-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F+8kfd9x6nBZ6fYTU9BR0fyWOKN1UajZSwKi08UAK+ZAQLwPqvj+2smynIa7AWHc /KthTpINi2cpplgTIYcaPQ== 0000950144-98-012323.txt : 19981113 0000950144-98-012323.hdr.sgml : 19981113 ACCESSION NUMBER: 0000950144-98-012323 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROFIT RECOVERY GROUP INTERNATIONAL INC CENTRAL INDEX KEY: 0001007330 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 582213805 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28000 FILM NUMBER: 98744059 BUSINESS ADDRESS: STREET 1: 2300 WINDY RIDGE PKWY STREET 2: STE 100 N CITY: ATLANTA STATE: GA ZIP: 30339-8426 BUSINESS PHONE: 7707793900 MAIL ADDRESS: STREET 1: 2300 WINDY RIDGE PKWY STREET 2: STE 100 NORTH CITY: ATLANTA STATE: GA ZIP: 30339-8426 10-Q 1 PROFIT RECOVERY GROUP INTERNATIONAL, INC. 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- FORM 10-Q --------------------- (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO____________
COMMISSION FILE NUMBER 0-28000 --------------------- THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) --------------------- GEORGIA 58-2213805 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2300 WINDY RIDGE PARKWAY 30339-8426 SUITE 100 NORTH (Zip Code) ATLANTA, GEORGIA (Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (770) 779-3900 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of outstanding shares of the issuer's no par value common stock as of October 31, 1998, the latest practicable date, was 23,788,139. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED SEPTEMBER 30, 1998 INDEX
PAGE NO. -------- PART I. Financial Information Item 1. Financial Statements (Unaudited) 1 Condensed Consolidated Statements of Earnings -- Three and nine month periods ended September 30, 1998 and September 30, 1997................................. 2 Condensed Consolidated Balance Sheets -- September 30, 1998 and December 31, 1997............... 3 Condensed Consolidated Statements of Cash Flows -- Nine months ended September 30, 1998 and September 30, 1997................................................... 4 Notes to Condensed Consolidated Financial Statements...... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations......................... 13 Item 3. Quantitative and Qualitative Disclosures about Market Risk................................................. PART II. Other Information........................................... 14 Signatures............................................................ 16
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
NINE MONTHS THREE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- ------------------- 1998 1997 1998 1997 -------- -------- -------- ------- Revenues........................................... $61,803 $29,627 $133,881 $76,445 Cost of revenues................................... 30,078 14,693 68,360 39,553 Selling, general and administrative expenses....... 19,312 8,790 46,332 25,709 ------- ------- -------- ------- Operating income................................. 12,413 6,144 19,189 11,183 Interest income (expense), net..................... (1,451) 14 (1,589) 132 ------- ------- -------- ------- Earnings before income taxes..................... 10,962 6,158 17,600 11,315 Income taxes....................................... 4,297 2,400 6,896 4,397 ------- ------- -------- ------- Net earnings..................................... $ 6,665 $ 3,758 $ 10,704 $ 6,918 ======= ======= ======== ======= Earnings per share (Note B): Basic............................................ $ 0.29 $ 0.21 $ 0.50 $ 0.38 ======= ======= ======== ======= Diluted.......................................... $ 0.28 $ 0.20 $ 0.47 $ 0.37 ======= ======= ======== ======= Weighted average shares outstanding (Note B): Basic............................................ 22,963 18,277 21,431 18,184 ======= ======= ======== ======= Diluted.......................................... 23,810 18,910 22,939 18,720 ======= ======= ======== =======
See accompanying notes to condensed consolidated financial statements. 1 4 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ ASSETS Current assets: Cash and cash equivalents (Note D)........................ $ 15,020 $ 19,386 Receivables: Billed contract receivables............................ 19,332 12,100 Unbilled contract receivables.......................... 65,051 41,771 Employee advances...................................... 4,541 2,299 -------- -------- Total receivables................................. 88,924 56,170 Prepaid expenses and other current assets................. 2,061 2,430 -------- -------- Total current assets.............................. 106,005 77,986 -------- -------- Property and equipment: Computer and other equipment.............................. 21,804 10,658 Furniture and fixtures.................................... 2,552 2,111 Leasehold improvements.................................... 3,717 1,760 -------- -------- 28,073 14,529 Less accumulated depreciation and amortization............ 9,194 5,760 -------- -------- 18,879 8,769 -------- -------- Noncompete agreements, less accumulated amortization........ 2,895 3,471 Deferred loan costs, less accumulated amortization.......... 1,921 24 Goodwill, less accumulated amortization..................... 153,371 39,591 Deferred income taxes....................................... 3,083 3,585 Other assets................................................ 458 459 -------- -------- $286,612 $133,885 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Note payable to bank...................................... $ 67 $ 81 Current installments of long-term debt.................... 88 1,428 Accounts payable and accrued expenses..................... 12,446 4,835 Accrued payroll and related expenses...................... 33,953 26,075 Deferred income taxes..................................... 9,645 9,917 Deferred revenue.......................................... 985 1,087 -------- -------- Total current liabilities......................... 57,184 43,423 Long-term debt, excluding current installments.............. 81,141 24,365 Deferred compensation....................................... 3,200 2,563 Other long-term liabilities................................. 2,736 462 -------- -------- Total liabilities................................. 144,261 70,813 -------- -------- Shareholders' equity (Note F): Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outstanding in 1998 and 1997................................................... -- -- Common stock, no par value; stated value $.001 per share. Authorized 60,000,000 shares; issued and outstanding 23,143,705 in 1998 and 19,193,676 in 1997.............. 23 19 Additional paid-in capital................................ 117,557 48,195 Cumulative translation adjustments........................ (1,940) (1,149) Retained earnings......................................... 26,711 16,007 -------- -------- Total shareholders' equity........................ 142,351 63,072 -------- -------- $286,612 $133,885 ======== ========
See accompanying notes to condensed consolidated financial statements. 2 5 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, -------------------- 1998 1997 -------- -------- Cash flows from operating activities: Net earnings.............................................. $ 10,704 $ 6,918 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: Depreciation and amortization.......................... 7,366 3,018 Loss on sale of property and equipment................. 26 -- Deferred income taxes.................................. 637 -- Deferred compensation expense.......................... 237 434 Cumulative translation adjustments..................... (1,582) (25) Changes in assets and liabilities, net of effect of acquisitions: Contract receivables................................. (31,864) (10,990) Prepaids and other current assets.................... 413 (743) Refundable income taxes.............................. -- 2,049 Other assets......................................... (1,680) (93) Accounts payable and accrued expenses................ 2,836 333 Accrued payroll and other accrued liabilities........ 9,016 1,084 -------- -------- Net cash (used in) provided by operating activities...................................... (3,891) 1,985 -------- -------- Cash flows from investing activities: Purchase of property and equipment........................ (13,015) (4,054) Purchase of companies..................................... (84,128) (3,194) -------- -------- Net cash used in investing activities............. (97,143) (7,248) -------- -------- Cash flows from financing activities: Net decrease in note payable to bank...................... (14) -- Proceeds from issuance of long-term debt.................. 79,240 -- Repayment of long-term debt............................... (23,804) -- Proceeds from sale of common stock........................ 41,246 603 -------- -------- Net cash provided by financing activities......... 96,668 603 -------- -------- Net decrease in cash and cash equivalents......... (4,366) (4,660) Cash and cash equivalents at beginning of period............ 19,386 16,891 -------- -------- Cash and cash equivalents at end of period.................. $ 15,020 $ 12,231 ======== ======== Supplemental disclosure of cash flow information: Cash paid during the period for interest.................. $ 411 $ 38 ======== ======== Cash paid during the period for income taxes.............. $ 5,159 $ 2,165 ======== ======== Supplemental disclosure of noncash investing and financing activities: In the first nine months of both 1998 and 1997, the Company purchased the net assets of certain companies. In conjunction with the acquisitions, the Company assumed liabilities as follows: Fair value of assets acquired........................ $118,057 $ 6,729 Cash paid for the acquisitions....................... (84,128) (3,194) Fair value of shares issued for acquisitions......... (28,120) (3,006) -------- -------- Liabilities assumed............................... $ 5,809 $ 529 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 6 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (UNAUDITED) NOTE A -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of The Profit Recovery Group International, Inc. and its wholly owned subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine-month periods ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. For further information refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the fiscal year ended December 31, 1997. NOTE B -- EARNINGS PER SHARE Effective December 31, 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." This pronouncement required the restatement of all prior-period earnings per share data presented to conform to its provisions. The following table sets forth the computation of basic and diluted earnings per share for the three and nine-month periods ended September 30, 1998 and 1997 in accordance with the provisions of SFAS No. 128 (in thousands, except for earnings per share information):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------- ----------------- 1998 1997 1998 1997 -------- -------- ------- ------- Numerator for both basic earnings per share and diluted earnings per share -- net earnings...... $ 6,665 $ 3,758 $10,704 $ 6,918 ======= ======= ======= ======= Denominator: Denominator for basic earnings per share -- weighted average shares outstanding.................................. 22,963 18,277 21,431 18,184 Effect of dilutive securities -- employee stock options...................................... 847 633 1,508 536 ------- ------- ------- ------- Denominator for diluted earnings per share...... 23,810 18,910 22,939 18,720 ======= ======= ======= ======= Earnings per share -- basic....................... $ 0.29 $ 0.21 $ 0.50 $ 0.38 ======= ======= ======= ======= Earnings per share -- diluted..................... $ 0.28 $ 0.20 $ 0.47 $ 0.37 ======= ======= ======= =======
NOTE C -- COMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." This statement establishes items that are required to be recognized under accounting standards as components of comprehensive income. SFAS No. 130 requires, among other things, that an enterprise report a total for comprehensive income in condensed financial statements of interim periods issued to shareholders. For the three month periods ended September 30, 1998 and 1997, the Company's consolidated comprehensive income was $6,630,000 and $3,763,000, respectively. For the nine month periods ended September 30, 1998 and 1997, the Company's consolidated comprehensive income was $10,223,000 and $6,903,000, respectively. The difference between consolidated comprehensive income, as disclosed here, and traditionally-determined consolidated net earnings, as set forth on the accompanying Condensed Consolidated Statements of Earnings, results from tax-effected foreign currency translation adjustments. 4 7 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE D -- CASH EQUIVALENTS Cash equivalents at September 30, 1998 and December 31, 1997 included $1.4 million and $2.5 million, respectively, of reverse repurchase agreements with NationsBank, N.A. (South) which were fully collateralized by United States of America Treasury Notes in the possession of such bank. The reverse repurchase agreement in effect on September 30, 1998 matured and was settled on October 1, 1998. In addition, cash equivalents at September 30, 1998 and December 31, 1997 also included $4.0 million and $4.7 million, respectively, of temporary investments held in a French bank by certain of the Company's French subsidiaries. The Company does not intend to take possession of collateral securities on future reverse repurchase agreement transactions conducted with banking institutions of national standing. The Company does insist, however, that all such agreements provide for full collateralization using obligations of the United States of America having a current market value equivalent to or exceeding the reverse repurchase agreement amount. NOTE E -- INTERNAL USE COMPUTER SOFTWARE Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" provides guidance on a variety of issues relating to costs of internal use software including which of these costs should be capitalized and which should be expensed as incurred. This pronouncement is effective for fiscal years beginning after December 15, 1998 although earlier application is encouraged. The Company has chosen to early adopt this pronouncement effective January 1, 1998 since it provides definitive accounting guidance on a large-scale information systems development project initiated by the Company during the first quarter of 1998. NOTE F -- FOLLOW-ON COMMON STOCK OFFERING On March 16, 1998, the Company sold 2,000,000 newly issued shares of its common stock and certain selling shareholders sold an additional 2,400,000 outstanding shares in an underwritten follow-on offering. The offering was priced at $21.00 per share. The proceeds of the offering (net of underwriting discounts and commissions) were distributed by the underwriting syndicate on March 20, 1998. The Company then used a portion of its net proceeds from the offering to repay the $24.8 million outstanding principal balance on its bank credit facility, along with accrued interest, on March 20, 1998. In April 1998, the Company received notification from its underwriting syndicate that the syndicate had exercised its full over-allotment option to purchase an additional 660,000 shares of Company common stock. All of these shares were then sold to the syndicate by certain selling shareholders. The Company received no proceeds from the sale of such shares. NOTE G -- ACQUISITIONS On March 20, 1998, the Company acquired the net assets Ginger Quill, Inc., d/b/a Precision Data Link, a 22-person air freight recovery audit firm. On June 19, 1998, the Company acquired the net assets of The Medallion Group, a 27-person air freight recovery audit operation consisting of seven separate legal entities. All companies are located in Salt Lake City, Utah, and each transaction was accounted for as a purchase and involved both cash and common stock consideration. On July 30, 1998, the Company acquired all of the outstanding capital stock of Novexel S.A., a Lyon, France-based company that assists business entities in securing European Union grants. This transaction was accounted for as a purchase and involved cash of $3.7 million and 165,863 restricted, unregistered shares of the Company's common stock. On August 6, 1998, the Company acquired substantially all the assets and assumed certain liabilities of Loder, Drew & Associates ("Loder Drew"), a California-based international recovery auditing firm primarily 5 8 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) serving clients in the manufacturing, financial services and other non-retail sectors. The transaction was accounted for as a purchase, effective as of July 1, 1998, with initial consideration of $70.0 million in cash and 803,535 restricted, unregistered shares of the Company's common stock. Approximately $3.0 million in direct acquisition-related costs were also incurred and capitalized as part of this transaction. Additionally, Loder Drew will be eligible to receive further purchase price consideration up to a maximum of $70.0 million in cash conditioned on future financial performance of Loder Drew through December 31, 1999. On September 28, 1998, the Company acquired the net assets of Cost Recovery Professionals Pty Ltd, an Australia-based recovery auditing firm primarily serving clients in the retail sector. The transaction was accounted for as a purchase with consideration of $1.4 million and 100,000 restricted, unregistered shares of the Company's common stock. On October 29, 1998, the Company acquired all the issued and outstanding common stock of Robert Beck & Associates, Inc. ("RBA"), a direct retail sector recovery auditing competitor based in Ringwood, Illinois. The Company also simultaneously purchased either the common stock or substantially all net assets of certain other entities that provided management services to RBA. The acquisitions were accounted for under the purchase method of accounting, and the collective consideration paid for RBA and related entities consisted of $26.1 million in cash and 644,434 restricted, unregistered shares of the Company's common stock. 6 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere herein. OVERVIEW The Company is a leading provider of accounts payable and other recovery audit services to large retailers, wholesale distributors, healthcare providers, technology companies and other large transaction-intensive companies, as well as to certain governmental agencies. In businesses with large purchase volumes and continuously fluctuating purchase prices, some small percentage of erroneous overpayments to vendors is inevitable. In addition, compliance with various complex tax laws also results in overpayments to governmental agencies. Moreover, services such as telecommunications, utilities and freight provided to businesses under complex pricing arrangements can result in overpayments. All of these overpayments result in "lost profits." The Company identifies and documents overpayments by using sophisticated proprietary technology and advanced audit techniques and methodologies, and by employing highly trained, experienced recovery audit specialists. The Company receives a contractually negotiated percentage of amounts recovered. The earliest of the Company's predecessors was formed in November 1990, and in early 1991 acquired the operating assets of Roy Greene Associates, Inc. and Bottom Line Associates, Inc., which were formed in 1971 and 1985, respectively. In January 1995, the Company purchased certain assets of Fial & Associates, Inc., a direct U.S. competitor. In January 1997, the Company acquired the net operating assets of Shaps Group, Inc., a California-based company providing recovery audit services to manufacturers and distributors of technology products. In February 1997, the Company acquired all of the common stock of Accounts Payable Recovery Services, Inc., a Texas-based company providing recovery audit services to healthcare entities and energy companies. In May 1997, the Company acquired all of the common stock of The Hale Group, a California-based company that also provides recovery audit services to healthcare entities. In October 1997, the Company acquired 98.4% of Financiere Alma, S.A. and subsidiaries ("Alma"), a Paris-based recovery audit firm specializing in identifying and recovering various types of French corporate tax overpayments. In November 1997, the Company acquired the net operating assets of TradeCheck, LLC, a Washington-based recovery audit firm specializing in ocean freight shipments. On March 20, 1998, the Company acquired Ginger Quill, Inc., d/b/a Precision Data Link, a air freight recovery audit firm based in Utah. On June 19, 1998, the Company acquired The Medallion Group, a air freight recovery audit operation consisting of seven separate legal entities, all based in Utah. On July 30, 1998, the Company acquired substantially all of the outstanding capital stock of Novexel S.A., a Lyon, France-based company that assists business entities in securing European Union grants. The Company announced on July 7, 1998 that it had agreed in principle to purchase Loder, Drew and Associates, Inc. ("LDA"), an international recovery auditing firm based in San Juan Capistrano, California. LDA's client concentration is primarily in the manufacturing, financial services and other non-retail sectors. The transaction was closed on August 6, 1998, with an effective date of July 1, 1998. On September 28, 1998 the Company acquired the net assets of Cost Recovery Professionals Pty Ltd, an Australia-based recovery auditing firm primarily serving clients in the retail sector. On October 29, 1998 the Company acquired, effective as of October 1, 1998, all the issued and outstanding stock of Robert Beck & Associates, Inc. ("RBA"), a direct retail sector recovery auditing competitor based in Ringwood, Illinois. The Company also simultaneously purchased either the common stock or substantially all net assets of certain other entities that provided management services to RBA. The Company intends to continue to pursue domestic and international strategic acquisitions, including acquisitions of direct competitors and complementary businesses. 7 10 RESULTS OF OPERATIONS The following table presents, for the periods indicated, certain items in the condensed consolidated statements of earnings as a percentage of revenues.
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- -------------- 1998 1997 1998 1997 ----- ----- ----- ----- Revenues.................................................... 100.0% 100.0% 100.0% 100.0% Cost of Revenues............................................ 48.7 49.6 51.1 51.8 Selling, general and administrative expenses................ 31.2 29.7 34.6 33.6 ----- ----- ----- ----- Operating income.......................................... 20.1 20.7 14.3 14.6 Interest income (expense), net.............................. (2.3) 0.1 (1.2) 0.2 ----- ----- ----- ----- Earnings before income taxes.............................. 17.8 20.8 13.1 14.8 Income taxes................................................ 7.0 8.1 5.1 5.8 ----- ----- ----- ----- Net earnings.............................................. 10.8% 12.7% 8.0% 9.0% ===== ===== ===== =====
Three and Nine Month Periods Ended September 30, 1998 Compared to Corresponding Periods of the Prior Year Revenues. The Company's revenues consist principally of contractual percentages of overpayments recovered for clients that continue to be heavily concentrated in the retailing industry. Revenues increased 108.6% to $61.8 million for the third quarter of 1998, up from $29.6 million in the third quarter of 1997. For the nine months ended September 30, 1998, revenues were $133.9 million, or 75.1% higher than $76.4 million achieved in the corresponding period of 1997. Domestic revenues were $47.7 million in the third quarter of 1998, up 107.6% from $23.0 million in the third quarter of 1997. Of this 107.6% increase, (i) 11.6% was contributed by growth from existing retail, wholesale distribution and governmental agency clients (the Company's historical client base) which were served both in the third quarter of 1998 and 1997; (ii) 80.6% was derived from the seven domestic complementary recovery audit firms acquired during the last nine fiscal quarters; and (iii) 15.4% was contributed by growth from provision of services to new clients. For the first nine months of 1998 domestic revenues were $93.5 million, an increase of 58.9% over $58.8 million during the comparable period of 1997. The Company considers international operations to be all operations located outside of the United States. International revenues were $14.1 million in the third quarter of 1998, up 112.1% from $6.6 million in the third quarter of 1997. Of this 112.1% increase, (i) 89.3% was contributed by operations of Alma and Novexel, which were acquired in October 1997 and July 1998, respectively, and (ii) 22.8% resulted from existing operations, primarily from services provided to new clients. For the first nine months of 1998, international revenues were $40.4 million, a 129.5% increase over $17.6 million during the comparable period of 1997. The Company continues to believe that the rate of revenue growth for its international operations will significantly exceed its rate of domestic revenue growth for the foreseeable future if the revenue effect of acquired businesses, if any, is excluded. There can be no assurance, however, that recent international growth trends will continue. See "Forward-looking Statements." The Company has experienced and expects to continue to experience significant seasonality in its business. The Company typically realizes higher revenues and operating income in the last two quarters of its fiscal year. This trend is expected to continue and reflects the inherent purchasing and operational cycles of the retailing industry, which continues to be the source of the majority of the Company's revenues. The Company's recent acquisitions, including the October 1997 acquisition of Alma, the August 1998 acquisition of Loder, Drew & Associates and the October 1998 acquisition of Robert Beck & Associates are not expected to significantly affect this trend because these entities, in the aggregate, have historically experienced similar seasonality in revenues and operating income. Should the Company not continue to realize increased revenues in future third and fourth quarter periods, profitability for any affected quarter and the entire year could be 8 11 materially and adversely affected due to ongoing selling, general and administrative expenses that are largely fixed over the short term. See "Forward-looking Statements." Cost of Revenues. Cost of revenues consists principally of commissions paid or payable to the Company's auditors based upon the level of overpayment recoveries, and salaries and bonuses paid or payable to divisional and regional managers. Also included are other direct costs incurred by these personnel including rental of field offices, travel and entertainment, telephone, utilities, maintenance and supplies, and clerical assistance. Cost of revenues was 48.7% of revenues for the third quarter of 1998, down from 49.6% in the comparable quarter of 1997. For the nine months ended September 30, 1998 and 1997, cost of revenues was 51.1% and 51.8%, respectively. Domestically, cost of revenues as a percentage of revenues was 48.8% in the third quarter of 1998, down from 50.0% during the corresponding quarter of 1997. The 1998 improvement relates principally to the operations of Loder, Drew & Associates, which conducts its business at a lower cost of revenues ratio than the Company's core domestic retail, wholesale and government operations. For the nine months ended September 30, 1998, domestic cost of revenues as a percentage of revenues was 52.8%, up slightly from 52.6% during the corresponding quarter of 1997. Internationally, cost of revenues as a percentage of revenues remained flat at 48.3% in the third quarter of 1998 and the corresponding quarter of 1997. For the nine months ended September 30, 1998, international cost of revenues as a percentage of revenues was 47.1%, down from 48.7% for the corresponding period in 1997. Improvements in the 1998 nine month period related primarily to various components of fixed costs being spread over a rapidly growing revenue base. Selling, General and Administrative Expenses. Selling, general and administrative expenses include the expenses of sales and marketing activities, information technology services and the corporate data center, human resources, legal and accounting, administration, headquarters-related depreciation of property and equipment and amortization of intangibles. Selling, general and administrative expenses as a percentage of revenues increased to 31.2% in the third quarter of 1998, up from 29.7% in the third quarter of 1997. For the nine months ended September 30, 1998, selling, general and administrative expenses as a percentage of revenues was 34.6%, up from 33.6% in the comparable period of 1997. On a domestic basis, selling, general and administrative expenses as a percentage of revenues was 29.9% in the third quarter of 1998, up from 26.2% in the comparable quarter of 1997. For the first nine months of 1998, domestic selling, general and administrative expenses as a percentage of revenues increased to 33.0% from 30.2% in the corresponding period of 1997. The Company's 1998 domestic selling, general and administrative expenses percentages are higher than the comparable percentages in 1997 due to increased expenditures for various 1998 initiatives such as significantly expanded auditor hiring and training programs, significant additional resource commitments in the Company's information technology functions, and period costs associated with intensified mergers and acquisitions efforts. Internationally, selling, general and administrative expenses as a percentage of revenues improved to 35.7% of revenues in the third quarter of 1998, compared to 41.7% in the 1997 third quarter. For the nine month periods ended September 30, 1998 and 1997, this percentage likewise improved to 38.4% in 1998 from 45.1% in 1997. Improvements in 1998 related primarily to various components of fixed costs being spread over a rapidly growing revenue base. In connection with acquired business, the Company has recorded intangible assets including goodwill and deferred non-compete costs. Amortization of these intangible assets totaled $1.9 million and $365,000 for the quarters ended September 30, 1998 and 1997, respectively, and $3.7 million and $1.0 million for the nine month periods ended September 30, 1998 and 1997, respectively. Operating Income. Operating income increased 102.0% to $12.4 million in the third quarter of 1998, up from $6.1 million in the third quarter of 1997. For the nine months ended September 30, 1998, operating income increased 71.6% to $19.2 million, up from $11.2 million in the comparable period of 1997. Operating income did not grow proportionately with revenues during the 1998 periods due to increased domestic selling, general and administrative expenses associated with various planned initiatives, as previously discussed. 9 12 Interest Income (Expense), Net. The Company reported net interest expense of $1.5 million during the third quarter of 1998, compared to $14,000 of net interest income during the comparable quarter of 1997. For the nine months ended September 30, 1998, net interest expense was $1.6 million, compared to net interest income of $132,000 during the comparable period of 1997. The 1998 increase relates principally to interest on bank borrowings in connection with the Company's purchases of Alma, Medallion, Novexel, Cost Recovery Professionals and Loder, Drew & Associates, offset in part by interest income as a result of the follow-on public offering completed at the end of the first quarter. Earnings Before Income Taxes. Earnings before income taxes rose 78.0% and 55.5% in the quarter and nine-month period ended September 30, 1998, respectively, compared to the same periods of 1997. Earnings before income taxes did not grow proportionately with revenues during the 1998 periods due primarily to increased domestic selling, general and administrative expenses associated with various planned initiatives and additional net interest expense, as previously discussed. Income Taxes. The provisions for income taxes for all periods presented consist of federal, state and foreign income taxes at a composite effective rate which approximates 39.0%. Weighted-Average Shares Outstanding-Basic. The Company's weighted-average shares outstanding for purposes of calculating basic earnings per share increased to 22,963,000 during the third quarter of 1998, up from 18,277,000 during the third quarter of 1997. For the nine months ended September 30, 1998 the Company's weighted-average shares outstanding was 21,431,000 compared to 18,184,000 for the same period in 1997. These increases related primarily to 2,000,000 common shares issued in a public offering on March 16, 1998 and common shares issued in connection with acquisitions of various companies. LIQUIDITY AND CAPITAL RESOURCES On July 29, 1998 the Company replaced its existing $30.0 million senior bank credit facility with a five-year $150.0 million senior bank credit facility. Subject to adherence to standard loan covenants, borrowings under the new credit facility are available for working capital, acquisitions of other companies in the recovery audit industry, capital expenditures and for general corporate purposes. The Company transferred $5.4 million in outstanding borrowings to the new credit facility on July 29, 1998 and borrowed an additional $74.0 million on August 6, 1998 in connection with its acquisition of Loder, Drew & Associates, Inc. and for normal working capital needs. On September 18, 1998 the Company increased its credit facility from $150.0 million to $200.0 million and the facility was syndicated between ten prominent banking institutions led by NationsBank, N.A. as agent for the group. As of September 30, 1998 the Company had $80.9 million in outstanding borrowings under the credit facility. On October 29, 1998, the Company borrowed an additional $27.2 million to acquire Robert Beck & Associates, thereby increasing its outstanding credit facility borrowings to $108.1 million. Net cash used in operating activities was $3.9 million for the first nine months of 1998 and $2.0 million was provided by operations for the same period in 1997. The change was primarily a result of an increase in accounts receivable, offset in part by increased earnings, depreciation and amortization as a result of internal and acquired growth. Net cash used in investing activities was $97.1 million in the first nine months of 1998 and $7.2 million in the first nine months of 1997. In the first nine months of 1998, $13.0 million was used to acquire property and equipment (primarily computer-related equipment), and $84.1 million was paid in connection with business acquisitions. Of the $13.0 million in capital additions, $4.3 million relates to the large-scale systems development project discussed in Note E of notes to condensed consolidated financial statements. During the nine quarters ended September 30, 1998, the Company acquired ten recovery audit firms. Additionally, the Company subsequently acquired Robert Beck & Associates along with certain related companies in October 1998. The Company is pursuing, and intends to continue to pursue, the acquisition of domestic and international businesses including both direct competitors and business providing other types of recovery services. There can be no assurance, however, that the Company will be successful in consummating further acquisitions due to factors such as receptivity of potential acquisition candidates and valuation issues. 10 13 Additionally, there can be no assurance that future acquisitions, if consummated, can be successfully assimilated into the Company. See "Forward-looking Statements." Net cash provided by financing activities was $96.7 million for the first nine months of 1998 and $603,000 for the same period in 1997. For the first nine months of 1998, net cash provided by financing activities consisted primarily of $79.2 million in credit facility borrowings and $41.2 million in net proceeds from the sale of common stock, offset in part by a $23.8 million March 1998 principal repayment under the credit facility. Net proceeds from the sale of common stock primarily relate to the Company's public sale of 2,000,000 newly issued common shares in an underwritten offering which became effective on March 16, 1998. The Company believes that its current working capital, availability remaining under its $200.0 million senior bank credit facility and cash flow generated from future operations will be sufficient to meet the Company's working capital and capital expenditure requirements through September 30, 1999 unless one or more acquisitions are consummated which require the Company to seek additional debt or equity financing. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" establishes revised standards for the manner in which public business enterprises report information about operating segments. The Company does not believe that this Statement will significantly alter the segment disclosures it has historically provided. This Statement is effective for fiscal years beginning after December 15, 1997. Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as "derivatives"), and for hedging activities. This pronouncement is effective for all fiscal quarters beginning after June 15, 1999 although earlier application is encouraged. The Company has chosen to adopt this pronouncement effective with its fiscal year which begins January 1, 2000 and does not believe that it will materially affect its reported results of operations or financial condition upon adoption. Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" defines such costs and requires that they be expensed as incurred. This pronouncement is effective for financial statements for fiscal years beginning after December 15, 1998 although earlier application is encouraged. The Company has chosen to adopt this pronouncement effective January 1,1999 and does not believe that it will materially affect its reported results of operations or financial condition upon adoption. YEAR 2000 ISSUE Many existing computer programs use only two digits to identify a year in the date field. These programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the Year 2000. The Company has undertaken, but not completed, an assessment of its Year 2000 issues. The assessment is scheduled for completion in January 1999, pending receipt of information from third parties whose software and hardware are integral components of the Company's information technology ("IT") systems. Preliminary analysis indicates that exposure is limited by the fact that the Company has virtually no active IT systems that are more than two years old and has no non-IT systems that could materially impact the Company's operations. The Company has a significant dependence on personal computer ("PC") systems both for internal accounting and for completion of audit engagements for its clients. It has recently completed an inventory of those PC systems and expended approximately $745,000 to replace older hardware and software which was possibly incapable of handling the Year 2000, and intends to expend another $170,000 in the fourth quarter of 1998 to complete the process. The Company has adopted and enforced corporate standards for operating systems and administrative applications. 11 14 The Company has not verified that its financial accounting software is capable of handling the Year 2000 because it made a decision totally independent of any Year 2000 issue to replace substantially all of its existing financial packages. Replacement of certain general accounting components is scheduled for completion in January 1999. Replacement of the balance of the financial accounting systems is scheduled for mid-year 1999. One of the existing internally developed financial system components is not ready for the Year 2000. The Company has initiated a complete rewrite of that component as part of its overall plan to replace the existing financial systems. This component is reasonably complex, and there is some risk that it will not be completed on schedule. Failure to complete the system by the end of 1999 could result in inability of the Company's systems to accurately determine its revenues or calculate incentive compensation for its employees. In the unlikely event that the replacement is not completed in time to handle Year 2000 transactions, the Company would be forced to hire temporary staff to perform the tasks manually. The potential cost cannot be estimated but the Company believes that the impact would be immaterial to its financial position or results of operations. Certain of the Company's international operations continue to utilize an older (not ready for Year 2000) version of the Company's proprietary recovery audit software. Plans are in place to upgrade all operations to the current version by mid-year 1999. The only significant issue in completing the upgrade is developing a training plan in the native language of the users. If the upgrade is not completed, affected international auditors may be required to utilize other less effective audit tools, techniques and processes, and the Company could suffer a loss of revenues outside the U.S. as a result. The Company has made and continues to make acquisitions of other companies in the recovery audit business. It is possible that the Company might acquire a business with a significant risk from Year 2000 issues. The Company's preliminary risk assessment does not include assessment of risks within Financiere Alma, S.A. ("Alma"), which was acquired by the Company in October 1997. Alma's financial systems are separate from and independent of the Company's other financial systems, and are subject to similar risks which have yet to be specifically identified or quantified. Should a subsequent Year 2000 Alma risk assessment indicate the existence of significant problems, the Company could experience a loss of revenues from Alma's operations. The Company's long-range plan includes conversion of Alma's financial systems to the same packaged software utilized by the rest of the Company. The Company's business operations involve working with outputs from its clients' financial systems. Each of the Company's clients is assessing its own risks related to Year 2000 issues which may cause them to upgrade or replace certain of their systems. The Company believes that its investment in advanced technology is a competitive advantage as clients and potential clients are implementing new and more sophisticated accounts payable systems. In the case of clients which experience a temporary inability to process payables due to Year 2000 issues, the Company's risk of lost revenues is mitigated by the fact that it audits in arrears and would have advance notice of client problems in making vendor payments. FORWARD-LOOKING STATEMENTS Statements made in this Form 10-Q for the quarter and nine month period ended September 30, 1998 which look forward in time involve risks and uncertainties and are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such risks and uncertainties include the Company's assessment of the state of its Year 2000 readiness, anticipated expenditures and potential risks, the adequacy of the Company's current working capital and other available sources of funds, the ability of the Company to successfully implement its operating strategy and acquisition strategy, the Company's ability to manage rapid expansion, including, without limitation, the assimilation of acquired companies, changes in economic cycles, competition from other companies, changes in laws and governmental regulations applicable to the Company and other risk factors detailed in the Company's Securities and Exchange commission filings, including the Company's Prospectus dated March 16, 1998 contained in its Registration Statement on Form S-3 (No. 333-46225). 12 15 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company has not conducted transactions, established commitments or entered into relationships requiring disclosures beyond those provided elsewhere in this Form 10-Q. 13 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On August 6, 1998, in connection with the acquisition of the net operating assets of Loder, Drew & Associates ("LDA"), the Company issued 803,535 restricted, unregistered shares of its common stock to the former shareholders of LDA. The shares were issued pursuant to the exemption from registration provided by Section 4(a) of the Securities Act of 1933, as amended. On September 28, 1998, in connection with the acquisition of the net operating assets of Cost Recovery Professionals, Pty Ltd. ("CRP"), the Company issued 100,000 restricted, unregistered shares of its common stock to the former shareholders of CRP. The shares were issued pursuant to the exemption from registration provided by Section 4(a) of the Securities Act of 1933, as amended. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION With respect to the Company's annual meeting of shareholders to be held in 1999, all shareholder proposals submitted outside the shareholder proposal rules contained in Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended, which pertains to the inclusion of shareholder proposals in a Company's proxy materials, must be received by the Company by March 31, 1999, in order to be considered timely. With regard to such shareholder proposals, if the date of the next annual meeting of shareholders is advanced or delayed by more than 30 calendar days from June 15, 1999, the Company shall, in a timely manner, inform its shareholders of the change, and the date by which such proposals must be received. As set forth in the Company's Proxy Statement dated May 15, 1998, shareholders who wish to avail themselves of the provisions of Rule 14a-8 must submit their proposals no later than January 15, 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 2.1* -- Asset Purchase Agreement dated as of July 31, 1998 among the Company, The Profit Recovery Group International I, Inc., Loder, Drew & Associates, Inc., Ronald K. Loder and H. Richard Byrne (incorporated by reference to Exhibit 2.1 to the Registrant's Form 8-K pertaining to the LDA transaction filed on August 12, 1998). 3.1 -- Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to Registrant's March 26, 1996 registration statement number 333-1086 on Form S-1). 3.2 -- Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to Registrants's March 26, 1996 registration statement number 333-1086 on Form S-1). 4.1 -- Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Registrant's March 16, 1998 registration statement number 333-46225 on Form S-3).
14 17 10.1 -- Syndication Amendment and Assignment dated as of September 17, 1998 by and among the Registrant, certain of subsidiaries of the Registrant and various banking institutions; Credit Agreement dated as of July 29, 1998 among the Registrant, certain subsidiaries of the Registrant and various banking institutions. 10.2 -- Sublease agreement dated June 1, 1998, by and between Electrolux, LLC and a subsidiary of the Registrant. 10.3 -- Sub-Sublease Agreement dated August 19, 1998 by and between a subsidiary of the Registrant and Manhattan Associates, Inc. 10.4 -- Lease agreement dated July 17, 1998 by and between Wildwood Associates and a subsidiary of the Registrant. 10.5 -- The Profit Recovery Group International, Inc. Stock Incentive Plan. 10.6 -- Description of The Profit Recovery Group International, Inc. Executive Incentive Plan. 27.1 -- Financial Data Schedule (for SEC use only).
