<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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:
<TABLE>
<S> <C>
. 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
</TABLE>
6
<PAGE>
Services are primarily performed in relation to infrastructure and business
development, including but not limited to:.
<TABLE>
<S> <C>
. 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
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Year Ended December 31
1996 1995 1994 1993 1992
--------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
The table above includes the consolidation of IAM/E from April 1992 through May
1993.
17
<PAGE>
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.
<TABLE>
<CAPTION>
Year to Year Percentage
Year Ended December 31 Increase (Decrease)
1996 1995 1994 1996 vs 1995 1995 vs 1994
---------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
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%
</TABLE>
18
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------- -------------------------------------- -----------------
<S> <C> <C>
/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
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------- -------------------------------------- -----------------
<S> <C> <C>
/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
</TABLE>
31
<PAGE>
ITEM 14(a) FINANCIAL STATEMENTS
Law Companies Group, Inc.
Consolidated Audited Financial Statements
For the years ended December 31, 1996 and 1995
Contents
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
<PAGE>
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
<PAGE>
Law Companies Group, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
------------------------------------------------------
1996 1995
------------------------------------------------------
(In thousands of dollars, except per share amounts)
<S> <C> <C>
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
======================================================
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
December 31
------------------------------------------------------
1996 1995
------------------------------------------------------
(In thousands of dollars, except per share amounts)
<S> <C> <C>
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
======================================================
</TABLE>
See accompanying notes.
3
<PAGE>
Law Companies Group, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
-------------------------------------------------------------------------
(In thousands of dollars, except per share amounts)
<S> <C> <C> <C>
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
=========================================================================
</TABLE>
See accompanying notes.
4
<PAGE>
ITEM 14(a) Financial Statements
Law Companies Group, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C>
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
================================================================================
</TABLE>
See accompanying notes.
5
<PAGE>
Law Companies Group, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
---------------------------------------------------
1996 1995 1994
---------------------------------------------------
(In thousands of dollars)
<S> <C> <C> <C>
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
===================================================
</TABLE>
See accompanying notes.
6
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
December 31
------------------------------
1996 1995
------------------------------
<S> <C> <C>
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
==============================
</TABLE>
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
<PAGE>
Law Companies Group, Inc.
Notes to Consolidated Financial Statements
(In thousands of dollars)
<TABLE>
<CAPTION>
Amended Credit Facilities (1)
- -----------------------------
Maximum
Nature Amount (4) Interest Rate (6) Expiration Date (8)
- ------ ---------- ----------------- -------------------
<S> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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:
<TABLE>
<S> <C>
1997 $ 2,206
1998 36,751
1999 2,771
2000 1,861
2001 1,223
Thereafter 241
-----------
$45,053
===========
</TABLE>
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:
<TABLE>
<S> <C>
1997 $16,084
1998 13,470
1999 10,637
2000 7,497
2001 5,809
Thereafter 29,651
-----------
$83,148
===========
</TABLE>
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
<PAGE>
Law Companies Group, Inc.
Notes to Consolidated Financial Statements
(In thousands of dollars)
Net periodic pension costs consist of the following components:
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------------------------------------
1996 1995 1994
------------------------------------------------------------------------------
<S> <C> <C> <C>
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
==============================================================================
</TABLE>
The following table sets forth the funded status and net liability recognized
for the plan:
<TABLE>
<CAPTION>
December 31
---------------------------------------------------
1996 1995
---------------------------------------------------
<S> <C> <C>
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)
===================================================
</TABLE>
Actuarial assumptions used to determine net periodic pension costs are as
follows:
<TABLE>
<CAPTION>
December 31
---------------------------------------------------------------
1996 1995 1994
---------------------------------------------------------------
<S> <C> <C> <C>
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%
</TABLE>
12
<PAGE>
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
<PAGE>
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
<PAGE>
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):
<TABLE>
<CAPTION>
1996 1995
----------------------------------
<S> <C> <C>
Pro forma net income (loss) $1,768 $(2,275)
Pro forma earnings per share:
Primary and fully diluted $0.93 $(1.20)
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------------------------------------------
Weighted-average Weighted-average Weighted-average
Options exercise price Options exercise price Options exercise price
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------------------------
<S> <C> <C> <C>
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)
====================================================================
</TABLE>
The federal, state and foreign components of the provision (benefit) for income
taxes are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------
<S> <C> <C> <C>
Federal $ 730 $ (1,696) $ (810)
State 7 (270) (336)
Foreign 1,878 2,993 (373)
---------------------------------------------------------
$ 2,615 $ 1,027 $ (1,519)
=========================================================
</TABLE>
16
<PAGE>
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:
<TABLE>
<CAPTION>
December 31
--------------------------------------------------
1996 1995
--------------------------------------------------
<S> <C> <C>
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
==================================================
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------------------------
<S> <C> <C> <C>
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%
================================================================
</TABLE>
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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
For the year ended December 31
----------------------------------------------------------------
1996 1995 1994
----------------------------------------------------------------
<S> <C> <C> <C>
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
================================================================
</TABLE>
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
<PAGE>
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
<PAGE>
ITEM 14(a) SUPPLEMENTAL FINANCIAL SCHEDULE
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
LAW COMPANIES GROUP, INC. AND SUBSIDIARIES
(Dollars in 000's)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
Beginning Additions Ending
Description Balance Expense Other (1) Deductions (2) Balance
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
=================================================================================
</TABLE>
(1) Principally recoveries of previously written-off receivables and effects of
foreign currency exchange adjustments.
