-----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, BByHxOpBlMZyaKrMKPR28be1WNTDPJrG017pD3TYv2TUMn3Pm0Zqx2dP5uP1cnou lNns54pCYnEa3uMnRARdUg== 0000950144-05-002542.txt : 20050315 0000950144-05-002542.hdr.sgml : 20050315 20050315162927 ACCESSION NUMBER: 0000950144-05-002542 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20050315 DATE AS OF CHANGE: 20050315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRAWFORD & CO CENTRAL INDEX KEY: 0000025475 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 580506554 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10356 FILM NUMBER: 05682041 BUSINESS ADDRESS: STREET 1: 5620 GLENRIDGE DR NE CITY: ATLANTA STATE: GA ZIP: 30342 BUSINESS PHONE: 4042560830 MAIL ADDRESS: STREET 1: 5620 GLENRIDE DR CITY: ATLANTA STATE: GA ZIP: 30342 10-K 1 g93630e10vk.txt CRAWFORD & COMPANY UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2004 [ ] 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 1-10356. CRAWFORD & COMPANY ---------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Georgia 58-0506554 - ------------------------------------------------ ------------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification Number) 5620 Glenridge Dr., N.E., Atlanta, Georgia 30342 - ------------------------------------------------ -------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (404) 256-0830 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on which Title of each class registered ------------------- ------------------------------ Class A Common Stock - $1.00 Par Value New York Stock Exchange Class B Common Stock - $1.00 Par Value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None --------------------------------------- (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [ ] The aggregate market value of the voting and non-voting stock held by nonaffiliates* of the Registrant was $96,830,678 as of June 30, 2004, based upon the closing price as reported on NYSE on such date. - ------------------ *All shareholders, other than Directors, Executive Officers, and 10% beneficial owners. The number of shares outstanding of each of the Registrant's classes of common stock, as of March 11, 2005, was: Class A Common Stock - $1.00 Par Value - 24,180,992 Shares Class B Common Stock - $1.00 Par Value - 24,697,172 Shares Documents incorporated by reference: (1) Annual Report to Shareholders for the Year Ended December 31, 2004, Part II - Items 5, 6, 7, 7A and 8; Part IV - Item 15, and (2) Proxy Statement for the Annual Meeting of Shareholders to be held April 26, 2005, Part III -Items 10, 11, 12, 13, and 14. PART I ITEM 1. BUSINESS Crawford & Company (the "Registrant"), founded in 1941, is the world's largest (based on annual revenues) independent provider of claims management solutions to insurance companies and self-insured entities, with a global network of more than 700 offices in 63 countries. Major service lines include workers' compensation claims administration and healthcare management services, property and casualty claims management, class action services and risk management information services. DESCRIPTION OF SERVICES The percentages of consolidated revenues before reimbursements, derived from the Registrant's United States ("U.S.") and international operations are shown in the following schedule:
Years Ended December 31, -------------------------------- 2004 2003 2002 ------ ------ ------ U.S. Operations 65.2% 68.3% 72.7% International Operations 34.8% 31.7% 27.3% ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== =====
U.S. OPERATIONS. Claims management services are provided by the Registrant in the U. S. to three different markets. Insurance companies, which represent the major source of revenues, customarily manage their own claims administration function, but require limited services which the Registrant provides, primarily the field investigation and evaluation of property and casualty insurance claims. The Registrant services clients in the self-insured or commercially insured market through alternative loss funding methods, and provides them with a more complete range of services. In addition to the field investigation and evaluation of their claims, the Registrant may also provide initial loss reporting services for their claimants, loss mitigation services such as medical case management and vocational rehabilitation, administration of trust funds established to pay claims and risk management information services. The Registrant also performs administrative services for class actions settlements, including those settlements for product liability, bankruptcy noticing and distribution, and other legal settlements, by identifying and qualifying class members, determining and dispensing settlement payments, and administering the settlement funds. The major elements of U.S. claims management services (which include the limited services required by most property and casualty insurance company clients as well as the expanded services required by self-insured clients) are: - Initial Loss Reporting - the Registrant's XPressLink(SM) service provides 24-hour receipt, acknowledgment, and distribution of claims information through Electronic Data Interchange, customized reporting and referral programs, call center reporting, and facsimile receipt and distribution. 2 - Investigation - the development of information necessary to determine the cause and origin of loss. - Evaluation - the determination of the extent and value of damage incurred and the coverage, liability, and compensability relating to the parties involved. - Disposition - the resolution of the claim, whether by negotiation and settlement, by denial, or by other means as to a claimant or an insured. - Subrogation - the negotiation with, and recovering funds from, third parties or insurers responsible for the loss. Expanded services provided primarily, but not exclusively, to the Registrant's self-insured clients include: - Information Services - through the Registrant's information system, SISDAT(SM), it provides reports of detailed claims information of both a statistical and financial nature to self-insured entities and insurance companies. - Management - the coordination and supervision of all parties involved in the claims settlement process, including the adjusting personnel directly involved in handling the claim. Typically, this management function is performed by an independent administrative unit within the Registrant which is not involved in the initial investigation of a claim. - Auditing Services - the Registrant's medical and hospital bill audit programs assist clients in controlling medical costs associated with workers' compensation and liability claims by comparing fees charged by health care providers and hospitals with maximum fee schedules prescribed by statutory regulations as well as usual and customary charges in non-fee-schedule states. The Registrant also provides a preferred provider organization through an affiliation with the First Health Group. - Managed Care Services - provides a broad range of cost containment and utilization review services to insurance companies, service organizations and self-insured corporations. These services, which are designed to both control the cost and enhance the efficient delivery of medical benefits, include early medical intervention, triage, assessment, case management, PPO channeling, and medical bill review. - Vocational Services - provides vocational evaluation in order to assess an injured employee's potential to return to work. These services involve diagnostic testing and occupational, personal and motivational counseling of the employee. Vocational, medical and employment consultants assist in the re-employment and preparation of injured individuals to return to work. 3 - Medical Case Management Services - are typically provided by rehabilitation nurses who work closely with attending physicians and other medical personnel in order to expedite the injured person's physical recovery and rehabilitation and maximize the opportunity for the person to return to work. These services also involve coordinating and monitoring treatment plans and related costs to ensure that such treatment is appropriate and necessary in the circumstances. - Long-Term Care - offers a full menu of long-term care services including comprehensive on-site assessments, complete care coordination, and on-going care monitoring. These services are provided through experienced health care professionals with an insight to local quality care needs and are offered primarily to senior citizens and their children, attorneys, and trust officers. The claims administration services described above are provided to clients for a variety of different referral assignments which generally are classified as to the underlying insured risk categories, or major types of loss, used by insurance companies. The major risk categories are described below: - Automobile - relates to all types of losses involving use of the automobile. Such losses include bodily injury, physical damage, medical payments, collision, fire, theft, and comprehensive liability. - Property - relates to losses caused by physical damage to commercial or residential real property and certain types of personal property. Such losses include those arising from fire, windstorm, or hail damage to commercial and residential property, burglary, robbery or theft of personal property, and damage to property under inland marine coverage. - Workers' Compensation - relates to claims arising under state and federal workers' compensation laws. - Public Liability - relates to a wide range of non-automobile liability claims such as product liability; owners', landlords' and tenants' liabilities; and comprehensive general liability. - Catastrophe - covers all types of natural disasters, such as hurricanes, earthquakes and floods, and man-made disasters such as oil spills, chemical releases, and explosions, where the Registrant provides specially trained catastrophe teams to handle claims, as well as to manage the recovery efforts. - Surveillance and Forensic Investigation - provides discrete surveillance operations to confirm suspicious claims and forensic cause and origin investigations. The major elements of class action services are as follows: - Administration - provided by The Garden City Group, Inc. ("GCG"), a wholly owned subsidiary of the Registrant, acquired by the Registrant in January 1999. 