- --------------- * The Company has received confidential treatment of portions of this Agreement. Accordingly, portions thereof have been omitted and filed separately with the Securities and Exchange Commission. In addition, in accordance with Item 601(b)(2) of Regulation S-K, the schedules have been omitted and a list briefly describing the schedules is at the end of the Exhibit. The Registrar will furnish supplementally a copy of any omitted schedule to the Commission upon request. (b) Reports on Form 8-K. The Registrant filed two reports on Form 8-K during the quarter ended September 20, 1998: (1) Form 8-K pertaining to the issuance of securities pursuant to Regulation S in the Novexel transaction, as required by Item 9 of Form 8-K, was filed on August 12, 1998. (2) Form 8-K describing the LDA transaction, as required by Item 2 thereof, and containing the audited financial statements of LDA, and related pro forma financial information, as required by Item 7 thereof, was filed on August 12, 1998. 15 18 SIGNATURES Pursuant to the requirements 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. THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. Dated: November 12, 1998 By: /s/ DONALD E. ELLIS, JR. -------------------------------------------- Donald E. Ellis, Jr. Senior Vice President, Treasurer and Chief Financial Officer (principal financial officer) Dated: November 12, 1998 By: /s/ MICHAEL R. MELTON -------------------------------------------- Michael R. Melton Vice President -- Finance (principal accounting officer)
16 EX-10.1 2 SYNDICATE AMENDMENT AND ASSIGNMENT 1 EXHIBIT 10.1 SYNDICATION AMENDMENT AND ASSIGNMENT THIS SYNDICATION AMENDMENT AND ASSIGNMENT (this "Amendment"), dated as of September 17, 1998, is by and among THE PROFIT RECOVERY GROUP INTERNATIONAL , INC., a Georgia corporation (the "Borrower"), certain Subsidiaries of the Borrower (each a "Subsidiary Guarantor", and collectively, the "Subsidiary Guarantors"), THE PERSON IDENTIFIED AS THE "EXISTING LENDER" ON THE SIGNATURE PAGES HERETO (the "Existing Lender"), THE PERSONS IDENTIFIED AS "NEW LENDERS" ON THE SIGNATURE PAGES HERETO (the "New Lenders" and, together with the Existing Lender, the "Lenders") and NATIONSBANK, N.A., as Agent for the Lenders (the "Agent"). W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement dated as of July 29, 1998 (the "Existing Credit Agreement") among the Borrower, the Subsidiary Guarantors, the Existing Lender and the Agent, the Existing Lender has extended commitments to make certain credit facilities available to the Borrower; and WHEREAS, the parties hereto have agreed to amend the Existing Credit Agreement as set forth herein; NOW, THEREFORE, in consideration of the agreements herein contained and other good and valuable consideration, the parties hereby agree as follows: PART I DEFINITIONS SUBPART 1.1. Certain Definitions. Unless otherwise defined herein or the context otherwise requires, the following terms used in this Amendment, including its preamble and recitals, have the following meanings: "Amended Credit Agreement" means the Existing Credit Agreement as amended hereby. "Amendment Effective Date" shall have the meaning set forth in Subpart 4.1. SUBPART 1.2. Other Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Amendment, including its preamble and recitals, have the meanings provided in the Amended Credit Agreement. 2 PART II AMENDMENTS TO EXISTING CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Amendment Effective Date, the Existing Credit Agreement is hereby amended in accordance with this Part II. Except as so amended, the Existing Credit Agreement shall continue in full force and effect. SUBPART 2.1. Amendments to Section 1.1(a). (a) The definition of "Upfront Fee" appearing in Section 1.1 of the Credit Agreement is hereby deleted. (b) References to "Section 3.5(b)" appearing in the definitions of "Unused Fee" and "Unused Fee Calculation Period", each appearing in Section 1.1 of the Credit Agreement, are hereby amended to refer to "Section 3.5(a)". SUBPART 2.2. Amendment to Section 2.1(a). The first sentence of Section 2.1(a) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: (a) Revolving Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Borrower such Lender's Revolving Commitment Percentage of revolving credit loans requested by the Borrower in Dollars ("Revolving Loans") from time to time from the Closing Date until the Maturity Date, or such earlier date as the Revolving Commitments shall have been terminated as provided herein; provided, however, that (i) with regard to the Lenders collectively, the Dollar Amount (determined as of the most recent Determination Date) of Revolving Obligations outstanding shall not exceed TWO HUNDRED MILLION DOLLARS ($200,000,000) (as such aggregate maximum amount may be reduced from time to time as provided in Section 3.4, the "Revolving Committed Amount"); provided, further, (ii) with regard to each Lender individually, the Dollar Amount (determined as of the most recent Determination Date) of such Lender's Revolving Commitment Percentage of the sum of the Revolving Loans plus Foreign Currency Loans plus LOC Obligations plus Swingline Loans outstanding shall not exceed such Lender's Revolving Committed Amount. SUBPART 2.3. Amendment to Section 7.11(iii). Reference to "$105,000,0000" appearing in Section 7.11(iii) of the Credit Agreement is hereby amended to read as "$105,000,000". -2- 3 SUBPART 2.4. Amendment to Section 7.16. Section 7.16 of the Credit Agreement is hereby amended and restated in its entirety to read as follows: 7.16 FURTHER ASSURANCES. Within 90 days after the Closing Date, the Credit Parties agree to provide to the Agent (a) a pledge of 66% of the stock of PRG France S.A. and (b) an opinion, in a form and from legal counsel reasonably acceptable to the Agent, which shall cover the enforceability, the perfection and the priority of the Lenders' security interest in the pledged shares of PRG France S.A. SUBPART 2.5. Amendment to Schedule 2.1(a). Schedule 2.1(a) of the Existing Credit Agreement is hereby deleted in its entirety and a new schedule in the form of Schedule 2.1(a) attached hereto is substituted therefor. SUBPART 2.6. Amendment to Exhibit 7.1(c). The attachment to Exhibit 7.1(c) of the Existing Credit Agreement is hereby deleted in its entirety and a new attachment to Exhibit 7.1(c) in the form attached hereto is substituted therefor. PART III ASSIGNMENTS AND ASSUMPTIONS The Existing Lender hereby sells and assigns, without recourse, to the New Lenders, and the New Lenders hereby purchase and assume, without recourse, from the Existing Lender, effective as of the Amendment Effective Date, such interests in the Existing Lender's rights and obligations under the Existing Credit Agreement (including, without limitation, the Commitments of the Existing Lender on the Amendment Effective Date and the Loans owing to the Existing Lender which are outstanding on the Amendment Effective Date) as shall be necessary in order to give effect to the reallocations of the Revolving Committed Amount, the Revolving Commitment Percentages, the Foreign Currency Committed Amount and the Foreign Currency Commitment Percentages effected by the amendment to Schedule 2.1(a) to the Existing Credit Agreement pursuant to Subpart 2.2. From and after the Amendment Effective Date, the New Lenders shall each become a "Lender" for all purposes of the Credit Documents and hereby ratifies, as of the Amendment Effective Date, and agrees to be bound by all of the terms and provisions contained in the Credit Agreement The Existing Lender hereby (i) represents and warrants to the New Lenders that it is the holder of the Loans assigned hereby and Participation Interests related thereto, and it has not previously transferred or encumbered such Loans or Participation Interests, (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 Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Documents 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 any Credit Party or the performance or observance by any Credit Party of any of its obligations under the Credit Documents or any other instrument or document furnished pursuant thereto and (iv) makes no other representation or warranty, express or implied. The -3- 4 New Lenders shall make payment in exchange for such interests in the Existing Lenders' rights and obligations under the Existing Credit Agreement on the Amendment Effective Date, in the amounts and in accordance with the instructions of the Agent. Each New Lender (a) represents and warrants that it is legally authorized to enter into this Amendment; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 5.1(c) thereof, the financial statements delivered pursuant to Section 7.1 thereof, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment; (c) agrees that it will, independently and without reliance upon the Existing Lender, the Agent 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, the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws of a jurisdiction outside the United States, its obligations pursuant to subsection 3.11 of the Credit Agreement. The Existing Lender shall, to the extent of the interests assigned hereby, relinquish its rights and be released from its obligations under the Existing Credit Agreement. The Agent shall maintain in its internal records and record in the Register the information relating to the assignments and assumptions effected pursuant to this Part III and as required by Section 11.3(c). PART IV CONDITIONS TO EFFECTIVENESS SUBPART 4.1. Amendment Effective Date. This Amendment shall be and become effective when all of the conditions set forth in this Part IV shall have been satisfied (the "Amendment Effective Date"), and thereafter this Amendment shall be known, and may be referred to, as "Syndication Amendment and Assignment." SUBPART 4.2. Execution of Counterparts of Amendment. The Agent shall have received counterparts of this Amendment, which collectively shall have been duly executed on behalf of each of the Borrower, the Subsidiary Guarantors, the Agent and the Lenders. SUBPART 4.3. Execution and Delivery of New Notes. Each Lender shall have received new Notes duly executed on behalf of the Borrower. SUBPART 4.4. Corporate Resolutions. The Agent shall have received copies of resolutions of the board of directors of each Credit Party approving and adopting this Amendment, the transactions contemplated herein and authorizing execution and delivery -4- 5 thereof, certified by a secretary or assistant secretary of such Credit Party to be true and correct and in force and effect as of the Amendment Effective Date. SUBPART 4.5. Legal Opinion. The Agent shall have received a legal opinion in form and substance satisfactory to it dated as of the Amendment Effective Date from counsel to the Credit Parties. PART V MISCELLANEOUS SUBPART 5.1. Cross-References. References in this Amendment to any Part or Subpart are, unless otherwise specified, to such Part or Subpart of this Amendment. SUBPART 5.2. References in Other Credit Documents. At such time as this Amendment shall become effective pursuant to the terms of Subpart 4.1, all references in the Existing Credit Agreement to the "Credit Agreement" and all references in the other Credit Documents to the "Credit Agreement" shall be deemed to refer to the Amended Credit Agreement. SUBPART 5.3. Representations and Warranties of the Borrower. The Borrower hereby represents and warrants that (a) the conditions precedent to the initial Loans were satisfied as of the Closing Date, (b) the representations and warranties contained in Section 6 of the Existing Credit Agreement (as amended by this Amendment) are correct in all material respects on and as of the date hereof as though made on and as of such date and after giving effect to the amendments contained herein and (c) no Default or Event of Default exists under the Existing Credit Agreement on and as of the date hereof and after giving effect to the amendments contained herein. SUBPART 5.4. Counterparts. This Amendment may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SUBPART 5.5. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF GEORGIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. SUBPART 5.6. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. -5- 6 SUBPART 5.7. Assignment Pursuant to the Credit Agreement. Notwithstanding any provision in the Amended Credit Agreement to the contrary, the execution of this Amendment shall constitute an assignment for purposes of Section 11.3 of the Amended Credit Agreement. [The remainder of this page is intentionally left blank.] -6- 7 Each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. BORROWER: THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., By: -------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treasurer SUBSIDIARY GUARANTORS: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. THE PROFIT RECOVERY GROUP U.K., INC. THE PROFIT RECOVERY GROUP ASIA, INC. THE PROFIT RECOVERY GROUP CANADA, INC. THE PROFIT RECOVERY GROUP NEW ZEALAND, INC. THE PROFIT RECOVERY GROUP NETHERLANDS, INC. THE PROFIT RECOVERY GROUP BELGIUM, INC. THE PROFIT RECOVERY GROUP MEXICO, INC. THE PROFIT RECOVERY GROUP FRANCE, INC. THE PROFIT RECOVERY GROUP AUSTRALIA, INC. THE PROFIT RECOVERY GROUP GERMANY, INC. PRG INTERNATIONAL HOLDING COMPANY, INC. THE PROFIT RECOVERY GROUP SWITZERLAND, INC. THE PROFIT RECOVERY GROUP SOUTH AFRICA, INC. By: -------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treasurer 8 EXISTING LENDER: NATIONSBANK, N. A., individually in its capacity as a Lender and in its capacity as Agent By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- NEW LENDERS: UNION BANK OF CALIFORNIA, N.A. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- FIRST UNION NATIONAL BANK By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- WACHOVIA BANK, N.A. By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- FLEET NATIONAL BANK By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CREDIT LYONNAIS ATLANTA AGENCY By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- 9 SUNTRUST BANK, ATLANTA By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- PNC BANK, NATIONAL ASSOCIATION By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- CREDIT AGRICOLE INDOSUEZ By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- LASALLE NATIONAL BANK By: ---------------------------------------- Name: -------------------------------------- Title: ------------------------------------- 10 Schedule 2.1(a) Lenders' Addresses and Commitments
- ---------------------------------------------------------------------------------------------------------------------- Revolving Foreign Currency Revolving Commitment Commitment Foreign Currency Commitment Lender Percentage Commitment Percentage - ---------------------------------------------------------------------------------------------------------------------- NATIONSBANK,N.A. $30,000,000 15% $11,250,000 15% Independence Center, 15th Floor NC1-001-15-04 101 North Tryon Street Charlotte, NC 28255 Attn: Agency Services Phone: 704-386-8958 Fax: 704-388-9436 - ---------------------------------------------------------------------------------------------------------------------- UNION BANK OF CALIFORNIA, $15,000,000 7.5% $5,625,000 7.5% N.A. 550 South Hope Street 3rd Floor Los Angeles, CA 90071 Attn: Denton Folkes Phone: 213-243-3559 Fax: 213-243-3503 - ---------------------------------------------------------------------------------------------------------------------- FIRST UNION NATIONAL BANK $23,750,000 11.875% $8,906,250 11.875% 999 Peachtree Street 9th Floor MC - GA 0174 Atlanta, GA 30309 Attn: Bill Bartlett Phone: 404-225-4149 Fax: 404-225-4286 - ---------------------------------------------------------------------------------------------------------------------- WACHOVIA BANK, N.A. $23,750,000 11.875% $8,906,250 11.875% 3333 Cumberland Circle Suite 220 Atlanta, GA 30339 Attn: Katherine Glista Phone: 770-989-5807 Fax: 770-989-5885 - ----------------------------------------------------------------------------------------------------------------------
11
- ---------------------------------------------------------------------------------------------------------------------- FLEET NATIONAL BANK $23,750,000 11.875% $8,906,250 11.875% Mailstop: MA OF D04J One Federal Street Boston, MA 02110 Attn: Thomas Engels Phone: 617-346-4236 Fax: 617-346-4667 - ---------------------------------------------------------------------------------------------------------------------- SUNTRUST BANK ATLANTA $15,000,000 7.5% $5,625,000 7.5% 25 Park Place 23rd Floor Atlanta, GA 30303 Attn: Daniel Komitor Phone: 404-724-3889 Fax: 404-588-8833 - ---------------------------------------------------------------------------------------------------------------------- PNC BANK, NATIONAL $15,000,000 7.5% $5,625,000 7.5% ASSOCIATION 249 5th Avenue Southeast Group, 2nd Floor Pittsburgh, PA 15222 Attn: Rose Crump Phone: 412-762-2539 Fax: 412-762-6484 - ---------------------------------------------------------------------------------------------------------------------- CREDIT AGRICOLE INDOSUEZ $15,000,000 7.5% $5,625,000 7.5% 55 East Monro Suite 4700 Chicago, IL 60603 Attn: Eric Robison Phone: 312-917-7532 Fax: 312-372-2830 - ---------------------------------------------------------------------------------------------------------------------- LASALLE NATIONAL BANK $15,000,000 7.5% $5,625,000 7.5% 135 South LaSalle Suite 208 Chicago, IL 60603 Attn: Donna Smith Phone: 312-904-1426 Fax: 312-904-0522 - ---------------------------------------------------------------------------------------------------------------------- CREDIT LYONNAIS ATLANTA $23,750,000 11.875% $8,906,250 11.875% AGENCY One Peachtree Center 303 Peachtree Street, N.E., Suite 4400 Atlanta, GA 30308 Attn: Gerald Finney Phone: 404-524-3700 Fax: 404-584-5249 - ---------------------------------------------------------------------------------------------------------------------- TOTAL $200,000,000 100% $75,000,000 100% - ----------------------------------------------------------------------------------------------------------------------
12 Attachment to Officer's Certificate COMPUTATION OF FINANCIAL COVENANTS 1. Fixed Charge Coverage Ratio (a) Consolidated EBIT $ ------- (b) Consolidated Rental Expense $ ------- (c) Amortized Intangibles $ ------- (d) [(a) + (b) + (c)] $ ------- (e) Consolidated Interest Expense $ ------- (f) Consolidated Rental Expense $ ------- (g) [(e) + (f)] $ ------- (h) Fixed Charge Coverage Ratio [(d)/(g)] :1.0 ------- 2. Leverage Ratio (a) Funded Indebtedness $ ------- (b) Consolidated EBITDA $ ------- (c) Leverage Ratio [(a)/(b)] :1.0 ------- 3. Net Worth (a) Actual Net Worth as of the end of the fiscal period referred to above $ ------- (b) Beginning net worth $ ------- (c) .75 x cumulative Consolidated Net Income (without deduction for any losses) subsequent to the Closing Date $ ------- (d) 100% of Net Cash Proceeds from any Equity Issuance subsequent to the Closing Date $ ------- (e) Net worth required by Section 7.11(iii) [(b) + (c) + (d)] $ ------- 4. Funded Indebtedness to Capitalization Ratio (a) Funded Indebtedness $ ------- (b) Total Capitalization $ ------- (c) Funded Indebtedness to Capitalization Ratio [(a)/(b)] :1.0 -------
13 CREDIT AGREEMENT Dated as of July 29, 1998 among THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., as Borrower, AND CERTAIN SUBSIDIARIES OF THE BORROWER FROM TIME TO TIME PARTY HERETO, as Guarantors, THE SEVERAL LENDERS FROM TIME TO TIME PARTY HERETO AND NATIONSBANK, N. A., as Agent 14
TABLE OF CONTENTS SECTION 1 DEFINITIONS............................................................................................1 1.1 Definitions..........................................................................................1 1.2 Computation of Time Periods.........................................................................22 1.3 Accounting Terms....................................................................................22 SECTION 2CREDIT FACILITIES.......................................................................................23 2.1 Revolving Loans.....................................................................................23 2.2 Letter of Credit Subfacility........................................................................25 2.3 Foreign Currency Loan Subfacility...................................................................30 2.4 Swingline Loan Subfacility..........................................................................32 SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES........................................................34 3.1 Default Rate........................................................................................34 3.2 Extension and Conversion............................................................................34 3.3 Prepayments.........................................................................................35 3.4 Termination and Reduction of Revolving Committed Amount.............................................36 3.5 Fees................................................................................................36 3.6 Capital Adequacy....................................................................................37 3.7 Limitation on Eurocurrency Loans....................................................................37 3.8 Illegality..........................................................................................38 3.9 Requirements of Law.................................................................................38 3.10 Treatment of Affected Loans........................................................................39 3.11 Taxes..............................................................................................40 3.12 Compensation.......................................................................................42 3.13 Pro Rata Treatment.................................................................................43 3.14 Sharing of Payments................................................................................43 3.15 Payments, Computations, Etc........................................................................44 3.16 Evidence of Debt...................................................................................46 3.17 Mitigation; Mandatory Assignment...................................................................46 3.18 European Monetary Union...........................................................................47 SECTION 4 GUARANTY..............................................................................................48 4.1 The Guaranty........................................................................................48 4.2 Obligations Unconditional...........................................................................48 4.3 Reinstatement.......................................................................................49 4.4 Certain Additional Waivers..........................................................................50 4.5 Remedies............................................................................................50 4.6 Rights of Contribution..............................................................................50 4.7 Guarantee of Payment; Continuing Guarantee..........................................................51 SECTION 5 CONDITIONS............................................................................................51 5.1 Closing Conditions..................................................................................51 5.2 Conditions to all Extensions of Credit..............................................................54 SECTION 6 REPRESENTATIONS AND WARRANTIES........................................................................55 6.1 Financial Condition.................................................................................55 6.2 No Material Change..................................................................................56 6.3 Organization and Good Standing......................................................................56 6.4 Power; Authorization; Enforceable Obligations.......................................................56
i 15 6.5 No Conflicts........................................................................................56 6.6 No Default..........................................................................................57 6.7 Ownership...........................................................................................57 6.8 Indebtedness........................................................................................57 6.9 Litigation..........................................................................................57 6.10 Taxes..............................................................................................57 6.11 Compliance with Law................................................................................58 6.12 ERISA..............................................................................................58 6.13 Subsidiaries.......................................................................................59 6.14 Governmental Regulations, Etc......................................................................59 6.15 Purpose of Loans and Letters of Credit.............................................................61 6.16 Environmental Matters..............................................................................61 6.17 Intellectual Property..............................................................................62 6.18 Solvency...........................................................................................62 6.19 Investments........................................................................................62 6.20 Location of Collateral.............................................................................62 6.21 Disclosure.........................................................................................62 6.22 Brokers'Fees.......................................................................................63 6.23 Labor Matters......................................................................................63 6.24 Year 2000 Compliance...............................................................................63 SECTION 7 AFFIRMATIVE COVENANTS.................................................................................63 7.1 Information Covenants...............................................................................63 7.2 Preservation of Existence and Franchises............................................................67 7.3 Books and Records...................................................................................67 7.4 Compliance with Law.................................................................................67 7.5 Payment of Taxes and Other Indebtedness.............................................................67 7.6 Insurance...........................................................................................67 7.7 Maintenance of Property.............................................................................68 7.8 Performance of Obligations..........................................................................68 7.9 Use of Proceeds.....................................................................................69 7.10 Audits/Inspections.................................................................................69 7.11 Financial Covenants................................................................................69 7.12 Additional Credit Parties..........................................................................70 7.13 Environmental Laws.................................................................................70 7.14 Collateral.........................................................................................71 7.15 Year 2000 Compliance...............................................................................71 7.16 Further Assurances.................................................................................71 SECTION 8 NEGATIVE COVENANTS....................................................................................72 8.1 Indebtedness........................................................................................72 8.2 Liens...............................................................................................72 8.3 Nature of Business..................................................................................73 8.4 Consolidation, Merger, Dissolution, etc.............................................................73 8.5 Asset Dispositions..................................................................................73 8.6 Investments.........................................................................................73 8.7 Restricted Payments.................................................................................74
ii 16 8.8 [Intentionally Omitted].............................................................................74 8.9 Transactions with Affiliates........................................................................74 8.10 Fiscal Year; Organizational Documents..............................................................74 8.11 Limitation on Restricted Actions...................................................................74 8.12 Ownership of Subsidiaries..........................................................................75 8.13 Sale Leasebacks....................................................................................75 8.14 Capital Expenditures...............................................................................75 8.15 No Further Negative Pledges........................................................................75 SECTION 9 EVENTS OF DEFAULT.....................................................................................76 9.1 Events of Default...................................................................................76 9.2 Acceleration; Remedies..............................................................................78 SECTION 10 AGENCY PROVISIONS....................................................................................79 10.1 Appointment, Powers and Immunities.................................................................79 10.2 Reliance by Agent..................................................................................80 10.3 Defaults...........................................................................................80 10.4 Rights as a Lender.................................................................................80 10.5 Indemnification....................................................................................81 10.6 Non-Reliance on Agent and Other Lenders............................................................81 10.7 Successor Agent....................................................................................81 SECTION 11 MISCELLANEOUS........................................................................................82 11.1 Notices............................................................................................82 11.2 Right of Set-Off; Adjustments......................................................................83 11.3 Benefit of Agreement...............................................................................83 11.4 No Waiver; Remedies Cumulative.....................................................................85 11.5 Expenses; Indemnification..........................................................................85 11.6 Amendments, Waivers and Consents...................................................................86 11.7 Counterparts.......................................................................................88 11.8 Headings...........................................................................................88 11.9 Survival...........................................................................................88 11.10 Governing Law; Submission to Jurisdiction; Venue..................................................88 11.11 Severability......................................................................................89 11.12 Entirety..........................................................................................89 11.13 Binding Effect; Termination.......................................................................89 11.14 Confidentiality...................................................................................90 11.15 Use of Sources....................................................................................90 11.16 Conflict..........................................................................................91
iii 17 SCHEDULES Schedule 1.1(a) Investments Schedule 1.1(b) Liens Schedule 2.1(a) Lenders Schedule 6.13 Subsidiaries Schedule 6.17 Intellectual Property Schedule 6.20(a) Collateral Locations Schedule 6.20(b) Chief Executive Offices/Principal Places of Business Schedule 7.6 Insurance Schedule 8.1 Indebtedness EXHIBITS Exhibit 2.1(b)(i) Form of Notice of Borrowing for Revolving Loans Exhibit 2.1(e) Form of Revolving Note Exhibit 2.3(b)(i) Form of Notice of Borrowing for Foreign Currency Loans Exhibit 2.4(d) Form of Swingline Note Exhibit 3.2 Form of Notice of Extension/Conversion Exhibit 7.1(c) Form of Officer's Compliance Certificate Exhibit 7.12 Form of Joinder Agreement Exhibit 11.3(b) Form of Assignment and Acceptance iv 18 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of July 29, 1998 (as amended, modified, restated or supplemented from time to time, the "Credit Agreement"), is by and among THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation (the "Borrower"), the Subsidiary Guarantors (as defined herein), the Lenders (as defined herein) and NATIONSBANK, N. A., as Agent for the Lenders (in such capacity, the "Agent"). W I T N E S S E T H WHEREAS, the Borrower has requested that the Lenders provide a $150,000,000 credit facility for the purposes hereinafter set forth; and WHEREAS, the Lenders have agreed to make the requested credit facility available to the Borrower on the terms and conditions hereinafter set forth; NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1 DEFINITIONS 1.1 DEFINITIONS. As used in this Credit Agreement, the following terms shall have the meanings specified below unless the context otherwise requires: "Acquisition", by any Person, means the acquisition by such Person of the Capital Stock or all or substantially all of the Property of another Person, whether or not involving a merger or consolidation with such Person. "Additional Credit Party" means each Person that becomes a Subsidiary Guarantor after the Closing Date by execution of a Joinder Agreement. "Adjusted Base Rate" means the Base Rate plus the Applicable Percentage. "Adjusted Eurocurrency Rate" means the Eurocurrency Rate plus the Applicable Percentage. "Affiliate" means, with respect to any Person, any other Person (i) directly or indirectly controlling or controlled by or under direct or indirect common control with such Person or (ii) directly or indirectly owning or holding five percent (5%) or more of the 19 Capital Stock in such Person. For purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agency Services Address" means NationsBank, N. A., NC1-001-15-04, 101 North Tryon Street, Charlotte, North Carolina 28255, Attn: Agency Services, or such other address as may be identified by written notice from the Agent to the Borrower. "Agent" shall have the meaning assigned to such term in the heading hereof, together with any successors or assigns. "Agent's Fee Letter" means that certain letter agreement, dated as of July 15, 1998, between the Agent and the Borrower, as amended, modified, restated or supplemented from time to time. "Agent's Fees" shall have the meaning assigned to such term in Section 3.5(d). "Applicable Lending Office" means, for each Lender, the office of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to the Agent and the Borrower by written notice as the office by which its Eurocurrency Loans are made and maintained. "Applicable Percentage" means, for purposes of calculating the applicable interest rate for any day for any Revolving Loan, the applicable rate of the Unused Fee for any day for purposes of Section 3.5(b) and the applicable rate of the Letter of Credit Fee for any day, the appropriate applicable percentage corresponding to the Leverage Ratio in effect as of the most recent Calculation Date:
------------------------------------------------------------------------------------------------ APPLICABLE APPLICABLE PERCENTAGE FOR PERCENTAGE APPLICABLE APPLICABLE BASE RATE FOR PERCENTAGE PRICING LEVERAGE PERCENTAGE FOR LOANS LETTER OF FOR UNUSED LEVEL RATIO EURODOLLAR LOANS CREDIT FEES FEES ------------------------------------------------------------------------------------------------ I < 1.0 to 1.0 .75 % 0.0% .75% .20% ------------------------------------------------------------------------------------------------ II < 1.5 to 1.0 1.00% 0.0% 1.00% .25% but > 1.0 to 1.0 ------------------------------------------------------------------------------------------------ III < 2.0 to 1.0 1.25% 0.0% 1.25% .30% but > 1.5 to 1.0 ------------------------------------------------------------------------------------------------ IV < 2.5 to 1.0 1.50% 0.0% 1.50% .375% but > 2.0 to 1.0 ------------------------------------------------------------------------------------------------ V > 2.5 to 1.0 1.875% .50% 1.875% .45% ------------------------------------------------------------------------------------------------
The Applicable Percentages shall be determined and adjusted quarterly on the date (each a "Calculation Date") five Business Days after the date by which the Borrower is required 2 20 to provide the officer's certificate in accordance with the provisions of Section 7.1(c) for the most recently ended fiscal quarter of the Consolidated Parties; provided, however, (i) the initial Applicable Percentages shall be based on Pricing Level III and shall remain at Pricing Level III until the first Calculation Date subsequent to the Closing Date and, thereafter, the Applicable Percentage shall be determined by the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding the applicable Calculation Date and (ii) if the Borrower fails to provide the officer's certificate to the Agency Services Address as required by Section 7.1(c) for the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding the applicable Calculation Date, the Applicable Percentage from such Calculation Date shall be based on Pricing Level V until such time as an appropriate officer's certificate is provided, whereupon the Applicable Percentage shall be determined by the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Consolidated Parties preceding such Calculation Date. Each Applicable Percentage shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in the Applicable Percentages shall be applicable to all existing Loans as well as any new Loans made or issued. "Asset Disposition" means the disposition of any or all of the assets (including without limitation the Capital Stock of a Subsidiary) of any Consolidated Party whether by sale, lease, transfer or otherwise (including pursuant to any casualty or condemnation event), other than transfers of assets permitted by Section 8.5. "Available Foreign Currency" means (i) British Pounds Sterling and French Francs and (ii) any other freely available currency which is freely transferable and freely convertible into Dollars and in which dealings in deposits are carried on in the London interbank market, which shall be requested by the Borrower and approved by each Lender. "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time. "Bankruptcy Event" means, with respect to any Person, the occurrence of any of the following with respect to such Person: (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or ordering the winding up or liquidation of its affairs; or (ii) there shall be commenced against such Person an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded for a period of sixty (60) consecutive days; or (iii) such Person shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the 3 21 entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or make any general assignment for the benefit of creditors; or (iv) such Person shall be unable to, or shall admit in writing its inability to, pay its debts generally as they become due. "Base Rate" means, for any day, the rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and (b) the Prime Rate for such day. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate. "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate. "Borrower" means the Person identified as such in the heading hereof, together with any permitted successors and assigns. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in Charlotte, North Carolina or Atlanta, Georgia are authorized or required by law to close, except that, (i) when used in connection with a Eurocurrency Loan, such day shall also be a day on which dealings between banks are carried on in U.S. dollar deposits in London, England and (ii) when used in connection with a Foreign Currency Loan, such day shall also be a day on which dealings between banks are carried on in deposits in Available Foreign Currencies in London interbank market. "Capital Lease" means, as applied to any Person, any lease of any Property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. "Capital Stock" means (i) in the case of a corporation, capital stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (a) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) U.S. dollar denominated time deposits and certificates of deposit of (i) any Lender, (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof 4 22 (any such bank being an "Approved Bank"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by any Person with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed by the United States of America in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) Investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least $500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (d). "Change of Control" means the occurrence of any of the following events: (i) except for any member of the Management Shareholder Group, any Person or two or more Persons acting in concert shall have acquired "beneficial ownership," directly or indirectly, of, or shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, control over, Voting Stock of the Borrower (or other securities convertible into such Voting Stock) representing 35% or more of the combined voting power of all Voting Stock of the Borrower, or (ii) during any period of up to 24 consecutive months, commencing after the Closing Date, individuals who at the beginning of such 24 month period were directors of the Borrower (together with any new director whose election by the Borrower's Board of Directors or whose nomination for election by the Borrower's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the directors of the Borrower then in office. As used herein, "beneficial ownership" shall have the meaning provided in Rule 13d-3 of the Securities and Exchange Commission under the Securities Act of 1934. "Closing Date" means the date hereof. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto, as interpreted by the rules and regulations issued thereunder, in each case as in effect from time to time. References to sections of the Code shall be construed also to refer to any successor sections. "Collateral" means a collective reference to the collateral which is identified in, and at any time will be covered by, the Collateral Documents. "Collateral Documents" means a collective reference to the Security Agreement, the Pledge Agreement and such other documents executed and delivered in connection 5 23 with the attachment and perfection of the Agent's security interests and liens arising thereunder, including without limitation, UCC financing statements and patent and trademark filings. "Commitment" means the Revolving Commitment, the Swingline Commitment, the Foreign Currency Commitment and the LOC Commitment. "Consolidated Capital Expenditures" means, for any period, all capital expenditures of the Consolidated Parties on a consolidated basis for such period, as determined in accordance with GAAP. "Consolidated EBITDA" means, for any period, the sum of (i) Consolidated Net Income for such period, plus (ii) an amount which, in the determination of Consolidated Net Income for such period, has been deducted for (A) Consolidated Interest Expense, (B) total federal, state, local and foreign income, value added and similar taxes and (C) depreciation and amortization expense, all as determined in accordance with GAAP. "Consolidated EBIT" means, for any period, the sum of (i) Consolidated Net Income for such period, plus (ii) an amount which, in the determination of Consolidated Net Income for such period, has been deducted for (A) Consolidated Interest Expense and (B) total federal, state, local and foreign income, value added and similar taxes. "Consolidated Interest Expense" means, for any period, interest expense (including the amortization of debt discount and premium and the interest component under Capital Leases) of the Consolidated Parties on a consolidated basis for such period, as determined in accordance with GAAP. "Consolidated Net Income" means, for any period, net income (excluding extraordinary items) after taxes for such period of the Consolidated Parties on a consolidated basis, as determined in accordance with GAAP. "Consolidated Parties" means a collective reference to the Borrower and its Subsidiaries, and "Consolidated Party" means any one of them. "Consolidated Rental Expense" means, for any period, rental expense under Operating Leases of the Consolidated Parties on a consolidated basis for such period, as determined in accordance with GAAP. "Credit Documents" means a collective reference to this Credit Agreement, the Notes, the LOC Documents, each Joinder Agreement, the Agent's Fee Letter, the Collateral Documents and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto (in each case as the same may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time), and "Credit Document" means any one of them. 6 24 "Credit Parties" means a collective reference to the Borrower and the Guarantors, and "Credit Party" means any one of them. "Credit Party Obligations" means, without duplication, (i) all of the obligations of the Credit Parties to the Lenders (including the Issuing Lender and the Swingline Lender) and the Agent, whenever arising, under this Credit Agreement, the Notes, the Collateral Documents or any of the other Credit Documents (including, but not limited to, any interest accruing after the occurrence of a Bankruptcy Event with respect to any Credit Party, regardless of whether such interest is an allowed claim under the Bankruptcy Code) and (ii) all liabilities and obligations, whenever arising, owing from the Borrower to any Lender, or any Affiliate of a Lender, arising under any Hedging Agreement. "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Lender" means, at any time, any Lender that (a) has failed to make a Loan or purchase a Participation Interest required pursuant to the term of this Credit Agreement within one Business Day of when due, (b) other than as set forth in (a) above, has failed to pay to the Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement within one Business Day of when due, unless such amount is subject to a good faith dispute or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or with respect to which (or with respect to any of assets of which) a receiver, trustee or similar official has been appointed. "Determination Date" means, with respect to any Foreign Currency Loan: (a) in connection with any origination of such Loan, the Business Day which is the earliest of the date such Loan is made or the date the interest rate is set; (b) in connection with any extension or conversion of an existing Foreign Currency Loan, the Business Day that such Loan is extended or converted, or the date the rate is set, as applicable, in connection with any extension or conversion; or (c) the date of any reduction of the Revolving Committed Amount or the Foreign Currency Committed Amount pursuant to the terms of Section 3.4; In addition to the foregoing, such additional dates not more frequently than once a month as may be determined by the Agent. "Dollar Amount" means (a) with respect to Dollars or an amount denominated in Dollars, such amount and (b) with respect to an amount of any Available Foreign Currency or an amount denominated in such Available Foreign Currency, the Dollar Equivalent of such amount on the applicable date contemplated in the Credit Agreement. 7 25 "Dollar Equivalent" means, on any date, with respect to any amount denominated in an Available Foreign Currency, the amount of Dollars into which the Agent could, in accordance with its practice from time to time in the interbank foreign exchange market, convert such amount of Available Foreign Currency at its spot rate of exchange (inclusive of all reasonable related costs of conversion) applicable to the relevant transaction at or about 10:00 A.M., Charlotte, North Carolina time, on such date. "Dollars" and "$" means dollars in lawful currency of the United States of America. "Domestic Subsidiary" means, with respect to any Person, any Subsidiary of such Person which is incorporated or organized under the laws of any State of the United States or the District of Columbia. "Eligible Assets" means another business or any substantial part of another business or other long-term assets, in each case, in, or used or useful in, the same or a similar line of business as the Borrower and its Subsidiaries were engaged in on the Closing Date, or any reasonable extensions or expansions thereof. "Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a Lender in which such Lender owns at least a 20% interest; and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 11.3, the Borrower (such approval not to be unreasonably withheld or delayed by the Borrower and such approval to be deemed given by the Borrower if no objection is received by the assigning Lender and the Agent from the Borrower within two Business Days after notice of such proposed assignment has been provided by the assigning Lender to the Borrower); provided, however, that neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee. "Environmental Laws" means any and all lawful and applicable Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Issuance" means any issuance by any Consolidated Party to any Person which is not a Credit Party of (a) shares of its Capital Stock, (b) any shares of its Capital Stock pursuant to the exercise of options or warrants or (c) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations 8 26 thereunder, all as the same may be in effect from time to time. References to sections of ERISA shall be construed also to refer to any successor sections. "ERISA Affiliate" means an entity which is under common control with any Consolidated Party within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes any Consolidated Party and which is treated as a single employer under Sections 414(b) or (c) of the Code. "ERISA Event" means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by any Consolidated Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the complete or partial withdrawal of any Consolidated Party or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or (viii) the adoption of an amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA. "Eurocurrency Loan" means any Loan that bears interest at a rate based upon the Eurocurrency Rate. "Eurocurrency Rate" means, for any Eurocurrency Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by the Agent to be equal to the quotient obtained by dividing (a) the Interbank Offered Rate for such Eurocurrency Loan for such Interest Period by (b) 1 minus the Eurocurrency Reserve Requirement for such Eurocurrency Loan for such Interest Period. "Eurocurrency Reserve Requirement" means, at any time, the maximum rate at which reserves (including, without limitation, any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Eurocurrency Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the Adjusted Eurocurrency Rate is to be determined, or (ii) any category of extensions of credit or other assets which include Eurocurrency Loans. The Adjusted Eurocurrency Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Requirement. "Event of Default" shall have the meaning as defined in Section 9.1. 9 27 "Executive Officer" of any Person means any of the chief executive officer, chief operating officer, president, senior vice president, chief financial officer or treasurer of such Person. "Fees" means all fees payable pursuant to Section 3.5. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Agent (in its individual capacity) on such day on such transactions as determined by the Agent. "Fixed Charge Coverage Ratio" means, as of the end of each fiscal quarter of the Consolidated Parties for the twelve month period ending on such date, the ratio of (a) the sum of (i) Consolidated EBIT for the applicable period plus (ii) Consolidated Rental Expense for the applicable period plus (iii) any amortization of intangible assets for the applicable period to (b) the sum of (i) Consolidated Interest Expense for the applicable period plus (ii) Consolidated Rental Expense for the applicable period. "Foreign Currency" means the Available Foreign Currency. "Foreign Currency Commitment" means, with respect to each Lender, the commitment of such Lender to make Foreign Currency Loans in an aggregate principal amount at any time outstanding of up to such Lender's Foreign Currency Commitment Percentage of the Foreign Currency Committed Amount. "Foreign Currency Commitment Percentage" means, for any Lender, the percentage identified as its Foreign Currency Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3. "Foreign Currency Committed Amount" means, collectively, the aggregate amount of all Foreign Currency Commitments as referenced in Section 2.3(a) and, individually, the amount of each Lender's Foreign Currency Commitment as specified on Schedule 2.1(a). "Foreign Currency Equivalent" means, on any date, with respect to an amount denominated in Dollars, the amount of any applicable Available Foreign Currency into which the Agent could, in accordance with its practice from time to time in the interbank foreign exchange market, convert such amount of Dollars at its spot rate of exchange (inclusive of all reasonable related costs of conversion) applicable to the relevant transaction on or about 10:00 A.M. (Charlotte, North Carolina) on such date. 10 28 "Foreign Currency Loans" shall have the meaning assigned to such term in Section 2.3(a). "Foreign Subsidiary" means, with respect to any Person, any Subsidiary of such Person which is not a Domestic Subsidiary of such Person. "Funded Indebtedness" means, with respect to any Person, without duplication, (a) all Indebtedness of such Person other than Indebtedness of the types referred to in clause (e), (f), (g), (i), and (l) of the definition of "Indebtedness" set forth in this Section 1.1, (b) all Indebtedness of another Person of the type referred to in clause (a) above secured by (or for which the holder of such Funded Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (c) all Guaranty Obligations of such Person with respect to Indebtedness of the type referred to in clause (a) above of another Person and (d) Indebtedness of the type referred to in clause (a) above of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer. "Funded Indebtedness to Capitalization Ratio" means, with respect to the Consolidated Parties on a consolidated basis, the ratio of (a) Funded Indebtedness of the Consolidated Parties to (b) Total Capitalization of the Consolidated Parties. "GAAP" means generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3. "Governmental Authority" means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "Guarantors" means a collective reference to each of the Subsidiary Guarantors, together with their successors and permitted assigns, and "Guarantor " means any one of them. "Guaranty Obligations" means, with respect to any Person, without duplication, any obligations of such Person (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any Property constituting security therefor, (ii) to advance or provide funds or other support for the payment or purchase of any such Indebtedness or to maintain working capital, solvency or other balance sheet condition of such other Person (including without limitation keep well agreements, maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of any holder of Indebtedness of such other Person, (iii) to lease or purchase Property, securities or services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof. The amount of any Guaranty 11 29 Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made. "Hedging Agreements" means any interest rate protection agreement or foreign currency exchange agreement between Borrower and any Lender, or any Affiliate of a Lender. "Indebtedness" means, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to Property purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of Property or services purchased by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) all obligations of such Person under take-or-pay or similar arrangements or under commodities agreements, (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, Property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all Guaranty Obligations of such Person, (h) the principal portion of all obligations of such Person under Capital Leases, (i) all obligations of such Person under Hedging Agreements, (j) the maximum amount of all standby letters of credit issued or bankers' acceptances facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (k) the principal portion of all obligations of such Person under Synthetic Leases and (l) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer. "Interbank Offered Rate" means, for any Eurocurrency Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Interbank Offered Rate" shall mean, for any Eurocurrency Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). 12 30 "Interest Payment Date" means (a) as to Base Rate Loans, the last Business Day of each calendar month, the date of repayment of principal of such Loan and the Maturity Date, and (b) as to Eurocurrency Loans, the last day of each applicable Interest Period, the date of repayment of principal of such Loan and the Maturity Date, and in addition where the applicable Interest Period for a Eurocurrency Loan is greater than three months, then also the date three months from the beginning of the Interest Period and each three months thereafter. "Interest Period" means, as to Eurocurrency Loans, a period of one, two, three or six months' duration, as the Borrower may elect, commencing, in each case, on the date of the borrowing (including continuations and conversions thereof); provided, however, (a) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (b) no Interest Period shall extend beyond the Maturity Date, and (c) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month. "Investment" means (a) the acquisition (whether for cash, property, services, assumption of Indebtedness, securities or otherwise) of assets, Capital Stock, bonds, notes, debentures, partnership, joint ventures or other ownership interests or other securities of any Person or (b) any deposit with, or advance, loan or other extension of credit to, any Person (other than deposits made in connection with the purchase or lease of equipment or other assets in the ordinary course of business or the leasing of real property in the ordinary course of business) or (c) any other capital contribution to or investment in any Person, including, without limitation, any Guaranty Obligations (including any support for a letter of credit issued on behalf of such Person) incurred for the benefit of such Person. "Issuing Lender" means NationsBank. "Issuing Lender Fees" shall have the meaning assigned to such term in Section 3.5(c)(ii). "Joinder Agreement" means a Joinder Agreement substantially in the form of Exhibit 7.12 hereto, executed and delivered by an Additional Credit Party in accordance with the provisions of Section 7.12. "Lender" means any of the Persons identified as a "Lender" on the signature pages hereto, and any Person which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns. "Letter of Credit" means any letter of credit issued by the Issuing Lender for the account of the Borrower in accordance with the terms of Section 2.2. 13 31 "Letter of Credit Fee" shall have the meaning assigned to such term in Section 3.5(c)(i). "Leverage Ratio" means, with respect to the Consolidated Parties on a consolidated basis for the twelve month period ending on the last day of any fiscal quarter, the ratio of (a) Funded Indebtedness of the Consolidated Parties on a consolidated basis on the last day of such period to (b) Consolidated EBITDA for such period. "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), preference, priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof). "Loan" or "Loans" means the Revolving Loans (or a portion of any Revolving Loan bearing interest at the Adjusted Base Rate or the Adjusted Eurocurrency Rate) and/or any Swingline Loans and/or any Foreign Currency Loan (or any Foreign Currency Loan referred to as a Eurocurrency Loan), individually or collectively, as appropriate. "LOC Commitment" means the commitment of the Issuing Lender to issue Letters of Credit, and to honor payment obligations under Letters of Credit hereunder in an aggregate face amount at any time outstanding (together with the amounts of any unreimbursed drawings thereon) of up to the LOC Committed Amount and with respect to each Lender, the commitment of each Lender to purchase participation interests in the Letters of Credit. "LOC Committed Amount" shall have the meaning assigned to such term in Section 2.2. "LOC Documents" means, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (i) the rights and obligations of the parties concerned or at risk or (ii) any collateral security for such obligations. "LOC Obligations" means, at any time, the sum of (i) the maximum amount which is, or at any time thereafter may become, available to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit plus (ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed by the Borrower. "Management Shareholder Group" means John M. Cook, John M. Toma, Stanley B. Cohen, Jonathon Golden and their respective family members and trusts and/or partnerships created for the benefit of such family members or for charitable purposes. 