right of set-off or otherwise) after the occurrence and during the continuance of an Event of Default on account of the principal of or interest on any Note or any fees in respect of this Agreement in excess of its pro rata share of payments and other --- ---- recoveries obtained by all the Banks on account of the principal of and interest on the Notes then held by them or any fees due to them in respect of this Agreement, such Bank shall forthwith purchase from the other Banks such participation in the Notes held by them or in such fees owed to them as shall be necessary to cause such purchasing Bank to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any or any --------- -------- portion of the excess payment or other recovery is thereafter recovered from such purchasing Bank, the purchase from such Bank shall be rescinded and the purchase price restored by each selling Bank to the extent of such recovery, but without interest. After the occurrence and during the continuance of an Event of Default, disproportionate payments of interest shall be shared by the purchase of separate -36- participations in unpaid interest obligations, disproportionate payments of fees shall be shared by the purchase of separate participations in unpaid fee obligations, and disproportionate payments of principal shall be shared by the purchase of separate participations in unpaid principal obligations. The Company agrees that any Bank so purchasing a participation from another Bank pursuant to this Section 2.20 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Bank were the direct creditor of the Company in the amount of such participation. Each Bank shall give the Agent notice within five (5) days of any payments or other recoveries described above which it obtains. SECTION 2.21. Banks' Obligations Several. The obligation of each Bank -------------------------- to make any Advance is several, and not joint or joint and several, and is not conditioned upon the performance by all other Banks of their obligations to make Advances. SECTION 2.22. Calculation of Interest. Interest payable on the Notes, ----------------------- including interest payable as provided in Section 2.19, shall be calculated on the basis of a year of 360 days and paid for the actual number of days elapsed. SECTION 2.23. Payments Free of Taxes. (a) All Payments made by the ---------------------- Company under this Agreement and the Notes shall be made free and clear of, and without deduction for, any Tax. To the extent that the Company is obligated by Applicable Law to make any deduction or withholding on account of any Tax from any amount payable to any Bank under this Agreement or the Notes, the Company shall (1) make such deduction or witholding and pay the same to the relevant governmental authority and (2) pay such additional amount to such Bank as is necessary to result in that Bank's receiving a net after-tax (or after-assessment or after-charge) amount equal to the amount to which such Bank would have been entitled under this Agreement or the Notes absent such deduction or withholding. (b) Each Bank that is organized under the laws of any jurisdiction other than the United States of America or any State thereof (including the District of Columbia) agrees to furnish to the Company and the Agent, on the Closing Date and otherwise prior to the time it becomes a Bank hereunder, two copies of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 or any successor forms thereto (wherein such Bank claims entitlement to complete exemption from or reduced rate of U.S. Federal withholding tax on interest paid by the Company hereunder) and to provide to the Company and the Agent a new Form 4224 or Form 1001 or any successor forms thereto if any previously delivered form is found to be incomplete or incorrect in any material respect or upon the obsolescence of any previously delivered form. -37- SECTION 2.24. Illegality. Notwithstanding any other provision ---------- contained in this Agreement, the Agent shall not be obligated to issue any Letter of Credit, nor shall any Bank be obligated to purchase its participation in any Letter of Credit to be issued hereunder, if the issuance of such Letter of Credit or purchase of such participation shall have become unlawful or prohibited by compliance by Agent or such Bank in good faith with any law, governmental rule, guideline, request, order, injunction, judgment or decree (whether or not having the force of law); provided that in the case of the -------- obligation of a Bank to purchase such participation, such Bank shall have notified the Agent to such effect at least three (3) Business Days' prior to the issuance thereof by the Agent, which notice shall relieve the Agent of its obligation to issue such Letter of Credit pursuant to Section 2.04 and Section 2.05 hereof. SECTION 2.25. Letter of Credit Obligations Absolute. The obligation of ------------------------------------- each Account Party to reimburse the Agent for drawings made under Letters of Credit issued for the account of the Account Party and the Banks' obligation to honor their participations purchased therein shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including without limitation, the following circumstances: (a) Any lack of validity or enforceability of any Letter of Credit; (b) The existence of any claim, set-off, defense or other right which the Company or any Subsidiary or Affiliate of the Company may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such beneficiary or any transferee may be acting), any Bank or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including without limitation any underlying transaction between the Company or any of its Subsidiaries and Affiliates and the beneficiary for which such Letter of Credit was procured); (c) Any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (d) Payment by the Agent under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; (e) Any other circumstance or happening whatsoever which is similar to any of the foregoing; or -38- (f) the fact that a Default or an Event of Default shall have occurred and be continuing. Nothing in this Section 2.25 shall prevent an action against the Agent for its gross negligence or willful misconduct in honoring drafts under the Letters of Credit. ARTICLE III CONDITIONS TO BORROWINGS ------------------------ The obligation of each Bank to make an Advance to the Company hereunder is subject to the satisfaction of the following conditions: SECTION 3.01. Conditions Precedent to Initial Advances. At the time ---------------------------------------- of the making by each Bank of its initial Advance hereunder, unless otherwise waived or consented to by the Required Banks, (1) all obligations of the Company to the Agent or any Bank incurred prior thereto (including, without limitation, the Company's obligation to reimburse the fees and disbursements of counsel to the Agent and the Banks in accordance with this Agreement, the expense of the prefunding field audit conducted by the Banks in an amount not to exceed $2,500 and any fees payable to the Agent on or prior to such date), together with the Arrangement Fee and the Agent's Fee, shall have been paid in full; (2) the Barclays Agreement and the Barclays Guaranties shall have been executed and delivered to Barclays Bank PLC, and all conditions precedent thereto shall have been fulfilled; (3) the Agent shall have received the following, each dated as of the Closing Date, in form and substance satisfactory to the Banks and (except for the Notes and Intercompany Notes) in sufficient copies for each Bank: (a) A duly executed original of this Agreement. (b) A duly completed and executed original of a Note payable to the order of each Bank in the principal amount of such Bank's Commitment. (c) A duly executed original of the Intercreditor Agreement. -39- (d) A duly executed original of the Company Security Agreement and the Guarantor Security Agreement, together with such UCC financing statements and UCC amendments recorded in such jurisdictions as the Required Banks deem necessary or desirable to perfect the security interests granted thereunder and under the Company Pledge Agreement, the Guarantor Pledge Agreement, the Company Trademark Security Agreement, the Guarantor Trademark Security Agreement. (e) Certified Requests for Information or Copies (Form UCC-11) or equivalent reports, listing all effective financing statements which name the Company or any of its Material U.S. Subsidiaries as debtor, together with copies of such other financing statements (none of which shall cover the U.S. Collateral purported to be covered by the Company Security Agreement, the Guarantor Security Agreement, the Company Pledge Agreement, the Guarantor Pledge Agreement, the Company Trademark Security Agreement or the Guarantor Trademark Security Agreement, other than financing statements in favor of the U.S. Collateral Agent. (f) A duly executed original of the Company Pledge Agreement and the Guarantor Pledge Agreement, together with (i) stock certificates evidencing the shares of stock of all U.S. Subsidiaries of the Company (other than Law/Spear, LLC) pledged to the U.S. Collateral Agent thereunder and an undated stock power for each such stock certificate, executed in blank by the pledgor of such stock and (ii) Intercompany Notes evidencing all intercompany indebtedness among the Company and its Subsidiaries and appropriate instruments of transfer executed in blank by the pledgor of each Intercompany Note. (g) A duly executed original of the Company Trademark Security Agreement and the Trademark Security Agreement, together with such filings in the United States Patent and Trademark Office as the Required Banks deem necessary or desirable to prefect the security interests granted under the Company Trademark Security Agreement and the Guarantor Trademark Security Agreement. (h) Duly executed originals of the North Carolina Mortgage to be recorded in the real estate records of the jurisdiction in which the Mortgaged Property related thereto is located, together with such fixture filings and amendments to existing fixture filings recorded in such jurisdictions as the Required Banks deem necessary or desirable to perfect the security interests granted thereunder, and endorsements to the existing title insurance policies for such Mortgage showing that the U.S. Collateral Agent has a valid first priority Lien with respect to such Mortgaged Property subject to no encumbrances other than such Mortgages and Liens permitted pursuant to Section 6.02 hereof. -40- (i) Evidence satisfactory to the Required Banks that all other actions necessary or desirable to perfect and protect the security interests created by the U.S. Security Documents have been taken. (j) Certificates of insurance issued by the Company's insurers, describing in reasonable detail the insurance maintained by the Company, together with appropriate evidence showing that the Agent has been named as loss payee or additional insured, as its interest may appear, on all insurance policies insuring property of the Company and its Subsidiaries. (k) (i) Duly executed originals of the Second Amendment to SunTrust Interest Rate Agreement and the Swap Guaranty for SunTrust and executed copies thereof for all other Banks, (ii) duly executed originals of the California Guaranty Supplement for each Bank, (iii) duly executed originals of the U.S. Share Charges, (iv) share certificates evidencing 65% of the issued and outstanding shares of the International Subsidiaries that are pledged under the U.S. Shares Changes or evidence that Barclays Bank PLC is holding such share certificates as bailee for the U.S. Collateral Agent, and (v) evidence that all conditions precedent to the effectiveness of all such amendments and U.S. Shares Charges shall have been satisfied. (l) Certificates signed by the Chief Executive Officer or the Chief Financial Officer of each of the Company and the Guarantors as to the solvency of such Company or Guarantor. (m) A duly executed original of the Closing Certificate, in the form attached hereto as Exhibit E. --------- (n) Copies of the organizational papers of each of the Company and the Material U.S. Subsidiaries, certified as true and correct by the Secretary of State of the State in which the Company or such Material U.S. Subsidiary is incorporated, and certificates from the Secretaries of State of the States in which the Company or such Material U.S. Subsidiary is incorporated and of each Foreign Corporation State in which the Company or such Material U.S. Subsidiary is legally required to qualify to transact business as a foreign corporation, certifying the Company's or Material U.S. Subsidiaries' good standing as a corporation in such States. (o) Copies of the organizational papers of each Guarantor other than the Material U.S. Subsidiaries, certified as true and correct by the Secretary or Assistant Secretary of the Company or such Guarantor. -41- (p) Copies of the bylaws of each of the Company and the Guarantors, of resolutions of the Board of Directors of each of the Company and the Guarantors approving this Agreement, the Notes, the Borrowings hereunder, the U.S. Security Documents and all other Loan Documents to which the Company or such Guarantor is a party and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement, the Notes, the U.S. Security Documents and all other Loan Documents to which the Company or such Guarantor is a party, in each case certified as true and correct by the Secretary or an Assistant Secretary of the Company or such Guarantor. (q) Copies of all documents delivered in satisfaction of the conditions precedent to the effectiveness of the Barclays Agreement; (r) A certificate from a duly authorized officer of the Company certifying that all promissory notes existing on the date hereof that evidence all Indebtedness of the Company and its Subsidiaries incurred for the purchase of stock of the Company (other than the promissory note, dated as of June 1, 1992, in favor of Trilok B. Chaudhary in the amount of $243,500.00 and the promissory note, dated as of January 1, 1995, in favor of Timothy J. Quinn in the amount of $12,359.00) are in the form of Schedule 6.01 hereof or contain a subordination provision substantially in ------------- the form of the following; The indebtedness evidenced by this Note represents a primary obligation of Law Companies Group, Inc. and is and shall be subordinated as to payment of principal and interest to all bona fide indebtedness of Law Companies Group, Inc. payable to any bank, including, but not limited to, SunTrust Bank, Atlanta, Atlanta, Georgia, and the terms of all agreements with any such bank are incorporated herein by reference. (s) A favorable written opinion of Long, Aldridge & Norman, LLP, counsel for the Company and the Guarantors organized under the laws of Georgia and Delaware, substantially in the form of Exhibit F-1 attached ----------- hereto, and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request, addressed to the Agent and the Banks. (t) A favorable written opinion of Darryl Segraves, General Counsel for the Company and the Guarantors, substantially in the form of Exhibit F-2 attached hereto, and covering such additional matters relating ----------- to the transactions contemplated hereby as the Required Banks may reasonably request, addressed to the Agent and the Banks. -42- (u) A favorable written opinion of local counsel in California for the Company and Guarantors, substantially in the form of Exhibit F-3(A) attached -------------- hereto with appropriate insertions, and favorable written opinion of local counsel in North Carolina, substantially in the form of Exhibit F-3(B) attached -------------- hereto with appropriate insertions, and in each case covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request, addressed to the Agent and the Banks. (v) Favorable written opinions of counsel for the Company and its Subsidiaries in England and Cyprus, in form and substance satisfactory to the Required Banks, and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request, addressed to the Agent and the Banks. (w) A copy of integrated financial forecasts and statements of cash flow for all domestic and international operations of the Company and its Subsidiaries through April 30, 1998. (x) Copies of manuals and policies of the 401(k) Plan. (y) Completion of satisfactory prefunding field audit by the Banks or their representatives or auditors of the assets of the Company and its Subsidiaries. (z) A duly executed copy of the Barclays Agreement, the Barclays Guaranties and all legal opinions rendered by counsel to the Company or any of its International Subsidiaries with respect thereto, certified as true and correct copies of such documents by the Chief Executive Officer or the Chief Financial Officer of the Borrower. (aa) Certified copies of all consents, approvals, authorizations, registrations or filings required to be made or obtained by the Borrower or Guarantors in connection with the transactions contemplated hereby, by the other Loan Documents and by the Barclays Agreement. (bb) Evidence that the Company has notified all persons holding Shareholder Notes whose payments are past due or who have amortization of principal due prior to the Commitment Termination Date, that all principal and interest on such person's Shareholders Notes continues to be subordinated to all Indebtedness of the Company and its Subsidiaries under this Agreement, the other Loan Documents, the Barclays Agreement and all related documents which notice shall be in form and substance reasonably satisfactory to the Banks. -43- (4) all corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all Loan Documents and other documents incident thereto or delivered in connection therewith shall be satisfactory in form and substance to each Bank. SECTION 3.02. Conditions Precedent to Each Advance. At the time of ------------------------------------ the making by the Banks of each Advance hereunder (including the initial Advances), (a) the following statements shall be true: (i) The representations and warranties contained in Article IV hereof are true and correct in all material respects on and as of the date of such Borrowing as though made on and as of such date; (ii) No Default or Event of Default exists or would result from such Borrowing or from the application of the proceeds therefrom; (iii) Since the date of the most recent consolidated financial statements of the Company and its Subsidiaries decided in Section 4.05 or delivered to the Banks pursuant to Section 5.02, there shall have been no change which has had or could reasonably be expected to have a Materially Adverse Effect; (iv) There shall be no action or proceeding instituted or pending before any court or other governmental authority or, to the knowledge of the Company, threatened (i) which reasonably could be expected to have a Materially Adverse Effect, or (ii) seeking to prohibit or restrict the ownership or operation of any portion of the business or assets of the Company or any of its Subsidiaries, or to compel the Company or any of its Subsidiaries to dispose of or hold separate all or any portion of its businesses or assets, where such portion or portions of such business(es) or assets, as the case may be, constitute a material portion of the total businesses or assets of the Company or its Subsidiaries; and (v) The Advances to be made and the use of proceeds thereof shall not contravene, violate or conflict with, or involve the Agent or any Bank in a violation of, any Applicable Law. (b) the Agent shall have received such other approvals, opinions or documents as any Bank through the Agent may reasonably request. Each Notice of Borrowing given by the Company in accordance with Section 2.02 hereof and the acceptance by the Company of the proceeds of any Borrowing shall constitute a representation and warranty by the Company, made as of the time of the making of such Borrowing that the conditions specified in this Section 3.02 have been fulfilled as of such time unless a notice to the contrary -44- specifically captioned "Disclosure Statement" is received by each of the Banks from the Company prior to 5:00 p.m. (Atlanta, Georgia time) on the Business Day immediately preceding the date of the making of such Borrowing. To the extent that the Banks agree to make such Borrowing after receipt of a Disclosure Statement in accordance with the preceding sentence, the representations and warranties pursuant to the preceding sentence will be deemed made as modified by the contents of such Disclosure Statement and repeated, as so modified, as at the time of the making of such Borrowing. Any such modification shall be effective only for the occasion on which the Banks elect to make such Borrowing, and unless expressly agreed by the Required Banks in writing to the contrary in accordance with Section 10.02, shall not be deemed a waiver or modification of any condition to the making of any future Borrowing. SECTION 3.03. Condition Subsequent to Advances. It shall be a -------------------------------- condition to the making by the Banks of each Advance hereunder at any time thirty (30) days after the Closing Date that (1) the Company have repaid or caused to have been repaid all loans to shareholders or former shareholders of the Company made by SunTrust for which any payment of principal or interest is past due by 60 days or more, which shall be in an amount of no more than $60,000, and (2) Law Engineering and Environmental Services, Inc. shall have delivered to the US Collateral Agent a certificate certifying that the pledge of all of its uncertificated membership interests in Law/Spear, LLC has been registered to the US Collateral Agent, which certificate shall be acknowledged and agreed to by the Person in whose possession the books and records of Law/Spear, LLC are kept. ARTICLE IV REPRESENTATIONS AND WARRANTIES ------------------------------ The Company and the Guarantors represent and warrant (to the extent such representations and warranties pertain to it and its Subsidiaries) as follows: SECTION 4.01. Corporate Status of Company; Status of Subsidiaries. --------------------------------------------------- The Company and each Subsidiary that is a corporation are duly organized, existing and in good standing under the laws of the jurisdictions of their respective incorporation and have the corporate power and authority to own their respective property and assets and to transact the businesses in which they respectively are engaged or presently propose to engage and are duly qualified and in good standing as foreign corporations in the Foreign Corporation States and any other state where failure to be so qualified and in good standing could have a Materially Adverse Effect. Each Subsidiary that is a partnership is duly constituted, existing and in good standing under the laws of the jurisdiction of its constitution and has all requisite -45- power, authority and legal right to own its property and assets and to transact the businesses in which it is engaged or presently proposes to engage and is duly qualified and in good standing as a foreign partnership wherever failure to be so qualified and in good standing could have a Materially Adverse Effect. The Company and each of its Subsidiaries have the power to own their respective properties and to carry on their respective businesses as now being conducted. The Company is adequately capitalized for the purpose of conducting its business, was not formed solely for the purpose of acting as agent for, or as an instrumentality of, any Subsidiary, and maintains and will continue to maintain an identity independent of and separate from Crandall. SECTION 4.02. Corporate Power and Authority. Each of the Company and ------------------------------ the Guarantors has the corporate power and has taken all necessary corporate action (including, without limitation, any consent of stockholders required by law or by its certificate of incorporation or bylaws) to authorize it, to execute, deliver and carry out the terms and provisions of and to incur its obligations under this Agreement, the Notes, the Security Documents and the other Loan Documents to which it is a party. This Agreement, the Notes, the Security Documents and the other Loan Documents have been duly authorized, executed and delivered by the Company and the Guarantors party thereto and constitute the legal, valid and binding obligation of the Company and the Guarantors party thereto enforceable in accordance with their terms, except as the enforceability thereof may be limited by Bankruptcy Law and by general principles of equity. SECTION 4.03. Compliance with other Instruments. Neither the Company --------------------------------- nor any of its Subsidiaries is in default under any material agreement to which it is a party, and the execution, delivery and performance by the Company and any Guarantor, as the case may be, of this Agreement, the Notes the Security Documents and the other Loan Documents, (a) will not contravene any provision of Applicable Law, (b) will not conflict with or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any Lien upon any of the property or assets of the Company or any of its Subsidiaries pursuant to the terms of, any indenture, mortgage, deed to secure debt, deed of trust, or other material agreement or instrument to which it may be subject, (c) will not violate any provision of the certificate of incorporation (or equivalent thereof) or bylaws (or equivalent thereof) of the Company or any corporate Subsidiary of the Company or the certificate of partnership or other document governing the constitution or conduct of affairs of any Subsidiary of the Company that is not a corporation, (d) will not require any Governmental Approval and (e) will not result in the creation of any Lien upon the assets or properties of the Company and its Subsidiaries except as contemplated by the Security Documents. Neither the Company nor any of its Subsidiaries is a party to, or otherwise subject to any provision contained in, any in, any instrument evidencing Indebtedness of the Company or any of its Subsidiaries, any -46- agreement relating thereto or any other contract or agreement (including its charter) which limits the amount of, or otherwise imposes restrictions on the incurring of, Indebtedness of the type to be evidenced by the Notes or contains dividend or redemption limitations on the capital stock of the Borrower, except for this Agreement and the Barclays Agreement. SECTION 4.04. Litigation. Except as set forth on Schedule 4.04, there ---------- -------------- are no actions, suits, investigations or proceedings pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its subsidiaries or any of their rights by or before any court, arbitrator or administrative or governmental body in which the amount claimed or the Company's or such Subsidiary's potential liability exceeds $500,000 per claim or $1,000,000 in the aggregate for the Company and its Subsidiaries, taken as a whole. SECTION 4.05. Financial Statements. The audited consolidated financial -------------------- statements of the Company and its Subsidiaries dated December 31, 1995, and the related consolidated statements of income (including supporting footnote disclosures), with opinion of Ernst & Young, Certified Public Accountants, and the unaudited consolidated financial statements of the Company and its Subsidiaries dated September 30, 1996, and the related consolidated statements of income (including supporting footnote disclosures), all heretofore furnished to the Banks, are all true and correct in all material respects and present fairly the consolidated financial condition at the date of said financial statements and the results of operations for the fiscal year then ending of the Company and said Subsidiaries. Neither the Company nor any of its Subsidiaries has as of such date any significant liabilities, contingent or otherwise, including liabilities for Taxes or any unusual forward or long-term commitments which were not disclosed by or reserved against in the financial statements referred to above or in the notes thereto, and at the present time there are no material unrealized or anticipated losses from any unfavorable commitments of the Company or any of its Subsidiaries. All such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved. Since September 30, 1996, there has been no material adverse change in the operations, business, property or assets of, or in the condition (financial or otherwise) of, the Company and its subsidiaries, taken as a whole. SECTION 4.06. Consents and Governmental Approvals. Except as set forth ----------------------------------- on Schedule 4.06 hereto, no Governmental Approval or consent, permission, ------------- approval or authorization of any non-governmental authority or Person is required to authorize, or is required in connection with, the execution, delivery, performance or enforcement of this Agreement, the Notes or any other Loan Documents. SECTION 4.07. Title to Properties. Each of the Company and its ------------------- Subsidiaries has (i) good and marketable fee simple title to its respective real properties (other than real -47- properties it leases from others), including such real properties reflected in the financial statements referred to in Section 4.05, subject to no Lien of any kind except Liens permitted under Section 6.03 and (ii) good title to all of its other respective properties and assets (other than properties and assets which it leases from others), including the other properties and assets reflected in the financial statements referred to in Section 4.05, subject to no Lien of any kind except Liens permitted by Section 6.02. Except as set forth on Schedule -------- 4.07 hereto, each of the Company and its Subsidiaries enjoys peaceful and - ---- undisturbed possession under all leases necessary for the operation of its respective properties and assets, none of which contains any unusual or burdensome provisions that would adversely affect or impair the operation of such properties and assets, and all such leases are valid and subsisting and in full force and effect. SECTION 4.08. Taxes. Except as set forth on Schedule 4.08 hereto, each ----- ------------- of the Company and its Subsidiaries has filed or caused to be filed all declarations, reports and tax returns including, in the case of the Company and each Subsidiary located in the United States, all federal and state income tax returns which it is required by law to file, and has paid all Taxes which are shown as being due and payable on such returns or on any assessments made against it or any of its properties. The accruals and reserves on the books of the Company and its Subsidiaries in respect of Taxes are adequate for all periods. Neither the Company nor any of its Subsidiaries has any knowledge of any unpaid adjustment, assessment or any penalties or interest of significance, or any basis therefor, by any taxing authority for any period, except those being contested in good faith and by appropriate proceedings which effectively stay the enforcement of any Lien and the attachment of a penalty. SECTION 4.09. ERISA. Except as disclosed on Schedule 4.09 attached ----- ------------- hereto: (a) Identification of Plans. (i) Neither the Company nor any ERISA ----------------------- Affiliate maintains or contributes to, or has maintained or contributed to, any Plan that is an ERISA Plan, and (ii) neither the Company nor any of its Subsidiaries maintains or contributes to, or has maintained or contributed to, any Plan that is an Executive Arrangement; (b) Compliance. Each Plan has at all times been maintained, by its ---------- terms and in operation, in accordance with all Applicable Laws, except such noncompliance (when taken as a whole) that will not have a Materially Adverse Effect; (c) Liabilities. Neither the Company nor any of its Subsidiaries is ----------- currently nor has in the last 6 years been obligated to make contributions (directly or indirectly) to a Multiemployer Plan, nor is it currently nor will it become subject to any liability -48- (including withdrawal liability), tax or penalty whatsoever to any Person whomsoever with respect to any Plan including, but not limited to, any tax, penalty or liability arising under Title I or Title IV or ERISA of Chapter 43 of the Code, except such liabilities (when taken as a whole) as will not have a Materially Adverse Effect; and (d) Funding. The Company and each ERISA Affiliate has made full and ------- timely payment of all amounts (i) required to be contributed under the terms of each Plan and Applicable Law and (ii) required to be paid as expenses of each Plan. No Plan has an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA). SECTION 4.10. Solvency. Each of the Company and the Guarantors hereby -------- acknowledges receipt of fair consideration and reasonably equivalent value for the incurrence of its obligations hereunder. Each of the Company and the Guarantors (other than IAM Environmental, Inc.) (ii) represents and warrants that, (A) after giving effect to the incurrence of such obligations and its obligations under the SunTrust Interest Rate Contracts, any Letter of Credit applications, the Barclays Agreement, the Barclays Guaranties and the Swap Guaranty, as the case may be, and (B) taking into account its rights under Section 10.01(e) as a Funding Guarantor against the other Guarantors as Contributing Guarantors and any similar rights under the Barclay Guaranties and the Swap Guaranty, the present fair salable value of its assets exceeds its liabilities in that it retains sufficient capital to reasonably anticipate needs and risks of its ongoing business, and (iii) represents and warrants that, (A) after giving effect to the incurrence of such obligations and its obligations under the SunTrust Interest Rate Contracts, any Letter of Credit applications, the Barclays Agreement, the Barclays Guaranties and the Swap Guaranty, as the case may be, and (B) taking into account its rights under Section 10.01(e) as a Funding Guarantor against the other Guarantors as Contributing Guarantors and any similar rights under the Barclays Guaranties and the Swap Guaranty, it has not incurred, nor is it obligated for, debts beyond its ability to pay such debts as they mature, and that the present fair salable value of its assets is greater than that needed to pay its probable existing debts as they become due. Each Guarantor further represents and warrants that because of the provision of loans, advances and other corporate services by the Company to the Guarantors are materially interested in the financial success of the Company and will materially benefit from the Company entering into this Agreement, for which its guaranty is a condition precedent. SECTION 4.11. Subsidiaries. Schedule 4.11 attached hereto correctly ------------ ------------- sets forth the name of each Subsidiary of the Company, the jurisdiction of such Subsidiary's incorporated or organization and the ownership of all issued and outstanding capital stock of such Subsidiary. All the outstanding shares of the capital stock of each such Subsidiary have been validly issued and are fully paid and nonassessable and all such outstanding -49- shares, except as noted on such Schedule, are owned of record and beneficially by the Company or a wholly-owned Subsidiary of the Company free of any Lien or claim. Both Law/Crandall, Inc. and Law Engineering, Inc. have merged with and into Law Environmental and Engineering Services, Inc. Neither Law/Crandall, Inc. nor Law Engineering, Inc. now exist. SECTION 4.12. Outstanding Indebtedness. Except for (i) the ------------------------ Indebtedness to the Banks to be refinanced with the proceeds of Borrowings hereunder pursuant to Section 2.12, (ii) Indebtedness existing on the Closing Date and set forth on Schedule 4.12, and (iii) Indebtedness permitted by Section ------------- 6.01, neither the Company nor any of its Subsidiaries, on a consolidated basis, has outstanding basis, has outstanding any Indebtedness. There exists no default under the provisions of any instrument evidencing or securing Indebtedness of the Company or any of its Subsidiaries or of any agreement otherwise relating thereto which has had or would reasonably be expected to have a Material Adverse Effect. SECTION 4.13. Pollution and Other Regulations. ------------------------------- (a) The Company and its Subsidiaries are not in violation of, and do not presently have outstanding any liability under, have not been notified that they are or may be liable under and do not have knowledge of any liability or potential liability (including any liability relating to matters set forth in Part A. of Schedule 4.13) except as set forth in Part A. of Schedule 4.13, under ------------- ------------- any applicable Environmental Laws which violation, liability or potential liability could reasonably be expected to have a Materially Adverse Effect. (b) Except as set forth in Part B. of Schedule 4.13, neither the ------------- Company nor any of its Subsidiaries has received a written request for information under any Environmental Laws stating or suggesting that the Company or any of its Subsidiaries has or may have liability thereunder or written notice that any such entity has been identified as a potentially responsible party under any Environmental Laws, or any comparable state law, or any public health or safety or welfare law, nor has any such entity received any written notification that any Hazardous Substance that it or any of its respective predecessors in interest has generated, stored, treated, handled, transported, or disposed of, has been released or is threatened to be released at any site at which any Person intends to conduct or is conducting a remedial investigation or other action pursuant to any Environmental Laws. (c) Except as set forth in Part C. of Schedule 4.13, each of the ------------- Company and its Subsidiaries has obtained all material permits, licenses or other authorizations required for the conduct of their respective operations under all applicable Environmental and Asbestos Laws and each such authorization is in full force and effect. -50- (d) Except as set forth in Part D. of Schedule 4.13, each of Company ------------- and its Subsidiaries complies in all material respects with all laws and regulations relating to equal employment opportunity and employee safety in all jurisdictions in which it is presently doing business, and Company will use its reasonable best efforts to comply, and to cause each of its Subsidiaries to comply, with all such laws and regulations which may be legally imposed in the future in jurisdictions in which Company or any of its Subsidiaries may then be doing business. SECTION 4.14. Possession of Franchise, Licenses, Etc. Except as set -------------------------------------- forth on Schedule 4.14, each of Company and its Subsidiaries possesses all ------------- franchises, certificates, licenses, permits and other authorizations from governmental political subdivisions or regulatory authorities, that are necessary in any material respect for the ownership, maintenance and operation of its properties and assets, and neither Company nor any of its Subsidiaries is in violation of any thereof in any material respect. SECTION 4.15. Intellectual Property. Except as set forth on Schedule --------------------- -------- 4.15, each of Company and its Subsidiaries owns or has the right to use all - ---- patents, trademarks, service marks, trade names, copyrights, licenses and other rights, free from burdensome restrictions, which are necessary for the operation of its business as presently conducted. Nothing has come to the attention of Company, any of its Subsidiaries or any of their respective directors and officers to the effect that (i) any product, process, method, substance, part or other material presently contemplated to be sold by or employed by Company or any of its Subsidiaries in connection with its business may infringe any patent, trademark, service mark, trade name, copyright, license or other right owned by any other Person, (ii) there is pending or threatened any claim or litigation against or affecting Company or any of its Subsidiaries contesting its right to sell or use any such product, process, method, substance, part or other material or (iii) there is, or there is pending or proposed, any patent, invention, device, application or principle or any statute, law, rule, regulation, standard or code which would prevent, inhibit or render obsolete the production or sale of any products of, or substantially reduce the projected revenues of, or otherwise materially adversely affect the business, condition or operations of, Company or any of its Subsidiaries. SECTION 4.16. Insurance Coverage. Each property of the Company or any ------------------ of its Subsidiaries is insured within terms reasonably acceptable to the Banks for the benefit of the Company or a Subsidiary of the Company in amounts deemed adequate by the Company's management and no less than those amounts customary in the industry in which the Company and its Subsidiaries operate against risks usually insured against by Persons operating business similar to those of the Company or its Subsidiaries in the localities where such properties are located, and the Agent has been named loss payee or additional -51- insured, as its interest may appear, on all such policies. Attached as Schedule -------- 4.16 hereto are certificates evidencing such insurance. - ---- SECTION 4.17. Labor Matters. Except as set forth on Schedule 4.17, the ------------- ------------- Company and its Subsidiaries have experienced no strikes, labor disputes, slow downs or work stoppages due to labor disagreements which have had, or would reasonably be expected to have, a Materially Adverse Effect, and, to the best knowledge of Company's executive officers, there are no such strikes, disputes, slow downs or work stoppages threatened against any Company or any of Company's Subsidiaries. The hours worked and payment made to employees of the Company and its Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable law dealing with such matters. All payments due from the Company and its Subsidiaries, or for which any claim may be made against the Company or any of its Subsidiaries, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as liabilities on the books of the Company and its Subsidiaries where the failure to pay or accrue such liabilities would reasonably be expected to have a Materially Adverse Effect. SECTION 4.18. Intercompany Loans. All intercompany indebtedness owned ------------------ by the Company or any of its Subsidiaries or owed by a U.S. Subsidiary to the Company is evidenced by an Intercompany Note, which Intercompany Note has been duly authorized and approved by all necessary corporate and shareholder action on the part of the parties thereto, and constitutes the legal, valid and binding obligations of the party thereto, enforceable against it in accordance with the terms of the Intercompany Note, except as may be limited by Bankruptcy Law and by general principles of equity. There are no restrictions on the power of the Company or any of its Subsidiaries to repay the indebtedness evidenced by any Intercompany Note except restrictions on the Company contained herein and in the Barclays Agreement. SECTION 4.19. Disclosure. Neither this Agreement, any Loan Document ---------- nor any other document, certificate or statement furnished to the Banks or the Agent by or on behalf of the Company or any Guarantor in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact peculiar to the Company or any of its Subsidiaries which materially adversely affects or in the future may (so far as the Company can now foresee) materially adversely affect the business, property or assets, or financial condition of the Company or any of its Subsidiaries which has not been set forth in this Agreement, the Loan Documents or in the other documents, certificates and statements furnished to the Banks or the Agent by or on behalf of the Company or any Guarantor prior to the date hereof in connection with the transactions contemplated hereby. -52- SECTION 4.20. Partially Owned Subsidiaries. The Company and its ---------------------------- Subsidiaries own 50% of the issued and outstanding shares of stock of Law/Sundt, Inc., and Envirosource Incorporated. Law Engineering and Environmental Services, Inc. owns 50% of the issued and outstanding membership interests of Law/Spear, LLC, a Georgia limited liability company. The Company and its Subsidiaries do not own or control sufficient outstanding capital stock with the power to vote to elect a majority of the board of directors of Law/Sundt, Inc. and Envirosource Incorporated. The organizational documents of Law/Spear, LLC do not permit Law Engineering and Environmental Services, Inc., without the consent of the other persons holding membership interests of Law/Spear, LLC, to cause Law/Spear, LLC to guaranty the Obligations or to grant a lien in its assets in favor of the U.S. Collateral Agent, nor do the organizational documents of Law/Spear, LLC permit Law Engineering and Environmental Services, Inc., without the consent of the other persons holding membership interests of Law/Spear, LLC, to amend the organizational documents to provide such a guarantee or grant such a lien. The fair market value of all of the assets of Law/Sundt, Inc. is approximately $10,000, the fair market value of all assets of Envirosource Incorporated is less than $25,000 and the fair market value of all assets of Law/Spear, LLC is less than $550,000. ARTICLE V AFFIRMATIVE COVENANTS --------------------- So long as any Note shall remain unpaid or any Bank shall have any Commitment hereunder, unless the Required Banks shall otherwise consent in writing: SECTION 5.01. Use of Proceeds. The proceeds of all Borrowings will be --------------- used by the Company as provided in Section 2.12. None of the proceeds of any Borrowing shall be used, directly or indirectly, to purchase or carry, or to reduce or retire or refinance any credit incurred to purchase or carry, any "margin security" or "margin stock" (within the meaning of the regulations of the Board of Governors of the Federal Reserve System) or to extend credit to others for the purpose of purchasing or carrying any such "margin security" or "margin stock" or for any other purpose that might deem this transaction as a "purpose credit" (within the meaning of the regulations of the Board of Governors of the Federal Reserve System). If requested by any Bank, the Company will furnish to such Bank statements in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U. -53- SECTION 5.02. Reporting Covenants. The Company will furnish to each of ------------------- the Banks: (a) as soon as available and in any event no later than 120 days after the end of each fiscal year of the Company, an audited consolidated balance sheet of the Company and its Subsidiaries as of the close of such fiscal year, and the related audited consolidated statements of income and cash flow of the Company and its Subsidiaries for such fiscal year, all in reasonable detail and with (1) an unqualified opinion of Ernst & Young or other independent certified public accountants of recognized standing selected by the Company and satisfactory to the Required Banks and (2) a certificate (with supporting details) from such accountants stating whether anything has come to their attention during their audit that causes them to believe that the Company has failed to comply with the covenants set forth in Article VII of the Credit Agreement and the equivalent sections of the Barclays Agreement, and as soon as available and in any event no later than 160 days after the end of each fiscal year of the Company, the management letter prepared in connection with such audited financial statements, provided that the Company may make a change in its accounting principles in any fiscal year, so long as (w) the Required Banks shall consent thereto (which consent shall not be unreasonably withheld), (x) such change or changes are clearly reflected in the annual audit report, (y) any principle has been concurred in by the Company and the Company's independent certified public accountants and is in accordance with generally accepted accounting principles, and (z) this Agreement has been amended to the extent necessary to reflect such changes in the financial covenants and other terms and conditions of this Agreement; (b) (1) as soon as available and in any event within 30 days after the end of each fiscal month of each fiscal year of the Company, (A) a consolidated balance sheet of the Company and its Subsidiaries as of the close of such month and consolidated statements of income and cash flow for such month and for the year-to-date, with comparisons to the forecasts and the actual performance by the Company and its Subsidiaries for equivalent periods of the previous year, all in reasonable detail and in accordance with GAAP, subject to usual and customary year end audit and adjustments and footnote disclosures, (B) a certificate (with supporting details) in the form of Schedule 5.02(b)(1) hereto, ------------------- of the Chief Financial Officer stating that to the best of his knowledge no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto, and (C) accounts payable, accounts receivable and work in process reports in the form reasonably acceptable to the Banks, together with a brief commentary summarizing these reports, the balance sheet and the statements of income and cash flow, and (2) as soon as available and in any event no later than the Borrowing Base Reporting Date for each fiscal month of each fiscal year of the Company, a Borrowing Base Certificate hereto as of the close of the immediately preceding fiscal month; -54- (c) as soon as available and in any event within 45 days after the end of each fiscal quarter of each fiscal year of the Company (1) a certificate in the form of Schedule 5.02(c) hereto by the Chief Financial Officer of the Company ---------------- accompanied with the Company's Form 10-Q (with quarterly financial statements) with respect to such fiscal quarter duly filed with the Securities and Exchange Commission, (2) integrated financial forecasts for the immediately succeeding twelve-month period, which forecasts shall be updated to reflect actual historical performance data reported as of the most recently ended fiscal quarter and to reflect any changes in future expected performance, and (3) a backlog report indicating as of the close of such fiscal quarter the amount of uncommenced work of Gibb Limited; (d) promptly upon the approval of its board of directors and in any event within 45 days after the end of each fiscal year of the Company, a capital expenditures budget for the succeeding fiscal year, in reasonable detail; (e) as soon as available and in any event within 45 days of the end of each fiscal month of the Company, a report listing all employees of the Company or its Subsidiaries that are shareholders of the Company and that left (voluntarily or involuntarily) employment of the Company or any of its Subsidiaries during such month, indicating the number of shares of stock of the Company held by each such shareholder and whether such shareholder executed a promissory note in favor of SunTrust Bank, Atlanta in connection with the purchase of any shares of stock of the Company; and (f) with reasonable promptness, such further information regarding the business, affairs and financial condition of the Company or any of its Subsidiaries as any Bank may reasonably request. SECTION 5.03. Maintenance of Books; Inspection of Property and ------------------------------------------------ Records. Each of the Company and the Guarantors shall, and shall cause each of - ------- its Subsidiaries to, keep proper books of record and account containing complete and accurate entries in all material respects of all of their respective financial and business transactions and prepare or cause to be prepared its annual statements and reports in accordance with generally accepted accounting principles. Each of the Company and the Guarantors shall, and shall cause each of its Subsidiaries to, permit any person designated by any Bank to visit and inspect any of its properties, corporate books and financial records, to make copies and take extracts therefrom, and to discuss its accounts, affairs, and finances with the principal officers of the Company and such Subsidiary during reasonable business hours, all at such times as the Banks may reasonably request; provided, however, that any time following the occurrence and -------- ------- continuance of an Event of Default, no prior notice to the Company shall be required. Each of the Company and the Guarantors shall, and shall cause each of its Subsidiaries to, prepare or cause to be prepared its interim statements and reports in accordance with -55- generally accepted accounting principles, subject to usual and customary year end audit and adjustments and footnote disclosures. SECTION 5.04. Maintenance of Properties. Each of the Company and the ------------------------- Guarantors shall, and shall cause each of its Subsidiaries to, maintain, preserve, protect and keep, or cause to be maintained, preserved, protected and kept, its properties and every part thereof in good repair, working order and condition, and from time to time will make or cause to be made all needful and proper repairs, renewals, replacements, extensions, additions, betterments, and improvements thereto, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, --------- -------- that the Company and its Subsidiaries shall not be under any obligation to repair or replace any such properties which have become obsolete or have become unsuitable or inadequate for the purpose for which they are used. SECTION 5.05. Maintenance of Insurance. Each of the Company and the ------------------------ Guarantors shall, and shall cause each of its Subsidiaries to, (i) maintain liability and worker's compensation insurance with financially sound and reputable insurers (or maintain a legally sufficient, fully funded, program of self insurance against worker's compensation liabilities), and also maintain adequate insurance on its properties against such hazards and in at least such amounts as is customary in the business, and (ii) name the Agent as loss payee or additional insured, as its interest may appear, on each of such insurance policies. At the request of any Bank, the Company will forthwith deliver an officer's certificate specifying the details of such insurance in effect. SECTION 5.06. Taxes and Claims. Each of the Company and the Guarantors ---------------- shall, and shall cause each of its Subsidiaries to, pay and discharge (i) all Taxes prior to the date on which penalties attach thereto, and (ii) all claims (including, without limitation, claims for labor, materials, supplies or services) (collectively "Other Claims") which, if unpaid, might become a Lien ------------ upon any of its property; provided, however, that the Company and its -------- ------- Subsidiaries shall not be required to pay and discharge any such Tax or Other Claim so long as the legality or amount thereof shall be promptly contested in good faith and by appropriate proceedings which effectively stay the enforcement of any Lien and the attachment of a penalty and the Company or such Subsidiary, as the case may be, shall have set aside appropriate reserves therefor in accordance with generally accepted accounting principles. SECTION 5.07. Existence and Status. Except as provided in Section -------------------- 6.04, each of the Company and the Guarantors shall, and shall cause each of its Subsidiaries that is a corporation to, maintain its corporate existence, its material rights, franchises and licenses (for the schedule duration thereof), its trademarks, tradenames and service marks necessary or desirable in the normal conduct of its business, its good standing in its state of -56- incorporation and its qualification and good standing as a foreign corporation in all jurisdictions where its ownership of property or its business activities cause such qualification to be required and the failure to do so could have a Materially Adverse Effect. The Company shall cause each Subsidiary that is not a corporation to maintain its present form of existence, its material rights, franchises and licenses (for the scheduled duration thereof), its trademarks, tradenames and service marks necessary or desirable in the normal conduct of its business, its good standing in the jurisdiction of its constitution and its qualification and good standing as a foreign entity in all jurisdictions where its ownership of property or its business activities cause such qualification to be required and the failure to do so could have a Materially Adverse Effect. SECTION 5.08. Compliance with Laws, Etc. Each of the Company and the ------------------------- Guarantors shall, and shall cause each of its Subsidiaries to, comply with all Applicable Law (including, without limitation, the Environmental Laws) and Contractual Obligations applicable to or binding on any of them where the failure to comply with such Applicable Law and Contractual Obligations would reasonably be expected to have a Materially Adverse Effect. SECTION 5.09. ERISA. The Company and the Guarantors shall, and shall ----- cause each of its Subsidiaries to, deliver to each of the Banks: (i) Promptly after the discovery of the occurrence thereof with respect to any Plan, or any trust established thereunder, notice of (A) a "reportable event" described in Section 4043 of ERISA and the regulations issued from time to time thereunder (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under such regulations), or (B) any other event which could subject the Company or any ERISA Affiliate to any material tax, penalty or liability under Title I or Title IV of ERISA or Chapter 43 of the Code; (ii) At the same time and in the same manner as such notice must be provided to the PBGC, or to a Plan participant, beneficiary or alternative payee, any notice required under Section 101(d), 302(f)(4), 303(e), (307)(e), 4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or Section 412(f) of the Code with respect to any Plan; and (iii) Upon the request of any Bank, (A) true and complete copies of any and all documents, government reports and determination or opinion letters (if any) for any Plan, or (B) a current statement of withdrawal liability for each Multiemployer Plan. SECTION 5.10. Litigation. The Company shall give prompt written ---------- notice to each of the Banks of (a) any judgment entered by a court, tribunal, administrative agency -57- or arbitration panel in which the amount of liability is $500,000 or more in excess of insurance coverage, or in which the aggregate amount of liability is $1,000,000 or more in excess of insurance coverage, and (b) any disputes which may exist between the Company or any of its Subsidiaries and any governmental or regulatory body, in which the amount in controversy is $500,000 or more and which may materially and adversely affect the normal business operations of the Company or any of its Subsidiaries or any of their respective properties and assets. The Company shall provide each of the Banks, on a quarterly basis, concurrently with the delivery of the information required under Section 5.02(c), the Company's internal litigation reports prepared in the course of its business, which shall set forth each action, proceeding or claim, of which the Company or any of its Subsidiaries has notice, which is commenced or asserted against the Company or any of its Subsidiaries, and in which the amount claimed or the potential liability is $500,000 or more. SECTION 5.11. Notice of Events of Default. The Company shall deliver --------------------------- to each of the Banks within five (5) days after any Executive Officer obtains any knowledge of any condition, event or act which creates or causes a Default or an Event of Default, a certificate signed by an officer of the Company or Gibb Limited specifying the nature thereof, the period of existence thereof and what action the Company's or such Subsidiary proposes to take with respect thereto. SECTION 5.12. Stockholder Reports, etc. Contemporaneously with the ------------------------ sending or filing thereof, the Company will provide to each of the Banks copies of all proxy statements, financial statements, and reports which the Company sends to its stockholders, and copies of all regular, periodic, and special reports, and all statements which the Company files with the Securities and Exchange Commission or any governmental authority which may be substituted therefor, or with any national securities exchange. SECTION 5.13. Future Guarantors and Pledgors. ------------------------------ (a) Subject to any prohibitions or limitations as to power or authority imposed by law applicable to any such Subsidiary, the Company and the Guarantors shall cause (1) each Person incorporated or otherwise organized in the United States that hereafter becomes a Subsidiary (an "Additional ---------- Guarantor") to become a Guarantor under this Agreement, the Swap Guaranty and - --------- the Barclays Guaranties and to pledge all of its assets, including, to the extent owned by such Guarantor, 100% of the stock of other U.S. Subsidiaries, 65% of the stock of any International Subsidiaries (other than those Subsidiaries listed on Schedule 1.01(e)) and all Intercompany Notes, to the U.S. ----------------- Collateral Agent upon the creation of such Additional Guarantor by executing and delivering to the U.S. Collateral Agent the Supplemental Documents; provided, -------- however, that none of the Partially Owned Subsidiaries shall be required to - ------- become a Guarantor under this Agreement or pledge any of its assets under the U.S. Security Documents unless and until the Company -58- shall beneficially own, directly or indirectly, 100% of the outstanding common stock (exclusive of directors' qualifying shares) of such Partially Owned Subsidiary; and (2) each Person that owns the stock of the Additional Guarantor or holds any Intercompany Notes executed by the Additional Guarantor to pledge and deliver such stock and Intercompany Notes to the U.S. Collateral Agents, together with a supplement to the Company Pledge Agreement or Guarantor Pledge Agreement, as the case may be, and with stock powers or other appropriate instruments of transfer executed by such Person in blank. (b) If an Additional Guarantor is a Material U.S. Subsidiary, the Additional Guarantor shall also deliver to the U.S. Collateral Agent and the Banks, simultaneously with the Supplemental Documents, (1) Certified Requests for Information or Copies (Form UCC-11) or equivalents reports, showing that there are no effective financing statements which name the Additional Guarantor as debtor and (2) an opinion rendered by legal counsel to such Additional Guarantor and the Person required to pledge the shares of stock of the Additional Guarantor under the U.S. Security Documents to the U.S. Collateral Agent, addressing the types of matters set forth in Exhibit F-1, Exhibit F-2 and Exhibit F-3(A) hereof and such other matters ----------- ----------- -------------- as the Required Banks may reasonably request, addressed to the Agent and the Banks. (c) The Company and the Guarantors shall cause each Person (an "Additional Pledgor") that hereafter acquires the stock of or other ------------------ ownership interest in any Subsidiary that is incorporated or otherwise organized in a country or state other than the United States and which (1) has assets comprising five percent (5%) or more of the assets of the Company and its Subsidiaries, taken as a whole, or (2) has revenues comprising five percent (5%) or more of the revenues of the Company and its Subsidiaries, taken as a whole, to pledge 65% of such stock or other ownership interest to the U.S. Collateral Agent under documents in form and substance acceptable to the Banks, together with an opinion rendered by legal counsel to such Additional Pledgor to the Banks, addressing such issues are requested by the Banks, in form and substance satisfactory to the Banks, and such evidence of corporate or partnership approval as the Banks shall require. SECTION 5.14. Ownership of Guarantors. The Company and its ----------------------- Subsidiaries that own Guarantors shall maintain their percentage ownership of such Guarantors existing as of the date hereof and shall not decrease its ownership percentage in each Additional Guarantor pursuant to Section 5.13 after the date hereof, as such ownership exists at the time such Additional Guarantor becomes a Guarantor hereunder. SECTION 5.15. 