4 GCG handles the administrative functions related to securities, product liability and other class action settlements, including qualifying class members, dispensing payments, and administering the settlement funds. With the field operations of the Registrant, GCG and the Registrant offer comprehensive programs to integrate the field inspection and administrative functions in a single source for product liability class action settlements. - Inspection - the determination of the extent and value of damage incurred, liability, and compensability primarily related to product liability class action settlements. ADDITIONAL RISK MANAGEMENT AND OTHER SERVICES. The Registrant provides the following additional risk management and other related services, which support and supplement the claims and risk management services offered: - Risk Sciences Group, Inc. ("RSG"), a wholly owned subsidiary of the Registrant, is a software applications and consulting firm. RSG provides customized computer-based information systems and analytical forecasting services to the risk management and insurance industry. It manages the Registrant's basic information systems, including SISDAT(SM), and has developed the SIGMA ENCORE (SM) system, an on-line risk management information system which supports multiple sources of claims, locations, risk control, medical, litigation, exposure, and insurance policy information. RSG serves a variety of clients with specialized computer programs for long-term risk management planning, data and systems integration, development of historical claims/loss databases, claims administration and management, regulatory reporting, insurance and risk management cost control, and actuarial and financial analysis required for loss forecasting, reserve estimation and financial reporting. - The PRISM Network, Inc., a wholly owned subsidiary of the Registrant acquired in August 1999, contracts with a network of contractors ("Contractor Connection(SM)") to provide property damage repair services at agreed contract rates for property damage losses. The Registrant and The PRISM Network, Inc. market Contractor Connection to property and casualty insurance companies to facilitate faster, more economical resolution of smaller property damage claims under homeowner policies. - Education Services are provided by Crawford University, an internal program that provides education for professionals engaged in service delivery for all lines of business to assure consistent quality in the Registrant's work products. In addition, the University provides continuing education in support of career paths, management and supervisory training, and the opportunity to obtain professional certification through IIA/CPCU. Clients have the opportunity to attend Crawford University education programs and access the Crawford University continuing education curriculum in a variety of risk management subjects. 5 INTERNATIONAL OPERATIONS. Substantially all of the Registrant's international revenues are derived from the insurance company market where the Registrant provides field investigation and evaluation of property and casualty insurance claims. The Registrant divides its operations outside the United States into four geographic regions: the Americas (excluding the U.S.); the United Kingdom; Continental Europe, which also includes the Middle East and Africa; and Asia/Pacific, which includes Australia. The major elements of international claims management services are substantially the same as those provided by the Registrant to its U. S. property and casualty insurance company clients. The major services offered by the Registrant through its international operations are provided to clients for a variety of different referral assignments which are generally classified as to the underlying risk categories, or major types of loss, used by insurance companies. The major risk categories are described below: - Property and Casualty - provides loss adjusting services for property, general liability, professional indemnity for directors and officers, product liability and medical malpractice. - Oil, Energy & Engineering - provides loss adjusting for oil, gas, petrochemicals, other energy risks, utilities and mining industries, as well as marine and off-shore risks. - Environmental Pollution - provides cost-containment and claims management services with respect to environmental related losses. - Construction - provides loss adjusting services under contractors' all risk, engineering all risk, and contractors' liability coverages. Additionally, evaluates machinery breakdown claims and provides peripheral services including plant valuation and loss prevention surveys. - Catastrophe - organizes major loss teams to provide claims management and cost containment services through proprietary information systems. - Class Action Administration - handles the administrative functions related to product liability and other class action settlements, including qualifying class members, dispersing payments, and administering the settlement funds. - Marine - provides loss adjusting services for freight carriers' liability, loss investigations, recoveries, salvage disposal, yacht and small craft, cargo, container, discharge, draft, general average, load, trailer and on/off live surveys, ship repairer liability and port stevedore liability. - Specie and Fine Art - provides loss adjusting services under fine art dealers' block and jewelry and furriers' block policies. - Entertainment Industry - provides a broad range of loss adjusting services for television, commercial and educational film production, and theater and live events. 6 - Aviation - manages salvage removal and sale, and provides loss adjusting services for hull related risks, as well as cargo and legal liability, hangar and airport owners'/operators' liability policies. - Banking, Financial and Political Risks - performs loss adjusting functions under bankers' blanket bond, political risk, and financial contingency policies. - Livestock - performs loss adjusting on bloodstock, and liability/equestrian activity. - Security Consultancy - performs loss prevention and bank surveys and adjusts cash-in-transit losses. - Reinsurance - provides external audits, portfolio analyses, and management and marketing research. Additionally provides underwriting review, cash control and management of discontinued operations. - Medical and Vocational Case Management Services - provides specialized return to work and expert testimony services in the employer liability and auto liability markets. Revenues and expenses outside of North America and the Caribbean are reported on a two-month delayed basis and, accordingly, the Registrant's December 31, 2004, 2003, and 2002 consolidated financial statements reflect the non-North American financial position as of October 31, 2004, 2003, and 2002, respectively, and the results of non-North American operations and cash flows for the 12-month periods ended October 31, 2004, 2003, and 2002, respectively. SERVICE DELIVERY - The Registrant's claims management services are offered primarily through its more than 400 branch offices throughout the U. S. and approximately 300 offices in 62 countries throughout the rest of the world. COMPETITION, EMPLOYMENT AND OTHER FACTORS The claims services markets, both in the U. S. and internationally, are highly competitive and are composed of a large number of companies of varying size and scope of services. These include large insurance companies and insurance brokerage firms which, in addition to their primary services of insurance underwriting or insurance brokerage, also provide services such as claims administration, healthcare and disability management, and risk management information systems, which compete with services offered by the Registrant. Many of these companies are larger than the Registrant in terms of annual revenues and total assets; however, based on experience in the market, the Registrant believes that few, if any, of such organizations derive revenues from independent claims administration activities which equal those of the Registrant. The majority of property and casualty insurance companies maintain their own staffs of salaried adjusters, with field adjusters located in those areas in which the volume of claims justifies maintaining a salaried staff. An insurance company's decision to retain an independent adjusting 7 firm and the selection of a particular firm typically depends on a number of factors, including geographic location, complexity of the underlying claim, the firm's reputation and financial strength, and the in-house capacity of the insurance company. These companies utilize independent adjusters to service claims when the volume of claims exceeds the capacity of their staffs, when claims arise in areas not serviced by staff adjusters, and when claims require specialized knowledge to handle. The volume of property claim assignments referred to the Registrant fluctuates in part depending on the occurrence of severe weather and environmental disasters. The Registrant tries to mitigate this risk through the geographic spread of its operations and through the development and marketing of services which are not affected by weather related events. The U. S. insurance industry generally uses internal adjusting personnel to make automobile and smaller property damage claims adjustments by telephone and may assign the limited function of appraising physical damage to outside adjusting companies, such as the Registrant. The Registrant believes that such limited assignments from automobile and property insurers may continue, reflecting a perception by insurance companies that they can reduce adjusting expenses in amounts greater than the higher losses associated with telephone adjusting. In certain instances, however, insurers have attempted to reduce the fixed cost of their claims departments by increasing outside assignments to independent firms such as the Registrant. During a hard insurance underwriting market, insurance companies become very selective in the risks they underwrite and insurance premiums and policy deductibles increase. This results in a reduction in industry-wide claims volumes, which reduces claim referrals to the Registrant unless the Registrant can offset the decline in claim referrals with growth in its market share. During hard insurance markets, corporate risk management personnel have become more aware of alternative methods of financing losses (alternative risk programs), creating a trend toward higher retention levels of risk insurance or implementation of self-insurance programs by large corporations and governmental entities which give the Registrant certain opportunities in the self-insured market. These alternative risk programs generally utilize an insurance company which writes specialized policies that permit each client to select its own level of risk retention, and may permit certain risk management services to be provided to the client by service companies independent of the insurance company or broker. In addition to providing full claims administration services for such clients, the Registrant generally provides statistical data such as loss experience analysis. The services are usually the subject of a contractual agreement with the specialty insurance company or the self-insured client that specifies the claims to be administered by the Registrant and the fee to be paid for its services (generally a fixed rate per assignment within the various risk classifications). These alternative risk programs are sensitive to changes in premiums charged for full coverage insurance. In softer insurance markets, where insurance premium and deductible levels are generally in decline, as were experienced during the 1990's, industry-wide claim volumes generally increase, which should increase claim referrals to the Registrant. However, during soft insurance markets, alternative risk programs tend to be less attractive to potential clients and are replaced by full traditional insurance and, accordingly, reduce the number of alternative risk programs in which the Registrant