14 32 "Material Adverse Effect" means a material adverse effect on (i) the condition (financial or otherwise), operations, business, assets, liabilities or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of any Credit Party to perform any material obligation under the Credit Documents to which it is a party or (iii) the material rights and remedies of the Lenders under the Credit Documents. "Materials of Environmental Concern" means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Laws, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Maturity Date" means July 29, 2003. "Moody's" means Moody's Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities. "Multiemployer Plan" means a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA. "Multiple Employer Plan" means a Plan which any Consolidated Party or any ERISA Affiliate and at least one employer other than the Consolidated Parties or any ERISA Affiliate are contributing sponsors. "NationsBank" means NationsBank, N.A. and its successors. "Net Cash Proceeds" means the aggregate cash proceeds received by the Consolidated Parties in respect of any Asset Disposition or Equity Issuance, net of (a) direct costs (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and (b) taxes paid or payable as a result thereof; it being understood that "Net Cash Proceeds" shall include, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received by the Consolidated Parties in any Asset Disposition or Equity Issuance. "Net Worth" means, as of any date, shareholders' equity or net worth of the Consolidated Parties on a consolidated basis as determined in accordance with GAAP. "Note" or "Notes" means the Revolving Notes, individually or collectively, as appropriate. "Notice of Borrowing" means a written notice of borrowing in substantially the form of Exhibit 2.1(b)(i), as required by Section 2.1(b)(i) in the case of Revolving Loans or Exhibit 2.3(b)(i), as required by Section 2.3(b)(i) in the case of Foreign Currency Loans. 15 33 "Notice of Extension/Conversion" means the written notice of extension or conversion in substantially the form of Exhibit 3.2, as required by Section 3.2. "Operating Lease" means, as applied to any Person, any lease (including, without limitation, leases which may be terminated by the lessee at any time) of any Property (whether real, personal or mixed) which is not a Capital Lease other than any such lease in which that Person is the lessor. "Other Taxes" shall have the meaning assigned to such term in Section 3.11. "Participation Interest" means a purchase by a Lender of a participation in Letters of Credit or LOC Obligations as provided in Section 2.2, in Swingline Loans as provided in Section 2.4 or in any Loans as provided in Section 3.14. "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereof. "Permitted Acquisition" means an Acquisition by the Borrower or any Subsidiary of the Borrower for consideration no greater than the fair market value of the Capital Stock or Property acquired, provided that (i) the Capital Stock or Property acquired in such Acquisition constitute Eligible Assets, (ii) the Agent shall have received all items in respect of the Capital Stock or Property acquired in such Acquisition (and/or the seller thereof) required to be delivered by the terms of Section 7.12 and/or Section 7.14, (iii) in the case of an Acquisition of the Capital Stock of another Person, the board of directors (or other comparable governing body) of such other Person shall have duly approved such Acquisition, (iv) the Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate demonstrating that, upon giving effect to such Acquisition on a pro forma basis, the Credit Parties shall be in compliance with all of the covenants set forth in Section 7.11, (v) the representations and warranties made by the Credit Parties in any Credit Document shall be true and correct in all material respects at and as if made as of the date of such Acquisition (after giving effect thereto) except to the extent such representations and warranties expressly relate to an earlier date, (vi) unless otherwise approved in writing by the Required Lenders, the cost of such Acquisition (including cash and any assumption of liabilities) shall not exceed $25,000,000 and (vii) unless otherwise approved in writing by the Required Lenders, after giving effect to such Acquisition, the aggregate consideration (including cash and non-cash consideration and any assumption of liabilities) for all such Acquisitions occurring during any fiscal year shall not exceed $50,000,000. "Permitted Investments" means Investments which are either (i) cash and Cash Equivalents; (ii) accounts receivable created, acquired or made by any Consolidated Party in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; (iii) Investments consisting of Capital Stock, obligations, securities or other property received by any Consolidated Party in settlement of accounts receivable (created in the ordinary course of business) from bankrupt obligors; (iv) Investments existing as of the Closing Date and set forth in Schedule 1.1(a), (v) Guaranty Obligations permitted by Section 8.1; (vi) advances or loans to directors, officers, employees, agents, 16 34 customers or suppliers that do not exceed $500,000 in the aggregate at any one time outstanding for all of the Consolidated Parties; (vii) Investments in any Credit Party; (viii) Investments by the Borrower in Foreign Subsidiaries of the Borrower in an amount not to exceed $2,000,000 in the aggregate during the term of this Credit Agreement; (ix) Permitted Acquisitions, (x) compensation advances to commissioned auditors made in the ordinary course of business and (xi) other loans, advances and Investments of a nature not contemplated in the foregoing subsections in an amount not to exceed $2,500,000 in the aggregate at any time outstanding. "Permitted Liens" means: (i) Liens in favor of the Agent to secure the Credit Party Obligations; (ii) Liens (other than Liens created or imposed under ERISA) for taxes, assessments or governmental charges or levies not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and suppliers and other Liens imposed by law or pursuant to customary reservations or retentions of title arising in the ordinary course of business, provided that such Liens secure only amounts not yet due and payable or, if due and payable, are unfiled and no other action has been taken to enforce the same or are being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the Property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof); (iv) Liens (other than Liens created or imposed under ERISA) incurred or deposits made by any Consolidated Party in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (v) Liens in connection with attachments or judgments (including judgment or appeal bonds) provided that the judgments secured shall, within 30 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall have been discharged within 30 days after the expiration of any such stay; (vi) easements, rights-of-way, restrictions (including zoning restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered Property for its intended purposes; (vii) Liens on Property of any Person securing purchase money Indebtedness (including Capital Leases and Synthetic Leases) of such Person to the extent permitted 17 35 under Section 8.1(c), provided that any such Lien attaches to such Property concurrently with or within 90 days after the acquisition thereof; (viii) leases or subleases granted to others not interfering in any material respect with the business of any Consolidated Party; (ix) normal and customary rights of setoff upon deposits of cash in favor of banks or other depository institutions; and (x) Liens existing as of the Closing Date and set forth on Schedule 1.1(b); provided that (a) no such Lien shall at any time be extended to or cover any Property other than the Property subject thereto on the Closing Date and (b) the principal amount of the Indebtedness secured by such Liens shall not be extended, renewed, refunded or refinanced. "Person" means any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise (whether or not incorporated) or any Governmental Authority. "Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which any Consolidated Party or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the meaning of Section 3(5) of ERISA. "Pledge Agreement" means the pledge agreement dated as of the Closing Date executed in favor of the Agent by each of the Credit Parties, as amended, modified, restated or supplemented from time to time. "Prime Rate" means the per annum rate of interest established from time to time by NationsBank as its prime rate, which rate may not be the lowest rate of interest charged by NationsBank to its customers. "Pro Forma Compliance Certificate" means a certificate of an Executive Officer of the Borrower delivered to the Agent in connection with a Permitted Acquisition and containing reasonably detailed calculations, upon giving effect to the applicable transaction on a pro forma basis, of the financial covenants set forth in Section 7.11. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Quoted Rate" means, with respect to a Swingline Loan, the rate per annum offered by the Swingline Lender and accepted by the Borrower with respect to such Swingline Loan. "Register" shall have the meaning given such term in Section 11.3(c). 18 36 "Regulation T, U, or X" means Regulation T, U or X, respectively, of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment or discarding of barrels, containers and other closed receptacles) of any Materials of Environmental Concern. "Reportable Event" means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation. "Required Lenders" means, at any time, Lenders which are then in compliance with their obligations hereunder (as determined by the Agent) and holding in the aggregate at least 51% of (i) the Revolving Commitments (and Participation Interests therein) or (ii) if the Commitments have been terminated, the outstanding Loans and Participation Interests (including the Participation Interests of the Issuing Lender in any Letters of Credit). "Requirement of Law" means, as to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its material property is subject. "Restricted Payment" means (i) any dividend or other payment or distribution, direct or indirect, on account of any shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding (including without limitation any payment in connection with any merger or consolidation involving any Consolidated Party), or to the direct or indirect holders of any shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding, in their capacity as such (other than dividends or distributions payable in the same class of Capital Stock of the applicable Person or to any Credit Party (directly or indirectly through Subsidiaries), (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding and (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of Capital Stock of any Consolidated Party, now or hereafter outstanding. "Revolving Commitment" means, with respect to each Lender, the commitment of such Lender in an aggregate principal amount at any time outstanding of up to such Lender's Revolving Commitment Percentage of the Revolving Committed Amount, (i) to make Revolving Loans in accordance with the provisions of Section 2.1(a) and (ii) to purchase Participation Interests in Letters of Credit in accordance with the provisions of Section 2.2(c). 19 37 "Revolving Commitment Percentage" means, for any Lender, the percentage identified as its Revolving Commitment Percentage on Schedule 2.1(a), as such percentage may be modified in connection with any assignment made in accordance with the provisions of Section 11.3. "Revolving Committed Amount" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Loans" shall have the meaning assigned to such term in Section 2.1(a). "Revolving Note" or "Revolving Notes" means the promissory notes of the Borrower in favor of each of the Lenders evidencing the Revolving Loans provided pursuant to Section 2.1(e), individually or collectively, as appropriate, as such promissory notes may be amended, modified, restated, supplemented, extended, renewed or replaced from time to time. "Revolving Obligations" means, collectively, the Revolving Loans, the Foreign Currency Loans, the Swingline Loans and the LOC Obligations. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor or assignee of the business of such division in the business of rating securities. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to any Consolidated Party of any Property, whether owned by such Consolidated Party as of the Closing Date or later acquired, which has been or is to be sold or transferred by such Consolidated Party to such Person or to any other Person from whom funds have been, or are to be, advanced by such Person on the security of such Property. "Security Agreement" means the security agreement dated as of the Closing Date executed in favor of the Agent by each of the Credit Parties, as amended, modified, restated or supplemented from time to time. "Single Employer Plan" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan. "Solvent" or "Solvency" means, with respect to any Person as of a particular date, that on such date (i) such Person is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (ii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person's Property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged or is 20 38 to engage, (iv) the fair value of the Property of such Person is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Person and (v) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Subsidiary" means, as to any Person at any time, (a) any corporation more than 50% of whose Capital Stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at such time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at such time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, association, joint venture or other entity of which such Person directly or indirectly through Subsidiaries owns at such time more than 50% of the Capital Stock. "Subsidiary Guarantor" means each of the Persons identified as a "Subsidiary Guarantor" on the signature pages hereto and each Additional Credit Party which may hereafter execute a Joinder Agreement, together with their successors and permitted assigns, and "Subsidiary Guarantor" means any one of them. "Swingline Commitment" means the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding of up to the Swingline Committed Amount. "Swingline Committed Amount" shall have the meaning assigned to such term in Section 2.4(a). "Swingline Lender" means NationsBank. "Swingline Loan" shall have the meaning assigned to such term in Section 2.4(a). "Swingline Note" means the promissory note of the Borrower in favor of the Swingline Lender in the original principal amount of $10,000,000, as such promissory note may be amended, modified, restated or replaced from time to time. "Synthetic Lease" means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease. "Taxes" shall have the meaning assigned to such term in Section 3.11. 21 39 "Total Assets" means, as of any date, all items, which in accordance with GAAP, would be classified as assets of the Consolidated Parties on a consolidated basis. "Total Capitalization" means, at any date of determination calculated for the Consolidated Parties on a consolidated basis the sum of (i) Net Worth plus (ii) Funded Indebtedness of the Consolidated Parties. "Unused Fee" shall have the meaning assigned to such term in Section 3.5(b). "Unused Fee Calculation Period" shall have the meaning assigned to such term in Section 3.5(b). "Unused Revolving Committed Amount" means, for any period, the amount by which (a) the then applicable Revolving Committed Amount exceeds (b) the daily average sum for such period of (i) the outstanding aggregate principal amount of all Revolving Loans plus (ii) the outstanding aggregate principal amount of all LOC Obligations. "Upfront Fee" shall have the meaning assigned to such term in Section 3.5(a). "Voting Stock" means, with respect to any Person, Capital Stock issued by such Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. "Wholly Owned Subsidiary" of any Person means any Subsidiary 100% of whose Voting Stock is at the time owned by such Person directly or indirectly through other Wholly Owned Subsidiaries. 1.2 COMPUTATION OF TIME PERIODS. For purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." 1.3 ACCOUNTING TERMS. Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 7.1 (or, prior to the delivery of the first financial statements pursuant to Section 7.1, consistent with the financial statements as at December 31, 1997); provided, however, if (a) the Credit Parties shall object to determining such compliance on such basis at the time of delivery of such financial statements due to any change in GAAP or the rules promulgated with respect thereto or (b) the Agent or the Required Lenders shall so object in writing within 60 days after delivery of 22 40 such financial statements, then such calculations shall be made on a basis consistent with the most recent financial statements delivered by the Credit Parties to the Lenders as to which no such objection shall have been made. Notwithstanding the above, the parties hereto acknowledge and agree that, for purposes of all calculations made under the financial covenants set forth in Section 7.11 so long as the Borrower shall have provided the Agent with a Pro Forma Compliance Certificate with respect to the applicable Permitted Acquisition, income statement items (whether positive or negative) attributable to the Property acquired in any Permitted Acquisition and any Indebtedness incurred by the Borrower or any of its Subsidiaries in order to consummate such Permitted Acquisition shall be included to the extent relating to any period applicable in such calculations occurring after the date of such Permitted Acquisition (and, notwithstanding the foregoing, during the first four fiscal quarters following the date of such Permitted Acquisition, (i) such Permitted Acquisition and any Indebtedness incurred by the Borrower or any of its Subsidiaries in order to consummate such Permitted Acquisition (A) shall be deemed to have occurred on the first day of the four fiscal quarter period immediately preceding the date of such Permitted Acquisition and (B) if such Indebtedness has a floating or formula rate, then the implied rate of interest for such Indebtedness for the applicable period shall be determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination and (ii) with respect to the calculation of Consolidated EBITDA and Consolidated EBIT (A) such Consolidated EBITDA or Consolidated EBIT shall be increased by an amount approved by the Agent, in its reasonable discretion, as the Excess Compensation (as defined below) applicable to the period under consideration, (B) the Borrower agrees to provide the Agent with such supporting documentation for such Excess Compensation as shall be requested from time to time by the Agent and (C) as used in this Section 1.3, the term "Excess Compensation" shall mean the amount by which compensation paid to owners, employees and/or independent contractors of a former privately held company prior to the acquisition of such company in connection with a Permitted Acquisition exceeds the compensation to be paid to such owners, employees and independent contractors after the closing of such Permitted Acquisition). SECTION 2 CREDIT FACILITIES 2.1 REVOLVING LOANS. (a) Revolving Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make available to the Borrower such Lender's Revolving Commitment Percentage of revolving credit loans requested by the Borrower in Dollars ("Revolving Loans") from time to time from the Closing Date until the Maturity Date, or such earlier date as the Revolving Commitments shall have been terminated as provided herein; provided, however, that (i) with regard to the Lenders collectively, the Dollar Amount (determined as of the most recent Determination Date) of Revolving Obligations outstanding shall not exceed ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000) (as such 23 41 aggregate maximum amount may be reduced from time to time as provided in Section 3.4, the "Revolving Committed Amount"); provided, further, (ii) with regard to each Lender individually, the Dollar Amount (determined as of the most recent Determination Date) of such Lender's Revolving Commitment Percentage of the sum of the Revolving Loans plus Foreign Currency Loans plus LOC Obligations plus Swingline Loans outstanding shall not exceed such Lender's Revolving Committed Amount. Revolving Loans may consist of Base Rate Loans or Eurocurrency Loans, or a combination thereof, as the Borrower may request; provided, however, that no more than eight (8) Eurocurrency Loans shall be outstanding hereunder at any time (it being understood that, for purposes hereof, Eurocurrency Loans with different Interest Periods shall be considered as separate Eurocurrency Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurocurrency Loan with a single Interest Period). Revolving Loans hereunder may be repaid and reborrowed in accordance with the provisions hereof. (b) Revolving Loan Borrowings. (i) Notice of Borrowing. The Borrower shall request a Revolving Loan borrowing by written notice (or telephonic notice promptly confirmed in writing) to the Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the Business Day prior to the date of the requested borrowing in the case of Base Rate Loans, and on the third Business Day prior to the date of the requested borrowing in the case of Eurocurrency Loans. Each such request for borrowing shall be irrevocable and shall specify (A) that a Revolving Loan is requested, (B) the date of the requested borrowing (which shall be a Business Day), (C) the aggregate principal amount to be borrowed, and (D) whether the borrowing shall be comprised of Base Rate Loans, Eurocurrency Loans or a combination thereof, and if Eurocurrency Loans are requested, the Interest Period(s) therefor. If the Borrower shall fail to specify in any such Notice of Borrowing (I) an applicable Interest Period in the case of a Eurocurrency Loan, then such notice shall be deemed to be a request for an Interest Period of one month, or (II) the type of Revolving Loan requested, then such notice shall be deemed to be a request for a Base Rate Loan hereunder. The Agent shall give notice to each affected Lender promptly upon receipt of each Notice of Borrowing pursuant to this Section 2.1(b)(i), the contents thereof and each such Lender's share of any borrowing to be made pursuant thereto. (ii) Minimum Amounts. Each Base Rate Loan that is a Revolving Loan shall be in a minimum aggregate principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof (or the remaining amount of the Revolving Committed Amount, if less), and each Eurocurrency Loan that is a Revolving Loan shall be in a minimum aggregate principal amount of $2,500,000 and integral multiples of $1,000,000 in excess thereof (or the remaining amount of the Revolving Committed Amount, if less). 24 42 (iii) Advances. Each Lender will make its Revolving Commitment Percentage of each Revolving Loan borrowing available to the Agent for the account of the Borrower as specified in Section 3.15(a), or in such other manner as the Agent may specify in writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date specified in the applicable Notice of Borrowing in Dollars and in funds immediately available to the Agent. Such borrowing will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Agent by the Lenders and in like funds as received by the Agent. (c) Repayment. The principal amount of all Revolving Loans shall be due and payable in full on the Maturity Date, unless accelerated sooner pursuant to Section 9.2. (d) Interest. Subject to the provisions of Section 3.1, (i) Base Rate Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Base Rate Loans, such Base Rate Loans shall bear interest at a per annum rate equal to the Adjusted Base Rate. (ii) Eurocurrency Loans. During such periods as Revolving Loans shall be comprised in whole or in part of Eurocurrency Loans, such Eurocurrency Loans shall bear interest at a per annum rate equal to the Adjusted Eurocurrency Rate. Interest on Revolving Loans shall be payable in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (e) Revolving Notes. The Revolving Loans made by each Lender shall be evidenced by a duly executed promissory note of the Borrower to such Lender in an original principal amount equal to such Lender's Revolving Commitment Percentage of the Revolving Committed Amount and in substantially the form of Exhibit 2.1(e). 2.2 LETTER OF CREDIT SUBFACILITY. (a) Issuance. Subject to the terms and conditions hereof and of the LOC Documents, if any, and any other terms and conditions which the Issuing Lender may reasonably require and in reliance upon the representations and warranties set forth herein, the Issuing Lender agrees to issue, and each Lender severally agrees to participate in the issuance by the Issuing Lender of Letters of Credit in Dollars from time to time from the Closing Date until the Maturity Date as the Borrower may request, in a form acceptable to the Issuing Lender in its reasonable discretion; provided, however, that (i) the LOC Obligations outstanding shall not at any time exceed TEN MILLION DOLLARS ($10,000,000) (the "LOC Committed Amount"), (ii) with regard to the Lenders collectively, the Dollar Amount (determined as of the most recent Determination Date) of the Revolving Obligations shall not exceed the Revolving Committed Amount and (iii) with regard to each Lender individually, the Dollar Amount (determined as of the most recent Determination Date) of the sum of the Revolving Loans plus LOC Obligations plus Foreign Currency 25 43 Loans plus Swingline Loans outstanding shall not exceed such Lender's Revolving Commitment Percentage of the Revolving Committed Amount. No Letter of Credit shall (x) have an original expiry date more than one year from the date of issuance or (y) as originally issued or as extended, have an expiry date extending beyond the Maturity Date. Each Letter of Credit (1) shall comply with the related LOC Documents, (2) may be issued only for the purposes set forth in Section 6.15 hereof and (3) may be issued only in Dollars. The issuance and expiry dates of each Letter of Credit shall be a Business Day. (b) Notice and Reports. The request for the issuance of a Letter of Credit shall be submitted by the Borrower to the Issuing Lender at least three (3) Business Days prior to the requested date of issuance. The Issuing Lender will, at least quarterly and more frequently upon request, disseminate to each of the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of the prior report, and including therein, among other things, the beneficiary, the face amount and the expiry date, as well as any payment or expirations which may have occurred. (c) Participation. Each Lender, upon issuance of a Letter of Credit, shall be deemed to have purchased without recourse a Participation Interest from the Issuing Lender in such Letter of Credit and the obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its pro rata share of the obligations under such Letter of Credit (based on the respective Revolving Commitment Percentages of the Lenders) and shall absolutely, unconditionally and irrevocably assume and be obligated to pay to the Issuing Lender and discharge when due, its pro rata share of the obligations arising under such Letter of Credit. Without limiting the scope and nature of each Lender's Participation Interest in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any such Letter of Credit, each such Lender shall pay to the Issuing Lender its pro rata share of such unreimbursed drawing in same day funds on the day of notification by the Issuing Lender of an unreimbursed drawing pursuant to the provisions of subsection (d) below. The obligation of each Lender to so reimburse the Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. (d) Reimbursement. In the event of any drawing under any Letter of Credit, the Issuing Lender will promptly notify the Borrower. Unless the Borrower shall immediately notify the Issuing Lender that the Borrower intends to otherwise reimburse the Issuing Lender for such drawing, the Borrower shall be deemed to have requested that the Lenders make a Revolving Loan in the amount of the drawing as provided in subsection (e) below on the related Letter of Credit, the proceeds of which will be used to satisfy the related reimbursement obligations. The Borrower promises to reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Revolving Loan obtained hereunder or otherwise) in same day funds. If the Borrower shall fail to reimburse the Issuing Lender as provided hereinabove, the unreimbursed amount of such drawing 26 44 shall bear interest at a per annum rate equal to the Adjusted Base Rate plus 2%. The Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of any rights of setoff, counterclaim or defense to payment the Borrower may claim or have against the Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation any defense based on any failure of the Borrower or any other Credit Party to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit. The Issuing Lender will promptly notify the other Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Agent for the account of the Issuing Lender in Dollars and in immediately available funds, the amount of such Lender's pro rata share of such unreimbursed drawing. Such payment shall be made on the day such notice is received by such Lender from the Issuing Lender if such notice is received at or before 2:00 P.M. (Charlotte, North Carolina time) otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received. If such Lender does not pay such amount to the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Agent for the account of the Issuing Lender interest on the unpaid amount during the period from the date of such drawing until such Lender pays such amount to the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business Days of the date that such Lender is required to make payments of such amount pursuant to the preceding sentence, the Federal Funds Rate and thereafter at a rate equal to the Base Rate. Each Lender's obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Credit Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the obligations of the Borrower hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever. Simultaneously with the making of each such payment by a Lender to the Issuing Lender, such Lender shall, automatically and without any further action on the part of the Issuing Lender or such Lender, acquire a Participation Interest in an amount equal to such payment (excluding the portion of such payment constituting interest owing to the Issuing Lender) in the related unreimbursed drawing portion of the LOC Obligation and in the interest thereon and in the related LOC Documents, and shall have a claim against the Borrower with respect thereto. (e) Repayment with Revolving Loans. On any day on which the Borrower shall have requested, or been deemed to have requested, a Revolving Loan advance to reimburse a drawing under a Letter of Credit, the Agent shall give notice to the Lenders that a Revolving Loan has been requested or deemed requested by the Borrower to be made in connection with a drawing under a Letter of Credit, in which case a Revolving Loan advance comprised of Base Rate Loans (or Eurocurrency Loans to the extent the Borrower has complied with the procedures of Section 2.1(b)(i) with respect thereto) shall be immediately made to the Borrower by all Lenders (notwithstanding any termination of the Commitments pursuant to Section 9.2) pro rata based on the respective Revolving Commitment Percentages of the Lenders (determined before giving effect to any termination of the Commitments pursuant to Section 9.2) and the proceeds thereof shall be paid directly to the Issuing Lender for application to the respective LOC Obligations. Each 27 45 such Lender hereby irrevocably agrees to make its pro rata share of each such Revolving Loan immediately upon any such request or deemed request in the amount, in the manner and on the date specified in the preceding sentence notwithstanding (i) the amount of such borrowing may not comply with the minimum amount for advances of Revolving Loans otherwise required hereunder, (ii) whether any conditions specified in Section 5.2 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) failure for any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (v) whether the date of such borrowing is a date on which Revolving Loans are otherwise permitted to be made hereunder or (vi) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such borrowing. In the event that any Revolving Loan cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower or any other Credit Party), then each such Lender hereby agrees that it shall forthwith purchase (as of the date such borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Issuing Lender such Participation Interests in the outstanding LOC Obligations as shall be necessary to cause each such Lender to share in such LOC Obligations ratably (based upon the respective Revolving Commitment Percentages of the Lenders (determined before giving effect to any termination of the Commitments pursuant to Section 9.2)), provided that at the time any purchase of Participation Interests pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Issuing Lender, to the extent not paid to the Issuer by the Borrower in accordance with the terms of subsection (d) above, interest on the principal amount of Participation Interests purchased for each day from and including the day upon which such borrowing would otherwise have occurred to but excluding the date of payment for such Participation Interests, at the rate equal to, if paid within two (2) Business Days of the date of the Revolving Loan advance, the Federal Funds Rate, and thereafter at a rate equal to the Base Rate. (f) Designation of Credit Parties as Account Parties. Notwithstanding anything to the contrary set forth in this Credit Agreement, including without limitation Section 2.2(a), a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of a Credit Party other than the Borrower, provided that notwithstanding such statement, the Borrower shall be the actual account party for all purposes of this Credit Agreement for such Letter of Credit and such statement shall not affect the Borrower's reimbursement obligations hereunder with respect to such Letter of Credit. (g) Renewal, Extension. The renewal or extension of any Letter of Credit shall, for purposes hereof, be treated in all respects the same as the issuance of a new Letter of Credit hereunder. (h) Uniform Customs and Practices. The Issuing Lender may have the Letters of Credit be subject to The Uniform Customs and Practice for Documentary Credits, as published as of the date of issue by the International Chamber of Commerce (the "UCP"), 28 46 in which case the UCP may be incorporated therein and deemed in all respects to be a part thereof. (i) Indemnification; Nature of Issuing Lender's Duties. (i) In addition to its other obligations under this Section 2.2, the Borrower hereby agrees to pay, and protect, indemnify and save each Lender harmless from and against, any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that such Lender actually incurs or becomes subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or (B) the failure of such Lender to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority (all such acts or omissions, herein called "Government Acts"). (ii) As between the Borrower and the Lenders (including the Issuing Lender), the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. Subject to the terms of Section (i)(v) below, no Lender (including the Issuing Lender) shall be responsible: (A) 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 any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (D) for any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (E) for any consequences arising from causes beyond the control of such Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of the Issuing Lender's rights or powers hereunder. (iii) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by any Lender (including the Issuing Lender), under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put such Lender under any resulting liability to the Borrower or any other Credit Party. It is the intention of the parties that this Credit Agreement shall be construed and applied to protect and indemnify each Lender (including the Issuing Lender) against any and all risks involved in the issuance of the Letters of Credit, all of which risks are hereby assumed by the Borrower (on behalf of itself and each of the other Credit Parties), including, without limitation, any and all Government Acts. No Lender (including the Issuing Lender) shall, in any way, be liable for any failure by such 29 47 Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control of such Lender. (iv) Nothing in this subsection (i) is intended to limit the reimbursement obligations of the Borrower contained in subsection (d) above. The obligations of the Borrower under this subsection (i) shall survive the termination of this Credit Agreement. No act or omission of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of the Lenders (including the Issuing Lender) to enforce any right, power or benefit under this Credit Agreement. (v) Notwithstanding anything to the contrary contained in this subsection (i), the Borrower shall have no obligation to indemnify any Lender (including the Issuing Lender) in respect of any liability incurred by such Lender (A) arising solely out of the gross negligence or willful misconduct of such Lender, as determined by a court of competent jurisdiction, or (B) caused by such Lender's failure to pay under any Letter of Credit after presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit, as determined by a court of competent jurisdiction, unless such payment is prohibited by any law, regulation, court order or decree. (j) Responsibility of Issuing Lender. It is expressly understood and agreed that the obligations of the Issuing Lender hereunder to the Lenders are only those expressly set forth in this Credit Agreement and that the Issuing Lender shall be entitled to assume that the conditions precedent set forth in Section 5.2 have been satisfied unless it shall have acquired actual knowledge that any such condition precedent has not been satisfied; provided, however, that nothing set forth in this Section 2.2 shall be deemed to prejudice the right of any Lender to recover from the Issuing Lender any amounts made available by such Lender to the Issuing Lender pursuant to this Section 2.2 in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit constituted gross negligence or willful misconduct on the part of the Issuing Lender. (k) Conflict with LOC Documents. In the event of any conflict between this Credit Agreement and any LOC Document (including any letter of credit application), this Credit Agreement shall control. 2.3 FOREIGN CURRENCY LOAN SUBFACILITY. (a) Foreign Currency Commitment. Subject to the terms and conditions hereof and in reliance upon the representations and warranties set forth herein, each Lender severally agrees to make certain foreign currency revolving loans in Available Foreign Currencies ("Foreign Currency Loans") to the Borrower from time to time in the amount of such Lender's Foreign Currency Commitment Percentage of such Foreign Currency Loans; provided, however, that the Dollar Amount (as determined as of the most recent Determination Date) of the sum of Foreign Currency Loans outstanding at any time shall not exceed SEVENTY-FIVE MILLION DOLLARS ($75,000,000) (the "Foreign Currency Committed Amount"; provided, further, (i) with regard to each Lender individually, (A) the Dollar Amount (determined as of the most recent Determination 30 48 Date) of such Lender's Revolving Commitment Percentage of the sum of the Revolving Loans plus Foreign Currency Loans plus LOC Obligations plus Swingline Loans outstanding shall not exceed such Lender's Revolving Commitment Percentage of the Revolving Committed Amount, and (B) the Dollar Amount (determined as of the most recent Determination Date) of such Lender's portion (including participation interests therein) of the Foreign Currency Loans outstanding shall not exceed such Lender's Foreign Currency Commitment Percentage of the Foreign Currency Committed Amount and (ii) with regard to the Lenders collectively, the Dollar Amount (as determined as of the most recent Determination Date) of the Revolving Obligations shall not exceed the Revolving Committed Amount. Foreign Currency Loans shall consist solely of Eurocurrency Loans and may be repaid and reborrowed in accordance with the provisions hereof. For purposes hereof, Eurocurrency Loans with different Interest Periods and/or in different currencies shall be considered as separate Eurocurrency Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurocurrency Loan with a single Interest Period and in the same currency. (b) Foreign Currency Loan Borrowings. (i) Notice of Borrowing. The Borrower shall request a Foreign Currency Loan borrowing by written notice (or telephone notice promptly confirmed in writing) to the Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the third Business Day prior to the date of the requested borrowing. Each such request for borrowing shall be irrevocable and shall specify (A) that a Foreign Currency Loan is requested, (B) the requested Available Foreign Currency, (C) the date of the requested borrowing (which shall be a Business Day), (D) the aggregate principal amount to be borrowed and (E) the Interest Period(s) therefor. If the Borrower shall fail to specify in any such Notice of Borrowing an applicable Interest Period, then such notice shall be deemed to be a request for an Interest Period of one month. The Agent shall give notice to each Lender promptly upon receipt of each Notice of Borrowing, the contents thereof and each such Lender's share of any borrowing to be made pursuant thereto. (ii) Minimum Amounts. Each Foreign Currency Loan shall be in a minimum aggregate principal amount equal to the applicable Foreign Currency Equivalent of $2,500,000 and integral multiples of the applicable Foreign Currency Equivalent of $500,000 in excess thereof (or the remaining amount of the Foreign Currency Commitment, if less). (iii) Advances. Each Lender will make its Foreign Currency Commitment Percentage of each Foreign Currency Loan borrowing available to the Agent by 1:00 P.M., local time in the place where such deposit is required to be made by the succeeding terms hereof, on the date specified in the applicable Notice of Borrowing by deposit with the Agent, at the same place and same account specified in Section 3.15(a) for payments by the Borrower in the applicable Available Foreign Currency, of same day funds in the applicable Available Foreign Currency. Such deposit will be made to such accounts in the primary market for such Foreign Currencies as the Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Agent shall promptly 31 49 make such funds available to the Borrower by wire transfer to such accounts as the Borrower shall have specified to the Agent. (c) Repayment. The principal amount of all Foreign Currency Loans shall be due and payable in full in the applicable Available Foreign Currency on the Maturity Date, unless accelerated sooner pursuant to Section 9.2. (d) Interest. Subject to the provisions of Section 3.1, Foreign Currency Loans shall bear interest at a per annum rate equal to the Adjusted Eurocurrency Rate. Interest on Foreign Currency Loans shall be payable (in the applicable Available Foreign Currency) in arrears on each applicable Interest Payment Date (or at such other times as may be specified herein). (e) Foreign Currency Notes. The Foreign Currency Loans shall be evidenced by a Revolving Note duly executed by the Borrower in favor of each Lender. 2.4 SWINGLINE LOAN SUBFACILITY. (a) Swingline Commitment. Subject to the terms and conditions hereof, the Swingline Lender, in its individual capacity, agrees to make certain revolving credit loans to the Borrower (each a "Swingline Loan" and, collectively, the "Swingline Loans") from time to time from the Closing Date until the Maturity Date for the purposes hereinafter set forth; provided, however, (i) the aggregate amount of Swingline Loans outstanding at any time shall not exceed TEN MILLION DOLLARS ($10,000,000.00) (the "Swingline Committed Amount"), and (ii) with regard to the Lenders collectively, the amount of outstanding Revolving Obligations outstanding (including the Dollar Amount (determined as of the most recent Determination Date) of the outstanding Foreign Currency Loans) shall not exceed the Revolving Committed Amount. Swingline Loans hereunder shall be made in accordance with the provisions of this Section 2.4, and may be repaid and reborrowed in accordance with the provisions hereof. (b) Swingline Loan Advances. (i) Notices; Disbursement. Swingline Loan advances shall be made in accordance with the provisions of any agreement between the Swingline Lender and the Borrower establishing an "Auto Borrow" plan for, among other things, the automatic advance to the Borrower for deposit into an account of the Borrower with the Swingline Lender. (ii) Repayment of Swingline Loans. The principal amount of all Swingline Loans shall be due and payable on the Maturity Date. The Swingline Lender may, at any time, in its sole discretion, by written notice to the Borrower and the Lenders, demand repayment of its Swingline Loans by way of a Revolving Loan advance, in which case the Borrower shall be deemed to have requested a Revolving Loan advance comprised solely of Base Rate Loans in the amount of such Swingline Loans; provided, however, that any such demand shall be deemed to have been given one Business Day prior to the Maturity Date and on the date of the occurrence of any Event of Default described in Section 9.1 and 32 50 upon acceleration of the indebtedness hereunder and the exercise of remedies in accordance with the provisions of Section 9.2. Each Lender hereby irrevocably agrees to make its pro rata share of each such Revolving Loan in the amount, in the manner and on the date specified in the preceding sentence notwithstanding (I) the amount of such borrowing may not comply with the minimum amount for advances of Revolving Loans otherwise required hereunder, (II) whether any conditions specified in Section 5.2 are then satisfied, (III) whether a Default or an Event of Default then exists, (IV) failure of any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (V) whether the date of such borrowing is a date on which Revolving Loans are otherwise permitted to be made hereunder or (VI) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such borrowing. In the event that any Revolving Loan cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower or any other Credit Party), then each Lender hereby agrees that it shall forthwith purchase (as of the date such borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Lender such participations in the outstanding Swingline Loans as shall be necessary to cause each such Lender to share in such Swingline Loans ratably based upon its Revolving Commitment Percentage of the Revolving Committed Amount (determined before giving effect to any termination of the Commitments pursuant to Section 3.4), provided that (A) all interest payable on the Swingline Loans shall be for the account of the Swingline Lender until the date as of which the respective participation is purchased and (B) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay to the Swingline Lender, to the extent not paid to the Swingline Lender by the Borrower in accordance with the terms of subsection (c) below, interest on the principal amount of participation purchased for each day from and including the day upon which such borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the rate equal to the Federal Funds Rate. (c) Interest on Swingline Loans. Subject to the provisions of Section 3.1, each Swingline Loan shall bear interest at per annum rate (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to the Quoted Rate unless the Borrower and the Swingline Lender cannot agree on the applicable Quoted Rate in which case such Swingline Loan shall bear interest at a per annum rate equal to the Adjusted Base Rate. Interest on Swingline Loans shall be payable in arrears on the dates agreed upon by the Borrower and the Swingline Lender (or at such other times as may be specified herein). (d) Swingline Note. The Swingline Loans shall be evidenced by a duly executed promissory note of the Borrower to the Swingline Lender in substantially the form of Exhibit 2.4(d). 33 51 SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES 3.1 DEFAULT RATE. Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents shall bear interest, payable on demand, at a per annum rate 2% greater than the rate which would otherwise be applicable (or if no rate is applicable, whether in respect of interest, fees or other amounts, then the Adjusted Base Rate plus 2%). 3.2 EXTENSION AND CONVERSION. The Borrower shall have the option, on any Business Day, to extend existing Loans into a subsequent permissible Interest Period or to convert Loans into Loans of another interest rate type; provided, however, that (i) except as provided in Section 3.8, Eurocurrency Loans may be converted into Base Rate Loans or extended as Eurocurrency Loans for new Interest Periods only on the last day of the Interest Period applicable thereto, (ii) without the consent of the Required Lenders, Eurocurrency Loans may be extended, and Base Rate Loans may be converted into Eurocurrency Loans, only if the conditions precedent set forth in Section 5.2 are satisfied on the date of extension or conversion, (iii) Loans extended as, or converted into, Eurocurrency Loans shall be subject to the terms of the definition of "Interest Period" set forth in Section 1.1 and shall be in such minimum amounts as provided in, with respect to Revolving Loans, Section 2.1(b)(ii), or with respect to Foreign Currency Loans, Section 2.3(b)(ii), (iv) no more than eight (8) Eurocurrency Loans shall be outstanding hereunder at any time (it being understood that, for purposes hereof, Eurocurrency Loans with different Interest Periods shall be considered as separate Eurocurrency Loans, even if they begin on the same date, although borrowings, extensions and conversions may, in accordance with the provisions hereof, be combined at the end of existing Interest Periods to constitute a new Eurocurrency Loan with a single Interest Period) and (v) any request for extension or conversion of a Eurocurrency Loan which shall fail to specify an Interest Period shall be deemed to be a request for an Interest Period of one month. Each such extension or conversion shall be effected by the Borrower by giving a Notice of Extension/Conversion (or telephonic notice promptly confirmed in writing) to the office of the Agent specified in specified in Schedule 2.1(a), or at such other office as the Agent may designate in writing, prior to 11:00 A.M. (Charlotte, North Carolina time) on the third Business Day prior to the date of the proposed extension or conversion, specifying the date of the proposed extension or conversion, the Loans to be so extended or converted, the types of Loans into which such Loans are to be converted and, if appropriate, the applicable Interest Periods with respect thereto. Each request for extension or conversion shall be irrevocable and shall constitute a representation and warranty by the Borrower of the matters specified in subsections (b), (c), (d), (e) and (f) of Section 5.2. In the event the Borrower fails to request extension or conversion of any Eurocurrency Loan in accordance with this Section, or any such conversion or extension is not permitted or required by this Section, then (i) in the case of any Eurocurrency Loan which is not a Foreign Currency Loan, such Eurocurrency Loan shall be automatically converted into a Base Rate Loan at the end of the Interest Period applicable 34 52 thereto and (ii) in the case of any Foreign Currency Loan, such Eurocurrency Loan shall be automatically continued as a Eurocurrency Loan in the same Available Foreign Currency for an Interest Period of one month. The Agent shall give each Lender notice as promptly as practicable of any such proposed extension or conversion affecting any Loan. 3.3 PREPAYMENTS. (a) Voluntary Prepayments. The Borrower shall have the right to prepay Loans in whole or in part from time to time; provided, that (i) Eurocurrency Loans may not be prepaid other than at the end of the Interest Period applicable thereto and only then upon notice by the Borrower to the Agent (which may be given by telephone) by no later than 11:00 a.m. (Charlotte, North Carolina time) at least three Business Days' prior to the day of the requested prepayment, (ii) Base Rate Loans may be prepaid by the Borrower giving notice to the Agent (which may be given by telephone) no later than 11:00 a.m. (Charlotte, North Carolina time) on the date of the requested prepayment and (iii) each partial prepayment of Loans shall be in a minimum principal amount of $2,500,000 and integral multiples of $500,000. Subject to the foregoing terms, amounts prepaid under this Section 3.3(a) shall be applied as the Borrower may elect; provided that if the Borrower fails to specify a voluntary prepayment then such prepayment shall be applied to Revolving Loans, in each case first to Base Rate Loans and then to Eurocurrency Loans in direct order of Interest Period maturities. All prepayments under this Section 3.3(a) shall be subject to Section 3.12, but otherwise without premium or penalty. (b) Mandatory Prepayments. (i) Revolving Committed Amount. If at any time (A) the Dollar Amount (as determined as of the most recent Determination Date) of the Revolving Obligations then outstanding shall exceed the Revolving Committed Amount, (B) the aggregate amount of LOC Obligations outstanding shall exceed the LOC Committed Amount, (C) the Dollar Amount (determined as of the most recent Determination Date) of Foreign Currency Loans shall exceed the Foreign Currency Committed Amount, or (D) the amount of Swingline Loans outstanding shall exceed the Swingline Committed Amount, the Borrower shall immediately make payment on the Loans and/or to a cash collateral account in respect of the LOC Obligations, in an amount sufficient to eliminate the deficiency. (ii) Application of Mandatory Prepayments. All amounts required to be paid pursuant to Section 3.3(b)(i) shall be applied first to Loans in the currency in which such payment is received, and then to a cash collateral account to secure LOC Obligations. Within the parameters of the applications set forth above, prepayments shall be applied first to Base Rate Loans and then to Eurocurrency Loans in direct order of Interest Period maturities. All prepayments under this Section 3.3(b) shall be subject to Section 3.12. 35 53 3.4 TERMINATION AND REDUCTION OF REVOLVING COMMITTED AMOUNT. (a) Revolving Commitment. The Borrower may from time to time permanently reduce or terminate the Revolving Committed Amount in whole or in part (in minimum aggregate amounts of $5,000,000 or in integral multiples of $1,000,000 in excess thereof (or, if less, the full remaining amount of the then applicable Revolving Committed Amount)) upon five Business Days' prior written notice to the Agent; provided, that, no such termination or reduction shall be made which would cause the Dollar Amount (as of the most recent Determination Date) of the Revolving Obligations outstanding to exceed the Revolving Committed Amount, unless, concurrently with such termination or reduction, the Loans are repaid to the extent necessary to eliminate such excess. The Agent shall promptly notify each affected Lender of receipt by the Agent of any notice from the Borrower pursuant to this Section 3.4(a). (b) Foreign Currency Commitment. The Borrower may from time to time permanently reduce or terminate the Foreign Currency Committed Amount in whole or in part (in minimum aggregate amounts of $5,000,000 or in integral multiples of $1,000,000 in excess thereof (or, if less, the full remaining amount of the then applicable Foreign Currency Committed Amount)) upon five Business Days' prior written notice to the Agent; provided, that, (i) no such termination or reduction shall be made which would cause the Dollar Amount (as of the most recent Determination Date) of the Foreign Currency Loans outstanding to exceed the Foreign Currency Committed Amount and (ii) no such termination or reduction shall be made which would cause the Dollar Amount (as of the most recent Determination Date) of the Revolving Obligations outstanding to exceed the Revolving Committed Amount, unless, concurrently with such termination or reduction, the Loans are repaid to the extent necessary to eliminate such excess. The Agent shall promptly notify each affected Lender of receipt by the Agent of any notice from the Borrower pursuant to this Section 3.4(b). 3.5 FEES. (a) Unused Fee. In consideration of the Revolving Commitments of the Lenders hereunder, the Borrower agrees to pay to the Agent for the account of each Lender a fee (the "Unused Fee") equal to the Applicable Percentage per annum for Unused Fees then in effect on the Unused Revolving Committed Amount for each day during the applicable Unused Fee Calculation Period (hereinafter defined). The Unused Fee shall commence to accrue on the Closing Date and shall be due and payable in arrears on the last business day of each March, June, September and December (and any date that the Revolving Committed Amount or Foreign Currency Committed Amount is reduced as provided in Section 3.4 and the Maturity Date) for the immediately preceding quarter (or portion thereof) (each such quarter or portion thereof for which the Unused Fee is payable hereunder being herein referred to as an "Unused Fee Calculation Period"), beginning with the first of such dates to occur after the Closing Date. For purposes of computation of the Unused Fee, the Swingline Loans shall not be counted toward or considered usage under the Revolving Loan Facility. 36 54 (b) Letter of Credit Fees. (i) Letter of Credit Issuance Fee. In consideration of the issuance of Letters of Credit hereunder, the Borrower promises to pay to the Agent for the account of each Lender a fee (the "Letter of Credit Fee") on such Lender's Revolving Commitment Percentage of the average daily maximum amount available to be drawn under each such Letter of Credit computed at a per annum rate for each day from the date of issuance to the date of expiration equal to the Applicable Percentage. The Letter of Credit Fee will be payable quarterly in arrears on the last Business Day of each March, June, September and December for the immediately preceding quarter (or a portion thereof). (ii) Issuing Lender Fees. In addition to the Letter of Credit Fee payable pursuant to clause (i) above, the Borrower promises to pay to the Issuing Lender for its own account without sharing by the other Lenders (A) a letter of credit fronting fee of one-eighth percent (1/8%) per annum on the average daily maximum amount available to be drawn under outstanding Letters of Credit payable quarterly in arrears with the Letter of Credit Fee, and (B) customary charges from time to time of the Issuing Lender with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit (collectively, the "Issuing Lender Fees"). (c) Administrative Fees. The Borrower agrees to pay to the Agent, for its own account and NationsBanc Montgomery Securities LLC, as applicable, the fees referred to in the Agent's Fee Letter (collectively, the "Agent's Fees"). 3.6 CAPITAL ADEQUACY. If any Lender has determined, after the date hereof, that the adoption or the becoming effective of, or any change in, or any change by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof in the interpretation or administration of, any applicable law, rule or regulation regarding capital adequacy, or compliance by such Lender with any request or directive regarding capital adequacy (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 Lender's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy), then, upon notice from such Lender to the Borrower, the Borrower shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction; provided, however, that no such amounts shall be payable with respect to a reduction in rate of return incurred more than one (1) year before such Lender demands compensation under this Section 3.6. 3.7 LIMITATION ON EUROCURRENCY LOANS. If on or prior to the first day of any Interest Period for any Eurocurrency Loan: 37 55 (a) the Agent reasonably determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period; or (b) the Required Lenders reasonably determine (which determination shall be conclusive) and notify the Agent that the Eurocurrency Rate will not adequately and fairly reflect the cost to the Lenders of funding Eurocurrency Loans for such Interest Period; then the Agent shall give the Borrower prompt notice thereof, and so long as such condition remains in effect, the Lenders shall be under no obligation to make additional Eurocurrency Loans, renew Eurocurrency Loans, or to convert Base Rate Loans into Eurocurrency Loans and the Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurocurrency Loans, either prepay such Eurocurrency Loans or convert such Eurocurrency Loans into Base Rate Loans in accordance with the terms of this Credit Agreement. 3.8 ILLEGALITY. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Closing Date shall make it unlawful for any Lender to make or maintain Eurocurrency Loans or Foreign Currency Loans as contemplated by this Credit Agreement, (a) such Lender shall promptly give written notice of such circumstances to the Borrower and the Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurocurrency Loans or Foreign Currency Loans, continue Eurocurrency Loans or Foreign Currency Loans as such and convert a Base Rate Loan to Eurocurrency Loans or Foreign Currency Loans, shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurocurrency Loans or Foreign Currency Loans, such Lender shall then have a commitment only to make a Base Rate Loan when a Eurocurrency Loan or Foreign Currency Loan is requested and (c) such Lender's Loans then outstanding as Eurocurrency Loans or Foreign Currency Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurocurrency Loan or Foreign Currency Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.13. 