401(k) Plan. To the extent that an employer ----------- stock option is available under the 401(k) Plan, the Company shall designate that all employer matching and profit-sharing contributions be made in common stock of the Company or in cash held -59- temporarily in trust until converted into common stock of the Company, which conversion shall occur at least quarterly. SECTION 5.16. Law International Sales Company. No later than ------------------------------- September 30 of each year, the Company and the Guarantors shall cause Law International Sales Company, a U.S. Virgin Island corporation, to issue and pay a dividend to Law International, Inc. in a amount equal to the intercompany indebtedness which has accrued since September 30 of the prior year. SECTION 5.17. Lex. The Company shall cause Lex Insurance to issue --- dividends at least annually to the Company in such amounts, if any, such that Lex Insurance maintains only the minimum capital level required by law and regulation and by Lex Insurance's underwriters, and shall not permit Lex Insurance to grant a Lien or permit any Lien to exist on the real property and other assets owned by Lex Insurance. SECTION 5.18. Refinancing of FLECBOA. No later than April 15, 1997, ---------------------- the Company shall (1) cause all agreements relating to FLECBOA to be terminated; (2) cause ownership of fee title to the property leased by the Company or any of its Subsidiaries in connection with FLECBOA to be transferred to the Company or such Subsidiary; (3) have all Liens on the collateral securing FLECBOA released, other than Liens permitted under Section 6.02; and (4) execute and deliver, or cause such Subsidiary to executed and deliver, to the Agent a Mortgage, in form and substance reasonably satisfactory to the Required Banks, pursuant to which such collateral shall be pledged to the U.S. Collateral Agent for the benefit of the Banks and Barclays Bank PLC, together with (A) fixture filings recorded in such jurisdictions as the Required Banks reasonably deem necessary to perfect the security interest granted thereunder, (B) a title insurance policy with respect to such collateral showing that the U.S. Collateral Agent has a valid first priority lien with respect to the Mortgaged Property located in Escambia Country, Florida subject to no encumbrances other than such Mortgage and Liens permitted pursuant to Section 6.02 hereof, (C) such environment reports as the Required Banks shall reasonably require, (D) such legal opinions addressing such issues as the Required Banks may reasonably require addressed to the Agent and the Banks, and (E) all other documents, instruments, and certificates reasonably required by the Required Banks in connection therewith. -60- ARTICLE VI NEGATIVE COVENANTS ------------------ So long as any Note shall remain unpaid or any Bank shall have any Commitment hereunder, without the written consent of the Required Banks (unless otherwise provided herein): SECTION 6.01. Indebtedness and Rental Obligations. The Company and the ----------------------------------- Guarantors shall not, and shall not permit any Subsidiary of the Company or joint venture in which the Company or any of its Subsidiaries is a party to, create, incur, assume or suffer to exist, any Indebtedness or any operating lease and other rental obligations, not existing as of the date of this Agreement and disclosed on Schedule 4.12 hereto, except ------------- (a) all Indebtedness owing to the Banks and the Agent under this Agreement and the Notes; (b) rental obligations which involve either real estate or personalty if the aggregate of all rental payments by the Company and its Subsidiaries shall not exceed per fiscal year 8.0% of Net Fees Budgeted for such fiscal year; (c) Indebtedness not evidenced by a promissory note or other instrument, incurred in the normal course of business and payable on customary terms, including, but not limited to, salaries and bonuses and general overhead expenses; (d) Indebtedness existing on the Closing Date and evidenced by a Shareholder Note; provided, however, that (1) such Indebtedness may not be -------- ------- refinanced after the Closing Date except with the consent of and upon terms satisfactory to the Banks and Barclays, (2) such Shareholder Notes may not be amended or otherwise modified in any material respect, other than modifications to extend the scheduled payment of any interest or principal or reduce the interest rate payable thereunder, and (3) the Company may not make principal payments on any of such Shareholder Notes except to the extent expressly permitted in Section 6.03(b); (e) Indebtedness incurred after the Closing Date for the repurchase of common stock of the Company, provided that (1) such Indebtedness shall not exceed in principal amount an aggregate of (A) $250,000, less (B) the ---- amount of any principal of the Shareholder Notes paid in cash by the Company on or after the Closing Date, plus (C) an amount equal to the net ---- proceeds of sales of stock of the Company at any one time outstanding, (2) after giving effect to such incurrence of -61- Indebtedness and corresponding stock repurchase, the Company shall be in compliance with Section 6.01, (3) such Indebtedness shall be evidenced by a Shareholder Note, and all principal and interest with respect to such Indebtedness shall be expressly subordinated to the prior payment in full of the Obligations, in substantially the form set forth on Schedule 6.01 ------------- hereto, and (4) no principal amount of such Indebtedness shall be due and payable on or prior to the Commitment Termination Date. (f) obligations of the Company and the Guarantors under and with respect to the Interest Rate Contracts; provided that the maximum secured -------- exposure of the Interest Rate Contracts is $200,000; (g) endorsements of negotiable instruments for deposit or collection in the ordinary course of business; (h) guarantees and endorsements of employee stock purchase loans, and other loans to employees, financed by SunTrust in aggregate principal amount not exceeding $1,250,000; (i) Indebtedness of any Guarantor owing to the Company and Indebtedness of the Company owing to any Guarantor, which Indebtedness shall be evidenced by Intercompany Notes pledged to the U.S. Collateral Agent pursuant to the Company Pledge Agreement or the Guarantor Pledge Agreement, as the case may be, provided such Indebtedness is subject to the provisions of Section 11.09; (j) Indebtedness arising under the BGI Facility and the Barclays Revolver; (k) any guarantee of Indebtedness expressly permitted under the terms of this Section 6.01; (l) the HKS Synthetic Stock; and (m) Indebtedness in the amount of $310,000 owed in respect of the previous purchase of the stock of Prointec, a Spanish corporation; provided that such Indebtedness shall be repaid no faster than, or in greater amounts than, in twenty-four equal monthly installments, commencing as of January, 1996. SECTION 6.02. Limitation on Liens and Security Interests. The Company ------------------------------------------ and the Guarantors shall not, and shall not permit their respective Subsidiaries to, create, incur, assume or suffer to exist, any Lien or other encumbrance of any kind on any of its properties or assets, real or personal, wherever located, including assets hereafter acquired, except -62- (a) Liens existing on the date hereof and described on Schedule 6.02; ------------- (b) Liens in favour of the U.S. Collateral Agent or the International Collateral Agent; (c) Liens for Taxes not yet payable or being contested in good faith and by appropriate proceedings; (d) deposits or pledges to secure payments of workmen's compensation, unemployment insurance, old age pension and other social security obligations; (e) mechanics', carriers', workmen's, repairmen's, landlord's, or other Liens arising in the ordinary course of business securing obligations which are not overdue for a period longer than 60 days, or which are being contested in good faith by appropriate proceedings; (f) pledges or deposits to secure performance in connection with bids, tenders, contracts (other than contracts for the payment of money) or leases made in the ordinary course of the business of the Company or any of its Subsidiaries; (g) deposits to secure, or in lieu of, surety and appeal bonds to which the Company or a Subsidiary of the Company is a party; (h) deposits in connection with the prosecution or defense of any claim in any court or before any administrative commission or agency; (i) Liens arising out of judgments or awards with respect to which the Company or a Subsidiary of the Company at the time shall in good faith be diligently prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review; (j) purchase money security interests, and leases in the nature thereof, for equipment and machinery or mortgages for real estate, in each case purchased in the ordinary course of business and to be used in the conduct of its business provided that any such security interest or mortgage secures only the repayment - -------- of the purchase price of such machinery, equipment or real estate and any such lease obligations do not exceed the purchase price of such machinery or equipment; (k) Liens granted in any Intercompany Note in the form of Exhibit B-2 ----------- hereto, provided that such Intercompany Notes are pledged to the U.S. Collateral Agent, all related UCC-1 financing statements are assigned to the U.S. Collateral -63- Agent and such Lien is subordinated to the first priority Lien granted to the U.S. Collateral Agent in the Security Documents; and (l) Liens with respect to cash collateral securing the BGI Exposure, to the extent permitted under Section 6.5 of the Intercreditor Agreement, and any other cash collateral securing any of the Letters of Credit and the BGI Exposure obtained in accordance with the Intercreditor Agreement. SECTION 6.03. Dividends; Other Restricted Payments. ------------------------------------ (a) In any fiscal year of the Company, the Company shall not pay or declare any dividends on any of its capital stock, other than dividends on Permitted Preferred Stock. (b) In any fiscal year of the Company, the Company shall not (i) redeem, repurchase, retire or make similar payments with respect to any of its shares of capital stock in cash or cash equivalents or (ii) pay any principal of, premium, if any, or redeem, purchase, retire or make any similar payment with respect to, any Subordinated Indebtedness; provided, however, that (l) the --------- -------- Company may pay principal of the Shareholder Notes in an aggregate amount not to exceed (A) $250,000, less (B) the stated principal amount of any ---- Shareholder Notes issued by the Company after the Closing Date in connection with a repurchase of its common stock, (2) the Company may pay interest on the Shareholder Notes, (3) the Company may redeem outstanding Shareholder Notes from Persons holding such Shareholder Notes on the Closing Date to the extent it issues Permitted Preferred Stock in exchange therefor, (4) the Company may repurchase shares of its common stock to the extent permitted by Section 6.01(e) and (5) HKS or HKS Trust may repurchase shares of HKS Synthetic Stock when required with proceeds of the Barclays Revolver in an amount not to exceed $1,000,000 in the aggregate since June 30, 1995. SECTION 6.04. Merger; Joint Ventures; Sale of Assets; Acquisitions. ---------------------------------------------------- The Company and the Guarantors shall not, and shall not permit any of their respective Subsidiaries to: (a) merge or consolidate with any other entity, except that this Section 6.04 shall not apply to (i) any merger or consolidation of the Company or a Guarantor with any Subsidiary of the Company provided that the Company or such Guarantor shall be the continuing entity, and (ii) any merger or consolidation of any Subsidiary of the Company (other than a Guarantor) with any other Subsidiary of the Company (other than a Guarantor) if, after giving effect thereto, the continuing entity is a wholly-owned Subsidiary of the Company; -64- (b) enter into a partnership or joint venture with any other entity; provided, however, that so long as no Event of Default has occurred, the -------- ------- Company or any of its Subsidiaries may request that the Banks consent to its entering into a partnership or joint venture for the purposes of carrying on its business and the Banks agree to consider any such request in conjunction with the consideration of such request by Barclays Bank PLC under the Barclays Agreement; (c) sell, lease, transfer or otherwise dispose of any assets, including any assets of any International Subsidiaries, except that this Section 6.04 shall not prohibit any disposition of (i) any asset if on the date such asset is sold, the Asset Value of all asset sales occurring after the Closing Date (excluding the Asset Value of the property permitted to be sold in clauses (x) and (y) of the proviso below), taking into account the Asset Value of the proposed asset sale, would not exceed on an aggregate basis five percent (5%) of the Consolidated Net Worth of the Company and its Subsidiaries on the Closing Date and such sale is in the ordinary course of business or (ii) any obsolete or retired property not used or useful in its business. (d) purchase, lease or otherwise acquire for cash, stock or other consideration, the stock of any Person or all or any substantial portion of the assets of any Person where such stock, assets or other consideration have an aggregate fair market value of more than $1,000,000, except that this Section 6.04 shall not apply to repurchases of stock permitted pursuant the proviso in to Section 6.03(b)(3) hereof. SECTION 6.05. Sale and Leaseback. The Company and the Guarantors shall ------------------ not, and shall not permit any of their respective Subsidiaries to, enter into any transaction with any other entity whereby such other entity leases assets sold or otherwise transferred to it by the Company or such Subsidiary, unless all proceeds obtained transferred to it by the Company or such Subsidiary, unless all proceeds obtained from such transaction are immediately paid to the Intercreditor Agreement Agent for application in accordance with the terms of the Intercreditor Agreement. SECTION 6.06. Investments, Loans, Etc. The Company and the Guarantors ----------------------- shall not, and shall not permit any of their respective Subsidiaries to, make, permit or hold any Investments in any Person, or otherwise acquire or hold any Subsidiaries, other than: (a) Investments in Subsidiaries existing on the Closing Date; (b) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case supported by the full faith and credit of the United States and maturing within one year from the date of creation thereof; -65- (c) commercial paper maturing within one year from the date of creation thereof rated in the highest grade by a nationally recognized credit rating agency; (d) time deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by any Bank and any office located in the United States or England of any bank or trust company which is organized under the laws of the United States or England or any state thereof and has total assets aggregating at least $500,000,000, including without limitation, any such deposits in Eurodollars issued by a foreign branch of any such bank or trust company; (e) Investments made by Plans; (f) Loans to the Company or other Subsidiaries (excluding HKS, Law/Sundt, Inc., Envirosource Incorporated, IHT Rosser Gibb GmbH, Law International Sales Company or any of their respective Subsidiaries) to the extent such loans are evidenced by Intercompany Notes, pledged to the U.S. Collateral Agent, subordinated to the extent required in Section 11.09, and otherwise on terms and conditions acceptable to the Required Banks, or loans to International Subsidiaries which are "Chargors" under the Barclays Agreement; and (g) Employee stock purchase loans, and other loans to employees, acquired by the Company in connection with honoring its guarantee of such loans permitted under Section 6.01(g) hereof. SECTION 6.07. Nature of Business. The Company and the Guarantors shall ------------------ not, and shall not permit any of their respective Subsidiaries to, engage in any business or businesses other than those engaged in by the Company or such Subsidiary on the date hereof; provided, however, that nothing herein contained -------- ------- shall prevent the Company or any of its Subsidiaries (i) from expanding the location of its business or businesses (A) in the United States, (B) in those foreign countries in which the Company or such Subsidiary engages in business on the date hereof or (C) in any other foreign country if the Company (1) gives the Banks prompt notice thereof and (2) if the aggregate amount of assets moved or to be moved to such new country equals or exceeds five percent (5%) of the Consolidated Net Worth of the Company, executes such additional security documents and delivers such legal opinions as the Banks and Barclays may reasonably require, or (ii) from ceasing or omitting to exercise any rights, licenses, permits, or franchises which in good faith in the judgment of the Company or such Subsidiary can no longer be profitably exercised. SECTION 6.08. Sale of Subsidiaries. The Company and the Guarantors -------------------- shall not, and shall not permit any of their respective Subsidiaries to, sell or otherwise dispose of any shares of capital stock of or other ownership interest in any Subsidiary of the Company -66- (except in connection with a merger or consolidation permitted by Section 6.04(a)), or permit any Subsidiary of the Company to issue any additional shares of its capital stock or other incidents of ownership, except on a pro rata basis --- ---- to all its stockholders, partners or owners, as the case may be and provided that any such additional shares of capital stock or other incidents of ownership issued to the Company, any Guarantor or Additional Pledgor are pledged to the U.S. Collateral Agent; provided, however, that if the issuer is an International -------- ------- Subsidiary (other than those Subsidiaries listed on Schedule 1.01(e) hereto), ---------------- 65% of such additional shares of capital stock or other incidents of ownership shall be pledged to the U.S. Collateral Agent and 35% of such additional shares of capital stock or other incidents of ownership shall be pledged to the International Collateral Agent. SECTION 6.09. Compliance with ERISA. The Company and the Guarantors --------------------- shall not take or fail to take, or permit any of their Subsidiaries or ERISA Affiliates to take or fail to take, any action with respect to a Plan including, but not limited to, (i) establishing any Plan, (ii) amending any Plan, (iii) terminating or withdrawing from any Plan, or (iv) incurring an "amount of unfunded benefit liabilities", as defined in Section 4001(a)(18) of ERISA, or any withdrawal liability under Title IV of ERISA, where such action or failure could have a Materially Adverse Effect, result in a Lien on the property of the Company or any of its Subsidiaries or require the company or any of its Subsidiaries to provide any security, except to the extent permitted pursuant to Section 6.02 hereof. SECTION 6.10. Negative Pledges. The Company and the Guarantors shall ---------------- not, and shall not permit any of their respective Subsidiaries to, agree or covenant with any Person to restrict in any way its ability to grant any Lien on its assets, except that this Section 6.10 shall not apply to (i) any covenants contained in this Agreement or the Security Documents, (ii) any covenants contained in the Barclays Agreement, and (iii) covenants and agreements made in connection with Liens described in Section 6.02(j) but only if such covenant or agreement applies solely to the specific machinery, equipment or real estate to which such Lien relates. SECTION 6.11. Transactions with Affiliates. The Company and the ---------------------------- Guarantors shall not, and shall not permit any of their respective Subsidiaries to: (a) Enter into any material transaction or series of related transactions which in the aggregate would be material, whether or not in the ordinary course of business, with any Affiliate of the Company or any of its Subsidiaries (but excluding any Affiliate which is the Company or any of its Subsidiaries), other than on terms and conditions substantially as favorable to the Company or such Subsidiary as would be obtained by the Company or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate. -67- (b) Convey or transfer to any other Person (including the Company or any of its Subsidiaries) any real property, buildings, or fixtures used in the manufacturing or production operations of the Company or any of its Subsidiaries, or convey or transfer to the Company or any of its Subsidiaries any other assets (excluding conveyances or transfers in the ordinary course of business) if at the time of such conveyance or transfer any Default or Event of Default exists or would exist as a result of such conveyance or transfer. SECTION 6.12. Limitations on Payment Restrictions. The Company and the ----------------------------------- Guarantors shall not, and shall not permit any of their respective Subsidiaries to, create or otherwise cause or suffer to exist or become effective, any consensual encumbrance or restriction on the ability of the Company or any of its Subsidiaries to (i) pay dividends or make any other distributions on stock of the Company or any of its Subsidiaries, (ii) pay any indebtedness owed to the Company or any of its Subsidiaries, or (iii) transfer any of its property or assets to the Company or any of its Subsidiaries except any consensual encumbrance or restriction existing under the Loan Documents or the Barclays Agreement. SECTION 6.13. Actions Under Certain Documents. The Company and the ------------------------------- Guarantors shall not, and shall not permit any of their respective Subsidiaries to, modify, amend, restate, cancel, refinance or rescind the Barclays Agreement, the Intercompany Notes, any Shareholder Note or any other agreements or documents evidencing or governing Subordinated Indebtedness, without the prior written consent of the Banks and Barclays. SECTION 6.14. Law Companies Group, Ltd. The Company shall not permit ------------------------ Law Companies Group, Ltd, to issue any additional Class A ordinary stock or Class B ordinary stock subject to a put or a call or honor any put or any call on such stock except with respect to the $50,000 worth of Class A ordinary stock already issued by Law Companies Group, Ltd. and held by Gibb Limited, nor shall it permit Law Companies Group, Ltd. to issue any preference shares subject to a put or honor any put on such preference shares. SECTION 6.15. HKS. The Company, the Guarantors and all other --- Subsidiaries of the Company, including the International Subsidiaries, but excluding HKS, shall not make or permit to exist investments (whether by capital contribution, loan or otherwise) into HKS, HKS Trust or any of their respective Subsidiaries. SECTION 6.16. Additional Classes of Shares. The Company shall not ---------------------------- issue any new classes of capital stock (including any class of preferred stock) other than those classes outstanding on the Closing Date and Permitted Preferred Stock to the extent issued to Persons holding Shareholder Notes on the Closing Date in exchange for all or a portion of such Shareholder Notes. -68- ARTICLE VII FINANCIAL COVENANTS ------------------- So long as any Note shall remain unpaid or any Bank shall have any Commitment hereunder: SECTION 7.01. Senior Debt Coverage Ratio. The Company shall not -------------------------- permit the Senior Debt Coverage Ratio as of the last day of (1) the fiscal quarters ending March 31, 1997 and June 30, 1997 to be greater than 2.0 to 1.0 and (2) each fiscal quarter ending thereafter to be greater than 1.75 to 1.0. SECTION 7.02. Fixed Charge Coverage Ratio. The Company shall not --------------------------- permit the Fixed Charge Coverage Ratio as of the last day of any fiscal quarter of the Company, commencing with the fiscal quarter ending March 31, 1997, to be less than 0.95 to 1.0. SECTION 7.03. Senior Debt Leverage Ratio. The Company shall not -------------------------- permit the Senior Debt Leverage Ratio as of the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 1997, to be greater than 0.70 to 1.0. SECTION 7.04. Minimum Net Worth. The Company shall not permit ----------------- Consolidated Net Worth as of the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 1997, to be less than the sum of (a) $16,500,000 plus (b) 75% of Consolidated Net Income (but not loss) for the ---- period beginning January 1, 1997 and ending on the last day of such fiscal quarter, plus (c) the net proceeds of any equity offering made by the Company or ---- its Subsidiaries, minus (d) the aggregate amount of repurchases by the Company ----- of its common stock in excess of $250,000 but only to the extent approved by all Banks and Barclays. SECTION 7.05. Domestic Senior Debt Coverage Ratio. The Company shall ----------------------------------- not permit the Domestic Senior Debt Coverage Ratio as of the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 1997, to be greater than 2.75 to 1.0. SECTION 7.06. Domestic Interest Coverage Ratio. The Company shall -------------------------------- not permit the Domestic Interest Coverage Ratio as of the last day of (1) the fiscal quarter ending March 31, 1997 to be less than 0.7 to 1.0, (2) the fiscal quarter ending June 30, 1997 to be less than 1.0 to 1.0 and (2) the fiscal quarters ending thereafter to be less than 1.15 to 1.0. -69- SECTION 7.07. Minimum Domestic Cash Flow. The Company shall not permit -------------------------- EBITDA of the U.S. Subsidiaries for the rolling four-quarter period ending on the last day of each fiscal quarter of the Company to be less than $11,000,000. SECTION 7.08. Minimum International Cash Flow. The Company shall not ------------------------------- permit EBITDA of the International Subsidiaries for the rolling four-quarter period ending on the last day of each fiscal quarter of the Company to be less than the Dollar Equivalent of $7,000,000. SECTION 7.09. Capital Expenditures. The Company and the Guarantors -------------------- shall not make, or permit any of their respective Subsidiaries to make, any expenditures for capital assets in excess of $6,000,000 during any fiscal year of the Company; provided, however, that this limitation shall not apply to (1) --------- -------- the refinancing of FLECBOA and any purchases of assets made in connection therewith and (2) expenditures for corporate automobiles used by the International Subsidiaries in an amount not to exceed (pounds) 500,00. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ------------------------------ SECTION 8.01. Events of Default. Any one or more of the following ----------------- shall constitute an Event of Default hereunder: (a) The Company shall fail to pay any principal amount owing pursuant to this Agreement, the Notes or any amount owed pursuant to Section 2.15; or (b) The Company shall fail to pay interest or any other sum owing pursuant to this Agreement or the Notes within five calendar days after notice by the Agent of the amount due; or (c) Any representation or warranty made by or on behalf of the Company or any Guarantor to the Agent or any Bank in this Agreement, the Company Security Agreement, the Company Pledge Agreement, the Company Trademark Security Agreement, the Guarantors Security Agreement, the Guarantors Pledge Agreement, the Guarantors Trademark Security Agreement and the Mortgage shall be in any respect false or misleading as of the time at which such representation or warranty was given, or any representation or warranty made by or on behalf of the Company or any Guarantor to the Agent or any Bank in any other Loan Documents or in any financial statement, report or certificate furnished pursuant to this Agreement shall -70- be in any material respect false or misleading as of the time at which such representation or warranty was made; or (d) The Company or any Guarantor shall fail to perform or observe any covenant or agreement contained in Sections 5.02 and 5.11, Article VI (other than Section 6.07) and Article VII; or (e) The Company or any Guarantor shall fail to perform or observe any other covenant or agreement set forth in this Agreement, other than those referred to in clauses (a), (b), (c) and (d) above, and (to the extent such failure can be remedied) such failure of performance shall not be remedied within ten (10) days after the earlier of the date on which (1) any Executive Officer has actual knowledge of the facts creating or causing such failure to perform or observe such covenant or agreement and (2) the Agent delivers notice of such Default to the Company in accordance with Section 11.03 of this Agreement; or (f) Final judgment for the payment of money in excess of $100,000 or a non-monetary final judgment that has a Materially Adverse Effect should be rendered against the Company or any of its Subsidiaries and the same shall remain unpaid, unstayed on appeal, undischarged, or undismissed for a period of sixty (60) days or such longer period as may be permitted by Applicable Law during which execution may not be made provided no judgment Lien has or continues to attach to the assets of the Company or such Subsidiary during such longer period; or (g) A Change of Control occurs or a Change of Management occurs; or (h) The Company or any of its Subsidiaries fails to make any payment as and when such payment is due upon any Indebtedness having an aggregate unpaid principal balance in excess of $100,000, other than Indebtedness owing or arising pursuant to this Agreement and the Notes, or any other default, event or condition shall have occurred or exist with respect to any such other Indebtedness, or under any agreement or instrument evidencing, securing or related to such other Indebtedness, the effect of which is to cause, or to permit the holder or owner of such Indebtedness to cause, such Indebtedness or any portion thereof, to become due prior to its stated maturity date or prior to its regularly scheduled dates of payment; or (i) Any involuntary petition is filed against the Company or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect and such petition shall remain undismissed for a period of sixty -71- (60) days or the Company or such Subsidiary approves, consents or acquiesces thereto; or (j) The Company or any of its Subsidiaries makes an assignment for the benefit of the creditors or files a voluntary petition seeking relief under any provision of any bankruptcy, reorganization, arrangement insolvency or readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or (k) The Company incurs any liability or is exposed to any potential liability under any employee benefit that has or would have a Materially Adverse Effect; or (l) An "Event of Default" shall have occurred under, and as defined in, the Security Documents, the SunTrust Interest Rate Agreement or the Barclays Agreement; or (m) Any Loan Document shall become unenforceable for any reason and the Company or any Guarantor fails to take such action as is reasonably necessary to make such Loan Document enforceable again to the reasonable satisfaction of the Banks (to the extent such unenforceability can be cured) within ten (10) days after the earlier of the date on which (1) an Executive Officer has actual knowledge of the facts creating or causing such failure to perform or observe such covenant or agreement and (2) the Agent delivers notice thereof to the Company in accordance with Section 11.03 of this Agreement. SECTION 8.02. Remedies on Default. ------------------- (a) Upon (i) the occurrence and during the continuation of an Event of Default (other than an Event of Default described in Section 8.01(j) or (k)), (ii) the receipt of written instructions by the Agent from any Bank and (iii) the receipt of written approval by the Agent from (A) the Required Banks if a Payment Default has occurred and is continuing or (B) all Banks and Barclays Bank PLC if a Nonpayment Default has occurred and is continuing, provided, -------- however, that if any Credit Document (as defined in the Intercreditor Agreement) - ------- has expired upon its stated maturity date (including any extension date to which such Credit Document is extended) and the 30-day period immediately following thereafter has lapsed, no approval other than the approval of the Bank instructing the Agent pursuant to clause (ii) above shall be required, the Agent shall (x) terminate all obligations of the Banks to the Company, including, without limitation, the Commitments and all obligations to make Advances and issue Letters of Credit under this Agreement, and (y) declare the Notes, including, without limitation, principal, accrued interest and costs of collection (including, without limitation, reasonable attorneys' fees if collected by or through -72- an attorney at law or in bankruptcy, receivership or other judicial proceedings) and all other Obligations immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are expressly waived. (b) Upon the occurrence of an Event of Default under Section 8.01(j) or (k) all obligations of the Banks to the Company, including, without limitation, the Commitments and all obligations to make Advances and issue Letters of Credit under this Agreement, shall terminate automatically and the Notes, including, without limitation, principal, accurred interest and costs of collection (including, without limitation, reasonable attorneys' fees if collected by or through an attorney at law or in bankruptcy, receivership or other judicial proceedings) and all other Obligations shall be immediately due and payable, without presentment, demand, protest, or any other notice of any kind, all of which are expressly waived. (c) Upon the occurrence of an Event of Default and acceleration of the Notes as provided in (a) or (b) above, each of the Banks, the Agent and the Collateral Agents, or any of them, may pursue any remedy available under this Agreement, the Notes, the Security Documents or any other Loan Document, or available at law or in equity, all of which shall be cumulative. The order and manner in which the rights and remedies of the Banks under Loan Documents and otherwise may be exercised shall be determined by the Required Banks. (d) Regardless of how each Bank may treat the payments for the purpose of its own accounting, for the purpose of computing the Company's obligations hereunder and under the Notes, all payments with respect to this Agreement received by the Agent and the Banks, or any of them, shall be applied in accordance with the terms of the Intercreditor Agreement. No application of the payments will cure any Event of Default or prevent acceleration, or continued acceleration,of amounts payable under the Loan Documents or prevent the exercise, or continued exercise, of rights or remedies of the Banks hereunder or under applicable law. ARTICLE IX THE AGENT --------- SECTION 9.01. Appointment and Authorization. Each Bank hereby ----------------------------- designates SunTrust Bank, Atlanta as Agent to act as herein specified. Each Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of a Note shall be deemed irrevocably to authorize, the Agent to take such action on its behalf under the -73- provisions of this Agreement and the Notes and any other instruments and agreements referred to herein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agent may perform any of its duties hereunder by or through its agents or employees. SECTION 9.02. Nature of Duties of the Agent. The Agent shall have no ----------------------------- duties or responsibilities except those expressly set forth in this Agreement. Neither the Agent nor any of its officers, directors, employees or agents shall be liable for any action taken or omitted by it as such hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct. The Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Bank; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Agent any obligations in respect of this Agreement except as expressly set forth herein. The Agent agrees to give each Bank prompt notice of the Agent's receipt from the Company of any notice under this Agreement. SECTION 9.03. Lack of Reliance on the Agent. ----------------------------- (a) Each Bank agrees that, independently and without reliance upon the Agent, any other Bank, or the directors, officers, agents or employees of the Agent or of any other Bank, each Bank, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Company and its Subsidiaries in connection with the taking or not taking of any action in connection with this Agreement and the other Loan Documents, including the decision to enter into this Agreement, and (ii) its own appraisal of the creditworthiness of the Company and its Subsidiaries, and, except as expressly provided in this Agreement, the Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information with respect thereto, whether coming into its possession before the making of any Advance or at any time to times thereafter. (b) The Agent shall not be responsible to any Bank for any recitals, statement, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, collectibility, priority or sufficiency of this Agreement or any other Loan Documents or the financial condition of the Company or its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Loan Documents, or the financial condition of the Company or its Subsidiaries, or the existence or possible existence of any Default or Event of Default. -74- SECTION 9.04. Certain Rights of the Agent. --------------------------- (a) If the Agent shall request instructions from the Required Banks with respect to any act or action (including the failure to act) in connection with this Agreement or any other Loan Documents, the Agent shall be entitled to refrain from such act or taking such action unless and until the Agent shall have received instructions from the Required Banks and the Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Bank shall have any right of action whatsoever against the Agent as a result of the Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Banks; provided, however, that -------- ------- the Agent shall not be required to act or not act in accordance with any instructions of the Required Banks if to do so would expose the Agent to personal liability or would be contrary to any Loan Document or to Applicable Law. (b) The Agent may assume that no Event of Default has occurred and is continuing, unless the Agent has received notice from the Company stating the nature of the Event of Default, or has received notice from a Bank stating the nature of the Event of Default and that such Bank considers the Event of Default to have occurred and to be continuing. (c) If the Agent may not, pursuant to Section 9.04(b), assume that no Event of Default has occurred and is continuing, the Agent shall give notice thereof to the Banks and shall act or not act upon the instructions of the Required Banks, provided that the Agent shall not be required to act or or not -------- act if to do so would expose the Agent to personal liability or would be contrary to any Loan Document or to Applicable Law, and provided further, -------- ------- that if the Required Banks fail, for five days after the receipt of notice from the Agent, to instruct the Agent, then the Agent, in its discretion, may act or not act as it deems advisable for the protection of the interests of the Banks and shall be fully protected in so acting. SECTION 9.05. Liability of the Agent. Neither the Agent nor any of ---------------------- its directors, officers, agents or employees shall be liable for any action taken or not taken by them under or in connection with the Loan Documents, except for their own gross negligence or willful misconduct. Without limitation - ------ on the foregoing, the Agent and its directors, officers, agents, and employees: (a) may treat the payee of any Note as the holder thereof until the Agent receives notice of the assignment or transfer thereof in form satisfactory to the Agent, signed by the payee, and may treat each Bank as the owner of that Bank's interest in the obligations due to such Bank for all purposes of this Agreement and the other Loan Documents until the Agent receives notice of the assignment or transfer thereof, in form satisfactory to the Agent, signed by such Bank; -75- (b) may consult with outside legal counsel (including King & Spalding and Lovell White Durrant), in-house legal counsel, independent public accountants, in-house accountants and other professionals, or other experts selected by it with reasonable care, or with legal counsel, independent public accountants, or other experts for the Company, and shall not be liable for any action taken or not taken by it or them in good faith in accordance with the advice of such legal counsel, independent public accountants, or experts; (c) will not be responsible to any Bank for any statement, warranty, or representation made in any of the Loan Documents or in any notice, certificate, report, request, or other statement (written or oral) in connection with any of the Loan Documents; (d) except to the extent expressly set forth in the Loan Documents, will have no duty to ascertain or inquire as to the performance or observance by the Company or any other Person of any of the terms, conditions, or covenants of any of the Loan Documents or to inspect the property, books, or records of the Company or any of its Subsidiaries or other Person; (e) will not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, effectiveness, sufficiency, or value of any Loan Document, any other instrument or writing furnished pursuant thereto or in connection therewith; (f) will not incur any liability by acting or not acting in reliance upon any Loan Document, notice, consent, certificate, document, statement, telex, telecopier message or other instrument or writing believed by it or them to be genuine and to have been signed, sent or made by the proper Person; and (g) will not incur any liability for any arithmetical error in computing any amount payable to or receivable from any Bank hereunder, including, without limitation, payment of principal and interest on the Notes, Advances and other amounts; provided that promptly upon discovery of -------- such an error in computation, the Agent, the Bank and (to the extent applicable) the Company shall make such adjustments as are necessary to correct such error and to restore the parties to the position that they would have occupied had the error not occurred. SECTION 9.06. Indemnification. Each Bank shall, ratably in --------------- accordance with the respective outstanding principal amount of its Advances, indemnify and hold the Agent and its directors, officers, agents and employees harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or -76- disbursements of any kind or nature whatsoever (including, without limitation, attorneys' fees and disbursements) that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of the Loan Documents (other than losses incurred by reason of the failure by the Company to pay the obligations due to the Banks hereunder or under the Notes) or any action taken or not taken by it as Agent thereunder, except for the gross negligence or ------ willful misconduct of the Agent. Without limitation of the foregoing, each Bank shall reimburse the Agent upon demand for that Bank's ratable share of any cost or expense incurred by the Agent in connection with the negotiation, preparation, execution, delivery, administration, amendment, waiver, refinancing, restructuring, reorganization (including a bankruptcy reorganization) or enforcement of the Loan Documents, to the extent that the Company is required to pay that cost or expense but fails to do so upon demand. SECTION 9.07. Agent and Affiliates. SunTrust Bank, Atlanta (and each -------------------- successor Agent) has the same rights and powers under the Loan Documents as any other Bank and may exercise the same as though it were not the Agent; and the term "the Banks" or "Bank" includes SunTrust Bank, Atlanta in its individual capacity. SunTrust Bank, Atlanta (and each successor Agent) and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with the Company and any Affiliate of the Company, as if it were not the Agent and without any duty to account therefor to the Banks, including, without limitation, the transactions contemplated by the SunTrust Interest Rate Contracts. SunTrust Bank, Atlanta (and each successor Agent) need not account to any other Bank for the monies received by it for reimbursement of its costs, expenses and fees as the Agent hereunder, or for any monies received by it in its capacity as a Bank hereunder, except as otherwise provided herein. This Agreement shall not be deemed to constitute a joint venture or partnership among the Banks. SECTION 9.08. Successor Agent. The Agent may resign as such at any --------------- time by written notice to the Company and the Banks, to be effective upon a successor's acceptance of appointment as Agent. In such event, the Required Banks shall appoint a successor Agent or Agents who must be from among the Banks; provided, that the Agent shall be entitled to appoint a successor Agent -------- from among the Banks, subject to acceptance of appointment by that successor Agent if the Required Banks have not appointed a successor Agent within thirty (30) calendar days after the date the Agent gave notice of resignation or was removed. Upon a susccessor's acceptance of appointment as Agent the successor will thereupon succeed to and become vested with all the rights, powers, privileges, and duties of the Agent under the Loan Documents, and the resigning Agent will thereupon be discharged from its duties and obligations thereafter arising under the Loan Documents. -77- ARTICLE X GUARANTEE --------- SECTION 10.01. The Guarantee. ------------- (a) In consideration of (1) the substantial direct and indirect benefits to be derived by the Guarantors as a result of the Banks making the Commitments available to the Company, including, without limitation, the advances to be made available to such Guarantors by the Company from time to time from the proceeds of Advances lent to the Company hereunder, (2) the substantial direct and indirect benefits to be derived by the Company and the Guarantors as a result of the Banks making the Letter of Credit Subfacility available to the Company and the Guarantors, including, without limitation, the Letters of Credit issued or to be issued by the Agent on behalf of the Banks for the account of the Company or any Guarantor, and (3) substantial direct and indirect benefits to be derived by the Guarantors as a result of Barclays Bank PLC making the other First Tier Facilities available under the Barclays Agreement, pursuant to which the Guarantors shall receive further direct and indirect benefit, each Guarantor hereby absolutely, unconditionally and irrevocably, jointly and severally, guarantees to each of the Banks, the Agent and the Collateral Agents the due and punctual payment and performance of all the Obligations of the Company and each other Guarantor as and when the same shall become due and payable, whether at maturity, by acceleration, mandatory prepayment or otherwise, according to their terms (the obligations of such Guarantor in respect of such guarantee, its "Guaranty Obligations"). In case of -------------------- failure by the Company or such Guarantor punctually to pay or perform the Obligations, each Guarantor hereby unconditionally and irrevocably agrees to cause such payment or performance to be made punctually as and when the same shall become due and payable, whether at maturity, by prepayment, declaration or otherwise, and as if such payment or performance were made by the Company or such Guarantor. The foregoing guarantees (collectively, the "Guaranty") shall be -------- guarantees of payment and not of collection merely. (b) It is the intent of the Guarantors, the Agent, the Banks and any other Person holding any of the Guaranty Obligations that each Guarantor's maximum obligations hereunder (such Guarantor's "Maximum Guaranty Liability") -------------------------- shall not be in excess of: (i) in a case or proceeding commenced by or against such Guarantor under 11 U.S.C. (S) 101 et seq., as amended (the "Bankruptcy Code"), on or -- --- --------------- within one year from the date on which any of the Guaranty Obligations of such Guarantor are incurred, the maximum amount that would not otherwise cause the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Agent, the Banks and any other Person holding any of the Guaranty Obligations) to -78- be avoidable or unenforceable against such Guarantor under (A) Section 548 of the Bankruptcy Code or (B) any state fraudulent transfer or fraudulent conveyance act or statute applied in such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or (ii) in a case of proceeding commenced by or against such Guarantor under the Bankruptcy Code subsequent to one year from the date on which any of the Guaranty Obligations of such Guarantor are incurred, the maximum amount that would not otherwise cause the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Agent, the Banks and any other Person holding any of the Guaranty Obligations) to be avoidable or unenforceable against such Guarantor under any state fraudulent transfer or fraudulent conveyance act or statue applied in any such case or proceeding by virtue of Section 544 of the Bankruptcy Code; or (iii) in a case or proceeding commenced by or against such Guarantor under any law, statute or regulation other than the Bankruptcy Code relating to dissolution, liquidation, conservatorship, bankruptcy, moratorium, readjustment of debt, compromise, rearrangement, receivership, insolvency, reorganization or similar debtor relief from time to time in effect affecting the rights of creditors generally (collectively, "Other ----- Debtor Relief Law"), the maximum amount that would not otherwise cause the ----------------- obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Agent, the Banks and any other Person holding any of the Guaranty Obligations) to be avoidable or unenforceable against such Guarantor under such Other Debtor Relief Law, including, without limitation, any state fraudulent transfer or fraudulent conveyance act or statute applied in any such case or proceeding. (The substantive state or federal laws under which the possible avoidance or unenforceability of the obligations of any Guarantor hereunder (or any other obligations of such Guarantor to the Agent, the Banks and any other Person holding any of the Guaranty Obligations) shall be determined in any such case or proceeding shall hereinafter be referred to as the "Avoidance Provisions"). -------------------- (c) To the extent set forth in Section 10.01(b), but only to the extent that the obligations of any Guarantor hereunder, or the transfers made by the Guarantor under the Guarantor Pledge Agreement, the Guarantor Security Agreement or the Guarantor Trademark Security Agreement, would otherwise be subject to avoidance under any Avoidance Provisions if such Guarantor is not deemed to have received valuable consideration, fair value, fair consideration or reasonably equivalent value for such transfers or obligations, or if such transfers or obligations of any Guarantor hereunder would render such Guarantor insolvent, or leave such Guarantor with an unreasonably small capital or unreasonably small assets to conduct its business, or cause such Guarantor to have incurred debts (or to have in- -79- tended to have incurred debts) beyond its ability to pay such debts as they mature, in each case as of the time any of the obligations of such Guarantor are deemed to have been incurred and transfers made under such Avoidance Provisions, then the obligations of such Guarantor hereunder shall be reduced to that amount which, after giving effect thereto, would not cause the obligations of such Guarantor hereunder (or any other obligations of such Guarantor to the Agent, the Banks or any other Person holding any of the Guaranty Obligations), as so reduced, to be subject to avoidance under such Avoidance Provisions. This Section 10.01(c) is intended solely to preserve the rights hereunder of the Agent, the Banks and any other Person holding any of the Guaranty Obligations to the maximum extent that would not cause the obligations of the Guarantors hereunder to be subject to avoidance under any Avoidance Provisions, and no Guarantor nor any other Person shall have any right or claim under this Section 10.01(c) as against the Agent, the Banks or any other Person holding any of the Guaranty Obligations that would not otherwise be available to such Person under the Avoidance Provisions. To the extent that the limitations contained in this Section 10.01 are raised by any Guarantor as a limitation or defense to any action to collect from such Guarantor hereunder, then, to the extent the provisions of this sentence do not cause the obligations of the Guarantor to be avoidable under any Avoidance Provision, the burden of proof and persuasion with respect to the dollar amount of such limitation shall be on the Guarantor, notwithstanding any provison of state or federal law to the contrary. (d) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the Maximum Guaranty Liability of such Guarantor, and may exceed the aggregate Maximum Guaranty Liability of all Guarantors hereunder, without impairing this Guaranty or affecting the rights and remedies of the Banks and the Agent hereunder. Nothing in the Section 10.01(d) shall be construed to increase any Guarantor's obligations hereunder beyond its Maximum Guaranty Liability. (e) In the event any Guarantor (a "Funding Guarantor"") shall make ----------------- any payment or payments under this Guaranty or shall suffer any loss as a result of any realization upon any collateral granted by it to secure its obligations hereunder, each other Guarantor (each, a "Contributing Guarantor") ---------------------- shall contribute to such Funding Guarantor an amount equal to such Contributing Guarantor's pro rata share of such payment or payments made, or losses suffered, by such Funding Guarantor determined as of the date on which such payment or loss was made by reference to the ratio of (i) the Maximum Guaranty Liability of such Contributing Guarantor (without giving effect to any right to receive any contribution or other obligation to make any contribution hereunder), to (ii) the aggregate Maximum Guaranty Liability of all Guarantors (including the Funding Guarantors) hereunder (without giving effect to any right to receive, or obligation to make, any contribution hereunder). Nothing in this Section 10.01(e) shall affect each Guarantor's several liability for the entire amount of its Guaranty Obligations subject only to the limitations set forth in Section 10.01. Each Guarantor covenants and agrees that its right to -80- receive any contribution hereunder from a Contributing Guarantor shall be subordinate and junior in right of payment to all obligations of the Guarantors to the Banks hereunder. SECTION 10.02. Guarantee Unconditional. The obligations of each ----------------------- Guarantor under this Article X shall be continuing, unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company or any of the other Guarantors under this Agreement, the Notes or any other Loan Document, by operation of law or otherwise; (b) any modification or amendment of or supplement to this Agreement, the Notes or any other Loan Document; (c) any modification, amendment, waiver, release, non-perfection or invalidity of any direct or indirect security, or of any guaranty or other liability of any third party, for any obligation of the Company or any other Guarantor under this Agreement, the Notes or any other Loan Document; (d) any change in the corporate existence, structure or ownership of the Company or any Guarantor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or any Guarantor, or any of their respective assets, or any resulting release or discharge of any obligation contained in this Agreement, the Notes or any other Loan Document; (e) the existence of any claim, set off or other right which any Guarantor may have at any time against the Company, any other Guarantor, any Bank, the Agent or any other person or entity, whether or not arising in connection with this Agreement, the Notes or any other Loan Document; (f) any invalidity or unenforceability relating to or against the Company or any other Guarantor for any reason of the whole or any provision of this Agreement, the Notes or other Loan Document, or any provision of Applicable Law purporting to prohibit the payment by the Company or such Guarantor of any Obligation, or any other amount payable by it under this Agreement, the Notes or any other Loan Document; (g) any other act or omission to act or delay of any kind by the Company, any other Guarantor, any Bank, the Agent, either Collateral Agent or any other person -81- or entity, or any other circumstance whatsoever, that might constitute a legal or equitable discharge of the obligations of any Guarantor under this Article X; or (h) any future changes in conditions, including any change of law or any invalidity or irregularity with respect to the issuance of the Loan Documents. SECTION 10.03. Discharge Only Upon Payment in Full; Reinstatement in ----------------------------------------------------- Certain Circumstances. Each Guarantor's obligations under this Article IX shall - --------------------- remain in full force and effect until the Commitments shall have been terminated in full and the Obligations and all other amounts payable by the Company and each other Guarantor under this Agreement, the Notes and the other Loan Documents shall have been paid in full. If at any time any payment of the Obligations or any other amount payable by the Company or any other Guarantor under this Agreement, any Note or other Loan Documents is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy or reorganization of the Company or any other Guarantor or otherwise, each Guarantor's obligation under this Article X with respect to such payment shall be reinstated at such time as though such payment had become due but not been made at such time. SECTION 10.04. Waiver. Each Guarantor irrevocably waives acceptance ------ hereof, presentment, demand, protest and any notice not provided for herein or required by Applicable Law, as well as any requirement that at any time any action be taken by any person or entity against the Company or any other person or entity, or any collateral granted to secure any of the Obligations and/or the Guaranteed Obligations. Each Guarantor acknowledges that in certain circumstances it may be exonerated from its obligations hereunder if the Banks (i) materially alter the original Obligations, (ii) impair or suspend their rights or remedies against the Company without the consent of such Guarantor, or (iii) take any action materially prejudicing such Guarantor without notifying such Guarantor, and each Guarantor hereby waives its right to be exonerated from its obligations hereunder upon the Banks taking any of the actions referred to in clauses (i), (ii) and (iii) of this sentence. Each Guarantor further acknowledges that in certain circumstances the acceptance by the Banks of any compensation in partial satisfaction of the Obligations may reduce the Obligations of such Guarantor hereunder by an amount equal to such compensation, and each Guarantor hereby waives any right it may have to be relieved of any portion of its obligations hereunder by reason of the Banks accepting any such compensation in partial satisfaction of the Obligations. Each Guarantor hereby unconditionally waives any right that it has to given written notice to the Banks requiring the U.S. Collateral Agent or any Bank to use all reasonable diligence to recover against the Company and to proceed to realize upon the Collateral or any other securities which the U.S. Collateral Agent or any Bank holds securing the Obligations. -82- SECTION 10.05. Waiver of Subrogation. Each Guarantor hereby waives, to --------------------- the fullest extent possible, as against the Company and its assets, any and all rights, whether at law, in equity, by agreement or otherwise, to subrogation, indemnity, reimbursement, contribution, or any other similar claim, cause of action or remedy that otherwise would arise out of such Guarantor's payment or performance of the Guaranteed Obligations. The preceding waiver is intended by each Guarantor, the Banks and the Agent to be for the benefit of the Company and any of its successors or assigns as an absolute defense to any action by any such Guarantor against the Company or its assets that arises out of such Guarantor's having made any payment to the Banks and the Agent with respect to any of the Company's Obligations guaranteed hereunder. Upon the bankruptcy of the Company, the Banks' and the Agent's rights hereunder shall not be affected or impaired by its omission to prove all or any portion of its claim, and the Banks and the Agent may, in their discretion, value or refrain from valuing any security held by it without in any way releasing, reducing or otherwise affecting any Guarantor's obligations hereunder. SECTION 10.06. Stay of Acceleration. If acceleration of the time for ------------------- payment of any amount payable by the Company under this Agreement is stayed upon the insolvency, bankruptcy or reorganization of the Company, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Guarantors hereunder forthwith. ARTICLE XI MISCELLANEOUS ------------- SECTION 11.01. Survival. All covenants, agreements, warranties and -------- representations made herein, in the other Loan Documents, or in any certificates or other documents delivered in connection with this Agreement by or on behalf of the Company or any Guarantor shall survive the advances of money made by the Banks to the Company hereunder and the delivery of this Agreement and the other Loan Documents, and all such covenants, agreements, warranties and representations shall be binding upon and inure to the benefit of the Company, the Guarantors, the Banks, the Agent, the Collateral Agents and their respective successors and assigns, whether or not so expressed, provided, however, that the -------- ------- Company may not assign or transfer any of its rights under this Agreement without the prior written consent of each of the Banks. SECTION 11.02. Amendments; Consents. No amendment, modification, -------------------- supplement, termination, or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Company, any Guarantor or any -83- Subsidiary of the Company therefrom, may in any event be effective unless in writing signed by the Required Banks, and then only in the specific instance and for the specific purpose given; provided, however, that without the approval in -------- ------- writing of all Banks and Barclays Bank PLC, no amendment, modification, supplement, termination, waiver, or consent may be effective: (a) to amend or modify the principal of, the rate of interest payable on, or any fees with respect to, any Bank's Note, the Fees or the amount of any Bank's Commitment or the Letter of Credit Subfacility; (b) to postpone any date fixed for any payment of principal of, or any installment of interest on, any Bank's Notes or the Fees, or to extend the term of any Bank's Commitment; (c) to amend or modify the definitions of "Commitment", "Borrowing Base" or "Required Banks" or the provisions of Section 11.07 or of this Section 11.02; (d) to release any of the Collateral pledged to the U.S. Collateral Agent or the International Collateral Agent for the benefit of, inter alia, ----- ---- the Agent, the Collateral Agents, the Banks or Barclays Bank PLC pursuant to the Security Documents to secure the Obligations, if any Obligations are outstanding or any Commitment or the Barclays Revolver has not been terminated; (e) To consent to the existence of any other lien, security interest or encumbrance on the Collateral except as otherwise permitted herein; and (f) To subordinate any of the Obligations or the Commitments to any other indebtedness of the Company or any of its Subsidiaries. Any amendment, modification, supplement, termination, waiver or consent effected in accordance with this Section 11.02 shall apply equally to, and shall be binding upon, all Banks and the Agent. SECTION 11.03. Notices. All notices, consents, demands and other ------- communications provided for hereunder, unless otherwise provided, shall be in writing and mailed, sent by facsimile transmission or delivered to the parties hereto addressed as follows or at such other address as shall be designated by any party in a written notice to the other party hereto: If to the Company: -84- Law Companies Group, Inc. 114 Town Park Drive Kennesaw, Georgia 30144 Attn: Robert Fooshee Chief Financial Officer Telecopier No.: 770-499-6713 Confirmation No.: 770-590-4600 with a copy to: Long, Aldridge & Norman, LLP One Peachtree Center, Ste. 5300 Atlanta, Georgia 30308 Attn: F.T. Davis, Esq. Telecopier No.: 404-527-4198 Confirmation No.: 404-527-4080 If to the Guarantor: The address, telecopier and confirmation numbers set forth opposite its name on the signature pages hereof. If to the Agent: SunTrust Bank, Atlanta P.O. Box 4418 Atlanta, GA 30303 Attn: Corporate Banking Department 127 Mr. J. Christopher Deisley Telecopier No.: 404-588-8833 Confirmation No.: 404-588-8684 with a copy to: -85- King & Spalding 191 Peachtree St. Atlanta, Georgia 30303 Attn: G. Lemuel Hewes, Esq. Telecopier No.: 404-572-5149 Confirmation No.: 404-572-4862 If to a Bank: The address, telecopier and confirmation numbers set forth opposite its name on the signature pages hereof. All notices that are sent by facsimile transmission or are hand delivered shall be deemed to be delivered upon receipt. All notices which are mailed shall be mailed first class certified mail-return receipt requested, postage prepaid, and shall be deemed delivered upon actual receipt or three days after being deposited in the mail, whichever shall occur first. SECTION 11.04. Severability; Time of Essence. Every provision of this ----------------------------- Agreement and the other Loan Documents are intended to be severable. If any term or provision of this Agreement or the Loan Documents, or any other document delivered in connection herewith shall be unenforceable in any respect, the enforceability of the remaining provisions shall not thereby be affected. Time is of the essence of this Agreement and the other Loan Documents. SECTION 11.05. GOVERNING LAW; SUBMISSION TO JURISDICTION. ----------------------------------------- (A) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER DOCUMENTS CONTEMPLATED HEREBY, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF GEORGIA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF). (B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF GEORGIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF GEORGIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY AND THE -86- GUARANTORS HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND EACH OF THE COMPANY AND THE GUARANTORS HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. (c) EACH OF THE GUARANTORS HEREBY IRREVOCABLY DESIGNATES THE COMPANY AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, FOR AND ON ITS BEHALF, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR THE NOTES OR ANY DOCUMENT RELATED THERETO. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY MAIL TO SUCH GUARANTOR AT ITS ADDRESS, BUT THE FAILURE OF SUCH GUARANTOR TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. EACH OF THE COMPANY AND THE GUARANTORS FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS AS SET FORTH IN SECTION 11.03, SUCH SERVICE TO BECOME EFFECTIVE 3 DAYS AFTER SUCH MAILING. (d) Nothing herein shall affect the right of the Banks and the Agent to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company or any Guarantor in any other jurisdiction. SECTION 11.06. Payment of Costs. The Company shall pay all reasonable ---------------- costs, expenses, taxes and fees (i) incurred by the Agent, the Collateral Agents, the Intercreditor Agreement Agent and all Banks in connection with the negotiation, preparation, execution and delivery of this Agreement, the term sheet and the Commitment Letter relating to this Agreement, the Security Documents and all other Loan Documents, including, without limitation, the out- of-pocket expenses of Barclays and the disbursements and professional fees of (a) King & Spalding, counsel to the Agent, the U.S. Collateral Agent and the Intercreditor Agreement Agent, (b) all local counsel to the Agent, the Collateral Agents and the Intercreditor Agreement Agent, including without limitation Lovell White Durrant, (c) -87- U.K. and U.S. counsel to Barclays, in all cases whether or not the transaction contemplated hereby shall be consummated and (d) Kilpatrick & Cody, counsel to Canada; (ii) incurred by the Agent, the Collateral Agents and the Intercreditor Agreement Agent in connection with the perfection, registration, maintenance, administration, custody and preservation of the Collateral, including, without limitation, with respect to any and all stamp, intangible or other taxes that may be payable or determined in the future to be payable in connection with this Agreement, the Security Documents and all other Loan Documents, and relating to releases and consents; and (iii) incurred by any of the Banks in connection with or after the occurrence of any Event of Default, including, without limitation, in connection with (a) the negotiation, preparation, execution and delivery of any waiver, amendment or consent by the Banks relating to this Agreement or the Security Documents, (b) the negotiation of any restructuring or workout transaction, and the preparation, execution and delivery of any documents prepared in connection therewith, and (c) enforcement or foreclosure with respect to this Agreement or the Security Documents, in all such cases such costs, expenses, taxes and fees shall include, without limitation, the disbursements and reasonable professional fees actually incurred of counsel to any Bank. To the extent that any such fees and expenses are subject to value added taxes, such taxes will be paid by the Company. To the extent reimbursement is sought pursuant to this Section 11.06 or pursuant to the Security Documents or any other Loan Document, the Banks shall submit to the Company a statement of expenses to be paid by the Company. Such expenses shall be due and payable within thirty (30) days of the date of the original statement to the extent that such Bank is entitled to such reimbursement. Section 11.07 Indemnity. The Company agrees to protect, indemnify --------- and save harmless the Agent, the Collateral Agents and each Bank, and all directors, officers, employees and agents of the Agent, the Collateral Agents and each Bank, from and against any and all (i) claims, demands and causes of action of any nature whatsoever brought by any person or entity not a party to this Agreement and arising from or related or incident to this Agreement or any other Loan Document, (ii) costs and expenses incident to the defense of such claims, demands and causes of action, including, without limitation, attorneys' fees, and (iii) liabilities, judgements, settlements, penalties and assessments arising from such claims, demands and causes of action, provided such claims, costs and liabilities are not the result of the gross negligence or willful misconduct of such Agent, such Collateral Agent or such Bank. The indemnity contained in this Section shall survive the termination of this Agreement. Section 11.08. Benefit of the Agreement. ------------------------ (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, provided that neither the Company nor any Guarantor may assign or transfer any of its interest hereunder -88- without the prior written consent of the Banks, and no such assignment or transfer of any such obligations shall relieve the Company or such Guarantor of its obligations hereunder unless each Bank shall have consented to such release in a writing specifically referring to the obligation from which the Company or such Guarantor is to be released. (b) Any Bank may make, carry or transfer Advances or Letters of Credit Obligations at, to or for the account of, any of its branch offices or the office of an Affiliate of such Bank. Any Bank may at any time assign all or any portion of its rights in this Agreement and the Notes issued to it to a Federal Reserve Bank; provided that no such assignment shall release the Bank -------- from any of its obligations hereunder. (c) Each Bank may assign or delegate all or a portion of its interests, rights and obligations under this Agreement and the other Loan Documents (including all or a portion of any of its Commitments, Letter of Credit Obligations and the Advances at the time owing to it and the Notes held by it) to another financial or lending institution or entity; provided, however, -------- ------- that (i) the Agent and the Company must give their prior written consent to such assignment (which consent, in the case of the Company, shall not be unreasonably withheld) unless such assignment is to an Affiliate of the assigning Bank or, in the case of the Company, unless an Event of Default has occurred and is continuing, (ii) the parties to each such assignment shall execute and deliver to the Agent an Assignment Agreement, and, together with a Note or Notes subject to such assignment and, unless such assignment is to an Affiliate of such Bank, a processing and recordation fee of $3,000, and (iv) the assignee must execute and deliver a confirmation of its acceptance of the terms and conditions of the Intercreditor Agreement and any other related agreement to the other parties to the Intercreditor Agreement and any other related agreement in accordance with the terms thereof. The Company shall not be responsible for such processing and recordation fee or any costs or expenses incurred by any Bank (other than the Agent) in connection with such assignment. From and after the effective date specified in each Assignment Agreement, which effective date shall be at least five (5) Business Days after the execution thereof, the assignee thereunder shall be a party hereto and to the extent of the interest assigned by such Assignment Agreement, have the rights and obligations of a Bank under this Agreement. Within five (5) Business Days after receipt of the notice and the Assignment Agreement, the Company, at its own expense, shall execute and deliver to the Agent, in exchange for the surrendered Note or Notes, a new Note or Notes to the order of such assignee in a principal amount equal to the applicable Commitments assumed by it pursuant to such Assignment and Acceptance and new Note or Notes to the assigning Bank in the amount of its retained Commitment or Commitments. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the date of the surrendered Note or Notes which they replace, and shall otherwise be in substantially the form attached hereto. -89- (d) Each Bank may from time to time sell or otherwise grant participations in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitments, the Letter of Credit Obligations and the Advances owing to it and the Notes held by it) to another financial or lending institution or entity, whereupon the holder of any such participation, if the participation agreement so provides, shall be entitled to all of the rights of a Bank hereunder; provided, however, that (i) the Agent and the Company must give their prior - --------- -------- written consent to such participation (which consent, in the case of the Company, shall not be unreasonably withheld) unless such participation is to an Affiliate of such Bank or, in the case of the Company, unless an Event of Default has occurred and is continuing, (ii) such selling Bank's obligations under this Agreement shall remain unchanged, (iii) such selling Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iv) the Company, the Agent and other Banks shall continue to deal solely and directly with each Bank in connection with such Bank's rights and obligations under this Agreement and the other Loan Documents, and such Bank shall retain the sole right to enforce the obligations of the Company relating to the Advances and Letter of Credit Obligations and to approve any amendment, modification or waiver of any provisions of this Agreement or the other Loan Documents. Any Bank selling a participation hereunder shall provide prompt written notice to the Company of the name of such participant. SECTION 11.09. Subordination of Indebtedness. ----------------------------- (a) Any Indebtedness of the Company now or hereafter owed to any Guarantor is hereby subordinated in right of payment to the payment by the Company of the Obligations such that if a default in the payment of the Obligations shall have occurred and be continuing, any such Indebtedness of the Company owed to such Guarantor, if collected or received by such Guarantor, shall be held in trust by such Guarantor for the holders of the Obligations and be paid over to the Banks and the Agent for application on the Obligations. (b) Any Indebtedness of any Guarantor now or hereafter owed to the Company is hereby subordinated in right of payment to the payment by such Guarantor of its Guaranty Obligations such that if a default in the payment of the Obligations shall have occurred and be continuing, any such Indebtedness of such Guarantor owed to the Company, if collected or received by the Company, shall be held in trust by the Company for the holders of the Obligations and be paid over to the Banks and the Agent for application of such Guarantor's Guaranty Obligations. SECTION 11.10. Judgment Currency. ----------------- (a) The Company's and the Guarantors' obligations hereunder and under the other Loan Documents to make payments in U.S. Dollars shall not be discharged or satisfied -90- by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than U.S. Dollars, except to the extent that such tender or recovery results in the effective receipt by the Banks and the Agent of the full amount of U.S. Dollars expressed to be payable to the Banks and the Agent under this Agreement and the other Loan Documents. (b) If for the purpose of obtaining or enforcing any judgment against the Company or any Guarantor in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than U.S. Dollars (such other currency being hereinafter referred to as the "Judgment Currency") an ----------------- amount due in U.S. Dollars, the conversion shall be made at the Dollar Equivalent determined, as on the Business Day immediately preceding the day on which the judgment is entered (such Business Day being hereafter referred to as the "Judgment Currency Conversion Date"). In any such case, if there is a change -------------------------------- in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Company and each Guarantor, jointly and severally, covenants and agrees to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount), as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of U.S. Dollars which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date. (c) For purposes of determining the Dollar Equivalent for this Section, such amounts shall include any premium and costs payable in connection with the purchase of U.S. Dollars. SECTION 11.11. Dollar Equivalent Computations. To the extent that the ------------------------------ determination of compliance with any requirement of this Agreement requires the conversion to U.S. Dollars of foreign currency amounts, such U.S. Dollar amount shall be computed using the Dollar Equivalent of the amount of such foreign currency at the time such item is to be calculated or is to be or was incurred, created or suffered or permitted to exist, or assumed or transferred or sold for purposes of this Agreement (except that if such item was incurred, created or assumed, or suffered or permitted to exist or transferred or sold prior to the date hereof, such conversion shall be made based on the Dollar Equivalent of the amounts of such foreign currency at the date hereof). SECTION 11.12. Maximum Interest Rate. Nothing contained in this --------------------- Agreement or any Note shall require the Company to pay interest at a rate exceeding the Maximum Permissible Rate. If interest payable to any Bank for any period would exceed the Maximum Permissible Rate, such interest shall be reduced automatically to the maximum -91- amount that will not exceed the Maximum Permissible Rate, and interest payable to any Bank for any subsequent period, to the extent less than the Maximum Permissible Rate, shall, to that extent, be increased by the aggregate amount of all such reductions. SECTION 11.13. Entire Agreement. This Agreement and the other Loan ---------------- Documents executed and delivered contemporaneously herewith, together with the exhibits and schedules attached hereto and thereto, constitute the entire understanding of the parties with respect to the subject matter hereof, and any other prior or contemporaneous agreements, whether written or oral, with respect thereto, including, without limitation, the Original Credit Agreement, the Original Reimbursement Agreement and the Commitment Letter, all of which are expressly superseded hereby; provided, however, that the indemnities of the --------- -------- Company in favor of the Banks, Barclays Bank PLC and SunTrust Capital Markets, Inc. contained in the Commitment Letter shall survive the execution and delivery of this Agreement. The execution of this Agreement and the other Loan Documents by the Company and the Guarantors was not based upon any facts or materials provided by the Agent, either Collateral Agent or any Bank, nor was the Company or any Guarantor induced to execute this Agreement or any other Loan Document by any representation, statement or analysis made by the Agent, either Collateral Agent or any Bank. SECTION 11.14. Set-Off. Upon the occurrence and during the continuance ------- of any Event of Default, each Bank, and each of its branches and offices, is hereby authorized by the Company and each Guarantor, at any time and from time to time, without notice to the Company or any Guarantor, (i) to set off against, and to appropriate and apply to the payment of the Obligations and the Guaranty Obligations (in each case whether matured or unmatured) any and all amounts owing by such Bank, or any such office or branch, to the Company or such Guarantor (whether payable in Dollars or any other currency, whether matured or unmatured, and, in the case of deposits, whether general or special, time or demand and however evidenced) and (ii) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such Obligations and Guaranty Obligations and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as such Bank in its sole discretion may elect. The Company and the Guarantors agree, to the fullest extent they may effectively do so under Applicable Law, that any holder of a participation in any Advance may exercise rights of set-off and counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Company or such Guarantor in the amount of such participation. SECTION 11.15. Provisions relating to the Original Credit Agreement ---------------------------------------------------- and Original Reimbursement Agreement. Upon the fulfillment of all conditions - ------------------------------------ precedent to this Agreement set forth in Section 3.01 and 3.02, (a) this Agreement shall replace the Original Credit Agreement and (b) this Agreement and the Swap Guaranty shall replace -92- the Original Reimbursement Agreement, at which time (i) all amounts owing to SunTrust and Canada under the Original Credit Agreement, including, without limitation, all accrued and unpaid interest and fees, shall be deemed be outstanding under each of their respective Commitments, (ii) the Notes shall replace and substitute for all Notes (as defined in the Original Credit Agreement) previously issued to such Banks and shall not constitute payment of such indebtedness or effectuate a novation with respect thereto and (iii) all Existing Letters of Credit and all letter of credit applications and agreements executed in connection with such Existing Letters of Credit shall be deemed to be Letters of Credit and Letters of Credit Applications, respectively, outstanding hereunder. SECTION 11.16. Counterparts. This Agreement may be executed in any ------------ number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same instrument. SECTION 11.17. Replacement Notes. Upon receipt of evidence reasonably ----------------- satisfactory to the Company of the loss, theft, destruction or mutilation of any Note, and in the case of any such loss, theft or destruction, upon delivery of any indemnity agreement reasonably satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Note, the Company shall execute and deliver, in lieu thereof, a replacement note identical in form and substance to such Note and dated as of the date of such Note, and upon such execution and delivery of the replacement note all references in this Agreement and in all other Loan Documents to the Note shall be deemed to refer to such replacement note. SECTION 11.18. Release. In consideration of the Agent's and the Banks' ------- agreement to enter into this Agreement and to establish the Commitments hereunder, the Company and the Guarantors hereby (a) release, acquit and forever discharge the Agent and the Banks, their respective agents, employees, officers, directors, servants, representatives, attorneys, affiliates, successors and assigns (collectively, the "Released Parties") from any and all liabilities, claims, suits, debts, liens, losses, causes of action, demands, rights, damages, costs and expenses of any kind, character or nature whatsoever, known or unknown, fixed or contingent, that the Company or the Guarantors may have or claim to have against the Agent and the Banks which might arise out of or be connected with any act of commission or omission of the Agent or the Banks existing or occurring on or prior to the date of this Agreement, including, without limitation, any claims, liabilities or obligations relating to or arising out of or in connection with the Original Credit Agreement, the Original Reimbursement Agreement, the other Loan Documents and the Advances under the Original Credit Agreement (including, without limitation, arising out of or in connection with the initiation, negotiation, closing or administration of the transactions contemplated thereby or related thereto), from the beginning of time until the execution and delivery of this Agreement (the "Released -93- Claims") and (b) agree forever to refrain from commencing, instituting or prosecuting any lawsuit, action or other proceeding against the Released Parties with respect to any and all Released Claims. SECTION 11.19 Certain Consents. (a) The Company requests that the ---------------- Banks consent to the creation by Gibb Limited of a wholly owned Subsidiary organized in Portugal and the transfer of all assets of Gibb Limited located in Portugal as of the Closing Date to such new Subsidiary, for the purpose of permitting the new Subsidiary to obtain national certificates of quality which are mandatory for carrying out certain projects in Portugal and thus enable such Subsidiary to increase the market share of Law Companies Group, Inc. and its Subsidiaries in Portugal and in other Portuguese-speaking countries such as Mozambique and Angola. Based upon the foregoing, the Banks hereby consent to Gibb Limited creating a wholly owned Subsidiary incorporated in Portugal and transferring all of its assets located in Portugal as of the Closing Date into such Subsidiary, notwithstanding anything contained in this Credit Agreement or the Intercreditor Agreement to the contrary; provided that (l) promptly upon the -------- formation of such Subsidiary, Gibb Limited delivers to the U.S. Collateral Agent a share certificate evidencing sixty-five percent (65%) of the issued and outstanding shares of such Subsidiary, together with such share charge, pledge agreement or similar instrument as the Banks shall reasonably require pursuant to which Gibb Limited shall pledge such share certificate to the U.S. Collateral Agent, (2) promptly upon the formation of such Subsidiary, Gibb Limited delivers to the International Collateral Agent a share certificate evidencing thirty-five percent (35%) of the issued and outstanding shares of such Subsidiary, together with such share charge, pledge agreement or similar instrument as the Banks shall reasonably require pursuant to which Gibb Limited shall pledge such share certificate to the International Collateral Agent, (3) such Subsidiary gives Barclays a written pledge not to grant or permit any Lien or encumbrance to exist on its assets other than Liens in favor of the International Collateral Agent, (4) the Company delivers an opinion of Portuguese counsel to such Subsidiary and Gibb Limited, addressed to the Banks, addressing such issues as the Banks shall reasonably require, in form and substance reasonably satisfactory to the Banks, together with such other certificates, documents, instruments, stock powers, and corporate documents as the Banks shall reasonably require and (5) Barclays also consents to the foregoing. (b) The Company requests that the Banks consent to the transfer of 51% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd., a Kenyan corporation, now owned by Gibb Africa International Ltd., a Cypriot corporation, to PBM Nominees, Ltd., a wholly owned subsidiary of Ernst & Young, as the trustee for Mr. Paul Karekezi, a Kenyan national and employee of Gibb (Eastern Africa) Ltd., for the purpose of permitting Gibb (Eastern Africa) Ltd. to be eligible to register with the World Bank, the African Development Bank and other funding agencies in Africa and, therefore, to -94- increase the likelihood that Gibb (Eastern Africa) Ltd. will be short-listed for donor-funded projects in Africa. Based upon the foregoing, the Banks consent to the transfer of fifty-one percent (51%) of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. by Gibb Africa International Ltd. to PBM Nominees Ltd., as trustee for Mr. Paul Karekezi, a Kenyan national and employee of Gibb (Eastern Africa) Ltd., and instruct the International Collateral Agent to release the share certificates of Gibb (Eastern Africa) Ltd. to a representative of Gibb Limited, on behalf of Gibb Africa International Ltd. notwithstanding anything in this Credit Agreement or the Intercreditor Agreement to the contrary; provided, however, that (l) no later than 15 days after such share --------- -------- certificates are released to a representative of Gibb Limited, Gibb Limited delivers, or causes its Subsidiary to deliver, to the U.S. Collateral Agent (A) a share certificate evidencing 65% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. still held by Gibb Africa International Ltd., (B) a share certificate evidencing 65% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. then held by PBM Nominees, as trustee for Mr. Paul Karekezi, and (C) share charges, pledge agreements or similar instruments in form and substance reasonably acceptable to the Banks, one executed by Gibb Africa International Ltd. and one executed by PBM Nominees, Ltd. and Mr. Paul Karekezi, pursuant to which such share certificates shall be pledged to the U.S. Collateral Agent, (2) no later than 15 days after such share certificates are released to a representative of Gibb Limited, Gibb Limited delivers, or causes its Subsidiary to deliver, to the International Collateral Agent (A) a share certificate evidencing 35% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. still held by Gibb Africa International Ltd., (B) a share certificate evidencing 35% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. then held by PBM Nominees, as trustee for Mr. Paul Karekezi, and (C) share charges, pledge agreements or similar instruments in form and substance reasonably acceptable to the Banks, one executed by Gibb Africa International Ltd. and one executed by PBM Nominees, Ltd. and Mr. Paul Karekezi, pursuant to which such share certificates shall be pledge to the International Collateral Agent, (3) the Company delivers an opinion of Kenyan counsel to such Subsidiary, Gibb Africa International Ltd, PBM Nominees, Ltd. and Mr. Paul Karekezi, addressed to the Banks, addressing such issues as the Banks shall reasonably require, in form and substance reasonably satisfactory to the Banks, together with such other certificates, documents, instruments, stock powers, and corporate documents as the Banks shall reasonably require and (4) Barclays also consents to the foregoing. (c) The Company hereby represents and warrants to the Banks that the Petermuller Subsidiaries are inactive corporations with assets of not more than $10,000 in the aggregate. The Company requests that the Banks consent to the dissolution of the Petermuller Subsidiaries and the transfer of all remaining assets of the Petermuller Subsidiaries to Gibb Limited. Based upon the Company's foregoing representation and warranty, the Banks hereby consent to the dissolution of the Petermuller Subsidiaries -95- notwithstanding anything set forth in this Credit Agreement or the Intercreditor Agreement to the contrary; provided, however, that Barclays also consents to the --------- -------- foregoing. -96- WITNESS the hand and seal of the parties hereto through their duly authorized officers, as of the date first above written. LAW COMPANIES GROUP, INC., A GEORGIA CORPORATION Address: 114 Town Park Drive By: /s/ Bruce C. Coles ---------------------------------- Kennesaw, Georgia 30144 Bruce C. Coles Telecopier Number: 770-499-6713 President, Chief Executive Officer and Chairman of the Board of Directors Attest: /s/ Darryl B. Segraves ------------------------------ Darryl B. Segraves Secretary LAW INTERNATIONAL, INC., A GEORGIA CORPORATION Address: 114 Town Park Drive By: /s/ Michael W. Montgomery ---------------------------------- Kennesaw, Georgia 30144 Michael W. Montgomery Telecopier Number: 770-499-6713 President Attest: /s/ Darryl B. Segraves ------------------------------ Darryl B. Segraves Secretary [SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT] LAW ENGINEERING AND ENVIRONMENTAL SERVICES, INC., FORMERLY LAW ENVIRONMENTAL, INC., A GEORGIA CORPORATION Address: 114 Town Park Drive By: /s/ Bruce C. Coles ---------------------------------- Kennesaw, Georgia 30144 Bruce C. Coles Telecopier Number: 770-499-6713 President Attest: /s/ Lawrence D. Young ------------------------------ Lawrence D. Young Secretary ENSITE, INC., A KENTUCKY CORPORATION Address: 114 Town Park Drive By: /s/ Louis S. Karably ---------------------------------- Kennesaw, Georgia 30144 Louis S. Karably Telecopier Number: (770) 421-3526 President Attest: /s/ Karl J. Duff ------------------------------ Karl J. Duff Secretary [SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT] GIBB INTERNATIONAL HOLDINGS, INC., A DELAWARE CORPORATION Address: 114 Town Park Drive By: /s/ Michael W. Montgomery -------------------------------- Kennesaw, Georgia 30144 Michael W. Montgomery Telecopier Number: 770-499-6713 President Attest: /s/ Darryl B. Segraves ---------------------------- Darryl B. Segraves Secretary LEROY CRANDALL & ASSOCIATES, A CALIFORNIA CORPORATION Address: 200 Citadel Drive By: /s/ L. LeRoy Crandall -------------------------------- Los Angeles, California 90040-1554 L. LeRoy Crandall Telecopier Number: (310) 823-76884 President Attest: /s/ Darryl B. Segraves ---------------------------- Darryl B. Segraves Secretary [SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT] ON SITE TECHNOLOGY, INC., A GEORGIA CORPORATION Address: 112 Town Park Drive By: /s/ J. Leonard Ledbetter -------------------------------- Kennesaw, Georgia 30144 J. Leonard Ledbetter Telecopier Number: (770) 499-6601 President Attest: /s/ Karl J. Duff ---------------------------- Karl J. Duff Secretary GIBB USA, INC., A DELAWARE CORPORATION Address: 114 Town Park Drive By: /s/ Michael W. Montgomery -------------------------------- Kennesaw, Georgia 30144 Michael W. Montgomery Telecopier Number: 770-499-6713 President Attest: /s/ Kendall H. Sherrill ---------------------------- Kendall H. Sherrill Secretary [SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT] LAW ENVIRONMENTAL CONSULTANTS, INC. FORMERLY LAW ASSOCIATES, INC., A GEORGIA CORPORATION Address: 114 Town Park Drive By: /s/ Kendall H. Sherrill -------------------------------- Kennesaw, Georgia 30144 Kendall H. Sherrill Telecopier Number: 770-499-6713 Chief Financial Officer and Treasurer Attest: /s/ Karl J. Duff ---------------------------- Karl J. Duff Secretary LAW ENVIRONMENTAL N.C., INC., A NORTH CAROLINA CORPORATION Address: 114 Town Park Drive By: /s/ J. Leonard Ledbetter -------------------------------- Kennesaw, Georgia 30144 J. Leonard Ledbetter Telecopier Number: 770-499-6713 President Attest: /s/ Lawrence D. Young ---------------------------- Lawrence D. Young Secretary [SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT] LAW/ENVIRONMENTAL INC., A TEXAS CORPORATION Address: 114 Town Park Drive By: /s/ William Allen Walker -------------------------------- Kennesaw, Georgia 30144 Name: William Allen Walker Telecopier Number: 770-499-6713 Title: President Attest: /s/ Karl J. Duff ---------------------------- Name: Karl J. Duff Title: Secretary [SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT] SUNTRUST BANK, ATLANTA INDIVIDUALLY AND AS AGENT By: /s/ J. Christopher Deisley -------------------------------- J. Christopher Deisley First Vice President By: /s/ Jeffrey L. Seavey -------------------------------- (Title) JEFFREY L. SEAVEY VICE PRESIDENT NATIONAL BANK OF CANADA Address: By:________________________________ 200 Galleria Parkway, NW Name: Suite 800 Title: Atlanta, Georgia 30339 Attention: William L. Benning By:________________________________ Name: Title: [SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT] SUNTRUST BANK, ATLANTA INDIVIDUALLY AND AS AGENT By:________________________________ J. Christopher Deisley First Vice President By_________________________________ (Title) NATIONAL BANK OF CANADA Address: By: /s/ William L. Benning -------------------------------- 200 Galleria Parkway, NW Name: Suite 800 Title: VP Atlanta, Georgia 30339 Attention: William L. Benning By: /S/ Vernon B. Woods ------------------------------- Name: Title: VP/Mgr [SIGNATURE PAGE TO THE SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT] EX-10.31 6 AMENDED & RESTATED REVOLVING CREDIT A NOTE EXHIBIT 10.31 THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED, OR ANY OTHER STATE SECURITIES LAW. THIS PROMISSORY NOTE IS SUBJECT TO THE PROVISIONS OF (1) THAT CERTAIN AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, DATED AS OF OCTOBER 11, 1995, AS AMENDED BY THAT CERTAIN FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, DATED AS OF MAY 24, 1996, AS AMENDED BY THAT CERTAIN SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, DATED AS OF JUNE 17, 1996, AMONG LAW COMPANIES GROUP, INC. (THE "COMPANY"). CERTAIN OF ITS SUBSIDIARIES NOW OR HEREAFTER EXISTING AS GUARANTORS, THE FINANCIAL INSTITUTIONS PARTIES THERETO AS BANKS (THE "BANKS") AND SUNTRUST BANK, ATLANTA AS AGENT FOR THE BANKS, AND (2) THAT CERTAIN INTERCREDITOR AGREEMENT, DATED AS OF OCTOBER 11, 1995, AMONG THE BANKS AND BARCLAYS BANK PLC AND ACKNOWLEDGED AND AGREED TO BY THE COMPANY AND CERTAIN OF ITS SUBSIDIARIES, AS AMENDED BY THAT CERTAIN FIRST AMENDMENT TO INTERCREDITOR AGREEMENT, DATED AS OF JUNE 17, 1996, BY AND AMONG THE COMPANY, THE FINANCIAL INSTITUTIONS PARTIES THERETO AS BANKS (THE "BANKS") AND SUNTRUST BANK, ATLANTA AS AGENT FOR THE BANKS. AMENDED AND RESTATED REVOLVING CREDIT A NOTE December 24, 1996 $14,692,260.00 Atlanta, Georgia FOR VALUE RECEIVED, the undersigned, LAW COMPANIES GROUP, INC., a corporation organized and existing under the laws of the State of Georgia (the "Company"), promises to pay to the order of NATIONAL BANK OF CANADA, a Federal Bank chartered under the laws of Canada (the "Bank"), on January 15, 1997, the principal sum of Fourteen Million, Six Hundred, Ninety-Two Thousand, Two Hundred and Sixty and No/100 U.S. Dollars ($14,692,260.00) or so much thereof as may from time to time be disbursed hereunder prior to the maturity of this Revolving Credit A Note, as may be shown on the grid schedule attached hereto, at the main office of SunTrust Bank, Atlanta or any successor Agent under the Credit Agreement (as herein defined), and in immediately available funds. In addition to principal, the Company agrees to pay interest on the principal amounts disbursed hereunder from time to time from the date of each disbursement until paid at such rates of interest and upon such dates as provided in the Credit Agreement. This Amended and Restated Revolving Credit A Note (this "Note") evidences a replacement and substitution of the indebtedness previously outstanding under that certain Amended and Restated Revolving Credit A Note, dated as of May 24, 1996, made by the Company to National City Bank, Kentucky, in the original principal sum of $8,041,317.50, and that certain Amended and Restated Revolving Credit A Note, dated as of May 24, 1996, made by the Company to SouthTrust Bank of Georgia, N.A., collectively, the "Original Notes") and this Note is being delivered by the Company and accepted by the Company as a substitution for the Original Notes, but not as payment of such indebtedness or as a novation with respect thereto. This Note is and remains secured by certain real and personal property of the Company and its Subsidiaries pursuant to the Security Documents executed on October 11, 1995, to which reference is made for a full description of the collateral securing this Note. This Note is one of the Revolving Credit A Notes defined in, and evidences Revolving Credit A Advances incurred pursuant to, that certain Amended and Restated Revolving Credit Agreement, dated as of October 11, 1995, as amended by that certain First Amendment to Amended and Restated Revolving Credit Agreement, dated as of May 24, 1996, and by that certain Second Amendment to Amended and Restated Revolving Credit Agreement, dated as of June 17, 1996, by and among the Company, certain Subsidiaries of the Company as Guarantors, the other Persons that hereafter become Guarantors as provided in Section 5.16 thereof, SunTrust Bank, Atlanta, and National Bank of Canada, as assignee of both National City Bank, Kentucky and SouthTrust Bank of Georgia, N.A., as Banks thereunder, and SunTrust Bank, Atlanta, as Agent for such Banks, (as the same may be from time to time supplemented, amended, renewed or extended, the "Credit Agreement"). Reference hereby is made to the Credit Agreement for a full and complete description of such terms and conditions, including, without limitation, the circumstances under which the maturity of this Note may or will be accelerated and the unpaid balance and all accrued and unpaid interest shall become due and payable. Unless otherwise defined herein, all capitalized terms used in this Note shall have the same meanings as set forth in the Credit Agreement. The Bank shall at all times have a right of set-off against any deposit balances of the Company in the possession of the Bank, and the Bank may apply the same against payment of this Note or any other indebtedness of the Company to the Bank, provided that such indebtedness has matured (by its terms, by acceleration or otherwise), subject to the terms and conditions of the Intercreditor Agreement. The -2- payment of any indebtedness evidenced by this Note shall not affect the enforceability of this Note as to any future, different or other indebtedness evidenced hereby. In the event the indebtedness evidenced by this note is collected by legal action or through an attorney at law, the Bank shall be entitled to recover from the Company all costs of collection including reasonable attorneys' fees actually incurred. The Company acknowledges that the actual crediting of the amount of any Revolving Credit A Advance under the Credit Agreement to an account of the Company or recording such amount on the grid schedule attached hereto shall, in the absence of manifest error, constitute presumptive evidence of such Revolving credit advance. Such account records or grid schedule shall constitute, in the absence of manifest error, presumptive evidence of principal amounts outstanding and repayments made under this Note and the Credit Agreement, at any time and from time to time, provided that the failure of the Bank to record on the grid schedule or in such account records the amount of any Revolving Credit Advance shall not affect the obligation of the undersigned to repay such amount together with interest thereon in accordance with this Note and the Credit Agreement. Failure or forbearance of the Bank to exercise any right hereunder, or otherwise granted by the Credit Agreement or by law, shall now affect or release the liability of the Company hereunder, and shall not constitute a waiver of such right unless so stated in writing by such of the Banks as are required under the Credit Agreement to effect such waiver. THIS NOTE SHALL BE DEEMED TO BE MADE UNDER, AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY, THE LAWS OF THE STATE OF GEORGIA. Time is of the essence of this Note. PRESENTMENT FOR PAYMENT, NOTICE OF DISHONOR AND PROTEST ARE HEREBY WAIVED. -3- Executed under hand and seal in Atlanta, Georgia, on the day and year first above written. LAW COMPANIES GROUP, INC. By: /s/ Bruce C. Coles ------------------------- Name: Bruce C. Coles ---------------- Title: Chairman, CEO --------------- [CORPORATE SEAL] Attest: /s/ Robert Fooshee --------------------- Name: Robert Fooshee ----------------- Title: EVP, CFO, Treasurer -------------------- -4- EX-10.32 7 FACILITY AGREEMENT EXHIBIT 10.32 DATED FEBRUARY 1997 ---------------------------------- GIBB LTD - and - GIBB HOLDINGS LTD AND CERTAIN OF ITS UK SUBSIDIARIES - and - GIBB AFRICA INTERNATIONAL LTD - and - LAW COMPANIES GROUP, INC. - and - BARCLAYS BANK PLC - and - BARCLAYS BANK PLC AS THE AGENT - and - BARCLAYS BANK PLC AS THE INTERNATIONAL COLLATERAL AGENT __________________________________________________________________ FACILITY AGREEMENT __________________________________________________________________ -2- Lovell White Durrant 65 Holborn Viaduct London EC1A 2DY A1/MJL/DS 001BB.37624 INDEX 1. DEFINITIONS.......................................................... 2 2. PURPOSE OF THE FACILITIES............................................ 15 3. NATURE OF THE LOAN FACILITY AND UTILISATION OF THE LOAN FACILITY TO REFINANCE EXISTING BORROWINGS........................................ 15 4. PROVISION OF LOCAL FACILITIES AND EFFECT ON LOAN FACILITY AVAILABILITY......................................................... 16 5. DURATION OF LOAN FACILITY............................................ 16 6. SFET FACILITIES...................................................... 16 7. GUARANTEE FACILITY................................................... 17 8. DRAWDOWN............................................................. 19 9. INTEREST............................................................. 19 10. CHANGE OF CIRCUMSTANCES AND SALE EVENT............................... 21 11. FEES................................................................. 22 12. LEGAL, VALUATION AND OTHER EXPENSES.................................. 23 13. REPAYMENT............................................................ 23 14. PREPAYMENT AND CANCELLATION.......................................... 24 15. INTERNATIONAL SECURITY AND US SECURITY............................... 24 16. DISPOSAL OF CHARGED ASSETS AND PERMANENT REDUCTION OF FACILITY....... 26 17. DISTRIBUTION OF DISPOSAL PROCEEDS.................................... 27 19. POSITIVE COVENANTS................................................... 34 20. NEGATIVE COVENANTS................................................... 39 21. INFORMATION ABOUT THE INTERNATIONAL GROUP............................ 49 22. PAYMENTS AND GROSS-UP................................................ 50 23. EVENTS OF DEFAULT.................................................... 50
-ii- 24. INTEREST ON AN OVERDUE AMOUNT......................................... 53 25. ASSIGNMENT AND TRANSFER............................................... 54 26. THE AGENT AND THE BANKS............................................... 54 27. RETIREMENT OF AGENT................................................... 59 28. CONDITIONS PRECEDENT.................................................. 59 29. MISCELLANEOUS......................................................... 63 31. AUTHORITY OF THE PARENT COMPANY....................................... 66 32. GOVERNING LAW AND JURISDICTION........................................ 66 33. NOTICES............................................................... 66 34. PARTNERSHIP........................................................... 67 35. ENTIRE AGREEMENT...................................................... 67 36. COUNTERPARTS.......................................................... 67 SCHEDULE 1 UK QUALIFYING SUBSIDIARIES.................................................. 68 SCHEDULE 2 SPECIFIED SUBSIDIARIES...................................................... 69 SCHEDULE 3 LIST OF CHARGORS............................................................ 70 SCHEDULE 4 LIST OF PLEDGORS............................................................ 71 SCHEDULE 5 LIST OF GROUP COMPANIES AND ASSOCIATED COMPANIES............................ 73 SCHEDULE 6 MONEY MARKET LOAN........................................................... 75
-iii- SCHEDULE 7 THE OVERDRAFT............................................................... 76 SCHEDULE 8 BMRF........................................................................ 77 SCHEDULE 9 SFET........................................................................ 79 SCHEDULE 10 HKS SYNTHETIC STOCK FACILITY................................................ 80 SCHEDULE 11 ASSOCIATED COSTS FORMULA.................................................... 81 SCHEDULE 12 LIST OF EXECUTIVE OFFICERS.................................................. 82 SCHEDULE 13 LIST OF THIRD PARTY SECURITY................................................ 83 SCHEDULE 14 THE BANKS................................................................... 84 SCHEDULE 15 FORM OF TRANSFER CERTIFICATE................................................ 85 SCHEDULE 16 LIST OF DORMANT GROUP COMPANIES............................................. 88 SCHEDULE 17 PART A THE GUARANTEE AND DEBENTURE.......................................... 89 PART B THE PLEDGES.......................................................... 90
-iv- EXHIBIT DISCLOSURE LETTER........................................................... 94
THIS FACILITY AGREEMENT is dated the day of February 1997 BETWEEN: (1) GIBB LTD ("Gibb"); ---- (2) THE UK QUALIFYING SUBSIDIARIES named in Schedule 1; (3) THE SPECIFIED SUBSIDIARIES named in Schedule 2; (4) LAW COMPANIES GROUP, INC. (the "Parent Company"); -------------- (5) THE BANKS; (6) BARCLAYS BANK PLC (the "Agent"); ----- (7) BARCLAYS BANK PLC (the "International Collateral Agent"). ------------------------------ WHEREAS: (A) The Banks have agreed, subject to the terms and conditions set out in this Agreement with effect from the Effective Date, to make available to Gibb, and, subject to certain restrictions, the UK Qualifying Subsidiaries in respect of paragraph (a) below, and, subject to certain restrictions, the Specified Subsidiaries in respect of paragraph (b) below, the following facilities: (a) a sterling short term revolving loan facility (the "Loan Facility") of ------------- up to (Pounds)4,474,940; (b) a multi-currency guarantee facility (the "Guarantee Facility") of up ------------------ to (Pounds)5,966,587; and (c) a spot and forward exchange transactions facility (the "SFET ---- Facility") of up to (Pounds)1,000,000 gross risk. -------- (B) The Banks may, at their sole discretion, make available to certain specified subsidiaries of the Parent Company local facilities of up to (Pounds)1,551,313 in aggregate and the committed amount of the Loan Facility will be deemed to be reduced by an amount equivalent to the amount of any such local facilities. (C) In addition, a facility of up to (Pounds)596,658 (calculated in accordance with the provisions of this Agreement) shall be made available to Gibb for the acquisition of HKS Synthetic Stock and the committed amount of the Loan Facility will be deemed to be reduced by an amount equivalent to the amount utilised under that facility. (D) The Banks or any Bank Affiliate may, at their option, on Gibb ceasing to be a direct or indirect Subsidiary of the Parent Company make available to the Parent Company a replacement facility in substitution for the Loan Facility. (E) Certain facilities (the "October Facilities") were made available by the ------------------ Banks to the Obligors under the provisions of a facility agreement dated 11 October 1995 (as amended from time to time, the "October Agreement") ----------------- between the same parties. The Banks have agreed to continue to provide the October Facilities subject to the revised provisions of this Agreement. (F) The Facilities are to be utilised to assist the Obligors with their additional working capital, general corporate purposes and capital expenditure requirements. (G) Upon the Effective Date, the provisions of this Agreement shall replace the provisions of the October Agreement. IT IS AGREED: 1. DEFINITIONS 1.1 In this Agreement, unless the context otherwise requires: "Additional Facility" has the meaning attributed to it in subclause ------------------- 10.3(a); "Advance" means the principal amount of each borrowing made or to be made ------- under the Loan Facility or (as the case may be) the principal amount for the time being outstanding in respect of such borrowing; "Affiliate" has the meaning attributed to it in the US Credit Agreement; --------- "Agent" means Barclays Bank PLC acting in its capacity as agent for the ----- Banks for the purposes of this Agreement (whether before or after any transfer effected under Clause 25) and includes any successors in title as agent of the Banks appointed under the terms of this Agreement; "Agreement" means this agreement; --------- "All Banks" means, collectively, all Banks and each other bank which is a --------- party to the Intercreditor Agreement; "Applicable Law" means (a) all applicable common law and principles of -------------- equity and (b) all applicable provisions of all (i) constitutions, statutes, rules, regulations and orders of governmental bodies, (ii) Governmental Approvals and (iii) orders, decisions, judgments and decrees of all courts and arbitrators; "Arrangement Fee" means the fee payable under subclause 11.2; --------------- "Asset Value" has the meaning attributed to it in the US Credit Agreement; ----------- "Associated Company" means a Person which is not a Group Company but in ------------------ which any Group Company has a shareholding, participation or other interest; "Associated Costs" means in relation to any sum outstanding under this ---------------- Agreement during any period for which an interest rate is to be calculated in relation to such sum, the rate per annum determined in accordance with Schedule 11; "Authorised Signatory" means, at any time, in relation to any Group -------------------- Company, Obligor, Chargor, Guarantor or Pledgor and any communication to be made or any document to be executed or certified by such Group Company, Obligor, Chargor, Guarantor or Pledgor, any person or persons who is or are at such time duly authorised by or pursuant to the resolutions mentioned in Clause 28 of the board of directors or other governing body of such Group Company, Obligor, Chargor, Guarantor or Pledgor or in such other manner as may be acceptable to the Banks to make such communication or to execute or certify such document on behalf of such Group Company, Obligor, Chargor, Guarantor or Pledgor; -2- "Availability" means, in respect of a facility, the sum of (a) the facility ------------ limit of such facility less (b) any principal then outstanding under such facility; less (c) any part of such facility which is not available for drawing under the terms of this Agreement; "Banks" means, before any transfer or assignment under Clause 25, Barclays ----- Bank PLC and, thereafter, means Barclays Bank PLC and each Transferee and permitted assignee (and in each case their respective successors in title) but only in respect of each for so long as it has any rights or obligations under the Loan Documents and the term "Bank" shall mean any one of them; ---- "Bank Affiliate" means from time to time any local affiliate of any Bank -------------- which makes available any Local Facility to a Specified Subsidiary; "Bank Guarantee" means (a) those guarantees detailed in subclause 7.4; and -------------- (b) a guarantee, bond or indemnity issued or to be issued by the Banks under the Guarantee Facility, together with any guarantee, bond or indemnity issued by Barclays Bank PLC under the Original Guarantee Facility which is outstanding at the Effective Date; "BGI Exposure" has the meaning attributed to it in the Intercreditor ------------ Agreement; "BMRF" has the meaning attributed to it in subclause 3.1(c); ---- "Book Equity" means the shareholders' equity of the Parent Company as ----------- determined in accordance with generally accepted accounting principles. "Borrowings" means (a) Indebtedness for borrowed money or for the deferred ---------- purchase price of property or services (other than trade accounts payable on customary terms in the ordinary course of business), (b) financial obligations evidenced by bonds, debentures, notes or other similar instruments, (c) financial obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (d) financial obligations as the issuer of share capital redeemable in whole or in part at the option of any person other than such issuer, at a fixed and determinable date or upon the occurrence of an event or condition not solely within the control of such issuer, (e) all obligations (contingent or otherwise) with respect to interest rate and currency leasing agreements, (f) reimbursement obligations (contingent or otherwise) with respect of amounts under letters of credit, bankers acceptances and similar instruments, (g) obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, Indebtedness or financial obligations of any kind referred to in paragraphs (a) to (f) inclusive above and (h) any other obligations having the commercial effect of a borrowing; "Branch" has the meaning attributed to it in Clause 8; ------ "Business Day" means a day (excluding Saturdays) on which Barclays Bank PLC ------------ is ordinarily open to effect transactions of the kind contemplated in this Agreement; "Capital" shall mean, at any time, the sum of (a) Consolidated Net Worth ------- plus (b) Funded Debt; ---- "CEO Letter of Credit" shall mean a single letter of credit in a face -------------------- amount of not more than $1,000,000 which has been issued by the Banks for the account of Gibb as part of a compensation package for the chief executive officer of the Parent Company in accordance with the information previously disclosed to All Banks; "Chargors" means the persons set out in Schedule 3 and any person that -------- hereafter becomes a Chargor in accordance with all the terms of Clause 15 and "Chargor" means any one of them; ------- -3- "Closing Date" means the date of this Agreement; ------------ "Code" means the US Internal Revenue Code of 1986, as amended from time to ---- time, and the regulations promulgated and the rulings issued thereunder; "Collateral Agents" means the International Collateral Agent and the US ----------------- Collateral Agent and "Collateral Agent" means any one of them; "Commitment" means, in relation to any Bank, the facility limit set ---------- opposite its name in Schedule 14 (or, in the case of a Transferee, the facility limit set out in the Schedule to the relevant Transfer Certificate as being transferred to that Transferee) as the same may be transferred (in whole or in part), reduced, varied or terminated in accordance with the terms of this Agreement; "Consolidated EBIT" shall mean, for any fiscal period of the Parent ----------------- Company, an amount equal to the sum of (a) Consolidated Net Income (Loss), plus (b) to the extent deducted in determining Consolidated Net Income ---- (Loss), (i) provisions for taxes based on income of the Parent Company and its Subsidiaries (unless otherwise noted) determined on a consolidated basis in accordance with GAAP and (ii) Interest Expense; "Consolidated Net Income (Loss)" shall mean, for any fiscal period of the ------------------------------ Parent Company, the net income (or loss) of the Parent Company and its Subsidiaries (unless otherwise noted) determined on a consolidated basis for such period (taken as a single accounting period), in accordance with GAAP; "Consolidated Net Worth" means at any date of determination the Parent ---------------------- Company's total shareholders' equity, determined in accordance with generally accepted accounting principles, but measured at the currency exchange rates in effect as at 31 December of the immediately preceding fiscal year but measured at the currency exchange rates as in effect as of 31 December 1996; "Credit Documents" has the meaning attributed to it in the Intercreditor ---------------- Agreement; "Deed of Accession" means any deed of accession to the International ----------------- Security or the US Security, as appropriate, in a form set out in the relevant Security documents; "Disclosure Letter" means a letter from the Parent Company to the Banks ----------------- together with any schedules and annexures annexed thereto at the time of receipt disclosing certain matters, received by the Banks before the Closing Date and designated as the "Disclosure Letter" on its front sheet and attached as an Exhibit to this Agreement; "Disposal Proceeds" means the net proceeds of sale or disposition (before ----------------- the Enforcement Date) of any assets which are subject to the charges contained in the Security, less any costs, revenues or expenses associated with such sale or disposition as previously approved by the relevant Collateral Agent, together with any amounts which pursuant to this Agreement or with the consent of the relevant Collateral Agent shall be deemed to be Disposal Proceeds, but excluding proceeds derived from assets subject only to an uncrystallised floating charge which are sold by a Chargor in the normal course of business; "dollar" and "$" mean the lawful currency of the United States of America; ------ - "Domestic Banks" mean the "Banks" as defined under the US Credit Agreement -------------- and comprise, as at the date of this Agreement, SunTrust and NBC; "Domestic Interest Coverage Ratio" shall mean, for any fiscal period of the -------------------------------- Parent Company, the ratio of (a) Consolidated EBIT of the Parent Company and the US Subsidiaries for such fiscal -4- period to (b) Interest Expense of the Parent Company and the US Subsidiaries for such fiscal period; "Domestic Senior Debt Coverage Ratio" shall mean, for any fiscal period of ----------------------------------- the Parent Company, the ratio of (a) Senior Funded Debt of the Parent Company and the US Subsidiaries as of the last day of such fiscal period to (b) EBITDA of the Parent Company and the US Subsidiaries for the rolling four-quarter period ending on the last day of such fiscal period; "Dormant Group Company" means any company listed in Schedule 16; --------------------- "EBITDA" means, for any period of the Parent Company, an amount equal to ------ the sum of (a) Consolidated EBIT, plus (b) depreciation and amortization ---- expenses (as determined on a consolidated basis in accordance with GAAP) to the extent deducted in determining such Consolidated EBIT; "Effective Date", means the earliest date (being a Business Day) on which -------------- by 1.00 pm (London Time) all the conditions precedent in Clause 28.1 are satisfied in form and substance satisfactory to the Agent or waived in writing by the Required Banks; or alternatively such other date as the Required Banks and all the Obligors agree in writing; "Encumbrance" includes any mortgage, pledge, lien (excluding any lien ----------- arising automatically and solely by operation of law in the ordinary course of business), hypothecation, charge, assignment or deposit by way of security or any other agreement or arrangement (whether conditional or not and whether relating to existing or to future assets), having the effect of providing a security or preferential treatment to a creditor (including set-off, title retention, defeasance or reciprocal fee arrangements) or any agreement or arrangement to give any form of security or preferential treatment to a creditor (and shall include, without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof including any lease or similar arrangement with a public authority executed in connection with the issuance of industrial development revenue bonds or pollution control revenue bonds, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction); "Enforcement Date" means the first date on which an Enforcement Event ---------------- occurs; "Enforcement Event" has the meaning attributed to it in the Intercreditor ----------------- Agreement; "Environment" means ----------- (a) any land, including surface land and subsurface strata, sea bed or river bed under any water as defined below and any natural or man-made structures; (b) water, including coastal and inland waters, surface waters, ice, snow and rain water, ground waters and water in drains and sewers; (c) air, including air within buildings and other natural or man-made structures above or below ground; "Environmental Laws" means all or any applicable law (whether civil, ------------------ criminal or administrative), common law, statute, statutory instrument, treaty, regulation, directive, by-law, circular, code, order, notice, demand, decree, injunction, resolution or judgment (in any such case, with which it is mandatory to comply) of any government, quasi-government, supranational, federal, state or local government, statutory or regulatory body or agency, or court in any jurisdiction with regard to or entailing liability because of the pollution or protection of the Environment or the harm or the protection of human health or the health of animals or plants, including laws relating to public -5- and workers' health and safety, emissions, discharges, spillages or releases or chemicals or any other pollutants or contaminants, or industrial, radioactive, dangerous, toxic or hazardous substances or wastes (whether in solid or liquid form or in the form of a gas or vapour and including noise and generically modified organisms) into the Environment, or otherwise relating to the manufacture, processing, use, treatment, storage, distribution, disposal, transport or handling or such substances or wastes; "Environmental Permits" means all or any permits, licences, consents, --------------------- approvals, certificates, qualifications, specifications, registrations and other authorisations and the filing of all notifications, reports, improvement programmes and assessments required under any Environmental Laws for the operation of the business of any of the Group Companies or the occupation or use of any Properties in which any Group Company has an interest or which it occupies or on which it conducts any activity; "ERISA" means the Employee Retirement Income Security Act of 1974 and all ----- rules and regulations promulgated pursuant to it, as the same may from time to time be supplemented or amended; "ERISA Affiliate" shall mean any trade or business (whether incorporated or --------------- unincorporated) which together with the Parent Company is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code; "ESOP" has the meaning attributed to it in the US Credit Agreement; ---- "Event of Default" means any event or circumstances referred to in Clause ---------------- 23; "Executive Arrangement" has the meaning attributed to it in sub-paragraph --------------------- (a) of the definition of "Plan" in this Agreement; "Executive Officer" means, with respect to any Group Company, each of the ----------------- officers of such Company listed in Schedule 12 and any Person hereafter holding office or offices which are individually or collectively assigned substantially similar duties; "Facilities" means the Guarantee Facility, SFET Facility, Loan Facility, ---------- each Local Facility and any Additional Facility or Substitute Facility and "Facility" shall mean any one of them; -------- "First Tier Facilities" shall mean, collectively, and, without duplication, --------------------- the US Commitments and the Facilities (excluding the SFET Facility); "401(k) Plan" shall mean, collectively, the Law Companies Group, Inc. ------------ 401(k) Savings Plan sponsored by and maintained by the Parent Company, as in effect on the date hereof, together with the Law Companies Group, Inc. Puerto Rico 401(k) Savings Plan sponsored by and maintained by the Parent Company; "Fixed Charge Coverage Ratio" shall mean, for any fiscal period of the --------------------------- Parent Company, the ratio (a) (1) EBITDA for the rolling four-quarter period ending on the last day of such period, minus (2) capital ----- expenditures (determined on a consolidated basis in accordance with GAAP) made by the Parent Company and its Subsidiaries during the rolling four- quarter period ending on the last day of such period to the extent permitted by subclause 20.7, to (b) Fixed Charges for the rolling four- quarter period ending on the last day of such period; "Fixed Charges" shall mean, for any fiscal period of the Parent Company, ------------- (i) Interest Expense for such period plus (ii) current maturities of long- ---- term indebtedness of the Parent Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP, plus (iii) taxes paid by the Parent Company and its Subsidiaries in cash during such period, determined on a consolidated -6- basis in accordance with GAAP, plus (iv) any payments made during such ---- period by the Parent Company in connection with the Georgetown Steel Litigation; "FLECBOA" shall mean the $3,589,000 loan and lease arrangements evidenced ------- by that certain Participation Agreement dated as of November 2, 1994, among Law Engineering and Environmental Services, Inc., formerly known as Law Environmental, Inc., FLECBOA, Inc., the Company and South Trust Bank of Georgia N.A. and other related documents executed in connection therewith, as amended or modified prior to the date hereof; "Funded Debt" shall mean all indebtedness for borrowed money of the Parent ----------- Company and its Subsidiaries on a consolidated basis, including, without limitation, current maturities of indebtedness for borrowed money, but excluding reimbursement obligations relating to the Letters of Credit and bonds, guaranties and indemnitees issued under the Guarantee Facility; "GAAP" shall mean generally accepted accounting principles set forth in the ---- opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Georgetown Steel Litigation" shall mean the obligation of the Parent --------------------------- Company and its Subsidiaries under the judgment rendered by the United States District Court for the District of South Carolina in Georgetown Steel Corporation v. Union Carbide Corporation, et al; "Gibb" means Gibb Ltd (Company number 2387707); ---- "Governmental Approval" means any order, permission, authorization, --------------------- consent, approval, licence, franchise, permit or validation of, exemption by, registration or filing with, or report or notice to, any governmental agency or unit, or any public commission, board or authority; "Group Company" means at any time any one of the Parent Company and its ------------- Subsidiaries at that time; "Group Outstandings" means the sum of (a) the Loan Outstandings; (b) the ------------------ outstandings under any Local Facility; (c) the BGI Exposure; and (d) the outstandings under the US Commitments (including, for the avoidance of doubt, the Letter of Credit Exposure); "Guarantee" means any guarantee executed and delivered to the International --------- Collateral Agent pursuant to Clause 15 or otherwise; "Guarantee and Debenture" means the guarantee and debentures and other ----------------------- security listed in Part A of Schedule 17 and each guarantee and debenture or other security executed in favour of the International Collateral Agent pursuant to Clause 15; "Guarantee Facility" has the meaning attributed to it in Recital A; ------------------ "Guarantors" means any person that hereafter becomes a Guarantor in ---------- accordance with all the terms of Clause 15 and "Guarantor" shall mean any --------- of the Guarantors; "HKS" means Hill Kaplan Scott Law Gibb (Pty) Limited, a South African --- company; "HKS Synthetic Stock" shall mean the synthetic share capital issued by HKS ------------------- Trust and remaining outstanding as of the Closing Date which tracks the value of the share capital of the Parent Company; -7- "HKS Trust" means HKS Law Gibb Share Trust (Pty) Limited, a South African --------- trust; "Indebtedness" means at any time any obligation (whether incurred as a ------------ principal or a surety) for the payment or repayment of money, whether present or future, actual or contingent and including (i) indebtedness for borrowed money or for the deferred purchase price of property or services (other than trade accounts payable on customary terms in the ordinary course of business), (ii) financial obligations evidenced by bonds, debentures, notes or other similar instruments, (iii) financial obligations as lessee under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, (iv) financial obligations as the issuer of share capital redeemable in whole or in part at the option of any Person other than such issuer, at a fixed and determinable date or upon the occurrence of an event or condition not solely within the control of such issuer, (v) all obligations (contingent or otherwise) with respect to interest rate and currency leasing agreements, (vi) reimbursement obligations (contingent or otherwise) with respect of amounts under letters of credit, bankers acceptances and similar instruments, (vii) financial obligations under purchase money mortgages, (viii) financial obligations under asset securitisation vehicles, (ix) conditional sale contracts and similar title retention instruments, and (x) obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or financial obligations of others of the kinds referred to in clauses (i) through (ix) above; "Indemnity" means the general indemnity to be issued or issued by Gibb in --------- favour of Barclays Bank PLC in connection with bonds, guarantees and indemnities issued by Barclays Bank PLC "Intercompany Notes" has the meaning attributed to it in the US Credit ------------------ Agreement; "Intercreditor Agreement" means the agreement dated of even date between ----------------------- Barclays Bank PLC, SunTrust and NBC and acknowledged and agreed to by the Parent Company and certain of the Group Companies; "Intercreditor Agreement Agent" means the "Intercreditor Agreement Agent" ----------------------------- as defined under the Intercreditor Agreement and is, at the date of this Agreement, SunTrust; "Interest Expense" means, for any fiscal period of the Parent Company, ---------------- total interest expense (including, without limitation, interest expense attributable to capitalized leases in accordance with generally accepted accounting principles) of the Parent Company and its Subsidiaries, on a consolidated basis, unless otherwise noted, for such period; "Interest Period" means, for an Advance or an overdue amount, each --------------- successive period of a duration determined hereunder for the purpose of calculating the interest rate from time to time applicable to that Advance; "International Collateral Agent" has the meaning attributed to it in the ------------------------------ Intercreditor Agreement and is, as of the date of this Agreement, Barclays Bank PLC; "International Group" has the meaning attributed to it in subclause ------------------- 21.1(a); "International Group Company" means any Group Company not incorporated or --------------------------- otherwise organised in the United States of America; "International Guarantees" shall mean, collectively, (a) the guarantee ------------------------ agreement in a form acceptable to the Banks executed by the Parent Company, Law International, Inc. and Gibb International Holdings, Inc. in favour of the Banks and any Bank Affiliate, and (b) the guarantee agreement in a form acceptable to the Banks executed by certain other US Group Companies in -8- favour of the Banks and any Bank Affiliate, in each case as hereafter amended, restated, renewed, extended, supplemented or otherwise modified from time to time. "International Security" means any security granted from time to time by ---------------------- any International Group Company to the International Collateral Agent; "International Security Documents" means the Pledge Agreements, the -------------------------------- Guarantee and Debentures and the Guarantees and any additional substitute or supplemental security from time to time granted by any International Group Company to the International Collateral Agent in favour of any Bank or Bank Affiliate to secure the repayment of all or any part of the Facilities made available to such Group Companies; "Investment" means when used with respect to any Person any direct or ---------- indirect advance, loan or other extension of credit (other than the creation of receivables in the ordinary course of business) or capital contribution by such Person (by means of transfers of property to others or payments for property or services for the account or use of others, or otherwise) to any Person, or any direct or indirect purchase or other acquisition by such Person of, or a beneficial interest in, share capital, partnership interests, bonds, notes debentures or other securities issued by any other Person; "Letter of Credit Exposure" has the meaning attributed to it in the US ------------------------- Credit Agreement; "Letter of Credit Subfacility" has the meaning attributed to it in the US ---------------------------- Credit Agreement; "Letters of Credit" has the meaning attributed to it in the US Credit ----------------- Agreement; "Letters of Credit Obligations" has the meaning attributed to it in the US ----------------------------- Credit Agreement; "Lex Insurance" means, collectively, Lex International Insurance Company ------------- Limited and Carriber Insurance Company Limited, each a Bermuda corporation; "Loan Documents" means this Agreement, the International Security -------------- Documents, any Local Facility documents, the Intercreditor Agreement, the International Guarantees, the US Security Documents and each document, instrument, certificate and opinion executed and delivered to any Bank, Domestic Bank, Agent, Collateral Agent or Intercreditor Agreement Agent in connection with the foregoing; "Loan Facility" has the meaning attributed to it in Recital A but to the ------------- extent provided in subclause 10.4 shall mean any Additional Facility or Substitute Facility which replaces the original Loan Facility for the purposes of this Agreement; "Loan Outstandings" means at any time the aggregate principal amount ----------------- outstanding under the Loan Facility pursuant to the Money Market Loan and the BMRF and the HKS Synthetic Stock Facility and the amount of the Overdraft and Local UK Overdraft at that time; "Local Facility" has the meaning attributed to it in subclause 4.1; -------------- "Local UK Overdraft" has the meaning attributed to it in subclause 3.1(d); ------------------ "Majority Banks" means any Bank or group of Banks which holds at least 75 -------------- per cent of the aggregate amount of the facility limits of the Facilities; "Material Adverse Effect" means a material adverse change in the ----------------------- operations, business, property or assets of, or in the condition (financial or otherwise) or prospects of, the Parent Company and its Subsidiaries, taken as a whole; -9- "Money Market Loan" has the meaning attributed to it in subclause 3.1(a); ----------------- "month" means a period starting on one day in a calendar month and ending ----- on the corresponding day in the next calendar month or, if that is not a business day, on the next business day unless that falls in another calendar month in which case it shall end on the preceding business day, save that where a period starts on the last business day in a month or there is no corresponding day in the month in which the period ends, that period shall end on the last business day in the later month; "Multiemployer Plan" shall mean a "multiemployer plan" as defined in ------------------ Section 4001(a)(3) of ERISA; "NBC" means National Bank of Canada; --- "Net Fees" means, for the Parent Company and its Subsidiaries on a -------- consolidated basis, gross fees less costs related to subcontracts; "Net Fees Budgeted" means, with respect to any fiscal year of the Parent ----------------- Company, the Net Fees reasonably budgeted by the Parent Company and its Subsidiaries for such fiscal year, the amount of which shall be reasonably satisfactory to the Required Banks; if no Bank, Reimbursement Agreement Bank or Domestic Bank objects to such budgeted fees within 45 days of receipt by it of the annual budget required to be delivered pursuant to subclause 19.2(e), such budget shall be deemed satisfactory to the Required Banks; "Net Issuance Proceeds" means the net cash proceeds received by the Parent --------------------- Company or any of its Subsidiaries upon the issue by the Parent Company of any of its share capital to any Person; "Obligations" has the meaning attributed to it in the Intercreditor ----------- Agreement; "Obligors" means the Parent Company, Gibb, the UK Qualifying Subsidiary and -------- the Specified Subsidiaries and "Obligor" means any one of them; ------- "October Agreement" has the meaning given to it in Recital D; ----------------- "Original Bank Guarantee Facility" means the bank guarantee facility -------------------------------- contained in the October Agreement; "Original Facility Letter" means the facility letter dated 8 October 1993 ------------------------ from Barclays Bank PLC to the Parent Company and Gibb; "Original Reimbursement Agreement" has the meaning attributed to it in the -------------------------------- US Credit Agreement; "Original SFET Facility" means the "SFET Facility" as defined in the ---------------------- October Agreement; "Outstanding Amount" means, in relation to a Bank Guarantee at any time, ------------------ the maximum actual and contingent liability of any Bank under that Bank Guarantee at that time; "Overdraft" has the meaning attributed to it in subclause 3.1(b); --------- "Parent Company" means Law Companies Group, Inc; -------------- "Partially Owned Subsidiaries" shall mean, collectively, Law/Sundt, Inc., a ---------------------------- California corporation, Envirosource Incorporated, a Georgia corporation and Law/Spear, LLC, a Georgia limited liability company; -10- "Permitted Preferred Stock" shall mean preferred stock of the Company which --------------------------- either (1) has a dividend rate of no more than 8% per annum and does not require any return of capital or equity prior to May 1, 2000 or (2) is on terms and conditions to which the Banks have otherwise given their prior written consent; "Person" shall mean an individual, corporation, partnership, trust or ------ unincorporated organisation, a government or any agency or political subdivision thereof; "Petermuller Subsidiaries" shall mean, collectively, Gibb Petermuller & -------------------------- Partners (Guernsey) Limited, a Guernsey corporation, and Gibb Petermuller & Partners (Cyprus) Limited, a Cypriot corporation; "PBGC" means the Pension Benefit Guaranty Corporation and any successor to ---- it; "Plan" means any employee benefit plan, program, arrangement, practice or ---- contract, maintained by or on behalf of the Parent Company or any ERISA Affiliate, which provides benefits or compensation to or on behalf of employees or former employees, whether formal or informal, whether or not written, including but not limited to the following types of plans: (a) Executive Arrangements - any bonus, incentive compensation, stock ---------------------- option, deferred compensation, commission, severance, "golden parachute", "rabbi trust", or other executive compensation plan, program, contract, arrangement or practice; (b) ERISA Plans - any "employee benefit plan" as defined in ERISA, ----------- including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase pension plan, savings or thrift plan, stock bonus plan, employee share capital ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits; (c) Other Employee Fringe Benefits - any stock purchase, vacation, ------------------------------ scholarship, day care, prepaid legal services, severance pay or other fringe benefit plan, program, arrangement, contract or practice; "Pledge Agreement" means each share pledge or charge listed in Part B of ---------------- Schedule 17 and each share pledge or charge executed by each Pledgor pursuant to Clause 15; "Pledgors" means the persons listed in Part A and Part B of Schedule 4 and -------- any person that hereafter becomes a Pledgor in accordance with all the terms of Clause 15 and "Pledgor" shall mean any one of them; "Potential Event of Default" means any event or the existence of any -------------------------- circumstances which, with the giving of notice or the lapse of time, or any combination of them might, in the opinion of the Agent constitute or bring about an Event of Default; "Properties" means, at any time, all interests in freehold and leasehold ---------- property then owned by any Group Company; "Prospective Transferee" means a bank or other financial institution to ---------------------- which a Bank seeks to transfer all or part of its rights and/or obligations under the Loan Documents in accordance with Clause 25; "Qualifying Bank" means (i) a bank as defined for the purpose of section --------------- 349 of the Income and Corporation Taxes Act 1988 which is within the charge to United Kingdom corporation tax as respects payments of interest received by it under this Agreement; or (ii) a person which is a bank -11- or financial institution (whether incorporated into the United Kingdom or elsewhere) to which the Obligors may lawfully, and without incurring any additional expense make payments under this Agreement without any deduction or withholding in respect of Taxes by virtue of a double taxation treaty; "Regulation G, T, U or X" shall mean Regulation G, T, U or X respectively ----------------------- of the Board of Governors of the US Federal Reserve System, as in effect from time to time, and any regulation successor to it; "Relevant Percentage" means at any time, in relation to a Bank in respect ------------------- of a facility: (a) in relation to the drawdown of an Advance, the proportion (expressed as a percentage) which that Bank's Commitment forms of the Total Commitments; and (b) for all other purposes, the proportion (expressed as a percentage) which the amount of the facility limit of that Bank bears to the total facility limit of such facility; "Repayment Date" has the meaning attributed to it in subclause 5.4; -------------- "Required Banks" has the meaning attributed to it in the Intercreditor -------------- Agreement; "Sale Event" means Gibb ceasing to be a direct or indirect Subsidiary of ---------- the Parent Company; "Second Tier Facilities" shall have the meaning attributed to it in the ---------------------- Intercreditor Agreement; "Security" means collectively the International Security and US Security -------- together with any security from any Group Company in favour of the Banks existing at the Closing Date and includes each or any part of it; "Senior Funded Debt" means, at any time, (a) Funded Debt minus (b) ------------------ Subordinated Indebtedness; "SFET Facility" has the meaning attributed to it in Recital A; ------------- "Shareholder Notes" shall mean all promissory notes now or hereafter issued ----------------- by the Parent Company to any shareholder in connection with the repurchase of such shareholder's share capital of the Parent Company or issued by Law Companies Group Ltd or HKS Trust in connection with the repurchase of any synthetic stock issued by Law Companies Group Limited or HKS Trust; "Specified Subsidiaries" means the companies listed in Schedule 2; ---------------------- "Sterling" and "(Pounds)" means the lawful currency of the United Kingdom; -------- -------- "Sterling Equivalent" means, on any date, in relation to any sum ------------------- denominated in any currency other than sterling, the amount determined by Barclays to be the amount in sterling which would be required to purchase that amount of that other currency at Barclays Bank PLC's spot rate of exchange for the purchase of that other currency with sterling at or about 11 am (London time) on that date; "stock" includes shares; ----- "stockholders" includes shareholders; ------------ "Subordinated Indebtedness" shall mean any Indebtedness of the Parent ------------------------- Company or an Obligor that is subordinated in certain instances in right of payment to the prior payment in full in cash of the Obligations and any Indebtedness of any Group Company to any Bank, Bank Affiliate, Agent -12- or International Collateral Agent on terms and conditions satisfactory to the Required Banks, including, without limitation, those Intercompany Notes executed by the Parent Company and the Shareholder Notes; "Subsidiaries" of any Person means any corporations or other entities of ------------ which a majority of all the outstanding share capital (including director's qualifying shares) or other securities or ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions is, at the time as of which any such determination is being made, directly or indirectly owned by such Person, or by one or more of the Subsidiaries of such Person, and which corporation or other Person is consolidated with such Person for financial reporting purposes. Unless otherwise specified, "Subsidiaries" and "Subsidiary" shall mean the Subsidiaries and a Subsidiary, respectively, of the Parent Company; "Substitute Facility" has the meaning attributed to it in subclause ------------------- 10.3(b); "SunTrust" means SunTrust Bank, Atlanta (being a Georgia banking -------- corporation); "SunTrust Interest Rate Contracts" has the meaning attributed to it in the -------------------------------- US Credit Agreement; "Tax" means, with respect to any person or entity, any federal, state or --- foreign tax, assessment, customs duties, or other governmental charge, levy or assessment (including any withholding tax) upon such person or entity or upon such person's or entity's assets, revenues, income or profits, other than income taxes imposed upon any Bank by the jurisdictions (or any political sub-division thereof) in which such Bank has its principal office or office from which its Advances or any other outstandings are made available, or in which such Bank is incorporated; "Total Liabilities" includes all obligations of the Parent Company and its ----------------- Subsidiaries, on a consolidated basis, which in accordance with generally accepted accounting principles are classified in the consolidated balance sheet of the Parent Company and its Subsidiaries as liabilities, and in any event shall include all (a) obligations for borrowed money or which have been incurred in connection with the acquisition of property or assets, (b) obligations secured by any Encumbrances upon property or assets owned by the Parent Company or any Subsidiary, even though such person has not assumed or become liable for the payment of such obligations, (c) obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by the Parent Company or any Subsidiary, notwithstanding that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property, and (d) capitalised lease obligations; "Transferee" means a bank or other financial institution to which a Bank ---------- has transferred all or part of its rights and/or obligations under the Loan Documents in accordance with Clause 25; "Transfer Certificate" means a certificate substantially in the form set -------------------- out in Schedule 15 signed by a Bank and a Prospective Transferee whereby: (a) such Bank seeks to transfer to such Prospective Transferee all or part of such Bank's rights and/or obligations under the Loan Documents subject to and upon the terms and conditions set out in Clause 25; and (b) such Prospective Transferee undertakes to perform those obligations it will assume as a result of delivery of such certificate to the Agent as contemplated in Clause 25; "Total Commitments" means the aggregate of the Commitments of all of the ----------------- Banks; "UK Qualifying Subsidiary" means any company listed in Schedule 1; ------------------------ -13- "United Kingdom" means the United Kingdom of Great Britain and Northern -------------- Ireland; "United States of America" and "US" means the United States of America, its ------------------------ -- fifty States, the District of Columbia and its territories and possessions; "US Additional Guarantor" has the meaning attributed to it in subclause ----------------------- 15.3(a)(i); "US Collateral Agent" has the meaning attributed to it in the Intercreditor ------------------- Agreement; "US Commitments" means the Commitments as defined in the US Credit -------------- Agreement; "US Credit Agreement" means the second amended and restated revolving ------------------- credit agreement dated of even date between the Parent Company, certain of its Subsidiaries, certain banks and SunTrust as agent; "US Group Company" means any Group Company incorporated or otherwise ---------------- organised in the United States of America; "US Guarantors" means the "Guarantors" as defined in the US Credit ------------- Agreement; "US Security" means the Security from time to time granted by any Group ----------- Company to the US Collateral Agent; "US Security Documents" means the "U.S. Security Documents" as defined in --------------------- the US Credit Agreement; "US Subsidiary" shall mean any Subsidiary of the Parent Company that is ------------- incorporated or otherwise organised in the United States; "Working Capital" has the meaning attributed to it in the US Credit --------------- Agreement. 1.2 Reference to any statutory provision includes any amended or re-enacted version of such provision with effect from the date on which it comes into force. 1.3 Save as otherwise expressly provided herein, references in this Agreement to this Agreement or any other document include reference to this Agreement or such other document as varied, supplemented and/or replaced as agreed between the parties to it or as permitted hereby or to which such parties shall have consented from time to time. 1.4 References to Recitals, Clauses, subclauses, paragraphs, Schedules and annexures are to be construed as references to the recitals, clauses, subclauses, paragraphs, schedules and annexures of this Agreement unless otherwise stated. 1.5 Clause headings are for convenience only and shall not affect the construction hereof. 1.6 The words "other" or "otherwise" and "whatsoever" shall not be construed ejusdem generis or be construed as a limitation upon the generality of any preceding words or matters specifically referred to. The words "including" and "in particular" shall be construed as being by way of illustration or emphasis and shall not limit the generality of any preceding words nor exclude any words not included in any preceding words. -14- 2. PURPOSE OF THE FACILITIES 2.1 The Facilities shall be utilised to assist with the relevant Obligor's additional working capital requirements, capital expenditure requirements and general corporate purposes. 2.2 Without prejudice to the obligations of the Obligors to apply amounts borrowed in accordance with this Clause 2 or Clause 3, no Bank, Bank Affiliate, Agent or Collateral Agent shall be under any duty to check that the Obligors have done so. 3. NATURE OF THE LOAN FACILITY AND UTILISATION OF THE LOAN FACILITY TO REFINANCE EXISTING BORROWINGS 3.1 The Loan Facility may, subject as stated below, be utilised in the case of subclauses 3.1(a) to (c) and (e) below by Gibb and in the case of subclause 3.1(d) by all or any of UK Qualifying Subsidiaries, by way of the following facility types and where relevant in accordance with the provisions of the Schedules related thereto: (a) a sterling committed money market loan ("Money Market Loan") on the ----------------- terms set out in Schedule 6; and/or (b) a sterling overdraft ("Overdraft") on the terms set out in Schedule 7; --------- and/or (c) a Banks' managed rate facility ("BMRF") on the terms set out in ---- Schedule 8; and/or (d) a short term sterling overdraft ("Local UK Overdraft") for all or any ------------------ of the UK Qualifying Subsidiaries of up to (Pounds)298,329 (or such other amount as All Banks may agree from time to time) in aggregate on terms equivalent to those set out in Schedule 7; and/or (e) a short term facility of up to an amount as calculated in accordance with Schedule 10 on the terms set out in Schedule 10 (the "HKS --- Synthetic Stock Facility"). ------------------------ Provided that neither Gibb, nor as regards subclause 3.1(d) above the UK Qualifying Subsidiaries, shall be entitled to request any utilisation of the Loan Facility if, as a result of and after such utilisation: (i) the Loan Outstandings would exceed the sum of (aa) (Pounds)4,474,940 less (bb) any permanent reduction of the Loan Facility less (cc) the sum of the Sterling Equivalent of the facility limits of any Local Facilities; or (ii any applicable limit or sub-limit of the Loan Facility would be breached. 4. PROVISION OF LOCAL FACILITIES AND EFFECT ON LOAN FACILITY AVAILABILITY 4.1 Gibb requests the Banks and/or any Bank Affiliate to make short term revolving loan facilities of up to (Pounds)1,551,313 (or its equivalent in other currencies) in aggregate (each a "Local Facility") available to any -------------- Specified Subsidiary, and if any Bank and/or any Bank Affiliate does so, the amount of the Loan Facility available for drawing by Gibb (and, to the extent permitted, UK Qualifying Subsidiaries and the HKS Stock Borrowers hereunder) shall be reduced by an amount equal to the aggregate for the time being of the Local Facilities. 4.2 The relevant Bank and/or any Bank Affiliate shall notify Gibb if it makes any such Local Facility available as contemplated under subclause 4.1 and, on each occasion on which a Local Facility is to be utilised, may not allow such utilisation if, as a result of and after such utilisation any of the conditions in subclauses 3.1(i) or (ii) would occur. -15- 4.3 Gibb acknowledges that the Banks have indicated that Local Facilities will only be available at their sole discretion and on terms that the Specified Subsidiaries provide security in the terms required by the Banks for all liabilities of the relevant Specified Subsidiary in respect of the Local Facility made available to it and such liabilities are guaranteed by the Chargors in the form required by the Banks. 5. DURATION OF LOAN FACILITY 5.1 The Loan Facility shall be a committed facility available for a term expiring on 6 February 1998 (or close of business on the date falling 364 days after the Closing Date if earlier) (such expiry date being referred to herein as the "Initial Repayment Date"). ---------------------- 5.2 The Parent Company may, 90 days prior to the Initial Repayment Date, approach the Banks and request that the Banks extend the Facilities for a further 364 days. If the Facilities are so extended, the new expiry date as so extended shall be referred to herein as the "Extended Repayment ------------------ Date". ---- 5.3 The Parent Company may, 90 days prior to the Extended Repayment Date, approach the Banks and request that the Facilities be extended for a further period of 364 days. If the Facilities are so extended, the new expiry date as so extended shall be referred to herein as the "Final ----- Repayment Date". -------------- 5.4 The term "Repayment Date" when used in this Agreement shall mean, prior to -------------- the Initial Repayment Date, the Initial Repayment Date; if the Facilities are extended in accordance with subclause 5.2, it shall mean the Extended Repayment Date; and if the Facilities are extended in accordance with subclause 5.3, it shall mean the Final Repayment Date. 5.5 The Banks may refuse to extend the Facilities following a request from the Parent Company under subclauses 5.2 or 5.3 above at their sole discretion. None of the Facilities shall be extended without prior All Bank approval. 6. SFET FACILITIES 6.1 With effect from the Effective Date, the Original SFET Facilities shall continue on the terms of the SFET Facility hereunder. 6.2 Liabilities outstanding under the Original SFET Facility as at the Effective Date shall continue and shall, without limitation to the generality of the foregoing, continue to be included at the amount of their gross risk for the purpose of calculating utilisation of the SFET Facility under Schedule 9. 6.3 From the Effective Date Gibb may continue to utilise the SFET Facility on the terms and subject to the limit and conditions set out in Schedule 9. 7. GUARANTEE FACILITY 7.1 With effect from the Effective Date, the Original Bank Guarantee Facility shall be terminated and replaced by the Guarantee Facility. 7.2 All bank guarantees issued under the Original Bank Guarantee Facility and outstanding at the Effective Date shall from the Effective Date be treated as if they had been issued under the -16- Guarantee Facility and shall, without limitation to the generality of the foregoing, be included in the calculation of the Outstanding Amounts of the Bank Guarantees for the purposes of this clause. 7.3 The Guarantee Facility will be available for utilisation by Gibb from the Effective Date on the following terms and conditions: (a) no Bank shall be obliged to issue any Bank Guarantee until Gibb has provided the Agent with such information, evidence and other documentation relating to that Bank Guarantee and the proposed beneficiary under it as the Banks may require; (b) each Bank Guarantee shall be issued on behalf of and for the account of Gibb (unless otherwise agreed by the Banks at their sole discretion) and shall be in favour of a beneficiary acceptable to the Banks and otherwise on terms agreed by the Banks in their sole discretion and for the avoidance of doubt such beneficiary may include in particular any Bank Affiliate or correspondent bank to which any Bank issues a Bank Guarantee to secure banking facilities made available by such beneficiary to a Group Company acceptable to the Banks; (c) no Bank shall be obliged to issue any Bank Guarantee after the Repayment Date; (d) no Bank shall be obliged to issue any Bank Guarantee at any time before the Repayment Date with a term of more than five years or with no specified term, unless Gibb shall, prior to the issue of such Bank Guarantee, deposit with such Bank and/or any of its Bank Affiliates as cash cover an amount equal to the Outstanding Amount of that Bank Guarantee (or, if the Banks so require, its Sterling Equivalent on the proposed issue date) and, if any Bank so requires, execute a first fixed charge in favour of the issuing Bank with the issuing Bank and/or any of its Bank Affiliates over that deposit on terms satisfactory to the Banks; (e) each Bank Guarantee shall be denominated in sterling or in such other currency as the Banks may from time to time agree; (f) no Bank shall be obliged to issue any Bank Guarantee whose Sterling Equivalent on the proposed issue date, when aggregated with the Sterling Equivalent on that day of the Outstanding Amounts of all other Bank Guarantees (including bank guarantees outstanding under the Original Bank Guarantee Facility) then outstanding would exceed the sum of (aa) (Pounds)5,966,587 less (bb) any permanent reduction of the Guarantee Facility. 7.4 Barclays Bank PLC has issued: (a) a guarantee in favour of British Bank of the Middle East Qatar in the maximum amount of 142,000 Qatar Riyals on 27 September 1990 (the "Qatar Guarantee"); and (b) a guarantee in favour of Barclays Bank of Kenya Limited in a maximum amount of (Pounds)250,000 in relation to overdraft facilities granted to Gibb Eastern Africa Limited under a bank guarantee dated 1 March 1995 (the "Kenya Guarantee"). The Kenya Guarantee and the Qatar Guarantee shall be treated as if they had been issued under the Guarantee Facility and shall, without limitation to the generality of the foregoing, be included in the calculation of the Outstanding Amounts of the Bank Guarantees for the purposes of this clause 7. 7.5 Gibb or the relevant Specified Subsidiary, as applicable, shall pay to the Agent for the account of the relevant Banks guarantee commission in Sterling during the period from the date of issue of each relevant Bank Guarantee until the date on which no further claims may be made on the -17- relevant Banks thereunder, such guarantee commission to be payable in advance on the issue date of that Bank Guarantee and on the last Business Day of each successive 3 months ending after the issue date and calculated on the Sterling Equivalent of the Outstanding Amount of that Bank Guarantee on the date of payment for the next 3 months at the rate as set out below: STERLING EQUIVALENT OF THE OUTSTANDING AMOUNT OF THE BANK GUARANTEES PERCENTAGE COMMISSION up to (Pounds)50,000 2.50% per annum up to (Pounds)250,000 2.50% on the first (Pounds)50,000 and 2.00% on the balance above (Pounds)250,000 2.50% on the first (Pounds)50,000 2.00% on the next (Pounds)250,000 1.75% on the balance 7.6 In consideration of the Banks making available the Guarantee Facility, Gibb and each Specified Subsidiary hereby agrees to pay to the Agent for the account of the relevant Banks immediately upon demand by the Agent from time to time an amount equal to (and, unless the Agent shall specify to the contrary, in the same currency as) each amount demanded of or paid out by any Bank or the Agent under or pursuant to any Bank Guarantee and to keep each Bank and the Agent fully indemnified on demand from and against all actions, proceedings, liabilities, claims, demands, damages, costs and expenses in relation to or arising out of or appearing to any Bank to arise out of any Bank Guarantee and to pay to the Agent for its account and/or that of the relevant Banks, as appropriate, immediately upon demand by the Agent from time to time all payments, losses, charges, damages and expenses suffered or incurred by the Agent or any Bank in consequence of any Bank Guarantee or arising therefrom whether directly or indirectly. 7.7 Gibb and each Specified Subsidiary irrevocably authorises and directs the Agent and the Banks to make any payments and comply with any demands which may be claimed or made or appear to the Agent or the Banks to be claimed or made under or in connection with any Bank Guarantee without any reference to or further authority, confirmation or verification from Gibb or the Specified Subsidiary and regardless of whether or not Gibb or the Specified Subsidiary shall be in any way in breach of any of its obligations under or by virtue of the transaction for which that Bank Guarantee was issued and without making any investigation as to the bona fide nature, validity or genuineness of any such claim or demand and agrees that any payment which the Agent or the Banks may from time to time make in accordance with or appearing to the Agent or the Banks to be in accordance with its obligations under any Bank Guarantee shall be binding upon Gibb or the Specified Subsidiary (as appropriate) and shall be accepted by Gibb or the Specified Subsidiary (as appropriate) as conclusive evidence that the Agent or the Banks were liable to make such payment or comply with such demand. The liability of Gibb or the Specified Subsidiary (as appropriate) hereunder and the right and obligation of the Agent or the Banks to make any such payment or comply with any such demand shall not be diminished or prejudiced if it should appear that, as between Gibb or the Specified Subsidiary (as appropriate) and the relevant beneficiary, that beneficiary was not entitled for any reason to demand payment under the relevant Bank Guarantee or that such claim or demand was not valid or genuine. 7.8 Gibb and each Specified Subsidiary hereby agrees that any demand made upon the Agent or any Bank for payment of any sum under or pursuant to any Bank Guarantee shall for all purposes be deemed to be a valid and effective demand and the Agent or any Bank shall be entitled to treat it as such notwithstanding any lack of authority on the part of the person making the demand. Gibb and each Specified Subsidiary further agrees that its liability hereunder shall apply to any extension, renewal or variation of any Bank Guarantee or any indemnity including a general indemnity to Barclays Bank PLC from Gibb dated 28 March 1990 and the Indemnity. -18- 8. DRAWDOWN Subject to Clauses 3 and 5 above and subject to satisfaction of the conditions precedent in subclause 28.1, Gibb and, to the extent permitted under subclause 3.1(d) above, all or any the UK Qualifying Subsidiaries may request an Advance under the Loan Facility in a minimum amount of (Pounds)250,000 and thereafter in a multiple of (Pounds)10,000 on any Business Day on or before, in respect of the Loan Facility, the Repayment Date, after which date the Banks' commitment to provide the respective Facility shall lapse and all undrawn amounts will be deemed to have been cancelled. Gibb or any UK Qualifying Subsidiary shall give Jeremy Masding (on telephone number 0171 699 5000) at the 54 Lombard Street, London branch of Barclays Bank PLC or such Bank, branch or other person as the Agent may designate (the "Branch") notice by telephone of its intention to draw not later than 12.00 noon on the Business Day prior to the proposed drawing date stating the required amount of the Advance, the Interest Period for it and giving instructions for the payment of funds. If those instructions do not stipulate that the funds must be credited to Gibb's current account with the Branch, such instructions must be confirmed by letter to the Agent at the earliest opportunity. 9. INTEREST 9.1 Interest will accrue during each Interest Period for an Advance under the Loan Facility at the rate determined by the Agent to be the aggregate of (i) the Banks' Margin (as defined in subclause 9.2) (ii) the cost of sterling deposits (being the annual percentage rate at which Sterling deposits are offered to Barclays Bank PLC in the London Interbank Market on the first day of that Interest Period in an amount and for a period comparable to such Advance and such Interest Period) and (iii) the Associated Costs, calculated in accordance with Schedule 11; 9.2 For the purposes of this Agreement, the term "the Banks' Margin" shall mean the amounts as calculated in accordance with the following: (a) where the ratio of Senior Funded Debt to EBITDA when tested in accordance with subclause 20.1 is greater than 1.75 to 1.00 for the fiscal quarter preceding the fiscal quarter which immediately precedes the start of the relevant Interest Period the Banks' Margin shall be 3.50%; (b) where the ratio of Senior Funded Debt to EBITDA when tested in accordance with subclause 20.1 is greater than 1.25 to 1.00 but less than or equal to 1.75 to 1.00 for the fiscal quarter preceding the fiscal quarter which immediately precedes the start of the relevant Interest Period, the Banks' Margin shall be 3.00%; (c) where the ratio of Senior Funded Debt to EBITDA when tested in accordance with subclause 20.1 is greater than 1.00 to 1.00 but less than or equal to 1.25 to 1.00 for the fiscal quarter preceding the fiscal quarter which immediately precedes the start of the relevant Interest Period, the Banks' Margin shall be 2.50%; (d) where the ratio of Senior Funded Debt to EBITDA when tested in accordance with subclause 20.1 is less than or equal to 1.00 to 1.00 for the fiscal quarter preceding the fiscal quarter which immediately precedes the start of the relevant Interest Period, the Banks' Margin shall be 2.00%. 9.3 Each Interest Period for an Advance under the Loan Facility shall be of 3 months' duration, or such other duration as may be applicable hereunder or agreed between the Agent and Gibb, commencing on drawdown of that Advance or on the last day of its preceding Interest Period. -19- 9.4 If a rollover date for an Advance falls immediately prior to the Repayment Date, the amount to be repaid will be rolled over for the period until the Repayment Date. 9.5 Gibb may draw up to 6 Advances under the Loan Facility, provided that no more than 6 Advances in aggregate are outstanding under the Loan Facility at any one time. If a subsequent Advance is made in excess of the number permitted, the first Interest Period for such Advance shall end on the expiry of the then current Interest Period applicable to an existing Advance under the same Facility and such Advances shall be consolidated (unless the Agent expressly otherwise agrees). 9.6 Interest will be calculated on the basis of actual days elapsed over a 365- day year and will be payable in arrear by Gibb or, as appropriate, the relevant UK Qualifying Subsidiary on the last Business Day of each Interest Period, except that if an Interest Period exceeds six months, interest shall be payable six-monthly in arrear and on the last day of such Interest Period. 9.7 Reference to the London Interbank Market shall, if such market no longer exists in comparable form, be construed as meaning the appropriate alternative source of funds as reasonably determined by the Agent. 9.8 Where the Banks' Margin alters during an Interest Period for an Advance, the Banks shall calculate the revised amount of interest due from Gibb or the relevant UK Qualifying Subsidiary (the "Affected Party") in respect of -------------- that Advance and shall notify the Affected Party of the revised amount due (the "revised amount"). If the revised amount is less than the amount paid or to be paid on the last Business Day of the Interest Period in connection with which the calculation is being made, the Banks shall notify the Affected Party of the revised amount and shall either (a) if the interest has been paid, the Bank shall credit the account of the Affected Party with the difference between the amount paid and the revised amount; or (b) if the interest has not been paid, the Affected Party shall pay the revised amount on the last Business Day of the relevant Interest Period. If the revised amount is more than the amount of interest paid or to be paid, the Bank shall notify the Affected Party of the revised amount and either (a) if the interest has been paid, the Affected Party shall pay to the Bank the difference between the amount paid and the revised amount within three Business Days of being notified by the Bank; or (b) if the interest has not been paid, the Affected Party shall pay the revised amount on the last Business Day of the relevant Interest Period. 10. CHANGE OF CIRCUMSTANCES AND SALE EVENT 10.1 In the event of: (a) any change in applicable law, regulation or practice resulting in any Bank being subjected to any new or additional tax, levy, duty, charge, penalty, deduction or withholding of any nature (other than tax on such Bank's overall net profits and gains), or (b) any existing requirements of the Bank of England or any governmental, fiscal, monetary, regulatory or other authority affecting the conduct of any Bank's business being changed or any new requirements being imposed (whether or not having the force of law), including, without limitation, a request or requirement which affects the manner in which such Bank allocates capital resources to its commitments, including its obligations under this Agreement, and the result is in the sole opinion of the Agent (directly or indirectly) to increase the cost to such Bank of funding, making available or maintaining any Facility or to reduce the amount of any payment received or receivable by such Bank or to reduce the effective return to such Bank by an -20- amount which such Bank deems material, then the relevant Obligor shall pay to such Bank on demand such sum as may be certified in writing by the Agent to that Obligor as necessary to compensate such Bank for such increased cost or such reduction. 10.2 Gibb or the relevant UK Qualifying Subsidiary may, at any time within six weeks after the date of certification from the Bank under the preceding sub-clause, prepay all (but not part) of such Facility as is attributable to such Bank without penalty, by giving not less than five Business Days' irrevocable notice to the Agent to that effect specifying the prepayment date. Gibb or the relevant UK Qualifying Subsidiary shall be obliged to prepay such Facility to the Agent on such date, together with all interest accrued to the date of actual payment and all other sums due to such Bank hereunder (including without limitation broken Interest Period costs recoverable under subclause 29.4(c) if such repayment shall not fall at the end of an Interest Period for any Advance being prepaid). Unless prepayment is made within such period of six weeks, an amount equal to such increased cost or such reduction will be payable by the relevant Obligors to the relevant Bank under the preceding sub-clause from the date of such certification. 10.3 In the event of a Sale Event: (a) Where the Loan Facility granted by the Bank to Gibb shall, at the option of the Bank, be continued in whole or in part after the sale, the Bank may, at the option of the Bank in addition grant to the Parent Company and the Parent Company shall accept additional facilities on identical terms and conditions as to rate of interest and date of repayment (each an "Additional Facility") with a facility ------------------- limit equal to the facility limit applicable to the original Facility made available to Gibb and the Parent Company shall immediately (i) draw down such Additional Facility to the same extent as Gibb had utilised the original Facility immediately prior to the Sale Event and (ii) the First Tier Facilities shall be permanently and proportionately reduced in accordance with the Intercreditor Agreement by an amount equal to the remaining Availability under such Additional Facility. Any money so drawn down under sub-clause 10.3(a)(i) shall be added to the net proceeds of sale of Gibb and paid to and applied by the Intercreditor Agreement Agent as if the money so borrowed were net proceeds of sale of Gibb. (b) Where the Loan Facility granted to Gibb shall be repaid on or before the completion of such sale, the Bank shall cancel such facility and may, at the option of the Bank, grant to the Parent Company and the Parent Company shall accept substitute facilities on identical terms and conditions as to rate of interest and date of repayment (each a "Substitute Facility") with a facility limit equivalent to the ------------------- cancelled Facility and the Parent Company shall immediately (i) draw down on such Substitute Facility to the same extent as the original Facility had been utilised by Gibb immediately prior to its cancellation and (ii) the First Tier Facilities shall be permanently and proportionately reduced in accordance with the Intercreditor Agreement by an amount equal to the remaining Availability under such Substitute Facility. Any money so drawn down under subclause 10.3(b)(i) by the Parent Company under the Substitute Facility shall be added to the net proceeds of sale of Gibb and shall be paid to and applied by the Intercreditor Agreement Agent as if the money so borrowed were net proceeds of sale of Gibb. 10.4 Any Additional Facility or Substitute Facility granted pursuant to subclause 10.3 shall be deemed to be a Facility and replace the original Facility for the purposes of this Agreement and the Security and be a First Tier Facility and replace the original Loan Facility for the purposes of the Intercreditor Agreement and all Loan Documents. 10.5 For the avoidance of doubt, an Obligor shall not be required to make any payment to the Bank under subclause 10.1 where the sum which is the subject of such demand is fully compensated for by the operation of Schedule 11 or is attributable to any law or regulation to the extent -21- implemented in accordance with the paper entitled "International Convergence of Capital Measurement and Capital Standards" dated July 1988 (as amended prior to the date of this Agreement) prepared by the Basle Committee on Banking Regulation and Supervisory Practices in the terms existing as at the date of this Agreement. 11. FEES 11.1 NON-UTILISATION FEE Gibb or the relevant UK Qualifying Subsidiary (as appropriate) shall pay to the Banks a non-utilisation fee computed at a rate as set out below (the "Non-utilisation Rate"), calculated on the basis of a 360 day year, for the --------------------- actual number of days elapsed on the daily undrawn and uncancelled amount of the Facility. The fee shall be payable quarterly in arrears, the first payment to be made on the date falling ninety days after the Effective Date, and subsequent payments to be made quarterly thereafter. The Non- utilisation Rate shall be calculated as follows: (a) where the ratio of Senior Funded Debt to EBITDA when tested in accordance with subclause 20.1 is greater than 1.25 to 1.00 for the fiscal quarter preceding the fiscal quarter which immediately precedes the date of calculation of the Non-utilisation Rate, the Non- utilisation Rate shall be 0.5%; (b) where the ratio of Senior Funded Debt to EBITDA when tested in accordance with subclause 20.1 is greater than 1.00 to 1.00 and less than or equal to 1.25 to 1.00 for the fiscal quarter preceding the fiscal quarter which immediately precedes the date of calculation of the Non-utilisation Rate, the Non-utilisation Rate shall be 0.375%; and (c) where the ratio of Senior Funded Debt to EBITDA when tested in accordance with subclause 20.1 is less than or equal to 1.00 to 1.00 for the fiscal quarter preceding the fiscal quarter which immediately precedes the date of calculation of the Non-utilisation Rate, the Non- utilisation Rate shall be 0.25%. 11.2 ARRANGEMENT FEE An Arrangement Fee of $650,000 will be due and payable by the Parent Company to the Intercreditor Agreement Agent in accordance with Section 2.13(a) of the US Credit Agreement to be applied in accordance with the provisions of the Intercreditor Agreement. The Arrangement Fee will be distributed between the Banks and the Domestic Banks. 11.3 The Parent Company and Gibb hereby authorise the Agent or SunTrust on behalf of the Banks to withdraw an amount equal to any such fees which are due and payable under this Clause 11 from any of the accounts of the Parent Company or Gibb held at SunTrust or any of the Banks. 12. LEGAL, VALUATION AND OTHER EXPENSES The Obligors shall pay and shall indemnify each Bank on the date of this Agreement and subsequently on demand (payment to be made within 30 calendar days of such demand) (on a full indemnity basis and whether or not any of the Facilities are drawn down or utilised) in respect of all costs or expenses (including without limitation legal fees, valuation, accountancy, consultation and documentation fees, any stamp, documentary, registration or similar tax and communication, travel and out of pocket expenses and in each case any applicable VAT or similar tax) in any relevant jurisdiction incurred by any Bank, Bank Affiliate, the Agent or International Collateral Agent in connection with: (a) the Original Facility Agreement; (b) the October Agreement; (c) the -22- carrying out of due diligence procedures, negotiation, preparation, execution, completion of the Loan Documents or the Security or any of the documents referred to in those Loan Documents or the Security or any variation, amendment, extension of termination thereof or the transactions contemplated by them; (d) the perfection, registration, maintenance, administration, attempted enforcement, enforcement or preservation of any of its respective rights under any of the Loan Documents or the Security or any of the documents referred to in such Loan Documents or the Security in any jurisdiction; and (e) the ongoing monitoring or reviewing of the Facilities or meeting with any Domestic Bank or Group Company. 13. REPAYMENT 13.1 The Loan Facility shall be repaid in full on the Repayment Date. The amount made available under the Loan Facility shall automatically be permanently reduced by (Pounds)59,666 on the 15th of each month, the first payment to be made on 15 July 1997. Provided that if the Loan Facility has previously been reduced by such amount (disregarding for this purpose any reduction from Disposal Proceeds) pursuant to the terms of this Agreement, no further reduction shall be required on the relevant date. 13.2 If any date for repayment is not a Business Day, the relevant repayment shall be made on the preceding Business Day. 13.3 Subject as otherwise provided in this Agreement, where the relevant Obligor is required to repay an Advance, such repayment shall be made in Sterling on the relevant date, together with all unpaid interest accrued on that Advance. 13.4 Notwithstanding the above, no permanent reduction in the Loan Facility made from the proceeds of asset sales which require the consent of the Banks hereunder shall count towards the permanent reductions required pursuant to subclause 13.1. 13.5 To the extent that the Loan Outstandings are in excess of the Commitment of the Banks on any mandatory permanent reduction date the Parent Company shall immediately repay such excess Loan Outstandings to the Agent for the benefit of the Banks. 14. PREPAYMENT AND CANCELLATION 14.1 Any Advance may be prepaid in full or in part in a minimum amount of (Pounds)250,000 and multiples of (Pounds)10,000, in each case on maturity of its then current Interest Period, subject to the Agent receiving not less than seven Business Days' irrevocable written notice of the relevant Obligor's intention to prepay. 14.2 Amounts so prepaid shall be available for redrawing in accordance with the terms of this Agreement. 14.3 When a prepayment is made voluntarily other than on the last day of any Interest Period relating to it, the relevant Obligor will be obliged to make payment under subclause 30.4(c) of any breakage costs incurred by the Agent or any Bank. 14.4 Any voluntary prepayment shall be made, together with accrued interest on the amount prepaid and any other sums then due and payable to the Banks under this Agreement calculated up to the date of prepayment. -23- 14.5 Gibb or the relevant UK Qualifying Subsidiary, as applicable, shall (subject to the conditions set out below) have the right at any time to cancel its right to utilise the whole or any part (being not less than (Pounds)100,000 or a multiple thereof) of the Facilities insofar as they remain undrawn by giving three Business Days prior written notice to the Agent provided that at the same time (and so that such cancellation shall ------------- take place on the same Business Day) the whole or a percentage of (such percentage to be equal to the percentage of the Facilities being cancelled hereunder) of the US Commitments are also cancelled. Any amount so cancelled may not subsequently be drawn down. 15. INTERNATIONAL SECURITY AND US SECURITY 15.1 All Indebtedness now or subsequently owing by the Obligors to the Banks or any Bank Affiliate shall (notwithstanding that the whole or any part of it may be owing under a facility other than one of the Facilities) be secured by the Security. 15.2 The Obligors consent to the Security being held by the International Collateral Agent on behalf of the Banks, any Bank Affiliate and any other lender which accedes to the International Security pursuant to a Deed of Accession save that the US Security shall be held by the US Collateral Agent on behalf of the Banks, any Bank Affiliate and the Domestic Banks and any other lender which accedes to the US Security. 15.3 Future Guarantors and Pledgors ------------------------------ From the Closing Date and subject to the prohibitions or limitations as to power or authority imposed by law applicable to any such Group Company, the Obligors shall procure that: (a) (i) each Person that is or hereafter becomes a US Group Company, which is not (aa) a US Guarantor and (bb) a party to the International Guarantees, (a "US Additional Guarantor") shall ----------------------- become a guarantor under the US Credit Agreement and the International Guarantees and pledge all of its assets, including, to the extent owned by such US Additional Guarantor, 100% of the share capital of other US Group Companies, 65% of the share capital of any International Group Companies and all Intercompany Notes, to the US Collateral Agent upon the creation of such US Additional Guarantor by executing and delivering to the US Collateral Agent the supplemental documents required under Schedule 5.13 of the US Credit Agreement including any opinions addressed to the Domestic Banks (but such opinions shall also be produced and addressed to the Banks and any Bank Affiliate addressing such issues as they may require, in form and substance satisfactory to the Banks and any Bank Affiliate (provided, however, that none of the Partially-Owned Subsidiaries shall be required to become a US Guarantor under this Agreement or pledge any of its assets under the US Security Documents unless and until the Parent Company shall beneficially own, directly or indirectly, 100% of the outstanding share capital (exclusive of directors' qualifying shares) of such Partially-Owned Subsidiary); and (ii) each Person that owns shares in the US Additional Guarantor or holds any Intercompany Notes executed by the US Additional Guarantor to pledge and deliver such shares and Intercompany Notes to the US Collateral Agent, together with a supplement to any other US Security Document where relevant and with stock powers or other appropriate instruments of transfer executed by such Person in blank; (iii) if a US Additional Guarantor is a material US Group Company the US Additional Guarantor shall also deliver to the US Collateral Agent and the Banks, -24- simultaneously with the Supplemental Documents, (aa) Certified Requests for Information or Copies (Form UCC-11) or equivalent reports, showing that there are no effective financing statements which name the US Additional Guarantor as debtor and (bb) an opinion rendered by legal counsel to such US Additional Guarantor and the Person required to pledge the share capital of the US Additional Guarantor under the US Security Documents to the US Collateral Agent, addressing such matters as the Required Banks may reasonably request, addressed to the Agent and the Banks; (b) each Person that is or becomes an International Group Company which is not then a Chargor shall within five business days of a request from the Agent, to the extent that it is or can be made to be lawfully able to do so, shall join in, duly execute and deliver to the International Collateral Agent a supplemental deed in a form approved by the International Collateral Agent in which that International Group Company shall (a) guarantee in favour of the Banks and any Bank Affiliate with the intent that it should (jointly and severally with any other guarantor) guarantee all money and liabilities at any time due, owing or incurred to the Banks and any Bank Affiliate in respect of the Indebtedness of any Group Company and (b) charge to the International Collateral Agent in favour of the Banks and any Bank Affiliate all its undertaking, property and assets by way of first priority fixed and floating charges on substantially the same terms as the Guarantee and Debenture, and the Parent Company agrees to notify the Agent immediately of the existence of any such new International Group Company; (c) each Person that is not then a Guarantor and is or hereafter becomes an International Group Company shall within five Business Days of a request from the Agent and to the extent that it is or can be made to be lawfully able to do so become a Guarantor under this Agreement by executing and delivering to the International Collateral Agent such documents as may reasonably be required by the International Collateral Agent; (d) each Person (other than the Banks, any Bank Affiliate and the Domestic Banks) that has or hereafter acquires any share capital of or other ownership interest in an International Group Company shall within five Business Days of a request from the Agent and to the extent that it is or can be made to be lawfully able to do so become a Pledgor and shall pledge (i) 35% of such International Group Company's voting shares or other similar ownership interest to the International Collateral Agent in favour of the Banks and any Bank Affiliate and (ii) 65% of the voting shares or other ownership interest and 100% of any non-voting shares or other similar ownership interest to the US Collateral Agent in favour of the Domestic Banks, the Banks and any Bank Affiliate: under documents duly executed and delivered to the International Collateral Agent in respect of subclause 15.3(d)(i) and to the US Collateral Agent in respect of subclause 15.3(d)(ii) in form and substance acceptable to the Collateral Agents, together with an opinion rendered by legal counsel of such Pledgor to the Collateral Agents, addressing such issues as are requested by the Collateral Agents in form and substance satisfactory to the Collateral Agents, and such evidence of corporate or partnership approval as the Collateral Agents shall require; and (e) each International Group Company will, if and whenever the Agent shall so require it, and within five Business Days if such request and to the extent that it is or can be made to be lawfully able to do so cause to be executed in favour of the Banks and any Bank Affiliate such new or additional charges, guarantees and/or other security over such of its assets or classes of assets available for security as the International Collateral Agent may from time to time specify to secure all Indebtedness (present and future) incurred to the Banks and any Bank Affiliate by any Group Company (whether owing under the Facilities or otherwise) and immediately thereafter will cause such charges, guarantees and/or security -25- to be delivered to the International Collateral Agent together with any ancillary documents which the International Collateral Agent requires. 15.4 Where a mortgage, charge, security or guarantee is requested by the Agent from a Group Company or Associated Company which is not a wholly-owned subsidiary of the Parent Company, the Obligors shall procure the execution and delivery of it to the extent that they are able to do so through the exercise of all voting rights and powers of control available to them in relation to such Group Company or Associated Company. 15.5 The International Collateral Agent may with the prior written consent of the Agent hold the International Security on behalf of any other banks or financial institutions which execute a Deed of Accession on such terms as to priorities as the Agent may agree. 16. DISPOSAL OF CHARGED ASSETS AND PERMANENT REDUCTION OF FACILITY 16.1 Each Obligor undertakes that no International Group Company shall sell or otherwise dispose of any of its assets which are subject to the Security (or any interest therein) without the prior written consent of All Banks save for sales or disposals of assets subject only to a floating charge under the International Security which has not crystallised and which is a sale or disposal in the ordinary course of such company's business for full value on arms length terms to a person other than a Group Company. 16.2 Each Obligor undertakes to the Banks that: (a) an International Group Company wishing to make a sale or disposition of assets which requires the consent of All Banks under subclause 16.1 shall give the Intercreditor Agreement Agent at least ten days' notice in writing of its wish to do so; (b) any notice so given shall contain details of the assets in question, the expected amount of consideration for the proposed sale or disposition, the book value (if available) of that asset as shown in the last set of audited accounts of such International Group Company, together with a request for All Banks to consent to such sale or disposition; (c) the International Group Company giving such notice shall, if reasonably so requested by the Intercreditor Agreement Agent following receipt of it, promptly provide such supplemental information as the Intercreditor Agreement Agent may deem (at its absolute discretion) to be necessary or desirable to enable All Banks to consider such request and to reach a decision thereon; (d) it is acknowledged that All Banks shall endeavour to respond to any such notice within ten days of such notice, but failure by any such banks to respond to such a notice shall not be deemed to constitute consent to any such sale or disposition; and (e) where a sale or disposition or connected sales or dispositions does not require the consent of All Banks under subclause 16.1 but shall involve a consideration of (Pounds)50,000 or more (or its equivalent in other currencies), the International Group Company shall still inform the Intercreditor Agreement Agent in reasonable detail of such sale or disposition at the earliest reasonable opportunity. 16.3 Each Bank shall have an absolute discretion to give or refuse a consent to any such sale or disposition or to grant a consent subject to such conditions as it may think fit in relation to such sale or disposition, without assigning any reason for so doing. -26- 17. DISTRIBUTION OF DISPOSAL PROCEEDS 17.1 If consent is given pursuant to subclause 16.1 to a sale or disposition of any assets which are the subject of (or which ought to have been the subject of) a notice under subclause 16.2, the Obligors shall procure that the Group Company selling or disposing of such assets shall, except as stated in subclause 17.3, account to the Intercreditor Agreement Agent or relevant Collateral Agent in full for such proceeds (less any costs, expenses or duties associated with the sale or disposition previously approved by the Intercreditor Agreement Agent) and the Disposal Proceeds derived from such sale or disposition shall be apportioned or held by the Intercreditor Agreement Agent or relevant Collateral Agent in accordance with the terms of the Intercreditor Agreement. 17.2 The Intercreditor Agreement Agent, Agent or relevant Collateral Agent shall hold Disposal Proceeds on trust for distribution in accordance with the provisions of the Intercreditor Agreement. 17.3 The proceeds of book or other debts generated by the Group Companies in the ordinary course of business prior to the Enforcement Date and paid to the International Collateral Agent in accordance with the provision of the Guarantee and Debenture shall be deemed (but only for the purposes of this subclause) not to constitute Disposal Proceeds, notwithstanding that such book debts are subject to a fixed charge under the Guarantee and Debenture. 17.4 Disposal Proceeds arising from the sale or disposition of assets subject to the International Security shall be conclusively treated as appropriated and applied in accordance with the terms of the Intercreditor Agreement in such manner as the International Collateral Agent may from time to time notify to the Parent Company (on behalf of the Group Companies) notwithstanding that the payer or any other person may have purported to appropriate or apply such Disposal Proceeds in some other manner. 