(2) Principally write-offs of receivables.
<PAGE>
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).
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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:
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT 3.02
BYLAWS
OF
LAW COMPANIES GROUP, INC.
A GEORGIA CORPORATION
AS AMENDED THROUGH
OCTOBER, 1996
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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]
<PAGE>
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]
<PAGE>
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]
<PAGE>
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]
<PAGE>
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]
<PAGE>
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]
<PAGE>
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]
<PAGE>
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]
<PAGE>
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.
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
__________________________________________________________________
<PAGE>
-2-
Lovell White Durrant
65 Holborn Viaduct
London EC1A 2DY
A1/MJL/DS 001BB.37624
<PAGE>
INDEX
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
-ii-
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
-iii-
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
-iv-
<TABLE>
<S> <C>
EXHIBIT
DISCLOSURE LETTER........................................................... 94
</TABLE>
<PAGE>
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.
<PAGE>
(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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
SCHEDULE 1
----------
UK QUALIFYING SUBSIDIARIES
NAME REGISTERED NUMBER REGISTERED OFFICE
Gibb Holdings Ltd 2387714 Gibb House
427 London Road
Reading
Berkshire
RG6 1BL
-67-
<PAGE>
SCHEDULE 2
----------
SPECIFIED SUBSIDIARIES
NAME REGISTERED NUMBER COUNTRY OF INCORPORATION
Gibb Africa International Limited 36926 Cyprus
[Gibb (Botswana)]?
-68-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
- 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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
[ (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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
EXHIBIT
-------
DISCLOSURE LETTER
-92-
<PAGE>
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.
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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:
<PAGE>
"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-
<PAGE>
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
---------------------- -----------------------------
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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
<PAGE>
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-
<PAGE>
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-
<PAGE>
[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-
<PAGE>
[Signature Page to Joinder to Intercreditor Agreement]
BARCLAYS BANK, PLC
By: /s/ Terry Bond
--------------------------------
Title: LENDING SERVICES DIRECTOR
-6-
<PAGE>
[SIGNATURE PAGE TO JOINDER TO INTERCREDITOR AGREEMENT]
LAW COMPANIES GROUP, INC.
BY: /s/ Bruce C. Coles
--------------------
Title: Chairman, CEO
-7-
<PAGE>
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.
<PAGE>
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:
----------------------------
<PAGE>
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
<PAGE>
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:
--------------------
<PAGE>
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
<PAGE>
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.
<PAGE>
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:
--------------------
<PAGE>
EXHIBIT 11.01
ITEM 14(c) Exhibit 11.01
LAW COMPANIES GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
-----------------------------------------------
<S> <C> <C> <C>
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)
===============================================
</TABLE>
The difference between primary income per share and fully diluted
income per share is insignificant; therefore, primary income per
share is presented.
<PAGE>
EXHIBIT 21.01
LAW COMPANIES GROUP, INC.
DOMESTIC SUBSIDIARIES (INCLUDING PARTNERSHIPS)
<TABLE>
<CAPTION>
PLACE OF
SUBSIDIARY INCORPORATION OWNERSHIP
- ---------- ------------- ---------
<S> <C> <C>
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%)
</TABLE>
<PAGE>
LAW COMPANIES GROUP, INC.
INTERNATIONAL SUBSIDIARIES (INCLUDING PARTNERSHIPS)
<TABLE>
<CAPTION>
PLACE OF
SUBSIDIARY INCORPORATION OWNERSHIP
- ---------- ------------- ---------
<S> <C> <C>
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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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%)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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%)
</TABLE>
<PAGE>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 8,097
<SECURITIES> 0
<RECEIVABLES> 61,480
<ALLOWANCES> 4,465
<INVENTORY> 29,961
<CURRENT-ASSETS> 99,263
<PP&E> 62,899
<DEPRECIATION> 40,263
<TOTAL-ASSETS> 138,697
<CURRENT-LIABILITIES> 70,804
<BONDS> 0
0
0
<COMMON> 1,905
<OTHER-SE> 15,685
<TOTAL-LIABILITY-AND-EQUITY> 138,697
<SALES> 323,179
<TOTAL-REVENUES> 323,179
<CGS> 0
<TOTAL-COSTS> 153,408
<OTHER-EXPENSES> 157,414
<LOSS-PROVISION> 683
<INTEREST-EXPENSE> 4,715
<INCOME-PRETAX> 4,418
<INCOME-TAX> 2,615
<INCOME-CONTINUING> 1,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,910
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