can participate. In addition to large insurance companies and insurance brokerage firms, the Registrant competes with a great number of smaller local and regional claims management services firms located 8 throughout the U. S. and internationally. Many of these smaller firms have rate structures that are lower than the Registrant's, but do not offer the broad spectrum of claims management services which the Registrant provides and, although such firms may secure business which has a local or regional source, the Registrant believes its quality product offering, broader scope of services, and its large number of geographically dispersed offices provide it with a competitive advantage in securing business from U. S. and international clients. There are also national independent companies that provide a similar broad spectrum of claims management services and who directly compete with the Registrant. At December 31, 2004, the total number of full-time equivalent employees was 7,421 compared with 7,663 at December 31, 2003. In addition, the Registrant has available a significant number of on-call employees, as and when the demand for services requires. The Registrant, through Crawford University, provides many of its employees with formal classroom training in basic and advanced skills relating to claims administration and healthcare management services. Such training is generally provided at the Registrant's education facility in Atlanta, Georgia, although much of the material is also available through correspondence courses and the Internet. In many cases, employees are required to complete these or other professional courses in order to qualify for promotion from their existing positions. In addition to technical training through Crawford University, the Registrant also provides ongoing professional education for certain of its management personnel on general management, marketing, and sales topics. These programs involve both in-house and external resources. Special Note Regarding Forward-Looking Statements and Analysts' Reports Certain written and oral statements made or incorporated by reference from time to time by the Registrant in this report, other reports, filings with the Securities and Exchange Commission, press releases, conferences, or otherwise, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements. Forward-looking statements may be identified, without limitation, by the use of such words as "anticipates", "estimates", "expects", "intends", "plans", "predicts", "projects", "believes", or words or phrases of similar meaning. Forward-looking statements include risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. In addition to other factors and matters discussed elsewhere herein, some of the important factors that could cause actual results to differ materially from those discussed in the forward-looking statements include the following: - - Changes in general economic conditions in the Registrant's major geographic markets, which include the U. S., U. K., and Canada, as well as, to a lesser extent, the other areas throughout the world in which the Registrant does business; - - Occurrences of weather-related, natural and man-made disasters; - - Changes in overall employment levels and associated workplace injury rates in the U. S.; 9 - - Changes in the degree to which property and casualty insurance carriers outsource their claims handling functions; - - Decisions by major insurance carriers, underwriters, and brokers to expand their activities as third party administrators and adjusters, which would directly compete with the Registrant's business; - - Continued growth in product liability and securities class actions and the possibility that legislation may curtail or limit that growth; - - The ability to identify new revenue sources not directly tied to the insurance underwriting cycle; - - The growth of alternative risk programs and the use of independent third party administrators such as the Registrant, as opposed to administrators affiliated with brokers or insurance carriers; - - Ability to develop or acquire information technology resources to support and grow the Registrant's business; - - The ability to recruit, train, and retain qualified personnel, including retaining a sufficient number of on-call claims adjusters to respond to catastrophic events that may, singularly or in combination, significantly increase our customers' needs for adjusters; - - The renewal of existing major contracts with clients and the Registrant's ability to obtain such renewals and new contracts on satisfactory financial terms and the credit worthiness of its major clients; - - Changes in accounting principles or application of such principles to the Registrant's business; - - General risks associated with doing business outside the U. S., including without limitation, restrictions on foreign-owned or controlled entities conducting loss adjusting activities in those jurisdictions, exchange rate fluctuations, expropriation of assets, and currency restrictions; - - The outcome of the items under "ITEM 3. LEGAL PROCEEDINGS" below; - - Changes in law, particularly as related to tort reform and changes in the states' workers' compensation laws; and - - Any other factors referenced or incorporated by reference in this report and any other publicly filed report. The risks included above are not exhaustive. Other sections of this report may include additional factors which could adversely impact the Registrant's business and financial performance. Moreover, the Registrant operates in a very competitive and rapidly changing environment. New 10 risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of known risk factors on the Registrant's business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement. The Registrant undertakes no obligation to revise or publicly release the results of any revisions to forward-looking statements or to identify any new risk factors which may arise. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual future results. Investors should also be aware that while the Registrant does, from time to time, communicate with securities analysts, it is against the Registrant's policy to disclose to them any material, non-public information or other confidential commercial information. Accordingly, investors should not assume that the Registrant agrees with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, the Registrant has a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that the reports issued by securities analysts contain any projections, forecasts, or opinions, such reports are not the responsibility of the Registrant. Available Information The Registrant's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to reports filed pursuant to Section 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available on our website at www.crawfordandcompany.com via a link to a third party website with SEC filings. These reports are made available at no cost. The Registrant's Corporate Governance Guidelines, Committee Charters, and Code of Business Conduct are available on its website at www.crawfordandcompany.com and are available without charge in print to any shareholder who makes a request by writing to Corporate Secretary, Legal Department, Crawford & Company, 5620 Glenridge Drive, N.E., Atlanta, Georgia 30342. ITEM 2. PROPERTIES The Registrant's home office and educational facilities are owned by the Registrant and located in Atlanta, Georgia. The Registrant also owns its Canadian home office facility located in Kitchener, Ontario and an additional office location in Stockport, England. As of December 31, 2004, the Registrant leased approximately 421 office locations under leases with remaining terms ranging from a few months to ten years. The remainder of its office locations are occupied under various short-term rental arrangements. ITEM 3. LEGAL PROCEEDINGS In the normal course of the claims administration services business, the Registrant is named as a defendant in suits by insureds or claimants contesting decisions by the Registrant or its clients with respect to the settlement of claims. Additionally, clients of the Registrant have brought actions for indemnification on the basis of alleged negligence on the part of the Registrant, its agents or its employees in rendering service to clients. The majority of these claims are of the type covered by insurance maintained by the Registrant; however, the Registrant is self-insured 11 for the deductibles under its various insurance coverages. In the opinion of the Registrant, adequate reserves have been provided for such self-insured risks. The Registrant has received a subpoena from the State of New York, Office of the Attorney General requesting various documents relating to the Registrant's operations. The Registrant is responding to the subpoena and does not know if the Office of the Attorney General will request further documents. The Registrant cannot predict when the Attorney General's investigation will be completed, its ultimate outcome or its effect on the Registrant's financial condition, results of operations, or cash flows, if any. The Registrant has received two related federal grand jury subpoenas which the Registrant understands have been issued as part of a possible conflicts of interest investigation involving a public entity client of one of the Registrant's New York offices for Risk Management Services and Healthcare Management. The Registrant has completed its response to both of these subpoenas. These subpoenas do not relate to the billing practices of the Registrant. The Registrant cannot predict when the government's investigation will be completed, its ultimate outcome or its effect on the Registrant's financial condition, results of operations, or cash flows including the effect, if any, on the Registrant's contract with the client. Although the loss of revenues from this client would not be material to the Registrant's financial condition, results of operations, or cash flows, the investigation could result in the imposition of civil, administrative or criminal fines or sanctions. The Registrant has received notice and anticipates that it will be the subject of an audit under California Labor Code Sections 129 and 129.5 by the Audit Unit, Division of Workers' Compensation, Department of Industrial Relations, State of California ("Audit Unit"). The Audit Unit seeks to audit workers' compensation files which the Registrant handled on behalf of its clients in the Registrant's El Segundo, California office in 2001 and 2002. This audit relates to a previous audit that the Registrant underwent in El Segundo in 2000 wherein the Registrant agreed to the imposition of a civil penalty pursuant to California Labor Code Section 129.5 and submission to this current follow-up audit, among other items. With respect to this current audit, the Registrant cannot predict when it will be completed, its ultimate outcome, or its effect on the Registrant's financial condition, results of operations, or cash flows. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to security holders for a vote during the fourth quarter of 2004. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASE OF EQUITY SECURITIES The information required by this Item is included in the Registrant's Annual Report to Shareholders for the year ended December 31, 2004, under the caption "Quarterly Financial Data (unaudited), Dividend Information and Common Stock Quotations" and is incorporated herein by reference. 12 ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is included in the Registrant's Annual Report to Shareholders for the year ended December 31, 2004, under the caption "Selected Financial Data" and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is included in the Registrant's Annual Report to Shareholders for the year ended December 31, 2004, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The information required by this Item is included in the Registrant's Annual Report to Shareholders for the year ended December 31, 2004, under the caption "Market Risk" and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is included in the Registrant's Annual Report to Shareholders for the year ended December 31, 2004, under the captions "Consolidated Statements of Income", "Consolidated Balance Sheets", "Consolidated Statements of Shareholders' Investment", "Consolidated Statements of Cash Flows", "Notes to Consolidated Financial Statements", "Quarterly Financial Data (unaudited), Dividend Information and Common Stock Quotations", and "Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements", and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable ITEM 9A. CONTROLS AND PROCEDURES DISCLOSURE CONTROLS AND PROCEDURES As required by SEC rules, the Registrant has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of December 31, 2004. This evaluation was carried out under the supervision and with the participation of the Registrant's management, including its principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that the design and operation of the Registrant's disclosure controls and procedures are effective. There were no significant changes to its internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation. 13 Disclosure controls and procedures are the Registrant's controls and other procedures that are designed to ensure that information required to be disclosed by it in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Registrant in the reports that it files under the Exchange Act is accumulated and communicated to its management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. MANAGEMENT'S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING The management of the Registrant is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal controls over financial reporting are defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Registrant's principal executive and principal financial officers and effected by the Registrant's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: - Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Registrant; - Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the Registrant; and - Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Registrant's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Registrant's management assessed the effectiveness of the Registrant's internal controls over financial reporting as of December 31, 2004. In making this assessment, the Registrant's management used the criteria set forth by the Committee of Sponsoring Organizations of the Trendway Commission ("COSO") in Internal Control-Integrated Framework and the Public Company Accounting Oversight Board ("PCAOB"). Based on the Registrant's assessment, management believes that, as of December 31, 2004, the Registrant's internal controls over financial reporting are effective based on those criteria. 14 The Registrant's independent auditors have issued an audit report on our assessment of the Registrant's internal control over financial reporting. This report is included in the Registrant's Annual Report to Shareholders for the year ended December 31, 2004, under the caption "Report of Independent Registered Public Accounting Firm on Management's Assessment of Internal Control Over Financial Reporting." PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Certain information required by this Item is included under the caption "Nominee Information" of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held April 26, 2005, and is incorporated herein by reference. EXECUTIVE OFFICERS OF THE REGISTRANT The following are the names, positions held, and ages of each of the executive officers of the Registrant:
Name Office Age ---- ------ --- T. W. Crawford President and Chief Executive Officer 61 J. T. Bowman President - Crawford & Company International, Inc. 51 J. F. Giblin Executive Vice President - Finance 48 K. B. Frawley Executive Vice President - Financial Administrative Services 53 P. G. Porter Senior Vice President - Claims Management Services 54 L. A. Mattingly Senior Vice President - Healthcare Management Services 58 R. R. Kulbick Senior Vice President - Risk Management Services 56 R. J. Cormican Senior Vice President - Compliance, Quality and Training 57 P. J. Rescigno Senior Vice President - General Counsel & Corporate Secretary 47 W. L. Beach Senior Vice President - Human Resources 60
Mr. Crawford was appointed President and Chief Executive Officer of the Registrant on September 1, 2004. Prior to joining the Registrant from June 1998 until his retirement in January 2003 he was President of the Retail Distribution division of Prudential Financial, Inc., and from May 2004 until September 2004 he was Chairman of The Bodie Group, Inc., a business consulting firm. Mr. Bowman was appointed to his present position effective April 1, 2001. From August 1997 to July, 1999 he was Vice President, Regional Managing Director - Americas and from August 1999 to April 1, 2001 he was Senior Vice President, Regional Managing Director - Americas. Mr. Giblin has held his present position with the Registrant for more than five years. 15 Mr. Frawley was appointed to his present position with the Registrant on February 23, 2005. Prior to joining the Registrant and since 1996 he was Chief Compliance Officer - Insurance Division for Prudential Financial, Inc. Mr. Porter was appointed to his current position January 19, 2005 and was interim Senior Vice President - Claims Management from December 15, 2004. Prior to that and from May 1, 2001 he was Senior Vice President in charge of business development for Claims Management Services. Prior to that and from 1998 he was Vice President - Business Development. Mr. Mattingly was appointed to his present position November 1, 2004. Prior to joining the Registrant and since 1999 he was President and Chief Executive Officer of Mednet Connect a software and service company specializing in the workers' compensation medical review software business. Mr. Kulbick was appointed to his present position November 1, 2004. Prior to joining the Registrant from March 2004 to October 2004 he was Senior Vice President in charge of implementing new products and enhancing current products for ESIS, Inc., a third party administrator. Prior to March 2004 and from June 1997 he was Chief Executive Officer of RSKCo, Inc., a total risk services company. Mr. Cormican was appointed to his present position February 15, 2005. Prior to joining the Registrant from August 2002 until February 2005 he was Senior Vice President and Chief Financial Officer of AssuranceAmerica Corporation, an insurance holding company. Prior to August 2002 and from 1997 he was Vice President - Agent Operations for Prudential Property and Casualty Company. Mr. Rescigno was appointed to his present position with the Registrant on September 1, 2004. Prior to that and from August 1, 2003 he was Vice President - General Counsel and prior to that and from February 1, 2003 he was Assistant Vice President - Assistant General Counsel. Since January 16, 2003 he has served as Corporate Secretary. From June 15, 2000 to February 1, 2003 he was the Registrant's Assistant General Counsel. Prior to June 15, 2000 he was Counsel for GAB Robins North America, Inc. Mr. Beach has held his present position with the Registrant for more than five years. Officers of the Registrant are appointed annually by the Board of Directors of the Registrant, except for Mr. Bowman, who is appointed by the Board of Directors of Crawford & Company International, Inc., a wholly owned subsidiary of the Registrant. Registrant has adopted a Code of Business Conduct for its CEO, CFO, principal accounting officer and all other officers, directors and employees of the Registrant. The Code of Business Conduct is available at www.crawfordandcompany.com and any amendment or waiver of this Code of Business Conduct shall be posted within four business days on this website. The Code of Business Conduct may also be obtained without charge by writing to Corporate Secretary, Legal Department, Crawford & Company, 5620 Glenridge Drive, N.E., Atlanta, Georgia 30342. 16 ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is included under the captions "Executive Compensation and Other Information" of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held April 26, 2005, and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS The information required by this Item is included under the caption "Stock Ownership Information" of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held April 26, 2005, and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is included under the caption "Information with Respect to Certain Business Relationships" of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held April 26, 2005, and is incorporated herein by reference. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information regarding principal accounting fees and services is included under the caption "Fees Paid to Ernst & Young LLP" of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held April 26, 2005, and is incorporated hereby by reference. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report: 1. Financial Statements The Registrant's 2004 Annual Report to Shareholders contains the Consolidated Balance Sheets as of December 31, 2004 and 2003, the related Consolidated Statements of Income, Shareholders' Investment and Cash Flows for each of the three years in the period ended December 31, 2004, and the related reports of Ernst & Young LLP. These financial statements and the reports of Ernst & Young LLP are incorporated herein by reference and included in Exhibit 13.1 to this Form 10-K. The financial statements, incorporated by reference, include the following: - Consolidated Balance Sheets as of December 31, 2004 and 2003 - Consolidated Statements of Income for the Years Ended December 31, 2004, 2003, and 2002 17 - Consolidated Statements of Shareholders' Investment for the Years Ended December 31, 2004, 2003, and 2002 - Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003, and 2002 - Notes to Consolidated Financial Statements - December 31, 2004, 2003, and 2002 2. Financial Statement Schedule - Schedule II - Valuation and Qualifying Accounts - Information required by this schedule is included on page 41 of the Registrant's Annual Report to Shareholders for the year ended December 31, 2004, and is incorporated herein by reference. Schedules I and III through V have been omitted because they are not applicable. 3. Exhibits filed with this report.