3.9 REQUIREMENTS OF LAW. If, after the date hereof, the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, 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 any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such Governmental Authority, central bank, or comparable agency: 38 56 (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Eurocurrency Loans, its Notes, or its obligation to make Eurocurrency Loans, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Credit Agreement or its Notes in respect of any Eurocurrency Loans (other than taxes imposed on the overall net income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment, or similar requirement (other than the Eurocurrency Reserve Requirement utilized in the determination of the Adjusted Eurocurrency Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Commitment of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or the London interbank market any other condition affecting this Credit Agreement or its Notes or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, converting into, continuing, or maintaining any Eurocurrency Loans or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Credit Agreement or its Notes with respect to any Eurocurrency Loans, then the Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction; provided, however, that no such amounts shall be payable with respect to an increased cost or reduction in the rate of return incurred more than one (1) year before such Lender demands compensation under this Section 3.9. If any Lender requests compensation by the Borrower under this Section 3.9, the Borrower may, by notice to such Lender (with a copy to the Agent), suspend the obligation of such Lender to make or continue Eurocurrency Loans, or to convert Base Rate Loans into Eurocurrency Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.10 shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. Each Lender shall promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 3.9 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 3.9 shall furnish to the Borrower and the Agent a statement setting forth the additional amount or amounts to be paid to it hereunder. In determining such amount, such Lender may use any reasonable averaging and attribution methods. 3.10 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to make any Eurocurrency Loan or to continue, or to convert Base Rate Loans into, Eurocurrency Loans shall be suspended pursuant to Section 3.8 or 3.9 hereof, such Lender's Eurocurrency Loans shall be automatically converted into Base Rate Loans on the 39 57 last day(s) of the then current Interest Period(s) for such Eurocurrency Loans (or, in the case of a conversion required by Section 3.8 hereof, on such earlier date as such Lender may specify to the Borrower with a copy to the Agent) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 3.8 or 3.9 hereof that gave rise to such conversion no longer exist: (a) to the extent that such Lender's Eurocurrency Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Eurocurrency Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or continued by such Lender as Eurocurrency Loans shall be made or continued instead as Base Rate Loans, and all Base Rate Loans of such Lender that would otherwise be converted into Eurocurrency Loans shall remain as Base Rate Loans. If such Lender gives notice to the Borrower (with a copy to the Agent) that the circumstances specified in Section 3.8 or 3.9 hereof that gave rise to the conversion of such Lender's Eurocurrency Loans pursuant to this Section 3.10 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurocurrency Loans made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurocurrency Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurocurrency Loans and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Commitments. 3.11 TAXES. (a) Any and all payments by any Credit Party to or for the account of any Lender or the Agent hereunder or under any other Credit Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or the Agent (as the case may be) is organized or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If any Credit Party shall be required by law to deduct any Taxes from or in respect of any sum payable under this Credit Agreement or any other Credit Document to any Lender or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.11) such Lender or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Credit Party shall make such deductions, (iii) such Credit Party shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) such Credit Party shall furnish to the Agent, at its address referred to in Section 11.1, the original or a certified copy of a receipt evidencing payment thereof. 40 58 (b) In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Credit Agreement or any other Credit Document or from the execution or delivery of, or otherwise with respect to, this Credit Agreement or any other Credit Document (hereinafter referred to as "Other Taxes"). (c) The Borrower agrees to indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 3.11) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. (d) Each Lender that is not a United States person under Section 7701(a)(30) of the Code, on or prior to the date of its execution and delivery of this Credit Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Agent with (i) Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Credit Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from or a reduced rate of tax on payments pursuant to this Credit Agreement or any of the other Credit Documents. (e) For any period with respect to which a Lender has failed to provide the Borrower and the Agent with the appropriate form pursuant to Section 3.11(d) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 3.11(a) or 3.11(b) with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps (at such Lender's expense) as such Lender shall reasonably request to assist such Lender to recover such Taxes. (f) If any Credit Party is required to pay additional amounts to or for the account of any Lender pursuant to this Section 3.11, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to 41 59 eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Within thirty (30) days after the date of any payment of Taxes, the applicable Credit Party shall furnish to the Agent the original or a certified copy of a receipt evidencing such payment. (h) Without prejudice to the survival of any other agreement of the Credit Parties hereunder, the agreements and obligations of the Credit Parties contained in this Section 3.11 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 3.12 COMPENSATION. Upon the request of any Lender, the Borrower shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of: (a) any payment, prepayment, or conversion of a Eurocurrency Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 9.2) on a date other than the last day of the Interest Period for such Loan; or (b) any failure by the Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Section 5 to be satisfied) to borrow, convert, continue, or prepay a Eurocurrency Loan on the date for such borrowing, conversion, continuation, or prepayment specified in the relevant notice of borrowing, prepayment, continuation, or conversion under this Credit Agreement. With respect to Eurocurrency Loans, such indemnification may include an amount equal to the excess, if any, of (a) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurocurrency Loans provided for herein (excluding, however, the Applicable Percentage included therein, if any) over (b) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurocurrency market. The covenants of the Borrower set forth in this Section 3.12 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 42 60 3.13 PRO RATA TREATMENT. Except to the extent otherwise provided herein: (a) Loans. Each Loan, each payment or (subject to the terms of Section 3.3) prepayment of principal of any Loan or reimbursement obligations arising from drawings under Letters of Credit, each payment of interest on the Loans or reimbursement obligations arising from drawings under Letters of Credit, each payment of Unused Fees, each payment of the Letter of Credit Fee, each reduction in Commitments and each conversion or extension of any Loan, shall be allocated pro rata among the Lenders in accordance with the respective principal amounts of their outstanding Revolving Loans or Foreign Currency Loans and Participation Interests. (b) Advances. No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make its ratable share of a borrowing hereunder; provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. Unless the Agent shall have been notified in writing by any Lender prior to the date of any requested borrowing that such Lender does not intend to make available to the Agent its ratable share of such borrowing to be made on such date, the Agent may assume that such Lender has made such amount available to the Agent on the date of such borrowing, and the Agent in reliance upon such assumption, may (in its sole discretion but without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent, the Agent shall be able to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent will promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent at a per annum rate equal to (i) from the Borrower at the applicable rate for the applicable borrowing pursuant to the Notice of Borrowing and (ii) from a Lender at the Federal Funds Rate. 3.14 SHARING OF PAYMENTS. The Lenders agree among themselves that, in the event that any Lender shall obtain payment in respect of any Loan, LOC Obligations or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a Participation Interest in such Loans, LOC Obligations and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders share such payment in accordance with their 43 61 respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a Participation Interest theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such a Participation Interest may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker's lien or counterclaim, with respect to such Participation Interest as fully as if such Lender were a holder of such Loan, LOC Obligations or other obligation in the amount of such Participation Interest. Except as otherwise expressly provided in this Credit Agreement, if any Lender or the Agent shall fail to remit to the Agent or any other Lender an amount payable by such Lender or the Agent to the Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such amount is paid to the Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.14 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.14 to share in the benefits of any recovery on such secured claim. 3.15 PAYMENTS, COMPUTATIONS, ETC. (a) Except as otherwise specifically provided herein, all payments hereunder shall be made to the Agent in Dollars in immediately available funds, without setoff, deduction, counterclaim or withholding of any kind, at the Agent's office specified in Schedule 2.1(a) not later than 2:00 P.M. (Charlotte, North Carolina time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Agent may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower or any other Credit Party maintained with the Agent (with notice to the Borrower or such other Credit Party). The Borrower shall, at the time it makes any payment under this Credit Agreement, specify to the Agent the Loans, LOC Obligations, Fees, interest or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, the Agent shall distribute such payment to the Lenders in such manner as the Agent may determine to be appropriate in respect of obligations owing by the Borrower hereunder, subject to the terms of Section 3.13(a)). The Agent will distribute such payments to such Lenders, if any such payment is received prior to 12:00 Noon (Charlotte, North Carolina time) on a Business Day in like funds as received prior to the end of such Business Day and otherwise the Agent will distribute such payment to such Lenders on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and Fees for the period of such extension), except that in the case of Eurocurrency Loans, if the extension would cause the payment to be made in the next following calendar month, then such payment shall instead 44 62 be made on the next preceding Business Day. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days. Interest shall accrue from and include the date of borrowing, but exclude the date of payment. (b) Allocation of Payments After Event of Default. Notwithstanding any other provisions of this Credit Agreement to the contrary, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent or any Lender on account of the Credit Party Obligations or any other amounts outstanding under any of the Credit Documents or in respect of the Collateral shall be paid over or delivered as follows: FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Agent in connection with enforcing the rights of the Lenders under the Credit Documents and any protective advances made by the Agent with respect to the Collateral under or pursuant to the terms of the Collateral Documents; SECOND, to payment of any fees owed to the Agent; THIRD, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation, reasonable attorneys' fees) of each of the Lenders in connection with enforcing its rights under the Credit Documents or otherwise with respect to the Credit Party Obligations owing to such Lender; FOURTH, to the payment of all of the Credit Party Obligations consisting of accrued fees and interest; FIFTH, to the payment of the outstanding principal amount of the Credit Party Obligations (including the payment or cash collateralization of the outstanding LOC Obligations); SIXTH, to all other Credit Party Obligations and other obligations which shall have become due and payable under the Credit Documents or otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus. In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (ii) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans and LOC Obligations held by such Lender bears to the aggregate then outstanding Loans and LOC Obligations) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above; and (iii) to the extent that any amounts available for distribution pursuant to clause "FIFTH" 45 63 above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account and applied (A) first, to reimburse the Issuing Lender from time to time for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses "FIFTH" and "SIXTH" above in the manner provided in this Section 3.15(b). 3.16 EVIDENCE OF DEBT. (a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement. Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary. (b) The Agent shall maintain the Register pursuant to Section 11.3(c), and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder from or for the account of any Credit Party and each Lender's share thereof. The Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary. (c) The entries made in the accounts, Register and subaccounts maintained pursuant to subsection (b) of this Section 3.16 (and, if consistent with the entries of the Agent, subsection (a)) shall be prima facie evidence of the existence and amounts of the obligations of the Credit Parties therein recorded; provided, however, that the failure of any Lender or the Agent to maintain any such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Credit Parties to repay the Credit Party obligations owing to such Lender. 3.17 MITIGATION; MANDATORY ASSIGNMENT. Each Lender shall use reasonable efforts to avoid or mitigate any increased cost or suspension of the availability of an interest rate under Section 3.9 or Section 3.11 to the greatest extent practicable (including transferring the Loans to another lending office or affiliate of a Lender) unless, in the opinion of such Lender, such efforts would be likely to have an adverse effect upon such Lender. In the event a Lender makes a request to the Borrower for additional payments in accordance with Section 3.9 or Section 3.11, then, provided that no Default or Event of Default has occurred and is continuing at such time, the Borrower may, at its own expense (such expense to include any transfer fee payable to the Agent under Section 11.3(b) and any expense pursuant to Section 3.12), and in its sole discretion, require such Lender to transfer and assign in whole (but not in part), without recourse (in accordance with and subject to the terms and conditions of Section 11.3(b)), all of its interests, rights and obligations under this Credit 46 64 Agreement to an assignee which shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (a) such assignment shall not conflict with any law, rule or regulation or order of any court or other governmental authority and (b) the Borrower or such assignee shall have paid to the assigning Lender in immediately available funds the principal of and interest accrued to the date of such payment on the portion of the Loans hereunder held by such assigning Lender and all other amounts owed to such assigning Lender hereunder, including amounts owed pursuant to Section 3.9, Section 3.11 or Section 3.12. 3.18 EUROPEAN MONETARY UNION. (a) If, as a result of the implementation of the European economic and monetary union ("EMU"), (i) any currency available for borrowing under this Credit Agreement (a "national currency") ceases to be lawful currency of the state issuing the same and is replaced by a European single or common currency (the "Euro") or (ii) any national currency and the Euro are at the same time both recognized by the central bank or comparable Governmental Authority of the state issuing such currency as lawful currency of such state, then any amount payable hereunder by any party hereto in such national currency (including, without limitation, any Loan to be made under this Credit Agreement) shall instead be payable in the Euro and the amount so payable shall be determined by redenominating or converting such amount into the Euro at the exchange rate officially fixed by the European Central Bank for the purpose of implementing the EMU, provided, that to the extent any EMU legislation provides that an amount denominated either in the Euro or in the applicable national currency can be paid either in Euros or in the applicable national currency, each party to this Credit Agreement shall be entitled to pay or repay such amount in Euros or in the applicable national currency. Prior to the occurrence of the event or events described in clause (i) or (ii) of the preceding sentence, each amount payable hereunder in any such national currency will, except as otherwise provided herein, continue to be payable only in that national currency. (b) The Borrower shall from time to time, at the request of the Agent, pay to the Agent for the account of each Lender the amount of any cost or increased cost incurred by, or of any reduction in any amount payable to or in the effective return on its capital to, or of interest or other return foregone by, such Lender or any holding company of such Lender as a result of the introduction of, changeover to or operation of the Euro in any applicable state. (c) In addition, this Credit Agreement (including, without limitation, the definition of Interbank Offered Rate) will be amended to the extent determined by the Agent (acting reasonably and in consultation with the Borrower) to be necessary to reflect such implementation of the EMU and change in currency and to put the Lenders and the Borrower in the same position, so far as possible, that they would have been in if such implementation and change in currency had not occurred. Except as provided in the foregoing provisions of this Section, no such implementation or change in currency nor any economic consequences resulting therefrom shall (i) give rise to any right to terminate prematurely, contest, cancel, rescind, alter, modify or renegotiate the provisions of this Credit Agreement or (ii) discharge, excuse or otherwise affect the performance of any obligations of any Credit Party under this Credit Agreement or any of the other Credit Documents. 47 65 SECTION 4 GUARANTY 4.1 THE GUARANTY. Each of the Guarantors hereby jointly and severally guarantees to each Lender, each Affiliate of a Lender that enters into a Hedging Agreement, and the Agent as hereinafter provided, as primary obligor and not as surety, the prompt payment of the Credit Party Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof. The Guarantors hereby further agree that if any of the Credit Party Obligations are not paid in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Guarantors will, jointly and severally, promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Credit Party Obligations, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal. Notwithstanding any provision to the contrary contained herein or in any other of the Credit Documents or Hedging Agreements, the obligations of each Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of any applicable state law. 4.2 OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors under Section 4.1 are joint and several, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents or Hedging Agreements, or any other agreement or instrument referred to therein, or any substitution, release, impairment or exchange of any other guarantee of or security for any of the Credit Party Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 4.2 that the obligations of the Guarantors hereunder shall be absolute and unconditional under any and all circumstances. Each Guarantor agrees that such Guarantor shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor for amounts paid under this Section 4 until such time as the Lenders (and any Affiliates of Lenders entering into Hedging Agreements) have been paid in full, all Commitments under this Credit Agreement have been terminated and no Person or Governmental Authority shall have any right to request any return or reimbursement of funds from the Lenders in connection with monies received under the Credit Documents or Hedging Agreements. Without limiting the generality of the foregoing, it is agreed that, to the fullest extent permitted by law, the occurrence of any one or more of the following shall not alter or impair the liability of any Guarantor hereunder which shall remain absolute and unconditional as described above: 48 66 (a) at any time or from time to time, without notice to any Guarantor, the time for any performance of or compliance with any of the Credit Party Obligations shall be extended, or such performance or compliance shall be waived; (b) any of the acts mentioned in any of the provisions of any of the Credit Documents, any Hedging Agreement or any other agreement or instrument referred to in the Credit Documents or Hedging Agreements shall be done or omitted; (c) the maturity of any of the Credit Party Obligations shall be accelerated, or any of the Credit Party Obligations shall be modified, supplemented or amended in any respect, or any right under any of the Credit Documents, any Hedging Agreement or any other agreement or instrument referred to in the Credit Documents or Hedging Agreements shall be waived or any other guarantee of any of the Credit Party Obligations or any security therefor shall be released, impaired or exchanged in whole or in part or otherwise dealt with; (d) any Lien granted to, or in favor of, the Agent or any Lender or Lenders as security for any of the Credit Party Obligations shall fail to attach or be perfected; or (e) any of the Credit Party Obligations shall be determined to be void or voidable (including, without limitation, for the benefit of any creditor of any Guarantor) or shall be subordinated to the claims of any Person (including, without limitation, any creditor of any Guarantor). With respect to its obligations hereunder, each Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Agent or any Lender exhaust any right, power or remedy or proceed against any Person under any of the Credit Documents, any Hedging Agreement or any other agreement or instrument referred to in the Credit Documents or Hedging Agreements, or against any other Person under any other guarantee of, or security for, any of the Credit Party Obligations. 4.3 REINSTATEMENT. The obligations of the Guarantors under this Section 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in respect of the Credit Party Obligations is rescinded or must be otherwise restored by any holder of any of the Credit Party Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor agrees that it will indemnify the Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Agent or such Lender in connection with such rescission or restoration, including any such reasonable costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 49 67 4.4 CERTAIN ADDITIONAL WAIVERS. Each Guarantor agrees that such Guarantor shall have no right of recourse to security for the Credit Party Obligations, except through the exercise of rights of subrogation pursuant to Section 4.2 and through the exercise of rights of contribution pursuant to Section 4.6. 4.5 REMEDIES. The Guarantors agree that, to the fullest extent permitted by law, as between the Guarantors, on the one hand, and the Agent and the Lenders, on the other hand, the Credit Party Obligations may be declared to be forthwith due and payable as provided in Section 9.2 (and shall be deemed to have become automatically due and payable in the circumstances provided in said Section 9.2) for purposes of Section 4.1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or preventing the Credit Party Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such declaration (or the Credit Party Obligations being deemed to have become automatically due and payable), the Credit Party Obligations (whether or not due and payable by any other Person) shall forthwith become due and payable by the Guarantors for purposes of Section 4.1. The Guarantors acknowledge and agree that their obligations hereunder are secured in accordance with the terms of the Security Agreements and the other Collateral Documents and that the Lenders may exercise their remedies thereunder in accordance with the terms thereof. 4.6 RIGHTS OF CONTRIBUTION. The Guarantors hereby agree as among themselves that, if any Guarantor shall make an Excess Payment (as defined below), such Guarantor shall have a right of contribution from each other Guarantor in an amount equal to such other Guarantor's Contribution Share (as defined below) of such Excess Payment. The payment obligations of any Guarantor under this Section 4.6 shall be subordinate and subject in right of payment to the prior payment in full to the Agent and the Lenders of the Guaranteed Obligations, and none of the Guarantors shall exercise any right or remedy under this Section 4.6 against any other Guarantor until payment and satisfaction in full of all of such Guaranteed Obligations. For purposes of this Section 4.6, (a) "Guaranteed Obligations" shall mean any obligations arising under the other provisions of this Section 4; (b) "Excess Payment" shall mean the amount paid by any Guarantor in excess of its Pro Rata Share of any Guaranteed Obligations; (c) "Pro Rata Share" shall mean, for any Guarantor in respect of any payment of Guaranteed Obligations, the ratio (expressed as a percentage) as of the date of such payment of Guaranteed Obligations of (i) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all assets and other properties of all of the Credit Parties exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Credit Parties hereunder) of the Credit Parties; provided, however, that, for purposes of calculating the Pro Rata Shares of the Guarantors in respect of any payment of Guaranteed Obligations, any Guarantor that became a Guarantor subsequent to the date of any such payment shall be deemed to have been a Guarantor on the date 50 68 of such payment and the financial information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized for such Guarantor in connection with such payment; and (d) "Contribution Share" shall mean, for any Guarantor in respect of any Excess Payment made by any other Guarantor, the ratio (expressed as a percentage) as of the date of such Excess Payment of (i) the amount by which the aggregate present fair salable value of all of its assets and properties exceeds the amount of all debts and liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (ii) the amount by which the aggregate present fair salable value of all assets and other properties of the Credit Parties other than the maker of such Excess Payment exceeds the amount of all of the debts and liabilities (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Credit Parties) of the Credit Parties other than the maker of such Excess Payment; provided, however, that, for purposes of calculating the Contribution Shares of the Guarantors in respect of any Excess Payment, any Guarantor that became a Guarantor subsequent to the date of any such Excess Payment shall be deemed to have been a Guarantor on the date of such Excess Payment and the financial information for such Guarantor as of the date such Guarantor became a Guarantor shall be utilized for such Guarantor in connection with such Excess Payment. This Section 4.6 shall not be deemed to affect any right of subrogation, indemnity, reimbursement or contribution that any Guarantor may have under applicable law against the Borrower in respect of any payment of Guaranteed Obligations. 4.7 GUARANTEE OF PAYMENT; CONTINUING GUARANTEE. The guarantee in this Section 4 is a guaranty of payment and not of collection, is a continuing guarantee, and shall apply to all Credit Party Obligations whenever arising. SECTION 5 CONDITIONS 5.1 CLOSING CONDITIONS. The obligation of the Lenders to enter into this Credit Agreement and to make the initial Loans or the Issuing Lender to issue the initial Letter of Credit, whichever shall occur first, shall be subject to satisfaction of the following conditions (in form and substance acceptable to the Lenders in their reasonable discretion): (a) Executed Credit Documents. Receipt by the Agent of duly executed copies of: (i) this Credit Agreement, (ii) the Notes, (iii) the Swingline Note, (iv) the Collateral Documents and (v) all other Credit Documents, each in form and substance acceptable to the Agent in its reasonable discretion. (b) Corporate Documents. Receipt by the Agent of the following: (i) Charter Documents. Copies of the articles or certificates of incorporation or other charter documents of each Credit Party certified to be true 51 69 and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation and certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (ii) Bylaws. A copy of the bylaws of each Credit Party certified by a secretary or assistant secretary of such Credit Party to be true and correct as of the Closing Date. (iii) Resolutions. Copies of resolutions of the Board of Directors of each Credit Party approving and adopting the Credit Documents to which it is a party, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Credit Party to be true and correct and in force and effect as of the Closing Date. (iv) Good Standing. Copies of certificates of good standing, existence or its equivalent with respect to each Credit Party certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of incorporation and each other jurisdiction in which the failure to so qualify and be in good standing could have a Material Adverse Effect. (v) Incumbency. An incumbency certificate of each Credit Party certified by a secretary or assistant secretary to be true and correct as of the Closing Date. (c) Financial Statements. Receipt by the Agent of (i) the consolidated financial statements of the Borrower and its Subsidiaries, including balance sheets and income and cash flow statements for the fiscal year 1996 and 1997, in each case audited by nationally recognized independent public accountants and containing an unqualified opinion of such firm that such statements present fairly the consolidated financial position of the Borrower and its Subsidiaries and are prepared in conformity with GAAP and (ii) such other information relating to the Borrower and its Subsidiaries as the Agent may reasonably require in connection with the structuring and syndication of credit facilities of the type described herein. (d) Opinions of Counsel. The Agent shall have received a legal opinion in form and substance reasonably satisfactory to the Lenders dated as of the Closing Date from counsel to the Credit Parties. (e) Personal Property Collateral. The Agent shall have received: (i) searches of Uniform Commercial Code filings in the jurisdiction of the chief executive office of each Credit Party and each jurisdiction where any Collateral is located or where a filing would need to be made in order to perfect the Agent's security interest in the Collateral (it being understood and agreed that liens are not to be perfected with respect to personal property located in certain 52 70 field offices), copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens; (ii) duly executed UCC financing statements for each appropriate jurisdiction as is necessary, in the Agent's reasonable discretion, to perfect the Agent's security interest in the Collateral; (iii) searches of ownership of intellectual property in the appropriate governmental offices and such patent/trademark/copyright filings as requested by the Agent in order to perfect the Agent's security interest in the Collateral; (iv) all stock certificates evidencing the Capital Stock pledged to the Agent pursuant to the Pledge Agreement, together with duly executed in blank, undated stock powers attached thereto (unless, with respect to the pledged Capital Stock of any Foreign Subsidiary, such stock powers are deemed unnecessary by the Agent in its reasonable discretion under the law of the jurisdiction of incorporation of such Person); (v) such patent/trademark/copyright filings as requested by the Agent in order to perfect the Agent's security interest in the Collateral; and (vi) duly executed consents as are necessary, in the Agent's sole discretion, to perfect the Agent's security interest in the Collateral. (f) Priority of Liens. The Agent shall have received satisfactory evidence that (i) the Agent, on behalf of the Lenders, holds a perfected, first priority Lien on all Collateral and (ii) none of the Collateral is subject to any other Liens other than Permitted Liens. (g) Evidence of Insurance. Receipt by the Agent of copies of insurance policies or certificates of insurance of the Consolidated Parties evidencing liability and casualty insurance meeting the requirements set forth in the Credit Documents, including, but not limited to, naming the Agent as sole loss payee on behalf of the Lenders. (h) Material Adverse Effect. No material adverse change shall have occurred since December 31, 1997 in the condition (financial or otherwise), business, assets, operations, management or prospects of the Consolidated Parties taken as a whole. (i) Litigation. There shall not exist any pending or threatened action, suit, investigation or proceeding against a Consolidated Party that could have a Material Adverse Effect. (j) Officer's Certificates. The Agent shall have received a certificate or certificates executed by an Executive Officer of the Borrower as of the Closing Date stating that (A) each Credit Party is in compliance with all existing financial obligations, (B) all governmental, shareholder and third party consents and approvals, if any, with respect to the 53 71 Credit Documents and the transactions contemplated thereby have been obtained, (C) no action, suit, investigation or proceeding is pending or, to the knowledge of such Executive Officer, threatened in any court or before any arbitrator or governmental instrumentality that purports to affect any Credit Party or any transaction contemplated by the Credit Documents, if such action, suit, investigation or proceeding could have a Material Adverse Effect, and (D) immediately after giving effect to this Credit Agreement, the other Credit Documents and all the transactions contemplated therein to occur on such date, (1) each of the Credit Parties is Solvent, (2) no Default or Event of Default exists, (3) all representations and warranties contained herein and in the other Credit Documents are true and correct in all material respects, and (4) the Credit Parties are in compliance with each of the financial covenants set forth in Section 7.11. (k) Fees and Expenses. Payment by the Credit Parties of all fees and expenses owed by them to the Lenders and the Agent, including, without limitation, payment to the Agent of the fees set forth in the Fee Letter. (l) Year 2000. Receipt by the Agent and the Lenders of reasonable evidence that (a) the Consolidated Parties are taking all necessary and appropriate steps to ascertain the extent of, and to quantify and successfully address, business and financial risks facing the Consolidated Parties as a result of what is commonly referred to as the `Year 2000 problem' (i.e., the inability of certain computer applications to recognize correctly and perform date-sensitive functions involving certain dates prior to and after December 31, 1999), including risks resulting from the failure of key vendors and customers of the Consolidated Parties to successfully address the Year 2000 problem, and (b) each Consolidated Party's material computer applications and those of its key vendors and customers will, on a timely basis, adequately address the Year 2000 problem in all material respects. (m) Other. Receipt by the Lenders of such other documents, instruments, agreements or information as reasonably requested by any Lender, including, but not limited to, information regarding litigation, tax, accounting, labor, insurance, pension liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership and contingent liabilities of the Consolidated Parties. 5.2 CONDITIONS TO ALL EXTENSIONS OF CREDIT. The obligations of each Lender to make, convert or extend any Loan and of the Issuing Lender to issue or extend any Letter of Credit (including the initial Loans and the initial Letter of Credit) are subject to satisfaction of the following conditions in addition to satisfaction on the Closing Date of the conditions set forth in Section 5.1: (a) The Borrower shall have delivered (i) in the case of any Revolving Loan or Foreign Currency Loan, an appropriate Notice of Borrowing or Notice of Extension/Conversion or (ii) in the case of any Letter of Credit, the Issuing Lender shall have received an appropriate request for issuance in accordance with the provisions of Section 2.2(b); 54 72 (b) The representations and warranties set forth in Section 6 shall, subject to the limitations set forth therein, be true and correct in all material respects as of such date (except for those which expressly relate to an earlier date); (c) There shall not have been commenced against any Consolidated Party an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or any case, proceeding or other action for the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of such Person or for any substantial part of its Property or for the winding up or liquidation of its affairs, and such involuntary case or other case, proceeding or other action shall remain undismissed, undischarged or unbonded; (d) No Default or Event of Default shall exist and be continuing either prior to or after giving effect thereto; (e) No circumstances, events or conditions shall have occurred since December 31, 1997 which would have a Material Adverse Effect; and (f) Immediately after giving effect to the making of such Loan (and the application of the proceeds thereof) or to the issuance of such Letter of Credit, as the case may be, (i) the sum of the aggregate principal amount of outstanding Revolving Loans plus LOC Obligations outstanding plus outstanding Foreign Currency Loans plus outstanding Swingline Loans shall not exceed the Revolving Committed Amount, (ii) the LOC Obligations shall not exceed the LOC Committed Amount and (C) the Foreign Currency Loans outstanding shall not exceed the Foreign Currency Committed Amount. The delivery of each Notice of Borrowing, each Notice of Extension/Conversion and each request for a Letter of Credit pursuant to Section 2.2(b) shall constitute a representation and warranty by the Credit Parties of the correctness of the matters specified in subsections (b), (c), (d), (e) and (f) above. SECTION 6 REPRESENTATIONS AND WARRANTIES The Credit Parties hereby represent to the Agent and each Lender that: 6.1 FINANCIAL CONDITION. The financial statements delivered to the Lenders pursuant to Section 5.1(c) and Section 7.1(a) and (b), (i) have been prepared in accordance with GAAP and (ii) present fairly (on the basis disclosed in the footnotes to such financial statements) the consolidated financial condition, results of operations and cash flows of the Consolidated Parties as of such date and for such periods. 55 73 6.2 NO MATERIAL CHANGE. Since December 31, 1997 (a) there has been no development or event relating to or affecting a Consolidated Party which has had or could reasonably be expected to have a Material Adverse Effect and (b) except as otherwise permitted under this Credit Agreement, no dividends or other distributions have been declared, paid or made upon the Capital Stock in a Consolidated Party nor has any of the Capital Stock in a Consolidated Party been redeemed, retired, purchased or otherwise acquired for value. 6.3 ORGANIZATION AND GOOD STANDING. Each of the Consolidated Parties (a) is duly organized, validly existing and is in good standing under the laws of the jurisdiction of its incorporation or organization, (b) has the corporate or other necessary power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing could not be reasonably expected to have a Material Adverse Effect. 6.4 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of the Credit Parties has the corporate or other necessary power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party, and in the case of the Borrower, to obtain extensions of credit hereunder, and has taken all necessary corporate action to authorize the borrowings and other extensions of credit on the terms and conditions of this Credit Agreement and to authorize the execution, delivery and performance of the Credit Documents to which it is a party. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of any Credit Party in connection with the borrowings or other extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which such Credit Party is a party, except for filings to perfect the Liens created by the Collateral Documents. This Credit Agreement has been, and each other Credit Document to which any Credit Party is a party will be, duly executed and delivered on behalf of the Credit Parties. This Credit Agreement constitutes, and each other Credit Document to which any Credit Party is a party when executed and delivered will constitute, a legal, valid and binding obligation of such Credit Party enforceable against such party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 6.5 NO CONFLICTS. Neither the execution and delivery of the Credit Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and 56 74 provisions thereof by such Credit Party will (a) violate or conflict with any provision of its articles or certificate of incorporation or bylaws or other organizational or governing documents of such Person, (b) violate, contravene or materially conflict with any Requirement of Law or any other law, regulation (including, without limitation, Regulation U or Regulation X), order, writ, judgment, injunction, decree or permit applicable to it, (c) violate, contravene or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound, the violation of which could have a Material Adverse Effect, or (d) result in or require the creation of any Lien (other than those contemplated in or created in connection with the Credit Documents) upon or with respect to its properties. 6.6 NO DEFAULT. No Consolidated Party is in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its properties is bound which default could have a Material Adverse Effect. No Default or Event of Default has occurred or exists except as previously disclosed in writing to the Lenders. 6.7 OWNERSHIP. Each Consolidated Party is the owner of, and has good and marketable title to, all of its respective assets and none of such assets is subject to any Lien other than Permitted Liens. 6.8 INDEBTEDNESS. Except as otherwise permitted under Section 8.1, the Consolidated Parties have no Indebtedness. 6.9 LITIGATION. There are no actions, suits or legal, equitable, arbitration or administrative proceedings, pending or, to the knowledge of any Credit Party, threatened against any Consolidated Party which might have a Material Adverse Effect. 6.10 TAXES. Each Consolidated Party has filed, or caused to be filed, all tax returns (federal, state, local and foreign) required to be filed and paid (a) all amounts of taxes shown thereon to be due (including interest and penalties) and (b) all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes (i) which are not yet delinquent or (ii) that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP. No Credit Party is aware as of the Closing Date of any proposed tax assessments against it or any other Consolidated Party. 57 75 6.11 COMPLIANCE WITH LAW. Each Consolidated Party is in compliance with all Requirements of Law and all other laws, rules, regulations, orders and decrees (including without limitation Environmental Laws) applicable to it, or to its properties, unless such failure to comply could not have a Material Adverse Effect. 6.12 ERISA. (a) During the five-year period prior to the date on which this representation is made or deemed made: (i) no ERISA Event has occurred, and, to the best knowledge of the Credit Parties, no event or condition has occurred or exists as a result of which any ERISA Event could reasonably be expected to occur, with respect to any Plan; (ii) no "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each Plan has been maintained, operated, and funded in material compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal or state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan. (b) The actuarial present value of all "benefit liabilities" (as defined in Section 4001(a)(16) of ERISA), whether or not vested, under each Single Employer Plan, as of the last annual valuation date prior to the date on which this representation is made or deemed made (determined, in each case, in accordance with Financial Accounting Standards Board Statement 87, utilizing the actuarial assumptions used in such Plan's most recent actuarial valuation report), did not exceed as of such valuation date the fair market value of the assets of such Plan. (c) Neither any Consolidated Party nor any ERISA Affiliate has incurred, or, to the best knowledge of the Credit Parties, could be reasonably expected to incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither any Consolidated Party nor any ERISA Affiliate would become subject to any withdrawal liability under ERISA if any Consolidated Party or any ERISA Affiliate were to withdraw completely from all Multiemployer Plans and Multiple Employer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. Neither any Consolidated Party nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit Parties, reasonably expected to be in reorganization, insolvent, or terminated. (d) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or may subject any Consolidated Party or any ERISA Affiliate to any material liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any 58 76 Consolidated Party or any ERISA Affiliate has agreed or is required to indemnify any Person against any such material liability. (e) Neither any Consolidated Party nor any ERISA Affiliates has any material liability with respect to "expected post-retirement benefit obligations" within the meaning of the Financial Accounting Standards Board Statement 106. Each Plan which is a welfare plan (as defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply has been administered in compliance in all material respects of such sections. (f) Neither the execution and delivery of this Credit Agreement nor the consummation of the financing transactions contemplated thereunder will involve any transaction which is subject to the prohibitions of Sections 404, 406 or 407 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code. The representation by the Credit Parties in the preceding sentence is made in reliance upon and subject to the accuracy of the Lenders' representation in Section 11.15 with respect to their source of funds and is subject, in the event that the source of the funds used by the Lenders in connection with this transaction is an insurance company's general asset account, to the application of Prohibited Transaction Class Exemption 95-60, 60 Fed. Reg. 35,925 (1995), compliance with the regulations issued under Section 401(c)(1)(A) of ERISA, or the issuance of any other prohibited transaction exemption or similar relief, to the effect that assets in an insurance company's general asset account do not constitute assets of an "employee benefit plan" within the meaning of Section 3(3) of ERISA of a "plan" within the meaning of Section 4975(e)(1) of the Code. 6.13 SUBSIDIARIES. Set forth on Schedule 6.13 is a complete and accurate list of all Subsidiaries of each Consolidated Party. Information on Schedule 6.13 includes jurisdiction of incorporation, the number of shares of each class of Capital Stock outstanding, the number and percentage of outstanding shares of each class owned (directly or indirectly) by such Consolidated Party; and the number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase and all other similar rights with respect thereto. The outstanding Capital Stock of all such Subsidiaries is validly issued, fully paid and non-assessable and is owned by each such Consolidated Party, directly or indirectly, free and clear of all Liens (other than those arising under or contemplated in connection with the Credit Documents). Other than as set forth in Schedule 6.13, no Consolidated Party has outstanding any securities convertible into or exchangeable for its Capital Stock nor does any such Person have outstanding any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to its Capital Stock. 6.14 GOVERNMENTAL REGULATIONS, ETC. (a) No part of the Letters of Credit or proceeds of the Loans will be used, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation U, or for the purpose of purchasing or carrying or trading in any 59 77 securities that are "margin stock" within the meaning of Regulation U. If requested by any Lender or the Agent, the Borrower will furnish to the Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in Regulation U. No indebtedness being reduced or retired out of the proceeds of the Loans was or will be incurred for the purpose of purchasing or carrying any margin stock within the meaning of Regulation U or any "margin security" within the meaning of Regulation T. "Margin stock" within the meaning of Regulation U does not constitute more than 25% of the value of the consolidated assets of the Consolidated Parties. None of the transactions contemplated by this Credit Agreement (including, without limitation, the direct or indirect use of the proceeds of the Loans) will violate or result in a violation of Regulation T, U or X. (b) No Consolidated Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940, each as amended. In addition, no Consolidated Party is (i) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, and is not controlled by such a company, or (ii) a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. (c) No director, executive officer or principal shareholder of any Consolidated Party is a director, executive officer or principal shareholder of any Lender. For the purposes hereof the terms "director", "executive officer" and "principal shareholder" (when used with reference to any Lender) have the respective meanings assigned thereto in Regulation O issued by the Board of Governors of the Federal Reserve System. (d) Except where the failure to have or hold any such item would not have a Material Adverse Effect, each Consolidated Party has obtained and holds in full force and effect, all franchises, licenses, permits, certificates, authorizations, qualifications, accreditations, easements, rights of way and other rights, consents and approvals which are necessary for the ownership of its respective Property and to the conduct of its respective businesses as presently conducted. (e) No Consolidated Party is in violation of any applicable statute, regulation or ordinance of the United States of America, or of any state, city, town, municipality, county or any other jurisdiction, or of any agency thereof (including without limitation, environmental laws and regulations), which violation could reasonably be expected to have a Material Adverse Effect. (f) Each Consolidated Party is current with all material reports and documents, if any, required to be filed with any state or federal securities commission or similar agency and is in full compliance in all material respects with all applicable rules and regulations of such commissions. 60 78 6.15 PURPOSE OF LOANS AND LETTERS OF CREDIT. The proceeds of the Loans hereunder shall be used solely by the Borrower (i) for working capital (ii) to make Consolidated Capital Expenditures, (iii) to make Permitted Acquisitions and (iv) for general corporate purposes. The Letters of Credit shall be used only for or in connection with appeal bonds, reimbursement obligations arising in connection with surety and reclamation bonds, reinsurance, domestic or international trade transactions and obligations not otherwise aforementioned relating to transactions entered into by the applicable account party in the ordinary course of business. 6.16 ENVIRONMENTAL MATTERS. Except where failure to comply could not reasonably be expected to have a Material Adverse Effect: (a) Each of the facilities and properties owned, leased or operated by the Consolidated Parties (the "Properties") and all operations at the Properties are in compliance with all applicable Environmental Laws, and there is no violation of any Environmental Law with respect to the Properties or the businesses operated by the Consolidated Parties (the "Businesses"), and there are no conditions relating to the Businesses or Properties that could give rise to liability under any applicable Environmental Laws. (b) None of the Properties contains, or has previously contained, any Materials of Environmental Concern at, on or under the Properties in amounts or concentrations that constitute or constituted a violation of, or could give rise to liability under, Environmental Laws. (c) No Consolidated Party has received any written or verbal notice of, or inquiry from any Governmental Authority regarding, any violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Businesses, nor does any Consolidated Party have knowledge or reason to believe that any such notice will be received or is being threatened. (d) Materials of Environmental Concern have not been transported or disposed of from the Properties, or generated, treated, stored or disposed of at, on or under any of the Properties or any other location, in each case by or on behalf of any Consolidated Party in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the best knowledge of any Credit Party, threatened, under any Environmental Law to which any Consolidated Party is or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other 61 79 administrative or judicial requirements outstanding under any Environmental Law with respect to the Consolidated Parties, the Properties or the Businesses. (f) There has been no release, or threat of release, of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations (including, without limitation, disposal) of any Consolidated Party in connection with the Properties or otherwise in connection with the Businesses, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws. 6.17 INTELLECTUAL PROPERTY. Each Consolidated Party owns, or has the legal right to use, all trademarks, tradenames, copyrights, technology, know-how and processes (the "Intellectual Property") necessary for each of them to conduct its business as currently conducted except for those the failure to own or have such legal right to use could not have a Material Adverse Effect. Set forth on Schedule 6.17 is a list of all Intellectual Property owned by each Consolidated Party or that any Consolidated Party has the right to use. Except as provided on Schedule 6.17, no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does any Credit Party know of any such claim, and to the Credit Parties' knowledge the use of such Intellectual Property by any Consolidated Party does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not have a Material Adverse Effect. 6.18 SOLVENCY. Each Credit Party is and, after consummation of the transactions contemplated by this Credit Agreement, will be Solvent. 6.19 INVESTMENTS. All Investments of each Consolidated Party are Permitted Investments. 6.20 LOCATION OF COLLATERAL. Set forth on Schedule 6.20(a) is a list of all locations where any tangible personal property of a Consolidated Party is located, including county and state where located. Set forth on Schedule 6.20(b) is the chief executive office and principal place of business of each Consolidated Party. 6.21 DISCLOSURE. Neither this Credit Agreement nor any financial statements delivered to the Lenders nor any other document, certificate or statement furnished to the Lenders by or on behalf of any Consolidated Party in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not misleading. 62 80 6.22 BROKERS' FEES. No Consolidated Party has any obligation to any Person in respect of any finder's, broker's, investment banking or other similar fee in connection with any of the transactions contemplated under the Credit Documents. 6.23 LABOR MATTERS. There are no collective bargaining agreements or Multiemployer Plans covering the employees of a Consolidated Party as of the Closing Date and none of the Consolidated Parties has suffered any strikes, walkouts, work stoppages or other material labor difficulty within the last five years. 6.24 YEAR 2000 COMPLIANCE. Each Credit Party has (i) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those affected by suppliers, vendors and customers) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used by such Credit Party or any of its Subsidiaries (or suppliers, vendors and customers) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in accordance with the timetable. Based on the foregoing, the each Credit Party believes that all computer applications (including those of its suppliers, vendors and customers) that are material to its and any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 complaint"), except to the extent that a failure to do so could not reasonably be expected to have Material Adverse Effect. SECTION 7 AFFIRMATIVE COVENANTS Each Credit Party hereby covenants and agrees that, so long as this Credit Agreement is in effect or any amounts payable hereunder or under any other Credit Document shall remain outstanding, and until all of the Commitments hereunder shall have terminated: 7.1 INFORMATION COVENANTS. The Credit Parties will furnish, or cause to be furnished, to the Agent and each of the Lenders: (a) Annual Financial Statements. As soon as available, and in any event within 90 days after the close of each fiscal year of the Consolidated Parties, a consolidated balance sheet and income statement of the Consolidated Parties, as of the end of such fiscal 63 81 year, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal year, setting forth in comparative form consolidated figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by independent certified public accountants of recognized national standing reasonably acceptable to the Agent and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified as to the status of the Consolidated Parties as a going concern. (b) Quarterly Financial Statements. As soon as available, and in any event within 45 days after the close of each fiscal quarter of the Consolidated Parties (other than the fourth fiscal quarter, in which case 90 days after the end thereof) a consolidated balance sheet and income statement of the Consolidated Parties, as of the end of such fiscal quarter, together with related consolidated statements of operations for such fiscal quarter and cash flows for such year to date, in each case setting forth in comparative form consolidated figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in a form satisfying the Securities and Exchange Commission requirements for a 10-Q filing or otherwise in reasonable form and detail and reasonably acceptable to the Agent, and accompanied by a certificate of the chief financial officer of the Borrower to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the Consolidated Parties and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments. (c) Officer's Certificate. At the time of delivery of the financial statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate of the chief financial officer of the Borrower substantially in the form of Exhibit 7.1(c), (i) demonstrating compliance with the financial covenants contained in Section 7.11 by calculation thereof as of the end of each such fiscal period and (ii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Credit Parties propose to take with respect thereto. (d) Accountant's Certificate. Within the period for delivery of the annual financial statements provided in Section 7.1(a), a certificate of the accountants conducting the annual audit stating that they have reviewed this Credit Agreement and stating further whether, in the course of their audit, they have become aware of any Default or Event of Default and, if any such Default or Event of Default exists, specifying the nature and extent thereof. (e) Auditor's Reports. Promptly upon receipt thereof, a copy of any other report or "management letter" submitted by independent accountants to any Consolidated Party in connection with any annual, interim or special audit of the books of such Person. (f) Reports. Promptly upon transmission or receipt thereof, (i) copies of any filings and registrations with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all financial statements, proxy 64 82 statements, notices and reports as any Consolidated Party shall send to its shareholders or to a holder of any Indebtedness owed by any Consolidated Party in its capacity as such a holder and (ii) upon the request of the Agent, all reports and written information to and from the United States Environmental Protection Agency, or any state or local agency responsible for environmental matters, the United States Occupational Health and Safety Administration, or any state or local agency responsible for health and safety matters, or any successor agencies or authorities concerning environmental, health or safety matters. (g) Notices. Upon obtaining knowledge thereof, the Credit Parties will give written notice to the Agent promptly of (i) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Credit Parties propose to take with respect thereto, and (ii) the occurrence of any of the following with respect to any Consolidated Party (A) the pendency or commencement of any litigation, arbitral or governmental proceeding against such Person which if adversely determined is likely to have a Material Adverse Effect, (B) the institution of any proceedings against such Person with respect to, or the receipt of notice by such Person of potential liability or responsibility for violation, or alleged violation of any federal, state or local law, rule or regulation, including but not limited to, Environmental Laws, the violation of which could be reasonably expected to have a Material Adverse Effect, or (C) any notice or determination concerning the imposition of any withdrawal liability by a Multiemployer Plan against such Person or any ERISA Affiliate, the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA or the termination of any Plan. (h) ERISA. Upon obtaining knowledge thereof, the Credit Parties will give written notice to the Agent promptly (and in any event within five business days) of: (i) of any event or condition, including, but not limited to, any Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against the Credit Parties or any ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which any Consolidated Party or any ERISA Affiliate is required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (iv) any change in the funding status of any Plan that could have a Material Adverse Effect, together with a description of any such event or condition or a copy of any such notice and a statement by the chief financial officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Credit Parties with respect thereto. Promptly upon request, the Credit Parties shall furnish the Agent and the Lenders with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each "plan year" (within the meaning of Section 3(39) of ERISA). 