18. REPRESENTATIONS AND WARRANTIES 18.1 Each Obligor represents and warrants that with respect to itself and its own Subsidiaries: (a) Corporate status of Parent Company; status of Subsidiaries; the Parent ---------------------------------------------------------- Company and each Subsidiary which is a corporation are duly organised, existing and (where relevant) in good standing under the laws of the jurisdictions of their respective incorporation and have all requisite power and authority to own their respective property and assets and to transact the businesses in which they respectively are engaged or presently propose to engage and are duly qualified and (where relevant) in good standing as foreign corporations wherever failure to be so qualified and (where relevant) in good standing could have a Material Adverse Effect. Each Subsidiary which is a partnership is duly constituted, existing and (where relevant) in good standing under the laws of the jurisdiction of its constitution and has all requisite power, authority and legal right to own its property and assets and to transact the businesses in which it is engaged or presently proposes to engage and is duly qualified and (where relevant) in good standing as a foreign partnership wherever failure to be so qualified and in good standing could have a Material Adverse Effect. The Parent Company is adequately capitalised for the purpose of carrying on its business, was not formed solely for the purpose of acting as agent for, or as an instrumentality of, any Subsidiary, and maintains and will continue to maintain an identity independent of and separate from Crandall. (b) Power and Authority: Obligors: Each of the Obligors has the power, and ----------------------------- has taken all necessary action (including, without limitation, any consent of shareholders required by law or by its constitutional documents) to authorise it to execute, deliver and perform the terms and provisions of and to incur its obligations under this Agreement and the other Loan Documents to which it is a party and to borrow hereunder or otherwise utilise the Facilities. This Agreement and each of the other -27- Loan Documents to which it is a party has been or, when executed, will be duly authorised, executed and delivered by each Obligor and constitutes the legal, valid and binding obligation of that Obligor enforceable in accordance with its terms (except in so far as enforceability may be limited by insolvency or similar laws of general application affecting creditors' rights and by general principles of equity). (c) Power and Authority: Chargors, Pledgors and Guarantors: Each Chargor, ------------------------------------------------------ Pledgor and Guarantor has all requisite power and has, as at the date of execution of the Guarantee and Debenture, the Pledge Agreement or the Guarantee to which the respective Chargor Pledgor or Guarantor is a party, taken all necessary action (including, without limitation, any consent of shareholders required by law or by its constitutional documents) to authorise it to execute, deliver and perform the terms and provisions of and to incur its obligations under every Guarantee and Debenture, Pledge Agreement or Guarantee to which it is a party. Each Guarantee and Debenture has been duly authorised, executed and delivered by each Chargor which is to be a party to it, each Pledge Agreement has been duly authorised, executed and delivered by the Pledgor which is to be a party to it and each Guarantee has been duly authorised executed and delivered by the Guarantor which is to be a party to it and constitutes the legal, valid and binding obligation of the respective Chargor, Pledgor or Guarantor enforceable in accordance with its terms (except in so far as enforceability may be limited by insolvency or similar laws of general application affecting creditors' rights and by general principles of equity). (d) Compliance with other Instruments: Save as disclosed in the Disclosure --------------------------------- Letter no Group Company is in default under any material agreement to which it is a party, and the execution, delivery and performance by each Obligor, Chargor and Guarantor, as the case may be, of this Agreement, the Guarantee and Debenture, the Guarantees and the other Loan Documents, (a) will not contravene any provision of Applicable Law, (b) will not conflict with or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or otherwise than under the Security result in the creation or imposition of any Encumbrance on any of the property or assets of a Group Company pursuant to the terms of any mortgage, deed, or other material agreement or instrument to which a Group Company is a signatory or by which it is bound or to which it may be subject, (c) will not violate any provision of the constitutional documents of the Parent Company or any corporate Subsidiary or the certificate of partnership or other document governing the constitution or conduct of affairs of any Subsidiary which is not a corporation, (d) will not require any Governmental Approval and (e) otherwise than under the Security will not result in the creation or imposition of any Encumbrance on any of the property or assets of a Group Company. No Group Company is a party to, or otherwise subject to any provision contained in, any instrument evidencing Indebtedness of a Group Company, any agreement relating thereto or any other contract or agreement (including its constitution documents) which limits the amount of, or otherwise imposes restrictions on the incurring of Indebtedness or contains dividend or redemption limitations on the shares in a Group Company except for this Agreement and the US Credit Agreement. (e) Litigation: Except as disclosed in the Disclosure Letter, there are no ---------- actions, suits, investigations or proceedings pending or, to the knowledge of any Group Company threatened against or affecting any Group Company or any Group Company's properties or rights before any court, arbitrator or administrative or governmental body in which the amount claimed or the relevant Group Company's potential liability exceeds $500,000 per claim or $1,000,000 in the aggregate for all Group Companies (or the equivalent in other currencies). -28- (f) Financial Statements of the Parent Company: The most recent ------------------------------------------ consolidated financial statements of the Parent Company and its Subsidiaries and the related consolidated statements of income (including the notes thereto), with the opinion of Ernst & Young, Certified Public Accountants and the most recent unaudited consolidated financial statements of the Parent Company and its Subsidiaries and the related consolidated statements of income (including the notes thereto) are all true and correct in all material respects and present fairly the results of their operations for, respectively, the year then ending and the quarter then ending. No Group Company had as at such date any significant liabilities, contingent or otherwise (including liabilities for Taxes or any unusual forward or long-term commitments) which were not disclosed by or reserved against in the financial statements referred to above or in the notes to them, and there are no material unrealised or anticipated losses from any commitments of any Group Company. All such financial statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved. Since 30 September 1996, there has been no material adverse change in the operations, business, property or assets of, or in the condition (financial or otherwise) or prospects of, the Parent Company and its Subsidiaries, taken as a whole. (g) Financial Statements of Gibb etc: The most recent audited consolidated -------------------------------- accounts of each of Gibb and Gibb Holdings Ltd were prepared in accordance with accounting principles generally accepted in the United Kingdom and consistently applied and give (in conjunction with the notes to them) a true and fair view of their financial condition as at that date and the results of their operations during the financial year then ended and, since the date to which those accounts were prepared, neither Gibb nor Gibb Holdings Ltd nor any of their Subsidiaries has incurred (save in the ordinary course of trading) any liability (actual or contingent) which is substantial in relation to Gibb or to Gibb and its Subsidiaries taken as a whole. (h) Governmental Approvals and Consents: No Governmental Approval or ----------------------------------- consent, permission, approval or authorisation of any non-governmental authority or Person is required to authorise, or is required in connection with the execution, delivery and performance of this Agreement, the Guarantee and Debentures, the Pledge Agreements, the Guarantees or any other Loan Documents. (i) Title to Properties: Each Group Company has good and marketable title ------------------- to its properties, including the properties and assets reflected in the financial statements referred to in paragraph (f) above. None of those properties is subject to any Encumbrance except as referred to in those financial statements, those permitted under subclause 20.6 and possible title defects and Encumbrances which do not materially interfere with the use or materially detract from the value of such properties or the operations of the Group Company and save as otherwise disclosed in the Disclosure Letter. (j) Taxes: Each Group Company has filed or caused to be filed all ----- declarations, reports and tax returns including, in the case of the Parent Company and each Subsidiary located in the United States, all federal and state income tax returns which it is required by law to file, and has paid all Taxes (save as disclosed in the Disclosure Letter) which are shown as being due and payable on such returns or on any assessments made against it or any of its properties. The accruals and reserves on the books of each Group Company in respect of Taxes are adequate for all periods. No Group Company has any knowledge of any unpaid adjustment, assessment or any penalties or interest of significance, or any basis for it, by any taxing authority for any period, except those being contested in good faith and by appropriate proceedings which effectively stay the enforcement of any Encumbrance and the attachment of a penalty. -29- (k) Solvency: The Parent Company acknowledges that there are reasonable -------- grounds for concluding that the arrangements contemplated in this Agreement will benefit each Chargor and Guarantor and each Chargor and Guarantor (other than IAM Environmental, Inc.) represents and warrants that, after giving effect to its obligations and taking into account its rights of contribution against co-guarantors, the present realisable value of the assets of each Chargor and Guarantor exceeds its liabilities and it retains sufficient capital reasonably to anticipate the needs and risks of its ongoing business, and no Chargor or Guarantor has incurred (actually or contingently) debts beyond its ability to pay such debts as they mature. (l) Subsidiaries: Schedule 5 correctly sets out the name of each ------------ Subsidiary and Associated Company of the Parent Company at the date of this Agreement, the Parent Company's direct or indirect interest in it and the jurisdiction of its incorporation. All the outstanding shares in each such Subsidiary and Associated Company have been validly issued and are fully paid and non-assessable and all such outstanding shares, except as noted in Schedule 5, are owned legally and beneficially by the Parent Company or a wholly-owned Subsidiary of the Parent Company free of any Encumbrance or claim save as disclosed in the Disclosure Letter. Both Law/Crandall, Inc. and Law Engineering, Inc. have merged with and into Law Environmental and Engineering Services Inc. Neither Law/Crandall Inc. nor Law Engineering, Inc now exist. (m) Outstanding Indebtedness: Except for Borrowings existing at the date ------------------------ of this Agreement and as disclosed in the Disclosure Letter and Borrowings arising thereafter permitted under subclause 20.5, no Group Company has any Borrowings. As at the date of this Agreement, there exists no default under the provisions of any instrument evidencing or securing any Borrowings of any Group Company or of any agreement otherwise relating to them. (n) Pollution and Other Regulations: Except as disclosed in the Disclosure ------------------------------- Letter (i) Each Group Company has duly and punctually performed and observed all material covenants, conditions, restrictions, agreements, statutory requirements, planning consents, bye- laws, orders and regulations affecting the Properties (or any other property which is or was at any time occupied by any Group Company or on which any Group Company has conducted any activity), including relating to the Environment, and no notice of any breach of any such matter has been received and as far as the Obligors are aware there are no grounds for any such notice being issued. (ii) No Group Company has any actual or potential liability relating to the Environment in relation to waste or other substances used, kept or disposed of at on or in the Properties and/or the surrounding Environment or in connection with the activities of any Group Company on the Properties (or any other property which is or was at any time occupied by any Group Company or on which any Group Company has conducted any activity) or in connection with the acts or omissions of any predecessor in title to any of the Properties or in connection with any such activities on freehold and leasehold properties formerly owned, used or occupied by any Group Company. (iii) Each Group Company is, and has at all times been, in compliance in all material respects with Environmental Laws and has not caused or permitted any liability to arise under them and no circumstances exist which are known or ought reasonably to be known which may be expected to prevent or interfere with any -30- Group Company being in compliance with any Environmental Laws or result in any material liability under them. (iv) Each Group Company has obtained and is, and has at all times been, in substantial compliance with Environmental Permits and no circumstances exist which may reasonably be expected to prevent or interfere with such compliance in the future. (v) The application of any Environmental Law to the Group or to any Group Company is not reasonably likely to have a Material Adverse Effect. (o) Possession of Franchises, Licenses, Etc.: Except as set out in the ---------------------------------------- Disclosure Letter, each Group Company possesses all franchises, certificates, licenses, permits and other authorisations from governmental political subdivisions or regulatory authorities, that are necessary in any material respect for the ownership, maintenance and operation of its properties and assets, and no Group Company is in violation of any of them in any material respect. (p) Patents, Etc.: Except as set out in the Disclosure Letter, each Group ------------- Company owns or has the right to use all patents, trademarks, service marks, trade names, copyrights, licenses and other rights, free from onerous restrictions, which are necessary for the operation of its business as presently conducted. Nothing has come to the attention of any Group Company, or any of their respective directors and officers to the effect that (i) any product, process, method, substance, part or other material presently contemplated to be sold by or employed by any Group Company in connection with its business may infringe any patent, trademark, service mark, trade name, copyright, license or other right owned by any other Person, (ii) there is pending or threatened any claim or litigation against or affecting any Group Company contesting its right to sell or use any such product, process, method, substance, part or other material or (iii) there is, or there is pending or proposed, any patent, invention, device, application or principle or any statute, law, rule, regulation, standard or code which would prevent, inhibit or render obsolete the production or sale of any products of, or substantially reduce the projected revenues of, or otherwise materially adversely affect the business, condition or operations of any Group Company. (q) Insurance Coverage: Each property of any International Group Company ------------------ is insured in terms acceptable to the Banks for the benefit of the respective International Group Company in amounts deemed adequate by Gibb's management and no less than those amounts customary in the industry in which the International Group Companies operate against risks usually insured against by Persons operating businesses similar to those of the International Group Companies in the localities where such properties are located, and the Agent has been named loss payee or additional insured, as its interest may appear, on all such policies. (r) Labour Matters: Except as set out in the Disclosure Letter, no Group -------------- Company has experienced strikes, labour disputes, slow downs or work stoppages due to labour disagreements which have had, or would reasonably be expected to have, a Material Adverse Effect, and, to the best knowledge of the Parent Company's executive officers, there are no such strikes, disputes, slow downs or work stoppages threatened against any Group Company. The hours worked and payment made to employees of each Group Company have not been in violation in any material respect of any applicable law dealing with such matters. All payments due from any Group Company, or for which any claim may be made against any Group Company, on account of wages and employee health and welfare insurance and other benefits have been paid or accrued as liabilities on the books of each Group Company where the failure to pay or accrue such liabilities would reasonably be expected to have a Material Adverse Effect. -31- (s) Intercompany Loans: All intercompany Indebtedness between any Group ------------------ Companies incorporated in the USA is evidenced by an Intercompany Note, which Intercompany Note has been duly authorised and approved by all necessary corporate and shareholder action on the part of the party to it, and constitutes the legal, valid and binding obligations of the party to it, enforceable against it in accordance with the terms of the Intercompany Note, except in so far as enforceability may be limited by insolvency or similar laws of general application affecting creditors' rights and by general principles of equity. There are no restrictions on the power of the Parent Company or any of its Subsidiaries to repay the Indebtedness evidenced by any Intercompany Note, except restrictions on the Parent Company contained in this Agreement and the US Credit Agreement. (t) Disclosure: Neither this Agreement, nor any Loan Document nor any ---------- other document, certificate or statement (including the Disclosure Letter) furnished to the Banks by or on behalf of any Obligor, Chargor or Guarantor in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact peculiar to any Group Company or any of its Subsidiaries which materially adversely affects or may (as far as the Parent Company can foresee) materially adversely affect the business, property or assets, or financial condition of any Group Company which has not been set out in this Agreement, the Loan Documents or in the other documents, certificates and statements furnished to the Bank by or on behalf of any Obligor, Chargor or Guarantor prior to the date of this Agreement in connection with the transactions contemplated by this Agreement. (u) ERISA: Except as disclosed in the Disclosure Letter: ----- (i) Identification of Plans: (i) Neither the Parent Company nor any ----------------------- ERISA Affiliate maintains or contributes to, or has maintained or contributed to, any Plan that is an ERISA Plan, and (ii) neither the Parent Company nor any of its Subsidiaries maintains or contributes to, or has maintained or contributed to, any Plan that is an Executive Arrangement; (ii) Compliance: Each Plan has at all times been maintained, by its ---------- terms and in operation, in accordance with all Applicable Laws, except such noncompliance (when taken as a whole) that will not have a Material Adverse Effect; (iii) Liabilities: Neither the Parent Company nor any of its ----------- Subsidiaries is currently nor will it become subject to any liability (including withdrawal liability), tax or penalty whatsoever to any Person whomsoever with respect to any Plan including, but not limited to, any tax, penalty or liability arising under Title I or Title IV or ERISA or Chapter 43 of the Code, except such liabilities (when taken as a whole) as will not have a Material Adverse Effect; and (iv) Funding: The Parent Company and each ERISA Affiliate has made ------- full and timely payment of all amounts (i) required to be contributed under the terms of each Plan and Applicable Law and (ii) required to be paid as expenses of each Plan. No Plan has an "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA). (v) Partially Owned Subsidiaries: The Parent Company and its Subsidiaries ---------------------------- own 50% of the issued and outstanding share capital of Law/Sundt, Inc. and Envirosource Incorporated. Law Engineering and Environmental Services, Inc owns 50% of the issued and outstanding membership interests of Law/Spear, LLC,a Georgia limited liability company. The -32- Parent Company and its Subsidiaries do not own or control sufficient outstanding share capital with the power to vote to elect a majority of the board of directors of Law/Sundt, Inc. and Envirosource Incorporated. The organisational documents of Law/Spear, LLC do not permit Law Engineering and Environmental Services, Inc without the consent of the other persons holding membership interests of Law/Spear LLC to cause Law/Spear LLC to guarantee the Obligations or to grant a lien in its assets in favour of the US Collateral Agent, nor do the organisational documents of Law/Spear LLC permit Law Engineering and Environmental Services, Inc without the consent of the other persons holding membership interests of Law/Spear LLC to amend the organisational documents to provide such a guarantee or provide a lien. The fair market value of all of the assets of Law/Sundt, Inc. is approximately $10,000, the fair market value of all of the assets of Envirosource Incorporated is less than $25,000 and the fair market value of all of the assets of Law/Spear, LLC is less than $550,000. (w) Burdensome Restrictions: Save as disclosed in the Disclosure Letter, ----------------------- there are no burdensome restrictions (such as collective bargaining agreements) under any material agreement to which any Group Company is a party. (x) Long Term Investments: Save as disclosed in the Disclosure Letter, no --------------------- Group Company holds any long term Investments in contravention of subclause 20.13 save for those Investments agreed by the Banks. (y) Regulations: Each Group Company is in compliance, where appropriate ----------- with Regulations G, T, U and X 18.2 Each Obligor shall be deemed to repeat the representations and warranties contained in the preceding subclause 18.1 on each occasion when an Advance is drawn down or rolled over and on each other occasion on which there is any utilisation of the Facilities by reference to the circumstances then existing. 19. POSITIVE COVENANTS Each Obligor undertakes that unless the Required Banks otherwise agree in writing: 19.1 Use of Proceeds: The proceeds of the Facilities will be used only for the --------------- purposes stated in this Agreement. 19.2 Financial Information for the Parent Company: The Parent Company will -------------------------------------------- deliver to each of the Banks: (a) as soon as available and in any event no later than 120 days after the end of each fiscal year of the Parent Company, an audited consolidated balance sheet of the Parent Company and its Subsidiaries at the end of such year, and audited statements of income and cash flow of the Parent Company and its Subsidiaries for such fiscal year, all in reasonable detail and with (i) the unqualified opinion of Ernst & Young (or other independent certified public accountants of recognised standing selected by the Parent Company and satisfactory to the Agent) and (ii) a certificate (with supporting details) from such accountants stating whether, to such accountant's knowledge, an Event of Default or Potential Event of Default has occurred and is continuing as a result of the violation of any financial covenant and as soon as available and in any event no later than 160 days after the end of each fiscal year of the Parent Company the management letter prepared in connection with such audited financial statements, provided that the Parent Company may make a change in its accounting principles in any year, so long as (i) the Required Banks consent to such -33- change (which consent shall not be unreasonably withheld), (ii) such change is clearly reflected in the annual audit report, (iii) any principle has been accepted by the Parent Company and the Parent Company's independent certified public accountants and is in accordance with generally accepted accounting principles, and (iv) this Agreement has been amended to the extent necessary to reflect such change in the financial covenants and other terms and conditions of this Agreement; (b) as soon as available and in any event within 30 days after the end of each fiscal month of each fiscal year of the Parent Company, a consolidated balance sheet, profit and loss account and cashflow statement of the Parent Company and its Subsidiaries as at the end of such month, consolidated statements of income for such month and the year to date, and accounts payable, accounts receivable and work in progress reports (together the "Reports"), together with a brief commentary summarising the statements and Reports and with comparisons to the forecasts and the actual performance by the Parent Company and its Subsidiaries for equivalent periods of the previous year, all in reasonable detail (subject to usual and customary year end audit and adjustments and footnote disclosures); (c) as soon as available and in any event within 30 days or, in the case of subclause 20.2(c)(i), 60 days after the end of each month: (i) a certificate in the agreed terms from the Chief Financial Officer of the Parent Company setting out for such month the sum of (aa) the outstanding principal amount of all Advances (as defined in the US Credit Agreement), plus (bb) the Letter of Credit Exposure on the date ---- of that certificate (where those terms in each case have the meanings given to them in and represent amounts outstanding under the US Credit Agreement, and so that the sum of (aa) and (bb) shall be referred to herein as "the US Outstandings") and the sum of the outstandings under the Facilities; (ii) a backlog report indicating as of the end of such month the amount of uncommenced work of Gibb; (iii) accounts payable, accounts receivable and work in process reports in a form reasonably acceptable to the Banks, with a brief summary explaining each such report; (iv) a report listing all employees of the Parent Company or its Subsidiaries that are shareholders of the Parent Company and that left (voluntarily or involuntarily) employment of the Parent Company or any of its Subsidiaries during such month, indicating the number of shares of the Parent Company held by each such shareholder and whether such shareholder executed a promissory note in favour of SunTrust in connection with the purchase of any shares in the Parent Company; (v) a certificate in the agreed terms from the Chief Financial Officer of the Parent Company setting out calculations required to establish whether the covenants set out in subclauses 20.1 to 20.10 (inclusive) have been complied with and giving details of Subordinated Indebtedness; and (vi) a certificate delivered each fiscal quarter from the Chief Financial Officer of the Parent Company stating that, to the best of his knowledge, all financial information provided was prepared in accordance with generally accepted accounting principles save that in the case of financial information delivered other than at the year end of the Parent Company, such financial information will not contain footnotes, nor will it be adjusted for non-material year end adjustments; (d) as soon as available and in any event within 45 days after the end of each quarter: (i) a certificate in the agreed terms from the Chief Financial Officer of the Parent Company accompanied by Form 10-Q (with quarterly financial statements) with respect to such quarter as filed with the Securities and Exchange Commission; and (ii) integrated financial forecasts for the immediately succeeding twelve-month period, which forecasts shall be updated to reflect actual historical performance data reported as at the most recently ended fiscal quarter and to reflect any changes in future expected performance (iii) a report setting out the intercompany balances of each Group Company with any other Group Company as at the end of such quarter; -34- (e) as soon as available and in any event within ten days after the end of each quarter a certificate from the Chief Financial Officer of the Parent Company setting out for the fiscal quarter just ended the ratio of Senior Funded Debt to EBITDA and setting out in reasonable detail how such calculation was made; (f) promptly upon the approval of its board of directors and in any event within 45 days after the end of each fiscal year of the Parent Company, a capital expenditure budget for the succeeding year, in reasonable detail; and (g) with reasonable promptness, such further information regarding the business affairs and financial condition of the Parent Company or any Subsidiary or Associated Company as the Agent acting on behalf of the Banks may reasonably request. 19.3 Maintenance of Books; Inspection of Property and Records: Each Obligor -------------------------------------------------------- shall and shall procure that each Group Company shall prepare or cause to be prepared (a) its annual statements and reports in accordance with generally accepted accounting principles and permit any person designated by the Agent on behalf of the Banks to visit and inspect any of its properties, corporate books and financial records, and to discuss its accounts, affairs and finance with the principal officers of the Parent Company and the relevant Group Company if different during reasonable business hours, all at such times as the Agent on behalf of the Banks may reasonably request, provided that at any time during the continuance of a Potential Event of Default or an Event of Default no prior notice to the Parent Company shall be required and (b) its quarterly interim statements and reports in accordance with generally accepted accounting principles used by such Group Company, subject to usual and customary year-end audit adjustments and footnote disclosures. 19.4 Maintenance of Properties: Each Obligor shall and shall procure that each ------------------------- Group Company shall maintain, preserve, protect and keep, or cause to be maintained, preserved, protected and kept, its properties and every part of them in good repair, working order and condition or in no worse state than currently, and from time to time will make or cause to be made all needful and proper repairs, renewals, replacements, extensions, additions, betterments, and improvements of them, so that the business carried on in connection therewith may be properly and advantageously conducted at all times, provided that no Group Company shall be obliged to repair or replace any such properties which have become obsolete or unsuitable or inadequate for the purpose for which they are used. 19.5 Insurance: Each Obligor shall and shall procure that each International --------- Group Company shall maintain in the joint names of itself and the Agent (or, if that is not possible, with the Banks' interest noted on each policy) such policies of insurance in relation to its business and assets as a prudent person carrying on a similar business to that Group Company might be expected to maintain over such assets and/or in respect of such liabilities (including policies to cover public, product, environmental, terrorism and third party liability) and from time to time upon request supply the Agent with copies for each of the Banks of all such insurance policies or certificates of insurance or such other evidence of the existence of such policies as may be acceptable to the Banks. 19.6 Taxes: Each Obligor shall and shall procure that each Group Company shall ----- pay and discharge (i) all Taxes prior to the date on which penalties attach to them and (ii) all claims (including, without limitation, claims for labour, materials, supplies or services (collectively "Other Claims")) and, ------------ will pay all Taxes which, if unpaid, might become an Encumbrance upon any of its property, provided that no Group Company shall be required to pay and discharge a particular Tax so long as the legality or amount of it shall be promptly contested in good faith and by appropriate proceedings which effectively stay the enforcement of any Encumbrance and the attachment of a -35- penalty and the Group Company, as the case may be, shall have set aside appropriate reserves for it in accordance with generally accepted accounting principles. 19.7 Existence and Status: Except as provided in Clause 20.4, each Obligor shall -------------------- and shall cause each Group Company which is a corporation to maintain its corporate existence, its material rights, franchises and licenses (for their scheduled duration), its trademarks, tradenames and service marks necessary or desirable in the normal conduct of its business, and (where relevant) good standing in its state of incorporation and its qualification and (where relevant) good standing as a foreign corporation in all jurisdictions where its ownership of property or its business activities cause such qualification to be required and the failure to do so could have a Material Adverse Effect. Each Obligor shall procure that each Group Company which is not a corporation shall maintain its present form of existence, its material rights, franchises and licenses (for their scheduled duration), its trademarks, tradenames and service marks necessary or desirable in the normal conduct of its business, and (where relevant) its good standing in the jurisdiction of its constitution and its qualification and (where relevant) good standing as a foreign entity in all jurisdictions where its ownership of property or its business activities cause such qualification to be required and the failure to do so could have a Material Adverse Effect. 19.8 ERISA: It shall and shall cause each US Group Company to deliver to the ----- Agent on behalf of the Banks (with sufficient copies for the Banks): (i) promptly after the discovery of the occurrence of such event with respect to any Plan or any trust established thereunder, notice of (aa) a "reportable event" described in Section 4043 of ERISA and the regulations issued from time to time thereunder (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under such regulations), or (bb) any other event which could subject the Parent Company or any ERISA Affiliate to any material tax, penalty or liability under Title I or Title IV of ERISA or Chapter 43 of the Code; (ii) at the same time and in the same manner as such notice must be provided to the PBGC, or to a Plan participant, beneficiary or alternative payee, any notice required under Section 101(d), 302(f)(4), 303(e), 307(e), 4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or Section 412(f) of the Code with respect to any Plan; and (iii) at the request of the Agent, (aa) true and complete copies of any and all documents, government reports and determination or opinion letters (if any) for any Plan, or (bb) a current statement of withdrawal liability for each Multiemployer Plan. 19.9 Litigation: The Obligors shall give prompt written notice to the Agent on ---------- behalf of the Banks of (a) any judgments entered by a court, tribunal, administrative agency or arbitration panel in which the amount of liability is $500,000 (or its equivalent in any other currency) or more in excess of insurance coverage or in which the aggregate amount of liability is $1,000,000 or more in excess of insurance coverage, and (b) any dispute between any Group Company and any governmental or regulatory body in which the amount in controversy is $500,000 or its equivalent in any other currency or more and (c) any dispute which may materially and adversely affect the normal business operations of any Group Company or any of their respective properties and assets. The Parent Company shall provide the Agent on behalf of the Banks (with sufficient copies for the Banks) on a quarterly basis, together with the information required under Clause 19.2(c), the Parent Company's internal litigation reports prepared in the course of its business, which shall set forth each action, proceeding or claim of which any Group Company has notice, which has been commenced or asserted against any Group Company, and in which the amount claimed or the potential liability is $500,000 (or its equivalent in any other currency) or more. -36- 19.10 Notice of Events of Default: The Parent Company shall deliver to the --------------------------- Agent on behalf of the Banks (with sufficient copies for the Banks) within five (5) days after any Executive Officer of any Group Company obtains any knowledge of any condition, event or act which constitutes a Potential Event of Default or an Event of Default, a certificate signed by an officer of such Group Company specifying its nature, the period of its existence and what action such Group Company proposes to take with respect to it. 19.11 Shareholder Reports, etc: Contemporaneously with the sending or filing of ------------------------ the relevant document, the Parent Company will provide to the Agent on behalf of the Banks (with sufficient copies for the Banks) a copy of all proxy statements, financial statements, and reports which the Parent Company sends to its shareholders, and copies of all regular, periodic, and special reports, and all statements which the Parent Company files with the Securities and Exchange Commission or any governmental authority which may be substituted for it, or with any national securities exchange. 19.12 Compliance Certificate: Within ninety (90) days after the end of each ---------------------- fiscal year of the Parent Company, the Parent Company shall provide to the Agent on behalf of the Banks (with sufficient copies for the Banks) a certificate of the Chief Financial Officer of the Parent Company in the agreed terms (a) certifying to the best of his knowledge that no Potential Event of Default or Event of Default has occurred and is continuing or, if any has occurred and is continuing, a statement as to its nature and the action which is proposed to be taken with respect to it, and (b) setting out all calculations required to establish whether or not the Parent Company and the Guarantors are in compliance with subclauses 20.1 to 20.8 inclusive. 19.13 Grant of security The Parent Company will advise the Agent promptly upon ----------------- its becoming aware of any request which it or any other Group Company or Associated Company receives to give any mortgage or charge or other security including guarantees and indemnities. 19.14 Ownership of Chargors, Pledgors or Guarantors: The Parent Company and --------------------------------------------- its Subsidiaries that own any Chargor, Pledgor or Guarantor shall maintain their percentage ownership of such Chargor, Pledgor or Guarantor existing as at the date of this Agreement and shall not decrease its ownership percentage in any future chargor, pledgor or guarantor pursuant to subclause 15.3 after such date, as such ownership exists at the time such chargor, pledgor or guarantor becomes such hereunder or under any other Credit Document or from time to time. 19.15 Compliance with Laws, Etc.: Each Obligor shall, and shall cause each of -------------------------- its Subsidiaries or any Associated Company, to the extent that in the case of any Associated Company it is within such Obligors' power or control in relation to such Associated Company or its exercise of voting rights to do so, to comply with all Applicable Law (including, without limitation, Environmental Laws) and other obligations applicable to or binding on any of them where the failure to comply with such Applicable Law or obligations would have or be expected to have a Material Adverse Effect. 19.16 401(k) Plan: to the extent that an employer share option is available ----------- under the 401(k) Plan, the Parent Company shall designate that all employer matching and profit-sharing contributions be made in the share capital of the Parent Company or in cash held temporarily in trust until converted into share capital of the Parent Company, which conversion shall occur at least quarterly. 19.17 Law International Sales Company: No later than 30 September of each year ------------------------------- the Obligors shall procure that Law International Sales Company, a US Virgin Islands company shall issue and pay a dividend to Law International, Inc in an amount equal to the intercompany indebtedness which has accrued with any other Group Company since 30 September of the prior year. -37- 19.18 Refinancing of FLECBOA. No later than April 15, 1997, the Parent Company ---------------------- shall (1) cause all agreements relating to FLECBOA to be terminated; (2) cause ownership of fee title to the property leased by the Parent Company or any of its Subsidiaries in connection with FLECBOA to be transferred to the Parent Company or such Subsidiary; (3) to have all Encumbrances on the collateral securing FLECBOA released, other than Encumbrances permitted under this Agreement; and (4) to execute and deliver, or cause such Subsidiary to execute and deliver, to the US Collateral Agent a Mortgage, in form and substance reasonably satisfactory to the Required Banks, pursuant to which such collateral shall be pledged to the U.S. Collateral Agent for the benefit of All Banks, together with (A) fixture filings recorded in such jurisdictions as the Required Banks reasonably deem necessary to perfect the security interest granted thereunder, (B) a title insurance policy with respect to such collateral showing that the U.S. Collateral Agent has a valid first priority lien with respect to the Mortgaged Property located in Escambia County, Florida subject to no encumbrances other than such Mortgage and Encumbrances permitted pursuant to this Agreement, (C) such environmental reports as the Required Banks shall reasonably require, (D) such legal opinions addressing such issues as the Required Banks may reasonably require addressed to the Agent and the Banks, and (E) all other documents, instruments, and certificates reasonably required by the Required Banks in connection therewith. 20. NEGATIVE COVENANTS Each Obligor undertakes that without the written consent of the Required Banks (unless otherwise provided to require the written consent of All Banks): 20.1 Senior Funded Debt to EBITDA: The ratio of Senior Funded Debt to EBITDA, ---------------------------- measured at the end of each fiscal quarter during the periods indicated below shall not be greater than the ratio set forth opposite the relevant period: PERIOD RATIO Closing Date through June 30 1997 2.00:1.00 1 July 1997 through 31 December 1997 1.75:1.00 20.2 Fixed Charge Coverage: The ratio of EBITDA less Capital Expenditures to --------------------- the sum of Fixed Charges as of the last day of any fiscal quarter of the Parent Company, commencing with the fiscal quarter ending 31 March 1997 shall not be less than 0.95:1.00. 20.3 Total Senior Funded Debt to Capital: The ratio of Total Senior Funded ----------------------------------- Debt to Capital as of the last day of any fiscal quarter of the Parent Company, commencing with the fiscal quarter ending 31 March 1997 shall not be greater than 70%. 20.4 Minimum Net Worth: The Parent Company shall not permit Consolidated Net ----------------- Worth as of the last day of any fiscal quarter, commencing with the fiscal quarter ending 31 March, 1997, to be less than the sum of (a) $16,500,000 plus (b) 75% of Consolidated Net Income (but not loss) for ---- the period beginning 1 January, 1997 and ending on the last day of such fiscal quarter, plus (c) the net proceeds of any equity offering made by ---- the Parent Company or its Subsidiaries, minus (d) the aggregate amount of ----- repurchases by the Company of its common stock in excess of $250,000 but only to the extent approved by All Banks. 20.5 Domestic Senior Debt Coverage Ratio: The Parent Company shall not permit ----------------------------------- the Domestic Senior Debt Coverage Ratio as of the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 1997, to be greater than 2.75 to 1.0. -38- 20.6 Domestic Interest Coverage Ratio: The Parent Company shall not permit -------------------------------- the Domestic Interest Coverage Ratio as of the last day of (1) the fiscal quarter ending March 31, 1997 to be less than 0.7 to 1.0, (2) the fiscal quarter ending 30 June 1997 to be less than 1.00 to 1.00, and (3) the fiscal quarters ending thereafter to be less than 1.15 to 1.0. 20.7 Minimum Domestic Cash Flow: The Parent Company shall not permit EBITDA -------------------------- of the US Subsidiaries for the rolling four-quarter period ending on the last day of each fiscal quarter of the Company to be less than $11,000,000. 20.8 Cashflow: For each rolling four quarter period, ending on the last day -------- of each fiscal quarter of the Parent Company, cashflow, measured as EBITDA generated by Gibb together with all other International Subsidiaries shall not be less than the Dollar Equivalent US$7,000,000. 20.9 Capital Expenditures: The Parent Company and the Guarantors shall not -------------------- make, or permit any of their respective Subsidiaries to make, any expenditures for capital assets in excess of $6,000,000 during any fiscal year of the Parent Company; provided, however, that this limitation shall ------------------ not apply to (1) the refinancing of FLECBOA and any purchases of assets made in connection therewith and (2) expenditure by Gibb on the acquisition, whether by way of finance lease or outright purchase of corporate automobiles to be used by any International Group Company in an amount not to exceed (Pounds)500,000. 20.10 Indebtedness and Rental Obligations: The Obligors shall not and shall ----------------------------------- procure that no Group Company shall, or permit to the extent that it is able to withhold its permission from any joint venture to which any Group Company is a party such joint venture to create, incur, assume or suffer to exist, any Borrowings or any operating lease or other rental obligations, not existing as at the date of this Agreement and disclosed in writing to the Banks prior to such date, except: (a) Borrowings owed to the Banks or any Bank Affiliate under or as contemplated by this Agreement; (b) rental obligations which involve either real or personal property, if the aggregate of all rental payments by the Parent Company and its Subsidiaries in any year do not exceed 8.0% of Net Fees Budgeted for such year; (c) Borrowings not evidenced by a promissory note or other instrument, incurred in the normal course of business and payable on customary terms, including, but not limited to, salaries and bonuses and general overhead expenses; (d) Indebtedness incurred after 24 May 1996 for the repurchase of share capital of the Parent Company, provided that (i) the principal amount of such Indebtedness shall not exceed the aggregate of (aa) $250,000, less (bb) the amount of any principal of the Shareholder ---- Notes paid in cash by the Parent Company on or after the Closing Date, plus (cc) an amount equal to the net proceeds of sales of ---- stock of the Parent Company at any one time outstanding, (ii) after giving effect to such incurrence of Indebtedness and corresponding share capital repurchase, the Parent Company shall be in compliance with Clause 20.1 above, (iii) such Indebtedness (including both principal and interest) shall be evidenced by a Shareholder Note and all principal and interest with respect to such Indebtedness shall be expressly subordinated to the prior payment of all Obligations, on terms satisfactory to the Required Banks in substantially the form of Schedule 6.01 of the US Credit Agreement, and (iv) no principal amount of such Indebtedness shall be due and payable until the Obligations have been repaid in full and the Facilities have been terminated; -39- (e) Indebtedness incurred under the US Credit Agreement provided that the principal amount outstanding thereunder shall not exceed $40,000,000 less any permanent reductions in accordance with the Intercreditor Agreement; (f) obligations of the Parent Company and the US Guarantors under and with respect to the SunTrust Interest Rate Contracts as set out in Exhibit A of the Intercreditor Agreement; provided, that the maximum secured exposure under the Interest Rate Contracts is $200,000; (g) endorsements of negotiable instruments for deposit or collection in the ordinary course of business; (h) guarantees and endorsements of employee share purchase loans and other loans to employees, financed by the Domestic Banks in aggregate principal amount not exceeding $1,250,000; (i) Borrowings of any US Guarantor owing to the Parent Company and Borrowings of the Parent Company owing to any US Guarantor, which Borrowings shall be evidenced by Intercompany Notes pledged to the US Collateral Agent pursuant to the Company Pledge Agreement or the Guarantor Pledge Agreement, as the case may be, (as defined in the US Credit Agreement) provided that:- (i) any Borrowings of the Parent Company now or hereafter owed to any US Guarantor is subordinated in right of payment to the payment by the Parent Company of the Obligations such that if a default in the payment of the Obligations shall have occurred and be continuing, any such Borrowings of the Parent Company owed to US Guarantor, if collected or received by such US Guarantor, shall be held in trust by such US Guarantor for the holders of the Obligations and be paid over to the Banks and the Agent for application against the Obligations; (ii) any Borrowings of any US Guarantor now or hereafter owed to the Parent Company is subordinated in right of payment to the payment by such US Guarantor of its Guaranty Obligations (as defined in the US Credit Agreement) such that if a default in the payment of the Obligations shall have occurred and be continuing, any such Borrowings of such US Guarantor owed to the Parent Company, if collected or received by the Parent Company, shall be held in trust by the Parent Company for the holders of the Obligations and be paid over to the Banks and the Agent for application against such US Guarantor's Guaranty Obligations; (j) any guarantee of Borrowings permitted under paragraph (a), (e), and (f) of this subclause 20.10; (k) Indebtedness existing on the Closing Date and evidenced by a Shareholder Note; provided, however, that (i) such Indebtedness may not be refinanced after the Closing Date except with the consent of and upon terms satisfactory to All Banks, (ii) such Shareholder Notes may not be amended or otherwise modified in any material respect other than modifications to extend the scheduled payment of any interest or principal or reduce the interest rate payable thereunder and (iii) save to the extent permitted in this Agreement, the Parent Company may not make any principal payments on any of such Shareholder Notes until the Obligations have been repaid in full and the Facilities have been terminated; -40- (l) Gibb will be entitled to acquire, whether by way of finance lease or outright purchase, cars having an aggregate purchase price not exceeding (Pounds)500,000; (m) the HKS Synthetic Stock up to $1,000,000 maximum; and (n) Indebtedness in the amount of $310,000 owed in respect of the previous purchase of 20% of the share capital of Prointec SA, a Spanish corporation, provided that such Indebtedness shall be repaid no faster than, or in greater amounts than, in 24 equal monthly instalments, commencing as of January 1996. 20.11 Negative Pledge: The Obligors shall not, and shall procure that none of --------------- the Group Companies shall create, incur, assume or suffer to exist any Encumbrance of any kind on any of its properties or assets, real or personal wherever located, including assets hereafter acquired, except: (a) Encumbrances existing at the date of this Agreement and disclosed in the Disclosure Letter where the amount secured by such security and outstanding at the date of this Agreement is not increased at any time during the term of this Agreement; (b) Encumbrances over assets of any Group Company for Taxes not yet payable or being contested in good faith and by appropriate proceedings; (c) deposits or pledges by any Group Company to secure payments of workmen's compensation, unemployment insurance, old age pension and other social security obligations; (d) mechanics', carriers', workmen's, repairmen's, landlord's, or other liens arising in the ordinary course of business securing obligations which are not overdue for a period longer than 60 days, or which are being contested in good faith by appropriate proceedings; (e) pledges of cash or deposits of cash by a Group Company to secure performance in connection with bids, tenders, contracts (other than contracts for the payment of money) or leases made in the ordinary course of the business of any Group Company provided that, (i) at any time, the aggregate of all such amounts so pledged and deposited made by International Group Companies is (aa) less than $50,000 (or its equivalent in other currencies) and, (bb) in aggregate with any other deposit, pledge or security made by International Group Companies and permitted under subclauses 20.11(f), (g) and (h), less than $100,000 (or its equivalent in other currencies); or (ii) such pledges and deposits have been agreed in writing by the Banks in their absolute discretion; (f) deposits of cash by a Group Company to secure, or in lieu of, surety and appeal bonds to which any Group Company is a party provided that, (i) at any time, the aggregate of all such amounts so deposited by International Group Companies is (aa) less than $50,000 (or its equivalent in other currencies) and, (bb) in aggregate with any other deposit, pledge or security made by International Group Companies and permitted under subclauses 20.11(e), (g) and (h), less than $100,000 (or its equivalent in other currencies); or (ii) such deposits have been agreed in writing by the Banks in their absolute discretion; (g) deposits of cash in connection with the prosecution or defence of any claim in any court or before any administrative commission or agency, provided that, (i) at any time, the aggregate of all such amounts so pledged and deposited by International Group Companies is (aa) less than $50,000 (or its equivalent in other currencies) and, (bb) in aggregate with any other deposit, pledge or security made by International Group Companies and permitted under subclauses 20.11(e), (f) and (h), less than $100,000 (or its equivalent in -41- other currencies); or (ii) such deposits have been agreed in writing by the Banks in their absolute discretion; (h) purchase money security interests (and leases in the nature thereof) for equipment or machinery or mortgages over real property, in each case where such equipment machinery or real property is purchased in the ordinary course of business and to be used in the conduct of its business, provided that any such Encumbrance secures only the repayment of the purchase price of such machinery, equipment or real property and any such lease obligations do not exceed the purchase price of such machinery or equipment; provided that, (i) at any time, the aggregate of all amounts secured by such security interests created by International Group Companies is (aa) less than $50,000 (or its equivalent in other currencies) and, (bb) in aggregate with any other deposit, pledge or security made by International Group Companies and permitted under subclauses 20.9 (e), (f) and (g), less than $100,000 (or its equivalent in other currencies); or (ii) the creation of such security interests has been agreed in writing by the Banks in their absolute discretion; (i) Encumbrances arising out of judgements or awards with respect to which any Group Company at the time shall in good faith be diligently prosecuting an appeal or proceedings for review and with respect to which it shall have secured a stay of execution pending such appeal or proceedings for review; provided that, such Encumbrance is notified in writing to the Banks forthwith if the Encumbrance secures more than $50,000 (or its equivalent in other currencies) and such Encumbrance is not disapproved in writing by the Banks; (j) Encumbrances in favour of the Intercreditor Agreement Agent or any of the Collateral Agents; (k) Liens granted in any Intercompany Note in the forms specified in the US Credit Agreement, provided that such Intercompany Notes are pledged to the US Collateral Agent and all related UCC-1 financing statements are assigned to the US Collateral Agent and such Lien is subordinated to the first priority Lien granted to the US Collateral Agent in the Security documents; and (l) Liens with respect to cash collateral securing the CEO Letter of Credit and, to the extent permitted under Section 6.5 of the Intercreditor Agreement, any Bank Guarantee and any other cash collateral securing any of the Letters of Credit and any Bank Guarantee obtained in accordance with the Intercreditor Agreement. 20.12 Dividends: Other Restricted Payments: ------------------------------------ (a) The Parent Company shall not pay or declare any dividends on any of its share capital other than dividends on Permitted Preferred Stock; (b) In any fiscal year of the Parent Company, the Parent Company shall not (i) redeem, repurchase, retire or make similar payments with respect to any of its shares in cash or cash equivalents, or (ii) pay any principal of, premium, if any, or interest on, or redeem, purchase, retire or make any similar payment with respect to, any Subordinated Indebtedness; provided that: (aa) the Parent Company may pay principal of the Shareholder Notes in an aggregate amount not to exceed (1) $250,000, less (2) the ---- stated principal amount of any Shareholder Notes issued by the Parent Company after the Closing Date in connection with a repurchase of its common stock; and -42- (bb) the Parent Company may pay interest on the Shareholder Notes; and (cc) the Parent Company may redeem outstanding Shareholder Notes from Persons holding such Shareholder Notes on the Closing Date to the extent it issues Permitted Preferred Stock in exchange therefor; and (dd) the Parent Company may repurchase shares of its common stock to the extent permitted by 20.10(d) and (5) HKS or HKS Trust may repurchase shares of HKS Synthetic Stock when required with proceeds of the HKS Synthetic Stock Facility; (c) Save where such amendment extends the maturity of such Shareholder Notes, no Shareholder Notes shall be amended, restated or otherwise modified without the prior written consent of All Banks. 20.12 Merger; Joint Ventures; Sale of Assets; Acquisitions: The Parent Company ---------------------------------------------------- shall not, and shall procure that no Group Company shall: (a) merge or consolidate with any other entity, except for (i) any merger or consolidation of an Obligor, Chargor, Pledgor or US Guarantor with another Group Company provided that such Obligor, Chargor, Pledgor or US Guarantor shall be the continuing entity, and (ii) any merger or consolidation of any Subsidiary (other than an Obligor, Chargor, Pledgor or Guarantor) with any other Subsidiary (other than an Obligor, Chargor, Pledgor or Guarantor) if, after giving effect to such merger or consolidation, the continuing entity is a wholly-owned Subsidiary of the Parent Company; (b) enter into a partnership or joint venture with any other entity; provided, however, that so long as no Event of Default or Potential ----------------- Event of Default has occurred, the Parent Company or any of its Subsidiaries may request that the Banks consent to its entering into a partnership or joint venture for the purposes of carrying on its business and the Banks agree to consider any such request in conjunction with the consideration of such request by the Domestic Banks under the US Credit Agreement; or (c) purchase, lease or otherwise acquire for cash, share capital or other consideration, the share capital of any Person or any substantial portion of the assets of any Person where such share capital, assets or other consideration have an aggregate fair market value of more than $1,000,000, except that this subclause 20.13(c) shall not apply to repurchases of share capital permitted pursuant to the proviso in subclause 20.12(b)(aa). 20.13 Sale and Leaseback: No Group Company shall enter into any transaction ------------------ with any other entity whereby such other entity leases assets sold or otherwise transferred to it by the Parent Company or such Group Company and all proceeds obtained from such transaction are immediately paid to the Intercreditor Agreement Agent to be applied in accordance with the Intercreditor Agreement, except: (i) Parent Company and its Subsidiaries may sell and lease back computer equipment to the extent that the aggregate value of such equipment sold and leased back does not exceed $500,000 in aggregate and the net proceeds of such sale are used to repay indebtedness outstanding under and to permanently reduce the First Tier Facilities in accordance with the provisions of the Intercreditor Agreement; and (ii) in respect of any cars Gibb is entitled to acquire, whether by way of lease finance or outright purchase, cars having an aggregate purchase price not exceeding (Pounds)500,000 pursuant to subclause 20.8(l) and notwithstanding such cars are subject to fixed charges under the Guarantee and Debenture, nevertheless Gibb will be -43- entitled to dispose of any such car at any time without obtaining the prior consent of the Agent or the Banks provided that (i) the proceeds from the disposal of such cars will not as a result of such disposal exceed (Pounds)500,000 in aggregate and (ii) any such proceeds received upon disposal of such cars will constitute Disposal Proceeds for the purposes of this Agreement and the Loan Documents. 20.15 Investments, Loans, Etc.: No Group Company shall, or shall be permitted ------------------------ to, make, permit or hold any Investments (whether by way of capital contribution, loan or other means) in any Person, or otherwise acquire or hold any Subsidiaries, except: (a) Investments in Subsidiaries or Associated Companies existing on the Closing Date; (b) direct obligations of the federal government of the United States of America or any agency of it, or obligations guaranteed by the federal government of the United States of America or any agency of it, in each case supported by the full faith and credit of the federal government of the United States of America and maturing within one year from the date of its creation; (c) commercial paper maturing within one year from the date of its creation rated in the highest grade by a nationally recognised credit rating agency; (d) time deposits maturing within one year from the date of their creation with, including certificates of deposit issued by, any Bank and any office located in the United States or England of any bank or trust company which is organised under the laws of the United States of America or England or any state thereof and has total assets aggregating at least $500,000,000, including without limitation, any such deposits in Eurodollars issued by a foreign branch of any such bank or trust company; (e) Investments made by Plans; and (f) Loans between Group Companies which are Chargors or US Group Companies (excluding HKS, Law/Sundt Inc. Envirosource Incorporated, Law International Sales Company or any of their respective Subsidiaries) to the extent that such loans are evidenced by Intercompany Notes, pledged to a Collateral Agent, subordinated to the extent required in subclause 20.10(i), and otherwise on terms and conditions acceptable to the Required Banks. (g) Employee share purchase loans, and other loans to employees, acquired by the Parent Company in connection with honouring its guarantee of such loans to the extent permitted under subclause 20.10(h). 20.16 Nature of Business: The Obligors shall not themselves, and shall procure ------------------ that no Group Company shall, engage in any type of business or businesses other than those engaged in by the Parent Company or such Group Company at the date of this Agreement, provided that nothing herein shall prevent any Group Company (i) with the consent of the Agent from expanding the location of its business or businesses in (aa) the United States of America or (bb) those foreign countries in which the Parent Company or such Group Company has engaged in business on or before the date of this Agreement or (cc) in any other foreign country if the Parent Company (1) gives the Agent prompt notice thereof and (2) if the aggregate amount of assets moved or to be moved to such new country equals or exceeds five percent (5%) of the Consolidated Net Worth of the Parent Company, executes such additional security documents and delivers such legal opinions as the Banks and Domestic Banks may require and (ii) from ceasing or omitting to exercise any rights, licences, permits or franchises which in good faith in the judgment of the Parent Company or such Group Company can no longer be profitably exercised. -44- 20.17 Sale of Subsidiaries: The Obligors shall not and shall procure that none -------------------- of their respective Subsidiaries shall sell or otherwise dispose of any share capital of or other ownership interest in any Subsidiary (except in connection with a merger or consolidation permitted by paragraphs (a)(i) and (ii) of subclause 20.11 or the dissolution of any Subsidiary or the sale of any US Subsidiaries for Sale prior to the date set forth in subclause 18.1(v)) or permit any Subsidiary to issue any additional share capital or other incidents of ownership, except on a pro rata basis to all its shareholders, partners or owners, as the case may be and provided that any such additional share capital or other incidents of ownership issued to the Parent Company, Pledgor or any US Guarantor are pledged to the US Collateral Agent; provided, however, that if the issuer is an International Group Company (other than those Subsidiaries noted on Schedule [ ] hereto), 100% of such additional non-voting share capital or other similar incidents of ownership and 65% of such additional voting share capital or other similar incidents of ownership shall be pledged to the US Collateral Agent and 35% of such additional voting share capital or other similar incidents of ownership shall be pledged to the International Collateral Agent. 20.18 Restriction on Negative Pledges: The Obligors shall not and shall procure ------------------------------- that no Group Company shall agree or covenant with any person to restrict in any way its ability to grant any Encumbrance on its assets, except for any such covenants or agreements: (i) contained in this Agreement or the US Credit Agreement; (ii) contained in the US Security Documents or Loan Documents; and (iii) made in connection with Encumbrances described in subclause 20.11(h) but only if such covenant or agreement applies solely to the specific machinery, equipment or real property to which such Encumbrance relates. 20.19 Transactions with Affiliates: The Obligors shall not themselves, and ---------------------------- shall not permit any Group Company to: (a) enter into any material transaction or series of related transactions which in the aggregate would be material, whether or not in the ordinary course of business, with any Affiliate or the Parent Company or any of its Subsidiaries (but excluding any Affiliate which is the Parent Company or any of its Subsidiaries), except on terms and conditions substantially as favourable to the Parent Company or such Subsidiary as would be obtained by the Parent Company or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate. (b) convey or transfer to any other Person (including the Parent Company or any of its Subsidiaries) any real property, buildings, or fixtures used in the manufacturing or production operations of the Parent Company or any of its Subsidiaries, or convey or transfer to the Parent Company or any of its Subsidiaries any other assets (excluding conveyances or transfers in the ordinary course of business) if at the time of such conveyance or transfer any Potential Event of Default or Event of Default exists or would exist as a result of such conveyance or transfer. 20.20 Limitations on Payment Restrictions: The Obligors shall not themselves, ----------------------------------- and shall not permit any of their respective Subsidiaries to, create or otherwise cause or suffer to exist or become effective, any consensual encumbrance or restriction on the ability of the Parent Company or any of its Subsidiaries to (i) pay dividends or make any other distributions on share capital of the Parent Company or any of its Subsidiaries, (ii) pay any Indebtedness owed to the Parent Company or any of its Subsidiaries, or (iii) transfer any of its property or assets to the Parent Company or any of -45- its Subsidiaries except any consensual encumbrance or restriction existing under any Credit Documents or any other Loan Document. 20.21 Actions Under Certain Documents: The Obligors shall not themselves, and ------------------------------- shall not permit any of their respective Subsidiaries to, modify, amend, cancel, refinance or rescind the US Credit Agreement, the Intercompany Notes, any Shareholder Note or any other agreements or documents evidencing or governing Subordinated Indebtedness without the prior written consent of All Banks. 20.22 Law Companies Group, Ltd: The Obligors shall not permit Law Companies ------------------------ Group, Ltd. to issue any additional shares subject to a call or put or honour any call on any shares except with the prior written consent of the Required Banks with respect to the $50,000 worth of share capital already issued by Law Companies Group, Ltd. 20.23 Lex: The Obligors shall procure that Lex International Insurance Co. --- Ltd a Bermudan corporation ("Lex Insurance"), issues dividends at least ------------- annually to the Parent Company in amounts (if any) such that Lex Insurance maintains only the minimum capital level required by law and regulation and by Lex Insurance's underwriters, and shall not permit Lex Insurance to create an Encumbrance or permit any Encumbrance to exist on the real property and other assets owned by Lex Insurance. 