Exhibit No. Document - ----------- -------- 3.1 Restated Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 19.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991). 3.2 Restated By-laws of the Registrant, as amended (incorporated by reference to Exhibit 3.2 of the Registrant's annual report on Form 10-K for the year ended December 31, 2003). 10.1 * Crawford & Company 1990 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.5 to the Registrant's annual report on Form 10-K for the year ended December 31, 1992). 10.2 * Crawford & Company 1997 Key Employee Stock Option Plan, as amended (incorporated by reference to Appendix A on page A-1 of the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 25, 2000). 10.3 * Crawford & Company 1997 Non-Employee Director Stock Option Plan (incorporated by reference to Appendix B on page B-1 of the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 22, 1997).
18 10.4 * Amended and Restated Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004). 10.5 * Crawford & Company 1996 Employee Stock Purchase Plan (incorporated by reference to Appendix A on page A-1 of Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 18, 1996). 10.6 * Amended and Restated Crawford & Company Medical Reimbursement Plan (incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994). 10.7 * Discretionary Allowance Plan (incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994). 10.8 * Deferred Compensation Plan (As Amended and Restated as of January 1, 2003) (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003). 10.9* Crawford & Company 1996 Incentive Compensation Plan, as amended (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999). 10.10* Crawford & Company Executive Stock Bonus Plan (incorporated by reference to Appendix A of the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 26, 2005). 10.11 Revolving Credit Agreement dated as of September 30, 2003. 10.12 Note Purchase Agreement dated as of September 30, 2003. 13.1 The Registrant's Annual Report to Shareholders for the year ended December 31, 2004 (only those portions incorporated herein by reference). 14.1 Crawford & Company Code of Business Conduct (incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2003). 21.1 Subsidiaries of Crawford & Company. 23.1 Consent of Ernst & Young LLP. 24.1-8 Powers of Attorney.
19 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification pursuant to 18 U.S.C. Section 1850, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification pursuant to 18 U.S.C. Section 1850, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 601 of Regulation S-K. (b) The Registrant has filed the Exhibits listed in Item 15(a)3. (c) Separate financial statements of Crawford & Company have been omitted since it is primarily an operating company. All significant subsidiaries included in the consolidated financial statements are wholly owned. 20 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CRAWFORD & COMPANY Date March 14, 2005 By /s/ Thomas W. Crawford ------------------------------- THOMAS W. CRAWFORD, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. NAME AND TITLE Date March 14, 2005 /s/ Thomas W. Crawford ------------------------------- THOMAS W. CRAWFORD, President and Chief Executive Officer (Principal Executive Officer) Date March 14, 2005 /s/ J. F. Giblin ------------------------------- J. F. GIBLIN, Executive Vice President-Finance (Principal Financial Officer) Date March 14, 2005 /s/ W. B. Swain ------------------------------- W. B. SWAIN, Senior Vice President and Controller (Principal Accounting Officer) 21 NAME AND TITLE Date March 14, 2005 * ------------------------------- J. HICKS LANIER, Director Date March 14, 2005 * ------------------------------- JESSE C. CRAWFORD, Director Date March 14, 2005 * ------------------------------- LARRY L. PRINCE,, Director Date March 14, 2005 * ------------------------------- JOHN A. WILLIAMS, Director Date March 14, 2005 * ------------------------------- E. JENNER WOOD, III, Director Date March 14, 2005 * ------------------------------- CLARENCE H. RIDLEY, Director Date March 14, 2005 * ------------------------------- ROBERT T. JOHNSON, Director Date March 14, 2005 * ------------------------------- JAMES D. EDWARDS, Director Date March 14, 2005 *By /s/ Peter J. Rescigno ------------------------------- Peter J. Rescigno - As attorney-in-fact for the Directors above whose name an asterisk appears. 22 EXHIBIT INDEX
Sequential Page Number Exhibit No. Description of Exhibit of Exhibit - ----------- ---------------------- ----------- 3.1 Restated Articles of Incorporation of the Registrant, as amended (incorporated by reference to Exhibit 19.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1991). 3.2 Restated By-laws of the Registrant, as amended (incorporated by reference to Exhibit 3.2 of the Registrant's annual report on Form 10-K for the year ended December 31, 2003). 10.1 Crawford & Company 1990 Stock Option Plan, as amended (incorporated by reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992). 10.2 Crawford & Company 1997 Key Employee Stock Option Plan, as amended (incorporated by reference to Appendix A on page A-1 of the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 25, 2000). 10.3 Crawford & Company 1997 Non-Employee Director Stock Option Plan (incorporated by reference to Appendix B on page B-1 of the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 22, 1997). 10.4 Amended and Restated Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2004). 10.5 Crawford & Company 1996 Employee Stock Purchase Plan (incorporated by reference to Appendix A on page A-1 of Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 18, 1996). 10.6 Amended and Restated Crawford & Company Medical Reimbursement Plan (incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994). 10.7 Discretionary Allowance Plan (incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994).
23 EXHIBIT INDEX
Sequential Page Number Exhibit No. Description of Exhibit of Exhibit - ----------- ---------------------- ----------- 10.8 Deferred Compensation Plan (As Amended and Restated as of January 1, 2003) (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003). 10.9 Crawford & Company 1996 Incentive Compensation Plan, as amended (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1999). 10.10 Crawford & Company Executive Stock Bonus Plan (incorporated by reference to Appendix A of the Registrant's Proxy Statement for the Annual Meeting of Shareholders held on April 26, 2005). 10.11 Revolving Credit Agreement dated as of September 30, 2003. 26-123 10.12 Note Purchase Agreement dated as of September 30, 2003. 124-221 13.1 The Registrant's Annual Report to Shareholders for the year ended December 31, 2004 (only those portions incorporated hereby by reference). 222-267 14.1 Crawford & Company Code of Business Conduct (incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2003). 21.1 Subsidiaries of Crawford & Company. 268 23.1 Consent of Ernst & Young LLP. 269 24.1-8 Powers of Attorney. 270-277 31.1 Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 278 31.2 Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 280
24 EXHIBIT INDEX
Sequential Page Number Exhibit No. Description of Exhibit of Exhibit - ----------- ---------------------- ----------- 32.1 Certification pursuant to 18 U.S.C. Section 1850, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 282 32.2 Certification pursuant to 18 U.S.C. Section 1850, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 283
25 EX-10.11 2 g93630exv10w11.txt EX-10.11 REVOLVING CREDIT AGREEMENT ================================================================================ Exhibit 10.11 REVOLVING CREDIT AGREEMENT DATED AS OF SEPTEMBER 30, 2003 AMONG CRAWFORD & COMPANY AND CRAWFORD & COMPANY INTERNATIONAL, INC. AS BORROWERS THE LENDERS FROM TIME TO TIME PARTY HERETO AND BANK OF AMERICA, N.A. AS SYNDICATION AGENT AND SUNTRUST BANK AS ADMINISTRATIVE AGENT ================================================================================ SUNTRUST ROBINSON HUMPHREY (A DIVISION OF SUNTRUST CAPITAL MARKETS, INC.) AS LEAD ARRANGER TABLE OF CONTENTS