65 83 (i) Environmental. (i) Upon the reasonable written request of the Agent, the Credit Parties will furnish or cause to be furnished to the Agent, at the Credit Parties' expense, a report of an environmental assessment of reasonable scope, form and depth, (including, where appropriate, invasive soil or groundwater sampling) by a consultant reasonably acceptable to the Agent as to the nature and extent of the presence of any Materials of Environmental Concern on any Properties (as defined in Section 6.16) that are either owned by a Credit Party or for which the Credit Party is the tenant for a majority of the usable space, and as to the compliance by any Consolidated Party with Environmental Laws at such Properties. If the Credit Parties fail to deliver such an environmental report within seventy-five (75) days after receipt of such written request then the Agent may arrange for same, and the Consolidated Parties hereby grant to the Agent and their representatives access to the Properties to reasonably undertake such an assessment (including, where appropriate, invasive soil or groundwater sampling). The reasonable cost of any assessment arranged for by the Agent pursuant to this provision will be payable by the Credit Parties on demand and added to the obligations secured by the Collateral Documents. (ii) The Consolidated Parties will conduct and complete all investigations, studies, sampling, and testing and all remedial, removal, and other actions necessary to address all Materials of Environmental Concern on , from or affecting any of the Properties referred to in the preceding clause (i) to the extent necessary to be in compliance with all Environmental Laws and with the validly issued orders and directives of all Governmental Authorities with jurisdiction over such Properties to the extent any failure could have a Material Adverse Effect. (j) Additional Patents and Trademarks. At the time of delivery of the financial statements and reports provided for in Section 7.1(a), a report signed by the chief financial officer or treasurer of the Borrower setting forth (i) a list of registration numbers for all patents and copyrights awarded to any Consolidated Party since the last day of the immediately preceding fiscal year and (ii) a list of all patent applications and copyright applications submitted by any Consolidated Party since the last day of the immediately preceding fiscal year and the status of each such application, all in such form as shall be reasonably satisfactory to the Agent. (k) Other Information. With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of any Consolidated Party as the Agent or the Required Lenders may reasonably request. 66 84 7.2 PRESERVATION OF EXISTENCE AND FRANCHISES. Except as a result of or in connection with a merger of a Subsidiary permitted under Section 8.4, each Credit Party will, and will cause each of its Subsidiaries to, do all things necessary to preserve and keep in full force and effect its existence, rights, franchises and authority. 7.3 BOOKS AND RECORDS. Each Credit Party will, and will cause each of its Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves). 7.4 COMPLIANCE WITH LAW. Each Credit Party will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its Property if noncompliance with any such law, rule, regulation, order or restriction could be reasonably expected to have a Material Adverse Effect. 7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS. Each Credit Party will, and will cause each of its Subsidiaries to, pay and discharge (a) all taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent, (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien upon any of its properties, and (c) except as prohibited hereunder, all of its other Indebtedness as it shall become due; provided, however, that no Consolidated Party shall be required to pay any such tax, assessment, charge, levy, claim or Indebtedness which is being contested in good faith by appropriate proceedings and as to which adequate reserves therefor have been established in accordance with GAAP, unless the failure to make any such payment (i) could give rise to an immediate right to foreclose on a Lien securing such amounts or (ii) could be reasonably expected to have a Material Adverse Effect. 7.6 INSURANCE. (a) Each Credit Party will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect insurance (including worker's compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice (or as otherwise required by the Collateral Documents). The Agent shall be named as loss payee or mortgagee, as its interest may appear, and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral, and each provider of any such insurance shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Agent, that it will give the Agent thirty (30) days prior written notice before any such policy or policies shall be altered or canceled, and that no act or default 67 85 of any Consolidated Party or any other Person shall affect the rights of the Agent or the Lenders under such policy or policies. The present insurance coverage of the Consolidated Parties is outlined as to carrier, policy number, expiration date, type and amount on Schedule 7.6. (b) In case of any material loss, damage to or destruction of the Collateral of any Credit Party or any part thereof, such Credit Party shall promptly give written notice thereof to the Agent generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Collateral of any Credit Party or any part thereof, such Credit Party, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at such Credit Party's cost and expense, will promptly repair or replace the Collateral of such Credit Party so lost, damaged or destroyed; provided, however, that such Credit Party need not repair or replace the Collateral of such Credit Party so lost, damaged or destroyed to the extent the failure to make such repair or replacement (i) is desirable to the proper conduct of the business of such Credit Party in the ordinary course and otherwise in the best interest of such Credit Party; and (ii) would not materially impair the rights and benefits of the Agent or the Lenders under the Collateral Documents, any other Credit Document or any Hedging Agreement. In the event a Credit Party shall receive any proceeds of such insurance in a net amount in excess of $100,000, such Credit Party will immediately pay over such proceeds to the Agent, for payment on the Credit Party Obligations; provided, however, that the Agent agrees to release such insurance proceeds to such Credit Party for replacement or restoration of the portion of the Collateral of such Credit Party lost, damaged or destroyed if, but only if, (A) no Default or Event of Default shall have occurred and be continuing at the time of release, (B) written application for such release is received by the Agent from such Credit Party within 30 days of receipt of such proceeds and (C) the Agent has received evidence reasonably satisfactory to it that the Collateral lost, damaged or destroyed has been or will be replaced or restored to its condition immediately prior to the loss, destruction or other event giving rise to the payment of such insurance proceeds. 7.7 MAINTENANCE OF PROPERTY. Each Credit Party will, and will cause each of its Subsidiaries to, maintain and preserve its properties and equipment material to the conduct of its business in good repair, working order and condition, normal wear and tear and casualty and condemnation excepted, and will make, or cause to be made, in such properties and equipment from time to time all repairs, renewals, replacements, extensions, additions, betterments and improvements thereto as may be needed or proper, to the extent and in the manner customary for companies in similar businesses. 7.8 PERFORMANCE OF OBLIGATIONS. Each Credit Party will, and will cause each of its Subsidiaries to, perform in all material respects all of its obligations under the terms of all material agreements, indentures, mortgages, security agreements or other debt instruments to which it is a party or by which it is bound. 68 86 7.9 USE OF PROCEEDS. The Borrower will use the proceeds of the Loans and will use the Letters of Credit solely for the purposes set forth in Section 6.15. 7.10 AUDITS/INSPECTIONS. Upon reasonable notice and during normal business hours, each Credit Party will, and will cause each of its Subsidiaries to, permit representatives appointed by the Agent, including, without limitation, independent accountants, agents, attorneys, and appraisers to visit and inspect its property, including its books and records, its accounts receivable and inventory, its facilities and its other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and representatives of such Person. The Credit Parties agree that the Agent, and its representatives, may conduct an annual audit of the Collateral, at the expense of the Credit Parties. 7.11 FINANCIAL COVENANTS. (i) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties, shall be greater than or equal to 3.0 to 1.0. (ii) Leverage Ratio. The Leverage Ratio, as of the last day of each fiscal quarter of the Consolidated Parties, shall be less than or equal to: (a) From the Closing Date to and including June 30, 1999, 3.0 to 1.0; and (b) From July 1, 1999 and thereafter, 2.5 to 1.0. (iii) Net Worth. At all times Net Worth shall be greater than or equal to the sum of $105,000,0000, increased on a cumulative basis as of the end of each fiscal quarter of the Borrower, commencing with the fiscal quarter ending September 30, 1998 by an amount equal to 75% of Consolidated Net Income for the fiscal quarter then ended (without deductions for any losses) plus 100% of the Net Cash Proceeds from any Equity Issuance subsequent to the Closing Date. (iv) Funded Indebtedness to Capitalization Ratio. The Funded Indebtedness to Capitalization Ratio, as of the last day of each fiscal quarter of the Consolidated Parties, shall not be greater than 0.50 to 1.0. (v) Calculation Method. For purposes of calculating financial covenants as of the end of each fiscal quarter through the fiscal quarter ending June 30, 1999, the Consolidated EBITDA and the Consolidated EBIT to be included with respect to Loder, 69 87 Drew & Associates ("LD&A") for the portion of the applicable twelve month period that accrued prior to the acquisition of LD&A by the Borrower shall be as follows:
Date of Fiscal Quarter End EBIT EBITDA -------------------------- ---- ------ June 30, 1998 $6,847,000 $7,109,000 September 30, 1998 $5,288,000 $5,502,000 December 31, 1998 $3,729,000 $3,895,000 March 31, 1999 $2,241,000 $2,357,000 June 30, 1999 $0 $0
7.12 ADDITIONAL CREDIT PARTIES. As soon as practicable and in any event within 45 days after any Person becomes a Subsidiary of any Credit Party, the Borrower shall provide the Agent with written notice thereof setting forth information in reasonable detail describing all of the assets of such Person and shall (a) if such Person is a Domestic Subsidiary of a Credit Party, cause such Person to execute a Joinder Agreement in substantially the same form as Exhibit 7.12, (b) cause 100% (if such Person is a Domestic Subsidiary of a Credit Party) or 66% (if such Person is a direct Foreign Subsidiary of a Credit Party) of the Capital Stock of such Person to be delivered to the Agent (together with undated stock powers signed in blank (unless, with respect to a Foreign Subsidiary, such stock powers are deemed unnecessary by the Agent in its reasonable discretion under the law of the jurisdiction of incorporation of such Person)) and pledged to the Agent pursuant to an appropriate pledge agreement(s) in form acceptable to the Agent in its reasonable discretion and cause such Person to deliver such other documentation as the Agent may reasonably request in connection with the foregoing, including, without limitation, appropriate UCC-1 financing statements, real estate title insurance policies, environmental reports, landlord's waivers, certified resolutions and other organizational and authorizing documents of such Person, and favorable opinions of counsel to such Person all in form, content and scope reasonably satisfactory to the Agent. It is specifically understood and agreed that no Foreign Subsidiary (a "Parent Foreign Subsidiary") shall be required to pledge any of the Capital Stock of any other Foreign Subsidiary owned by such Parent Foreign Subsidiary. 7.13 ENVIRONMENTAL LAWS. (a) The Consolidated Parties shall comply in all material respects with, and take reasonable actions to ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply in all material respects with and maintain, and take reasonable actions to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws except to the extent that failure to do so would not reasonably be expected to have a Material Adverse Effect; 70 88 (b) The Consolidated Parties shall conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the failure to do or the pendency of such proceedings would not reasonably be expected to have a Material Adverse Effect; and (c) The Consolidated Parties shall defend, indemnify and hold harmless the Agent and the Lenders, and their respective employees, agents, officers and directors, from and against any and all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower or any of its Subsidiaries or the Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, reasonable attorney's and consultant's fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. The agreements in this paragraph shall survive repayment of the Loans and all other amounts payable hereunder, and termination of the Commitments. 7.14 COLLATERAL. If, subsequent to the Closing Date, a Credit Party shall acquire any intellectual property, securities instruments, chattel paper or other personal property required to be delivered to the Agent as Collateral hereunder or under any of the Collateral Documents, the Borrower shall notify the Agent of same in each case as soon as practicable after the acquisition thereof or execution of such lease agreement, as appropriate. Each Credit Party shall take such action as reasonably requested by the Agent and at its own expense, to ensure that the Agent shall have a first priority perfected Lien in all personal property of the Credit Parties (whether now owned or hereafter acquired), subject only to Permitted Liens. 7.15 YEAR 2000 COMPLIANCE. Each Credit Party will promptly notify the Agent and each of the Lenders in the event such Credit Party discovers or determines that any computer application (including those of its suppliers, vendors and customers) that is material to its or any of its Subsidiaries' business and operations will not be Year 2000 compliant, except to the extent that such failure could not reasonably be expected to have a Material Adverse Effect. 7.16 FURTHER ASSURANCES. Within 45 days after the Closing Date, the Credit Parties agree to provide to the Agent (a) a pledge of 66% of the stock of PRG France S.A. and (b) an opinion, in a form and from legal 71 89 counsel reasonably acceptable to the Agent, which shall cover the enforceability, the perfection and the priority of the Lenders' security interest in the pledged shares of PRG France S.A. SECTION 8 NEGATIVE COVENANTS Each Credit Party hereby covenants and agrees that, so long as this Credit Agreement is in effect or any amounts payable hereunder or under any other Credit Document shall remain outstanding, and until all of the Commitments hereunder shall have terminated: 8.1 INDEBTEDNESS. The Credit Parties will not permit any Consolidated Party to contract, create, incur, assume or permit to exist any Indebtedness, except: (a) Indebtedness arising under this Credit Agreement and the other Credit Documents; (b) Indebtedness of the Borrower set forth in Schedule 8.1 (and renewals, refinancings and extensions thereof on terms and conditions no less favorable to such Person than such existing Indebtedness); (c) purchase money Indebtedness (including obligations in respect of Capital Leases or Synthetic Leases) hereafter incurred by the Borrower to finance the purchase of fixed assets provided that (i) the total of all such Indebtedness (including any such Indebtedness referred to in subsection (b) above) shall not exceed an aggregate principal amount of $10,000,000 at any one time outstanding; (ii) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed; and (iii) no such Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; (d) obligations of the Borrower in respect of Hedging Agreements entered into in order to manage existing or anticipated interest rate or exchange rate risks and not for speculative purposes; and (e) other unsecured Indebtedness of the Borrower and its Subsidiaries in an amount not to exceed $5,000,000 in the aggregate at any one time. 8.2 LIENS. The Credit Parties will not permit any Consolidated Party to contract, create, incur, assume or permit to exist any Lien with respect to any of its Property, whether now owned or after acquired, except for Permitted Liens. 72 90 8.3 NATURE OF BUSINESS. The Credit Parties will not permit any Consolidated Party to materially alter the nature of the business conducted by such Person as of the Closing Date. 8.4 CONSOLIDATION, MERGER, DISSOLUTION, ETC. The Credit Parties will not permit any Consolidated Party to enter into any transaction of merger or consolidation or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that, notwithstanding the foregoing provisions of this Section 8.4, (a) the Borrower may merge or consolidate with any of its Subsidiaries provided that (i) the Borrower shall be the continuing or surviving corporation, (ii) the Credit Parties shall cause to be executed and delivered such documents, instruments and certificates as the Agent may request in order to maintain the perfection and priority of the Agent's liens on the assets of the Credit Parties as required by Section 7.14 after giving effect to such transaction and (iii) after giving effect to such transaction, no Default or Event of Default exists, (b) any Credit Party other than the Borrower may merge or consolidate with any other Credit Party other than the Borrower provided that (i) the Credit Parties shall cause to be executed and delivered such documents, instruments and certificates as the Agent may request in order to maintain the perfection and priority of the Agent's liens on the assets of the Credit Parties as required by Section 7.14 after giving effect to such transaction and (ii) after giving effect to such transaction, no Default or Event of Default exists, (c) any Consolidated Party which is not a Credit Party may be merged or consolidated with or into any Credit Party provided that (i) such Credit Party shall be the continuing or surviving corporation, (ii) the Credit Parties shall cause to be executed and delivered such documents, instruments and certificates as the Agent may request in order to maintain the perfection and priority of the Agent's liens on the assets of the Credit Parties as required by Section 7.14 after giving effect to such transaction and (iii) after giving effect to such transaction, no Default or Event of Default exists, and (d) any Consolidated Party which is not a Credit Party may be merged or consolidated with or into any other Consolidated Party which is not a Credit Party provided that, after giving effect to such transaction, no Default or Event of Default exists. 8.5 ASSET DISPOSITIONS. The Credit Parties will not permit any Consolidated Party to make any Asset Disposition (including, without limitation, any Sale and Leaseback Transaction) other than (i) the sale of inventory in the ordinary course of business for fair consideration, (ii) the sale or disposition of machinery and equipment no longer used or useful in the conduct of such Person's business and (iii) other sales of assets during any fiscal year having an aggregate fair market value of less than an amount equal to 10% of Total Assets of the Consolidated Parties. 8.6 INVESTMENTS. The Credit Parties will not permit any Consolidated Party to make Investments in or to any Person, except for Permitted Investments. 73 91 8.7 RESTRICTED PAYMENTS. The Credit Parties will not permit any Consolidated Party to, directly or indirectly, declare, order, make or set apart any sum for or pay any Restricted Payment, except (a) to make dividends payable solely in the same class of Capital Stock of such Person, (b) to make dividends or other distributions payable to the Borrower (directly or indirectly through Subsidiaries) and (c) the redemption of Capital Stock of the Borrower from any officer or director of the Borrower or any of its Subsidiaries provided that the aggregate price paid for all such shares purchased during the term of this Credit Agreement shall not exceed $250,000. 8.8 [INTENTIONALLY OMITTED] 8.9 TRANSACTIONS WITH AFFILIATES. The Credit Parties will not permit any Consolidated Party to enter into or permit to exist any transaction or series of transactions with any officer, director, shareholder, Subsidiary or Affiliate of such Person other than (a) normal compensation and reimbursement of expenses of officers and directors and (b) except as otherwise specifically limited in this Credit Agreement, other transactions which are entered into in the ordinary course of such Person's business on terms and conditions substantially as favorable to such Person as would be obtainable by it in a comparable arms-length transaction with a Person other than an officer, director, shareholder, Subsidiary or Affiliate. 8.10 FISCAL YEAR; ORGANIZATIONAL DOCUMENTS. The Credit Parties will not permit any Consolidated Party to change its fiscal year or amend, modify or change its articles of incorporation (or corporate charter or other similar organizational document) or bylaws (or other similar document) without the prior written consent of the Required Lenders (which consent shall not be unreasonably withheld). 8.11 LIMITATION ON RESTRICTED ACTIONS. The Credit Parties will not permit any Consolidated Party to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Person to (a) pay dividends or make any other distributions to any Credit Party on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, (b) pay any Indebtedness or other obligation owed to any Credit Party, (c) make loans or advances to any Credit Party, (d) sell, lease or transfer any of its properties or assets to any Credit Party, or (e) act as a Guarantor and pledge its assets pursuant to the Credit Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in respect of any of the matters referred to in clauses (a)-(d) above) for such encumbrances or restrictions existing under or by reason of (i) this Credit Agreement and the other Credit Documents, (ii) applicable law or (iii) any document or instrument governing Indebtedness incurred pursuant to Section 8.1(c), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith. 74 92 8.12 OWNERSHIP OF SUBSIDIARIES. Notwithstanding any other provisions of this Credit Agreement to the contrary, the Credit Parties will not permit any Consolidated Party to (i) permit any Person (other than the Borrower or any Wholly-Owned Subsidiary of the Borrower) to own any Capital Stock of any Subsidiary of the Borrower, (ii) permit any Subsidiary of the Borrower to issue Capital Stock (except to the Borrower or to a Wholly-Owned Subsidiary of the Borrower), (iii) permit, create, incur, assume or suffer to exist any Lien thereon, in each case except (A) to qualify directors where required by applicable law or to satisfy other requirements of applicable law with respect to the ownership of Capital Stock of Foreign Subsidiaries or (B) for Permitted Liens and (iv) notwithstanding anything to the contrary contained in clause (ii) above, permit any Subsidiary of the Borrower to issue any shares of preferred Capital Stock. 8.13 SALE LEASEBACKS. Except for transactions permitted by Section 8.1(c) hereof, the Credit Parties will not permit any Consolidated Party to, directly or indirectly, become or remain liable as lessee or as guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any Property (whether real, personal or mixed), whether now owned or hereafter acquired, (a) which such Consolidated Party has sold or transferred or is to sell or transfer to a Person which is not a Consolidated Party or (b) which such Consolidated Party intends to use for substantially the same purpose as any other Property which has been sold or is to be sold or transferred by such Consolidated Party to another Person which is not a Consolidated Party in connection with such lease. 8.14 CAPITAL EXPENDITURES. The Credit Parties will not permit Consolidated Capital Expenditures for any fiscal year to exceed fifteen percent (15%) of the gross revenues of the Borrower and its Subsidiaries for such fiscal year. 8.15 NO FURTHER NEGATIVE PLEDGES. The Credit Parties will not permit any Consolidated Party to enter into, assume or become subject to any agreement prohibiting or otherwise restricting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or requiring the grant of any security for such obligation if security is given for some other obligation, except (a) pursuant to this Credit Agreement and the other Credit Documents and (b) pursuant to any document or instrument governing Indebtedness incurred pursuant to Section 8.1(c), provided that any such restriction contained therein relates only to the asset or assets constructed or acquired in connection therewith. 75 93 SECTION 9 EVENTS OF DEFAULT 9.1 EVENTS OF DEFAULT. An Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): (a) Payment. Any Credit Party shall default, and such default shall continue for five (5) or more Business Days, in the payment when due of any principal of or interest on the Loans or on any reimbursement obligations arising from drawings under Letters of Credit, or of any Fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith or therewith; or (b) Representations. Any representation, warranty or statement made or deemed to be made by any Credit Party herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made; or (c) Covenants. Any Credit Party shall (i) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.2, 7.4, 7.9, 7.11, 7.12, 7.14 or 8.1 through 8.15, inclusive; (ii) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.1(a), (b), (c) or (d) and such default shall continue unremedied for a period of at least 5 days after the earlier of a responsible officer of a Credit Party becoming aware of such default or notice thereof by the Agent; or (iii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b), (c)(i) or (c)(ii) of this Section 9.1) contained in this Credit Agreement and such default shall continue unremedied for a period of at least 30 days after the earlier of a responsible officer of a Credit Party becoming aware of such default or notice thereof by the Agent; or (d) Other Credit Documents. (i) Any Credit Party shall default in the due performance or observance of any term, covenant or agreement in any of the other Credit Documents (subject to applicable grace or cure periods, if any), or (ii) except as a result of or in connection with a merger of a Subsidiary permitted under Section 8.4, any Credit Document shall fail to be in full force and effect or to give the Agent and/or the Lenders the 76 94 Liens, rights, powers and privileges purported to be created thereby, or any Credit Party shall so state in writing; or (e) Guaranties. Except as the result of or in connection with a merger of a Subsidiary permitted under Section 8.4, the guaranty given by any Guarantor hereunder (including any Additional Credit Party) or any provision thereof shall cease to be in full force and effect, or any Guarantor (including any Additional Credit Party) hereunder or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under such guaranty, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any guaranty (subject to applicable grace and cure periods, if any); or (f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to any Consolidated Party; or (g) Defaults under Other Agreements. (i) Any Consolidated Party shall default in the performance or observance (beyond the applicable grace period with respect thereto, if any) of any material obligation or condition of any contract or lease material to the Consolidated Parties, taken as a whole; or (ii) With respect to any Indebtedness (other than Indebtedness outstanding under this Credit Agreement) in excess of $1,000,000 in the aggregate for the Consolidated Parties taken as a whole, (A) any Consolidated Party shall (1) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (2) the occurrence and continuance of a default in the observance or performance relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required), any such Indebtedness to become due prior to its stated maturity; or (B) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof; or (h) Judgments. One or more judgments or decrees shall be entered against one or more of the Consolidated Parties involving a liability of $1,000,000 or more in the aggregate (to the extent not paid or fully covered by insurance provided by a carrier who has acknowledged coverage and has the ability to perform) and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days from the entry thereof; or 77 95 (i) ERISA. Any of the following events or conditions, if such event or condition could have a Material Adverse Effect: (i) any "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of any Consolidated Party or any ERISA Affiliate in favor of the PBGC or a Plan; (ii) an ERISA Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (iii) an ERISA Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Agent, likely to result in (A) the termination of such Plan for purposes of Title IV of ERISA, or (B) any Consolidated Party or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency or (within the meaning of Section 4245 of ERISA) such Plan; or (iv) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which may subject any Consolidated Party or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which any Consolidated Party or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability; or (j) Ownership. There shall occur a Change of Control. 9.2 ACCELERATION; REMEDIES. Upon the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived by the requisite Lenders (pursuant to the voting requirements of Section 11.6) or cured to the satisfaction of the requisite Lenders in their reasonable discretion (pursuant to the voting procedures in Section 11.6), the Agent shall, upon the request and direction of the Required Lenders, by written notice to the Credit Parties, take any of the following actions: (a) Termination of Commitments. Declare the Commitments terminated whereupon the Commitments shall be immediately terminated. (b) Acceleration. Declare the unpaid principal of and any accrued interest in respect of all Loans, any reimbursement obligations arising from drawings under Letters of Credit and any and all other indebtedness or obligations of any and every kind owing by the Credit Parties to the Agent and/or any of the Lenders hereunder to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Credit Parties. (c) Cash Collateral. Direct the Credit Parties to pay (and the Credit Parties agree that upon receipt of such notice, or upon the occurrence of an Event of Default under Section 9.1(f), they will immediately pay) to the Agent additional cash, to be held by the Agent, for the benefit of the Lenders, in a cash collateral account as additional security for the LOC Obligations in respect of subsequent drawings under all then outstanding Letters 78 96 of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding. (d) Enforcement of Rights. Enforce any and all rights and interests created and existing under the Credit Documents including, without limitation, all rights and remedies existing under the Collateral Documents, all rights and remedies against a Guarantor and all rights of set-off. Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(f) shall occur with respect to the Borrower, then the Commitments shall automatically terminate and all Loans, all reimbursement obligations arising from drawings under Letters of Credit, all accrued interest in respect thereof, all accrued and unpaid Fees and other indebtedness or obligations owing to the Agent and/or any of the Lenders hereunder automatically shall immediately become due and payable without the giving of any notice or other action by the Agent or the Lenders. SECTION 10 AGENCY PROVISIONS 10.1 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent under this Credit Agreement and the other Credit Documents with such powers and discretion as are specifically delegated to the Agent by the terms of this Credit Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. The Agent (which term as used in this sentence and in Section 10.5 and the first sentence of Section 10.6 hereof shall include its Affiliates and its own and its Affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Credit Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Credit Document or any certificate or other document referred to or provided for in, or received by any of them under, any Credit Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Credit Document, or any other document referred to or provided for therein or for any failure by any Credit Party or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by any Credit Party or the satisfaction of any condition or to inspect the property (including the books and records) of any Credit Party or any of its Subsidiaries or Affiliates; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Credit Document; and (e) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Credit Document, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. 79 97 10.2 RELIANCE BY AGENT. The Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telecopy) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for any Credit Party), independent accountants, and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until the Agent receives and accepts an Assignment and Acceptance executed in accordance with Section 11.3(b) hereof. As to any matters not expressly provided for by this Credit Agreement, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding on all of the Lenders; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to any Credit Document or applicable law or unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. 10.3 DEFAULTS. The Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless the Agent has received written notice from a Lender or the a Credit Party specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agent shall (subject to Section 10.2 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders. 10.4 RIGHTS AS A LENDER. With respect to its Commitment and the Loans made by it, NationsBank (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. NationsBank (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other business with any Credit Party or any of its Subsidiaries or Affiliates as if it were not acting as Agent, and NationsBank (and any successor acting as Agent) and its Affiliates may accept fees and other consideration from any Credit Party or any of its Subsidiaries or Affiliates for services in connection with this Credit Agreement or otherwise without having to account for the same to the Lenders. 80 98 10.5 INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent not reimbursed under Section 11.5 hereof, but without limiting the obligations of the Credit Parties under such Section) ratably in accordance with their respective Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including by any Lender) in any way relating to or arising out of any Credit Document or the transactions contemplated thereby or any action taken or omitted by the Agent under any Credit Document (including any of the foregoing arising from the negligence of the Agent); provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs or expenses payable by the Credit Parties under Section 11.5, to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Credit Parties. The agreements in this Section 10.5 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Credit Parties and their Subsidiaries and decision to enter into this Credit Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Credit Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of any Credit Party or any of its Subsidiaries or Affiliates that may come into the possession of the Agent or any of its Affiliates. 10.7 SUCCESSOR AGENT. The Agent may resign at any time by giving notice thereof to the Lenders and the Credit Parties. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a commercial bank organized under the laws of the United States of America having combined capital and surplus of at least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. 81 99 After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 10 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. SECTION 11 MISCELLANEOUS 11.1 NOTICES. Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (a) when delivered, (b) when transmitted via telecopy (or other facsimile device) to the number set out below, (c) the Business Day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid, in each case to the respective parties at the address, in the case of the Credit Parties and the Agent, set forth below, and, in the case of the Lenders, set forth on Schedule 2.1(a), or at such other address as such party may specify by written notice to the other parties hereto: if to any Credit Party: The Profit Recovery Group International, Inc. 2300 Windy Ridge Parkway, Suite 100 Atlanta, Georgia 30339 Attn: Chief Financial Officer Telephone: (770) 779-3230 Telecopy: (770) 779-3042 with a copy to: The Profit Recovery Group International, Inc. 2300 Windy Ridge Parkway, Suite 100 Atlanta, Georgia 30339 Attn: General Counsel Telephone: (770) 779-3051 Telecopy: (770) 779-3034 82 100 if to the Agent: NationsBank, N. A. Independence Center, 15th Floor NC1-001-15-04 101 North Tryon Street Charlotte, North Carolina 28255 Attn: Agency Services Telephone: (704) 386-8958 Telecopy: (704) 388-9436 with a copy to: NationsBank, N. A. 600 Peachtree Street, NE 19th Floor Atlanta, Georgia 30308 Attn: Melinda M. Bergbom Telephone: (404) 607-4761 Telecopy: (404) 607-6343 11.2 RIGHT OF SET-OFF; ADJUSTMENTS. Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its Affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its Affiliates) to or for the credit or the account of any Credit Party against any and all of the obligations of such Person now or hereafter existing under this Credit Agreement, under the Notes, under any other Credit Document or otherwise, irrespective of whether such Lender shall have made any demand under hereunder or thereunder and although such obligations may be unmatured. Each Lender agrees promptly to notify any affected Credit Party after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 11.2 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. 11.3 BENEFIT OF AGREEMENT. (a) This Credit 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 none of the Credit Parties may assign or transfer any of its interests and obligations without prior written consent of the Lenders; provided further that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth in this Section 11.3. 83 101 (b) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Commitment); provided, however, that (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Credit Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 (or, if less, the remaining amount of the Commitment being assigned by such Lender) or an integral multiple of $1,000,000 in excess thereof; (iii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its rights and obligations under this Credit Agreement and the Notes; and (iv) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance in the form of Exhibit 11.3(b) hereto, together with any Note subject to such assignment and a processing fee of $3,500. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Credit Agreement. Upon the consummation of any assignment pursuant to this Section 11.3(b), the assignor, the Agent and the Credit Parties shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not a United States person under Section 7701(a)(30) of the Code, it shall deliver to the Credit Parties and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 3.11. (c) The Agent shall maintain at its address referred to in Section 11.1 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Credit Parties, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Credit Parties or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit 11.3(b) hereto, (i) accept such Assignment and 84 102 Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (e) Each Lender may sell participations to one or more Persons in all or a portion of its rights, obligations or rights and obligations under this Credit Agreement (including all or a portion of its Commitment or its Loans); provided, however, that (i) such Lender's obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in Sections 3.7 through 3.12, inclusive, and the right of set-off contained in Section 11.2, and (iv) the Credit Parties shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement, and such Lender shall retain the sole right to enforce the obligations of the Credit Parties relating to the Credit Party Obligations owing to such Lender and to approve any amendment, modification, or waiver of any provision of this Credit Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, or extending its Commitment). (f) Notwithstanding any other provision set forth in this Credit Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (g) Any Lender may furnish any information concerning the Consolidated Parties in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants), subject, however, to the provisions of Section 11.14 hereof. 11.4 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Agent or any Lender and any of the Credit Parties shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle the Credit Parties to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Lenders to any other or further action in any circumstances without notice or demand. 85 103 11.5 EXPENSES; INDEMNIFICATION. (a) The Credit Parties jointly and severally agree to pay on demand all reasonable costs and expenses of the Agent in connection with the syndication, preparation, execution, delivery, administration, modification, and amendment of this Credit Agreement, the other Credit Documents, and the other documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under the Credit Documents. The Credit Parties further jointly and severally agree to pay on demand all reasonable costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable attorneys' fees and expenses and the cost of internal counsel), in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of the Credit Documents and the other documents to be delivered hereunder. (b) The Credit Parties jointly and severally agree to indemnify and hold harmless the Agent and each Lender and each of their Affiliates and their respective officers, directors, employees, agents, and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, costs, and expenses (including, without limitation, reasonable attorneys' fees) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation, or proceeding or preparation of defense in connection therewith) the Credit Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans (including any of the foregoing arising from the negligence of the Indemnified Party), except to the extent such claim, damage, loss, liability, cost, or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 11.5 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by any of the Credit Parties, their respective directors, shareholders or creditors or an Indemnified Party or any other Person or any Indemnified Party is otherwise a party thereto. The Credit Parties agree not to assert any claim against the Agent, any Lender, any of their Affiliates, or any of their respective directors, officers, employees, attorneys, agents, and advisers, on any theory of liability, for special, indirect, consequential, or punitive damages arising out of or otherwise relating to the Credit Documents, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Loans. (c) Without prejudice to the survival of any other agreement of the Credit Parties hereunder, the agreements and obligations of the Credit Parties contained in this Section 11.5 shall survive the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder. 11.6 AMENDMENTS, WAIVERS AND CONSENTS. Neither this Credit Agreement nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, 86 104 change, waiver, discharge or termination is in writing entered into by, or approved in writing by, the Required Lenders and the Borrower, provided, however, that: (i) without the consent of each Lender affected thereby, neither this Credit Agreement nor any other Credit Document may be amended to (a) extend the final maturity of any Loan or of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit, (b) reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or Fees hereunder, (c) reduce or waive the principal amount of any Loan or of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit, (d) increase the Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default or mandatory reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender), (e) release the Borrower or substantially all of the other Credit Parties from its or their obligations under the Credit Documents, (f) amend, modify or waive any provision of this Section 11.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 9.1(a), 11.2, 11.3, 11.5 or 11.9, (g) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders, or (h) consent to the assignment or transfer by the Borrower or all or substantially all of the other Credit Parties of any of its or their rights and obligations under (or in respect of) the Credit Documents except as permitted thereby; (ii) without the consent of the Agent, no provision of Section 10 may be amended; and (iii) without the consent of the Issuing Lender, no provision of Section 2.2 may be amended, and without the consent of the Swingline Lender, no provision of Section 2.4 may be amended. Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such Lender sees fit 87 105 on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein and (y) the Required Lenders may consent to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding. 11.7 COUNTERPARTS. This Credit Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart for each of the parties hereto. Delivery by facsimile by any of the parties hereto of an executed counterpart of this Credit Agreement shall be as effective as an original executed counterpart hereof and shall be deemed a representation that an original executed counterpart hereof will be delivered. 11.8 HEADINGS. The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement. 11.9 SURVIVAL. All indemnities set forth herein, including, without limitation, in Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the issuance of the Letters of Credit, the repayment of the Loans, LOC Obligations and other obligations under the Credit Documents and the termination of the Commitments hereunder, and all representations and warranties made by the Credit Parties herein shall survive delivery of the Notes and the making of the Loans hereunder. 11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS CREDIT AGREEMENT AND, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of Georgia, or of the United States for the Northern District of Georgia, Atlanta Division, and, by execution and delivery of this Credit Agreement, each of the Credit Parties hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the nonexclusive jurisdiction of such courts. Each of the Credit Parties further irrevocably consents to the service of process out 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 it at the address set out for notices pursuant to Section 11.1, such service to become effective three 88 106 (3) days after such mailing. Nothing herein shall affect the right of the Agent or any Lender to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against any Credit Party in any other jurisdiction. (b) Each of the Credit Parties hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE LENDERS, EACH OF THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. 11.11 SEVERABILITY. If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 11.12 ENTIRETY. This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 11.13 BINDING EFFECT; TERMINATION. (a) This Credit Agreement shall become effective at such time when all of the conditions set forth in Section 5.1 have been satisfied or waived by the Lenders and it shall have been executed by each Credit Party and the Agent, and the Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and thereafter this Credit Agreement shall be binding upon and inure to the benefit of each Credit Party, the Agent and each Lender and their respective successors and assigns. (b) The term of this Credit Agreement shall be until no Loans, LOC Obligations or any other amounts payable hereunder or under any of the other Credit Documents shall remain outstanding, no Letters of Credit shall be outstanding, all of the Credit Party 89 107 Obligations have been irrevocably satisfied in full and all of the Commitments hereunder shall have expired or been terminated. 11.14 CONFIDENTIALITY. The Agent and each Lender (each, a "Lending Party") agrees to keep confidential (and to cause their respective Affiliates, officers, directors, employees, agents and representatives to keep confidential) any information furnished or made available to it by the Credit Parties pursuant to this Credit Agreement that is marked confidential; provided that nothing herein shall prevent any Lending Party from disclosing such information (a) to any other Lending Party or any Affiliate of any Lending Party, or any officer, director, employee, agent, or advisor of any Lending Party or Affiliate of any Lending Party, (b) as required by any law, rule, or regulation, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority, (e) that is or becomes available to the public or that is or becomes available to any Lending Party other than as a result of a disclosure by any Lending Party prohibited by this Credit Agreement, (f) to the extent necessary in connection with any litigation to which such Lending Party or any of its Affiliates may be a party, (g) to the extent necessary in connection with the exercise of any remedy under this Credit Agreement or any other Credit Document, and (h) subject to provisions substantially similar to those contained in this Section 11.14, to any actual or proposed participant or assignee. The provisions of this Section 11.14 shall survive the termination of this Credit Agreement. 11.15 USE OF SOURCES Each of the Lenders hereby represents and warrants to the Borrower that at least one of the following statements is an accurate representation as to the source of funds to be used by such Lender in connection with the financing hereunder: (a) no part of such funds constitutes assets allocated to any separate account maintained by such Lender in which any employee benefit plan (or its related trust) has any interest; (b) to the extent that any part of such funds constitutes assets allocated to any separate account maintained by such Lender, such Lender has disclosed to the Borrower the name of each employee benefit plan whose assets in such account exceed 10% of the total assets of such account as of the date of such purchase (and, for purposes of this subsection (b), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan); (c) to the extent that any part of such funds constitutes assets of an insurance company's general account, such insurance company has complied with all of the requirements of the regulations issued under Section 401(c)(1)(A) of ERISA; or (d) such funds constitute assets of one or more specific benefit plans which such Lender has identified in writing to the Borrower. 90 108 As used in this Section 11.15, the terms "employee benefit plan" and "separate account" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 11.16 CONFLICT. To the extent that there is a conflict or inconsistency between any provision hereof, on the one hand, and any provision of any Credit Document, on the other hand, this Credit Agreement shall control. [Signature Page to Follow] 91 109 IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written. BORROWER: THE PROFIT RECOVERY GROUP INTERNATIONAL, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. SUBSIDIARY GUARANTORS: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP U.K., INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP ASIA, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP CANADA, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. [Signatures Continue] 110 THE PROFIT RECOVERY GROUP NEW ZEALAND, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP NETHERLANDS, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP BELGIUM, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP MEXICO, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP FRANCE, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. [Signatures Continue] 111 THE PROFIT RECOVERY GROUP AUSTRALIA, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP GERMANY, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. PRG INTERNATIONAL HOLDING COMPANY, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP SWITZERLAND, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. THE PROFIT RECOVERY GROUP SOUTH AFRICA, INC., a Georgia corporation By: --------------------------------------- Name: Donald E. Ellis, Jr. Title: S.V.P., C.F.O. and Treas. 112 LENDERS: NATIONSBANK, N. A., individually in its capacity as a Lender and in its capacity as Agent By: ---------------------------------------- Name: ---------------------------------------- Title: ---------------------------------------- EX-10.2 3 SUBLEASE AGREEMENT 1 EXHIBIT 10.2 SUBLEASE AGREEMENT THIS AGREEMENT is made this _________ day of May, 1998, by and between Electrolux, LLC, a Delaware limited liability company, f/k/a Electrolux Corporation, a Delaware corporation with an office at 2300 Windy Ridge Parkway, Suite 900 South, Atlanta, Georgia 30339, hereinafter called "Electrolux" and The Profit Recovery Group International I, Inc., a Georgia corporation with its principal place of business at 2300 Windy Ridge Parkway, Suite 100 North, Atlanta, Georgia 30339-8426 hereinafter called "PRG". W I T N E S S E T H: WHEREAS, by Agreement of Lease, dated November 19, 1987, as amended December 21, 1988 and June 30, 1988 (herein collectively called the "Prime Lease" and attached as Exhibit "A"), Electrolux leases from Wildwood Associates, a Georgia General Partnership (the "Prime Lessor") the ninth (9th) floor in the building known as 2300 Windy Ridge Parkway, Wildwood Office Park, Atlanta Georgia (the "Building"); and WHEREAS, Electrolux desires to Sublease to PRG and PRG desires to Sublease from Electrolux the ninth (9th) floor consisting of approximately 62,576 rentable square feet (the "Premises") NOW THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration and of the mutual agreements hereinafter set forth, Electrolux and PRG stipulate, covenant and agree as follows: 1. PREMISES Electrolux does hereby Sublease to PRG a portion of the Building consisting of approximately 62,576 square feet of rentable area on the ninth (9th) floor (the "Premises") as outlined in red and crosshatched on Exhibit "A" attached hereto and made a part hereof. 2. TERM The term shall commence on the date of delivery specified in Section 4 hereof, and shall expire on February 29, 2000. 3. USES The Premises shall be used for office space in accordance with all applicable laws, ordinances, rules and regulations of governmental authorities and the Rules and Regulations attached to the Prime Lease. PRG covenants and agrees to abide by the Rules and Regulations in all respects as now set forth and as hereafter promulgated by Prime Lessor. Prime Lessor shall have the right at all times during the Lease Term to publish and promulgate and thereafter enforce such rules and regulations or changes in the existing Rules and Regulations as it may reasonably deem. 4. RENT Beginning on the Commencement Date, PRG shall pay Rent as follows:
Term Square Footage Annual Rent Rent Annual Rent - ---------------------- --------------------- ---------------- ---------- --------------- Commencement - 2/28/99 31,288 (South Tower) $19.50/rsf $50,843.00 $ 610,116.00 3/1/99 - 2/29/00 62,576 (entire 9th floor) $19.10/rsf $99,600.13 $1,195,201.60