20.24 Ring-fence provisions: Save as permitted by this Agreement, the Obligors --------------------- shall not themselves, and shall not permit any of their Subsidiaries or any Associated Company, to the extent that in the case of any Associated Company it is within their power to do so, to: (a) enter into any arrangement whereby any Group Company or Associated Company (other than one of the Chargors) shall either (i) otherwise than in the ordinary course of business (and then only for market value or such other value as the Agent may agree) acquire or gain the right to acquire possession of any right, title or interest in any of the assets of any Group Company or Associated Company; or (ii) acquire and/or carry on the whole or any part of the trade or business presently being carried on by any Group Company or Associated Company and, for the avoidance of doubt, nothing in this Clause shall prevent arms' length trading between any Group Companies in the ordinary course of business on a commercial basis and on payment terms of no more than 60 days; (b) enter into any contract, transaction or arrangement, or modify or discharge any existing contract, transaction or arrangement, with any person, firm or company (including but not limited to the Parent Company or any Group Company), except on arms' length terms in the ordinary course of business for good reasons; (c) conduct any banking business otherwise than with the Banks, any Bank Affiliate or the Domestic Banks, except if and in so far as it is already conducting such business with a bank or financial institution with which it has an existing relationship at the date of this Agreement and has disclosed such relationship to All Banks in writing prior to the date of this Agreement; (d) use any of the First Tier Facilities to repay any principal indebtedness of any Group Company or any Associated Company to any third party save for the Domestic Banks, the Banks and any Bank Affiliate; (e) provide any new loans or financial accommodation (other than normal trade credit) to any Person which is not a Chargor; -46- (f) purchase or repay any amount of any outstanding loan stock issued by any Group Company or Associated Company or make any investment in shares, loan stock or other securities (whether secured or unsecured) of any company (other than a Chargor); (g) make any Investment in a business (other than that of a Chargor); (h) incorporate or acquire or permit any Group Company or Associated Company to acquire or incorporate or acquire any subsidiary or purchase, subscribe for or otherwise acquire any shares, debentures or other securities whatsoever of or in any person or acquire the business of any person or enter into any joint venture or partnership agreements with persons who are not Chargors; (i) make any payment of Indebtedness of any nature whatsoever to any Group Company or Associated Company save to a Chargor or the Parent Company; provided that Gibb Holdings Ltd may repay in accordance with subclause 20.8(n) the Indebtedness of $310,000 owed in respect of its previous purchase of share capital in Prointec SA, a Spanish corporation. 20.25 Financial Assistance: No Obligor shall use any part of the Facilities -------------------- for any purpose which would cause the execution of any of the Loan Documents by any Obligor or the performance by any Obligor of its obligations under any Loan Document or such utilisation to constitute, or would otherwise result in the provision of, unlawful financial assistance for the purposes of Part V, Chapter VI of the Companies Act 1985 or any other applicable legislation, or for any other unlawful purpose. 20.26 Compliance with ERISA: The Parent Company and the US Guarantors shall --------------------- not take or fail to take, or permit any of their Subsidiaries or ERISA Affiliates to take or fail to take, any action with respect to a Plan including, but not limited to, (i) establishing any Plan, (ii) amending any Plan, (iii) terminating or withdrawing from any Plan, or (iv) incurring an "amount of unfunded benefit liabilities", as defined in s 4001(a)(18) of ERISA, or any withdrawal liability under Title IV of ERISA, where such action or failure could have a Material Adverse Effect, result in an Encumbrance on the property of the Parent Company or any of its Subsidiaries or require the Parent Company or any of its Subsidiaries to provide any security except to the extent permitted under subclause 20.11. 20.27 Disposal of assets: The Parent Company shall not, and shall procure that ------------------ no US Group Company shall sell, lease, transfer or otherwise dispose of any assets, except for any disposition of (a) assets in the ordinary course of business, provided that on the date of a proposed asset sale the Asset Value of all asset sales after the date of this Agreement, taking into account the proposed asset sale would not exceed 5% of the Consolidated Net Worth of all Group Companies on the Closing Date (excluding the Asset Value of the property permitted to be sold in the proviso below), or (b) any obsolete or retired property not used or useful in its business. 20.28 Stock of Parent Company: The Parent Company shall not, and shall procure ----------------------- that no Subsidiary shall purchase or otherwise acquire further stock in the Parent Company save in accordance with the terms of this Agreement. 20.29 HKS. The Parent Company, the US Guarantors and all other Subsidiaries of --- the Company, including the International Subsidiaries, but excluding HKS, shall not make or permit to exist investments (whether by capital contribution, loan or otherwise) into HKS, HKS Trust or any of their respective Subsidiaries. -47- 20.30 Additional Classes of Shares. The Parent Company shall not issue any ---------------------------- new classes of capital stock (including any class of preferred stock) other than those classes outstanding on the Closing Date and Permitted Preferred Stock to the extent issued to Persons holding Shareholder Notes on the Closing Date in exchange for all or a portion of such Shareholder Notes. 21. INFORMATION ABOUT THE INTERNATIONAL GROUP 21.1 Gibb undertakes to provide to the Agent with sufficient copies for each of the Banks: (a) copies of the audited consolidated accounts (including profit and loss account and balance sheet) of each of Gibb and Gibb Holdings Ltd and the audited consolidated accounts of Law International, Inc. and its Subsidiaries (the "International Group") as soon as they are ------------------- available and not later than 160 days from the end of each accounting reference period, together with unaudited interim financial statements of each of Gibb, Gibb Holdings Ltd, Gibb International Holdings, Inc and Law International, Inc. and each of its Subsidiaries as soon as they are available after the end of each half-year; (b) copies of monthly management accounts for the International Group to include the consolidated profit and loss account and balance sheet and a cashflow statement as soon as they are available but not later than 21 days from the end of each month; (c) copies of any circular issued to shareholders or holders of loan capital; and (d) any other information which the Agent acting on behalf of the Banks may reasonably request from time to time. 21.2 If the basis on which the audited consolidated accounts of the International Group are prepared alters for any reason, then Gibb shall, if requested by the Agent promptly cause its auditors to provide such report and information as the Agent may require to enable the Agent to determine the financial position of the International Group as if the previous accounts had been prepared on the new basis. 21.3 Any Bank, Bank Affiliate, Agent or International Collateral Agent may disclose to any prospective assignee, transferee or sub-participant of all or any of its rights and benefits hereunder such information about the Obligors, the Guarantors and their respective Subsidiaries as shall have been made available to such Bank, Bank Affiliate or agent generally provided that the prospective party signs a confidentiality undertaking in an agreed form (such agreement not to be unreasonably withheld or delayed) in favour of the Banks and Gibb. 21.4 The Banks agree to use all reasonable efforts to maintain the confidentiality of any confidential information obtained by such Bank or Bank Affiliate or its agents hereunder except where such Bank or Bank Affiliate or any agent is required to disclose such information: (i) for regulatory purposes; (ii) pursuant to legal process; (iii) to its attorneys, solicitors, accountants or auditors; (iv) for the purpose of selling participations or interests in the Facilities (but subject as provided in subclause 21.3 above); (v) as necessary for the enforcement of its rights under this Agreement; or (vi) to the Domestic Banks. 22. PAYMENTS AND GROSS-UP 22.1 All payments by an Obligor, whether of principal, interest or otherwise, shall be made in Sterling to the Agent or International Collateral Agent for the account of the Banks not later than 12 noon (London time) on the due date in same day funds (or as otherwise expressly directed by the Agent), -48- without set-off or counterclaim and free of any deduction or withholding whatsoever, including without prejudice to the generality of the foregoing, for or on account of Taxes, unless that Obligor is required by law to make any such payments subject to deduction or withholding on account of Taxes, in which case the sum payable by that Obligor in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Agent or International Collateral Agent receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. 22.2 Without prejudice to the provisions of subclause 22.1, if the Agent, International Collateral Agent, any Bank or Bank Affiliate is required by law to make any payment on account of Taxes (other than Taxes on its overall net income) or otherwise on or in relation to any sum received or receivable by such agent, Bank or Bank Affiliate hereunder, or any liability in respect of any such payment is imposed, levied or assessed against such Bank or Bank Affiliate the relevant Obligor shall, on demand by such agent, Bank or Bank Affiliate, indemnify such agent, Bank or Bank Affiliate against such payment or liability together with any interest, penalties and expenses payable or incurred in connection therewith (except to the extent that such interest penalties and expenses results from the late settlement of such payment or liability by such agent, Bank or Bank Affiliate). 22.3 If the Agent, International Collateral Agent, any Bank or Bank Affiliate intends to make a claim pursuant to subclause 22.2, it shall notify the relevant Obligor of the event by reason of which it is entitled to do so and provide to that Obligor in reasonable detail a calculation of the amount claimed, provided that nothing herein shall require such agent, Bank or Bank Affiliate to disclose any information relating to the organisation of its affairs which such agent, Bank or Bank Affiliate shall, in its sole opinion, consider to be confidential. 22.4 The obligations of each Obligor under subclauses 22.1 and 22.2 to pay additional amounts to any Bank shall not arise where such Bank is not or ceases to be a Qualifying Bank. If such Bank ceases to be a Qualifying Bank as aforesaid, it shall give notice thereof to the Parent Company promptly upon becoming aware of the same. 23. EVENTS OF DEFAULT 23.1 Any one or more of the following shall constitute an Event of Default: (a) any Obligor fails to pay any principal amount owing pursuant to this Agreement (which shall include any amount payable to any Bank to collateralise any contingent obligations of such Bank incurred under the Guarantee Facility) on its due date; or (b) any Obligor fails to pay interest or any other sum owing pursuant to this Agreement five calendar days after notice by the Agent of the amount due; or (c) any representation or warranty made by or on behalf of any Group Company to the Banks, Agent or International Collateral Agent (whether made in this Agreement, any other Loan Documents or in any financial statement, report or certificate furnished pursuant to this Agreement, or for the purpose of obtaining any of the Facilities) shall be incorrect or misleading in any respect as at the time at which such representation or warranty was made or repeated; or (d) any Obligor fails to perform or observe any covenant or agreement contained in subclauses 19.2, 19.10, 19.12, clause 20 (excluding subclause 20.16) and subclause 21.1; or -49- (e) any Obligor fails to perform or observe any of its other covenants or agreements set out in this Agreement, other than those referred to in subclauses 23.1(a) to (d) and (f) and (to the extent such failure can be remedied) such failure shall not be remedied within ten calendar days after the earlier of the date on which: (i) any Executive Officer of a Group Company has actual knowledge of the facts creating or causing such failure to perform or observe such covenant or agreement or (ii) the Agent delivers notice of such failure to Gibb; or (f) any approval, authorisation, consent or clearance which is required either to ensure that this Agreement and the Security and the Loan Documents are valid, binding and enforceable or to enable the obligations thereby created to be duly performed, ceases to be in full force and effect or it becomes unlawful for each Obligor or any other person to perform all or any of its obligations hereunder or under any Security or Loan Document, or any such document is not or ceases to be legal, valid and binding on it; or (g) a petition is presented, an order is made or a meeting is convened or an effective resolution is passed, for winding up any Group Company (except for the purpose of a reconstruction or amalgamation while solvent on terms previously approved in writing by the Required Banks), or a petition is presented or an order is made for the administration of any Group Company; or (h) an encumbrancer takes possession or an administrator, liquidator, provisional liquidator, receiver, manager, trustee, sequestrator or similar officer is appointed over all or any of the assets of any Group Company; or (i) a distress, execution, attachment or other legal process is levied, enforced or sued out against any of the assets of any Group Company and is not discharged or paid in full within five Business Days; or (j) any Group Company suspends payment of its debts or is or becomes unable to pay its debts as they fall due, or is deemed, under Section 123 of the Insolvency Act 1986, to be unable to pay its debts; or (k) any Group Company proposes or enters into a voluntary arrangement (within the meaning of Section 1 of the Insolvency Act 1986) or takes or is subjected to any proceedings under any law, or commences negotiations with one or more of its creditors, for the readjustment, rescheduling or deferment of all or any of its debts, or proposes or enters into any general assignment or composition with or for the benefit of its creditors; or (l) save as otherwise expressly permitted in this Agreement, any Group Company ceases or threatens to cease to carry on its business or operations, or sells, transfers or otherwise disposes of the whole or a substantial part of its undertaking or assets, whether by a single transaction or a number of transactions, without the prior written consent of All Banks; or (m) any Indebtedness of any Group Company of more than $100,000 (or its equivalent in other currencies) becomes immediately due and payable, or capable of being declared so due and payable, prior to its stated maturity, by reason of default, or any Group Company fails to discharge any Indebtedness of more than $100,000 (or its equivalent in other currencies) on its due date or within any applicable original grace period (other than a liability which the relevant Group Company is then contesting in good faith on the basis of favourable legal advice); or -50- (n) there occurs an adverse change in the financial or trading position or prospects of Gibb Ltd, Gibb Holdings Ltd or the Parent Company which, in the Agent's opinion, is likely materially to affect the ability of any Person to perform or comply with its obligations hereunder or under any Loan Document; or (o) any consent, authorisation, licence and/or exemption which is required to enable any Group Company to carry on all or part of its business ceases for any reason, or any governmental, regulatory or other authority of any action is taken in relation to any Group Company (whether or not having the force of law) which could in the Agent's sole opinion, have a material adverse effect on all or part of such business; or (p) any Guarantor, Pledgor or Chargor gives or purports to give notice to determine its liability under any International Security Document or any event occurs in relation to any Guarantor Pledgor or Chargor in any applicable jurisdiction which has an effect substantially similar to any of the foregoing events specified in this Clause; or (q) the Parent Company ceases to be the legal owner (save where the US Collateral Agent or International Collateral Agent is the legal owner under the Security) and beneficial owner, directly or indirectly, of a minimum of 100% of the authorised and issued share capital of Gibb, any UK Qualifying Subsidiary or any Specified Subsidiary without the prior written consent of the Required Banks; or (r) any event occurs which, in the reasonable opinion of the Agent, under the Applicable Law of any relevant jurisdiction is analogous to or has an effect substantially similar to any of the events referred to in this Clause 23; or (s) control of any Obligors passes or has passed, whether by virtue of any agreement, offer, scheme or otherwise, to any person or persons (including institutions or companies), either acting individually or in concert, without the prior written consent of the Required Banks ("control" having the meaning ascribed to it in relation to a body ------- corporate by Section 840 of the Income and Corporation Taxes Act 1988); or (t) control of the Parent Company passes or has passed, whether by virtue of any agreement, offer, scheme or otherwise to any person or persons (including institutions or companies) either acting individually or in concert without the prior written consent of the Required Banks, the passing of such control occurring, for the purposes of this subclause, by any entity or related group of entities obtaining the beneficial ownership or power to vote securities of more than 25% of the outstanding securities of the Parent Company with the ability to vote for the election of the board of directors of the Parent Company; or (u) there occurs any change in the management of the Parent Company. For the purposes of this subclause, a change of management shall occur upon the departure for any reason of one of the officers forming the Executive Officers of the Parent Company (the "Departed Officer") where such Departed Officer is not replaced within 90 days of giving up such office by a person having equal or better qualifications, financial acumen, management skills and standing in the industry as the Departed Officer; or (v) the occurrence of any liability or potential liability under any Plan that would have a Material Adverse Effect on the Parent Company or its Subsidiaries; or (w) any event occurs which constitutes an "Event of Default" as defined ---------------- in any of the Loan Documents, the US Credit Agreement or the SunTrust Interest Rate Contracts; -51- (x) Law Companies Group Limited makes any call on Gibb or any of its Subsidiaries for the payment of all or any part of the money unpaid on any of their shares in Law Companies Group Limited in circumstances where the Required Banks have not given its prior written consent to the payment of any such call; or (y) any Obligor does not use all reasonable endeavours to satisfy, or procure the satisfaction or waiver of, the conditions precedent in subclause 28.1 by 7 February 1997 or such later date as the Banks may agree; then each Bank and Bank Affiliate's commitment to make available the Facilities (or any undrawn balance of the Facilities) shall cease and such Bank or Bank Affiliate may by notice to each relevant Obligor require that Obligor (i) to repay all sums then outstanding from that Obligor to such Bank or Bank Affiliate together with all accrued interest and other amounts of any Facility owing hereunder, and/or (ii) to pay full cash cover for the full amount of all Outstanding Amounts under Bank Guarantees and/or for all actual or contingent liabilities under the SFET, all of which shall become repayable forthwith on demand in writing made by such Bank or Bank Affiliate at any time. In addition, the Bank may close out all or any outstanding contracts effected pursuant to the SFET. In addition, the Bank may convert all or any part of the sums outstanding into any currency at the Bank's spot rate. 24. INTEREST ON AN OVERDUE AMOUNT 24.1 Any money payable under this Agreement or due and payable by any obligation under any judgement of any court in connection with this Agreement which is not paid when due by an Obligor shall bear interest on a daily basis from the due date or, as the case may be, date of such judgement to the date of actual payment. Such interest shall be calculated by reference to such successive default Interest Periods as the Bank may from time to time select. 24.2 Interest shall be charged pursuant to this Clause 24 at the rate per annum determined by the Banks to be equal to the aggregate of: (a) 2%; plus (b) the rate of interest payable on such sum in accordance with Clause 9. 24.3 Interest so accrued pursuant to this Clause 24 shall be due on demand or (in the absence of demand) on the last day of the default Interest Period in which it accrued and, if unpaid, shall be compounded on the last day of that and each successive Interest Period. Interest shall be charged and compounded on this basis both before and after any judgement obtained hereunder. 25. ASSIGNMENT AND TRANSFER 25.1 Any Bank may, at any time during the continuance of this Agreement and subject to the proposed assignee or Transferee paying (a) a fee of $3,000 to SunTrust, and (b) a fee of (Pounds)1,000 to the Agent, assign, transfer or novate all or any part of its rights, benefits and/or obligations under this Agreement and any of the other Loan Documents to a Qualifying Bank and acting through a lending office in the United Kingdom, provided that no such assignment, transfer or novation may be made without the prior written consent of the Parent Company (such consent not to be unreasonably withheld or delayed) and provided also that no such assignment, transfer or novation shall become effective unless and until the assignment and transfer provisions in the Loan Documents have been complied with in full. -52- 25.2 Each Obligor acknowledges that any person to which the rights, benefits and/or obligations of the Banks may be so assigned, transferred or novated, shall be entitled to share the benefit of this Agreement and such other Loan Documents to the same extent as if such person had constituted an original lender under this Agreement and such other Loan Documents had been entered into by the Banks as trustee for the bank(s) and financial institution(s) for the time being participating in the Facilities provided that before a party can benefit from the International Security such party must execute a Deed of Accession. 25.3 Each Obligor agrees at the expense of the assignee or transferee to execute and deliver such document(s) and/or to accept such amendments to this Agreement and the other Loan Documents as may be reasonably requested by the Banks to give effect to such assignment, transfer or novation. 25.4 Any bank or financial institution to which any Bank transfers or novates its obligations hereunder shall, prior to such transfer or novation taking effect, confirm to the relevant Obligor that it agrees to be bound in all respects by the terms of this Agreement in respect of such obligations. 25.5 No Obligor shall be entitled to assign or transfer any of its rights or obligations under this Agreement. 26. THE AGENT AND THE BANKS 26.1 Each Bank hereby appoints the Agent to act as its agent in connection with this Agreement and hereby acknowledges that the Intercreditor Agreement Agent, the International Collateral Agent and the US Collateral Agent will act as its trustee or, as the case may be, its agent in connection with the Security including pursuant to the Intercreditor Agreement, and authorises the Agent to exercise such rights, powers and discretions as are specifically delegated to it by the terms of this Agreement and the other Loan Documents together with all such rights, powers and discretions as are reasonably incidental thereto. Each Obligor shall be entitled to assume that the Agent and International Collateral Agent represent the Banks or the Majority Banks (as the case may be), and that all consents and notices given by such agent on their behalf are validly given. 26. Each of the Agent and International Collateral Agent may: (a) assume that: (i) any representation or warranty made by any Obligor or any other party to any of the Loan Documents in or in connection with this Agreement and/or the other Loan Documents is true; (ii) no Event of Default or Potential Event of Default has occurred; and (iii) neither any Obligor nor any other party to any of the Loan Documents is in breach of or default under its obligations under this Agreement and/or the other Loan Documents, unless it has in its capacity as agent for the Banks and/or Domestic Banks received actual notice to the contrary from any other party hereto; (b) assume that each Transferee's lending office is that identified in the Transfer Certificate pursuant to which it became a party hereto until it has received from such Transferee a notice designating some other office of such Transferee as its lending office and act upon any such notice until the same is superseded by a further such notice; -53- (c) engage and pay for the advice or services of any lawyers, accountants or other professional advisers whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (d) rely as to matters of fact which might reasonably be expected to be within the knowledge of any Obligor upon a certificate or statement signed by or on behalf of such Obligor; (e) rely upon any communication or document believed by it to be genuine and correct and to have been communicated or signed by the person by whom it purports to be communicated or signed; (f) refrain from exercising any right, power or discretion vested in it under this Agreement and/or the Loan Documents unless and until instructed by the Majority Banks whether or not such right, power or discretion is to be exercised and, if it is to be exercised, the manner in which it should be exercised and shall not be liable for acting or refraining from acting in accordance with or in the absence of instructions from the Majority Banks; (g) refrain from taking any step to protect or enforce the rights of any Bank under this Agreement and/or the other Loan Documents, or beginning any legal action or proceeding arising out of or in connection with this Agreement and/or the other Loan Documents, until it shall have been indemnified and/or secured as it may require (whether by way of payment in advance or otherwise) against all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instructions; (h) refrain from doing anything which would or might in its opinion be contrary to any applicable law or any requirements (whether or not having the force of law) of any governmental, judicial or regulatory body or otherwise render it liable to any person and may do anything which is in its opinion necessary to comply with any such applicable law or requirement; (i) do any act or thing in the exercise of any of its powers and duties hereunder which may lawfully be done and which in its absolute discretion it deems advisable for the protection and benefit of the Banks collectively; (j) perform any of its duties, obligations and responsibilities hereunder by or through its personnel or agents; (k) accept deposits from, lend money to and generally engage in any kind of banking or other business with any Obligor, or governmental authority, without any liability to account. 26.3 Each of the Agent and International Collateral Agent shall: (a) except as regards purely administrative acts, consult whenever reasonably practicable with the Banks or in the case of the International Collateral Agent, the Required Banks, before doing or refraining from doing any act or thing in the exercise of its powers as agent; (b) promptly upon receipt thereof, inform each Bank of the contents of any notice or document or other information received by it from any Obligor; (c) promptly notify each Bank of the occurrence of any Event of Default or any material breach by any Obligor in the due performance of its obligations under this Agreement or any of the other Loan Documents of which such agent has received notice from any other party hereto; -54- (d) subject to the foregoing provisions of this subclause 26.3, in the case of the Agent act in accordance with any instructions given to it by the Majority Banks or otherwise in accordance with the instructions of the Required Banks or All Banks as set out in the Intercreditor Agreement; and (e) in the case of the Agent if so instructed by the Majority Banks, refrain from exercising any right, power or discretion vested in it under this Agreement and in the case of the International Collateral Agent, if so instructed by the Required Banks or All Banks as set out in the Intercreditor Agreement, refrain from exercising any right, power or discretion vested in it under the relevant Loan Document. 26.4 Notwithstanding anything to the contrary expressed or implied herein, neither the Agent nor the International Collateral Agent shall: (a) be bound to enquire as to: (i) whether or not any representation or warranty made by any Obligor under or in connection with this Agreement or any of the other Loan Documents is true; (ii) the occurrence or otherwise of any Potential Event of Default or Event of Default; (iii) the performance by any Obligor or any other party to any of the Loan Documents of its obligations under this Agreement or any of the other Loan Documents; (iv) any breach of or default by any Obligor or any other party to any of the Loan Documents under this Agreement or any of the other Loan Documents; (b) be bound to account to any Bank for any fee or other sum or the profit element of any sum received by it for its own account; (c) be bound to disclose to any other person any information relating to any Obligor or governmental authority of any kind if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or (d) be under any fiduciary duty towards any Bank or under any obligations other than those expressly provided for in this Agreement; or (e) be liable (in the absence of its own gross negligence or wilful default): (i) for any failure, omission, or defect in the due execution, delivery, validity, legality, adequacy, performance, enforceability, or admissibility in evidence of this Agreement or any of the other Loan Documents or any communication, report or other document delivered hereunder or thereunder; or (ii) in respect of its exercise or failure to exercise any of its powers and duties hereunder or thereunder; or (f) be under any obligations other than those expressly provided for herein and shall have no liability or responsibility of whatever kind to: -55- (i) any Obligor arising out of or in relation to any failure or delay in the performance or breach by any Bank or Domestic Bank of any of its obligations under this Agreement or any of the other Loan Documents; or (ii) any Bank or Domestic Bank arising out of or in relation to any failure or delay in the performance or breach by any Obligor of any of its obligations under this Agreement or any of the other Loan Documents. 26.5 Each Bank shall, on demand by the Agent or International Collateral Agent indemnify such agent against any and all fees (to the extent properly chargeable by such agent hereunder but not promptly recovered from the Obligors) costs, claims and expenses and liabilities which such agent may pay or incur (otherwise than by reason of its own gross negligence or wilful misconduct) in acting in its capacity as agent for the Banks. The cost of indemnifying such agent shall be borne by the Banks in the proportion of their respective Relevant Percentage. If a Bank (a "defaulting Bank") fails to pay its due contribution under this --------------- indemnity, then such agent may (without prejudice to its other rights and remedies) deduct the amount due from the defaulting Bank from any sums then or thereafter in its possession which would otherwise be payable to the defaulting Bank. 26.6 Neither the Agent nor the International Collateral Agent accepts responsibility to any Bank for the accuracy and/or completeness of any information supplied in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of this Agreement or any of the other Loan Documents and such agent shall be under no liability to any Bank as a result of taking or omitting to take any action in relation to this Agreement or any of the other Loan Documents (save in the case of the gross negligence or wilful misconduct of such agent). 26.7 Each of the Banks agrees that it will not assert or seek to assert against any director, officer or employee of the Agent or International Collateral Agent any claim it may have against any of them in respect of the matters referred to in this Clause 26. 26.8 It is agreed by each Bank that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of each Obligor and the other parties to the Loan Documents and, accordingly, each Bank confirms to the Agent and International Collateral Agent that it has not relied and will not hereafter rely on such agent or any other Bank: (a) to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by or on behalf of any Obligor or any of the other parties to any of the Loan Documents in connection with this Agreement and/or the transactions contemplated herein (whether or not such information has been or is hereafter circulated to such Bank by such agent); or (b) to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of any Obligor or any of the other parties to any of the Loan Documents. 26.9 As between the Banks any question which would increase the Commitment or facility limit of any of the Banks under this Agreement, reduce the margin, extend the term of any Facility or defer any Repayment Date, reduce or defer the amount of any payment of principal, interest or other amounts payable to any Bank under this Agreement, or change the provisions of this subclause 26.9 shall be determined only with the agreement of all the Banks. 26.10 Subject to subclause 26.11, as between the Banks, any question which falls to be determined under this Agreement including, without limitation, the exercise by the Agent of any power or discretion -56- vested in it hereunder, including discretions to permit the drawing of the Advance and questions as to waiver of an Event of Default and which is not expressed by Clause 27.9 to be determinable only with the agreement of all the Banks or expressed elsewhere in this Agreement to be determinable solely by the Agent shall be resolved by the Majority Banks. No particular decision which has once been determined by the Majority Banks pursuant to this subclause 26.10 may subsequently be determined differently by the Majority Banks if such change would be effected only by reason of a change in the composition or calculation of the Majority Banks. Any action against any of the professional advisers whose advice has been made available to the Agent as agent for the Banks generally may be authorised and directed only by the Majority Banks and shall be pursued only by the Agent; no individual Bank shall be entitled to bring such an action in its own right whether before or after the Repayment Date. 26.11 The Agent and International Collateral Agent shall be entitled to determine purely administrative matters. 26.12 Where this Agreement provides for any matter to be determined by reference to the opinion of the Majority Banks or to be subject to the consent or request of the Majority Banks or for any action to be taken on the instructions of the Majority Banks, such opinion, consent, request or instructions shall only be regarded as having been validly given or issued by the Majority Banks if all the Banks shall have received prior notice of the matter on which such opinion, consent, request or instructions is sought but so that the Obligors shall be entitled (and bound) if so informed by the Agent to assume that such notice shall have been duly received by each Bank and that the relevant majority shall have been obtained to constitute Majority Banks whether or not this is the case. 26.13 The Agent shall be entitled to appoint any associate of its as a sub- agent in respect of any Local Facility. 26.14 It is understood and agreed by each Bank and Obligor that the US Collateral Agent, International Collateral Agent and Intercreditor Agreement Agent hold such security as may be granted by each Group Company pursuant to the Loan Documents as trustee upon and subject to the terms of the Intercreditor Agreement and each Bank and Obligor acknowledge and agree to be bound by those terms. 26.15 Each of the Banks hereby authorises the Agent or International Collateral Agent to execute any Deed of Accession entered into pursuant to subclause 25.2 on its behalf. 27. RETIREMENT OF AGENT 27.1 If the Agent wishes at any time to retire, it shall notify the Parent Company and the Banks of its intention to do so whereupon the Majority Banks after consultation with the Parent Company may in writing appoint a successor Agent which shall in any event be a Bank with an office in London. If such a successor has not been appointed and accepted office in writing within thirty days after the Agent's notice of proposed retirement, the Agent may within a further fourteen days give to the Parent Company and the Banks fourteen days' prior written notice nominating an alternative successor Agent which shall in any event be a Bank with an office in London. 27.2 Unless the Majority Banks shall have appointed a successor which has accepted office within such notice period of fourteen days, then, upon the expiry of such fourteen day period and upon the written acceptance in such form as the Banks may unanimously approve (such approval not to be unreasonably withheld or delayed) of its nomination by the Agent's nominee as successor Agent, such nominee shall be deemed to have been appointed to the office of Agent. -57- 27.3 With effect from the date that a successor is appointed and accepts the office of Agent and executes such necessary documentation in accordance with the foregoing provisions: (a) as regards the Banks, such successor shall become bound by all the obligations of the Agent and become entitled to all the rights, privileges, powers, authorities and discretions of the Agent under this Agreement; (b) the agency of the retiring Agent shall terminate and the retiring Agent shall be discharged from any further liability or obligation under this Agreement, but without prejudice to any liabilities which the retiring Agent may have incurred prior to the termination of its agency; (c) the costs, charges and expenses of the retiring Agent shall be discharged if recoverable under the provisions hereof; and (d) the provisions of this Agreement and the Loan Documents shall continue in effect for the benefit of any retiring Agent in respect of any actions taken or omitted to be taken by it or any event occurring before the termination of its agency. 28. CONDITIONS PRECEDENT 28.1 The Loan Facility will become available for drawing only upon receipt by the Agent not later than the close of business on 7 February 1997 (or such later date as the Required Banks may agree) of each of the following in form and substance satisfactory to the Agent or International Collateral Agent: (a) This Agreement -------------- This Agreement duly executed by all Obligors; (b) Constitutional Documents ------------------------ (i) a certificate of an Authorised Signatory of each of Gibb Ltd, the Parent Company, Gibb Africa International Limited and Gibb Holdings Ltd, certifying that there has been no change since a specified date to: (aa) the certificate of incorporation or other similar documents of incorporation of each such Group Company or such Associated Company; and (bb) the memorandum and articles of association, by-laws or other similar constituent documents of each such Group Company or such Associated Company; (ii) copies certified as true, complete and up to date by an Authorised Signatory of each Chargor, Pledgor and Guarantor (but excluding those companies detailed in (i) above) of; (aa) the certificate of incorporation or other similar documents of incorporation of each such Group Company or such Associated Company; and -58- (bb) the memorandum and articles of association, by-laws or other similar constituent documents of each such Group Company or such Associated Company; (c) Resolutions of Obligors and copy of minutes of board meetings ------------------------------------------------------------- (i) in relation to each Obligor, a certificate of an Authorised Signatory of such Obligor to the effect that the requisite resolutions have been duly and properly passed by way of written resolution signed by all the members of the board of directors authorising: (aa) the execution, delivery and performance of and, where relevant, the affixing of the common seal of such respective Obligor to this Agreement, the Indemnity and other Loan Documents to which it is a party; and (bb) a named Person or Persons specified therein to execute and deliver on behalf of such Obligor this Agreement, the Indemnity and other Loan Documents and whose instructions (jointly or alone) the Agent is authorised to accept in all matters concerning the Facilities and this Agreement and to give all other notices and communications required or permitted to be given by or on behalf of such Obligor under or for the purposes of this Agreement, the Indemnity and other Loan Documents and confirming that such resolutions are still in effect and have not been varied or rescinded; (ii) copies, certified by an Authorised Signatory of each Obligor referred to in paragraph 30.1(c)(i) above as being true, complete and up-to-date copies of the minutes of the meeting of the board of directors of such Obligor; (d) Letter of Confirmation ---------------------- A letter, signed by an Authorised Signatory, from each Pledgor, Chargor and Guarantor confirming that each such Group Company is aware of the terms of this Agreement and that the documents forming the Security to which it is a party remain in full force and effect and unaffected by the terms hereof; (e) Certificate of no Event of Default ---------------------------------- a certificate, signed by an Authorised Signatory of each Obligor, confirming that there is no Event of Default or Potential Event of Default in existence as at the date of the certificate; (f) Certificate as to borrowing limits ---------------------------------- a certificate, signed by an Authorised Signatory of each Obligor, confirming that the aggregate of the Facilities made available to such Obligor, does not or, as the case may be, would not, if fully drawn, exceed any borrowing limit contained in documents constituting the Obligor or in any trust deed or other agreement or instrument to which the Obligor is a party; (g) Certificate as to solvency -------------------------- -59- a certificate signed by the chief executive officer or the chief financial officer of each Obligor and each Guarantor, Chargor and Pledgor as to the solvency of such Group Company; (h) Documents to perfect security ----------------------------- certified copy of each such consent, licence, approval, registration or declaration as is, in the opinion of counsel to the International Collateral Agent, necessary to render the relevant guarantee and/or security documents legal, valid, binding and enforceable against each Pledgor, Guarantor or Chargor to make the relevant guarantee and/or security documents admissible in evidence in the jurisdiction of the incorporation of such Group Company and to enable it to perform its obligations thereunder; (i) Gibb as Process Agent --------------------- evidence in respect of each Obligor, Pledgor and Chargor that, unless it is incorporated in the UK, Gibb has irrevocably agreed to act as the agent of such person for service of process in England. (j) US Credit Agreement ------------------- a certified true copy of the US Credit Agreement as executed by all parties to it; (k) Intercreditor Agreement ----------------------- the Intercreditor Agreement duly executed by each of the parties to it; (l) Satisfaction or waiver of conditions precedent ---------------------------------------------- such evidence as the Banks may require that all conditions precedent to the effectiveness of the Intercreditor Agreement and the US Credit Agreement (other than any condition precedent equivalent to this one) have been satisfied or waived; and (m) Legal opinions -------------- formal legal opinions as required by the Required Banks and in a form approved by them rendered by legal counsel to each Pledgor, Guarantor or Chargor or such of them as required by the Required Banks that the obligations of such Group Company remain unaffected by the provisions of this Agreement and in full force and effect; (n) Certificate of dormancy ----------------------- a certificate of dormancy (or, if not dormant, as the Agent may require) in a form acceptable to the Banks signed by an Executive Officer or the auditors of such Group Company (as the Agent may require) in respect of each Group Company which is a Dormant Group Company; (o) Certificate of Insurance ------------------------ a certificate, signed by an Authorised Signatory of each Obligor, confirming that all Property has been insured in an amount deemed adequate by the Parent Company and the Agent against risks customarily insured against by similar businesses in similar localities -60- and that such insurance is either in the joint names of the Agent and the relevant Group Company, or the interest of the Agent is noted on the policy; (p) Indemnity --------- The Indemnity duly executed by Gibb. 28.2 Notwithstanding any other provision of this Agreement, no Bank or Bank Affiliate shall be obliged to make any Advance under the Loan Facility or issue a Bank Guarantee or permit any other utilisation of any of the Facilities if, as at the date of drawdown, issue or other utilisation, there would be a breach of any of the representations and warranties in Clause 18 or a breach of any of the Covenants in Clauses 19 to 23 inclusive and Clause 24 or there exists an Event of Default or a Potential Event of Default, or any Event of Default or Potential Event of Default will arise following such drawdown, issue or other utilisation, or if such drawdown, issue or other utilisation would violate any Applicable Law. 28.3 Each Obligor undertakes to, and to procure that its Subsidiaries shall, use all reasonable endeavours to satisfy the conditions precedent in subclause 29.1 to this Agreement as soon as possible on or after the Closing Date but in any event each Obligor undertakes that all such conditions precedent shall be satisfied in full no later than 7 February 1997 or such later date as the Required Banks shall agree. 28.4 It shall be a condition subsequent to the making by the Banks of any Advance under the Loan Facility, the issuing of a Bank Guarantee or the permitting of any other utilisation of any of the Facilities at any time thirty days after the Closing Date that (a) the Parent Company have repaid or caused to have been repaid all loans to shareholders or former shareholders of the Parent Company made by SunTrust for which any payment of principal or interest is past due by 60 days or more, which shall be in an amount of no more than $60,000; and (b) Law Engineering and Environmental Services, Inc. shall have delivered to the US Collateral Agent a certificate certifying that the pledge of all of all of its uncertified membership interests in Law/Spear, LLC has been registered to the US Collateral Agent, which certificate shall be acknowledged and agreed to by the Person in whose possession the books and records of Law/Spear are kept. 29. MISCELLANEOUS 29.1 All notifications or determinations given or made by the Banks, Agent or International Collateral Agent under this Agreement or any other Loan Document shall be conclusive and binding on each Obligor, except in any case of manifest error. 29.2 Any waiver of a breach of any of the terms of this Agreement or of any default hereunder shall not be deemed a waiver of any subsequent breach or default and shall in no way affect the other terms of this Agreement. 29.3 No failure to exercise and no delay on the part of any party in exercising any right, remedy, power or privilege of that party under this Agreement and no course of dealing between the parties shall be construed or operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights and remedies provided by this Agreement are cumulative and are not exclusive of any rights or remedies provided by law. 29.4 The Obligors shall jointly and severally indemnify the Agent, the International Collateral Agent and each Bank on demand (without prejudice to the Agent, the International Collateral Agent and the Bank's other rights) for any expense, loss or liability incurred by such Agent, Collateral Agent -61- or Bank in consequence of (a) any default or delay by an Obligor in the payment of any amount when due under this Agreement, or (b) the occurrence or continuance of any Potential Event of Default or Event of Default or (c) all or part of an Advance being prepaid or becoming repayable otherwise than on the maturity of the then current Interest Period applicable to such Advance, including, without limitation, any loss (including loss of margin), expense or liability sustained or incurred by the Agent, the International Collateral Agent or any Bank in any such event in liquidating or re-deploying funds acquired or committed to fund, make available or maintain that Advance (or any part of it). 29.5 Any sum of money at any time standing to the credit of an Obligor with the Agent, International Collateral Agent or any Bank in any currency upon any account or otherwise may be applied by the Agent, International Collateral Agent or any Bank at any time (without notice to that Obligor), in or towards the payment or discharge of any Indebtedness now or subsequently owing to the Agent, International Collateral Agent or any Bank by that Obligor and the Agent, International Collateral Agent or Bank may use any such money to purchase any currency or currencies required to effect such application. 29.6 If, for any reason, any amount payable under this Agreement is paid or is recovered in a currency (the "other currency") other than that in which -------------- it is required to be paid (the "contractual currency"), then, to the extent that the payment to the Agent, Collateral Agent or any Bank (when converted at the then applicable rate of exchange) falls short of the amount unpaid under this Agreement, the relevant Obligor shall, as a separate and independent obligation, fully indemnify the Agent, Collateral Agent or such Bank on demand against the amount of the shortfall. For the purposes of this Clause the expression "rate of exchange" means the rate at which the Agent, Collateral Agent or such Bank is able as soon as practicable after receipt to purchase the contractual currency in London with the other currency. 29.7 For the purpose of this Clause 30 the "Bank" shall be construed to mean ---- the Bank and/or any Bank Affiliate (as the case may require). 29.8 Nothing done by any Group Company in compliance with its obligations or the obligations of an Obligor under this Agreement or the Security shall be regarded as a breach of any existing agreement between the Banks and any of the Group Companies. 29.9 Each Obligor is a party to this Agreement, inter alia, for the purpose of giving the covenants, warranties and representations on the part of or relating to the Group Companies contained in this Agreement for the benefit of each Bank, the Agent and International Collateral Agent and to procure certain matters in relation to certain other Group Companies or companies in which any Obligor is a direct or indirect shareholder. 29.10 If any provision of this Agreement is held to be illegal, invalid or unenforceable in whole or in part in any jurisdiction this Agreement shall, as to such jurisdiction, continue to be valid as to its other provisions and the remainder of the affected provision; and the legality, validity and enforceability of such provision in any other jurisdiction shall be unaffected. 29.11 Each Obligor agrees at its own cost to execute and deliver all such instruments and other documents and to take all such actions as the Agent may from time to time request in order to give full effect to the purposes of this Agreement. 29.12 It is acknowledged that at the date of this Agreement the Facilities are being made available by Barclays Bank PLC and reference to the "Banks" or ----- "Majority Banks" shall, before the first Transfer Date, be construed as a -------------- reference solely to Barclays Bank PLC and all grammatical and other changes necessary to give effect to such construction for the time being shall be deemed to have been made and this Agreement shall be construed accordingly. -62- 30. CONSENTS 30.1 The Parent Company requests that the Banks consent to the creation by Gibb of a wholly owned Subsidiary organized in Portugal and the transfer of all assets of Gibb located in Portugal as of the Closing Date to such new Subsidiary, for the purpose of permitting the new Subsidiary to obtain national certificates of quality which are mandatory for carrying out certain projects in Portugal and thus enable such Subsidiary to increase the market share of the Parent Company and its Subsidiaries in Portugal and in other Portuguese-speaking countries such as Mozambique and Angola. Based upon the foregoing, the Banks hereby consent to Gibb creating a wholly owned Subsidiary incorporated in Portugal and transferring all of its assets located in Portugal as of the Closing Date into such Subsidiary, notwithstanding anything contained in this Agreement or the Intercreditor Agreement to the contrary; provided that -------- (1) promptly upon the formation of such Subsidiary, Gibb delivers to the U.S. Collateral Agent a share certificate evidencing sixty-five percent (65%) of the issued and outstanding shares of such Subsidiary, together with such share charge, pledge agreement or similar instrument as the Banks shall reasonably require pursuant to which Gibb shall pledge such share certificate to the U.S. Collateral Agent, (2) promptly upon the formation of such Subsidiary, Gibb delivers to the International Collateral Agent a share certificate evidencing thirty-five per cent (35%) of the issued and outstanding shares of such Subsidiary, together with such share charge, pledge agreement or similar instrument as the Banks shall reasonably require pursuant to which Gibb shall pledge such share certificate to the International Collateral Agent, (3) such Subsidiary gives the International Collateral Agent a written pledge not to grant or permit any Encumbrance to exist on its assets other than Encumbrances in favour of the International Collateral Agent, (4) such Subsidiary gives the International Collateral Agent a limited guarantee, such guarantee to be in a form as reasonably required by the International Collateral Agent, (5) the Parent Company delivers an opinion of Portuguese counsel to such Subsidiary and Gibb, addressed to the Banks, addressing such issues as the Banks shall reasonably require, in form and substance reasonably satisfactory to the Banks, together with such other certificates, documents, instruments, stock powers and corporate documents as the Banks shall reasonably require and (6) each other bank party to the Intercreditor Agreement also consents to the foregoing. 30.2 The Parent Company requests that the Banks consent to the transfer of 51% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd., a Kenyan corporation, now owned by Gibb Africa International Ltd., a Cypriot corporation, to PBM Nominees, Ltd., a wholly owned subsidiary of Ernst & Young, as the trustee for Mr. Paul Karekezi, a Kenyan national and employee of Gibb (Eastern Africa) Ltd., for the purpose of permitting Gibb (Eastern Africa) Ltd. to be eligible to register with the World Bank, the African Development Bank and other funding agencies in Africa and, therefore, to increase the likelihood that Gibb (Eastern Africa) Ltd. will be short-listed for donor-funded projects in Africa. Based upon the foregoing, the Banks consent to the transfer of fifty-one percent (51%) of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. by Gibb Africa International Ltd. to PBM Nominees Ltd., as trustee for Mr. Paul Karekezi, a Kenyan national and employee of Gibb (Eastern Africa) Ltd., and instruct the International Collateral Agent to release the share certificates of Gibb (Eastern Africa) Ltd. to a representative of Gibb, on behalf of Gibb Africa International Ltd. notwithstanding anything in this Agreement or the Intercreditor Agreement to the contrary; provided, however, that (1) no later than 15 days after such -------- ------- share certificates are released to a representative of Gibb, Gibb delivers, or causes its Subsidiary to deliver, to the U.S. Collateral Agent (A) a share certificate evidencing 65% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. still held by Gibb Africa International Ltd., (B) a share certificate evidencing 65% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. then held by PBM Nominees, as trustee for Mr. Paul Karekezi, and (C) share charges, pledge agreements or similar instruments in form and substance reasonably acceptable to the Banks, one executed by Gibb Africa International Ltd. and one executed by PBM -63- Nominees, Ltd. and Mr. Paul Karekezi, pursuant to which such share certificates shall be pledged to the U.S. Collateral Agent, (2) no later than 15 days after such share certificates are released to a representative of Gibb, Gibb delivers, or causes its Subsidiary to deliver, to the International Collateral Agent (A) a share certificate evidencing 35% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. still held by Gibb Africa International Ltd., (B) a share certificate evidencing 35% of the issued and outstanding shares of Gibb (Eastern Africa) Ltd. then held by PBM Nominees, as trustee for Mr. Paul Karekezi, and (C) share charges, pledge agreements or similar instruments in form and substance reasonably acceptable to the Banks, one executed by Gibb Africa International Ltd. and one executed by PBM Nominees, Ltd. and Mr. Paul Karekezi, pursuant to which such share certificates shall be pledged to the International Collateral Agent, (3) the Parent Company delivers an opinion of Kenyan counsel to such Subsidiary, Gibb Africa International Ltd, PBM Nominees, Ltd. and Mr. Paul Karekezi, addressed to the Banks, addressing such issues as the Banks shall reasonably require, in form and substance reasonably satisfactory to the Banks, together with such other certificates, documents, instruments, stock powers, corporate documents as the Banks shall reasonably require and (4) the other banks party to the Intercreditor Agreement also consent to the foregoing. 30.3 The Parent Company hereby represents and warrants to the Banks that the Petermuller Subsidiaries are inactive corporations with assets of not more than $10,000 in the aggregate. The Parent Company requests that the Banks consent to the dissolution of the Petermuller Subsidiaries and the transfer of all remaining assets of the Petermuller Subsidiaries to Gibb. Based upon the Parent Company's foregoing representation and warranty, the Banks hereby consent to the dissolution of the Petermuller Subsidiaries notwithstanding anything set forth in this Agreement or the Intercreditor Agreement to the contrary; provided, however, that the -------- ------- other banks party to the Intercreditor Agreement also consent to the foregoing. 31. AUTHORITY OF THE PARENT COMPANY Each Obligor hereby irrevocably authorises the Parent Company to agree, negotiate and sign on behalf of each of them any document varying, amending, extending or supplementing the terms and conditions contained in or replacing in whole or in part this Agreement or any documents ancillary thereto including the Security. 32. GOVERNING LAW AND JURISDICTION 32.1 This Agreement shall be governed by and construed in accordance with English law. 32.2 Each Obligor hereby irrevocably submits, for the exclusive benefit of each of the Banks, the Agent and the International Collateral Agent to the jurisdiction of the High Court of Justice in England (but without prejudice to the right of each of the Agent, International Collateral Agent and the Banks to commence proceedings against such Obligor in any other jurisdiction) and irrevocably waives any objections on the ground of venue or forum non conveniens or any similar grounds. 32.3 Each Obligor (including the Parent Company) hereby irrevocably appoints Gibb to act as its agent for the service of process in England and Gibb hereby accepts each such appointment. Notwithstanding Clause 33, any writ, judgment or other notice of legal process shall be sufficiently served on any Obligor if delivered to Gibb at its registered office for the time being. -64- 33. NOTICES Every notice, request or other communication shall: (a) be in writing delivered personally or by prepaid first class letter or facsimile/telex transmission; (b) be deemed to have been received, in the case of a letter when delivered personally or 48 hours after it has been sent by first class post or 5 business days after it has been sent by airmail (as the case may be) or, in the case of facsimile/telex transmission, at the time of transmission with the answerback of the addressee appearing at the beginning and end of the telex with a facsimile transmission report (or other appropriate evidence), provided that if the date of transmission is not a Business Day it shall be deemed to have been received at the opening of business on the next Business Day; and (c) be sent (i) to the Parent Company at 114 Town Park Drive, Kennesaw, Georgia 30144-5508 (telephone 001 404 590 4600 /facsimile no. 001 404 499 6713) (marked for the attention of the Chief Financial Officer and Treasurer) and to Gibb and each other Obligor at Gibb House, 427 London Road, Reading, RG6 1BL, England (telex no. /facsimile no. + 44 1734 491054) (marked for the attention of the finance director) and (ii) to the Banks, Agent and International Collateral Agent at the address or fax/telex number stated in Schedule 14 in respect of Barclays Bank PLC or in the schedule to the relevant Transfer Certificate, or to such other address or addresses in England as may be notified in writing by the relevant party to the other party. All notices of drawdown, rollover or prepayment given by an Obligor shall be effective only on actual receipt by the Agent. 34. PARTNERSHIP Nothing in this Agreement shall constitute a partnership between the Banks. 