PAGE ---- ARTICLE I. DEFINITIONS; CONSTRUCTION............................... 1 SECTION 1.1. DEFINITIONS............................................. 1 SECTION 1.2. CLASSIFICATIONS OF LOANS AND BORROWINGS................. 21 SECTION 1.3. ACCOUNTING TERMS AND DETERMINATION...................... 22 SECTION 1.4. TERMS GENERALLY; RULES OF INTERPRETATION................ 22 ARTICLE II. AMOUNT AND TERMS OF THE COMMITMENTS..................... 23 SECTION 2.1. GENERAL DESCRIPTION OF FACILITIES....................... 23 SECTION 2.2. REVOLVING LOANS......................................... 23 SECTION 2.3. PROCEDURE FOR REVOLVING BORROWINGS...................... 23 SECTION 2.4. SWINGLINE COMMITMENT.................................... 24 SECTION 2.5. PROCEDURE FOR SWINGLINE BORROWING; ETC.................. 24 SECTION 2.6. MULTI-CURRENCY OPTIONS.................................. 25 SECTION 2.7. EUROPEAN ECONOMIC AND MONETARY UNION.................... 28 SECTION 2.8. [RESERVED].............................................. 30 SECTION 2.9. FUNDING OF BORROWINGS................................... 30 SECTION 2.10. INTEREST ELECTIONS; CONVERSIONS; CONTINUATIONS.......... 31 SECTION 2.11. TERMINATION OF COMMITMENTS.............................. 32 SECTION 2.12. REPAYMENT OF LOANS...................................... 32 SECTION 2.13. EVIDENCE OF INDEBTEDNESS................................ 33 SECTION 2.14. OPTIONAL AND MANDATORY PREPAYMENTS...................... 33 SECTION 2.15. INTEREST ON LOANS....................................... 34
i SECTION 2.16. FEES.................................................... 35 SECTION 2.17. EFFECTIVE DATE FOR ADJUSTMENT TO APPLICABLE PERCENTAGE AND APPLICABLE MARGIN................................ 36 SECTION 2.18. COMPUTATION OF INTEREST AND FEES........................ 36 SECTION 2.19. INABILITY TO DETERMINE INTEREST RATES................... 36 SECTION 2.20. ILLEGALITY.............................................. 37 SECTION 2.21. INCREASED COSTS......................................... 37 SECTION 2.22. FUNDING INDEMNITY....................................... 39 SECTION 2.23. TAXES................................................... 39 SECTION 2.24. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS............................................. 42 SECTION 2.25. MITIGATION OF OBLIGATIONS; REPLACEMENT OF LENDERS....... 43 SECTION 2.26. LETTERS OF CREDIT....................................... 44 SECTION 2.27. BORROWERS' REPRESENTATIVE............................... 48 SECTION 2.28. JOINT AND SEVERAL LIABILITY............................. 49 ARTICLE III. CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT..... 50 SECTION 3.1. CONDITIONS TO EFFECTIVENESS............................. 50 SECTION 3.2. EACH CREDIT EVENT....................................... 52 SECTION 3.3. DELIVERY OF DOCUMENTS................................... 53 ARTICLE IV. REPRESENTATIONS AND WARRANTIES.......................... 53 SECTION 4.1. EXISTENCE; POWER........................................ 53 SECTION 4.2. ORGANIZATIONAL POWER; AUTHORIZATION..................... 53 SECTION 4.3. GOVERNMENTAL AND THIRD PARTY APPROVALS; NO CONFLICTS.... 54 SECTION 4.4. FINANCIAL STATEMENTS.................................... 54 SECTION 4.5. LITIGATION AND ENVIRONMENTAL MATTERS.................... 54 SECTION 4.6. COMPLIANCE WITH LAWS AND AGREEMENTS..................... 55
ii SECTION 4.7. INVESTMENT COMPANY ACT, ETC............................. 55 SECTION 4.8. TAXES................................................... 55 SECTION 4.9. MARGIN REGULATIONS...................................... 55 SECTION 4.10. ERISA................................................... 55 SECTION 4.11. OWNERSHIP OF PROPERTY................................... 56 SECTION 4.12. DISCLOSURE.............................................. 56 SECTION 4.13. LABOR RELATIONS......................................... 56 SECTION 4.14. SUBSIDIARIES............................................ 56 SECTION 4.15. SOLVENCY................................................ 56 SECTION 4.16. INDEBTEDNESS AT FUNDING DATE............................ 56 SECTION 4.17. DORMANT COMPANIES....................................... 57 SECTION 4.18. NOTE PURCHASE AGREEMENT................................. 57 ARTICLE V. AFFIRMATIVE COVENANTS................................... 57 SECTION 5.1. FINANCIAL STATEMENTS AND OTHER INFORMATION.............. 57 SECTION 5.2 NOTICES OF MATERIAL EVENTS.............................. 59 SECTION 5.3. EXISTENCE............................................... 59 SECTION 5.4. COMPLIANCE WITH LAWS, ETC............................... 59 SECTION 5.5. PAYMENT OF OBLIGATIONS.................................. 60 SECTION 5.6. BOOKS AND RECORDS....................................... 60 SECTION 5.7. VISITATION, INSPECTION, ETC............................. 60 SECTION 5.8. MAINTENANCE OF PROPERTIES; INSURANCE.................... 60 SECTION 5.9. USE OF PROCEEDS AND LETTERS OF CREDIT................... 60 SECTION 5.10. ADDITIONAL SUBSIDIARIES; DORMANT COMPANIES.............. 61 SECTION 5.11. AMENDMENT TO PRIVATE PLACEMENT LOAN DOCUMENTS........... 62
iii SECTION 5.12. POST CLOSING REQUIREMENTS............................... 63 ARTICLE VI FINANCIAL COVENANTS..................................... 63 SECTION 6.1. LEVERAGE RATIO.......................................... 63 SECTION 6.2. FIXED CHARGE COVERAGE RATIO............................. 64 SECTION 6.3. MINIMUM NET WORTH....................................... 64 ARTICLE VII NEGATIVE COVENANTS...................................... 64 SECTION 7.1. INDEBTEDNESS............................................ 65 SECTION 7.2. NEGATIVE PLEDGE......................................... 66 SECTION 7.3. FUNDAMENTAL CHANGES; LINE OF BUSINESS................... 66 SECTION 7.4. INVESTMENTS, LOANS, ACQUISITIONS, ETC................... 67 SECTION 7.5. RESTRICTED PAYMENTS..................................... 68 SECTION 7.6. SALE OF ASSETS.......................................... 69 SECTION 7.7. TRANSACTIONS WITH AFFILIATES............................ 69 SECTION 7.8. RESTRICTIVE AGREEMENTS.................................. 70 SECTION 7.9. SALE AND LEASEBACK TRANSACTIONS......................... 70 SECTION 7.10. HEDGING AGREEMENTS...................................... 70 SECTION 7.11. AMENDMENT TO ORGANIZATIONAL DOCUMENTS................... 70 SECTION 7.12. ACCOUNTING CHANGES; CHANGE OF FISCAL YEAR............... 71 SECTION 7.13. MINIMUM CASH............................................ 71 SECTION 7.14. NO LIMITATION ON PREPAYMENTS OR AMENDMENTS TO LOAN DOCUMENTS............................................ 71 ARTICLE VIII EVENTS OF DEFAULT....................................... 71 SECTION 8.1. EVENTS OF DEFAULT....................................... 71 ARTICLE IX THE ADMINISTRATIVE AGENT................................ 74 SECTION 9.1. APPOINTMENT OF ADMINISTRATIVE AGENT..................... 74
iv SECTION 9.2. NATURE OF DUTIES OF ADMINISTRATIVE AGENT................ 74 SECTION 9.3. LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT............ 75 SECTION 9.4. CERTAIN RIGHTS OF THE ADMINISTRATIVE AGENT.............. 75 SECTION 9.5. RELIANCE BY ADMINISTRATIVE AGENT........................ 75 SECTION 9.6. THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY..... 76 SECTION 9.7. SUCCESSOR ADMINISTRATIVE AGENT.......................... 76 ARTICLE X MISCELLANEOUS........................................... 77 SECTION 10.1. NOTICES................................................. 77 SECTION 10.2. WAIVER; AMENDMENTS...................................... 78 SECTION 10.3. EXPENSES; INDEMNIFICATION............................... 79 SECTION 10.4. SUCCESSORS AND ASSIGNS.................................. 80 SECTION 10.5. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.............................................. 83 SECTION 10.6. WAIVER OF JURY TRIAL.................................... 84 SECTION 10.7. RIGHT OF SETOFF......................................... 84 SECTION 10.8. COUNTERPARTS; INTEGRATION............................... 84 SECTION 10.9. SURVIVAL................................................ 84 SECTION 10.10. SEVERABILITY............................................ 85 SECTION 10.12. INTEREST RATE LIMITATION................................ 85 SECTION 10.12. CONFIDENTIALITY......................................... 85