Subject to Section 6 hereof, the Commencement Date for the 31,288 square feet in the South Tower shall be August 15, 1998. Electrolux shall vacate the 31,288 square feet in the South Tower and deliver possession of same to PRG in broom clean condition on or before July 1, 1998. Subject to Section 6 hereof, the Commencement Date for the 31,288 square feet in the North Tower shall be March 1, 1999. Electrolux shall vacate the 31,288 square feet in the North Tower and deliver possession of same to PRG in broom clean condition on or before January 15, 1999. 2 PRG shall pay the Rent and service charges, as described in Paragraph 5, (collectively the "Rent") provided for hereunder in advance on the first day of every month during the Term. Rent shall be a prorated rate for fractions of a month if this Sublease commences or expires (as the case may be) for any reason on any day other than the 1st or last day of the calendar month, respectively. PRG shall make payment of Rent to Electrolux, at the address specified in Paragraph 9. 5. SERVICE CHARGES If PRG shall procure any services from the Building beyond the Building standard services specified in the Prime Lease, (such as alterations or after-hour air-conditioning) PRG shall pay for same at the rates charged therefor by the Prime Lessor (the "Service Charges") and shall make such payment to Electrolux or Prime Lessor, as Electrolux shall direct. Any Rent or other sums payable by PRG under this Paragraph 5 shall be considered rent and collectible by Electrolux as such. If Electrolux shall receive any refund from Prime Lessor, PRG shall be entitled to the return of so much thereof as shall be attributable to prior payments by PRG. 6. PREPARATION FOR OCCUPANCY Prior to July 1, 1998, Electrolux shall at its own expense construct a demising wall between the North and South Towers. On or before July 1, 1998 Electrolux shall deliver possession of the Premises to PRG for the purpose of constructing tenant improvements. The Premises shall then be vacant and in broom clean condition. PRG will at its sole expense, perform or cause to be performed, such construction of the Premises as it desires, provided that prior to the commencement of construction PRG shall have obtained the written consent of Electrolux, and the Prime Lessor, if required, which consent shall not be unreasonably withheld or delayed, to PRG's construction plans. In the event delivery of the Premises or any portion thereof, shall be delayed, the Commencement Date shall be similarly delayed. 7. INCORPORATION OF PRIME LEASE (a) This Sublease is subject to all of the terms of the Prime Lease and the Sublease with the same force and effect as if fully set forth herein at length, excepting only as otherwise specifically provided herein. All of the terms with which Sublessor is bound to comply under the Prime Lease shall, to the extent only that they apply to the Premises and except as otherwise provided herein, be binding upon PRG, and all of the obligations of Prime Lessor set forth in the Prime Lease shall, to the extent only that they apply to the Premises and except as otherwise provided herein, inure to the benefit of PRG. It is the intention of the parties that, except as otherwise provided in the Sublease, the relationship between Electrolux and PRG shall be governed by the language of the various articles of the Prime Lease as if they were typed out in this Sublease in full, and the words "Lessor" "Lessee" and "Prime Lease" as used in the Prime Lease, shall read, respectively "Electrolux," "PRG" and "Sublease". (b) For the purpose of this Sublease, the following provisions of the Prime Lease are hereby deleted in their entirety: Sections; 5,6,7; Exhibit G articles 1, 2, 5, 8, 12, 13, 14, 15; Exhibit J; First Amendment to Lease articles 2.(L) and 3; Second Amendment to Lease articles 2.(j), (k), (l), (p), 4, 5 and 6. 8. QUIET ENJOYMENT (a) Electrolux covenants and agrees with PRG that upon PRG paying the rent reserved in this Sublease and observing and performing all of the other obligations, terms, covenants and conditions of this Sublease on PRG's part to be observed and performed, PRG may peaceably and quietly enjoy the Premises and Common building Facilities (in common with other tenants) during the term; provided, however, that this Sublease shall automatically terminate upon termination of the Prime Lease and PRG shall have no claim against Electrolux unless such termination was caused by the default of Electrolux in the performance of those obligations (under the Prime Lease) which have not been assumed by PRG hereunder. Electrolux will indemnify and hold harmless PRG from and defend PRG against all claims, liabilities losses and damages that PRG may incur by reason of, resulting from or arising out of any such termination of the Sublease due to Electrolux's default under the Prime Lease. Electrolux covenants and agrees that (i) Electrolux will not enter into a consensual agreement with Lessor under the Prime Lease to terminate the Prime Lease (ii) Electrolux will not terminate the Sublease as it pertains to 3 the Premises unless Electrolux is entitled to do so under this Sublease or by the condemnation and casualty provisions of this Sublease. (b) PRG covenants and agrees that PRG shall not do or suffer or permit anything to be done (within its reasonable and direct control) which would constitute a default under the Prime Lease or would cause the Prime Lease to be canceled, terminated or forfeited by virtue of any rights of cancellation, termination, or forfeiture reserved or vested in Prime Lessor under the Prime Lease, PRG will indemnify and hold harmless Electrolux from and defend Electrolux against all claims, liabilities, losses and damages of any kind whatsoever that Electrolux may incur by reason of, resulting from or arising out of the cancellation, termination or forfeiture of the Prime Lease, which is caused by PRG. 9. NOTICES Any notice, demand, or request under this Sublease shall be in writing and shall be considered properly delivered when addressed as hereinafter provided and delivered by hand or by nationally recognized overnight courier service to the addressee set forth in the preamble of this Agreement with all notices to PRG being directed to the attention of Clinton McKellar, Jr., Esq. and all notices to Electrolux being directed to the attention Steven D. Cooper, General Counsel. Rejection or other refusal to accept or the inability to deliver because of a changed address of which no notice was given shall be deemed to be receipt of the notice, demand or request sent. Address for notice may be changed by either party by giving 30 days written notice to the current address of record. Electrolux agrees to provide, in a timely manner, copies of any notices it receives from the Prime Lessor with respect to the Premises. 10. ASSIGNMENT AND SUBLETTING Except as permitted by Paragraph 19 of the Prime Lease, PRG shall not assign, mortgage, transfer, pledge or encumber its interest in this Sublease, in whole or in part, or sublet or permit the subletting of the Premises, or permit the Premises or any part thereof to be occupied or used by any person or entity other than PRG, without in each case having first obtained the written consent of (a) Electrolux, which consent shall not be unreasonably withheld, delayed or conditioned, and (b) the Prime Lessor. 11. PRIME LESSOR'S RESPONSIBILITIES Notwithstanding anything to the contrary contained in this Sublease, PRG agrees and acknowledges that it will look soley to the Prime Lessor, and not Electrolux, to furnish all services and to perform all obligations of Prime Lessor pursuant to the Prime Lease. Electrolux shall not be liable to PRG or be deemed in default hereunder for failure of Prime Lessor to furnish such services or perform such obligations. If Prime Lessor shall fail to perform any of its obligations under the Prime Lease, PRG may, at its option, enforce performance thereof if and to the extent authorized by the Prime Lease, and Electrolux shall cooperate with PRG in such enforcement. 12. DESTRUCTION AND EMINENT DOMAIN Article 20, titled "Destruction," and Article 33, titled "Eminent Domain," of the Prime Lease are modified to provide that if by operation of either of these two Articles the Prime Lease is not terminated and continues in full force and effect, this Sublease shall not be terminated but shall also continue in full force and effect, except that until the Premises are restored in accordance with these two Articles there shall be a proportionate abatement of annual rent and payable hereunder to the extent of damage to the Premises; provided, however, that such abatement shall in no event exceed the abatement granted to Electrolux under the Prime Lease for the Premises and, provided further, that no compensation or claim or reduction will be allowed or paid by Electrolux by reason of inconvenience, annoyance or injury to PRG's business arising from the necessity of affecting repairs to the Premises or any portion of the Building, whether such repairs are required by operation of these two Articles or any other provision of the Prime Lease. Notwithstanding the foregoing, if the Premises cannot be restored within one hundred twenty (120) days after damage, destruction or condemnation (in the reasonable opinion of Electrolux), then PRG may elect to terminate this Sublease by written notice (to Electrolux) given within thirty (30) days after PRG's receipt of Sublessor's estimate of the time required to restore the Premises. 4 13. PARKING Electrolux shall provide PRG five (5) of Electrolux reserved parking spaces on the commencement of the 31,288 square feet in the South Tower and an additional five-(5) spaces on March 1, 1999. 14. INSURANCE (a) PRG shall maintain comprehensive general liability insurance covering the legal liability of Electrolux and PRG against all claims for any bodily injury or death of persons and for damage to or destruction to property occurring on, in or about the Premises and arising out of the use or occupation of the Premises by PRG in the minimum amount of $5,000,000.00 in connection with any single occurrence of bodily injury or death and $500,000.00 in connection with claims for property damage. Such policy shall provide that it may not be canceled or materially changed without at least thirty-(30) days prior written notice to each name insured. Electrolux shall be named as an additional insured on the insurance policies required of PRG under the Sublease. (b) Electrolux and PRG shall each have included in all policies of commercial property insurance and other insurance (required under the Prime Lease or this Sublease) obtained by them covering the Premises, the Building and the contents therein, a waiver by the insurer of all right or subrogation against the other in connection with any loss or damage thereby insured against. Any additional premium for such waiver shall be paid by the primary insured. To the full extent permitted by law, Electrolux and PRG each waive all right to recovery against the other for, and agrees to release the other from liability for, loss or damage to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage or would be covered by the insurance required to be maintained under this Sublease by the party seeking recovery. 15. BROKERAGE Carter and Associates, LLC has acted as agent for PRG in this transaction. PRG represents and warrants to Electrolux that, except as stated herein, no broker, agent or other person has represented PRG in the negotiations for and procurement of the Sublease and that, except as set forth herein no commissions, fees or compensation of any kind are due and payable in connection herewith to any broker, agent, or other person as a result of any act or agreement of PRG. PRG agrees to indemnify and hold Electrolux harmless from all loss, liability, damage, claim, cost or expense (including reasonable attorneys' fees and court costs) suffered or incurred by Electrolux as a result of a breach by PRG of the representations and warranties contained in the immediately preceding sentence. Electrolux shall pay Carter & Associates, LLC a brokerage commission of four (4%) of the aggregate rent. Fifty (50%) percent shall be paid upon Sublease execution and fifty (50%) percent upon occupancy. Electrolux represents and warrants to PRG that no broker, agent, or other person has represented Electrolux in the negotiations for and procurement of the Sublease and that except as set forth herein, no commissions, fees or compensation of any kind are due and payable in connection herewith to any broker, agent, or other person as a result of any act or agreement of Electrolux. Electrolux agrees to indemnify and hold PRG harmless from all loss, liability, damage, claim, cost or expense (including reasonable attorneys' fees and court costs) suffered or incurred by PRG as a result of a breach by Electrolux of the representations and warranties contained in the immediately preceding sentence. 16. BINDING AND ENTIRE AGREEMENT This Sublease shall be binding on PRG and its heirs and executors, and on the respective legal representatives, successors and permitted assigns of the parties. This Sublease contains the entire agreement of the parties with respect to the subject matter herein and may not be modified except by instrument in writing, which is signed by both parties. 17. CONSENT OF PRIME LESSOR In accordance with Paragraph 19 of the Prime Lease, it is understood and agreed that this Sublease shall not become effective unless and until Electrolux has obtained and delivered to PRG the written consent of Prime Lessor to the subletting herein on or before the Commencement Date. 5 IN WITNESS WHEREOF, duly authorized representatives of the parties hereto have executed this Sublease as of the day and year first above written. WITNESS: ELECTROLUX, LLC By: - ----------------------- ----------------------------- Title: -------------------------- [CORPORATE SEAL] WITNESS: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: - ------------------------ ------------------------------ Title: --------------------------- [CORPORATE SEAL] EX-10.3 4 SUB-SUBLEASE AGREEMENT 1 EXHIBIT 10.3 SUB-SUBLEASE AGREEMENT THIS AGREEMENT is made this ___ day of July, 1998, by and between The Profit Recovery Group International I, Inc., a Georgia corporation with its principal place of business at 2300 Windy Ridge Parkway, Suite 100 North, Atlanta, Georgia 30339-8426 (hereafter called "PRG") and Manhattan Associates, Inc., a Georgia corporation with its principal place of business at 2300 Windy Ridge Parkway, Suite 700 North, Atlanta, Georgia 30339 (hereinafter called "Manhattan"). W I T N E S S E T H: WHEREAS, pursuant to a Lease, dated July 31, 1987, as subsequently amended on November 10, 1987, April 30, 1988, August 4, 1989, October 10, 1989, November 7, 1989, December 1, 1989 and March 12, 1990 (herein collectively called the "Prime Lease" and attached as Exhibit "A"), International Business Machine Corporation, a New York corporation (hereinafter called the "Prime Sublessor") leased from Wildwood Associates, a Georgia general partnership (hereinafter called the "Prime Lessor") certain portions of the building known as 2300 Windy Ridge Parkway, Wildwood Office Park, Atlanta Georgia (the "Building"), including but not limited to the third (3rd) floor thereof; and WHEREAS, pursuant to a Sublease, dated October 29, 1993, (herein called the "Prime Sublease" and attached as Exhibit "B"), PRG's predecessor in interest sublet from the Prime Sublessor the third (3rd) floor of the Building; and WHEREAS, PRG desires to Sub-Sublease to Manhattan and Manhattan desires to Sub-Sublease from PRG the third (3rd) floor consisting of approximately 23,776 rentable square feet (the "Premises"). NOW THEREFORE, for and in consideration of the foregoing and for other good and valuable consideration and of the mutual agreements hereinafter set forth, PRG and Manhattan stipulate, covenant and agree as follows: 1. PREMISES PRG does hereby Sub-Sublease to Manhattan a portion of the Building consisting of approximately 23,776 square feet of rentable area on the third (3rd) floor of the North Tower thereof (the "Premises") as outlined in red and crosshatched on Exhibit "C" attached hereto and made a part hereof. 2. DELIVERY OF PREMISES On or before September ___, 1998, PRG shall make available to Manhattan that portion of the Premises consisting of approximately 7,998 square feet of rentable area as identified on 1 2 Exhibit "C". On or before March 1, 1999, PRG shall make available to Manhattan the remaining portion of the Premises. 3. TERM The term shall commence on the date of delivery specified in Section 4 hereof, and except as provided herein, shall expire on December 30, 2002. 4. USES The Premises shall be used for office space in accordance with all applicable laws, ordinances, rules and regulations of governmental authorities and the Rules and Regulations attached to the Prime Lease, as same may have been modified or amended by virtue of the Prime Sublease. Manhattan covenants and agrees to abide by the Rules and Regulations in all respects as now set forth and as hereafter promulgated by Prime Lessor. Prime Lessor shall have the right at all times during the Lease Term to publish and promulgate and thereafter enforce such rules and regulations or changes in the existing Rules and Regulations as it may reasonably deem. 5. RENT Commencing on the date the Premises, or the applicable portion thereof, shall be delivered to Manhattan, Manhattan shall pay to PRG Annual Base Rent equal to (a) $20.76 per rentable square foot for portions of the Premises which it occupies, plus (b) $20.76 per rentable square foot for its pro-rata portion of the "common area" described in Paragraph 7, and computed by multiplying the Annual Base Rent by a fraction, the numerator of which shall be the number of rentable square feet of the Premises occupied by Manhattan, and the denominator of which shall be the number of square feet of the Premises occupied by Manhattan plus the number of square feet of the Premises occupied by PRG (exclusive of any portion of the Premises designated as "common area"). In addition to Annual Base Rent, Manhattan shall pay Additional Rental as described in Paragraph 6, (collectively the "Rent") provided for hereunder in advance on the first day of every month during the Term. Rent shall be a prorated rate for fractions of a month if this Sub-Sublease commences or expires (as the case may be) for any reason on any day other than the first or last day of the calendar month, respectively. Manhattan shall make payment of Rent to PRG, at the address specified the preamble of this Agreement and directed to the attention of ________. 6. ADDITIONAL RENTAL (a) In addition to Annual Rent, Manhattan shall pay as Additional Rental its pro-rata share of increases in operating expenses over and above $6.50 per rentable square foot of the 2 3 Premises, as defined in Article 3.04 of the Prime Lease. PRG shall furnish Manhattan with a true copy of the statement of operating expenses delivered by Prime Lessor to PRG pursuant to the Prime Lease and the Prime Sublease. Manhattan shall reimburse PRG with twenty (20) days after the operating expense statement is furnished to Manhattan. For purposes of this Sub-Sublease, Manhattan shall pay Additional Rent on the Premises and its pro-rata portion of the "common area" described in Paragraph 7 hereof. Manhattan's share of said "common area" shall be equal to a fraction having as its numerator the number of rentable square feet of the Premises actually occupied by Manhattan, and as its denominator, the number of square feet of the Premises occupied by Manhattan plus the number of square feet of the Premises occupied by PRG; both the numerator and denominator shall exclude any portion of the Premises designated as "common area." (b) In addition to the foregoing, if Manhattan shall procure any services from the Building beyond the Building standard services specified in the Prime Lease, (such as alterations or after-hour air-conditioning) Manhattan shall pay for same at the rates charged therefor by the Prime Lessor and shall make such payment to PRG or Prime Lessor, as PRG shall direct. (c) Any Additional Rent or other sums payable by Manhattan under this Paragraph 6 shall be considered rent and collectible by PRG as such. If PRG shall receive any refund from either the Prime Sublessor or the Prime Lessor, Manhattan shall be entitled to the return of so much thereof as shall be attributable to prior payments by Manhattan. 7. PREPARATION FOR OCCUPANCY Prior to delivery of the first portion of the Premises, as described in Paragraph 2, PRG shall arrange for the construction of certain demising walls, corridors and doorways, as are indicated on Exhibit "C" to create a "common area" within the Premises, consisting of approximately 1,491 rentable square feet and identified on Exhibit "C". The cost of such construction shall be evenly divided by PRG and Manhattan, and Manhattan shall reimburse PRG for its share of such construction costs within thirty (30) days of an invoice therefor. Manhattan shall at its sole expense, perform or cause to be performed, such construction of the Premises as it desires; provided however, that prior to the commencement of construction, Manhattan shall obtain the written consent of PRG, the Prime Sublessor and the Prime Lessor, as same may be required under the Prime Lease or the Prime Sublease, which consent shall not be unreasonably withheld or delayed by PRG, to Manhattan's construction plans. 8. INCORPORATION OF PRIME LEASE (a) This Sublease is subject to all of the terms of the Prime Lease and the Prime Sublease with the same force and effect as if fully set forth herein at length, excepting only those provisions specified herein. All of the terms with which PRG is bound to comply under the 3 4 Prime Lease or the Prime Sublease shall, to the extent they apply to the Premises and except as otherwise provided herein, be binding upon Manhattan, and all of the obligations of Prime Lessor set forth in the Prime Lease shall and all of the obligations of IBM set forth in the Prime Sublease, to the extent only that they apply to the Premises and except as otherwise provided herein, inure to the benefit of Manhattan. It is the intention of the parties that, except as otherwise provided in this Sub-Sublease, the relationship between PRG and Manhattan shall be governed by the language of the various articles of the Prime Lease and the Prime Sublease as if they were typed out in this Sub-Sublease in full, and the words "Lessor" "Lessee and "Prime Lease" as used in the Prime Lease, and the words "Sublessor" "Sublessee" and "Sublease", shall read, respectively "PRG" "Manhattan" and "Sub-Sublease". (b) For the purpose of the Sub-Sublease, the following provisions of the Prime Sublease are hereby deleted in their entirety: Section 4, 12, and 15 of the Sublease dated October 29, 1993; Sections 1, 2, 3, 4, 5, 11 and 12 of Exhibit "B" to the Sublease dated October 29, 1993; and all provisions of the First Sublease Amendment dated as of February 12, 1996. 9. PARKING PRG shall provide Manhattan with a total of seven (7) of PRG's reserved parking spaces, in the area designated for reserved parking by the Prime Lessor, and as subject to change by the Prime Lessor. Subject to the rights of the Prime Lessor or Prime Sublessor, PRG shall have the sole authority to designate which of its reserved parking spaces shall be provided to Manhattan hereunder. Two (2) reserved parking spaces shall be provided to Manhattan upon commencement of its occupancy of the first portion of the Premises, and the remaining five (5) spaces shall be made available to Manhattan on or before March 1, 1999. 10. QUIET ENJOYMENT (a) PRG covenants and agrees with Manhattan that upon Manhattan paying the Rent and Additional Rent reserved in this Sub-Sublease and observing and performing all of the other obligations, terms, covenants and conditions of this Sub-Sublease on Manhattan's part to be observed and performed, Manhattan may peaceably and quietly enjoy the Premises and Common Building Facilities (in common with other tenants) during the Term; provided, however, that this Sub-Sublease shall automatically terminate upon termination of either the Prime Lease or the Prime Sublease, and Manhattan shall have no claim against PRG unless such termination was caused by the default of PRG in the performance of those material obligations (under either the Prime Lease or the Prime Sublease) which have not been assumed by Manhattan hereunder. PRG will indemnify and hold harmless Manhattan from and defend Manhattan against all claims, liabilities losses and damages that Manhattan may incur by reason of, resulting from or arising out of any such termination of the Prime Lease or the Prime Sublease due to PRG's default thereunder. PRG covenants and agrees that (i) PRG will not enter into a consensual agreement 4 5 with the Prime Lessor under the Prime Lease or with the Prime Sublessor under the Prime Sublease to terminate either the Prime Lease or the Prime Sublease, as the case may be, (ii) PRG will not terminate this Sub-Sublease as it pertains to the Premises unless PRG is entitled to do so under the Sublease or under this Sub-Sublease or by the condemnation and casualty provisions of this Sublease. (b) Manhattan covenants and agrees that Manhattan shall not do or suffer or permit anything to be done (within its reasonable and direct control) which would constitute a default under the Prime Lease or the Prime Sublease, or would cause the Prime Lease or the Prime Sublease to be canceled, terminated or forfeited by virtue of any rights of cancellation, termination, or forfeiture reserved or vested in Prime Lessor under the Prime Lease or the Prime Sublessor under the Prime Sublease, Manhattan will indemnify and hold harmless PRG from and defend PRG against all claims, liabilities, losses and damages of any kind whatsoever that PRG may incur by reason of, resulting from or arising out of the cancellation, termination or forfeiture of the Prime Lease or the Prime Sublease, which is caused by any act or omission of Manhattan. 11. NOTICES Any notice, demand, or request under this Sublease shall be in writing and shall be considered properly delivered when addressed as hereinafter provided and delivered by hand or by nationally recognized overnight courier service to the addressee set forth in the preamble of this Agreement with all notices to PRG being directed to the attention of Clinton McKellar, Jr., Esq. and all notices to Manhattan being directed to the attention of its President. Rejection or other refusal to accept or the inability to deliver because of a changed address of which no notice was given shall be deemed to be receipt of the notice, demand or request sent. Address for notice may be changed by either party by giving 30 days written notice to the current address of record. PRG agrees to provide, in a timely manner, copies of any notices it receives from the Prime Lessor or the Prime Sublessor with respect to the Premises. 12. ASSIGNMENT AND SUBLETTING Except as permitted by Paragraph 9 of the Prime Sublease, Manhattan shall not assign, mortgage, transfer, pledge or encumber its interest in this Sub-Sublease, in whole or in part, or sublet or permit the subletting of the Premises, or permit the Premises or any part thereof to be occupied or used by any person or entity other than Manhattan, without in each case having first obtained the written consent of (a) PRG, which consent shall not be unreasonably withheld, delayed or conditioned, and (b) the Prime Sublessor. Failure of any party to obtain the consent of the Prime Lessor shall in each case constitute a reasonable and conclusive basis for withholding consent. 5 6 13. PRIME LESSOR'S RESPONSIBILITIES Notwithstanding anything to the contrary contained in this Sub-Sublease, Manhattan agrees and acknowledges that it will look solely to the Prime Lessor, and to neither PRG nor Prime Sublessor, to furnish all services and to perform all obligations of Prime Lessor pursuant to the Prime Lease. PRG shall not be liable to Manhattan or be deemed in default hereunder for failure of Prime Lessor to furnish such services or perform such obligations. If Prime Lessor shall fail to perform any of its obligations under the Prime Lease, Manhattan may, at its option, enforce performance thereof if and to the extent authorized by the Prime Lease, and PRG shall cooperate with Manhattan in such enforcement. 14. DESTRUCTION AND EMINENT DOMAIN Article 10.01, titled "Damage or Destruction," and Article 12, titled "Condemnation," of the Prime Lease are modified to provide that if by operation of either of these two Articles the Prime Lease is not terminated and continues in full force and effect, this Sub-Sublease shall not be terminated but shall also continue in full force and effect, except that until the Premises are restored in accordance with these two Articles there shall be a proportionate abatement of Annual Rental and payable hereunder to the extent of damage to the Premises; provided, however, that such abatement shall in no event exceed the abatement granted to PRG under the Prime Sublease for the Premises and, provided further, that no compensation or claim or reduction will be allowed or paid by PRG by reason of inconvenience, annoyance or injury to Manhattan's business arising from the necessity of affecting repairs to the Premises or any portion of the Building, whether such repairs are required by operation of these two Articles or any other provision of the Prime Lease. Notwithstanding the foregoing, if the Premises cannot be restored within ninety (90) days after damage, destruction or condemnation (in the reasonable opinion of the Prime Lessor's architect), the Manhattan may elect to terminate this Sublease by written notice (to PRG) given within thirty (30) days after PRG's receipt of Sublessor's estimate of the time required to restore the Premises. 15. INSURANCE (a) Manhattan shall maintain comprehensive general liability insurance covering the legal liability of Manhattan and PRG against all claims for any bodily injury or death of persons and for damage to or destruction to property occurring on, in or about the Premises and arising out of the use or occupation of the Premises by Manhattan in the minimum amount of $5,000,000.00 in connection with any single occurrence of bodily injury or death and $500,000.00 in connection with claims for property damage. Such policy shall provide that it may not be canceled or materially changed without at least thirty-(30) days prior written notice to each name insured. PRG shall be named as an additional insured on the insurance policies required of Manhattan under this Sub-Sublease. 6 7 (b) PRG and Manhattan shall each have included in all policies of commercial property insurance and other insurance (required under the Prime Lease, the Prime Sublease or this Sub-Sublease) obtained by them covering the Premises, the Building and the contents therein, a waiver by the insurer of all right or subrogation against the other in connection with any loss or damage thereby insured against. Any additional premium for such waiver shall be paid by the primary insured. To the full extent permitted by law, PRG and Manhattan each waives all right to recovery against the other for, and agrees to release the other from liability for, loss or damage to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage or would be covered by the insurance required to be maintained under this Sublease by the party seeking recovery. 16. BROKERAGE Each party represents and warrants to the other that no broker, agent, or other person has represented such party in the negotiations for and procurement of this Sub-Sublease and that except as may be set forth herein, no commissions, fees or compensation of any kind are due and payable in connection herewith to any broker, agent, or other person as a result of any act or agreement of such party. Each party through which such a claim arises agrees to indemnify and hold the other harmless from all loss, liability, damage, claim, cost or expense (including reasonable attorneys' fees and court costs) suffered or incurred as a result of a breach of the representations and warranties contained in the immediately preceding sentence. 17. BINDING AND ENTIRE AGREEMENT This Sub-Sublease shall be binding on PRG and Manhattan, and each of its respective legal representatives, successors and permitted assigns. This Sub-Sublease contains the entire agreement of the parties with respect to the subject matter herein and may not be modified except by instrument in writing, which is signed by both parties. [Signatures on Next Page] 8 18. CONSENT OF PRIME SUBLESSOR In accordance with Section 9 of the Prime Sublease, it is understood and agreed that this Sub-Sublease shall not become effective unless and until PRG has obtained and delivered to Manhattan the written consent of Prime Sublessor to the subletting herein on or before the Commencement Date. IN WITNESS WHEREOF, duly authorized representatives of the parties hereto have executed this Sub-Sublease as of the day and year first above written. WITNESS: MANHATTAN ASSOCIATES, INC. - ------------------------ By: ----------------------------------- Title --------------------------------- [CORPORATE SEAL] - ------------------------ THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: ----------------------------------- Title --------------------------------- [CORPORATE SEAL] EX-10.4 5 LEASE AGREEMENT 1 EXHIBIT 10.4 LEASE AGREEMENT by and between WILDWOOD ASSOCIATES ("Landlord") and THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. ("Tenant") dated July ___, 1998 for Suite Number 900 containing 62,576 square feet of Rentable Floor Area Term: Sixty (60) months 2300 Windy Ridge Parkway Atlanta, Georgia 30339 2 TABLE OF CONTENTS
Page ---- 1. Certain Definitions.........................................................1 2. Lease of Premises...........................................................2 3. Term........................................................................2 4. Possession..................................................................2 5. Rental Payments.............................................................3 6. Base Rental.................................................................4 7. Rent Escalation.............................................................4 8. Additional Rental...........................................................5 9. Operating Expenses..........................................................7 10. Tenant Taxes; Rent Taxes..................................................11 11. Payments..................................................................12 12. Late Charges..............................................................12 13. Use Rules.................................................................12 14. Alterations...............................................................12 15. Repairs...................................................................13 16. Landlord's Right of Entry.................................................14 17. Insurance.................................................................14 18. Waiver of Subrogation.....................................................15 19. Default...................................................................16 20. Waiver of Breach..........................................................19 21. Assignment and Subletting.................................................19 22. Destruction...............................................................20 24. Services by Landlord......................................................21 25. Attorneys' Fees and Homestead.............................................21 26. Time......................................................................22 27. Subordination and Attornment..............................................22 28. Estoppel Certificates.....................................................23 29. No Estate.................................................................23 30. Cumulative Rights.........................................................23 31. Holding Over..............................................................24 32. Surrender of Premises.....................................................24 33. Notices...................................................................24 34. Damage or Theft of Personal Property......................................25 35. Eminent Domain............................................................25 36. Parties...................................................................27 37. Liability.................................................................27 39. Force Majeure.............................................................28 40. Landlord's Liability......................................................28 41. Landlord's Covenant of Quiet Enjoyment....................................28 42. Security Deposit..........................................................28
i 3 43. Hazardous Substances......................................................28 44. Submission of Lease.......................................................29 45. Severability..............................................................29 46. Entire Agreement..........................................................29 47. Headings..................................................................30 48. Broker....................................................................30 49. Governing Law.............................................................30 50. Special Stipulations......................................................30 51. Authority.................................................................30 52. Financial Statements......................................................31 54. ERISA Compliance..........................................................31
Rules and Regulations Exhibit "A" - Legal Description of Land Exhibit "B" - Floor Plan Exhibit "C" - Supplemental Notice Exhibit "D" - Landlord's Construction Exhibit "E" - Building Standard Services Exhibit "F" - Guaranty - Intentionally Omitted Exhibit "G" - Special Stipulations ii 4 LEASE AGREEMENT THIS LEASE AGREEMENT ("Lease"), is made and entered into this ______ day of July, 1998, by and between Landlord and Tenant. W I T N E S S E T H: 1. Certain Definitions. For purposes of this Lease, the following terms shall have the meanings hereinafter ascribed thereto: (a) Landlord: WILDWOOD ASSOCIATES, a Georgia general partnership (b) Landlord's Address: Wildwood Associates 2500 Windy Ridge Parkway Suite 1600 Atlanta, Georgia 30339-5683 Attn: Corporate Secretary (c) Tenant: THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. (d) Tenant's Address: 2300 Windy Ridge Parkway Suite 300 - North Atlanta, Georgia 30339-5683 (e) Building Address: 2300 Windy Ridge Parkway Atlanta, Georgia 30339 (f) Suite Number: 900 (g) Rentable Floor Area of Demised Premises: 62,576 square feet. (h) Rentable Floor Area of Building: 618,540 square feet. 5 (i) Lease Term: Sixty (60) months. (j) Base Rental Rate: $16.00 per square foot of Rentable Floor Area of Demised Premises per year, subject to adjustments as set forth in Article 7 below. (k) Rental Commencement Date: March 1, 2000. (l) Rent Deposit: Intentionally Deleted. (m) Construction Allowance: None. (n) Security Deposit: Intentionally Deleted. (o) Broker(s): Cousins Properties Incorporated ("CPI") and Carter & Associates 2. Lease of Premises. Landlord, in consideration of the covenants and agreements to be performed by Tenant, and upon the terms and conditions hereinafter stated, does hereby rent and lease unto Tenant, and Tenant does hereby rent and lease from Landlord, certain premises (the "Demised Premises") in the building (hereinafter referred to as "Building") located on that certain tract of land (the "Land") more particularly described on Exhibit "A" attached hereto and by this reference made a part hereof, which Demised Premises are outlined in red or crosshatched on the floor plan attached hereto as Exhibit "B" and by this reference made a part hereof, with no easement for light, view or air included in the Demised Premises or being granted hereunder. The "Project" is comprised of the Building, the Land, the Building's parking facilities, any walkways, covered walkways, tunnels or other means of access to the Building and the Building's parking facilities, all common areas, including any lobbies or plazas, and any other improvements or landscaping on the Land. The Project is located in the development known as "Wildwood Office Park". 3. Term. The term of this Lease ("Lease Term") shall commence on the date first hereinabove set forth, and, unless sooner terminated as provided in this Lease, shall end on the expiration of the period designated in Article 1(i) above, which period shall commence on the Rental Commencement Date, unless the Rental Commencement Date shall be other than the first day of a calendar month, in which event such period shall commence on the first day of the calendar month following the month in which the Rental Commencement Date occurs. Promptly after the Rental Commencement Date Landlord shall send to Tenant a Supplemental Notice in the form of Exhibit "C" attached hereto and by this reference made a part hereof, specifying the Rental Commencement Date, the date of expiration of the Lease Term in accordance with Article 1(i) above and certain other matters as therein set forth. 4. Possession. Tenant shall have been in occupancy of the Demised Premises prior to the Rental Commencement Date, and Tenant therefore takes the Demised Premises "as is, 2 6 where is", with no obligation on the part of Landlord to provide any work therein or any allowance therefor. 5. Rental Payments. (a) Commencing on the Rental Commencement Date, and continuing thereafter throughout the Lease Term, Tenant hereby agrees to pay all Rent due and payable under this Lease. As used in this Lease, the term "Rent" shall mean the Base Rental, Tenant's Forecast Additional Rental, Tenant's Additional Rental, and any other amounts that Tenant assumes or agrees to pay under the provisions of this Lease that are owed to Landlord, including without limitation any and all other sums that may become due by reason of any default of Tenant or failure on Tenant's part to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant. Base Rental together with Tenant's Forecast Additional Rental shall be due and payable in twelve (12) equal installments on the first day of each calendar month, commencing on the Rental Commencement Date and continuing thereafter throughout the Lease Term and any extensions or renewals thereof, and Tenant hereby agrees to pay such Rent to Landlord at Landlord's address as provided herein (or such other address as may be designated in writing by Landlord from time to time) monthly in advance. Tenant shall pay all Rent and other sums of money as shall become due from and payable by Tenant to Landlord under this Lease at the times and in the manner provided in this Lease, without demand, set-off or counterclaim. (b) If the Rental Commencement Date is other than the first day of a calendar month or if this Lease terminates on other than the last day of a calendar month, then the installments of Base Rental and Tenant's Forecast Additional Rental for such month or months shall be prorated on a daily basis and the installment or installments so prorated shall be paid in advance. Also, if the Rental Commencement Date occurs on other than the first day of a calendar year, or if this Lease expires or is terminated on other than the last day of a calendar year, Tenant's Additional Rental shall be prorated for such commencement or termination year, as the case may be, by multiplying such Tenant's Additional Rental by a fraction, the numerator of which shall be the number of days of the Lease Term (from and after the Rental Commencement Date) during the commencement or expiration or termination year, as the case may be, and the denominator of which shall be 365, and the calculation described in Article 8 hereof shall be made as soon as possible after the expiration or termination of this Lease, Landlord and Tenant hereby agreeing that the provisions relating to said calculation shall survive the expiration or termination of this Lease. (c) As security for Tenant's obligations to take possession of the Demised Premises in accordance with the terms of this Lease and to comply with all of Tenant's covenants, warranties and agreements hereunder, Tenant has deposited with Landlord the sum set forth in Article 1(l) above. Such amount shall be applied by Landlord to the first monthly installment(s) of Base Rental as they become due hereunder. In the event 3 7 Tenant fails to take possession of the Demised Premises as aforesaid or otherwise fails to comply with any of Tenant's covenants, warranties or agreements hereunder, said sum shall be retained by Landlord for application in reduction, but not in satisfaction, of damages suffered by Landlord as a result of such breach by Tenant. Landlord shall not be required to keep such deposit separate from its general accounts. 6. Base Rental. Subject to adjustments in accordance with Article 7 below, from and after the Rental Commencement Date Tenant shall pay to Landlord a base annual rental (herein called "Base Rental") equal to the Base Rental Rate set forth in Article 1(j) above multiplied by the Rentable Floor Area of Demised Premises set forth in Article 1(g) above. 7. Rent Escalation. (a) As used in this Article 7, the term "Lease Year" shall mean the twelve month period commencing on the Rental Commencement Date, or, if the Rental Commencement Date is not on the first day of a calendar month, commencing on the first day of the first calendar month following the Rental Commencement Date, and each successive twelve month period thereafter during the Lease Term. The term "Subsequent Year" shall mean each Lease Year of the Lease Term following the first Lease Year. The term "Prior Year" shall mean the Lease Year prior to each Subsequent Year. The term "Index" shall mean the Consumer Price Index for all Urban Consumers (U.S. City Average; Base 1982-84=100), published by the Bureau of Labor Statistics of the United States Department of Labor. The term "Base Month" shall mean the calendar month which is two (2) months prior to the month during which this Lease is fully executed by Landlord and Tenant. The term "Comparison Month" shall mean the calendar month which is two (2) months prior to the first full month of each Subsequent Year in question. (b) On the first day of each Subsequent Year, the Base Rental Rate shall be increased to an amount equal to the Base Rental Rate for the first Lease Year ($16.00) as set forth in Article 1(j) above, plus an amount equal to the product of ten (10) times the percentage increase in the Index for the Comparison Month as compared to the Index for the Base Month, multiplied by the Base Rental Rate for the first Lease Year ($16.00); provided, however, in no event shall the Base Rental Rate for a Subsequent Year be less than the Base Rental Rate applicable to the Prior Year and in no event shall the Base Rental Rate for the Subsequent Year be greater than the following amounts for the Lease Years shown: Second Lease Year $16.48 Third Lease Year $16.97 Fourth Lease Year $17.48 Fifth Lease Year $18.01
(c) If the Bureau of Labor Statistics should discontinue the publication of the Index, or publish the same less frequently, or alter the same in some manner, then 4 8 Landlord shall adopt a substitute Index or substitute procedure which reasonably reflects and monitors consumer prices. 8. Additional Rental. (a) For purposes of this Lease, "Tenant's Forecast Additional Rental" shall mean Landlord's reasonable estimate of Tenant's Additional Rental for the coming calendar year or portion thereof. If at any time it appears to Landlord, in Landlord's reasonable judgment, that Tenant's Additional Rental for the current calendar year will vary from Landlord's estimate by more than five percent (5%), Landlord shall have the right to revise, by written notice to Tenant, its estimate for such year, and subsequent payments by Tenant for such year shall be based upon such revised estimate of Tenant's Additional Rental. Failure to make a revision contemplated by the immediately preceding sentence shall not prejudice Landlord's right to collect the full amount of Tenant's Additional Rental. Prior to the Rental Commencement Date and thereafter prior to the beginning of each calendar year during the Lease Term, including any extensions thereof, Landlord shall present to Tenant a statement of Tenant's Forecast Additional Rental for such calendar year; provided, however, that if such statement is not given prior to the beginning of any calendar year as aforesaid, Tenant shall continue to pay during the next ensuing calendar year on the basis of the amount of Tenant's Forecast Additional Rental payable during the calendar year just ended until the month after such statement is delivered to Tenant. (b) For purposes of this Lease, "Tenant's Additional Rental" shall mean for each calendar year (or portion thereof) the Operating Expense Amount (defined below) multiplied by the number of square feet of Rentable Floor Area of Demised Premises. As used herein, "Operating Expense Amount" shall mean an amount equal to (x) plus (y), where: (x) equals the amount of Operating Expenses (as defined below) for such calendar year divided by the greater of (i) 95% of the number of square feet of Rentable Floor Area of the Building, or (ii) the total number of square feet of Rentable Floor Area occupied in the Building for such calendar year on an average annualized basis; provided, however, if the Operating Expenses actually incurred by Landlord are lower than would be incurred if at least 95% of the Building were occupied or if Landlord shall not furnish any particular item(s) of work or services (the cost of which would otherwise be included within Operating Expenses) to portions of the Building because (A) such portions are not occupied, (B) such item of work or services is not required or desired by the tenant of such portion, (C) such tenant is itself obtaining such item of work or services, or (D) of any other reason, then appropriate adjustments shall be made to determine Operating Expenses for such calendar year as though the Building were actually occupied to the extent of the greater of (i) or (ii) above and as though Landlord had furnished such item of work or services to the greater of (i) or (ii) above; and 5 9 (y) equals a management fee contribution equal to three percent (3%) of Tenant's Base Rental (on a per square foot basis) plus three percent (3%) of the per square foot amount described in (x). (c)(i) Within one hundred fifty (150) days after the end of the calendar year in which the Rental Commencement Date occurs and of each calendar year thereafter during the Lease Term, or as soon thereafter as practicable, Landlord shall provide Tenant an itemized statement showing the Operating Expenses for said calendar year, as prepared by a certified public accounting firm designated by Landlord, and a statement prepared by Landlord comparing Tenant's Forecast Additional Rental with Tenant's Additional Rental. In the event Tenant's Forecast Additional Rental exceeds Tenant's Additional Rental for said calendar year, Landlord shall credit such amount against Rent next due hereunder or, if the Lease Term has expired or is about to expire, refund such excess to Tenant within thirty (30) days if Tenant is not in default under this Lease (in the instance of a default such excess shall be held as additional security for Tenant's performance, may be applied by Landlord to cure any such default, and shall not be refunded until any such default is cured). In the event that the Tenant's Additional Rental exceeds Tenant's Forecast Additional Rental for said calendar year, Tenant shall pay Landlord, within thirty (30) days of receipt of the statement, an amount equal to such difference. The provisions of this Lease concerning the payment or refund of Tenant's Additional Rental shall survive the expiration or earlier termination of this Lease. (ii) If Tenant has not received a Statement of Operating Expenses by the end of the calendar year following the calendar year in which said statement is due from Landlord, it shall be conclusively presumed that Landlord has waived its claim against Tenant for Tenant's share of any additional Operating Expenses that would have been set forth in such statement, except for any Operating Expenses which are adjusted or billed to Landlord by a third-party after such period would have otherwise expired, which Operating Expenses may be billed by Landlord within eighteen (18) months of the receipt of such bill or adjustment by Landlord. (d) For so long as Tenant is not in default under this Lease, Landlord's books and records pertaining to the calculation of Operating Expenses for any calendar year within the Lease Term may be audited by an authorized representative of Tenant at Tenant's expense, at any time within twelve (12) months after the end of each such calendar year; provided that Tenant shall give Landlord not less than twenty (20) days' prior written notice of any such audit. For purposes hereof, an authorized representative of Tenant shall mean a bona fide employee of Tenant, any of the "big six" accounting firms, or any other party reasonably approved in writing by Landlord. In no event shall an authorized representative of Tenant include the owner of any office building in the metropolitan Atlanta, Georgia area or any affiliate of such owner. Prior to the 6 10 commencement of such audit, Tenant shall cause its authorized representative to agree in writing for the benefit of Landlord that such representative will keep the results of the audit confidential and that such representative will not disclose or divulge the results of such audit except to Tenant and Landlord and except in connection with any dispute between Landlord and Tenant relating to Operating Expenses. Such audit shall be conducted during reasonable business hours at Landlord's office where Landlord's books and records are maintained. If Tenant causes a written audit report to be prepared by its authorized representative following any such audit, Tenant shall provide Landlord with a copy of such report promptly after receipt thereof by Tenant. If Landlord's calculation of Tenant's Additional Rental for the audited calendar year was incorrect, then Tenant shall be entitled to a prompt refund of any overpayment or Tenant shall promptly pay to Landlord the amount of any underpayment, as the case may be. If Landlord's books and records show an over-billing by Landlord of five percent (5%) or more to Tenant, Landlord shall pay all reasonable costs incurred by Tenant in performing such inspection and/or audit, up to, but not in excess of, Five Hundred and No/100 Dollars ($500.00). 9. Operating Expenses. (a) For the purposes of this Lease, "Operating Expenses" shall mean all expenses, costs and disbursements (but not specific costs billed to specific tenants of the Building) of every kind and nature, computed on the accrual basis, relating to or incurred or paid in connection with the ownership, management, operation, repair and maintenance of the Project, including but not limited to, the following: (1) wages, salaries and other costs of all on-site and off-site employees engaged either full or part-time in the operation, management, maintenance or access control of the Project, including taxes, insurance and benefits relating to such employees, allocated based upon the time such employees are engaged directly in providing such services; (2) the cost of all supplies, tools, equipment and materials used in the operation, management, maintenance and access control of the Project; (3) the cost of all utilities for the Project, including but not limited to the cost of electricity, gas, water, sewer services and power for heating, lighting, air conditioning and ventilating; (4) the cost of all maintenance and service agreements for the Project and the equipment therein, including but not limited to security service, garage operators, window cleaning, elevator maintenance, HVAC maintenance, janitorial service, waste recycling service, landscaping maintenance and customary landscaping replacement; (5) the cost of repairs and general maintenance of the Project; 7 11 (6) amortization (together with reasonable financing charges, whether or not actually incurred) of the cost of acquisition and/or installation of capital investment items (including security and energy management equipment), amortized over their respective useful lives, which are installed for the purpose of reducing operating expenses, promoting safety, complying with governmental requirements (other than the cost to remedy any violation of applicable law, as such law is in effect (including as it is then interpreted) as of the date hereof), or maintaining the first-class nature of the Project; (7) the cost of casualty, rental loss, liability and other insurance applicable to the Project and Landlord's personal property used in connection therewith; (8) the cost of trash and garbage removal, air quality audits, vermin extermination, and snow, ice and debris removal; (9) the cost of legal and accounting services incurred by Landlord in connection with the management, maintenance, operation and repair of the Project, excluding the owner's or Landlord's general accounting, such as partnership statements and tax returns, and excluding services described in Article 9(b)(14) below; (10) all taxes, assessments and governmental charges, whether or not directly paid by Landlord, whether federal, state, county or municipal and whether they be by taxing districts or authorities presently taxing the Project or by others subsequently created or otherwise, and any other taxes and assessments attributable to the Project or its operation (and the costs of contesting any of the same), including business license taxes and fees, excluding, however, taxes and assessments imposed on the personal property of the tenants of the Project, federal and state taxes on income, death taxes, franchise taxes, and any taxes (other than business license taxes and fees) imposed or measured on or by the income of Landlord from the operation of the Project; and it is agreed that Tenant will be responsible for ad valorem taxes on its personal property and on the value of the leasehold improvements in the Demised Premises to the extent that the same exceed Building Standard allowances, if said taxes are based upon an assessment which includes the cost of such leasehold improvements in excess of Building Standard allowances (and if the taxing authorities do not separately assess Tenant's leasehold improvements, Landlord may make an appropriate allocation of the ad valorem taxes allocated to the Project to give effect to this sentence); (11) the cost of operating the management office for the Project and an equitable portion of the cost of operating the management office for Wildwood Office Park, including in each case the cost of office supplies, bulletins or newsletters distributed to tenants, postage, telephone expenses, maintenance and repair of office equipment, non-capital investment equipment, amortization (together with reasonable financing charges) of the cost of capital investment equipment, and rent; and 8 12 (12) the pro rata share applicable to the Project of the sum of (i) the actual costs of operation, maintenance, repair and replacement of the landscaping and irrigation systems now or hereafter located along Windy Ridge Parkway, Windy Hill Road, Wildwood Parkway, Wildwood Plaza, the right-of-way areas of Powers Ferry Road adjoining Wildwood Office Park, and all future roadways, whether public or private, constructed in Wildwood Office Park, together with the landscaped median strips and shoulders of such roadways (but not including the landscaping and irrigation system located on the shoulder of any roadway contiguous to a site upon which construction of improvements has commenced) and any and all light systems located on or in any rights-of-way for private roads within the Wildwood Office Park; (ii) ad valorem taxes on any private roadways now or hereafter located within Wildwood Office Park and on any medians adjacent to public roads if such medians are not included in public road rights-of-way; (iii) the actual costs of ownership, operation, maintenance, repair and replacement of office park signage for Wildwood Office Park and any underground sanitary sewer lines, storm water drainage lines, electric lines, gas lines, water lines, telephone lines and communication lines serving the Wildwood Office Park which are located across, through and under any public or private roadways now or hereafter located within Wildwood Office Park, except for any such utility facilities serving solely another project within Wildwood Office Park; (iv) the actual costs of ownership, operation, maintenance, repair and replacement of any private transportation system and equipment from time to time provided or made available to the developed portions of Wildwood Office Park, including but not limited to ad valorem taxes on personal property or equipment, electricity, fuel, painting and cleaning costs; (v) the actual costs and expenses of ownership and operation of any security patrols or services, if any, from time to time provided to Wildwood Office Park in general, but excluding any such security patrols or services provided solely to another project within Wildwood Office Park; and (vi) such other reasonable, actual costs and expenses incurred by Landlord as "Owner" of the Project under and pursuant to that certain Master Declaration of Covenants and Cross-Easements for Wildwood Office Park dated as of January 23, 1991, recorded in Deed Book 5992, page 430, Cobb County, Georgia records, as modified, amended or supplemented from time to time (the "Master Declaration"). The share of the foregoing costs which are applicable to the Project shall be determined in accordance with the Master Declaration. Landlord shall not employ or contract with any affiliated entity in the performance of any work or services which are included in Operating Expenses unless the cost of same is no greater than the reasonable cost of same if such work or services were provided by a non-affiliated entity of the same or similar quality and reputation as the entity affiliated with Landlord. For the purposes of this provision, an "affiliated entity" shall include (i) an entity owned by Landlord or any principal of Landlord, or (ii) any person or entity having common ownership or control with Landlord or any principal of Landlord. Notwithstanding anything to the contrary provided in this Lease, (i) all capital investment items which fall within the definition of "Operating Expenses" shall be amortized with 9 13 reasonable financing rates over the useful life of the item and included in Operating Expenses in installments based on amortization; and (ii) any maintenance or repair or operating service or work procured by Landlord for the Project shall be provided at competitive rates. Operating Expenses shall be "net" only, and for that purpose shall be reduced by the amounts of any reimbursement, refund or credit actually received by Landlord with respect to any item of cost that is included in Operating Expenses, including, but not limited to, heating, ventilating, air conditioning and electricity. If any such reimbursement, refund or credit is actually received or receivable by Landlord in a later year, it shall be applied against the Operating Expenses for such later year; provided, however, that, if the Term of this Lease has expired, Tenant's share of such item shall be refunded by Landlord to Tenant within thirty (30) days after receipt by Landlord. (b) For purposes of this Lease, and notwithstanding anything in any other provision of this Lease to the contrary, "Operating Expenses" shall not include the following: (1) the cost of any special work or service performed for any tenant (including Tenant) at such tenant's cost; (2) the cost of installing, operating and maintaining any specialty service, such as an observatory, broadcasting facility, luncheon club, restaurant, cafeteria, retail store, sundry shop, newsstand, or concession, but only to the extent such costs exceed those which would normally be expected to be incurred had such space been general office space; (3) the cost of correcting defects in construction; (4) compensation paid to officers and executives of Landlord (but it is understood that the office park manager, the on-site building manager and other on-site employees below the grade of building manager may carry a title such as vice president and the salaries and related benefits of these officers/employees of Landlord would be allowable Operating Expenses under Article 9[a][1] above); (5) the cost of any items for which Landlord is reimbursed by insurance, condemnation or otherwise, except for costs reimbursed pursuant to provisions similar to Articles 8 and 9 hereof; (6) the cost of any additions, changes, replacements and other items which are made in order to prepare for a new tenant's occupancy; (7) the cost of repairs incurred by reason of fire or other casualty reimbursed by insurance proceeds under policies maintained by Landlord; 10 14 (8) insurance premiums to the extent Landlord may be directly reimbursed therefor, except for premiums reimbursed pursuant to provisions similar to Articles 8 and 9 hereof; (9) interest on debt or amortization payments on any mortgage or deed to secure debt (except to the extent specifically permitted by Article 9[a]) and rental under any ground lease or other underlying lease; (10) any real estate brokerage commissions or other costs incurred in procuring tenants or any fee in lieu of such commission; (11) any advertising expenses incurred in connection with the marketing of any rentable space; (12) rental payments for base building equipment such as HVAC equipment and elevators; (13) any expenses for repairs or maintenance which are covered by warranties and service contracts, to the extent such maintenance and repairs are made at no cost to Landlord; (14) legal expenses arising out of the construction of the improvements on the Land or the enforcement of the provisions of any lease affecting the Land or Building, including without limitation this Lease; and (15) management fees (Tenant's obligation for a management fee contribution is set forth in Article 8[b][y] above). 