35. ENTIRE AGREEMENT 35.1 This Agreement and the other Loan Documents and the Security, together with any schedules or exhibits attached hereto and thereto, and the Disclosure Letter constitute the entire understanding of the parties with respect to the subject matter hereof, and any other prior or contemporaneous agreements, understandings or arrangements, whether written or oral, with respect thereto, including without limitation, the Original Facility Letter, the October Agreement and the Commitment Letter dated 24 December 1996, among the Parent Company, the Banks and the Domestic Banks (the "Commitment Letter"), are expressly superseded by ----------------- this Agreement; provided, however, that the indemnities of the Parent Company in favour of the Banks, Domestic Banks and SunTrust Securities, Inc. contained in the Commitment Letter shall survive the execution and delivery of this Agreement and provided, however, that the October Agreement shall survive the execution and delivery of this Agreement until but only until the Effective Date. 35.2 The execution of this Agreement and the other Loan Documents by the Parent Company and certain of its Subsidiaries was not based upon any facts or materials provided by the Agent, either Collateral Agent or any Bank, nor was the Parent Company and certain of its Subsidiaries induced to execute this Agreement or any other Loan Document by any representation, statement or analysis (whether innocent or negligent but not fraudulent) made by the Agent, either Collateral Agent or any Bank. -65- 36. COUNTERPARTS This Agreement may be executed and countersigned in any number of counterparts, all of which when taken together shall constitute a single instrument. AS WITNESS the hands of the authorised signatories of the parties to this Agreement the day and year first above written. -66- SCHEDULE 1 ---------- UK QUALIFYING SUBSIDIARIES NAME REGISTERED NUMBER REGISTERED OFFICE Gibb Holdings Ltd 2387714 Gibb House 427 London Road Reading Berkshire RG6 1BL -67- SCHEDULE 2 ---------- SPECIFIED SUBSIDIARIES NAME REGISTERED NUMBER COUNTRY OF INCORPORATION Gibb Africa International Limited 36926 Cyprus [Gibb (Botswana)]? -68- SCHEDULE 3 ---------- LIST OF CHARGORS NAME REGISTERED NUMBER REGISTERED OFFICE Gibb Africa Consulting Engineers Limited 41886 Cyprus Gibb Overseas Limited 2005717 England Gibb Holdings Ltd 2387714 England Gibb Ltd 2387707 England Gibb Africa International Limited 36926 Cyprus Gibb Eastern Africa Ltd C44849 Kenya Gibb (Mauritius) Ltd 9307 Mauritius Law Companies Group, Limited 56085 Jersey Gibb Overseas (Jersey) Limited 44811 Jersey -69- SCHEDULE 4 ---------- LIST OF PLEDGORS PART A - SECURITY TO INTERNATIONAL COLLATERAL AGENT PLEDGOR GROUP COMPANY OF WHICH 35% OF SHARES JURISDICTION PLEDGED OF GROUP COMPANY Gibb International Gibb Africa Consulting Engineers Ltd Cyprus Holdings, Inc Gibb International Gibb Overseas (Jersey) Ltd Jersey Holdings, Inc Gibb International Gibb Holdings Ltd England Holdings, Inc Gibb Africa Consulting Hill Kaplan Scott Law Gibb (Pty) Ltd S. Africa Engineers Ltd Gibb Africa International Gibb (Eastern Africa) Ltd Kenya Limited Gibb Africa International Gibb (Mauritius) Limited Mauritius Limited Gibb Africa International Gibb (Botswana) (Proprietary) Limited Botswana Limited Gibb Ltd Law Companies Group, Ltd Jersey PART B - SECURITY TO US COLLATERAL AGENT PLEDGOR GROUP COMPANY OF WHICH JURISDICTION 65% OF SHARES PLEDGED OF GROUP COMPANY Gibb International Gibb Africa Consulting Engineers Ltd Cyprus Holdings, Inc Gibb International Gibb Overseas (Jersey) Ltd Jersey Holdings, Inc Gibb International Gibb Holdings Ltd England Holdings, Inc Gibb Holdings Ltd Gibb Ltd England -70- PLEDGOR GROUP COMPANY OF WHICH JURISDICTION OF 65% OF SHARES PLEDGED GROUP COMPANY Gibb Holdings Ltd Westminster & Earley Services Ltd England Gibb Holdings Ltd Gibb Tanacsadasi Kft Hungary Gibb Holdings Ltd Prointec S.A. Spain Gibb Holdings Ltd Gibb Holdings Ltd England Gibb Holdings Ltd Nick Derbyshire Design England Associates Ltd Gibb Ltd Law Companies Group Ltd Jersey Gibb Africa Consulting Hill Kaplan Scott Law Gibb (Pty) Ltd S. African Engineers Ltd Gibb Africa Consulting Gibb Africa International Ltd South Africa Engineers Ltd Gibb Overseas (Jersey) Ltd Gibb Africa International Ltd South Africa Gibb Overseas (Jersey) Ltd Gibb Overseas Ltd England Gibb Overseas Ltd Gibb Gulf EC Bahrain Gibb Africa International Gibb (Namibia) Pty Ltd Namibia Ltd Gibb Africa International Gibb Swaziland (Pty) Ltd Swaziland Ltd Gibb Africa International Gibb (Lesotho) Pty Limited Lesotho Ltd Gibb Africa International Gibb (Botswana) (Pty) Ltd Botswana Ltd Gibb Africa International Gibb Eastern Africa Ltd Kenya Ltd Gibb Africa International Gibb (Malawi) Ltd Malawi Ltd Gibb Africa International Gibb (Mauritius) Ltd Mauritius Ltd Gibb Africa International Gibb Africa Services (Pty) Ltd South Africa Ltd Gibb Africa International Gibb (Zimbabwe) (Pty) Ltd Zimbabwe Ltd -71- SCHEDULE 5 ---------- LIST OF GROUP COMPANIES AND ASSOCIATED COMPANIES (see Clause 18.1(l)) Law Companies Group, Inc - ------------------------ - - 100% Law International, Inc - 100% Law International Sales Company (US Virgin Islands) - 100% Gibb USA, Inc - 100% Law International Thai Ltd - 100% held in trust for Gibb International Holdings, Inc - 100% Gibb Africa Consulting Engineers Ltd - 100% Gibb Africa International Ltd. - 100% Gibb (Namibia) (Pty) Ltd - 100% Gibb Swaziland (Pty) Ltd - 100% Gibb (Lesotho) Pty Ltd - 100% Gibb (Botswana) (Pty) Ltd - 100% Gibb Eastern Africa Ltd - 100% Gibb (Malawi) Ltd - 100% Gibb (Mauritius) Ltd - 100% Gibb Africa Services (Pty) Ltd - 100% Gibb & Partners (Zimbabwe) (Pvt) Ltd - 100% Hill Kaplan Scott Law Gibb (Pty) Ltd - 50% HKS-Law Gibb Share Trust (Pty) Ltd - 100% Geoscience Laboratories (Pty) Ltd - 100% Hill Kaplan Scott (Ciskei) Inc - 51% HKS Agriland (Pty) Ltd - 100% Hill Kaplan Scott (Transkei) Inc - 100% Hill Kaplan Scott (Venda) Inc - 100% Gibb Petermuller & Partners (Cyprus) Ltd - 100% Gibb Petermuller & Partners (Guernsey) Ltd - 50% Gibb Architects Ltd - 50% Giban Danismanlik ve Muhendislik Ltd Sirketi - 100% Gibb (Polska) Sp.z o.o. - 100% Gibb Petermuller & Partners (Europe) Ltd - 50% Gibb Petermuller & Partners, O.E. - 100% Gibb Petermuller & Partners (Middle East) Ltd - 50% Gibb Petermuller & Partners, O.E. - 24% Kattan-Gibb - 100% Gibb Holdings Ltd - 100% Gibb Ltd - 50% Law Companies Group, Ltd - 50% Gibb-Anglian Ltd - 100% Westminster and Earley Services Ltd - 25% WCML Development Company Ltd - 20% Prointec, S.A. - 100% Gibb GmbH - 39% IHT Rosser GmbH - 25% Kattan-Gibb - 100% Gibb Holdings Ltd - 100% Crispin Wade Architectural Design Studio Ltd -72- - 100% Nick Derbyshire Design Associates Ltd - 100% Gibb Overseas (Jersey) Ltd - 100% Gibb (Hong Kong) Ltd - 100% Gibb Overseas Ltd -100% Gibb Gulf E.C. - 47% Gibb Australia Pty. Ltd - - 100% LEX International Insurance Co. Ltd. (Bermuda) - - 100% Carriber Insurance Co., Ltd. (Bermuda) - - 100% Law Engineering and Environmental Services, Inc. (GA) - 90% Law Mexico, S.A. de C.V. (D.F.Mex) - 49% Drexxa Law, S.A. de C.V. (D.F.Mex) - - 10% Law Mexico S.A. de C.V. (D.F. Mex) - - 100% Law Associates, Inc. (GA)* * Renamed "Law Environmental - 100% Ensite, Inc. (KY) Consultants, Inc." on 5.1.95 - 100% On Site Technology, Inc. (GA) - 100% Law Environmental N.C., Inc. (NC) - 49% Envirosource Incorporated (GA) - [0%] Law Environmental - Cariba (PR General Partnership)** - [0%] Law Environmental (OH General Partnership)** - [0%] Law Environmental P.E.P.C. (NY)** ** Contract affiliates of Law - [0%] Law Engineering, P.C. (GA)** Engineering and - [0%] Law Engineering, Inc. (an Ohio P.C.)** Environmental Services, Inc - - 100% Law Engineering, Inc. (GA) but no Law ownership - - 100% LeRoy Crandall & Associates (CA) - 100% Law Crandall, Inc. (CA) - 50% Law/Sundt, Inc (CA) - - [79.5%] # IAM/Environmental, Inc (TEXAS) # Law Companies Group, Inc owns 47,667 shares of Class B Common Stock; Ensite, Inc, owns 23,833 shares of Class B Common Stock; total Class B Common Stock is 71,500 shares. The Class B Common Stock is entitled to 79.5 % of the voting rights of all capital stock. -73- SCHEDULE 6 ---------- MONEY MARKET LOAN The Sterling Money Market Loan may be drawn in one or more amounts, each drawing to be a minimum amount of (Pounds)500,000 and multiples of (Pounds)100,000 thereafter for periods up to a maximum of 6 months at the Borrower's option or other mutually agreed period but no drawing shall be made for an interest period with a maturity date of more than three months beyond the expiry date detailed in clause 2 of the letter. When wishing to draw under the Sterling Money Market Loan, the Borrower should telephone the Bank's dealers at the Global Treasury Services of the Bank in London ("GTS") on the following number - 0171 696 2496 on or shortly before the day on which funds are required, stating the amount of the drawing, the period required and giving instructions for payments of the funds. In the event these instructions do not stipulate that the funds must be credited to the Borrower's current account with the Branch, such instructions must be confirmed by letter to the Branch at the earliest opportunity. The rate of interest on each drawing will be subject to negotiation with GTS and such rate will include the Bank's Margin added to the cost of funds to the Bank (such cost of funds to be conclusively determined by the Bank and shall include any associated costs resulting from requirements of the Bank of England or other governmental authorities or agencies, whether having the force of law or otherwise, affecting the conduct of the Bank's business) for the period of the drawing. Interest will be payable without deduction at six monthly intervals, if appropriate and at the maturity of each drawing, and calculated on the basis of actual days elapsed over a 365 day year. Each drawing, together with interest thereon, will be repaid on its maturity on its maturity date by debit to the Borrower's current account at the Branch. -74- SCHEDULE 7 ---------- THE OVERDRAFT Subject to the terms and conditions on which the Loan Facility is made available the Overdraft will be available on Gibb's current account with Barclays Bank PLC at 54 Lombard Street, London EC3P 3AH or such other Bank, branch or account as the Agent may designate with interest charged at the rate equal to the Bank's Margin as set out in Clause 9 and the Bank's base rate current from time to time. Interest together with other charges as previously notified to Gibb will be debited to Gibb's current account at the Branch quarterly in arrear in March, June, September and December each year or at such other times as may be determined by the Bank, and such interest will be calculated on the basis of actual days elapsed over a 365 day year. Notwithstanding any provision of any Loan Document, the Overdraft is repayable on demand by the Bank and, if not demanded or otherwise prepaid earlier, shall be repayable on the Repayment Date. Interest will be charged on overdue amounts in accordance with Clause 25. The Overdraft may be prepaid at any time and shall have no minimum drawing or repayment requirement. -75- SCHEDULE 8 ---------- BMRF The BMRF will be available for drawing during the term of the Loan Facility and on its terms and conditions save that the BMRF will in addition be subject to the following terms and conditions: (a) Drawing ------- (i) When wishing to draw under the BMRF, Gibb should telephone Barclays Bank PLC at 54 Lombard Street, London EC3P 3AH or such other Bank or branch as the Agent may designate by no later than 11.30 am on the Business Day on which funds are required, stating the amount of the drawing (being a minimum amount of (Pounds)250,000 and a multiple of (Pounds)1,000). The amount of the drawing will be credited to the Gibb's current account at the relevant branch. (ii) A drawing may not be requested on a day upon which a repayment is to be made in accordance with paragraph (c) below. (b) Interest -------- Interest will be charged at the rate set out in Clause 9 assuming an Interest Period of one month and will be calculated on the basis of actual days elapsed over a 365 day year up to and including the 15th of each month, except that where the next following day is not a Business Day interest will be calculated up to and including the day falling immediately prior to the next following Business Day. Interest will be debited to Gibb's current account at the relevant branch on the Business Day falling immediately after the 15th of each month. (c) Repayment --------- (i) Each drawing under the BMRF must remain outstanding for a minimum period of three Business Days and may not be repaid until such period has expired. Thereafter drawings under the BMRF in respect of a particular Facility will be consolidated and may be repaid in whole or in part in minimum amounts of (Pounds)250,000. In the event that the BMRF is repaid only in part, the residual balance shall not be less than (Pounds)250,000. (ii) When wishing to make a repayment under the BMRF, Gibb should telephone the Branch no later than 11.30 am on the day of repayment stating the amount to be repaid. The amount to be repaid will be debited to Gibb's account at the Branch. (iii) A repayment may not be made on a day upon which a drawing is to be made in accordance with paragraph (a) above. (iv) If the BMRF is repaid only in part, the residual balance shall not be less than (Pounds)250,000. (v) The BMRF will be repayable in full on the Repayment Date in any event. (d) Confirmations ------------- All payment and delivery instructions must be confirmed in writing to the Branch at the earliest opportunity. -76- SCHEDULE 9 ---------- SFET The maximum aggregate gross risk under the SFET Facility shall be limited to and shall not at any time exceed (Pounds)1,000,000. The SFET Facility covers the maximum liability of Gibb to the Banks outstanding at any time under contracts of not more than 12 months duration for the forward purchase or sale of foreign currency for delivery at a future date and the spot purchase or sale of foreign currencies. The SFET Facility consists of one figure which represents the total aggregate value of all deals and/or contracts, whether spot or forward and whether sales or purchases which may be outstanding with the Banks at any one time. The Banks will never be required irrevocably to pay away funds prior to receiving firm confirmation of incoming cover acceptable to the Banks. The Banks' decision in such matters is final. When wishing to utilise the SFET Facility, Gibb should telephone the Branch on telephone number 0171-621 4104/5 (unless otherwise advised by the Agent). All payment and delivery instructions are to be advised to and processed by the Branch and confirmed by letter at the earliest opportunity. -77- SCHEDULE 10 ----------- HKS SYNTHETIC STOCK FACILITY To enable it to acquire HKS Synthetic Stock, Gibb may borrow up to the amount which is equivalent to (Pounds)596,658 less the aggregate of all amounts spent by Gibb or HKS Trust in purchasing HKS Synthetic Stock since 1 June 1995 provided that the aggregate of all such amounts so spent since 1 June 1995 does not exceed (Pounds)596,658. -78- SCHEDULE 11 ----------- ASSOCIATED COSTS FORMULA Associated Costs are the additional costs to the Banks (as determined by the Banks) of maintaining an Advance resulting from the imposition from time to time by the Bank of England (or other governmental authorities or agencies) of monetary control ratios, the payment of special deposits, liquidity costs and/or other similar requirements. Until further notice, the formula for arriving at such costs will be:- XL + B(L-C) + S(L-D) -------------------- 100 - (X+S) Where: "X" is the amount required to be maintained by the Banks as non-interest bearing balances with the Bank of England expressed as a percentage of eligible liabilities fixed by the Bank of England (or other governmental authorities or agencies). "L" is the offered quotation for sterling deposits for three months in the London Interbank Market on the day of quotation. "B" is the average level of secured deposits expressed as a percentage of eligible liabilities which the Bank is required by the Bank of England to maintain with members of the London Discount Market Association ("LDMA") and/or with money brokers and/or with gilt edged market makers. "C" is the rate at which members of the LDMA bid for sterling deposits from the Bank on the day of quotation. "S" is the amount of special deposits required to be maintained by the Banks expressed as a percentage of eligible liabilities fixed by the Bank of England (or other governmental authorities or agencies). "D" is the rate of interest paid by the Bank of England on special deposits. In the application of the above formula X, L, B, C, S and D will be included in the formula as figures and not as percentages. The Associated Costs shall be the percentage calculated by the Banks in accordance with the foregoing formula on the date of drawing or rollover and will be rounded up to the next 1/16th%. In the event of a change in circumstances which renders the above or any substitute formula inapplicable, the Banks shall notify the Parent Company of the manner in which the Associated Costs shall thereafter be determined and, if appropriate, substitute a new formula for that set out above. -79- SCHEDULE 12 ----------- LIST OF EXECUTIVE OFFICERS NAME TITLE James G S Dawson Chairman of Gibb Geoffrey J Brice Director of Europe of Gibb Peter D Brettell Managing Director of Gibb Director for Asia of Gibb Director for Middle East of Gibb Director for Africa of Gibb Christopher J Stancombe Finance Director of Gibb Sandra Ward Company secretary of Gibb Hemant Kavthankar Treasurer of Gibb Bruce Coles Chief Executive Officer of Parent Company W Allen Walker Assistant Treasurer of Parent Company Darryl Segraves Executive Vice President of Parent Company Secretary of Parent Company Robert Fooshee Treasurer of Parent Company Chief Financial Officer of Parent Company Kendall Sherrill Corporate Controller -80- SCHEDULE 13 ------------ LIST OF THIRD PARTY SECURITY Chargee Type of Security Date Registered Amount - ------- ---------------- --------------- ------ T C Ziraat Bankasi Cash deposit to secure 20 March 1995 $107,500 guarantee to KCIC -81- SCHEDULE 14 ----------- THE BANKS NAME REGISTERED OFFICE FACILITY LIMIT LOAN FACILITY - ------------- Barclays Bank PLC 54 Lombard Street (Pounds)4,474,940 London EC3A 2AH BGI FACILITY - ------------ Barclays Bank PLC 54 Lombard Street (Pounds)5,966,587 London EC3A 2AH SFET FACILITY - ------------- Barclays Bank PLC 54 Lombard Street (Pounds)1,000,000 (gross) London EC3A 2AH -82- SCHEDULE 15 ----------- FORM OF TRANSFER CERTIFICATE To: Barclays Bank PLC as Agent for and on behalf of itself and the Banks (as defined in the Facility Agreement referred to below) TRANSFER CERTIFICATE -------------------- relating to the agreement (as from time to time amended, varied, novated or supplemented, the "Facility Agreement") dated [ ] 1997 originally ------------------ made between Gibb Ltd (1), Gibb Holdings Ltd (2), Gibb Africa International Ltd and certain of its Subsidiaries (3) Law Companies Group, Inc. (4) Barclays Bank PLC as the Banks (5) Barclays Bank as Agent (6) Barclays Bank PLC as International Collateral Agent (7). 1. Terms defined in the Facility Agreement shall, subject to any contrary indication, have the same meanings herein. The terms Bank and Transferee are defined in the schedule hereto. 2. The Bank (i) confirms that the details in the schedule hereto under the heading "Commitment" and/or "Advance(s)" and/or "Guarantee(s)" accurately summarise its Commitment under the Loan Facility and New Money Facility and/or, as the case may be, its participation in, and the Interest Period of, one or more existing Advances and/or Guarantees under one or more Facilities and (ii) requests the Prospective Transferee to accept and procure the assignment and transfer to the Prospective Transferee of the portion specified in the schedule hereto of, as the case may be, such commitment and/or its participation in such Advance(s) and/or Guarantees under each such Facility by counter-signing and delivering this Transfer Certificate to the Agent at its address for the service of notices specified in the Facility Agreement. 3. The Prospective Transferee hereby requests the Agent to accept this Transfer Certificate as being delivered to the Agent pursuant to and for the purposes of Clause 26 of the Facility Agreement and hereby seeks to assign its rights under the Loan Documents and to transfer its obligations thereunder to the extent set out in the schedule hereto so as to take effect in accordance with the terms thereof on the Transfer Date or on such later date as may be determined in accordance with the terms thereof. 4. The Prospective Transferee warrants that it has received a copy of each of the Loan Documents together with such other information as it has required in connection with this transaction and that it has not relied and will not hereafter rely on the Bank to check or enquire on its behalf into the legality, validity, effectiveness, adequacy, accuracy or completeness of any such information and further agrees that it has not relied and will not rely on the Bank to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of any Obligor. 5. The Prospective Transferee hereby undertakes with the Bank and each of the other parties to the Loan Documents that it will perform in accordance with their terms all those obligations which by the terms of the Loan Documents will be assumed by it after delivery of this Transfer Certificate to the Agent and satisfaction of the condition (if any) subject to which this Transfer Certificate is expressed to take effect. 6. The Prospective Transferee hereby undertakes with the Bank that it shall pay an administrative fee of $3,000 to SunTrust, as directed by the Agent, upon the date hereof. 7. The Prospective Transferee hereby undertakes with the Bank that it shall pay an administrative fee of (Pounds)1,000 to the Agent for its own account, as directed by the Agent, upon the date hereof. -83- 8. The Bank makes no representation or warranty and assumes no responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any of the Loan Documents or any document relating thereto and assumes no responsibility for the financial condition of any of the Obligors or for the performance and observation by any of the Obligors of any of its obligations under any of the Loan Documents or any document relating thereto and any and all such conditions and warranties, whether express or implied by law or otherwise, are hereby excluded. 9. The Bank hereby gives notice that nothing herein or in the Loan Documents (or any document relating thereto) shall oblige the Bank to (i) accept a re-assignment or re-transfer from the Prospective Transferee of the whole or any part of its rights, benefits and/or obligations under the Loan Documents assigned and transferred pursuant hereto or (ii) support any losses directly or indirectly sustained or incurred by the Prospective Transferee for any reason whatsoever including, without limitation, the non-performance by any of the Obligors or any other party to any of the Loan Documents (or any document relating thereto) of its obligations under any such document. The Prospective Transferee hereby acknowledges the absence of any such obligation as is referred to in (i) and (ii) above. 10. This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with English law. THE SCHEDULE ------------ 1. Bank: 2. Prospective Transferee: 3. Transfer Date: 4. Commitment: 4.1 Commitment at the date hereof: (a) Bank's Loan Facility Commitment: (b) [Local Facility/ies] 4.2 Portion Transferred: (a) Loan Facility: (b) [Local Facility/ies] 5. Advance(s): (a) Loan Facility: Currency and Amount of Bank's Participation: Current Interest Period(s): Portion Transferred: -84- [ (b) [Local Facility/ies Currency and Amount of Bank's Participation: Current Interest Period: Portion Transferred:]] 6. Guarantee(s) Currency and Amount of Bank's Participation Current Guarantees Outstanding Tenors [Transferor Bank] [Transferee Bank] By: By: Date: Date: (Address, telex and facsimile numbers and main offices and each other Facility Office) [Agent] By: Date: -85- SCHEDULE 16 ----------- LIST OF DORMANT GROUP COMPANIES Dormant International Subsidiaries ---------------------------------- 1. Lex Insurance 2. Law Mexico, S.A. de C.V. (d.f. Mex) 3. Drexxa Law, S.A. de D.V. (d.f. Mex) 4. Law International Sales Company 5. Gibb Petermueller & Partners (Europe) Limited 6. Gibb Petermueller & Partners (Middle East) Limited 7. Gibb Petermueller & Partners, O.E. Limited 8. Gibb Petermueller & Partners (Cyprus) Limited 9. Gibb Petermueller & Partners (Guernsey) Limited 10. Kattan-Gibb 11. Gibb-Anglian Limited 12. WCML Development Company Limited 13. Amey-Gibb Building Management Limited 14. SIT.E.E. 15. Gibb Australia Pty. Ltd. 16. Subsidiaries of Hill Kaplan Scott Law Gib (Pty) Limited 17. Gibb (Hong Kong) Limited 18. Gibb (Polska) Sp z.oo 19. Giban Danismanlik ve Muhendislik Ltd Sirketi 20. Gibb Architects Ltd -86- SCHEDULE 17 ----------- PART A THE GUARANTEE AND DEBENTURES 1. Guarantee and Debenture dated 11 October 1995 between Gibb Ltd, Gibb Holdings Ltd and Gibb Overseas Limited and Barclays Bank PLC. 2. Assignment of debts dated 11 October 1995 between Gibb Ltd and Barclays Bank PLC. 3. Security agreement dated 9 February 1996 between Barclays Bank PLC and Gibb Ltd and Gibb International Holdings, Inc. 4. Security agreement dated 9 February 1996 between Suntrust Bank, Atlanta and Gibb International Holdings, Inc. 5. Guarantee and Debenture dated 1 November 1995 between Gibb Africa Consulting Engineers Limited and Barclays Bank PLC. 6. Guarantee and Debenture dated 26 October 1995 between Gibb Africa International Limited and Barclays Bank PLC (as Agent). 7. Guarantee and Debenture executed by Gibb Overseas (Jersey) Limited in favour of Barclays Bank PLC dated 9 February 1996. 8. Guarantee and debenture executed by Law Companies Group, Ltd in favour of Barclays Bank PLC dated 4 April 1996. 9. Guarantee and Debenture dated 16 February 1996 executed by Gibb Eastern Africa Limited in favour of Barclays Bank PLC. 10. Fixed charge dated 29 March 1996 executed by Gibb (Mauritius) Limited in favour of Barclays Bank PLC. 11. Floating charge dated 29 March 1996 executed by Gibb (Mauritius) Limited in favour of Barclays Bank PLC. -87- PART B THE PLEDGES 1. Charge over shares (re shares in Gibb Ltd and others) dated 11 October 1995 between Gibb Holdings and SunTrust Bank Atlanta. 2. Deed of Rectification and Supplemental Charge dated 3 November 1995 between Gibb Holdings and SunTrust Bank Atlanta. 3. Charge over shares (re: Gibb Gulf E.C. shares) dated 11 October 1995 and made between Gibb Overseas Limited and SunTrust Bank, Atlanta. 4. Charge over shares (re: shares in Gibb Holdings Ltd) dated 11 October 1995 between Gibb International Holdings Inc. and SunTrust Bank, Atlanta. 5. Charge over shares (re: shares in Gibb Holdings Ltd) dated 11 October 1995 between Gibb International Holdings Inc. and Barclays Bank PLC. 6. Security agreement dated 9 February 1996 between inter alia Barclays Bank PLC and Gibb International Holdings, Inc. 7. Security agreement dated 9 February 1996 between inter alia Suntrust Bank, Atlanta and Gibb International Holdings, Inc. 8. Charge over shares (re: shares in Gibb Africa International Limited) dated 1 November 1995 between Gibb Africa Consulting Engineers Limited and SunTrust Bank, Atlanta. 9. Pledge of shares dated 1 November 1995 between Gibb Africa Consulting Engineers Limited and Barclays Bank PLC. 10. Pledge of shares dated 1 November 1995 between Gibb Africa Consulting Engineers Limited and SunTrust Bank, Atlanta. 11. Charge over shares dated 26 October 1995 between Gibb Africa International Limited and Barclays Bank PLC. 12. Charge over shares (re: shares in Gibb Eastern Africa International Limited) dated 26 October 1995 between Gibb Africa International Limited and SunTrust Bank, Atlanta. 13. Charge over shares (re: Gibb (Lesotho) Limited and others) dated 26 October 1995 between Gibb Africa International Limited and SunTrust Bank, Atlanta. 14. Pledge of shares in Gibb (Botswana) (Pty) Limited dated 26 October 1995 between Gibb Africa International Limited and Barclays Bank PLC. 15. Pledge of shares in Gibb (Botswana) (Pty) Limited dated 26 October 1995 between Gibb Africa International Limited and SunTrust Bank, Atlanta. 16. Pledge agreement dated 9 April 1996 in respect of shares in Gibb (Mauritius) Limited between Gibb Africa International Limited, Barclays Bank PLC and others. -88- 17. Pledge agreement dated 9 April 1996 in respect of shares in Gibb (Mauritius) Limited between Gibb Africa International Limited, SunTrust Bank, Atlanta and others. 18. Charge over shares (re: shares in Gibb Africa International Ltd and Gibb Overseas Ltd) executed by Gibb Overseas (Jersey) Limited in favour of SunTrust Bank, Atlanta dated 9 February 1996. -89- For and on behalf of GIBB LTD by /s/ Peter D. Bretell ..................................... Date 2/7/97 ................................... For and on behalf of GIBB HOLDINGS LTD by /s/ Peter D. Bretell ..................................... Date 2/7/97 ................................... For and on behalf of GIBB AFRICA INTERNATIONAL LIMITED by /s/ Peter D. Bretell ..................................... Date 2/7/97 ................................... For and on behalf of LAW COMPANIES GROUP, INC. by /s/ Bruce C. Coles ..................................... Date 2/7/97 ................................... For and on behalf of BARCLAYS BANK PLC as the Bank by /s/ Allen Alderman ..................................... Date 2/7/97 ................................... -90- For and on behalf of BARCLAYS BANK PLC as Agent by /s/ Allen Alderman ..................................... Date 2/7/97 ................................... For and on behalf of BARCLAYS BANK PLC as International Collateral Agent by /s/ Allen Alderman ..................................... Date 2/7/97 ................................... -91- EXHIBIT ------- DISCLOSURE LETTER -92- EX-10.33 8 COMMITEMENT AND TERM SHEET EXHIBIT 10.33 SUNTRUST BANK, ATLANTA, AGENT 25 PARK PLACE 23RD FLOOR ATLANTA, GEORGIA 30303 December 24, 1996 Law Companies Group, Inc. 3 Ravinia Drive, Suite 1830 Atlanta, Georgia 30346 Attn: Mr. Bruce C. Coles Chairman and CEO Re: Credit Facilities described in attached Term Sheet (the "Facility") from SunTrust Bank, Atlanta as Agent and as a Bank ("SunTrust Bank, Atlanta"), and National Bank of Canada, and Barclays Bank PLC, in favor of Law Companies Group, Inc., its Subsidiaries and all partnerships in which the Company or its Subsidiaries have an interest (collectively, the "Company") Gentlemen: SunTrust Bank, Atlanta as Agent and the Banks are pleased to confirm to the Company their several commitments (the "Commitment") subject to and upon the terms and conditions described in this letter and in the Term Sheet (the "Term Sheet") attached hereto and by this reference made a part hereof to issue the Facility. SunTrust Bank, Atlanta will serve as the agent (in such capacity, the "Agent"), and the Banks will collectively issue several commitments to fund the Facility. Capitalized terms contained in either this letter or the Term Sheet, but not defined herein or therein, shall be defined in and have the meanings attributed thereto in the existing Amended and Restated Revolving Credit Agreement, the Amended and Restated Reimbursement and Guaranty Agreement and Facility Agreement (collectively the "Credit Agreement"). Without the prior written consent of the Banks, the contents or the existence of this letter and the Term Sheet may not be disclosed to any third party, either orally or in writing, by the Company, except (i) to the Company's and its Affiliates' directors, officers, employees, legal counsel, financial advisors and accountants on a confidential basis and (ii) as required by law (including filing with the SEC, appropriate notations in the financial statements of the Company and disclosure to Shareholders of the Company). The confidentiality agreement set forth in the preceding sentence shall be effective regardless of whether this letter is signed by the Company. a. Terms and Conditions of the Facility. ------------------------------------ The principal terms and conditions of the Facility Agreements will reflect the Term Sheet. The other terms and conditions of the Facility Agreements and the Collateral will be negotiated in good faith, but in the final event, must be in a form acceptable to each Bank and agreed in a timetable acceptable to each Bank. b. General. ------- i. Indemnity: Expenses. The Company agrees to indemnify ------------------- and hold harmless the Banks and their respective Affiliates and the officers, directors, employees, attorneys and agents of, and persons controlling any of them or any of their Affiliates within the meaning of the Securities Act of 1993 or the Securities Exchange Act of 1934 (all such persons being hereinafter referred to as "Indemnified Persons"), whether or not the Loan Documents are executed by the Banks and the Loans are actually made under the Facility by the Banks, from and against all losses, damages, liabilities or expenses of any kind or nature whatsoever, caused by any act or omission to act by the Company or any Affiliate or any of the Company's or Affiliate's agents, that may be incurred by or asserted against or involve any Indemnified Person in any and all actions, suits, proceedings (including any investigations or inquiries) or claims with respect to the transactions contemplated hereby (whether or not consummated) or the preparation, execution and delivery of this letter and the preparation, filing and dissemination of all documents in connection therewith; and, upon demand by any Bank, to pay or reimburse any such Indemnified Person for any reasonable legal or other expenses incurred in connection with investigating, defending or preparing to defend any such action, suit, proceeding (including any inquiry or investigation) or claim, it being understood that the Banks shall have the right to select their own counsel in connection with such matters; provided however, -------- ------- that the Company shall not be responsible to any such Indemnified Person for any losses, damages, liabilities or expenses which are finally judicially determined to have resulted from such Indemnified Person's gross negligence or willful misconduct. The indemnification provisions set forth herein shall apply whether or not the Banks are a party to any such action, suit, proceeding or claim and are expressly intended to cover, but not be limited to, reimbursement of legal and other expenses, including expenses incurred in depositions or other discovery proceedings. The indemnity obligations of the Company hereunder shall be in addition to, and not in limitation of, any other liability or obligation that the Company or any other Person may have. Each Bank will notify the Company promptly following its becoming aware of any claim for indemnification or reimbursement hereunder but -2- failure to give notice shall not, in any event, nullify or reduce any such claim hereunder. The Company shall pay the costs and expenses described in the attached Term Sheet. Without limiting the foregoing, the out-of-pocket costs and expenses of the Agent (including, without limitation, the reasonable fees and expenses of counsel to the Agent and the Banks) incurred in connection with the preparation, execution and delivery of this letter, the Term Sheet, the definitive Credit Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby shall be paid by the Company to the Agent and the Banks, regardless of whether the Loan Documents are executed or any funding of the Facility occurs. ii. CONSEQUENTIAL DAMAGES. THE BANKS SHALL NOT BE --------------------- RESPONSIBLE OR LIABLE TO THE COMPANY, ANY SUBSIDIARY OR AFFILIATE OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS LETTER OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. iii. Survival: Effectiveness. The confidentiality agreement ----------------------- contained on the first page hereof, together with the provisions of this Paragraph 3 and Paragraphs B.1 and B.2 hereof shall survive any termination or expiration of this letter. This letter shall immediately constitute a binding obligation of the Company and the Banks for all purposes upon the acceptance hereof by the Company in the manner provided herein, but subject to the terms hereof. iv. Acceptance: Termination. If you are in agreement with ----------------------- the foregoing, please sign and return this letter to SunTrust Bank, Atlanta, 25 Park Place, Atlanta, Georgia, 30303; Attention Mr. Christopher Deisley. Unless you have signed and SunTrust Bank, Atlanta shall have received this letter prior to 5:00 p.m., Atlanta, Georgia time, on December 27, 1996, the Banks' obligations hereunder shall terminate as of such time on such date. If this letter is accepted, the Banks shall not have any obligation to close or fund the Facility beyond January 15, 1997. In addition to the foregoing, this letter may be terminated at any time by mutual agreement or by the Banks if any condition precedent to the funding obligations contemplated by this letter, the Term Sheet, or the existing Credit Agreement cannot or will not be satisfied prior to the closing or the initial funding of the Facility. In addition to the foregoing, this letter may be terminated by the Company in the event the closing of the Facility has not occurred on or before January 15, 1997. -3- v. Conditions Precedent. The commitments and -------------------- undertakings of the Banks are subject to; (a) preparation, execution and delivery of mutually acceptable loan documentation, including credit and collateral agreements incorporating substantially the terms and conditions outlined in this Commitment Letter; (b) the absence of a material adverse change in the business, condition (financial or otherwise), operations, properties or prospects of the Company and its subsidiaries as reflected in its consolidated financial statements as of September 30, 1996, (c) the accuracy of all representations which you make to us and all information which you furnish us and your compliance with the terms of this Commitment Letter, and (d) the payment in full of all fees, expenses and other amounts payable hereunder and under other agreements. vi. Miscellaneous. This letter supersedes and replaces ------------- all previous offers related to this matter and may be executed in any number of counterparts which, taken together, shall constitute one original. This letter is solely for the benefit of the Company and the Banks and no provision hereof shall be deemed to confer rights on any other Person. This letter may not be assigned by the Company to any other person or entity, but all of the obligations of the Company hereunder shall be binding upon the successors of the Company. This letter will be governed by and construed in accordance with the laws of the State of Georgia without regard to principles of conflicts of law. No portion of this letter shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have drafted, structured, or dictated such provision. This letter and the Term Sheet embody the entire agreement and understanding between the parties hereto in respect of the transactions contemplated hereby and supersede all prior negotiations, understandings and agreements between such parties in respect of such transactions. vii. Syndication. SunTrust Capital Markets, Inc. has ----------- provided and will provide syndication services in connection with the Facility. To ensure an orderly and effective syndication of the Facility, the Company further agrees that until the earlier of the closing of the Facility or the termination of this Commitment Letter, the Company will not, and will not permit any of its subsidiaries and affiliates or agents to, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility or debt security (including any renewals thereof) except with the prior written consent of SunTrust Capital Markets other than (i) the issuance of commercial paper or other short term debt under programs currently in place and (ii) the issuance of any equity. -4- viii. Representations. The Company represents and warrants that --------------- all information made available to SunTrust Capital Markets by you or any of your representatives and agents in connection with the transactions contemplated hereby is complete and correct in all material respects and does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements were made. You agree to supplement the information provided to SunTrust Capital Markets from time to time so that the representation and warranty contained in this paragraph remains correct. In issuing the commitments and undertakings hereunder and in arranging and syndicating the Facility, SunTrust Capital Markets is relying on the accuracy of such information furnished to them by you without independent verification thereof. ix. Special Disclosure. SunTrust Capital Markets, Inc. is a ------------------ wholly owned subsidiary of SunTrust Banks, Inc. and an affiliate of SunTrust Bank, Atlanta. SunTrust Capital Markets is a broker/dealer registered with the Securities and Exchange Commission (SEC) and a member of the National Association of Securities Dealers, Inc. (NASD) and the Securities Investor Protection Corporation (SIPC). Although it is a subsidiary of SunTrust Banks, Inc., SunTrust Capital Markets is not a bank and is separate from any affiliated SunTrust Bank. SunTrust Capital Markets is solely responsible for its contractual obligations and commitments. Securities and financial instruments sold, offered, or recommended by SunTrust Capital Markets are not bank deposits, are not insured by the Federal Deposit Insurance Corporation (FDIC), or the SIPC, or any governmental agency and are not obligations of or endorsed or guaranteed in any way by any bank affiliated with SunTrust Capital Markets or any other bank unless otherwise stated. You authorize SunTrust Capital Markets and its affiliates, including SunTrust Bank, Atlanta and any other SunTrust affiliated bank, to share with each other credit and other confidential or non-public information regarding you and your accounts. It is the policy of SunTrust Bank, Atlanta, SunTrust Capital Markets, and all other SunTrust affiliates to strictly protect confidential client information. Therefore, any information shared by us will be on a limited basis and only to people within our organization who are part of our relationship team, except as otherwise provided in this letter. -5- Very truly yours, SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as Agent and as a Bank By: /s/ J. Christopher Deisley --------------------------- Its: First Vice President ------------------------- By: /s/ Dennis H. James Jr --------------------------- Its: A V P ------------------------- NATIONAL BANK OF CANADA, a Federal Bank chartered under the laws of Canada By: ____________________________ Its: __________________________ BARCLAYS BANK PLC, an English banking corporation By: ___________________________ Its: __________________________ -6- Very truly yours, SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as Agent and as a Bank By: __________________________ Its: ________________________ By: __________________________ Its: ________________________ NATIONAL BANK OF CANADA, a Federal Bank chartered under the laws of Canada By: /s/ William L. Benning ------------------------- Its: V.P. ----------------------- BARCLAYS BANK PLC, an English banking corporation By: __________________________ Its:_________________________ -6- Very truly yours, SUNTRUST BANK, ATLANTA, a Georgia banking corporation, as Agent and as a Bank By:_______________________ Its:_____________________ By:_______________________ Its:_____________________ NATIONAL BANK OF CANADA, a Federal Bank chartered under the laws of Canada By:_______________________ Its:_____________________ BARCLAYS BANK PLC, an England banking corporation By: /s/ Terry Bond _______________________ Its: Lending Services Director --------------------- -6- Accepted and Agreed to as of this 24th day of December, 1996. BORROWERS: - --------- LAW COMPANIES GROUP, INC., a Georgia corporation By: /s/ Bruce C. Coles ---------------------- Its: Chairman CEO -------------------- Sworn to and subscribed before me this 23rd day of [CORPORATE SEAL] December, 1996 /s/ Deans T. Rollins - ------------------------- Notary Public Notary Public Dekota County, Georgio My Corporation Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ------------------------- Unofficial Witness -7- SIGNED AND SEALED BY GIBB HOLDINGS LIMITED (duly authorized Attorney) AND DELIVERED BY [ Bruce C. Coles ] Sworn to and subscribed before me this [DATE UNREADABLE] day of /s/ Donna T. Rollins - ---------------------------------- Notary Public Notary Public, Dekato County, Georgia My Commission Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ---------------------------------- Unofficial Witness SIGNED AND SEALED BY GIBB LIMITID (duly authorized Attorney) AND DELIVERED BY [ Bruce C. Coles ] Sworn to and subscribed before me this [DATE UNREADABLE] day of /s/ Donna T. Rollins - ---------------------------------- Notary Public Notary Public, Dekato County, Georgia My Commission Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ---------------------- Unofficial Witness -5- GUARANTORS: - ---------- LAW ENGINEERING AND ENVIRONMENTAL SERVICES, INC., formerly LAW ENVIRONMENTAL, INC. By: /s/ Bruce C. Coles ------------------------------- Its: President ----------------------------- Sworn to and subscribed before me this 23rd day of [CORPORATE SEAL] December, 1996. /s/ Donna T. Rollins - ---------------------------------- Notary Public Notary Public, Dekato County, Georgia My Commission Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ---------------------------------- Unofficial Witness LEROY CRANDALL & ASSOCIATES, a California corporation By: /s/ Bruce C. Coles ------------------------------- Its: Authorized Agent ----------------------------- Sworn to and subscribed before me this 23rd day of [CORPORATE SEAL] December, 1996. /s/ Donna T. Rollins - ---------------------------------- Notary Public Notary Public, Dekato County, Georgia My Commission Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ---------------------------------- Unofficial Witness LAW/CRANDALL, INC., a California corporation -9- By: /s/ Bruce C. Coles ------------------------------- Its: Authorized Agent ----------------------------- Sworn to and subscribed before me this 23rd day of [CORPORATE SEAL] December, 1996. /s/ Donna T. Rollins - ---------------------------------- Notary Public Notary Public, Dekota County, Georgia My Commission Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ---------------------------------- Unofficial Witness LAW INTERNATIONAL, INC., a Georgia corporation By: /s/ Bruce C. Coles ------------------------------- Its: Authorized Agent ----------------------------- Sworn to and subscribed before me this 23rd day of [CORPORATE SEAL] December, 1996. /s/ Donna T. Rollins - ---------------------------------- Notary Public Notary Public, Dekota County, Georgia My Commission Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ---------------------------------- Unofficial Witness -10- ENSITE, INC., a Kentucky corporation By: /s/ Bruce C. Coles ------------------------------- Its: Authorized Agent ----------------------------- Sworn to and subscribed before me this 23rd day of [CORPORATE SEAL] December, 1996. /s/ Donna T. Rollins - ---------------------------------- Notary Public Notary Public, Dekota County, Georgia My Commission Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ---------------------------------- Unofficial Witness GIBB INTERNATIONAL HOLDINGS, INC., a Delaware corporation By: /s/ Bruce C. Coles ------------------------------- Its: Authorized Agent ----------------------------- /s/ R. Fooshee - ---------------------------------- Unofficial Witness Sworn to and subscribed before me this 23rd day of [CORPORATE SEAL] December, 1996. /s/ Donna T. Rollins - ---------------------------------- Notary Public Notary Public, Dekota County, Georgia My Commission Expires September 22, 2000 [NOTARY SEAL] /s/ R. Fooshee - ---------------------------------- Unofficial Witness -11- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- LAW COMPANIES GROUP, INC. SUMMARY OF PRINCIPAL TERMS AND CONDITIONS OF $57,500,000 SENIOR SECURED DOMESTIC AND INTERNATIONAL CREDIT FACILITY 1. GENERAL TERMS ------------- BORROWER: Law Companies Group, Inc. ("Law" or the "Company"), Gibb Holdings, Limited, Gibb Limited and certain other direct or indirect subsidiaries of Law will be direct obligors, as determined by the Lenders. GUARANTORS: Law, Law Engineering and Environmental Services, Inc., formerly Law Evironmental, Inc., Leroy Crandall & Associates, Law/Crandall, Inc., Law International, Inc., Ensite, Inc., Gibb International Holdings, Inc., Gibb Holdings Limited, Gibb Limited and all other direct or indirect subsidiaries of Law will be guarantors, as determined by the Lenders. Provided the federal income tax issues which existed in 1995 still exist, to reflect advantageous tax effect for Law, the Lenders have an intention to accept various share charges and pledges of stock in substitution for certain guaranties. AGENT: SunTrust Bank, Atlanta ("STBA") AGGREGATE AMOUNT: $57.5 million comprised of Loans under the facilities described below. LENDERS: STBA and two financial institutions acceptable to STBA and the Borrower. II. REVOLVING CREDIT FACILITIES - ------------------------------- FACILITIES: (A) $40.0 million domestic revolving credit facility with a $5.0 million sublimit for Letters of Credit ("Domestic Facility") to Law and guaranteed by all U.S. subsidiaries. At the discretion of the Banks, the Domestic Facility may include a cash management line of credit established by the Agent. (B) $10.0 million BGI facility ("International Facility") to Gibb Limited and guaranteed by Law and all the U.S. and non-U.S. Subsidiaries of Law (except as otherwise agreed by the Lenders.) ___________________________________________________________________________ Confidential SunTrust Capital Market LAWS COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- (C) $7.5 million international revolving credit facility ("International Revolving Facility") to Gibb Limited; this facility will be guaranteed by Law and all the other U.S. and non-U.S. subsidiaries of Law (except as otherwise agreed by the Lenders.) A subfacility under and included within the said $7.5 million International Revolving Facility of $500,000 or such higher amount as the Lenders may agree will be available for borrowings by UK Subsidiaries of the Company; drawings by each UK Subsidiary will be made on the Closing Date. A subfacility of up to $2,100,000 under and included within the said $7.5 million International Revolving Facility will be available for borrowings by the African partnerships and subsidiaries of the Company, and purchases of HKS stock, when required, may be made under this subfacility, up to $1,000,000, in the aggregate since June, 1995. (The above facilities shall sometimes be referred to herein as the First Tier Facilities.) BANK PARTICIPATIONS: Domestic Bank Group: (A) 100% (B) 0.00% (C) 0.00% Barclays Bank PLC: (A) 0.00% (B) 100% (C) 100% Payments shall be shared and applied to the Facilities on the basis agreed upon by the Banks. MATURITY: The Facilities will expire 364 days after the Closing Date, provided Law may request two 364-day extensions of the Facilities 90 days prior to termination, and the Facilities may be extended upon the approval of all Lenders, in the exercise of their sole discretion. -2- LAWS COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- AMORTIZATION: The International Revolving Facility shall be reduced $100,000 a month beginning in July, 1997. PURPOSE: To refinance existing bank facilities from domestic banks and international bank, for bonds, guarantees and indemnities, to provide additional working capital, to refinance the Flecboa transaction, and for general corporate purposes. COMMITMENT The Company may, on three business days notice, REDUCTION OR permanently reduce the unused commitment under the CANCELLATION: Facilities by a minimum of $500,000 increments or cancel them individually or entirely. VOLUNTARY The Company may prepay any Base Rate loan on one PREPAYMENTS: business day's advance notice. Note: Italicized terms are defined in the attached Schedule A ("Selected - ----- Definitions"). II. PRICING AND PAYMENT TERMS FOR THE FACILITIES -------------------------------------------- INTEREST RATE Domestic Credit Facility: Base Rate plus the OPTIONS: Applicable Margin. "Applicable Margin-Base" shall mean the percentage designated in a Pricing Grid to be determined based upon the Borrower's ratio of Senior Funded Debt to EBITDA. International Credit Facility: International Funding Rate designated by Barclays Bank PLC (depending on the type of usage, being (a) a sterling committed money market loan and/or (b) a sterling overdraft with a sublimit of 5,000,000 GBP and/or (c) a bank's managed rate facility, all as further defined in the Existing Agreements)) plus the Applicable Margin. Applicable Margin- International Funding Spread" shall mean the percentage designated in a Pricing Grid to be determined based upon the Borrower's ratio of Senior Funded Debt to EBITDA. INTEREST PAYMENTS Interest shall be calculated on the basis of a FOR DOMESTIC FACILITY: 360-day year and is payable on outstanding advances as follows; (i) Base Rate advances -- on the last day of the every month in arrears. (ii) LIBOR advances -- At the expiration of each Interest Period and, with respect to advances made for an Interest Period longer than three months, also on the last day of each three month period prior the expiration of the interest period. -3- LAWS COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- INTEREST PAYMENTS FOR INTERNATIONAL Interest payments shall be calculated according to REVOLVING FACILITY: the relevant product used under the International COMMITMENT FEE: Revolving Facility. A commitment fee, equal to the per annum percentage identified in the Pricing Grid, on the average daily unused portion of the committed amount under the Domestic Credit Facility and the International Revolving Facility. The fee will be calculated on the basis of a 360-day year for the actual number of days elapsed and will be payable quarterly in arrears. DOMESTIC LETTER OF The Lenders will be paid a letter of credit fee on CREDIT FEES: the issued and outstanding letters of credit equal to the Applicable Domestic Letter of Credit Fee. STBA will act as the facing bank for letters of credit and will be paid a facing fee of .125% (12.5 basis points) on the total amount of outstanding letters of credit. Letter of Credit Fees shall be paid annually in advance. DEFAULT RATE: Any amount not paid when due shall bear interest at the then applicable rate plus 2% per annum, provided that, for any LIBOR Borrowing, at the end of the applicable Interest Period, interest shall accrue at the Base Rate plus the Applicable Margin +2%. FUNDING: The Borrower shall provide prior notice (if by telephone, promptly confirmed in writing) of funding requests and interest rate conversions to the Agent (i) on the same business day with respect to Base Rate advances and (ii) of at least three business days with respect to LIBOR advances. Advances shall be in minimum amounts of $250,000 and in integral multiples of $50,000. Each Lender shall make its funds available to the Agent not later than 2:00 p.m. (Atlantic, Georgia, time) on the funding date. PAYMENTS: All payments by the Borrower shall be made not later than 2:00 p.m. (Atlanta, Georgia, time) to the Agent in immediately available funds, free and clear of any defenses, set-offs, counterclaims or withholdings or deductions for taxes. Any Lender not organized under the laws of the United States or any state thereof must, prior to the time it becomes a Lender, furnish the Borrower with forms or certificates as may be appropriate to verify that such Lender is exempt from U.S. tax withholding requirements. PRICING/YIELD Customary provisions with respect to payment of PROTECTION withholding tax "gross-up" amounts: suspension of PROVISIONS: LIBOR pricing options due to illegality or inability to ascertain funding costs; payment of reserve requirements, increases funding costs and capital adequacy -4- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- compensation; and payment of breakage and redeployment costs in connection with fundings and repayments of LIBOR advances. III. SECURITY FOR THE FACILITIES - -------------------------------- COLLATERAL: All Indebtedness owed to the Lenders by Law and all of its Subsidiaries shall be secured by a first priority lien on all assets of Law and all of its U.S. Subsidiaries, including without limitation, all accounts, general intangibles, contract rights, intellectual property unencumbered real estate (otherwise, a subordinate security interest therein), machinery and equipment, inventory and intercompany indebtedness. All Indebtedness owed to the Lenders by direct or indirect non-U.S. Subsidiaries of Law shall be secured by first priority fixed and floating charges in the form reasonably required by Barclays Bank PLC ("Barclays") (or any other provider of an International Credit Facility) on all assets on all non-U.S. Subsidiaries of Law, including, without limitation, first fixed charges on all accounts, general intangibles, contract rights, intellectual property unencumbered real estate (otherwise, a subordinate interest therein), machinery and equipment, inventory and intercompany indebtedness. In addition to the foregoing collateral, the Lenders shall take pledges of 100% of the stock of all U.S. Subsidiaries and 65% of the stock of all non-U.S. Subsidiaries of Law to secure all Indebtedness and Barclays shall take pledges of the remaining 35% of the stock of all non-U.S. subsidiaries of Law to secure Indebtedness owed by direct or indirect non U.S. subsidiaries of Law. Without limiting the foregoing, the Lenders have a present intention of maintaining priority of all security interests, liens and share charges which secure the existing Credit Facilities in a manner which will reduce the cost of perfection consistent with requirements of perfection. For the avoidance of doubt, Law and all of its subsidiaries shall (except as otherwise agreed by all the Lenders) guarantee the repayment of all indebtedness and liabilities of non-U.S. Subsidiaries of Law to Barclays (or any other Lender providing the International Credit Facility), and all U.S. Subsidiaries shall guarantee all Indebtedness and liabilities of Law and the U.S. Subsidiaries to the Lenders. For purposes of the foregoing paragraphs, the term "Indebtedness" shall mean all First Tier Facilities, guaranties thereof and the following additional facilities: -5- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- (a) Law's guaranty of the $1,250,000 in shareholder loans made by SunTrust Bank, Atlanta (b) Barclays' Spot and Forward Exchange Transactions for Gibb Limited of GBP 1 million, Gross, Marginal Risk GBP 100,000. Deals are limited to a maximum of 12 months. (c) $200,000 in SunTrust Bank, Atlanta's swap exposure. The Banks may apply the proceeds from the Collateral to the repayment of the above Facilities in the order they deem in their sole discretion as appropriate. BORROWING BASE: Availability under the Domestic Facility will be determined by a Borrowing Base defined as: -80% Advance against Eligible Domestic Billed Fees Receivable. Eligible fees receivable will be defined as billed receivables less than 90 days past invoice date. -80% Advance against Unbilled Domestic Work in Progress, capped at $12,000,000. Eligible Unbilled Work in Progress will be Work in Progress less than 60 days old. In the period between September 1, 1997 and December 31, 1997, Lenders acknowledge a need for an increase of $2,000,000 in the Borrowing Base calculations, but any increase shall not exceed the Domestic Facility limitations. CREDIT AGREEMENTS: The facilities will be evidenced by Credit Agreements which will contain terms and conditions customary in credit facilities of this nature, including, but not limited to, Conditions Precedent, Representations and Warranties, Covenants, Events of Default, and indemnification provisions. Such Credit Agreements Will be based upon, but not necessarily governed by the Amended and Restated Credit Agreement dated October 11, 1995 by and among Law and the domestic banks, the Reimbursement and Guaranty Agreement, dated October 11, 1993, between Law and Trust Company Bank and the Barclays Facilities Letter dated October 11, 1993 and the related loan documents (collectively, the "Existing Agreements"). Conditions Precedent will include all those in the Existing Agreements, including, but not limited to legal opinions from counsel to Law and its Subsidiaries and from counsel to the Banks in form and substance acceptable to the Banks. - -------------------------------------------------------------------------------- -6- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- IV. CONDITIONS TO FUNDING --------------------- Funding will be subject to conditions substantially similar to those in the Existing Agreements, and to other conditions customary in financing of this nature, including, but not limited to, the following: CONDITIONS TO INITIAL FUNDING: (1) Execution and delivery of credit agreement, promissory notes, security agreements, pledge agreements, share charges, intercreditor agreements and other loan documents. (2) Delivery of certified copies of organizational documents, including bylaws, authorizing resolutions of board of directors, and incumbency certificates for the Borrower and Guarantors. (3) Receipt of certified copies of all consents, approvals, authorizations, registrations, or filings required to be made or obtained by the Borrower or Guarantors in connection with the credit facilities. (4) Certificate of insurance showing all property has been insured in amounts deemed adequate by the Borrower and Agent against risks customarily insured against by similar businesses in such localities, naming Lenders as loss payee and additional insured. (5) Receipt of favourable opinion of counsel for the Borrower and Guarantors and from local counsel in every jurisdiction in which collateral is granted. (6) Delivery of closing certificate certifying there is no Default or Event of Default in existence as of the Closing Date. (7) Lack of material adverse change from the Borrower's and Guarantors' financial condition and operations as reflected in the Borrower's consolidated financial statements as exhibited in the September 30, 1996 financials previously delivered to the Agent. (8) Completion of and receipt of lien searches in all relevant jurisdictions in which material assets of Law and subsidiaries exist (consistent with the philosophy dictating lien searches which was applied in connection with the Existing Agreements revealing no liens on any assets of the -7- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- Borrower or its subsidiaries except for liens permitted by Credit Documentation. (9) Repayment of all loans made by SunTrust Bank, Atlanta to shareholders of Law for which there is principal or interest past due by at least 60 days. (10) Completion of a prefunding field audit at the cost of Borrower not exceeding $2,500. Additional field audits will be conducted quarterly and will be performed by SunTrust Bank, Atlanta at the cost of Borrower, not exceeding $2,500 per audit. CONDITIONS TO ALL FUNDINGS (1) All representations and warranties shall continue to be true and correct on and as of the date of such Borrowing. (2) No Default or Event of Default shall then exist or would result from such Borrowing. (3) No material adverse change. (4) Absence of actions or proceedings pending or threatened which could reasonably be expected to have a material adverse effect. (5) Loans will not violate any applicable law. (6) Receipt of all required opinions and documents. V. FINANCIAL COVENANTS AND REPORTING REQUIREMENTS ---------------------------------------------- Financial covenants will be tested quarterly and will be calculated on a rolling four quarter basis unless otherwise indicated. -8- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- MAXIMUM SENIOR FUNDED DEBT TO EBITDA: The ratio of Senior Funded Debt to EBITDA for the quarter then ended shall not be greater than the ratio set forth opposite the period set forth in the table below: PERIOD RATIO ------ ----- Closing Date through June 30, 1997 2.00 to 1 July 1, 1997 through December 31, 1997 1.75 to 1 MINIMUM FIXED CHARGE COVERAGE: The ratio of EBITDA less Capital Expenditures to the sum of Fixed Charges the quarter then ended shall not be less than the ratio set forth opposite the period set forth in the table below: PERIOD RATIO ------ ----- Closing through December 31, 1997 .95 to 1 MAXIMUM SENIOR FUNDED DEBT TO CAPITAL: The ratio of Total Senior Funded Debt to Capital for the quarter then ended shall not be greater than the ratio set forth opposite the period set forth in the table below: PERIOD RATIO ------ ----- Closing Date through December 31, 1997 70% MINIMUM NET WORTH: The Borrower shall maintain at all times a Minimum Book Net Worth of $16,5000,000 plus 75% % of Net Income in each fiscal year plus the net proceeds of any equity offering, less any Lender approved repurchases of stock in excess of $250,000 and less any future foreign currency translation adjustments. MAXIMUM DOMESTIC SENIOR FUNDED DEBT TO EBITDA: The ratio of Domestic Senior Funded Debt to EBITDA for the quarter then ended shall not be greater than the ratio set forth opposite the period set forth in the table below: PERIOD RATIO ------ ----- Closing Date through December 31, 1997 2.75 to 1 -9- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- MINIMUM DOMESTIC EBIT TO INTEREST: [NOT ON ROLLING FOUR QUARTER BASIS] The ratio of Domestic EBIT to Interest for the quarter then ended shall not be less than the ratio set forth opposite the period set forth in the table below: PERIOD RATIO ------ ----- Closing Date through June 30, 1997 1.15 to 1 July 1, 1997, through December 31, 1997 1.25 to 1 MINIMUM DOMESTIC CASH FLOWS: For each rolling four quarter period, cash flow, measured as EBITDA generated by Borrower's Domestic subsidiaries shall not be less than $11,000,000. MINIMUM INTERNATIONAL CASH FLOW: For each rolling four quarter period, cash flow, measured as EBITDA generated by Gibb Limited together with all other international subsidiaries, shall not be less than $7,000,000. CAPITAL EXPENDITURES: Limited to $6,000,000 each fiscal year, excluding Flecboa refinancing and UK auto leases not exceeding GBP 500,000. OPERATING LEASES: Limited to $16,500,000 per year. REPORTING REQUIREMENTS: The Borrower and Guarantors shall deliver the following financial statements: (1) its annual unqualified audited financial statements within 120 days after the end of each fiscal year, accompanied by a certificate (with supporting details) from the independent public accountant preparing the report on such financial statements stating whether a Default or Event of Default exists; (2) its monthly unaudited financial statements within 30 days after the end of each month, together with a compliance certificate (with supporting details) from its Chief Financial Officer stating that the financials were prepared in accordance with generally accepted accounting principals and that certain covenants have been meet. In each case, such financial statements shall include balance sheets, income statements, and statements of cash flows, accounts receivable and work in progress reports, with a brief commentary summarizing the above reports. The Borrower shall deliver notice of certain other events, including the occurrence or existence of any Default or Event of Default, -10- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- citation for material violations of environmental laws or regulations, important matters relating to funding of employee benefit plans, or such other information as any Lender, through the Agent, may reasonably request. VI. OTHER TERMS AND CONDITIONS APPLICABLE TO THE FACILITIES ------------------------------------------------------- SUBORDINATION: Existing notes due to former shareholders for repurchased stock shall continue to be subordinated in both principal and interest to debt under all the credit facilities owing to the Lenders, which will be confirmed prior to closing by documentation (in form satisfactory to Lenders), from or relating to all subordinated noteholders whose payments are past due or who have amortization due within the term of this proposed Facility. Borrower shall provide an opinion of counsel that all subordinated noteholders have no valid claim for payment prior to that of the Lenders. Payments of principal will be prohibited without permission from the Lenders, except for $250,000, which shall be allowed. REPRESENTATIONS AND WARRANTIES: Representations and warranties substantially similar to those in the Existing Agreements, including representations and warranties as to the following matters, subject to matters disclosed in Borrower's schedules which must be approved by Lenders, together with other customary representations and warranties are required: (1) Due organization, valid existence, and good standing of the Borrower and Guarantors and qualification to conduct business in each jurisdiction in which the failure to conduct business would have a material adverse effect on the Borrower. (2) Loan Agreement, Notes, all Security Documents and other Loan Documents are duly authorized and do not violate any law, rule, regulation, judgment, order, ruling, organizational documents or other instrument to which the Borrower is bound; no conflict, breach, or default under any other instrument. (3) Loan Agreement, Notes, all Security Documents and other Loan Documents are legal, valid, and binding agreements of the Borrower. (4) Good standing with respect to all governmental authorizations, consents, approvals, orders, licenses, or any -11- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- other action required, and maintenance of all trademarks and patents and other intellectual property rights necessary to conduct Borrower's business. (5) Identification of all outstanding indebtedness for borrowed money, which shall be satisfactory to the Lenders, including all intercompany loans. (6) Possession by the Borrower of insurance of types and in amounts customary in the industry and locations where the Borrower is located. (7) Possession by the Borrower of good and marketable title to and ownership of all its assets described