v Schedules Schedule I -- Applicable Margin and Applicable Percentage Schedule II -- Investment Guidelines of Crawford Schedule 1.1 -- Foreign Currency Payment Accounts Schedule 4.5(a) -- Litigation Schedule 4.5(b) -- Environmental Matters Schedule 4.14 -- Subsidiaries Schedule 4.16 -- Indebtedness Schedule 4.17 -- dormant Companies Schedule 7.1 -- Funding Date Indebtedness Schedule 7.2 -- Existing Liens Schedule 7.4 -- Existing Investments Schedule 7.8 -- Restrictive Agreements vi Exhibits Exhibit A -- Form of Assignment and Acceptance Exhibit B -- Form of Pledge Agreement Exhibit C -- Form of Revolving Credit Note Exhibit D -- Form of Subsidiary Guaranty Agreement Exhibit E -- Form of Swingline Note Exhibit F -- Form of Opinion of Counsel to Loan Parties Exhibit 2.3 -- Notice of Revolving Borrowing Exhibit 2.5 -- Notice of Swingline Borrowing Exhibit 2.10 -- Form of Continuation/Conversion Exhibit 2.21 -- Mandatory Costs Rate vii REVOLVING CREDIT AGREEMENT THIS REVOLVING CREDIT AGREEMENT (this "Agreement") is made and entered into as of September 30, 2003 by and among CRAWFORD & COMPANY, a Georgia corporation ("Crawford"), CRAWFORD & COMPANY INTERNATIONAL, INC., a Georgia corporation ("International"; Crawford and International are each referred to herein individually as a "Borrower", and collectively, the "Borrowers"), the several banks and other financial institutions from time to time party hereto (the "Lenders"), BANK OF AMERICA, N.A., as Syndication Agent, and SUNTRUST BANK, in its capacity as Administrative Agent for the Lenders (the "Administrative Agent"). WITNESSETH: WHEREAS, the Borrowers have requested that the Lenders establish a $70,000,000 revolving credit facility in favor of the Borrowers; and WHEREAS, to the extent of their respective Commitments and on a several (and not joint) basis, the Lenders are willing to establish the requested revolving credit facility on the terms and conditions herein. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Borrowers, the Lenders and the Administrative Agent agree as follows: ARTICLE I DEFINITIONS; CONSTRUCTION SECTION 1.1. DEFINITIONS. In addition to the other terms defined herein, the following terms used herein shall have the meanings herein specified (to be equally applicable to both the singular and plural forms of the terms defined): "ACQUISITION" shall mean any acquisition, whether by stock or other equity purchase, asset purchase, merger, consolidation or otherwise of a Person, all or substantially all of the assets of a Person or a business line or division of a Person. "ADJUSTED LIBOR" shall mean, with respect to each Interest Period for a Eurocurrency Borrowing, the rate per annum obtained by multiplying (i) LIBOR for such Interest Period by (ii) the Statutory Reserve Rate. "ADMINISTRATIVE AGENT" shall have the meaning assigned to such term in the opening paragraph hereof. 1 "ADMINISTRATIVE QUESTIONNAIRE" shall mean, with respect to each Lender, an administrative questionnaire in the form provided by the Administrative Agent and submitted to the Administrative Agent duly completed by such Lender. "AFFILIATE" shall mean, as to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person. "ALTERNATE LENDING OFFICE" means as to each Lender, such office, branch, affiliate or correspondent of such Lender as such Lender may from time to time designate by notice to Borrowers and the Administrative Agent as such Lender's office for making or receiving payments of Revolving Loans denominated in a Foreign Currency. "AGGREGATE REVOLVING COMMITMENTS" shall mean the sum of the Revolving Commitments of all Lenders at any time outstanding. On the Closing Date, the Aggregate Revolving Commitments equal $70,000,000. "APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or an Affiliate of such Lender) designated for such Type of Loan in the Administrative Questionnaire submitted by such Lender or such other office of such Lender (or an Affiliate of such Lender) as such Lender may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such Type are to be made and maintained. "APPLICABLE MARGIN" shall mean, as of any date, with respect to all Eurocurrency Loans outstanding on any date, the percentage per annum determined by reference to the applicable Leverage Ratio in effect on such date as set forth on Schedule I attached hereto, as adjusted and otherwise determined from time to time in accordance with Section 2.17. "APPLICABLE PERCENTAGE" shall mean, at any date, with respect to the commitment fee or the letter of credit fee, as the case may be, the percentage per annum determined by reference to the applicable Leverage Ratio in effect on such date as set forth on Schedule I attached hereto, as adjusted and otherwise determined from time to time in accordance with Section 2.17. "APPLICABLE PLEDGE AMOUNT" shall mean, in respect of the amount of capital stock or other equity interest of any Foreign Subsidiary to be pledged to the Administrative Agent, for the benefit of the Lenders, pursuant to a Pledge Agreement, the lesser of (i) 65% of all outstanding capital stock or other equity interest of such Foreign Subsidiary and (ii) the total amount of all outstanding capital stock or other equity interest of such Foreign Subsidiary owned by the Borrowers and their other Subsidiaries. "ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and acceptance entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4(b)) and accepted by the Administrative Agent, in the form of Exhibit A attached hereto or any other form approved by the Administrative Agent. 2 "AVAILABILITY PERIOD" shall mean the period from the Funding Date to the Commitment Termination Date. "BASE RATE" shall mean the higher of (i) the per annum rate which the Administrative Agent publicly announces from time to time to be its prime lending rate, as in effect from time to time, and (ii) the Federal Funds Rate, as in effect from time to time, plus one-half of one percent (0.50%). The Administrative Agent's prime lending rate is a reference rate and does not necessarily represent the lowest or best rate charged to customers. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Administrative Agent's prime lending rate. Each change in the Base Rate hereunder shall be effective on the effective date of any change in the Administrative Agent's prime lending rate. "BORROWER" and "BORROWERS" shall have the meanings given such terms in the introductory paragraph hereof. "BORROWING" shall mean a borrowing consisting of (i) Loans of the same Class and Type, made, converted or continued on the same date and in the case of Eurocurrency Loans, as to which a single Interest Period is in effect, or (ii) a Swingline Loan. "BUSINESS DAY" shall mean any day other than a Saturday or Sunday or other day on which banks are not authorized or required to close in Atlanta, Georgia or New York, New York and, if the applicable Business Day relates to the advance or continuation of, conversion into, or payment on a Eurocurrency Borrowing (i) in a currency other than Euros, on which banks are dealing in Dollar or any Foreign Currency (other than Euros) deposits, as applicable, in the applicable interbank eurocurrency market in London, England, and in the country of issue of the currency of such Eurocurrency Borrowing, and (ii) in Euros, on which the TARGET payment system is open for the settlement of payments in Euros. "CAPITAL LEASE OBLIGATIONS" of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CHANGE IN CONTROL" shall mean the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of Crawford to any Person or "group" (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission from time to time issued thereunder)(collectively, the "Exchange Act"), (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or "group" (as defined immediately above) of 30% or more of the outstanding shares of the voting stock of Crawford; (c) Crawford ceases to own directly 100% of the outstanding capital stock of International; or (d) occupation of a majority of the seats (other than vacant seats) on the board of 3 directors of Crawford by persons who were neither (i) nominated by the then current board of directors or (ii) appointed by directors so nominated. "CHANGE IN LAW" shall mean (i) the adoption of any applicable law, rule or regulation after the date of this Agreement, (ii) any change in any applicable law, rule or regulation, or any change in the interpretation or application thereof, by any Governmental Authority after the date of this Agreement, or (iii) compliance by any Lender (or its Applicable Lending Office) or the Issuing Bank (or for purposes of Section 2.21(b), by such Lender's or the Issuing Bank's holding company, if applicable) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "CLASS", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Swingline Loans and when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment or a Swingline Commitment. "CLOSING DATE" shall mean October 10, 2003. "CODE" shall mean the Internal Revenue Code of 1986, as amended and in effect from time to time. "COMMITMENT" shall mean a Revolving Commitment or a Swingline Commitment or any combination thereof (as the context shall permit or require). "COMMITMENT TERMINATION DATE" shall mean the earliest of (i) October 9, 2006 and (ii) the date on which all amounts outstanding under this Agreement have been declared or have automatically become due and payable (whether by acceleration or otherwise). "CONSOLIDATED EBITDA" shall mean, for the Consolidated Parties for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) without duplication and only to the extent deducted in determining Consolidated Net Income for such