10. Tenant Taxes; Rent Taxes. Tenant shall pay promptly when due all taxes directly or indirectly imposed or assessed upon Tenant's gross sales, business operations, machinery, equipment, trade fixtures and other personal property or assets, whether such taxes are assessed against Tenant, Landlord or the Building. In the event that such taxes are imposed or assessed against Landlord or the Building Landlord, within thirty (30) days after receipt, shall furnish Tenant with all applicable tax bills, public charges and other assessments or impositions and Tenant shall forthwith pay the same directly to the taxing authority, with reasonable evidence of such payment provided to Landlord. In addition, in the event there is imposed at any time a tax upon and/or measured by the rental payable by Tenant under this Lease, whether by way of a sales or use tax or otherwise, Tenant shall be responsible for the payment of such tax and shall pay the same on or prior to the due date thereof; provided, however, that the foregoing shall not include any inheritance, estate, succession, transfer, gift or income tax imposed on or payable by Landlord. 11 15 11. Payments. All payments of Rent and other payments to be made to Landlord shall be made on a timely basis and shall be payable to Landlord or as Landlord may otherwise designate in writing. All such payments shall be mailed or delivered to Landlord's Address designated in Article 1(b) above or at such other place as Landlord may designate from time to time in writing. If mailed, all payments shall be mailed in sufficient time and with adequate postage thereon to be received in Landlord's account by no later than the due date for such payment. Tenant agrees to pay to Landlord Fifty Dollars ($50.00) for each check presented to Landlord in payment of any obligation of Tenant which is not paid by the bank on which it is drawn, together with interest from and after the due date for such payment at the rate of twelve percent (12%) per annum on the amount due. 12. Late Charges. Any Rent or other amounts payable to Landlord under this Lease, if not paid by the fifth day of the month for which such Rent is due, or by the due date specified on any invoices from Landlord for any other amounts payable hereunder, shall incur a late charge of Fifty Dollars ($50.00) for Landlord's administrative expense in processing such delinquent payment and in addition thereto shall bear interest at the rate of twelve percent (12%) per annum from and after the due date for such payment. In no event shall the rate of interest payable on any late payment exceed the legal limits for such interest enforceable under applicable law. 13. Use Rules. The Demised Premises shall be used for any lawful use, but subject to and in accordance with all applicable laws, ordinances, rules and regulations of governmental authorities, any limitations or restrictions imposed by other tenants or users of the Building from time, and the Rules and Regulations attached hereto and made a part hereof. The occupancy rate of the Demised Premises shall in no event be more than one (1) person per 200 square feet of Rentable Floor Area within the Demised Premises. Tenant covenants and agrees to abide by the Rules and Regulations in all respects as now set forth and attached hereto or as hereafter promulgated by Landlord; provided, however, that Landlord shall provide Tenant with at least thirty (30) days prior written notice of any such new Rule and Regulation, and no such new Rule and Regulation shall materially and adversely affect Tenant's rights hereunder. Landlord shall have the right at all times during the Lease Term to publish and promulgate and thereafter enforce such reasonable, uniform and non-discriminatory rules and regulations or changes in the existing Rules and Regulations as it may reasonably deem necessary in its sole discretion to protect the tenantability, safety, operation, and welfare of the Demised Premises, the Project and Wildwood Office Park. 14. Alterations. Except for any initial improvement of the Demised Premises pursuant to Exhibit "D", which shall be governed by the provisions of said Exhibit "D", Tenant shall not make, suffer or permit to be made any alterations, additions or improvements to or of the Demised Premises or any part thereof, or attach any fixtures or equipment thereto, without first obtaining Landlord's written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Any such alterations, additions or improvements to the Demised Premises consented to by Landlord shall be made by either (i) a contractor selected by Tenant and consented to by Landlord (which consent shall not be unreasonably withheld, conditioned or delayed by Landlord), or (ii) by Landlord or under Landlord's supervision for Tenant's account, 12 16 and Tenant shall reimburse Landlord for all costs thereof (including a reasonable charge for Landlord's overhead), as Rent, within ten (10) days after receipt of a statement. All such alterations, additions and improvements shall become Landlord's property at the expiration or earlier termination of the Lease Term and shall remain on the Demised Premises without compensation to Tenant unless Landlord elects by notice to Tenant to have Tenant remove such alterations, additions and improvements, in which event, notwithstanding any contrary provisions respecting such alterations, additions and improvements contained in Article 32 hereof, Tenant shall promptly restore, at its sole cost and expense, the Demised Premises to its condition prior to the installation of such alterations, additions and improvements, normal wear and tear excepted. Notwithstanding the above, Tenant shall be entitled to make non-structural alterations which do not affect the Building systems, so long as such alterations do not exceed Ten Thousand and No/100 Dollars ($10,000.00) in cost with notice to, but without the need for the prior consent of, Landlord. In such event, Tenant shall provide Landlord with the as-built plans of such alterations, if any are prepared. 15. Repairs. (a) Landlord shall maintain in good order and repair (as compared to other first-class properties of similar quality in the area of the Building), subject to normal wear and tear and subject to casualty and condemnation, the Building (excluding the Demised Premises and other portions of the Building leased to other tenants), the Building parking facilities, the public areas and the landscaped areas. Notwithstanding the foregoing obligation, the cost of any repairs or maintenance to the foregoing necessitated by the intentional acts or gross negligence of Tenant or its agents, contractors, employees, invitees, licensees, tenants or assigns, shall be borne solely by Tenant and shall be deemed Rent hereunder and shall be reimbursed by Tenant to Landlord within thirty (30) days of written demand. Landlord shall not be required to make any repairs or improvements to the Demised Premises except structural repairs necessary for safety and tenantability. Landlord shall keep in good order and repair the roof, floor slab, gutters, downspouts, drains and leaders, load bearing structures and exterior walls of the Premises, all utility lines and systems up to their point of entry into the Premises, and all lines and systems within the Premises that do not exclusively serve the Premises. (b) Tenant covenants and agrees that it will take good care of the Demised Premises and all alterations, additions and improvements thereto and will keep and maintain the same in good condition and repair, except for normal wear and tear. Tenant shall as soon as reasonably practical report, in writing, to Landlord any defective or dangerous condition known to Tenant. To the fullest extent permitted by law, Tenant hereby waives all rights to make repairs at the expense of Landlord as may be provided by any law, statute or ordinance now or hereafter in effect. Landlord has no obligation and has made no promise to alter, remodel, improve, repair, decorate or paint the Demised Premises or any part thereof, except as specifically and expressly herein set forth. 13 17 (c) Notwithstanding anything to the contrary provided in this Lease, Landlord shall make all necessary repairs and replacements to the fire protection sprinklers and systems serving the Demised Premises, all utility lines and systems up to their point of entry into the Demised Premises and all pipes, conduits, wires and other lines running through the Demised Premises which do not exclusively serve the Demised Premises, with the cost thereof bring an Operating Expense, to the extent and as chargeable under Article 9 herein. 16. Landlord's Right of Entry. Landlord shall retain duplicate keys to all doors of the Demised Premises and Landlord and its agents, employees and independent contractors shall have the right to enter the Demised Premises at reasonable hours and upon reasonable prior notice (except in an emergency, for which no prior notice is required) to inspect and examine same, to make repairs, additions, alterations, and improvements, to exhibit the Demised Premises to mortgagees, prospective mortgagees, purchasers or tenants, and to inspect the Demised Premises to ascertain that Tenant is complying with all of its covenants and obligations hereunder, all without being liable to Tenant in any manner whatsoever for any damages arising therefrom; provided, however, that Landlord shall, except in case of emergency, afford Tenant such prior notification of an entry into the Demised Premises as shall be reasonably practicable under the circumstances. Landlord shall use its reasonable efforts not to unreasonably disrupt or disturb Tenant's use of the Demised Premises during such entry or inspections. Landlord shall be allowed to take into and through the Demised Premises any and all materials that may be required to make such repairs, additions, alterations or improvements. During such time as such work is being carried on in or about the Demised Premises, the Rent provided herein shall not abate, and Tenant waives any claim or cause of action against Landlord for damages by reason of interruption of Tenant's business or loss of profits therefrom because of the prosecution of any such work or any part thereof. 17. Insurance. Tenant shall procure at its expense and maintain throughout the Lease Term a policy or policies of special form/all-risk insurance insuring the full replacement cost of its furniture, equipment, supplies, and other property owned, leased, held or possessed by it and contained in the Demised Premises, together with the excess value of the improvements to the Demised Premises over the Construction Allowance, and worker's compensation insurance as required by applicable law. Tenant shall also procure at its expense and maintain throughout the Lease Term a policy or policies of commercial general liability insurance, insuring Tenant, Landlord and any other person reasonably designated by Landlord, against any and all liability for injury to or death of a person or persons and for damage to property occasioned by or arising out of any construction work being done on the Demised Premises, or arising out of the condition, use, or occupancy of the Demised Premises, or in any way occasioned by or arising out of the activities of Tenant, its agents, contractors, employees, guests, or licensees in the Demised Premises, or other portions of the Building, the Project or Wildwood Office Park, the limits of such policy or policies to be in combined single limits for both damage to property and personal injury and in amounts not less than Three Million Dollars ($3,000,000) for each occurrence. Such insurance shall, in addition, extend to any liability of Tenant arising out of the indemnities provided for in this Lease. Tenant shall also carry such other types of insurance in 14 18 form and amount which Landlord shall reasonably deem to be prudent for Tenant to carry, should the circumstances or conditions so merit Tenant carrying such type of insurance. All insurance policies procured and maintained by Tenant pursuant to this Article 17 shall name Landlord and any additional parties reasonably designated by Landlord as additional insured, shall be carried with companies licensed to do business in the State of Georgia having a rating from Best's Insurance Reports of not less than A-/X, and shall be non-cancelable and not subject to material change except after thirty (30) days' written notice to Landlord. Such policies or duly executed certificates of insurance with respect thereto, accompanied by proof of payment of the premium therefor, shall be delivered to Landlord prior to the Rental Commencement Date, and renewals of such policies shall be delivered to Landlord at least thirty (30) days prior to the expiration of each respective policy term. Landlord shall procure and maintain at its expense (but with the expense to be included in Operating Expenses) throughout the Lease Term a policy or policies of special form/all-risk (including rent loss coverage) real and personal property insurance covering the Project (including the leasehold improvements in the Demised Premises up to the amount of the Construction Allowance, but excluding Tenant's personal property and equipment), in an amount equal to the full insurable replacement cost thereof as such may increase from time to time (but such insurance may provide for a commercially reasonable deductible), and in an amount sufficient to comply with any co-insurance requirements in such policy, and a policy of workers' compensation insurance, if any, as required by applicable law. In addition, Landlord shall procure and maintain at its expense (but with the expense to be included in Operating Expenses) and shall thereafter maintain throughout the Lease Term, a commercial general liability insurance policy covering the Project with combined single limits for both damage to property and personal injury of not less than Three Million Dollars ($3,000,000) per occurrence, subject to annual aggregate limits of not less than Five Million Dollars ($5,000,000). Landlord may also carry such other types of insurance in form and amounts which Landlord shall determine to be appropriate from time to time, and the cost thereof shall be included in Operating Expenses. All such policies procured and maintained by Landlord pursuant to this Article 17 shall be carried with companies licensed to do business in the State of Georgia. Any insurance required to be carried by Landlord hereunder may be carried under blanket policies covering other properties of Landlord and/or its partners and/or their respective related or affiliated corporations so long as such blanket policies provide insurance at all times for the Project as required by this Lease. 18. Waiver of Subrogation. Landlord and Tenant shall each have included in all policies of fire, extended coverage, business interruption and loss of rents insurance respectively obtained by them covering the Demised Premises, the Building and contents therein, a waiver by the insurer of all right of subrogation against the other in connection with any loss or damage thereby insured against. Any additional premium for such waiver shall be paid by the primary insured. To the full extent permitted by law, Landlord and Tenant each waives all right of recovery against the other for, and agrees to release the other from liability for, loss or damage to the extent such loss or damage (a) is covered by valid and collectible insurance in effect at the time of such loss or damage (or required to be in effect at the time of such loss or damage), or 15 19 (b) would be covered by the insurance required to be maintained under this Lease by the party seeking recovery. 19. Default. (a) The following events shall be deemed to be events of default by Tenant under this Lease: (i) Tenant shall fail to pay any installment of Rent or any other charge or assessment against Tenant pursuant to the terms hereof within five (5) days after the date notice of such late payment is received by Tenant; provided, however, if more than two (2) payments due of Tenant hereunder in any one (1) calendar year are not made until after notice of such late payment is received by Tenant, then it shall be an event of default hereunder by Tenant if any subsequent payment due of Tenant hereunder in the same calendar year is not made within ten (10) days of the date when due; (ii) Tenant shall fail to comply with any term, provision, covenant or warranty made under this Lease by Tenant, other than the payment of the Rent or any other charge or assessment payable by Tenant, and shall not cure such failure within fifteen (15) days after notice thereof to Tenant, or such longer period as is necessary to cure such default, provided Tenant is diligently pursuing same, and such cure is effectuated in any event within sixty (60) days after notice thereof is given to Tenant; (iii) Tenant or any guarantor of this Lease shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall file a petition in bankruptcy, or shall be adjudicated as bankrupt or insolvent, or shall file a petition in any proceeding seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or shall file an answer admitting or fail timely to contest the material allegations of a petition filed against it in any such proceeding; (iv) a proceeding is commenced against Tenant or any guarantor of this Lease seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, and such proceeding shall not have been dismissed within ninety (90) days after the commencement thereof; (v) a receiver or trustee shall be appointed for all or substantially all of the assets of Tenant or of any guarantor of this Lease; (vi) Tenant shall fail to take possession of the Demised Premises as provided in this Lease; (vii) Tenant shall do or permit to be done anything which creates a lien upon the Demised Premises or the Project and such lien is not removed or discharged within fifteen (15) days after Tenant is provided notice of the filing thereof; (viii) Tenant shall fail to return a properly executed instrument to Landlord in accordance with the provisions of Article 27 hereof within the time period provided for such return following Landlord's request for same as provided in Article 27 and such failure continues for ten (10) days after notice of such failure is provided to Tenant; or (ix) Tenant shall fail to return a properly executed estoppel certificate to Landlord in accordance with the provisions of Article 28 hereof within the time period provided for such return following Landlord's request for same as provided in Article 28 and such failure continues for ten (10) days after notice of such failure is provided to Tenant. 16 20 (b) Upon the occurrence of any of the aforesaid events of default, Landlord shall have the option to pursue any one or more of the following remedies without any further notice or demand whatsoever: (i) terminate this Lease, in which event Tenant shall immediately surrender the Demised Premises to Landlord and if Tenant fails to do so, Landlord may without prejudice to any other remedy which it may have for possession or arrearages in Rent, enter upon and take possession of the Demised Premises and expel or remove Tenant and any other person who may be occupying said Demised Premises or any part thereof without being liable for prosecution or any claim of damages therefor; Tenant hereby agreeing to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the Demised Premises on satisfactory terms or otherwise; (ii) terminate Tenant's right of possession (but not this Lease) and enter upon and take possession of the Demised Premises and expel or remove Tenant and any other person who may be occupying said Demised Premises or any part thereof, by entry, dispossessory suit or otherwise, without thereby releasing Tenant from any liability hereunder, without terminating this Lease, and without being liable for prosecution or any claim of damages therefor and, if Landlord so elects, make such alterations, redecorations and repairs as, in Landlord's judgment, may be necessary to relet the Demised Premises, and Landlord may, but shall be under no obligation to do so, relet the Demised Premises or any portion thereof in Landlord's or Tenant's name, but for the account of Tenant, for such term or terms (which may be for a term extending beyond the Lease Term) and at such rental or rentals and upon such other terms as Landlord may deem advisable, with or without advertisement, and by private negotiations, and receive the rent therefor, Tenant hereby agreeing to pay to Landlord the deficiency, if any, between all Rent reserved hereunder and the total rental applicable to the Lease Term hereof obtained by Landlord re-letting, and Tenant shall be liable for Landlord's expenses in redecorating and restoring the Demised Premises and all costs incident to such re-letting, including broker's commissions and lease assumptions, and in no event shall Tenant be entitled to any rentals received by Landlord in excess of the amounts due by Tenant hereunder; or (iii) enter upon the Demised Premises without being liable for prosecution or any claim of damages therefor, and do whatever Tenant is obligated to do under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any expenses including, without limitation, reasonable attorneys' fees which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease and Tenant further agrees that Landlord shall not be liable for any damages resulting to Tenant from such action, except to the extent expressly arising under Article 37 herein. If this Lease is terminated by Landlord as a result of the occurrence of an event of default, Landlord may declare to be due and payable immediately, the present value (calculated with a discount factor of eight percent [8%] per annum) of the difference between (x) the entire amount of Rent and other charges and assessments which in Landlord's reasonable determination would become due and payable during the remainder of the Lease Term determined as though this Lease had not been terminated (including, but not limited to, increases in Rent pursuant to Article 7 hereof), and (y) the then fair market rental value of the Demised Premises for the remainder of the Lease Term. Upon the acceleration of such amounts, 17 21 Tenant agrees to pay the same at once, together with all Rent and other charges and assessments theretofore due, at Landlord's address as provided herein, it being agreed that such payment shall not constitute a penalty or forfeiture but shall constitute liquidated damages for Tenant's failure to comply with the terms and provisions of this Lease (Landlord and Tenant agreeing that Landlord's actual damages in such event are impossible to ascertain and that the amount set forth above is a reasonable estimate thereof). (c) Pursuit of any of the foregoing remedies shall not preclude pursuit of any other remedy herein provided or any other remedy provided by law or at equity, nor shall pursuit of any remedy herein provided constitute an election of remedies thereby excluding the later election of an alternate remedy, or a forfeiture or waiver of any Rent or other charges and assessments payable by Tenant and due to Landlord hereunder or of any damages accruing to Landlord by reason of violation of any of the terms, covenants, warranties and provisions herein contained. No reentry or taking possession of the Demised Premises by Landlord or any other action taken by or on behalf of Landlord shall be construed to be an acceptance of a surrender of this Lease or an election by Landlord to terminate this Lease unless written notice of such intention is given to Tenant. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. In determining the amount of loss or damage which Landlord may suffer by reason of termination of this Lease or the deficiency arising by reason of any reletting of the Demised Premises by Landlord as above provided, allowance shall be made for the expense of repossession. Tenant agrees to pay to Landlord all reasonable, actual costs and expenses incurred by Landlord in the enforcement of this Lease, including, without limitation, the fees of Landlord's attorneys as provided in Article 25 hereof. (d) The abandonment or vacation of the Demised Premises shall not be an event of default by Tenant under this Lease, but in the event Tenant shall abandon or vacate the Demised Premises, unless due to a casualty, condemnation or remodeling (which remodeling is being diligently prosecuted), Landlord may, at any time while such abandonment or vacation of the Demised Premises is continuing, notify Tenant of Landlord's election to terminate this Lease, in which event this Lease shall terminate on the date so selected by Landlord in Landlord's written election to terminate this Lease, and on the date so set forth in Landlord's written election, this Lease shall terminate and come to an end as though the date selected by Landlord were the last day of the natural expiration of the Lease Term; provided, however, that no such termination shall affect or limit any obligations or liabilities of Tenant arising or accruing under this Lease prior to the effective date of any such termination; and provided further that Tenant may rescind Landlord's election by (i) notifying Landlord in writing, within ten (10) days after receipt of Landlord's written election to terminate this Lease, that Tenant will reoccupy the Demised Premises for business purposes and (ii) in fact, so reoccupying the Demised Premises for business purposes within sixty (60) days thereafter, or such other reasonably practical time period, if longer, but not to exceed one hundred twenty (120) days. 18 22 20. Waiver of Breach. No waiver of any breach of the covenants, warranties, agreements, provisions, or conditions contained in this Lease shall be construed as a waiver of said covenant, warranty, provision, agreement or condition or of any subsequent breach thereof, and if any breach shall occur and afterwards be compromised, settled or adjusted, this Lease shall continue in full force and effect as if no breach had occurred. 21. Assignment and Subletting. (a) Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed, assign this Lease or any interest herein or in the Demised Premises, or mortgage, pledge, encumber, hypothecate or otherwise transfer or sublet the Demised Premises or any part thereof or permit the use of the Demised Premises by any party other than Tenant. Consent to one or more such transfers or subleases shall not destroy or waive this provision, and all subsequent transfers and subleases shall likewise be made only upon obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. Without limiting the foregoing prohibition, in no event shall Tenant assign this Lease or any interest herein, whether directly, indirectly or by operating of law, or sublet the Demised Premises or any part thereof or permit the use of the Demised Premises or any part thereof by any party (i) if the proposed assignee or subtenant is a party who would (or whose use would) detract from the character of the Building as a first-class building, such as, without limitation, a dental, medical or chiropractic office or a governmental office, (ii) if the proposed use of the Demised Premises shall involve an occupancy rate of more than one (1) person per 200 square feet of Rentable Floor Area within the Demised Premises, (iii) if the proposed assignment or subletting shall be to a governmental subdivision or agency or any person or entity who enjoys diplomatic or sovereign immunity, (iv) if such proposed assignee or subtenant is an existing tenant of the Building, or (v) if such proposed assignment, subletting or use would contravene any restrictive covenant (including any exclusive use) granted to any other tenant of the Building. Sublessees or transferees of the Demised Premises for the balance of the Lease Term shall become directly liable to Landlord for all obligations of Tenant hereunder, without relieving Tenant (or any guarantor of Tenant's obligations hereunder) of any liability therefor, and Tenant shall remain obligated for all liability to Landlord arising under this Lease during the entire remaining Lease Term. Landlord may, as a prior condition to considering any request for consent to an assignment or sublease, require Tenant to obtain and submit current financial statements of any proposed subtenant or assignee. In the event Landlord consents to an assignment or sublease, Tenant shall pay to Landlord a fee to cover Landlord's accounting costs plus any legal fees actually incurred by Landlord as a result of the assignment or sublease, such legal fees charged to Tenant not to exceed Five Hundred and No/100 Dollars ($500.00) per occurrence or request. Landlord may require an additional security deposit from the assignee or subtenant as a condition of its consent. Fifty percent (50%) of any net costs of subletting (including alteration or modification of the Demised Premises) consideration, in excess of the Rent and other charges and sums due and payable by Tenant under this Lease, paid to Tenant by any assignee of this Lease for its assignment, or by any sublessee under or in connection with its sublease, or otherwise paid to Tenant by another party for use and occupancy of the Demised Premises or any portion thereof, shall be promptly remitted by Tenant to Landlord as additional rent hereunder and Tenant shall have no right or claim thereto as 19 23 against Landlord. No assignment of this Lease consented to by Landlord shall be effective unless and until Landlord shall receive an original assignment and assumption agreement, in form and substance reasonably satisfactory to Landlord, signed by Tenant and Tenant's proposed assignee, whereby the assignee assumes due performance of this Lease to be done and performed for the balance of the then remaining Lease Term of this Lease. No subletting of the Demised Premises, or any part thereof, shall be effective unless and until there shall have been delivered to Landlord an agreement, in form and substance satisfactory to Landlord, signed by Tenant and the proposed sublessee, whereby the sublessee acknowledges the right of Landlord to continue or terminate any sublease, in Landlord's sole discretion, upon termination of this Lease, and such sublessee agrees to recognize and attorn to Landlord in the event that Landlord elects under such circumstances to continue such sublease. (b) Tenant shall have the right to assign the Lease or sublet the Demised Premises, or any part thereof, without Landlord's consent, but subject to Landlord's rights to notice and prohibition contained herein, to any parent, subsidiary, affiliate or controlled corporation or to corporation which Tenant may be converted or which it may merge. Tenant shall have the obligation to notify Landlord of its intent of any such arrangement, and if Landlord reasonably determines that the proposed assignee or sublessee is engaged in a business which would materially interfere with the operation of the Building or that permitting the assignment or subletting would cause a violation by Landlord of its obligations under any lease covering a portion of the Building, Landlord shall have the right to prohibit such arrangement based upon the issue of the business of the proposed assignee or sublessee or the compatibility of the proposed assignee or sublessee with the businesses in the Building. 22. Destruction. (a) If the Demised Premises are damaged by fire or other casualty, the same shall be repaired or rebuilt as speedily as practical under the circumstances at the expense of the Landlord (subject to subparagraph [c] below), unless this Lease is terminated as provided in this Article 22, and during the period required for restoration, a just and proportionate part of Base Rental shall be abated until the Demised Premises are repaired or rebuilt substantially to the condition which existed immediately prior to such casualty. (b) If the Demised Premises are (i) damaged to such an extent that repairs cannot, in Landlord's judgment, be completed within one (1) year after the date of the casualty or (ii) damaged or destroyed as a result of a risk which is not insured under standard special form/all-risk insurance policies, or (iii) damaged or destroyed during the last eighteen (18) months of the Lease Term, or if the Building is damaged in whole or in part (whether or not the Demised Premises are damaged), to such an extent that the Building cannot, in Landlord's judgment, be operated economically as an integral unit, then and in any such event Landlord may at its option terminate this Lease by notice in writing to the Tenant within sixty (60) days after the date of such occurrence. If the Demised Premises are damaged to such an extent that repairs cannot, in Landlord's judgment, be completed within one (1) year after the date of the casualty or if the 20 24 Demised Premises are substantially damaged during the last eighteen (18) months of the Lease Term, then in either such event Tenant may elect to terminate this Lease by notice in writing to Landlord within fifteen (15) days after the date of such occurrence. Unless Landlord or Tenant elects to terminate this Lease as hereinabove provided, this Lease will remain in full force and effect and Landlord shall repair such damage at its expense to the extent required in this Article as expeditiously as possible under the circumstances. (c) If Landlord should elect or be obligated pursuant to subparagraph (a) above to repair or rebuild because of any damage or destruction, Landlord's obligation shall be limited to the original Building and the leasehold improvements in the Demised Premises (to the extent such leasehold improvements can be restored for the amount of the Construction Allowance applicable thereto) and shall not extend to any furniture, equipment, supplies or other personal property owned or leased by Tenant, its employees, contractors, invitees or licensees. If the cost of performing such repairs and restoration exceeds the actual proceeds of insurance paid or payable to Landlord on account of such casualty, or if Landlord's mortgagee or the lessor under a ground or underlying lease shall require that any insurance proceeds from a casualty loss be paid to it, Landlord may terminate this Lease unless Tenant, within fifteen (15) days after demand therefor, deposits with Landlord a sum of money sufficient to pay the difference between the cost of repair and the proceeds of the insurance available to Landlord for such purpose. (d) In no event shall Landlord be liable for any loss or damage sustained by Tenant by reason of casualties mentioned hereinabove or any other accidental casualty. 23. Landlord's Lien. INTENTIONALLY DELETED 24. Services by Landlord. Landlord shall provide the Building Standard Services described on Exhibit "E" attached hereto and by reference made a part hereof. 25. Attorneys' Fees and Homestead. If any Rent or other debt owing by Tenant to Landlord hereunder is collected by or through an outside attorney-at-law, Tenant agrees to pay an additional amount equal to Landlord's reasonable attorney's fees actually incurred. If Landlord uses the services of any outside attorney in order to secure compliance with any other provisions of this Lease, to recover damages for any breach or default of any other provisions of this Lease, or to terminate this Lease or evict Tenant, Tenant shall reimburse Landlord upon demand for any and all reasonable, actual attorney's fees and expenses so incurred by Landlord. Tenant waives all homestead rights and exemptions which it may have under any law as against any obligation owing under this Lease, and assigns to Landlord its homestead and exemptions to the extent necessary to secure payment and performance of its covenants and agreements hereunder. If any action or proceeding is commenced by Tenant to enforce the terms of the Lease, and Tenant prevails in any such action, Landlord shall pay Tenant's reasonable attorney's fees actually incurred, in connection with such action or proceeding. 21 25 26. Time. Time is of the essence of this Lease and whenever a certain day is stated for payment or performance of any obligation of Tenant or Landlord, the same enters into and becomes a part of the consideration hereof. 27. Subordination and Attornment. (a) Tenant agrees that this Lease and all rights of Tenant hereunder are and shall be subject and subordinate to any ground or underlying lease which may now or hereafter be in effect regarding the Project or any component thereof, to any mortgage now or hereafter encumbering the Demised Premises or the Project or any component thereof, to all advances made or hereafter to be made upon the security of such mortgage, to all amendments, modifications, renewals, consolidations, extensions, and restatements of such mortgage, and to any replacements and substitutions for such mortgage. The terms of this provision shall be self-operative and no further instrument of subordination shall be required. Tenant, however, upon written request of any party in interest, shall execute within fifteen (15) days of notice of such request such instrument or certificates as may be reasonably required to carry out the intent hereof, whether said requirement is that of Landlord or any other party in interest, including, without limitation, any mortgagee. (b) If any mortgagee or lessee under a ground or underlying lease elects to have this Lease superior to its mortgage or lease and signifies its election in the instrument creating its lien or lease or by separate recorded instrument, then this Lease shall be superior to such mortgage or lease, as the case may be. The term "mortgage", as used in this Lease, includes any deed to secure debt, deed of trust or security deed and any other instrument creating a lien in connection with any other method of financing or refinancing. The term "mortgagee", as used in this Lease, refers to the holder(s) of the indebtedness secured by a mortgage. (c) In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under, any mortgage covering the Demised Premises or the Project, or in the event the interests of Landlord under this Lease shall be transferred by reason of deed in lieu of foreclosure or other legal proceedings, or in the event of termination of any lease under which Landlord may hold title, Tenant shall, at the option of the transferee or purchaser at foreclosure or under power of sale, or the lessor of the Landlord upon such lease termination, as the case may be (sometimes hereinafter called "such person"), attorn to such person and shall recognize and be bound and obligated hereunder to such person as the Landlord under this Lease; provided, however, that no such person shall be (i) bound by any payment of Rent for more than one (1) month in advance, except prepayments in the nature of security for the performance by Tenant of its obligations under this Lease (and then only if such prepayments have been deposited with and are under the control of such person); (ii) bound by any amendment or modification of this Lease made without the express written consent of the mortgagee or lessor of the Landlord, as the case may be; 22 26 (iii) obligated to cure any defaults under this Lease of any prior landlord (including Landlord); (iv) liable for any act or omission of any prior landlord (including Landlord); (v) subject to any offsets or defenses which Tenant might have against any prior landlord (including Landlord); or (vi) bound by any warranty or representation of any prior landlord (including Landlord) relating to work performed by any prior landlord (including Landlord) under this Lease. Tenant agrees to execute any reasonable attornment agreement not in conflict herewith requested by Landlord, the mortgagee or such person. Tenant's obligation to attorn to such person shall survive the exercise of any such power of sale, foreclosure or other proceeding. Tenant agrees that the institution of any suit, action or other proceeding by any mortgagee to realize on Landlord's interest in the Demised Premises or the Building pursuant to the powers granted to a mortgagee under its mortgage, shall not, by operation of law or otherwise, result in the cancellation or termination of the obligations of the Tenant hereunder. Landlord and Tenant agree that notwithstanding that this Lease is expressly subject and subordinate to any mortgages, any mortgagee, its successors and assigns, or other holder of a mortgage or of a note secured thereby, may sell the Demised Premises or the Building, in the manner provided in the mortgage and may, at the option of such mortgagee, its successors and assigns, or other holder of the mortgage or note secured thereby, make such sale of the Demised Premises or Building subject to this Lease. 28. Estoppel Certificates. Within fifteen (15) days after written request therefor by either party hereto, the other party hereto agrees to execute and deliver to the requesting party in recordable form an estoppel certificate, in a reasonable form, addressed to the requesting party, any mortgagee or assignee of Landlord's interest in, or purchaser of, the Demised Premises or the Building or any part thereof, certifying (if such be the case) that this Lease is unmodified and is in full force and effect (and if there have been modifications, that the same is in full force and effect as modified and stating said modifications); that there are no defenses or offsets against the enforcement thereof or stating those claimed by the party making the certificate; and stating the date to which Rent and other charges have been paid. Such certificate shall also include such other information as may reasonably be required by the requesting party or such mortgagee, proposed mortgagee, assignee or purchaser. Any such certificate may be relied upon by the recipient thereof, any mortgagee, proposed mortgagee, assignee, purchaser and any other party to whom such certificate is addressed. 29. No Estate. This Lease shall create the relationship of landlord and tenant only between Landlord and Tenant and no estate shall pass out of Landlord. Tenant shall have only an usufruct, not subject to levy and sale and not assignable in whole or in part by Tenant except as herein provided. 30. Cumulative Rights. All rights, powers and privileges conferred hereunder upon the parties hereto shall be cumulative to, but not restrictive of, or in lieu of those conferred by law. 23 27 31. Holding Over. If Tenant remains in possession after expiration or termination of the Lease Term with or without Landlord's written consent, Tenant shall become a tenant-at-sufferance, and there shall be no renewal of this Lease by operation of law. During the period of any such holding over, all provisions of this Lease shall be and remain in effect except that the monthly rental shall be one hundred fifty percent (150%) of the amount of Rent (including any adjustments as provided herein) payable for the last full calendar month of the Lease Term including renewals or extensions, for the first three (3) months of any such holdover, and then double the amount of such Rent thereafter. The inclusion of the preceding sentence in this Lease shall not be construed as Landlord's consent for Tenant to hold over. 32. Surrender of Premises. Except as provided in Article 14 herein, upon the expiration or other termination of this Lease, Tenant shall quit and surrender to Landlord the Demised Premises and every part thereof and all alterations, additions and improvements thereto, broom clean and in good condition and state of repair, reasonable wear and tear only excepted. If Tenant is not then in default, Tenant shall remove all personalty and equipment not attached to the Demised Premises which it has placed upon the Demised Premises, and Tenant shall restore the Demised Premises to the condition immediately preceding the time of placement thereof, less reasonable wear and tear. If Tenant shall fail or refuse to remove all of Tenant's effects, personalty and equipment from the Demised Premises upon the expiration or termination of this Lease for any cause whatsoever or upon the Tenant being dispossessed by process of law or otherwise, such effects, personalty and equipment shall be deemed conclusively to be abandoned and may be appropriated, sold, stored, destroyed or otherwise disposed of by Landlord without written notice to Tenant or any other party and without obligation to account for them. Tenant shall pay Landlord on demand any and all reasonable expenses incurred by Landlord in the removal of such property, including, without limitation, the cost of repairing any damage to the Building or Project caused by the removal of such property and storage charges (if Landlord elects to store such property), less any amounts actually received by Landlord in connection with the disposition of such property, which Landlord may dispose of in Landlord's sole and absolute discretion. The covenants and conditions of this Article 32 shall survive any expiration or termination of this Lease. 33. Notices. All notices required or permitted to be given hereunder shall be in writing and may be delivered in person to either party or may be sent by courier or by United States Mail, certified, return receipt requested, postage prepaid. Any such notice shall be deemed received by the party to whom it was sent (i) in the case of personal delivery or courier delivery, on the date of delivery to such party, and (ii) in the case or certified mail, the date receipt is acknowledged on the return receipt for such notice or, if delivery is rejected or refused or the U.S. Postal Service is unable to deliver same because of changed address of which no notice was given pursuant hereto, the first date of such rejection, refusal or inability to deliver. All such notices shall be addressed to Landlord or Tenant at their respective address set forth hereinabove or at such other address as either party shall have theretofore given to the other by notice as herein provided. Tenant hereby designates and appoints as its agent to receive notice of all distraint proceedings and all other notices required under this Lease, to Charles I. Pollack, Esq., 24 28 Silfen, Segal, Fryer & Shuster, P.C., 1050 Crown Pointe Parkway, Suite 410, Atlanta, GA 30338. 34. Damage or Theft of Personal Property. All personal property brought into Demised Premises by Tenant, or Tenant's employees or business visitors, shall be at the risk of Tenant only, and Landlord shall not be liable for theft thereof or any damage thereto occasioned by any act of co-tenants, occupants, invitees or other users of the Building or any other person. Landlord shall not at any time be liable for damage to any property in or upon the Demised Premises, which results from power surges or other deviations from the constancy of electrical service or from gas, smoke, water, rain, ice or snow which issues or leaks from or forms upon any part of the Building or from the pipes or plumbing work of the same, or from any other place whatsoever, except to the extent such liability would arise under Article 37 herein. 35. Eminent Domain. (a) If all or part of the Demised Premises shall be taken for any public or quasi-public use by virtue of the exercise of the power of eminent domain or by private purchase in lieu thereof, this Lease shall terminate as to the part so taken as of the date of taking, and, in the case of a partial taking, either Landlord or Tenant shall have the right to terminate this Lease as to the balance of the Demised Premises by written notice to the other within thirty (30) days after such date; provided, however, that a condition to the exercise by Tenant of such right to terminate shall be that the portion of the Demised Premises taken shall be of such extent and nature as substantially to handicap, impede or impair Tenant's use of the balance of the Demised Premises, as reasonably determined by Tenant. If title to so much of the Building is taken that a reasonable amount of reconstruction thereof will not in Landlord's sole discretion result in the Building being a practical improvement and reasonably suitable for use for the purpose for which it is designed, then this Lease shall terminate on the date that the condemning authority actually takes possession of the part so condemned or purchased. (b) If this Lease is terminated under the provisions of this Article 35, Rent shall be apportioned and adjusted as of the date of termination. Tenant shall have no claim against Landlord or against the condemning authority for the value of any leasehold estate or for the value of the unexpired Lease Term provided that the foregoing shall not preclude any claim that Tenant may have against the condemning authority for the unamortized cost of leasehold improvements, to the extent the same were installed at Tenant's expense (and not with the proceeds of the Construction Allowance), or for loss of business, moving expenses or other consequential damages, in accordance with subparagraph (d) below. (c) If there is a partial taking of the Building and this Lease is not thereupon terminated under the provisions of this Article 35, then this Lease shall remain in full force and effect, and Landlord shall, within a reasonable time thereafter, repair or reconstruct the remaining portion of the Building to the extent necessary to make the 25 29 same a complete architectural unit; provided that in complying with its obligations hereunder Landlord shall not be required to expend more than the net proceeds of the condemnation award which are paid to Landlord. Rent shall equitably abate during the period of reconstruction with respect to any portion of the Demised Premises which are rendered unsuitable for Tenant's business, as reasonably determined by Tenant. However, if all or any portion of the Building or the Project shall be taken, and such taking shall, in Tenant's reasonable judgment, substantially handicap, impede or impair Tenant's use of the Demised Premises, Tenant shall have the right to terminate this Lease by written notice to Landlord within thirty (30) days after the date of such taking or purchase. (d) All compensation awarded or paid to Landlord upon a total or partial taking of the Demised Premises or the Building shall belong to and be the property of Landlord without any participation by Tenant; provided, however, that should Landlord receive a lump award which expressly includes compensation for (i) Tenant's loss of business, (ii) damage to, and the cost of removal of, trade fixtures, furniture and other personal property belonging to Tenant, or (iii) the cost of any leasehold improvements installed at Tenant's expense, Landlord shall promptly deliver to Tenant the portion of the award which represents compensation for such items. Nothing herein shall be construed to preclude Tenant from prosecuting any claim directly against the condemning authority for loss of business, for damage to, and cost of removal of, trade fixtures, furniture and other personal property belonging to Tenant, and for the unamortized cost of leasehold improvements to the extent same were installed at Tenant's expense (and not with the proceeds of the Construction Allowance), provided, however, that no such claim shall diminish or adversely affect Landlord's award. In no event shall Tenant have or assert a claim for the value of any unexpired term of this Lease. Subject to the foregoing provisions of this subparagraph (d), Tenant hereby assigns to Landlord any and all of its right, title and interest in or to any compensation awarded or paid as a result of any such taking. (e) Notwithstanding anything to the contrary contained in this Article 35, if, during the Lease Term, the use or occupancy of any part of the Building or the Demised Premises shall be taken or appropriated temporarily for any public or quasi-public use under any governmental law, ordinance, or regulations, or by right of eminent domain, this Lease shall be and remain unaffected by such taking or appropriation and Tenant shall continue to pay in full all Rent payable hereunder by Tenant during the Lease Term. In the event of any such temporary appropriation or taking, Tenant shall be entitled to receive that portion of any award which represents compensation for the loss of use or occupancy of the Demised Premises during the Lease Term, and Landlord shall be entitled to receive that portion of any award which represents the cost of restoration and compensation for the loss of use or occupancy of the Demised Premises after the end of the Lease Term. 26 30 36. Parties. The term "Landlord", as used in this Lease, shall include Landlord and its assigns and successors. It is hereby covenanted and agreed by Tenant that should Landlord's interest in the Demised Premises cease to exist for any reason during the Lease Term, then notwithstanding the happening of such event, this Lease nevertheless shall remain in full force and effect, and Tenant hereby agrees to attorn to the then owner of the Demised Premises. The term "Tenant" shall include Tenant and its heirs, legal representatives and successors, and shall also include Tenant's assignees and sublessees, if this Lease shall be validly assigned or the Demised Premises sublet for the balance of the Lease Term or any renewals or extensions thereof. In addition, Landlord and Tenant covenant and agree that Landlord's right to transfer or assign Landlord's interest in and to the Demised Premises, or any part or parts thereof, shall be unrestricted, and that in the event of any such transfer or assignment by Landlord which includes the Demised Premises, Landlord's obligations to Tenant hereunder shall cease and terminate, and Tenant shall look only and solely to Landlord's assignee or transferee for performance thereof. Notwithstanding the foregoing, Landlord shall not be released from such liability under any of its covenants and obligations contained in or derived from this Lease arising out of any acts, occurrences or omissions occurring after the consummation of such transfer or assignment unless the transferee or assignee of the Demised Premises shall assume obligations of Landlord under this Lease. Furthermore, in no event shall Landlord be released from any obligations or liabilities accruing prior to the date of such transfer or assignment. 37. Liability. Except to the extent covered by and actually funded under any of the insurance provided or to be provided under the provisions of Articles 17 and 18 hereof, Tenant hereby indemnifies Landlord from and agrees to hold Landlord harmless against, any and all liability, loss, cost, damage or expense, including, without limitation, court costs and reasonable attorneys' fees actually incurred, imposed on Landlord by any person whomsoever, caused by the gross negligence or willful misconduct of Tenant, or any of its partners, employees, contractors, servants, agents, subtenants, or legal representatives, acting within the scope of their authority. Except to the extent covered by and actually funded under any of the insurance provided or to be provided under the provisions of Articles 17 and 18 hereof, Landlord hereby indemnifies Tenant from, and agrees to hold Tenant harmless against, any and all liability, loss, cost, damage or expense, including without limitation, court costs and reasonable attorneys' fees, imposed on Tenant by any person whomsoever, caused by the gross negligence or willful misconduct of Landlord, or any of its partners, employees, contractors, servants, agents or legal representatives, acting within the scope of their authority. Notwithstanding any provision of this Lease to the contrary, in no event shall Landlord or Tenant have any liability to the other party for lost profits. The provisions of this Article 37 shall survive the expiration or any termination of this Lease. The party claiming to be indemnified (the "Indemnitee") hereunder shall promptly notify the other party (the "Indemnitor") in writing of any liability or asserted liability which may result in a claim of indemnification. Indemnitor shall have, at its option, the right to compromise or defend any such matter through legal counsel of its own choosing, subject to Indemnitee's consent of such legal counsel, such consent of Indemnitee not to be unreasonably withheld or delayed. If Indemnitor elects to compromise or defend any such liability pursuant to the preceding sentence, Indemnitor shall notify Indemnitee in writing promptly of its intention to do so. Indemnitee shall cooperate 27 31 with Indemnitor and its legal counsel in any compromise or defense against any such liability or asserted liability. 38. Relocation of the Premises. INTENTIONALLY DELETED. 39. Force Majeure. In the event of strike, lockout, labor trouble, civil commotion, Act of God, or any other cause beyond a party's control (collectively "force majeure") resulting in the Landlord's inability to supply the services or perform the other obligations required of Landlord hereunder, this Lease shall not terminate and Tenant's obligation to pay Rent and all other charges and sums due and payable by Tenant shall not be affected or excused and Landlord shall not be considered to be in default under this Lease. If, as a result of force majeure, Tenant is delayed in performing any of its obligations under this Lease, and to pay Rent and all other charges and sums payable by Tenant hereunder, Tenant's performance shall be excused for a period equal to such delay and Tenant shall not during such period be considered to be in default under this Lease with respect to the obligation, performance of which has thus been delayed. 40. Landlord's Liability. Landlord shall have no personal liability with respect to any of the provisions of this Lease. If Landlord is in default with respect to its obligations under this Lease, Tenant shall look solely to the equity of Landlord in and to the Building and the Land described in Exhibit "A" hereto for satisfaction of Tenant's remedies, if any. It is expressly understood and agreed that Landlord's liability under the terms of this Lease shall in no event exceed the amount of its interest in and to said Land and Building. In no event shall any partner of Landlord nor any joint venturer in Landlord, nor any officer, director or shareholder of Landlord or any such partner or joint venturer of Landlord be personally liable with respect to any of the provisions of this Lease. 41. Landlord's Covenant of Quiet Enjoyment. Provided Tenant performs the terms, conditions and covenants of this Lease, and subject to the terms and provisions hereof, Landlord covenants and agrees to take all necessary steps to secure and to maintain for the benefit of Tenant the quiet and peaceful possession of the Demised Premises, for the Lease Term, without hindrance, claim or molestation by Landlord or any other person lawfully claiming under Landlord. 42. Security Deposit. INTENTIONALLY DELETED. 43. Hazardous Substances. Tenant hereby covenants and agrees that Tenant shall not cause or permit any "Hazardous Substances" (as hereinafter defined) to be generated, placed, held, stored, used, located or disposed of at the Project or any part thereof, except for Hazardous Substances as are commonly and legally used or stored as a consequence of using the Demised Premises for general office and administrative purposes, but only so long as the quantities thereof do not pose a threat to public health or to the environment or would necessitate a "response action", as that term is defined in CERCLA (as hereinafter defined), and so long as Tenant strictly complies or causes compliance with all applicable governmental rules and regulations concerning the use, storage, production, transportation and disposal of such Hazardous 28 32 Substances. Promptly upon receipt of Landlord's request, Tenant shall submit to Landlord true and correct copies of any reports filed by Tenant with any governmental or quasi-governmental authority regarding the generation, placement, storage, use, treatment or disposal of Hazardous Substances on or about the Demised Premises. For purposes of this Article 43, "Hazardous Substances" shall mean and include those elements or compounds which are contained in the list of Hazardous Substances adopted by the United States Environmental Protection Agency (EPA) or in any list of toxic pollutants designated by Congress or the EPA or which are defined as hazardous, toxic, pollutant, infectious or radioactive by any other federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to or imposing liability (including, without limitation, strict liability) or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or material, as now or at any time hereinafter in effect (collectively "Environmental Laws"). Tenant hereby agrees to indemnify Landlord and hold Landlord harmless from and against any and all losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of settlement or judgment and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against, Landlord by any person, entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence in, or the escape, leakage, spillage, discharge, emission or release from, the Demised Premises of any Hazardous Substances (including, without limitation, any losses, liabilities, including strict liability, damages, injuries, expenses, including reasonable attorneys' fees, costs of any settlement or judgment or claims asserted or arising under the Comprehensive Environmental Response, Compensation and Liability Act ["CERCLA"], any so-called federal, state or local "Superfund" or "Superlien" laws or any other Environmental Law); provided, however, that the foregoing indemnity is limited to matters arising solely from Tenant's violation of the covenant contained in this Article. The obligations of Tenant under this Article shall survive any expiration or termination of this Lease. 44. Submission of Lease. The submission of this Lease for examination does not constitute an offer to lease and this Lease shall be effective only upon execution hereof by Landlord and Tenant. 45. Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, the remainder of this Lease shall not be affected thereby, and in lieu of each clause or provision of this Lease which is illegal, invalid or unenforceable, there shall be added as a part of this Lease a clause or provision as nearly identical to the said clause or provision as may be legal, valid and enforceable. 46. Entire Agreement. This Lease contains the entire agreement of the parties and no representations, inducements, promises or agreements, oral or otherwise, between the parties not embodied herein shall be of any force or effect. No failure of Landlord to exercise any power given Landlord hereunder, or to insist upon strict compliance by Tenant with any obligation of Tenant hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of Landlord's right to demand exact compliance with the terms hereof. This Lease may not be altered, waived, amended or extended except by an instrument in writing 29 33 signed by Landlord and Tenant. This Lease is not in recordable form, and Tenant agrees not to record or cause to be recorded this Lease or any short form or memorandum thereof. 47. Headings. The use of headings herein is solely for the convenience of indexing the various paragraphs hereof and shall in no event be considered in construing or interpreting any provision of this Lease. 