in its most recent financial statements, free and clear of all liens, except permitted liens, as agreed by Lenders. (8) Absence of any burdensome restriction under any other agreements, such as collective bargaining agreements. (9) Absence of notice of Borrower's violation of any law, statute, order, rule, regulation, or judgment entered by any court. (10) Absence of default under any debt agreements or other material agreements. (11) Absence of equity or other long-term investments in any person except permitted investments, as agreed by Lenders. (12) Accuracy of the most recent annual audited financial statements and quarterly financial statements submitted to the Lenders and absence of any material adverse change in the financial condition of the Borrower and its Subsidiaries as reflected in such financial statements. (13) Absence of pending or threatened litigation. (14) Filing of all tax returns and payment of all taxes (except where being contested in good faith by appropriate proceedings and subject to maintenance of adequate reserves). -12- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- (15) Compliance with Regulations G, T, U, X, and all laws and regulations relating to employee benefit plans, and all environmental laws and regulations. (16) Possession of all material patents, trademarks, licenses, or other intellectual property rights free from burdensome restrictions and absence of any infringement of patents, trademarks, licenses or other intellectual property rights held by others. (17) Identification of all subsidiaries of the Borrower. (18) No information or statement herein contains any untrue statement of a material fact or omits to state a material fact necessary to make the statement not misleading. AFFIRMATIVE Affirmative covenants substantially similar COVENANTS: to those in the Existing Agreements, including affirmative covenants as to the following matters, subject to matters disclosed in Borrower's schedules which must be approved by Lenders, and other customary covenants applicable to the Borrower and Guarantors: (1) Maintenance of insurance. (2) Maintenance and permitted inspection of proper books and records. (3) Maintenance of corporate existence, and all material patents, trademarks, franchises, and other intellectual property rights. (4) The Borrower shall remain, and cause each subsidiary to remain, substantially in the same business. (5) Payment of all taxes, except where being contested in good faith by appropriate proceedings and subject to maintenance of adequate reserves. (6) Compliance with all laws and regulations, including environmental and employee benefit laws. (7) Giving notice of events of default. (8) Providing copies of reports to stockholders. -13- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- (9) Provisions for additional subsidiaries to become guarantors and pledgors of stock. NEGATIVE Negative covenants substantially similar to COVENANTS: those in the Existing Agreements, including negative covenants as to the following matters subject to matters disclosed in Borrower's schedules, which must be approved by Lenders, and other customary negative covenants applicable to the Borrowers and its subsidiaries: (1) Restriction against incurring or permitting liens on properties of the Borrower and its subsidiaries. (2) Compliance with ERISA. (3) Restrictions on sale/leaseback transactions. (4) Restrictions on transactions with affiliates (other than wholly owned subsidiaries) except on an arm's-length basis. (5) Restrictions on guarantees. (6) Restrictions on entering into other agreements that prohibit or limit the amount of dividends or loans that may be paid or made to the Borrower. (7) Restrictions on modifications or cancellations of intercompany loans or subordinated debt obligations. (8) Prohibition of mergers, sales and acquisitions. (9) Restriction against incurring other indebtedness and lease obligations. (10) Restrictions on investments. (11) Restrictions on sales of assets, mergers, and joint ventures. (12) Restrictions on change in business. (13) Negative pledge of assets. (14) Restrictions on dividends and other payments. (15) Prohibition on granting negative pledges and payment restrictions to others. -14- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- (16) Restriction on modifying or terminating certain agreements. (17) Prohibitions on purchasing additional stock of the Borrower, with permissions consistent with Existing Agreements. EVENTS OF DEFAULT: Events of default substantially similar to the Existing Agreements, events of default as to the following matters and other customary events of default applicable to the Borrowers and its subsidiaries: (1) Nonpayment of any principal amounts of the loans when due; nonpayment of any interest, fees, or other amounts within five (5) days of the due date thereof. (2) Breach of any financial covenant, negative covenant, or reporting requirement. (3) Breach of any other covenant or obligation in any loan document which remains uncured for 10 days after the earlier of (i) an Execution Officer of Borrower's obtaining actual knowledge thereof or (ii) written notice thereof having been given to the Borrower. (4) Any representation, warranty, or statement shall be untrue or incorrect in any material respect. (5) Failure of the Borrower or any subsidiary to make payments on any debt exceeding $100,000 in the aggregate, or breach of any covenant contained in any agreement relating to such indebtedness causing or permitting the acceleration of such indebtedness. (6) The Borrower or any Subsidiary shall file, or shall have filed against it and not dismissed within 60 days, any bankruptcy or other insolvency proceeding. (7) Incurrence of any liability or potential liability under any employee benefit plan that would have a material adverse effect on the Borrower and its subsidiaries. (8) Any final judgement in excess of $100,000 or otherwise having a material adverse effect shall be rendered against the Borrower or any subsidiary, which judgement stays in effect for 60 days without being stayed or deferred or after the -15- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- expiration of such stay, such judgment is not discharged or provided for. (9) An occurrence of a change of control of Law. For purposes of this section, "change of control" shall mean that any entity or related group of entities shall obtain the beneficial ownership, or power to vote securities, of more than 25% of the outstanding securities of Law with the ability to vote for the election of the Board of Directors. (10) An occurrence of a change in management. For purposes of this section "change of management" shall mean of change in personnel of any of a defined group of Executive Officers of Borrower to personnel not having equal or better qualifications, financial acumen, management skills, and standing in the industry, as the existing personnel have. PARTICIPATIONS AND ASSIGNMENTS: Assignments to other banks and financial institutions of credit facility will be permitted. An administrative fee of $3,000 shall be due and payable to the Agent upon the occurrence of any assignment payable by the assigned bank. Participations to other banks and financial institutions will be permitted. Such participation will not release the selling Lender from its obligations with respect to the credit facility, and the Borrower shall be promptly notified in writing of any such participation. REQUIRED LENDERS: Lenders holding 72% of the initial outstanding commitments for the Domestic Facility, the BGI Facility and the International Facility. INDEMNIFICATION: The Borrower shall pay all reasonable costs and expenses of the Agent, the International Collateral Agent and all other Lenders in connection with the credit facility, including, without limitation, all reasonable fees and expenses of special counsel to the Agent, International Collateral Agent, and each Lender. The Borrower shall indemnify the Agent and each Lender against all costs, losses, liabilities, damages, and expenses incurred by them in connection with any investigation, litigation, or other proceedings relating to the credit facility, except for instances of negligence or willful misconduct on the part of the indemnified party. GOVERNING LAW: State of Georgia. -16- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- PRICING GRID - -------------------------------------------------------------------------------- SENIOR FUNDED DOMESTIC BANK INTERNATIONAL COMMITMENT DOMESTIC DEBT/EBITDA BASE RATE FUNDING FEE LETTER OF SPREAD SPREAD CREDIT FEE - -------------------------------------------------------------------------------- greater than 1.75 1.50% 3.50% .50% 1.50% - -------------------------------------------------------------------------------- greater than 1.25 and less than or equal to 1.75 1.00% 3.00% .50% 1.25% - -------------------------------------------------------------------------------- greater than 1.00 and less than or equal to 1.25 .50% 2.50% .375% 1.25% - -------------------------------------------------------------------------------- less than or equal to 1.00 -0- 2.00% .25% 1.00% - -------------------------------------------------------------------------------- Interest rates under the Domestic Credit Facility and the International Revolving Facility and the Commitment Fee on the average unused portion of the Domestic Credit Facility and the International Revolving Facility shall be tied to the Senior Funded Debt/EBITDA ratio, calculated at the end of each quarter. Commissions on the International BGI Facility shall be as follows: Sterling Equivalent of the Outstanding Amount of the Bank Guarantee Percentage Commission up to (pounds) 50,000 2.50% per annum up to (pounds) 250,000 2.50% on the first (pounds) 50,000 and 2.00% on the balance above (pounds) 250,000 2.50% on the first (pounds) 50,000 2.00% on the next (pounds) 250,000 1.75% on the balance -17- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- SCHEDULE A SELECTED DEFINITIONS -------------------- SENIOR FUNDED DEBT shall mean Consolidated Senior Funded Debt. BANKS shall mean SunTrust Bank, Atlanta, Barclays Bank PLC and National Bank of Canada. BASE RATE shall mean the higher of i) the rate which STBA announces from time to time as its prime lending rate, as in effect from time to time, and (ii) the Federal Funds rate, as in effect from time to time, plus one- half of one percent (1/2%) per annum (any changes in such rates to be effective as of the date of any change in such rate). The STBA prime lending rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. STBA may make commercial loans or other loans at rates of interest at, above, or below the STBA prime lending rate. CAPITALIZATION shall mean the sum of Shareholder's plus TOTAL FUNDED DEBT. EBITDA shall mean, for any fiscal period of the Borrower, an amount equal to the sum of Consolidated EBIT plus (I) depreciation and amortization expenses to the extent deducted in determining such Consolidated EBIT as determined on a consolidated basis in accordance with GAAP, and (ii) the historical Consolidated EBITDA of any Person for such period which accrued prior to the date such Person became a Subsidiary of the Borrower or was merged into or consolidated with the Borrower or any of its Subsidiaries or such Person's assets were acquired by the Borrower or any of its Subsidiaries (and the underlying records of such Person shall be audited to the extent the Borrower is required pursuant to Regulation S-X of the SEC to present audited financial information for such Person in documents filed by it with the SEC). FIXED CHARGES shall mean consolidated interest expense for the period of determination (including both capitalized and non-capitalized interest and the interest component of Capital Leases), plus consolidated current maturities of long term debt, plus cash taxes and the Georgetown Steel Payment. FUNDED DEBT shall mean all indebtedness for money borrowed, purchase money mortgages, capitalized leases, outstandings under asset securitization vehicles, conditional sales contracts and similar title retention debt instruments, including any current maturities of such indebtedness, which by its terms matures more than one year from the date of any calculation thereof and/or which is renewable or extendable at the option of the obligor to a date beyond one year from such date. -18- LAW COMPANIES GROUP, INC. - -------------------------------------------------------------------------------- INTEREST PERIOD shall mean with respect to LIBOR advances, the period of 1, 2, 3, or 6 months selected by the Borrower pursuant to the terms of the credit facility and subject to customary adjustments in duration. LIBOR shall mean the cost of sterling deposits (being the rate at which Barclays Bank PLC is offering to prime banks in the London Interbank Market at or about 11:00 a.m. (London time) on the first day of the relevant Interest Period for delivery on that day, sterling deposits of an amount comparable to the amount of the relevant amount upon which interest is being calculated for a period equal to the Interest Period.) -19- EX-10.34 9 FIRST AMENDMENT TO WAIVER AGREEMENT EXHIBIT 10.34 First Amendment to Waiver Agreement ----------------------------------- This First Amendment to Waiver Agreement (hereinafter referred to as this Agreement) is made and entered into this 24th day of December 1996, by and among South Trust Bank of Georgia, N.A. ("Lender"); Law Engineering and Environmental Services, Inc., formerly known as Law Environmental, Inc. ("Lessee"); Law Companies Group, Inc. ("Group"); and certain of Group's subsidiaries executing this Agreement. STATEMENT OF BACKGROUND ----------------------- Lessee, Group, Lender, and Flecboa, Inc. ("Lessor") have heretofore entered into that certain Participation Agreement (the "Participation Agreement") dated as of November 2, 1994, with respect to the development of an office building in Pensacola, Florida. Pursuant to the Participation Agreement, Lessor and Lender have entered into that certain Loan and Security Agreement dated as of November 2, 1994, Group and certain of its subsidiaries have executed a joint and several Guaranty, dated November 2, 1994, in favor of Lender, and Lessor and Lessee have entered into that certain Lease and Development Agreement providing for the construction and lease of the office building in pensacola, Florida. In addition, the parties hereto are party to certain Waiver Agreement entered into on September 15, 1995 (the "Waiver Agreement"). In order to induce Lender, SunTrust Bank, Atlanta, National Bank of Canada and Barclays Bank PLC to take certain actions in connection with certain assignments and other matters, and for other good and valuable consideration, the parties hereto desire to amend the Waiver Agreement as hereinafter specified. AGREEMENT --------- 1. Definitions. Capitalized terms not other defined herein shall have the ------------ meaning or meanings ascribed to them in Waiver Agreement. 2. Amendments. ----------- a. Section 5.2 of the Waiver Agreement is hereby deleted in its entirety and replaced with the following: "5.2 Commitment to Take Out Lender. ------------------------------ Notwithstanding anything to the contrary appearing in the Operative Documents, on or before June 2, 1997, all of Lender's interests in the Loans and Operative Documents shall be purchased for cash in full at par, with payment of all accrued and unpaid interest and other unpaid and owing fees and expenses, and, if not so purchased and paid, such event shall constitute an Event of Default under each of the Operative Documents, and a Termination Event under this Agreement. Upon such Event of Default, or the occurrence of any Event of Default caused by non-payment of any monetary obligation (which is not cured upon five days written notice), Lender shall be free to exercise any and all rights and remedies available under the Operative Documents or at law or in equity, with each of the Borrowing Parties acknowledging that lender is no longer bound by, or subject to, the Intercreditor Agreement or Loss Sharing Agreement, each dated October 11, 1995, by and among lender and certain other parties." b. Section 8.5 of the Waiver Agreement is hereby deleted it in its entirety and replaced with the following: "8.5 Fees and Expenses. On or before December 27, 1996, Lessee will ----------------- pay all legal fees and expenses of Lender incurred in connection with the Operative Documents since the signing Date (as defined in the Waiver Agreement)." 3. General Terms. Except for the amendments to the Waiver Agreement ------------- provided for in this Agreement, the terms of the Waiver Agreement shall continue unamended and remain in full force and effect. This Agreement shall be governed by the laws of the State of Georgia. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which, when so executed and delivered, shall be an original, but all such counterparts shall together constitute one and the same instrument. Page -2- IN WITNESS WHEREOF, the parties hereto, by and through their duly authorized officers, have agreed or consented to this First Amendment to Waiver Agreement by signing below under seal as of the day and year first above written. SOUTHTRUST BANK OF GEORGIA, N.A. BY: /s/ William P. Carroll ----------------------------------- ITS: Vice President ---------------------------------- LAW ENGINEERING AND LAW COMPANIES GROUP, INC. ENVIROMENTAL SERVICES, INC. BY: /s/ Bruce C. Coles BY: /s/ Bruce C. Coles ----------------------- ------------------------------ ITS: President ITS: Chairman & CEO ---------------------- ----------------------------- LAW INTERNATIONAL, INC. ENSITE, INC. BY: /s/ Bruce C. Coles BY: /s/ Bruce C. Coles ----------------------- ------------------------------ ITS: Authorized Signatory ITS: Authorized Signatory ---------------------- ----------------------------- GIBB INTERNATIONAL LAW/CRANDALL, INC. HOLDINGS, INC. BY: /s/ Bruce C. Coles BY: /s/ Bruce C. Coles ----------------------- ------------------------------ ITS: Authorized Signatory ITS: Authorized Signatory ---------------------- ----------------------------- EX-10.35 10 ASSIGNMENT & ACCEPTANCE AGREEMENT EXHIBIT 10.35 ASSIGNMENT AND ACCEPTANCE AGREEMENT Dated December 24, 1996 Reference is made to the AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of October 11, 1995 (as amended, the "Credit Agreement"), among LAW COMPANIES GROUP, INC., a Georgia corporation (the "Borrower"), certain Subsidiaries of the Borrower whose names appear on the signature pages below as Guarantors (the "Guarantors"), SUNTRUST BANK, ATLANTA, a Georgia banking corporation, NATIONAL CITY BANK, KENTUCKY, a national banking association, and SOUTHTRUST BANK OF GEORGIA, N.A., a national banking association, (collectively, the "Banks"), and SUNTRUST BANK, ATLANTA as Agent for the Banks (the "Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. SOUTHTRUST BANK OF GEORGIA. N.A. (the "Assignor") and NATIONAL BANK OF -------- CANADA (the "Assignee") agree as follows: -------- 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the Assignor's rights and obligations under the Credit Agreement and all other Loan Documents, as of the date hereof with respect to the percentage interest specified in Section 1 of Schedule 1 hereto of the Revolving Credit A Commitments (the ---------- "Commitment") and the Revolving Credit A Note (the "Note") held by the Assignor. ---------- ---- After giving effect to such sale and assignment, the amount of the Assignee's Commitment and the amount of the Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1. ---------- 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement and the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any Guarantor or any of their respective Subsidiaries or the performance or observance by the Borrower, the Guarantors or any of their respective Subsidiaries of any of their obligations under the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note referred to in paragraph 1 above and requests that the Agent exchange such Note for a new Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto, as specified in Section 3 of Schedule 1. ---------- 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 4.05 of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance Agreement; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement and the other Loan Documents; (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender, and (v) specifies that its address for notices is the office set forth beneath its name on the signature pages hereof and (vi) attaches the Internal Revenue Service Form W-8 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that the Assignee is not a United States citizen or resident (or that the Assignee is filing as a foreign corporation, partnership, estate or trust) and providing the name and address of the Assignee or certifying that the income receivable pursuant to this Assignment and Acceptance Agreement is effectively connected with the conduct of a trade or business in the United States. 4. Following the execution of this Assignment and Acceptance Agreement by the Assignor and the Assignee, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date of this Assignment and Acceptance Agreement (the "Effective Date") shall be the later of (a) the -------------- date of consent thereto by Borrower and the Agent, (b) the date of acceptance thereof by the Agent and (c) the date specified in Section 4 of Schedule 1. ---------- 5. As of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance Agreement, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance Agreement, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Agent, from and after -2- the Effective Date, the Agent shall make all payments under the Credit Agreement and the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE. 8. This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto. - ---------- -3- SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE AGREEMENT DATED DECEMBER 23, 1996 Section 1. Percentage Interest of all Revolving Credit A Commitments Purchased - --------- by Assignee: 25.55% Section 2. Amount of: - --------- Assignee's Commitment: $7,346,130.00 Aggregate Outstanding Principal Amount of Advances owing to the Assignee: $5,732,359.17 Section 3. - --------- A Note payable to the order of the Assignee Dated: December 24, 1996 Principal amount $7,346,130.00 Section 4. - --------- Effective Date: December 24, 1996 -4- ASSIGNOR: SOUTHTRUST BANK OF GEORGIA, N.A. By: /s/ William P. Carroll -------------------------------- Name: Title: Vice President ASSIGNEE: NATIONAL BANK OF CANADA By: ________________________________ Name: Title: Assignee's Address for Notices): 200 Galleria Parkway, NW Suite 800 Atlanta, Georgia 30339 Attention: William L. Benning -5- ASSIGNOR: SOUTHTRUST BANK OF GEORGIA, N.A. By:_______________________________ Name: Title: ASSIGNEE: NATIONAL BANK OF CANADA By: /s/ William L. Benning ------------------------------- Name: Title: V.P. Assignee's Address for Notices): 200 Galleria Parkway, NW Suite 800 Atlanta, Georgia 30339 Attention: William L. Benning -5- Consented to this 24th day of December, 1996 LAW COMPANIES GROUP, INC. BY: /s/ Bruce C. Coles ---------------------- Name: Bruce C. Coles Title: Chairman, CEO -6- Accepted and consented to this 24th day of December, 1996 SUNTRUST BANK, ATLANTA as Agent By: /s/ J. Christopher Deisley -------------------------- J. Christopher Deisley First Vice President By: /s/ Dennis H. James Jr. ------------------------- Name: Dennis H. James Jr. Title: AVP -7- EX-10.36 11 ASSIGNMENT AND ACCEPTANCE AGREEMENT EXHIBIT 10.36 ASSIGNMENT AND ACCEPTANCE AGREEMENT Dated December 24, 1996 Reference is made to the AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of October 11, 1995 (as amended, the "Credit Agreement") among LAW COMPANIES GROUP, INC., a Georgia corporation (the "Borrower"), certain Subsidiaries of the Borrower whose names appear on the signature pages below as Guarantors (the "Guarantors"), SUNTRUST BANK, ATLANTA, a Georgia banking corporation, NATIONAL CITY BANK, KENTUCKY, a national banking association, and SOUTHTRUST BANK OF GEORGIA, N.A., a national banking association, (collectively, the "Banks"), and SUNTRUST BANK, ATLANTA as Agent for the Banks (the "Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. NATIONAL CITY BANK, KENTUCKY (the "Assignor") and NATIONAL BANK OF -------- CANADA (the "Assignee") agree as follows: -------- 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the Assignor's rights and obligations under the Credit Agreement and all other Loan Documents as of the date hereof with respect to the percentage interest specified in Section 1 of Schedule 1 hereto of the Revolving Credit A Commitments (the ---------- "Commitment") and the Revolving Credit A Note (the "Note") held by the Assignor. ---------- ---- After giving effect to such sale and assignment, the amount of the Assignee's Commitment and the amount of the Advances owing to the Assignee will be as set forth in Section 2 of Schedule 1. ---------- 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement and the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any Guarantor or any of their respective Subsidiaries or the performance or observance by the Borrower, the Guarantors or any of their respective Subsidiaries of any of their obligations under the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto; and (iv) attaches the Note referred to in paragraph 1 above and requests that the Agent exchange such Note for a new Note payable to the order of the Assignee in an amount equal to the Commitment assumed by the Assignee pursuant hereto, as specified in Section 3 of Schedule 1. - ---------- 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 4.05 of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance Agreement; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement and the other Loan Documents; (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender, and (v) specifies that its address for notices is the office set forth beneath its name on the signature pages hereof and (vi) attaches the Internal Revenue Service Form W-8 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that the Assignee is not a United States citizen or resident (or that the Assignee is filing as a foreign corporation, partnership, estate or trust) and providing the name and address of the Assignee or certifying that the income receivable pursuant to this Assignment and Acceptance Agreement is effectively connected with the conduct of a trade or business in the United States. 4. Following the execution of this Assignment and Acceptance Agreement by the Assignor and the Assignee, it will be delivered to the Agent for acceptance and recording by the Agent. The effective date of this Assignment and Acceptance Agreement (the "Effective Date") shall be the later of (a) the -------------- date of consent thereto by Borrower and the Agent, (b) the date of acceptance thereof by the Agent and (c) the date specified in Section 4 of Schedule 1. ---------- 5. As of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance Agreement, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance Agreement, relinquish its rights and be released from its obligations under the Credit Agreement. 6. Upon such acceptance and recording by the Agent, from and after the Effective Date, the Agent shall make all payments under the Credit Agreement and -2- the Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement and the Notes for periods prior to the Effective Date directly between themselves. 7. THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE. 8. This Assignment and Acceptance Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution being made on Schedule 1 hereto. ---------- -3- SCHEDULE 1 to ASSIGNMENT AND ACCEPTANCE AGREEMENT DATED DECEMBER 23, 1996 Section 1. Percentage Interest of all Revolving Credit A Commitments Purchased - --------- by Assignee: 25.55% Section 2. Amount of: - --------- Assignee's Commitment: $7,346,130.00 Aggregate Outstanding Principal Amount of Advances owing to the Assignee: $5,732,359.17 Section 3. - --------- A Note payable to the order of the Assignee Dated: December 24, 1996 Principal amount: $7,346,130.00 Section 4. - --------- Effective Date: December 24, 1996 -4- ASSIGNOR: NATIONAL CITY BANK, KENTUCKY By: /s/ Carrie C. Tate ---------------------------- Name: Carrie C. Tate Title: Vice President ASSIGNEE: NATIONAL BANK OF CANADA By:____________________________ Name: Title: Assignee's address for notices: 200 Galleria Parkway, NW Suite 800 Atlanta, Georgia 30339 Attention: William L. Benning -5- ASSIGNOR: NATIONAL CITY BANK, KENTUCKY By:____________________________ Name: Title: ASSIGNEE: NATIONAL BANK OF CANADA By: /s/ William L. Benning -------------------------- Name: Title: V.P. Assignee's address for notices: 200 Galleria Parkway, NW Suite 800 Atlanta, Georgia 30339 Attention: William L. Benning -5- Consented to this 24th day of December, 1996 LAW COMPANIES GROUP, INC. By: /s/ Bruce C. Coles ---------------------- Name: Bruce C. Coles Title: Chairman, CEO -6- Accepted and consented to this 24th day of December, 1996 SUNTRUST BANK, ATLANTA as Agent By: /s/ J. Christopher Deisley -------------------------- J. Christopher Deisley First Vice President By: /s/ Dennis H. James Jr. ----------------------- Name: Dennis H. James Jr. Title: AVP -7- EX-10.37 12 JOINDER TO INTERCREDITOR AGREEMENT EXHIBIT 10.37 JOINDER TO INTERCREDITOR AGREEMENT THIS JOINDER TO INTERCREDITOR AGREEMENT (this "Joinder"), dated as of December 24, 1996, made by NATIONAL BANK OF CANADA, a federal bank chartered in Canada (the "New Lender"), in favor of SUNTRUST BANK, ATLANTA, a Georgia banking corporation ("SunTrust"), and BARCLAYS BANK PLC, an English banking corporation (together with all of its relevant local affiliates, "Barclays"), in their various individual and agency capacities (collectively, the "Existing Lenders") WITNESSETH: ---------- WHEREAS, the Existing Lenders, SouthTrust Bank of Georgia, N.A. ("SouthTrust") and National City Bank, Kentucky ("NCB"), have made various credit facilities in favor of, Law Companies Group, Inc., a Georgia corporation (the "Company"), and certain of its Subsidiaries (together with the Company, the "Borrowers"), and to evidence their agreement as to certain intercreditor matters relating to such credit facilities in favor of the Borrowers, the Existing Lenders, SouthTrust and NCB entered into that certain Intercreditor Agreement, dated as of October 11, 1995 (as amended, restated, supplemented or otherwise modified from time to time, the "Intercreditor Agreement"; capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Intercreditor Agreement); WHEREAS, each of NCB and SouthTrust desires to assign to New Lender, and New Lender desires to accept assignment of and assume, 100% of its right, title and interest in and to its Revolving Credit A Commitment established in favor the Company and all other Obligations (as defined in the Credit Agreement) owed by the Company to NCB and SouthTrust, respectively, to the New Lender; WHEREAS, pursuant to Section 11.1 of the Intercreditor Agreement, NCB and SouthTrust may not assign or otherwise transfer any of their respective rights with respect to the Intercreditor Agreement or any of the Obligations owed to NCB or SouthTrust, and may not transfer or have assumed its commitment under the Credit Agreement, unless the Existing Lenders consent in writing; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the New Lender agrees that it shall be and become a Bank for all purposes of the Intercreditor Agreement and shall be fully liable thereunder as a Bank to the Existing Lenders to the same extent and with the same effect as though the New Lender had been one of the Banks originally executing and delivering the Intercreditor Agreement. All references in the Intercreditor Agreement to "Banks" or any "Banks" shall be deemed to include and to refer to the New Lender. This Joinder shall be governed by and construed in accordance with the laws of the State of Georgia, and all actions directly or indirectly arising out of this Joinder shall be commenced in and resolved by the courts of the State of Georgia. By their signatures below, the Existing Lenders hereby consent to the assignment and transfer by NCB and of all of their respective rights and obligations with respect to the Intercreditor Agreement and all Obligations owed thereto, and to the assignment, transfer and assumption of their respective commitments under the Credit Agreement, by the New Lender and acknowledge that NCB and South Trust are no longer parties to the Intercreditor Agreement. -2- IN WITNESS WHEREOF, the New Lender has caused this Joinder to be duly executed and delivered by its duly authorized officer as of the date first above written. Address for Notices: NEW LENDER: - ------------------- ---------- 200 Galleria Parkway, N.W. NATIONAL BANK OF CANADA Atlanta, Georgia Attn: Mr. Bill Benning By: /s/ William L. Benning ----------------------- Title: V.P. -------------------- -3- [Signature Page to Joinder to Intercreditor Agreement] Acknowledged and agreed: SUNTRUST BANK, ATLANTA By: /s/ J. Christopher Deisley --------------------------- J. Christopher Deisley First Vice President By: /s/ Dennis H. James Jr. --------------------------- Title: AVP -4- [Signature Page to Joinder to Intercreditor Agreement] BARCLAYS BANK, PLC By: /s/ Terry Bond -------------------------------- Title: LENDING SERVICES DIRECTOR -6- [SIGNATURE PAGE TO JOINDER TO INTERCREDITOR AGREEMENT] LAW COMPANIES GROUP, INC. BY: /s/ Bruce C. Coles -------------------- Title: Chairman, CEO -7- EX-10.38 13 SECOND AMENDMENT TO LAW CO. GRP. PENSION PLAN EXHIBIT 10.38 SECOND AMENDMENT TO THE LAW COMPANIES GROUP, INC. PENSION PLAN AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1989 THIS SECOND AMENDMENT to the Law Companies Group, Inc. Pension Plan, As Amended and Restated Effective as of January 1, 1989 (the "Plan"), made as of the day and year last appearing below, by Law Companies Group, Inc. (the "Company"), to be effective as noted below. WITNESSETH: WHEREAS, the Company sponsors and maintains the Plan for the exclusive benefit of its employees and their beneficiaries, and, pursuant to Section 8.4 thereof, the Company has the right to amend the Plan at any time; and WHEREAS, the Company wishes to amend the Plan at this time for the purpose of eliminating the service requirement applicable for early retirement; NOW, THEREFORE, the Plan is hereby amended as follows effective as indicated below: I. Section 1.24 of the Plan is amended effective as of February 14, 1997, to read as follows: 1.24 EARLY RETIREMENT AGE - with respect to a Participant, 55 years of age. II. All other provisions of the Plan not inconsistent herewith are hereby confirmed and ratified. IN WITNESS WHEREOF, this First Amendment to the Plan has been executed by the Company and its corporate seal attached hereto this 14/th/ day of February, 1997. COMPANY: [CORPORATE SEAL] LAW COMPANIES GROUP, INC. ATTEST: By: /s/ Bruce C. Coles -------------------------- Title: ----------------------- By: /s/ Darryl B. Segraves ------------------------------- Title: ---------------------------- EX-10.39 14 FIRST AMENDMENT TO LAW CO. GRP 401-K EXHIBIT 10.39 FIRST AMENDMENT TO THE LAW COMPANIES GROUP, INC. 401(K) SAVINGS PLAN AMENDED AND RESTATED TRUST AGREEMENT THIS FIRST AMENDMENT to The Law Companies Group, Inc. 401(k) Savings Plan Amended and Restated Trust Agreement (the "Trust Agreement"), made as of the day and year noted on the last page hereof, by Law Companies Group, Inc. (the "Company"), to be effective as noted below. W I T N E S S E T H: WHEREAS, the Company sponsors and maintains the Law Companies Group, Inc. 401(k) Savings Plan (the "Plan") for the exclusive benefit of its employees and their beneficiaries; and WHEREAS, the Company has entered into the Trust Agreement with George H. Ferguson III, Lawrence D. Young and Vicki L. Karch (herein collectively the "Trustees") for the purpose of holding and administering certain assets of the Plan; and WHEREAS, the Trustees have, upon the advice of their own separate counsel, requested that the Company modify the indemnification provisions of the Trust Agreement so as to provide indemnification for the Trustees unless their actions are "grossly negligent" rather than the current standard of mere negligence; and WHEREAS, the Company, having considered the request of the Trustees, believes such request appropriate, and wishes to amend the Trust Agreement at this time to effectuate the request of the Trustees; and WHEREAS, Section 7.1 of the Trust Agreement provides that the Company may amend the Trust Agreement at any time, provided, that no such modification or amendment which affects the rights, duties or responsibilities of the Trustees may be made without their consent in writing; NOW, THEREFORE, the Trust Agreement is hereby amended as follows effective as indicated below: Section 3.20 of the Trust Agreement is hereby amended effective as of May 10, 1996, to read as follows: 3.20 Indemnification. The Trustee shall be indemnified by the Company against prospective costs, expenses and liability (including attorney's fees) in connection with all litigation relating to the Plan, this Trust Agreement or the Trust, except in cases in which the Trustee is liable for the gross negligence or willful misconduct relating to such litigation. 1. All other provisions of the Trust Agreement not inconsistent herewith are hereby confirmed and ratified. IN WITNESS WHEREOF, this First Amendment to the Trust Agreement has been executed by the Company and by the Trustees on this 10th day of May, 1996. COMPANY: [CORPORATE SEAL] LAW COMPANIES GROUP, INC. By: /s/ Robert S. Gause ----------------------- Title: Sr. Vice President -------------------- ATTEST: By: /s/ Darryl B. Segraves ------------------------- Title: _____________________ TRUSTEES: /s/ George H. Ferguson III --------------------------- George H. Ferguson III Director of Human Resources /s/ Lawrence D. Young --------------------------- Lawrence D. Young, Esq. Senior Corporate Counsel /s/ Vicki L. Karch --------------------------- Vicki L. Karch Corporate Benefits Administrator 2. EX-10.40 15 SECOND AMENDMENT TO LAW CO. GRP. 401-K EXHIBIT 10.40 SECOND AMENDMENT TO THE THE LAW COMPANIES GROUP, INC. 401(k) SAVINGS PLAN THIS SECOND AMENDMENT to The Law Companies Group, Inc. 401(k) Savings Plan (the "Plan"), made as of the day and year noted on the last page hereof, by Law Companies Group, Inc. (the "Company"), to be effective as noted below. W I T N E S S E T H: WHEREAS, the Company sponsors and maintains the plan for the exclusive benefit of employees and their beneficiaries, and pursuant to Section 12.02(a) thereof, the Company has the right to amend the plan at any time; and WHEREAS, the Company wishes to amend the Plan at this time for the purposes of modifying the correction mechanisms associated with coverage testing, eliminating certain inconsistencies in plan provisions, providing certain default provisions, making certain technical corrections to the provisions of the Plan, suspending the rights of participants and beneficiaries to liquidate their investments in Company stock for the remainder of the current year, and for other purposes; NOW, THEREFORE, the Plan is hereby amended as follows effective as indicated below: 1. A new paragraph (iv) is added after paragraph (iii) of subsection (a) of Section 1.45 of the Plan effective as of November 1, 1995, to read as follows: (iv) Puerto Rican Employees. Employees who are legally domiciled in Puerto Rico shall not be eligible employees and shall not be eligible to participate in this Plan while whey remain so domiciled notwithstanding any provision of this Plan to the contrary. 2. A new Section 1.96A is added after Section 1.96 of the Plan effective as of November 1, 1995, to read as follows: 1.96A Special Contributions Account shall mean the Account of a Participant to which are credited any contributions of an Employer allocated to the Participant under the provisions of Section 3.1(g). 3. Paragraph (ii) of subsection (c) of Section 3.1 of the Plan is amended effective as of November 1, 1995, to read as follows: (ii) Allocation. Qualified Nonelective Contributions for a Plan Year shall be allocated as of the last day of such Plan Year to the Qualified Nonelective Contributions Account of each Participant who is an Employee as of such last day of such Plan Year and who is not a Highly Compensated Participant for such Plan Year in proportion to the ratio which his or her Compensation during such Plan Year bears to the total Compensation of all such Participants for such Plan Year. 4. Paragraph (ii) of subsection (d) of Section 3.1 of the Plan is amended effective as of November 1, 1995, to read as follows: (ii) Allocation. Qualified Matching Contributions for Plan Year shall be allocated as of the last day of such Plan Year to the Qualified Matching Contributions Account of each participant who is an Employee as of such last day of such Plan Year and who is not a Highly Compensated Participant for such Plan Year in proportion to the ratio which his or her Elective Contributions for such Plan Year bears to the total of all such Contributions of all such Participants for such Plan Year. 5. A new subsection (g) is added after subsection (f) of Section 3.1 of the Plan effective as of November 1, 1995, to read as follows: (g) Code (S)410(b) Failsafe Provision. As of any Plan Year in which the disaggregated portion of this Plan attributable to contributions other than Code (S)(S)401k and (m) contributions would, before application of this subsection (g), fail to satisfy the ratio percentage test provisions of Code (S)410(b)(1) and Treas. Reg. (S)1.410(b)-2(b)(2) (herein the "Code Coverage Requirements") (such a Plan Year herein described as a "Failed Plan Year"), then the following provisions shall apply: (i) Determination of Failsafe Participants for a Plan Year. For purposes of this subsection (g), each Participant (1) who is not a Highly Compensated Participant for a Plan Year, (2) who is an Employee on the last day of such Plan Year, (3) who has completed at least 2,000 Hours of Service during such Plan Year, and (4) who has not "benefited" (within the meaning of Treas. Reg. (S)1.410(b)-3) under the Plan for such Plan Year other than by reason of "benefiting" under the Plan's Code (S)(S)401(k) and (m) arrangements shall be considered a "Failsafe Participant" for such Plan Year. Second Amendment to The Law Companies Group, Inc. 401(k) Savings Plan Page 2 (ii) Grouping of Failsafe Participants. All Failsafe Participants for a Failed Plan Year shall be grouped first in order of such Participant's Compensation for such Plan Year beginning with the Failsafe Participant with the Failsafe Participant with the highest Compensation for such Plan Year and ending with the Failsafe Participant with the lowest Compensation for such Plan Year. Then, Failsafe Participants shall be grouped in groups of 100 beginning with the Failsafe Participant with the highest Compensation for such Plan Year, and concluding with a final grouping including the Failsafe Participant with the lowest Compensation for such Plan Year (such final grouping being the only group which may have fewer than 100 such Participants). (iii) Determination of Benefiting Failsafe Participants. For any Failed Plan Year, the Plan Administrator shall determine the number of Participants who are not Highly Compensated Participants who must "benefit" (within the meaning of Treas. Reg. (S)1.410(b)-3) during such Plan Year in order that the Code Coverage Requirements are satisfied for such Plan Year. The Plan Administrator shall then determine the number of groupings (determined under paragraph (ii) above) of Failsafe Participants which must "benefit" in order that the Code Coverage Requirements are satisfied, using the groupings with the highest aggregate Compensation for such Plan Year first, and only using the minimum number of such groupings to the extent absolutely necessary to satisfy the Code Coverage Requirements. Each Failsafe Participant who is included in such a grouping of Failsafe Participants which must so "benefit" (a "Benefiting Failsafe Participant") shall receive an allocation pursuant to paragraph (iv) below. (iv) Special Contribution and Allocation to Benefiting Failsafe Participants. For each Failed Plan Year, each Employer shall make (or cause the Company to make on its behalf) a contribution which shall be determined in the discretion of the Company and which shall be allocated on a per capita basis to the Special Contributions Account of each Benefiting Failsafe Participants (determined pursuant to paragraph (iii) above). (v) Intent. It is the intent of the foregoing provisions to provide that, for any Failed Plan Year, just enough Failsafe Participants (by groups of 100, and in order of decreasing Compensation beginning with the highest compensated Failsafe Participant) shall receive special per capita allocations in such Plan Year in order to that the portion of this Plan attributable to contributions other than Code (S)(S)401(k) and (m) contributions pass the Code Coverage Requirements applicable for such Plan Year, but utilizing no more groupings than are absolutely necessary. 6. A new Section 4.4 is added at the end of Article IV of the Plan effective as of November 1, 1995, to read as follows: 4.4 Retroactive Application. The provisions of this Article shall not only be effective as of the Effective Date, but shall also be effective for the period beginning January 1, 1987, and ending on the Effective Date, and shall supersede provisions of the prior plan document to the contrary. Second Amendment to The Law Companies Group, Inc. 401(k) Savings Plan Page 3 7. A new subsection (h) is added at the end of Section 6.1 of the Plan effective as of November 1, 1995, to read as follows: (h) Special contributions allocated to a Participant, if any, under the provisions of Section 3.1(g) of this Plan. 8. The last sentence of clause (II) of subparagraph (A) of paragraph (i), subsection(e), Section 6.2 of the Plan is amended to read as follows effective as of August 14, 1996: If no such investment direction of the Participant is timely received, the proceeds from such liquidation shall be invested entirely in the lowest-risk investment among other existing non- Company stock options. 9. A new sentence is added at the end of subparagraph (B) of paragraph (ii) of subsection (e) of Section 6.2 of the Plan effective as of November 1, 1995, to read as follows: In the event that the Company does not provide for allocation of a Participant's Matching Elective Contributions Accounts in shares of Company stock, the provisions of subsection (g) of Section 6.2 shall apply. 10. The last sentence of subparagraph (B) of paragraph (iv) of subsection (e) of Section 6.2 of the Plan is amended effective as of August 14, 1996, to read as follows: Any shares of Company Stock to be liquidated shall, as soon as administratively practicable following receipt of a Participant's direction to liquidate such shares and transfer the proceeds thereof to another investment, or as soon as administratively practicable following the date on which the Participant ceases to be an Employee, remain invested in Company Stock until the Trade Date which next follows the date of receipt of the Participant's direction or the date the Participant ceases to be an Employee by at least 30 days, at which time all such shares of Company Stock shall be liquidated and invested in other investments as the Participant has directed, or, if no such direction is received, invested entirely in the lowest-risk investment among the other existing options. Second Amendment to The Law Companies Group, Inc. 401(k) Savings Plan Page 4 11. A new subparagraph (C) is added after subparagraph (B) of paragraph (iv), subsection (e), Section 6.2 of the Plan effective as of August 14, 1996, to read as follows: (C) No Participant Direction on Certain Trade Dates. Notwithstanding any provision of the Plan to the contrary, Participants and Beneficiaries shall not be entitled to direct the liquidation of their Accounts invested in Company Stock on the normally scheduled Trade Dates occurring on August 15, 1996, and November 15, 1996. The foregoing sentence shall not affect liquidations of Account investments in Company Stock which are required under clause (II) of subparagraph (A), paragraph (i) of this subsection (e), Section 6.2. 12. A new subsection (g) is added after subsection (f) of Section 6.2 of the Plan effective as of November 1, 1995, to read as follows: (g) Default Provisions in Absence of Participant Directions. In the event that, pursuant to the foregoing provisions of this Section, Participants and/or Beneficiaries are entitled to direct the investment of all or a portion of their Plan Accounts, and, at a time when such direction is required, no investment direction of the Participant or Beneficiary has been timely received, investment of such Participant's or Beneficiary's Accounts shall be made entirely in the lowest-risk investment among all existing optional investments, except to the extent of an express requirement to the contrary in the foregoing provisions of this Section. 13. Subsection (b) of Section 8.5 of the Plan is amended effective as of August 14, 1996, to read as follows: (b) Application of Forfeited Amounts. Any forfeitures arising under paragraph (i) and (ii) of subsection (a) above during a Plan Year shall be used to reduce reasonable administrative expenses consistent with Sections 10.3 and 11.2, or shall be used to reduce future contributions of Employers under Section 3.1, as determined by the Company in its sole discretion. 14. Section 11.2 of the Plan is amended effective as of November 1, 1995, by striking "10.2" and inserting in lieu thereof "10.3". Second Amendment to The Law Companies Group, Inc. 401(k) Savings Plan Page 5 IN WITNESS WHEREOF, this Second Amendment to the Plan has been executed by the Company and its corporate seal attached hereto this 14th day of August, 1996. COMPANY: [CORPORATE SEAL] LAW COMPANIES GROUP, INC. By: /s/ Bruce C. Coles/BRUCE C. COLES ------------------------- TITLE: CEO/CHAIRMAN ---------------------- ATTEST: By: /s/ Darryl B. Segraves ----------------------- Title: -------------------- Second Amendment to The Law Companies Group, Inc. 401(k) Savings Plan Page 6 EX-10.41 16 THIRD AMENDMENT TO LAW CO. GRP. 401-K EXHIBIT 10.41 THIRD AMENDMENT TO THE THE LAW COMPANIES GROUP, INC. 401(k) SAVINGS PLAN THIS THIRD AMENDMENT to The Law Companies Group, Inc. 401(k) Savings Plan (the "Plan"), made as of the day and year noted on the last page hereof, by Law Companies Group, Inc. (the "Corporation"), to be effective as noted below. W I T N E S S E T H: WHEREAS, the Corporation sponsors and maintains the Plan for the exclusive benefit of its employees and their beneficiaries, and, pursuant to Section 12.2(a) thereof, the Corporation has the right to amend the Plan at any time; and WHEREAS, the Corporation wishes to amend the Plan at this time for the purpose of modifying the profit sharing provisions of the Plan, and for other purposes; NOW, THEREFORE, the Plan is hereby amended as follows effective as indicated below: I. Paragraphs (i), (ii) and (iv) of subsection (a) of Section 3.1 of the Plan are amended effective as of January 1, 1997, to read as follows: (i) Amount. As of each Trade Date or as of the last day of the Plan Year, each Employer may make (or cause the Company to make on its behalf) ESOP Contributions to this Plan from time to time subject to the provisions of Section 3.4 of this Plan. The amount of such ESOP Contributions shall be determined solely in the discretion of the Company, may be zero, and shall be communicated to Employees. (ii) Contingent Allocation. ESOP Contributions (which shall not include any special contributions made for the purposes outlined in Sections 8.5(c) or 13.11 of this Plan) which may be made as of a Trade Date shall be allocated as of such Trade Date for which the contribution is made to the ESOP Contributions Account of each Allocation Participant in proportion to the percentage that such Participant's Contribution Compensation paid during the Plan Year prior to the 15th of the month immediately preceding such Trade Date bears to the total Contribution Compensation paid during such Plan Year prior to the 15th of the month immediately preceding such trade Date for all such Participants, subject to paragraph (v) below. ESOP Contributions (which shall not include any special contributions made for the purposes outlined in Sections 8.5(c) or 13.11 of this Plan) which may be made as of the last day of a Plan Year (or which may be made thereafter, but are deemed made as of such last day of the Plan Year pursuant to Code (S)404(a)(6)) shall be allocated as of such last day of the Plan Year to the ESOP Contributions Account of each Allocation Participant in proportion to the percentage that such Participant's Contribution Compensation paid during such Plan Year bears to the total Contribution Compensation paid during such Plan Year for all such Participants, subject to paragraph (v) below. ... (iv) Investment of ESOP Contributions. All amounts allocated to a Participant's ESOP Contribution Account may, in the sole discretion of the Company, be invested primarily in, or may be contributed in the form of, whole or fractional (to thousandths of a share) shares of Company Stock. See Section 6.2(e)(ii)(A) of this Plan. I. Paragraph (ii) of subsection (e) of Section 6.2 of the Plan is amended effective January 1, 1997, to read as follows: (ii) Investment of ESOP Contribution, Capital Reallocation Incentive Contribution and Matching Elective Contribution Accounts. Subject to the provisions of subparagraph (A)(II) of the previous paragraph (i), the Company may, in its sole discretion, provide (i) that all amounts allocated to a Participant's ESOP Contribution Accounts (including Capital Reallocation Incentive Contributions) shall, for a period of time to be determined by the Company in its sole discretion, be invested primarily in, or shall be contributed in the form of, whole or fractional (to thousandths of a share) shares of Company Stock, and/or (ii) that any portion of, or all of the amounts allocated to a Participant's Matching Elective Contributions Accounts shall, for a period of time to be determined by the Company in its sole discretion, be invested primarily in, or shall be contributed in the form of, shares of Company Stock. If the Company does so provide, Participants shall be notified of the period of time during which such investment requirements shall be imposed (which may be related to the degree of vesting of such Accounts) and the portion of Participant's allocations to which such investment requirement shall apply prior to the beginning of such period of time. In the event that the Company does not provide for the investment of a Participant's ESOP Contribution Accounts or Matching Elective Contributions Accounts in shares of Company Stock, the provisions of subsection (g) of Section 6.2 shall apply. I. All other provisions of the Plan not inconsistent herewith are hereby confirmed and ratified. IN WITNESS WHEREOF, this Third Amendment to the Plan has been executed by the Corporation and its corporate seal attached hereto this 21st day of ---- December, 1996. CORPORATION: [CORPORATE SEAL] LAW COMPANIES GROUP, INC. By: Robert B. Fooshee Title: ATTEST: By:/s/ Darryl B. Segraves ---------------------- Title: -------------------- EX-10.42 17 FOURTH AMENDMENT TO LAW CO. GRP. 401-K EXHIBIT 10.42 FOURTH AMENDMENT TO THE LAW COMPANIES GROUP, INC. 401(k) SAVINGS PLAN THIS FOURTH AMENDMENT to the Law Companies Group, Inc. 401(k) Savings Plan (the "Plan"), made as of the day and year noted on the last page hereof, by Law Companies Group, Inc. (the "Company"), to be effective as noted below. W I T N E S S E T H: WHEREAS, the Company sponsors and maintains the Plan for the exclusive benefit of its employees and their beneficiaries, and, pursuant to Section 12.2(a) thereof, the Company has the right to amend the Plan at any time; and WHEREAS, the Company wishes to amend the Plan at this time for the purpose of adding an additional annual discretionary matching contribution component to the Plan, providing that different matching percentages may be made depending upon a participant's level of contributions, and for other purposes; NOW, THEREFORE, the Plan is hereby amended as follows effective as indicated below: I. Section 1.69 of the Plan is amended effective as of January 1, 1997, by adding the following sentence at the end thereof: The Company may determine that the Matching Percentage for a period may differ depending upon the level (on a percentage of Compensation basis) at which a Participant is contributing (e.g., the Matching Percentage may be 100% for the first 2% of Compensation contributed, and 50% for the next 3% of Compensation contributed). Any such differentiation in Matching Percentages shall be nondiscriminatory and uniform for all Participants who are contributing the same percentage of Compensation. II. A new subsection (h) is added after subsection (g) of Section 3.1 of the Plan to read as follows effective as of January 1, 1997: (h) Additional Discretionary Matching Elective Contributions. (i) Amount. In accordance with Section 3.3 of this Plan, as soon as practicable after the end of each Plan Year, each Employer shall make additional discretionary Matching Elective Contributions to this Plan in an amount equal to the aggregate amounts to be allocated pursuant to paragraph (ii) below to those Participants (1) who were employed by such Employer on the last day of such Plan Year and (2) who were credited with at least 1000 Hours of Service during such Plan Year. The aggregate amount of such additional discretionary Matching Elective Contributions to be made by all Employers shall be determined as soon as administratively practicable after the end of each Plan Year by the Company in its sole discretion, may be zero, and shall be communicated to Employees. (ii) Allocation. Additional discretionary Matching Elective Contributions made with respect to a Plan Year shall be allocated as soon as practicable following the date all such contributions from each Employer are received by the Insurance Company or the Trustee, as applicable, to the Matching Elective Contributions Account of each Participant (1) who was employed by such Employer on the last day of such Plan Year and (2) who was credited with at least 1000 Hours of Service during such Plan Year, so that each such Participant's Account receives an allocation of an amount equal to the total of such additional discretionary Matching Elective Contributions made for such Plan Year multiplied by a fraction, the numerator of which is the aggregate Elective Contributions made by such Participant for such Plan Year, and the denominator of which is the aggregate Elective Contributions made by all such Participants for such Plan Year. (iii) Treatment of Additional Discretionary Matching Elective Contributions. For all purposes of this Plan, additional discretionary Matching Elective Contributions made under this subsection (h) shall be treated in the same manner as Matching Elective Contributions made under Section 3.1(e), except for the allocation thereof as provided in this subsection (h). For example, the provisions of Section 3.6 through 3.9 shall apply to such contributions. III. All other provisions of the Plan not inconsistent herewith are hereby confirmed and ratified. IN WITNESS WHEREOF, this Fourth Amendment to the Plan has been executed by the Company and its corporate seal attached hereto this 14th day of February, 1997. COMPANY: [CORPORATE SEAL] LAW COMPANIES GROUP, INC. By: /s/ Bruce T. Coles -------------------------------- Title: ----------------------------- ATTEST: By: Darryl B. Segraves ----------------------- Title: -------------------- EX-11 18 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11.01 ITEM 14(c) Exhibit 11.01 LAW COMPANIES GROUP, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
Year Ended December 31, 1996 1995 1994 ----------------------------------------------- Average number of shares of capital stock outstanding before adjustments 1,906,902 1,903,185 2,156,409 Net effect of dilutive stock options-based on the treasury stock method using average market price 0 0 0 ----------------------------------------------- Average number of shares of capital stock outstanding 1,906,902 1,903,185 2,156,409 =============================================== Net income (loss) $1,910,000 ($2,266,000) ($11,464,000) =============================================== Net income (loss) per share of capital stock $1.00 ($1.19) ($5.32) ===============================================
The difference between primary income per share and fully diluted income per share is insignificant; therefore, primary income per share is presented. EX-21.01 19 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.01 LAW COMPANIES GROUP, INC. DOMESTIC SUBSIDIARIES (INCLUDING PARTNERSHIPS)
PLACE OF SUBSIDIARY INCORPORATION OWNERSHIP - ---------- ------------- --------- Law International, Inc. Georgia Law Companies Group, Inc. (100%) Gibb U.S.A. Delaware Law International, Inc. (100%) Gibb International Holdings, Inc. Delaware Law International, Inc. (100%) Law Engineering and Georgia Law Companies Group, Inc. (100%) Environmental Services, Inc. ("LE2S") Law Environmental Consultants, Inc. Georgia LE2S (100%) On-Site Technology, Inc. Georgia LE2S (100%) Ensite, Inc. Kentucky LE2S (100%) Envirosource Incorporated Georgia LE2S (50%); The Spear Group, Inc. (50%) LeRoy Crandall & Associates California Law Companies Group, Inc. (100%) Law/Sundt, Inc. California LE2S (50%); SundtCorp (50%). IAM/Environmental, Inc. Texas Law Companies Group, Inc. and LE2S (100%) Law Environmental N.C., Inc. North Carolina LE2S (100%) Law/Spear L.L.C. Georgia LE2S (50%); The Spear Group, Inc. (50%) Law International Sales Company U.S. Virgin Islands Law International, Inc. (100%)
LAW COMPANIES GROUP, INC. INTERNATIONAL SUBSIDIARIES (INCLUDING PARTNERSHIPS)
PLACE OF SUBSIDIARY INCORPORATION OWNERSHIP - ---------- ------------- --------- Gibb Limited England Gibb Holdings, Ltd. (100%) Law International Thai Ltd Thailand Law International, Inc. (100%) Gibb Africa Consulting Engineers Ltd Cyprus Gibb International Holdings, Inc. (100%) Gibb Africa International Ltd. (Cyprus) Cyprus Gibb Africa Consulting Engineers Ltd. (100%) Sir Alexander Gibb (Namibia) (Pty) Ltd Republic of Gibb Africa International Ltd. (100%) Namibia Gibb Swaziland (Pty) Ltd Swaziland Gibb Africa International Ltd. (100%) Gibb (Lesotho) Pty Ltd Kingdom of Gibb Africa International Ltd. (100%) Lesotho Gibb (Botswana) (Pty) Ltd Botswana Gibb Africa International Ltd. (100%) Gibb Eastern Africa Ltd Kenya Gibb Africa International Ltd. (100%) Gibb (Malawi) Ltd Malawi Gibb Africa International Ltd. (100%) Gibb (Mauritius) Ltd Mauritius Gibb Africa International Ltd. (100%) Gibb Africa Services (Pty) Ltd S. Africa Gibb Africa International Ltd. (100%) Sir Alexander Gibb & Partners (Zimbabwe) Zimbabwe Gibb Africa International Ltd. (100%) (Private) Ltd Hill Kaplan Scott Law Gibb (Pty) Ltd S. Africa Gibb Africa Consulting Engineers Limited (100%) HKS-Law Gibb Share Trust (Pty) Ltd S. Africa Hill Kaplan Scott Law Gibb (Pty) Ltd (.01%) MAM Services (Pty) Ltd. S. Africa Hill Kaplan Scott Law Gibb (Pty) Ltd (100%) Geoscience Laboratories (Pty) Ltd S. Africa Hill Kaplan Scott Law Gibb (Pty) Ltd (.01%) Hill Kaplan Scott (Ciskei) Inc. Republic of Hill Kaplan Scott Law Gibb (Pty) Ltd (100%) Ciskei Hill Kaplan Scott (Transkei) Inc. Republic of Hill Kaplan Scott Law Gibb (Pty) Ltd (100%) Transkei
Hill Kaplan Scott (Venda) Inc. Republic of Hill Kaplan Scott Law Gibb (Pty) Ltd (100%) Venda HKS Agriland (Pty) Ltd S. Africa Hill Kaplan Scott (Ciskei) Incorporated (51%) Gibb Petermuller & Partners (Cyprus) Ltd Cyprus Gibb International Holdings, Inc. (100%) Gibb Petermuller & Partners (Guernsey) Ltd Channel Islands Gibb Petermuller & Partners (Cyprus) Ltd (100%) Giban Danismanlik ve Muhendislik Limited Turkey Gibb International Holdings, Inc. (50%) Sir Alexander Gibb (Polska) Sp z o.o. Poland Gibb International Holdings, Inc. (100%) Gibb Petermuller & Partners (Europe) Ltd England Gibb International Holdings, Inc. (100%) Gibb Petermuller & Partners (Middle East) Ltd England Gibb International Holdings, Inc. (100%) Gibb Petermuller & Partners, O.E. Greece Gibb Petermuller & Partners (Middle East) Limited (50%) Gibb Petermuller & Partners (Europe) Limited (50%) Kattan-Gibb British Gibb Petermuller & Partners, O.E. (24%) Joint Venture Gibb Limited (25%) Gibb Holdings Limited England Gibb International Holdings, Inc. (100%) Gibb Ltd England Gibb Holdings Limited (100%) Law Companies Group, Ltd Jersey Gibb Ltd (.01%) Gibb-Anglian Ltd England Gibb Ltd (50%) Sir Alexander Gibb & Partners Ltd. England Gibb Limited (100%) Westminster and Earley Services Ltd England Gibb Holdings Limited (100%) Gibb Tanacsadasi Kft Hungary Gibb Holdings Limited (100%) WCML Development Company Ltd England Gibb Holdings Limited (25%) Prointec, S.A. Spain Gibb Holdings Limited (20%) Gibb Holdings Ltd England Gibb International Holdings, Inc. (100%) Crispin Wride Architectural Design Studios Ltd. England Gibb Holdings Ltd. (100%) Gibb Architects Ltd England Gibb Holdings Ltd (50%) Gibb Petermuller & Partners (Guernsey) Limited (50%)
Nick Derbyshire Design Associates Ltd England Gibb Holdings Limited (100%) Gibb Overseas (Jersey) Ltd Channel Islands Gibb International Holdings, Inc. (100%) Gibb (Hong Kong) Ltd Hong Kong Gibb Overseas (Jersey) Ltd (100%) Gibb Overseas Ltd England Gibb Overseas (Jersey) Ltd (100%) Gibb Gulf E.C. State of Bahrain Gibb Overseas Ltd (100%) Gibb Australia Pty. Ltd Australia Gibb Overseas Ltd (47%) LEX International Insurance Co. Ltd. Bermuda Law Companies Group, Inc. (100%) Carriber Insurance Co., Ltd. (Bermuda) Bermuda Law Companies Group, Inc. (100%) Law Mexico, S.A. de C.V. (D.F. Mex) Mexico Law Engineering and Environmental Services, Inc. (90%) Law Companies Group, Inc. (10%) Drexxa Law, S.A. de C.V. (D.F. Mex) Mexico Law Mexico, S.A. de C.V. (D.F. Mex) (49%) Gibb Portugal Lda. Portugal Gibb International Holdings, Inc. (99.95%) and Gibb Limited (.05%)
EX-23.01 20 CONSENT OF ERNST & YOUNG LLP. EXHIBIT 23.01 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-46702) pertaining to the 1990 Stock Option Plan of Law Companies Group, Inc., the Registration Statement (Form S-8 No. 33-48096) pertaining to the Employee Stock Purchase Plan of Law Companies Group, Inc., and the Registration Statement (Form S-8 No. 33-99114) pertaining to the 401(k) Savings Plan of Law Companies Group, Inc. of our report dated March 14, 1997, with respect to the consolidated financial statements and schedule of Law Companies Group, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1996. /s/ Ernst & Young LLP --------------------- Ernst & Young LLP Atlanta, Georgia March 20, 1997 EX-27 21 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 8,097 0 61,480 4,465 29,961 99,263 62,899 40,263 138,697 70,804 0 0 0 1,905 15,685 138,697 323,179 323,179 0 153,408 157,414 683 4,715 4,418 2,615 1,910 0 0 0 1,910 1.00 1.00
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