48. Broker. CPI HAS REPRESENTED LANDLORD IN THIS TRANSACTION, AND CARTER & ASSOCIATES HAS REPRESENTED TENANT IN THIS TRANSACTION. BROKER(S) (AS DEFINED IN ARTICLE 1[O]) IS (ARE) ENTITLED TO A LEASING COMMISSION FROM LANDLORD BY VIRTUE OF THIS LEASE, WHICH LEASING COMMISSION SHALL BE PAID BY LANDLORD TO BROKER(S) IN ACCORDANCE WITH THE TERMS OF A SEPARATE AGREEMENT BETWEEN LANDLORD AND BROKER(S). Tenant hereby authorizes Broker(s) and Landlord to identify Tenant as a tenant of the Building and to state the amount of space leased by Tenant in advertisements and promotional materials relating to the Building. Tenant represents and warrants to Landlord that (except with respect to any Broker[s] identified in Article 1[o] hereinabove) no broker, agent, commission salesperson, or other person has represented Tenant in the negotiations for and procurement of this Lease and of the Demised Premises and that (except with respect to any Broker[s] identified in Article 1[o] hereinabove) no commissions, fees, or compensation of any kind are due and payable in connection herewith to any broker, agent, commission salesperson, or other person as a result of any act or agreement of Tenant. Tenant agrees to indemnify and hold Landlord harmless from all loss, liability, damage, claim, judgment, cost or expense (including reasonable attorneys' fees and court costs) suffered or incurred by Landlord as a result of a breach by Tenant of the representation and warranty contained in the immediately preceding sentence or as a result of Tenant's failure to pay commissions, fees, or compensation due to any broker who represented Tenant, whether or not disclosed, or as a result of any claim for any fee, commission or similar compensation with respect to this Lease made by any broker, agent or finder (other than the Broker[s] identified in Article 1[o] hereinabove) claiming to have dealt with Tenant, whether or not such claim is meritorious. Tenant shall cause any agent or broker representing Tenant to execute a lien waiver to and for the benefit of Landlord, waiving any and all lien rights with respect to the Building and Land which such agent or broker has or might have under Georgia law. 49. Governing Law. The laws of the State of Georgia shall govern the validity, performance and enforcement of this Lease. 50. Special Stipulations. The special stipulations attached hereto as Exhibit "G" are hereby incorporated herein by this reference as though fully set forth (if none, so state). 51. Authority. If Tenant executes this Lease as a corporation, each of the persons executing this Lease on behalf of Tenant does hereby personally represent and warrant that Tenant is a duly incorporated or a duly qualified (if a foreign corporation) corporation and is fully authorized and qualified to do business in the State in which the Demised Premises are 30 34 located, that the corporation has full right and authority to enter into this Lease, and that each person signing on behalf of the corporation is an officer of the corporation and is authorized to sign on behalf of the corporation. If Tenant signs as a partnership, joint venture, or sole proprietorship or other business entity (each being herein called "Entity"), each of the persons executing on behalf of Tenant does hereby covenant and warrant that Tenant is a duly authorized and existing Entity, that Tenant has full right and authority to enter into this Lease, that all persons executing this Lease on behalf of the Entity are authorized to do so on behalf of the Entity, and that such execution is fully binding upon the Entity and its partners, joint venturers, or principal, as the case may be. Upon the request of Landlord, Tenant shall deliver to Landlord reasonable documentation satisfactory to Landlord evidencing Tenant's compliance with this Article, and Tenant agrees to promptly execute all necessary and reasonable applications or documents as reasonably requested by Landlord, required by the jurisdiction in which the Demised Premises is located, to permit the issuance of necessary permits and certificates for Tenant's use and occupancy of the Demised Premises. 52. Financial Statements. Upon Landlord's written request therefor, but not more often than once per year, Tenant shall promptly furnish to Landlord a financial statement with respect to Tenant for its most recent fiscal year prepared in accordance with generally accepted accounting principles and certified to be true and correct by Tenant, which statement Landlord agrees to keep confidential and not use except in connection with proposed sale or loan transactions. 53. Joint and Several Liability. INTENTIONALLY DELETED. 54. ERISA Compliance. Tenant represents to Landlord that Tenant is not an "employee benefit plan", a "plan" or a "governmental plan" as defined below or an entity whose assets constitute "plan assets" as defined below. The term "employee benefit plan" means an "employee benefit plan" as defined in Section 3(3) of the Employment Retirement Income Security Act of 1974, as amended ("ERISA"), which is subject to Title I of ERISA. The term "plan" means a "plan" as defined in Section 4975(e)(i) of the Internal Revenue Code of 1986, as amended. The term "governmental plan" means a "governmental plan" within the meaning of Section 3(32) of ERISA. The term "plan assets" means "plan assets" of one or more plans within the meaning of 2a C.F.R. 2510.3-101. 31 35 IN WITNESS WHEREOF, the parties have hereunto set their hands and seals as of the day, month and year first above written. "LANDLORD": WILDWOOD ASSOCIATES, a Georgia general partnership By: Cousins Properties Incorporated, Managing General Partner By: --------------------------------- Its: --------------------------------- (CORPORATE SEAL) "TENANT": THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC. By: ------------------------------------- Its: ------------------------------------- Attest: ------------------------------------- Its: ------------------------------------- (CORPORATE SEAL) 32 36 RULES AND REGULATIONS 1. No sign, picture, advertisement or notice visible from the exterior of the Demised Premises shall be installed, affixed, inscribed, painted or otherwise displayed by Tenant on any part of the Demised Premises or the Building unless the same is first approved by Landlord. Any such sign, picture, advertisement or notice approved by Landlord shall be painted or installed for Tenant at Tenant's cost by Landlord or by a party approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. No awnings, curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with any window or door of the Demised Premises without the prior consent of the Landlord, which approval shall not be unreasonably withheld, conditioned or delayed, including approval by the Landlord of the quality, type, design, color and manner of attachment. In the event of any breach of the foregoing, Landlord may remove the applicable item, and Tenant agrees to pay the cost and expense of such removal. 2. Tenant agrees that its use of electrical current shall never exceed the capacity of existing feeders, risers or wiring installation. 3. The Demised Premises shall not be used for storage of merchandise held for sale to the general public. Tenant shall not do or permit to be done in or about the Demised Premises or Building anything which shall increase the rate of insurance on said Building or obstruct or interfere with the rights of other lessees of Landlord or annoy them in any way, including, but not limited to, using any musical instrument, making loud or unseemly noises, or singing, etc. The Demised Premises shall not be used for sleeping or lodging. No cooking or related activities shall be done or permitted by Tenant in the Demised Premises except with permission of Landlord. Tenant will be permitted to use for its own employees within the Demised Premises a small microwave oven and Underwriters' Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages, provided that such use is in accordance with all applicable federal, state, county and city laws, codes, ordinances, rules and regulations, and provided that such use shall not result in the emission of odors from the Demised Premises into the common area of the Building. No vending machines of any kind will be installed, permitted or used on any part of the Demised Premises without the prior consent of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. No part of said Building or Demised Premises shall be used for gambling, immoral or other unlawful purposes. No intoxicating beverage shall be sold in said Building or Demised Premises without prior written consent of the Landlord. No area outside of the Demised Premises shall be used for storage purposes at any time. 4. No birds or animals of any kind shall be brought into the Building (other than trained assist dogs required to be used by the visually impaired). No bicycles, motorcycles or other motorized vehicles shall be brought into the Building. 37 5. The sidewalks, entrances, passages, corridors, halls, elevators, and stairways in the Building shall not be obstructed by Tenant or used for any purposes other than those for which same were intended as ingress and egress. No windows, floors or skylights that reflect or admit light into the Building shall be covered or obstructed by Tenant, and no articles shall be placed on the window sills of the Building. Toilets, wash basins and sinks shall not be used for any purpose other than those for which they were constructed, and no sweeping, rubbish, or other obstructing or improper substances shall be thrown therein. Any damage resulting to them, or to heating apparatus, from misuse by Tenant or its employees, shall be borne by Tenant. 6. Only one key for each office in the Demised Premises will be furnished Tenant without charge. Landlord may make a reasonable charge for any additional keys. No additional lock, latch or bolt of any kind shall be placed upon any door nor shall any changes be made in existing locks without written consent of Landlord and Tenant shall in each such case furnish Landlord with a key for any such lock. Notwithstanding anything to the contrary contained herein, Landlord's use of any keys or electronic access pass to the Demised Premises shall be coordinated with Tenant (except in the case of emergency), and Landlord shall use reasonable efforts to secure such keys or other access devices to prevent unauthorized use of same. At the termination of the Lease, Tenant shall return to Landlord all keys furnished to Tenant by Landlord, or otherwise procured by Tenant, and in the event of loss of any keys so furnished, Tenant shall pay to Landlord the cost thereof. 7. Landlord shall have the right to prescribe the weight, position and manner of installation of heavy articles such as safes, machines and other equipment brought into the Building. Tenant shall not allow the building structure within the Demised Premises, nor shall Tenant cause the elevators of the Building, to be loaded beyond rated capacities. No safes, furniture, boxes, large parcels or other kind of freight shall be taken to or from the Demised Premises or allowed in any elevator, hall or corridor except at times allowed by Landlord. Tenant shall make prior arrangements with Landlord for use of freight elevator for the purpose of transporting such articles and such articles may be taken in or out of said Building only between or during such hours as may be arranged with and designated by Landlord. The persons employed to move the same must be approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed. Landlord reserves the right to inspect and, where deemed appropriate by Landlord, to open all freight coming into the Building and to exclude from entering the Building all freight which is in violation of any of these Rules and Regulations and all freight as to which inspection is not permitted. No hand trucks shall be used in passenger elevators. All hand trucks used by Tenant or its service providers for the delivery or receipt of any freight shall be equipped with rubber tires. 2 38 8. Tenant shall not cause or permit any gases, liquids or odors to be produced upon or permeate from the Demised Premises, and no flammable, combustible or explosive fluid, chemical or substance shall be brought into the Building. Smoking shall not be permitted in any common areas of the Building or the Project or in any premises within the Building; provided, however, smoking shall be permitted in any premises of the Building where the tenant of such premises makes arrangements with Landlord for the installation at such tenant's cost of filtration or other equipment which in Landlord's judgment is adequate to prevent smoke from leaving such premises and entering the common areas or other premises of the Building. Until such approved equipment is installed, smoking shall not be permitted in a tenant's premises. If Tenant shall assert that the air quality in the Demised Premises is unsatisfactory or if Tenant shall request any air quality testing within the Demised Premises, Landlord may elect to cause its consultant to test the air quality within the Demised Premises and to issue a report regarding same. If the report from such tests indicates that the air quality within the Demised Premises is comparable to the air quality of other first-class office buildings in the market area of the Building, or if the report from such tests indicates that the air quality does not meet such standard as a result of the activities caused or permitted by Tenant in the Demised Premises, Tenant shall reimburse Landlord for all costs of the applicable tests and report. Additionally, in the event Tenant shall cause or permit any activity which shall adversely affect the air quality in the Demised Premises, in the common area of the Building or in any premises within the Building, Tenant shall be responsible for all costs of remedying same. 9. Every person, including Tenant, its employees and visitors, entering and leaving the Building may be questioned by a watchman as to that person's business therein and may be required to sign such person's name on a form provided by Landlord for registering such person; provided that, except for emergencies or other extraordinary circumstances, such procedures shall not be required between the hours of 7:00 a.m. and 7:00 p.m., on all days except Saturdays, Sundays and Holidays. Landlord may also implement a card access security system to control access to the Building during such other times. Landlord shall not be liable for excluding any person from the Building during such other times, or for admission of any person to the Building at any time, or for damages or loss for theft resulting therefrom to any person, including Tenant. 10. Unless agreed to in writing by Landlord, Tenant shall not employ any person other than Landlord's contractors for the purpose of cleaning and taking care of the Demised Premises, excluding those vendors used by Tenant for security purposes. Cleaning service will not be furnished on nights when rooms are occupied after 6:30 p.m., unless, by agreement in writing, service is extended to a later hour for specifically designated rooms. Landlord shall not be responsible for any loss, theft, mysterious disappearance of or damage to, any property, however occurring. Only persons authorized by the Landlord may furnish ice, drinking water, towels, and other similar services within the Building and only at hours and under regulations fixed by Landlord. 3 39 11. No connection shall be made to the electric wires or gas or electric fixtures, without the consent in writing on each occasion of Landlord. All glass, locks and trimmings in or upon the doors and windows of the Demised Premises shall be kept whole and in good repair. Tenant shall not injure, overload or deface the Building, the woodwork or the walls of the Demised Premises, nor permit upon the Demised Premises any noisome, noxious, noisy or offensive business. 12. If Tenant requires wiring for a bell or buzzer system, such wiring shall be done by the electrician of the Landlord only, and no outside wiring men shall be allowed to do work of this kind unless by the written permission of Landlord or its representatives, which permission shall not be unreasonably withheld, conditioned or delayed. If telegraph or telephonic service is desired, the wiring for same shall be approved by Landlord, and no boring or cutting for wiring shall be done unless approved by Landlord or its representatives, as stated. The electric current shall not be used for power or heating unless written permission to do so shall first have been obtained from Landlord or its representatives in writing, and at an agreed cost to Tenant. 13. Tenant and its employees and invitees shall observe and obey all parking and traffic regulations as imposed by Landlord. All vehicles shall be parked only in areas designated therefor by Landlord. 14. Canvassing, peddling, soliciting and distribution of handbills or any other written materials in the Building are prohibited, and Tenant shall cooperate to prevent the same. 15. Tenant agrees to participate in the waste recycling programs implemented by Landlord for the Building, including any programs and procedures for recycling writing paper, computer paper, shipping paper, boxes, newspapers and magazines and aluminum cans; provided, however, Tenant shall not be obligated to participate in any such program which, in Tenant's reasonable judgment, compromises its internal security, or is necessary to prevent disclosure of its trade secrets or other proprietary information. If Landlord elects to provide collection receptacles for recyclable paper and/or recyclable aluminum cans in the Demised Premises, Tenant shall designate an appropriate place within the Demised Premises for placement thereof, and Tenant shall cause its employees to place their recyclable papers and/or cans into the applicable such receptacles on a daily basis. 16. Any special work or services requested by Tenant to be provided by Landlord shall be provided by Landlord only upon request received at the Project management office. Building personnel shall not perform any work or provide any services outside of their regular duties unless special instructions have been issued from Landlord or its managing agent. 17. Landlord shall have the right to change the name of the Building and to change the street address of the Building, provided that in the case of a change in the street address, 4 40 Landlord shall give Tenant not less than 180 days' prior notice of the change, unless the change is required by governmental authority. 18. The directory of the Building will be provided for the display of the name and location of the tenants. Any additional name which Tenant shall desire to place upon said directory must first be approved by Landlord, and if so approved, a reasonable charge will be made therefor. 19. Landlord may waive any one or more of these Rules and Regulations for the benefit of any particular lessee, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other lessee, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the other lessees of the Building. 20. These Rules and Regulations are supplemental to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of any premises in the Building. 21. Landlord reserves the right to make such other and reasonable uniform, non-discriminatory Rules and Regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Building, the Land and Wildwood Office Park, and for the preservation of good order therein. 5 41 EXHIBIT "A" Legal Description of Land 42 EXHIBIT "B" Floor Plan 43 EXHIBIT "C" SUPPLEMENTAL NOTICE Re: Lease dated as of _________, 1998, by and between WILDWOOD ASSOCIATES, as Landlord, and THE PROFIT RECOVERY GROUP INTERNATIONAL I, INC., as Tenant. Dear Sirs: Pursuant to Article 3 of the captioned Lease, please be advised as follows: 1. The Rental Commencement Date is the__ day of__ , 199__, and the expiration date of the Lease Term is the__ day of , _____, subject however to the terms and provisions of the Lease. 2. Terms denoted herein by initial capitalization shall have the meanings ascribed thereto in the Lease. "LANDLORD": WILDWOOD ASSOCIATES, a Georgia general partnership By: Cousins Properties Incorporated, Managing General Partner By: ---------------------------------- Its: ---------------------------------- (CORPORATE SEAL) 44 EXHIBIT "D" CONSTRUCTION Tenant is taking the Demised Premises in its "as is" condition. Landlord has no obligation to provide any work therein or any allowance therefor. 45 EXHIBIT "E" BUILDING STANDARD SERVICES Landlord shall furnish the following services to Tenant during the Lease Term (the "Building Standard Services"): (a) Common-use restrooms (with cold and tempered domestic water) and toilets at locations provided for general use and as reasonably deemed by Landlord to be in keeping with the first-class standards of the Building. (b) Subject to curtailment as required by governmental laws, rules or mandatory regulations and subject to the design conditions set forth in paragraph 2(a) of Exhibit "D" attached hereto, central heat and air conditioning in season, at such temperatures and in such amounts as are reasonably deemed by Landlord to be in keeping with the first-class standards of the Building. Such heating and air conditioning shall be furnished between 8:00 a.m. and 6:00 p.m. on weekdays (from Monday through Friday, inclusive) and between 8:00 a.m. and 1:00 p.m. on Saturdays, all exclusive of Holidays, as defined below (the "Building Operating Hours"). (c) Electric lighting service for all public areas and special service areas of the Building in the manner and to the extent reasonably deemed by Landlord to be in keeping with the first-class standards of the Building. (d) Janitor service shall be provided five (5) days per week, exclusive of Holidays (as hereinbelow defined), in a manner that Landlord reasonably deems to be consistent with the first-class standards of the Building. (e) Security services for the Building comparable as to coverage, control and responsiveness (but not necessarily as to means for accomplishing same) to other similarly sized first-class, multi-tenant office buildings in suburban Atlanta, Georgia; provided, however, Landlord shall have no responsibility to prevent, and shall not be liable to Tenant for, any liability or loss to Tenant, its agents, employees and visitors arising out of losses due to theft, burglary, or damage or injury to persons or property caused by persons gaining access to the Building and/or the Demised Premises, and Tenant hereby releases Landlord from all liability for such losses, damages or injury. (f) Sufficient electrical capacity at the building core electrical panels to operate (i) incandescent lights, typewriters, calculating machines, photocopying machines and other machines of the same low voltage electrical consumption (120/208 volts), provided that the total rated electrical design load for said lighting and machines of low electrical voltage shall not exceed 1.54 watts per square foot of rentable area; and (ii) lighting (277/480 volts), provided that the total rated electrical design load for said lighting shall not exceed 2.0 watts per square foot of 46 rentable area (each such rated electrical design load to be hereinafter referred to as the "Building Standard Rated Electrical Design Load"). Should Tenant's total rated electrical design load exceed the Building Standard Rated Electrical Design Load for either low or high voltage electrical consumption, or if Tenant's electrical design requires low voltage or high voltage circuits in excess of Tenant's share of the Building Standard circuits, Landlord will (at Tenant's expense) install such additional circuits and associated high voltage panels and/or additional low voltage panels with associated transformers (which additional circuits, panels and transformers shall be hereinafter referred to as the "Additional Electrical Equipment"). If the Additional Electrical Equipment is installed because Tenant's low or high voltage rated electrical design load exceeds the applicable Building Standard Rated Electrical Design Load, then a meter shall also be added (at Tenant's expense) to measure the electricity used through the Additional Electrical Equipment. The design and installation of any Additional Electrical Equipment (or any related meter) required by Tenant shall be subject to the prior approval of Landlord (which approval shall not be unreasonably withheld). All expenses incurred by Landlord in connection with the review and approval of any Additional Electrical Equipment shall also be reimbursed to Landlord by Tenant. Tenant shall also pay on demand the actual metered cost of electricity consumed through the Additional Electrical Equipment (if applicable), plus any actual accounting expenses incurred by Landlord in connection with the metering thereof. Tenant agrees that if Tenant uses data processing or other electronic equipment which incorporates the use of switched mode power supplies or any other type device causing harmonic distortion on Landlord's power distribution system, Tenant shall install filters at Tenant's cost to eliminate the harmonic distortion. In addition, any damage to Landlord's equipment resulting from harmonic distortion caused by Tenant's electronic equipment shall be repaired at Tenant's expense. Total harmonic distortion shall not exceed thirteen percent (13%). If any of Tenant's electrical equipment requires conditioned air in excess of Building Standard air conditioning, the same shall be installed by Landlord (on Tenant's behalf), and Tenant shall pay all design, installation, metering and operating costs relating thereto. If Tenant requires that certain areas within Tenant's Demised Premises must operate in excess of the normal Building Operating Hours (as hereinabove defined), the electrical service to such areas shall be separately circuited and metered (at Tenant's expense) such that Tenant shall be billed the costs associated with electricity consumed during hours other than Building Operating Hours. (g) All Building Standard fluorescent bulb replacement in all areas and all incandescent bulb replacement in public areas, toilet and restroom areas, and stairwells. (h) Non-exclusive multiple cab passenger service to the floor(s) of the Demised Premises during Building Operating Hours (as hereinabove defined) and at least one (1) cab 2 47 passenger service to the floor(s) on which the Demised Premises are located twenty-four (24) hours per day and non-exclusive freight elevator service during Building Operating Hours (all subject to temporary cessation for ordinary repair and maintenance and during times when life safety systems override normal building operating systems) with such freight elevator service available at other times upon reasonable prior notice and the payment by Tenant to Landlord of any additional expense actually incurred by Landlord in connection therewith. To the extent the services described above require electricity and water supplied by public utilities, Landlord's covenants thereunder shall only impose on Landlord the obligation to use its reasonable efforts to cause the applicable public utilities to furnish same. Except for deliberate and willful acts of Landlord, failure by Landlord to furnish the services described herein, or any cessation thereof, shall not render Landlord liable for damages to either person or property, nor be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from fulfillment of any covenant or agreement hereof. In addition to the foregoing, should any of the equipment or machinery, for any cause, fail to operate, or function properly, Tenant shall have no claim for rebate of rent or damages on account of an interruption in service occasioned thereby or resulting therefrom; provided, however, Landlord agrees to use reasonable efforts to promptly repair said equipment or machinery and to restore said services during normal business hours. If Landlord fails to furnish or delays in furnishing any service Landlord is obligated to provide under this Lease, Tenant shall be entitled to abate Rent until the service is restored, but only under the following terms and conditions: (a) the loss of service was not caused by, through or under Tenant; (b) the loss of service is the result of a cause within Landlord's control; (c) the loss of service must be of a material nature so as to render the Demised Premises substantially unusable for the purposes contemplated by this Lease; (d) Tenant must give written notice promptly to Landlord of the loss of service and its claim for abatement under this provision and, Tenant shall be entitled to abatement of Rent, assuming all other conditions of this provision are satisfied, commencing on the day such service is curtailed, provided that if such service is restored or replaced within eight (8) business days of Landlord's receipt of such notice, then Tenant shall not be entitled to any such abatement; and (e) Landlord may prevent or stop abatement by providing substantially the same service by temporary or alternative means until the cause of the loss of service can be corrected. The following dates shall constitute "Holidays" as that term is used in this Lease: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas, and any other holiday generally recognized as such by landlords of office space in the metropolitan 3 48 Atlanta office market, as determined by Landlord in good faith. If in the case of any specific holiday mentioned in the preceding sentence, a different day shall be observed than the respective day mentioned, then that day which constitutes the day observed by national banks in Atlanta, Georgia on account of said holiday shall constitute the Holiday under this Lease. 4 49 EXHIBIT "F" GUARANTY INTENTIONALLY OMITTED 50 EXHIBIT "G" Special Stipulations 1. Cross Default. Any event of default on the part of The Profit Recovery Group International I, Inc. ("P-I") (an affiliate of Tenant) under the certain Lease Agreement, dated January 30, 1998, involving Landlord and P-I, shall, at Landlord's option and in Landlord's sole discretion, be an event of default on the part of Tenant under this Lease. 2. Renewal Option. Provided that this Lease is then in effect, no Event of Default under this Lease then exists and there is no sublease of any portion of the Demised Premises or assignment of Tenant's interest under this Lease, and otherwise subject to the terms herein set forth, Tenant shall have the option to extend the Lease Term for one (1) period of five (5) years (the "Extended Term"). Such option shall be exercised by written notice to Landlord given on or before the date which is twelve (12) months prior to the expiration of the initial Lease Term, and such notice shall be irrevocable. The Extended Term shall be upon the same covenants, agreements, terms, provisions and conditions that are contained herein for the initial Lease Term, as the same shall then be in effect hereunder, and the Base Rental Rate for the first (1st) year of such five (5) year period shall initially be $19.50 per square foot of Rentable Floor Area per annum, such Base Rental Rate increasing annually in the manner set forth in Article 7 of the Lease; provided, however, in no event shall the Base Rental Rate increase by in excess of three percent (3%) per annum. If Tenant fails to timely give such notice, the Renewal Option shall be deemed terminated. 3. Parking. Tenant shall have the right to use up to ten (10) reserved parking spaces in parking facilities for the Building, without any additional out-of-pocket charge due from Tenant. Such reserved parking spaces will be in an area as Landlord elects, and which Landlord may relocate, all in Landlord's sole discretion. Such reserved parking spaces will be marked by such designation as Landlord reasonably selects. 4. Possible Expansion of Demised Premises. Provided this Lease is then in full force and effect and Tenant is in full compliance with the terms and conditions of this Lease, and there is no sublease of any portion of the Premises or assignment of any of Tenant's interest in the Lease, Landlord hereby grants Tenant the right to lease any other "available" space in the Building. For the purposes of this Lease, "available space" shall mean space that is unleased, unoccupied, and unencumbered by an option, expansion right, refusal right or the like (the "Expansion Space"), at a rate and upon such other terms as Landlord shall indicate in a notice to Tenant. Landlord shall use its reasonable efforts to provide Tenant with notice when Expansion Space becomes available; provided, however, that a failure by Landlord to provide notice to Tenant of the availability of any Expansion Space shall not be a default on the part of Landlord hereunder. Tenant shall have fifteen (15) days after Landlord notifies Tenant of any Expansion Space available, to accept or reject such offer. To accept such offer, Tenant must elect to lease all of the Expansion Space then offered to 51 Tenant. If Tenant rejects such offer or fails to respond within said fifteen (15) day period, then Landlord shall be entitled to rent said space to a third party, and Tenant shall have no further rights to the Expansion Space in question. If Tenant accepts said offer, then Tenant shall have leased such space upon the terms contained in said offer. The Rent for said Expansion Space shall commence on the earlier to occur of (i) sixty (60) days after such Expansion Space first becomes available so that tenant fit-up and finish work can commence therein, or (ii) on the date Tenant occupies said Expansion Space. Such space, if any is available, shall be leased on such terms as Landlord and Tenant may agree, but there is no guaranty that such space shall be available at all, or on terms that Tenant may find acceptable. Attached to this Lease as Exhibit "H", for Tenant's information, is a list of when certain leases in the Building are currently scheduled to expire. However, all or any of such leases may have renewal rights or opportunities, which would alter the availability of such space, and Landlord makes no representation herein as to the availability of such space. 5. Signage. (a) Tenant shall have the right to up to eight (8) directory strips, on the Building's directory. The cost of such strips shall be at Tenant's expense. (b) Tenant shall have the right to place and maintain, at Tenant's expense, Tenant's own signage on any floor which Tenant leases and occupies in its entirety. (c) If Landlord elects to erect a Building monument sign for and to identify multiple tenants (which Landlord has no obligation to do), then Landlord shall provide Tenant (but no assignee or sublessee of Tenant) with the opportunity to identify Tenant on such a sign, at Tenant's sole cost and expense. 2 EX-10.5 6 STOCK INCENTIVE PLAN 1 THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. STOCK INCENTIVE PLAN SECTION 1. PURPOSE. The purpose of The Profit Recovery Group International, Inc. Stock Incentive Plan (the "Plan") is to enable The Profit Recovery Group International, Inc. (the "Company") to attract, retain and reward directors, officers and other employees of, and consultants and advisors to, the Company, and any Subsidiaries, Parent or Affiliates thereof, and strengthen the mutuality of interests between such persons and the Company's shareholders, by offering such persons performance based stock incentives and/or other equity interests or equity-based incentives in the Company. SECTION 2. DEFINITIONS. For purposes of the Plan, the following terms shall be defined as set forth below: (a) "Affiliate" means any corporation, partnership or other entity controlled by, or under common control with, the Company. For these purposes, control shall consist of the ownership, either directly or indirectly, of more than 50% of the ownership interests of an entity. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (d) "Committee" means the Committee referred to in Section 3 of the Plan. If at any time no Committee shall be in office, then the functions of the Committee specified in the Plan may be exercised by the Board, as set forth in Section 3 hereof. (e) "Company" means The Profit Recovery Group International, Inc., a corporation organized under the laws of the State of Georgia, or any successor corporation. (f) "Fair Market Value" means, for purposes of determining the exercise price for a Stock Option or SAR granted hereunder, as of any given date: (i) if the Stock is listed on an established stock exchange or exchanges, or traded on the Nasdaq National Market System ("Nasdaq/NMS") the closing price of the Stock as listed thereon on the applicable day, or if no sale of Stock has been made on any exchange on that date, on the next preceding day on which there was a sale of Stock; (ii) if the Stock is not listed on an established stock exchange or Nasdaq/NMS but is instead traded over-the-counter, the mean of the dealer "bid" and "ask" prices of the Stock in the over-the-counter market on the applicable day, as reported by the National Association of Securities Dealers, Inc.; 2 (iii) if the Stock is not listed on any exchange or traded over-the-counter, the value as determined in good faith by the Committee; (g) "Incentive Stock Option" means any Stock Option intended to be and designated as an "Incentive Stock Option" within the meaning of Section 422 of the Code. (h) "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option. (i) "Optionee" means any person holding an Option in accordance with the terms of this Plan. (j) "Parent" means any corporation (other than the Company) and any successor corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. (k) "Plan" is defined in Section 1 hereof and includes the Plan as hereinafter amended from time to time. (l) "Plan Participant" means any person granted an Option SAR or Stock Award pursuant to the Plan. (m) "SAR" means a stock appreciation right which entitles a Plan Participant to receive, in cash or Stock (as determined in accordance with Section 6(g)) value equal to all or a portion of the excess of: (a) the Fair Market Value of a specified number of shares of Stock at the time of exercise, over (b) an exercise price established by the Committee. (n) "Stock" means the common stock of the Company. (o) "Stock Award" means a grant of shares of Stock or of a right to receive shares of Stock (or their cash equivalent or a combination of both) in the future. (p) "Stock Option" or "Option" means any option to purchase shares of Stock granted pursuant to the Plan. (q) "Subsidiary" means any corporation (other than the Company) and any successor corporation in an unbroken chain of corporations beginning with the Company if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. -2- 3 SECTION 3. ADMINISTRATION. (a) By Committee. The Plan shall be administered by a Committee of not less than two Directors who are not employees of the Company, who shall be members of the Board and who shall serve at the pleasure of the Board. The functions of the Committee specified in the Plan may be exercised by the Board, if and to the extent that no Committee exists which has the authority to so administer the Plan. (b) Authority of Committee The Committee shall have full authority to grant, pursuant to the terms of the Plan, Stock Options, SARs and Stock Awards to directors, officers and other key employees, consultants and advisors eligible to be Plan Participants under Section 5 hereof. The Committee shall have the authority to adopt, alter and repeal such rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any award under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. Without limiting the generality of the foregoing, the Committee shall have the authority: (i) to select the directors, officers and other key employees of, and consultants and advisors to, the Company and any Subsidiaries, Parent and Affiliate to whom Stock Options, SARs and other Stock Awards may from time to time be granted hereunder; (ii) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, SARS and other Stock Awards or any combination thereof are to be granted hereunder to one or more eligible persons; (iii) to determine the number of shares subject to each such Option, SAR and other Stock Award granted hereunder; (iv) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option, SAR or other Stock Award granted hereunder including, but not limited to, the exercise price, or any vesting, acceleration, or forfeiture restrictions regarding any Option, SAR or other Stock Award and/or the shares of Stock relating thereto, or any other restrictions and to waive any such terms or conditions in each case on such factors as the Committee shall determine, in its sole discretion; and (v) to determine whether and under what circumstances cash payments shall be made upon the termination of a Stock Option, SAR or other Stock Award, and whether and under what circumstances Stock acquired pursuant to the exercise of a Stock Option or SAR or pursuant to the grant of a Stock Award shall be repurchased by the Company. (c) Committee Decisions Final and Binding. All decisions made by the Committee pursuant to the provisions of the Plan shall be made in the Committee's sole discretion and shall be final and binding on all persons, including the Company and Plan Participants. -3- 4 (d) Indemnification. In addition to such other rights of indemnification that they may have as directors of the Company or as members of the Committee, the members of the Committee shall be indemnified by the Company against the reasonable expenses, including attorneys' fees actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any option granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee member is liable for negligence or misconduct in the performance of his or her duties. SECTION 4. STOCK SUBJECT TO PLAN. The total number of shares of Stock reserved and available for distribution under the Plan shall be 4,500,000 shares (including shares subject to previous grants under the Company's 1996 Stock Option Plan), subject to adjustment as set forth herein, increased from time to time by action of the Board of Directors and the Stockholders of the Company. Such shares may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any outstanding Option, SAR or other Stock Award under the Plan expires or is terminated, the shares allocated to the unexercised portion of such Option, SAR or other Stock Award shall again be available for future Stock Option grants. Notwithstanding the foregoing, (i) The maximum number of shares that may be covered by awards granted to any one individual pursuant to Section 6 (relating to Options and SARs) shall be 500,000 shares during any consecutive 12 month period. (ii) The maximum number of shares that may be covered by Stock Awards granted to any one individual pursuant to Section 7 shall be 500,000 shares during any consecutive 12 month period. In the event of any transaction described in Section 8(d) hereof, such substitution or adjustment shall be made in the aggregate number of shares reserved for issuance under the Plan, in the individual maximums set forth above, in the number and option price of shares subject to outstanding Options and SARs and in the number of shares subject to outstanding Stock Awards such that each Plan Participant will continue to hold the same economic equivalent he had immediately prior to such transaction and such that all maximums will be increased or decreased in accordance with such transaction, provided that the number of shares subject to any such award shall always be a whole number. -4- 5 SECTION 5. ELIGIBILITY. Directors, officers and key employees of, and consultants and advisors to, the Company and any Subsidiaries, Parent and Affiliate thereof who are responsible for or contribute to the management, growth and/or profitability of the business of the Company and/or any Subsidiaries, Parent and Affiliate thereof are eligible to be Plan Participants and to receive awards under the Plan. SECTION 6. TERMS AND CONDITIONS OF OPTIONS AND SARS. Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options, and (ii) Non-Qualified Stock Options. The Committee shall have the authority to grant to any eligible person Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options; provided, however, that no person who is not an employee of the Company, its Parent or its Subsidiaries shall be eligible to be granted Incentive Stock Options. Options and SARs granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable: (a) Option Designation. Each Option granted under the Plan shall be clearly identified at the time of grant as an Incentive Stock Option or a Non-Qualified Stock Option. An Incentive Stock Option may not be granted in tandem stock option arrangements under the Plan (i.e., where an Incentive Stock Option is issued together with a Non-Qualified Stock Option and the exercise of either type of Option affects the right to exercise the other type of Option). (b) Written Agreement. Each Option and SAR granted under the Plan shall be evidenced by a written agreement in such form as the Committee shall from time to time approve. All such agreements shall comply with and be subject to the terms of the Plan. (c) Exercise Price. The "Exercise Price" of each Option and SAR granted under this Section 6 shall be established by the Committee or shall be determined by a method established by the Committee at the time the Option or SAR is granted; except that the Exercise Price shall not be less than the greater of 100% of the Fair Market Value or the par value of a share of Stock as of the Pricing Date, as defined below. However, if the Plan Participant owns more than 10% of the total combined voting power of all classes of capital stock of the Company or any Subsidiary or Parent, the Exercise Price of an Incentive Stock Option granted to such Plan Participant shall not be less than 110% of the Fair Market Value of a share of Stock as of the Pricing Date. For purposes of the preceding sentence, the "Pricing Date" shall be the date on which the Option or SAR is granted, except that the Committee may provide that: (i) the Pricing Date is the date on which the recipient is hired or promoted (or similar event), if the grant of the Option or SAR occurs not more than 90 days after the date of such hiring, promotion or other event; and (ii) if an Option or SAR is granted in tandem with, or in substitution for, an outstanding award, the Pricing Date is the date of grant of such outstanding award. -5- 6 (d) Term. The term of each Stock Option and SAR shall be fixed by the Committee, but no Incentive Stock Option shall be exercised more than ten years (or, in the case of an employee who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or Parent, more than five years) after the date the Option is granted. (e) Exercisability. Stock Options and SARs shall be exercised at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant. If the Committee provides, in its sole discretion, that any Stock Option or SAR is exercisable only in installments, the Committee may waive such installment exercise provisions at any time at or after grant in whole or in part, based on such factors as the Committee shall determine, in its sole discretion. (f) Method of Exercise. Subject to whatever installment exercise provisions apply pursuant to Section 6(e) hereof, Options and SARs may be exercised in whole or in part at any time during the term thereof, by giving written notice of exercise to the Company specifying the number of shares to be purchased or the amount of the SAR to be exercised. Such notice shall be accompanied by payment in full of the purchase price in the case of an Option, either by cash, check, note or such other instrument as the Committee may accept. As determined by the Committee, in its sole discretion, at or after grant, payment in full or in part may also be made in the form of Stock already owned by the Optionee based, in each case, on the fair market value of the Stock on the date the Option is exercised, as determined for this purpose by the Committee in its sole discretion; provided, however, that in no event shall payment in full or in part for the exercise of an Option be made with any Stock which, as of the date of exercise of the Option, has been owned by the Optionee less than six (6) months. If the Committee permits such payment in the form of Stock, the certificate or certificates representing the shares of Stock to be delivered shall be duly executed in blank by the Optionee or shall be accompanied by a stock power duly executed in blank suitable for purposes of transferring such shares to the Company. Fractional shares of Stock will not be accepted in payment of the purchase price of shares acquired upon exercise of the Option. No shares of Stock shall be issued until full payment therefor has been made. (g) Settlement of Award. Distribution following exercise of an Option or SAR, and shares of Stock distributed pursuant to such exercise, shall be subject to such conditions, restrictions and contingencies as the Committee may establish. Settlement of SARs may be made in shares of Stock (valued at their Fair Market Value at the time of exercise), in cash, or in a combination thereof, as determined in the discretion of the Committee. The Committee, in its discretion, may impose such conditions, restrictions and contingencies and may waive any such conditions, restrictions and contingencies, at or after grant, or otherwise accelerate the vesting of any Option or SAR, at any time, in its discretion with respect to shares of Stock acquired pursuant to the exercise of an Option or an SAR as the Committee determines to be desirable. -6- 7 SECTION 7. STOCK AWARDS. Each Stock Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine. These may include continuous service and/or the achievement of performance measures. The performance measures that may be used by the Committee for such Awards shall be measured by revenues, income, or such other criteria as the Committee may specify. The Committee may designate a single goal criterion or multiple goal criteria for performance measurement purposes, with the measurement based on absolute Company or business unit performance and/or on performance as compared with that of other publicly-traded companies. If the right to become vested in a Stock Award granted under this Section 7 is conditioned on the completion of a specified period of service with the Company or any Subsidiary or Parent without achievement of performance measures or other objectives being required as a condition of vesting, then the required period of service for vesting shall be not less than three years (subject to acceleration of vesting, to the extent permitted by the Committee, in the event of the Participant's death, disability, change in control or involuntary termination). SECTION 8. MISCELLANEOUS. (a) Non-Transferability of Options, SARs and Stock Awards. No Option, SAR or Stock Award shall be transferable by a Plan Participant otherwise than by will or by the laws of descent and distribution, and all Options and SARs shall be exercisable, during the Plan Participant's lifetime, only by the Plan Participant. (b) Investment Representations. The Company may require any grantee, as a condition of exercising an Option or SAR, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Stock subject to the Option or SAR for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effect as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws. (c) Compliance with Securities Laws. Each Option and SAR shall be subject to the requirement that, if at any time counsel to the Company shall determine that the listing, registration, or qualification of the shares subject to such Option and SAR upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of shares thereunder, such Option or SAR may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration, or qualification. (d) Recapitalization. If the outstanding shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, stock dividend, combination, subdivision or similar transaction, then, subject to any required action by the stockholders of the Company, the number and kind of shares of Stock subject to outstanding Options, SARs or Stock Awards and available under the Plan and price per share of Stock for any outstanding Options and SARs shall be proportionately adjusted; provided, however, that no fractional shares shall be issued or made subject to an Option, -7- 8 SAR or Stock Award in making the foregoing adjustments. All adjustments made by the Committee under this Section shall be final, conclusive and binding upon the holders of Options, SARs and Stock Awards. (e) Reorganization. If, while unexercised Options and/or SARs remain outstanding under the Plan, the Company proposes to merge or consolidate with another corporation, whether or not the Company is to be the surviving corporation, or if the Company proposes to liquidate or sell or otherwise dispose of substantially all of its assets or substantially all of the outstanding shares of Stock of the Company are to be sold, then the Committee may, in its sole discretion, either (i) make appropriate provision for the protection of any such outstanding Options and SARs by the substitution on an equitable basis of appropriate stock of the surviving corporation or its parent in the merger or consolidation, or other reorganized corporation that will be issuable in respect to the shares of Stock of the Company subject to such Options and SARs, provided that, with respect to Incentive Stock Options, such provision shall satisfy the requirement that no additional benefits shall be conferred upon Optionees as a result of such substitution within the meaning of Section 424(a) of the Code, and that the excess of the aggregate fair market value of the shares subject to the Options immediately after such substitution over the purchase price thereof is not more than the excess of the aggregate fair market value of the shares subject to such Options immediately before such substitution over the purchase price thereof, or (ii) upon written notice to the Plan Participants, provide that all unexercised Options and SARs must be exercised within a specified number of days of the date of such notice or they will be terminated. In any such case, the Committee may, in its discretion, accelerate the date on which outstanding Options and SARs become exercisable. In no event, however, shall the Committee be obligated to take any action as a result of any transaction described in this Section 8(e), it being acknowledged that it is in the Committee's sole discretion to determine if, and to what extent, the action authorized by this Section 8(e) shall be taken. (f) Rights as a Shareholder. A Plan Participant shall have no rights as a shareholder with respect to any shares subject to an Option or SAR until the date of issue of a stock certificate to him or her for such shares and only after such shares are fully paid. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. (g) Annual Limitation For Incentive Stock Options. To the extent that the Fair Market Value (determined as of the date of grant of an Option) of shares of Stock with respect to which an Incentive Stock Option first becomes exercisable by an Optionee during any calendar year exceeds $100,000, such excess portion of the Stock Option shall thereafter be treated as a Non-Qualified Stock Option. SECTION 9. NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in the Plan or in any agreement pursuant to which an Option, SAR or Stock Award is granted under the Plan shall confer upon any Plan Participant any right with respect to the continuation of his employment or other engagement by the Company or any Subsidiary, Parent or Affiliate or interfere in any way with the ability of the Company or any Subsidiary, Parent or Affiliate at any time to terminate such employment or other engagement or to increase or decrease the compensation of the Plan Participant from the rate in existence at the time of the grant of an -8- 9 award. SECTION 10. OTHER EMPLOYEE BENEFITS. The amount of any compensation deemed to be received by an Plan Participant as a result of the exercise of an Option or the sale of shares received upon such exercise will not constitute "earnings" with respect to which any other benefits of such Plan Participant are determined, including, without limitation, benefits under any pension, profit sharing, life insurance, or salary continuation plan. SECTION 11. WITHHOLDING. The Company's obligation to deliver shares upon the exercise of any Option or SAR granted under the Plan or to make any payments required by any option agreement shall be subject to the grantee's satisfaction of any applicable federal, state, and local income and employment tax and withholding requirements in a manner and form satisfactory to the Company. SECTION 12. GOVERNING LAW. The Plan, all awards granted under the Plan and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Georgia. SECTION 13. AMENDMENT OF THE PLAN. The Board may at any time and from time to time amend, suspend, alter, or discontinue the Plan in any respect, except that the Board may not, without the approval of the Company's shareholders: (a) except as expressly provided in Section 8(d) hereof, alter the total number of shares reserved for issuance pursuant to the Plan; (b) change the price at which Options and SARs may be granted pursuant to Section 6(c) hereof; (c) change the persons or class of persons eligible to participate in the Plan; (d) extend the maximum Option period under Section 6(d) hereof or the term of the Plan described in Section 14(b) hereof; or (e) materially increase the benefits accruing to Plan Participants. The Committee may amend the terms of any award, prospectively or retroactively, but, subject to Section 3 hereof, no such amendment shall impair the rights of any holder without the holder's consent. -9- 10 SECTION 14. EFFECTIVE DATE AND DURATION OF THE PLAN. (a) Effective Date. The Plan shall become effective when approved by the Company's shareholders. (b) Termination. Unless the Plan is sooner terminated in accordance with the terms herein, no further grants of awards may be made under the Plan after the earlier of (i) the close of business on the day next preceding the tenth anniversary of the date of its adoption by the shareholders and (ii) the date on which all shares available for issuance under the Plan shall have been issued pursuant to Stock Awards or the exercise of Options or SARs. Notwithstanding the foregoing, Options granted prior to the date specified in (i) above may extend beyond that date. -10- EX-10.6 7 EXECUTIVE INCENTIVE PLAN 1 DESCRIPTION OF THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. EXECUTIVE INCENTIVE PLAN GENERAL The Profit Recovery Group International, Inc. (the "Company") Executive Incentive Plan for its senior executives was approved at an Annual Meeting of Stockholders on June 15, 1998, and is effective as of January 1, 1999. Rather than specifying a formula for determining the relative weights of performance criteria used to determine incentive amounts, the Executive Incentive Plan enables the Subcommittee (as defined below), no later than 90 days after the beginning of each fiscal year, to establish an incentive program within the general parameters of the Executive Incentive Plan, which program may change from year to year as the Subcommittee determines necessary to best meet the Company's needs within the confines of the Executive Incentive Plan. Set forth below is a summary of the material features of the Company's Executive Incentive Plan which is currently not evidenced by a written plan. ADMINISTRATION The Executive Incentive Plan will be administered by the Subcommittee of the Company's Compensation Committee, consisting of at least two directors, each of whom is an "outside" director as such term is defined in the regulations promulgated pursuant to Section 162(m) of the Internal Revenue Code of 1986 as amended. PARTICIPANTS The Executive Incentive Plan provides for participation by senior executives of the Company, as determined by the Subcommittee, which determination is made prior to the start of each fiscal year. Currently, eight executives would be eligible for selection by the Subcommittee for participation in the Executive Incentive Plan, including the Chief Executive Officer and each of the Named Executives. To the extent that these executives do not participate in the Executive Incentive Plan, they will be eligible to participate in the Company's existing Management and Professional Incentive Plan. METHOD OF OPERATION No later than 90 days after the beginning of each fiscal year, the Subcommittee, after consulting with the Company's Chief Executive Officer and its Senior Vice President -- Human Resources, will determine the performance criteria from those listed below which will be applicable to each participant for such fiscal year, the maximum incentive which such participant may obtain, and the relative weight of each of the performance criteria which are applied. The performance criteria to be applied may include any combination of the following and may vary from participant to participant: (a) increases in quarterly and annual earnings per share of the Company, (b) increases in quarterly and annual revenues of the Company, (c) increases in quarterly and annual operating profit of the Company, (d) increases in quarterly and annual 2 revenues generated from various industry segments, (e) quarterly and annual revenues derived from specified territories or clients, (f) increases in quarterly and annual cash receipts derived from specified territories or clients, (g) increases in quarterly and annual gross profits derived from specified territories or clients, (h) control of expenses in various functional areas, and (i) individual objectives based on quantitative goals set by the participant and the Subcommittee. The annual incentives set for each participant contain threshold targets for each incentive component to ensure that no annual incentive compensation is earned for substandard performance. All incentives under the Executive Incentive Plan will be paid within 60 days following the end of the period with respect to which they are calculated. MAXIMUM ANNUAL COMPENSATION No participant in the Executive Incentive Plan may receive an incentive with respect to any fiscal year which is in excess of 1% of the Company's gross revenues during such year. AMENDMENTS The Executive Incentive Plan may be amended by the Board of Directors; however once the Subcommittee has set performance goals and incentive targets with respect to a participant for a specific fiscal year, such goals and targets may not be amended in any manner which would increase the amount of the incentive payable to the participant, and such goals or targets may not be waived or decreased. EX-27.1 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THE PROFIT RECOVERY GROUP INTERNATIONAL, INC. FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 15,020 0 88,924 0 0 106,005 28,073 9,194 286,612 57,184 81,141 0 0 23 142,328 286,612 0 133,881 68,360 0 46,332 0 (1,589) 17,600 6,896 10,704 0 0 0 10,704 .50 .47
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