period, (i) Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) non-recurring charges not to exceed $10,000,000 in an aggregate amount during the Availability Period relating to the settlement of claims described on Schedule 4.5(a) and (iv) all other non-cash charges satisfactory to the Administrative Agent in its reasonable discretion (including non-cash charges for such period taken for the impairment of goodwill in accordance with Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" issued by the Financial Accounting Standards Board) minus (c) all software costs capitalized during such period (other than software purchased or acquired from software vendors), in each case determined on a consolidated basis in accordance with GAAP for such period. "CONSOLIDATED EBITR" shall mean, for the Consolidated Parties for any period, an amount equal to the sum of (a) Consolidated Net Income for such period plus (b) without duplication and only to the extent deducted in determining Consolidated Net Income for such period, (i) Consolidated Interest Expense, (ii) income tax expense, (iii) Consolidated Lease Expense, (iv) non- 4 recurring charges not to exceed $10,000,000 in an aggregate amount during the Availability Period relating to the settlement of litigation pending as of the Closing Date and (iv) all other non-cash charges satisfactory to the Administrative Agent in its reasonable discretion (including non-cash charges for such period taken for the impairment of goodwill in accordance with Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" issued by the Financial Accounting Standards Board) minus (c) all software costs capitalized during such period (other than software purchased or acquired from software vendors), in each case determined on a consolidated basis in accordance with GAAP for such period. "CONSOLIDATED FIXED CHARGES" shall mean, for the Consolidated Parties for any period, the sum of: (a) Consolidated Interest Expense for such period and (b) Consolidated Lease Expense for such period. "CONSOLIDATED INTEREST EXPENSE" shall mean, for the Consolidated Parties for any period determined on a consolidated basis in accordance with GAAP, the sum of (i) total cash interest expense, including without limitation the interest component of any payments in respect of Capital Lease Obligations capitalized or expensed during such period (whether or not actually paid during such period) plus (ii) the net amount payable (or minus the net amount receivable) under Hedging Agreements during such period (whether or not actually paid or received during such period). "CONSOLIDATED LEASE EXPENSE" shall mean, for any period, the aggregate amount of fixed and contingent rentals payable by the Consolidated Parties with respect to leases of real and/or personal property (excluding Capital Lease Obligations) determined on a consolidated basis in accordance with GAAP for such period. "CONSOLIDATED NET INCOME" shall mean, for any period, the net income (or loss) of the Consolidated Parties for such period determined on a consolidated basis in accordance with GAAP, but excluding therefrom (to the extent otherwise included therein): (i) any extraordinary gains or losses, (ii) any gains attributable to write-ups of assets, (iii) any equity interest of any Consolidated Party in the unremitted earnings of any Person that is not a Subsidiary, (iv) any income (or loss) of any Person accrued prior to the date such Person becomes a Subsidiary or is merged into or consolidated with Crawford or any Subsidiary or the date that such Person's assets are acquired by Crawford or any such Subsidiary and (v) any income of any Subsidiary which is not a Subsidiary Loan Party to the extent the payment of such income in the form of dividends or other distributions to either Crawford or any Subsidiary is then prohibited, whether on account of restrictions in such Subsidiary's organizational documents or restrictions in any agreement, document, contract, deed or other instrument applicable to such Subsidiary. "CONSOLIDATED PARTIES" shall mean, at any time, Crawford and each Consolidated Subsidiary of Crawford. 5 "CONSOLIDATED SUBSIDIARY" shall mean, at any date, any Person that, in accordance with GAAP, would or should be consolidated in Crawford's consolidated financial statements on such date. "CONSOLIDATED TOTAL ASSETS" shall mean, at any time, the total assets of Crawford and its Subsidiaries, determined on a consolidated basis, in accordance with GAAP. "CONSOLIDATED TOTAL FUNDED DEBT" shall mean, at any time, all then outstanding obligations, liabilities and indebtedness of the Consolidated Parties on a consolidated basis of the types described in the definition of Indebtedness, including, without limitation, all Obligations under the Loan Documents. "CONTROL" shall mean the power, directly or indirectly, either to (i) vote 10% or more of securities having ordinary voting power for the election of directors (or persons performing similar functions) of a Person or (ii) direct or cause the direction of the management and policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms "CONTROLLING", "CONTROLLED BY", and "UNDER COMMON CONTROL WITH" have meanings correlative thereto. "CURRENCY CALCULATION DATE" means (a) each date of delivery of a Notice of Revolving Borrowing in accordance with Section 2.3, (b) the date of any required conversion of Eurocurrency Loans pursuant to Section 2.10(c) and (c) each other date on which the Administrative Agent shall, in its discretion, calculate the Dollar Equivalent of a Revolving Loan denominated in a Foreign Currency, other than on a Currency Calculation Date as set forth in clause (a) of this definition. "CRAWFORD" shall have the meaning set forth in the introductory paragraph hereof. "DEFAULT" shall mean any condition or event that, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "DEFAULTING LENDER" shall mean any Lender with respect to which a Lender Default is in effect. "DOLLAR(S)" and the sign "$" shall mean lawful money of the United States of America. "DOLLAR EQUIVALENT" of any amount expressed in an Foreign Currency, means the equivalent amount of Dollars as of the most recent date on which Administrative Agent in its judgment determines to make a foreign exchange calculation, after giving effect to a conversion of such amount of such Foreign Currency to Dollars at the buy spot rate quoted for wholesale transactions by Administrative Agent at approximately 11:00 a.m. on any Currency Calculation Date in accordance with its normal practice. 6 "DORMANT COMPANY" means each of the Subsidiaries of the Borrowers specifically designated as "dormant" on Schedule 4.14 hereto. "EMU" means the economic and monetary union as contemplated in the Treaty on European Union. "EMU LEGISLATION" shall mean the legislative measures of the European Union for the introduction of, changeover to or operation of the Euro in one or more member states. "ENVIRONMENTAL LAWS" shall mean all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or with any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to health and safety matters. "ENVIRONMENTAL LIABILITY" shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of either Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "EQUITY OFFERING" means an underwritten public offering of any capital stock of Crawford, or any debt security convertible into or exchangeable for capital stock of Crawford (whether conditionally or unconditionally convertible or exchangeable or convertible currently or in the future), or any debt security issued with a warrant or other instrument conferring upon its owner the right to purchase capital stock of Crawford, in each case pursuant to an effective registration statement filed with the Securities and Exchange Commission in accordance with the Securities Act of 1933, as amended. In no event shall an Equity Offering include any issuances of stock and stock options to employees and directors of Crawford or its Subsidiaries. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated), which, together with either Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA EVENT" shall mean (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated 7 funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303 of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by either Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by either Borrower or any ERISA Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by either Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by either Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from either Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "EURO" or "E" shall mean the single currency of the European Union as constituted by the Treaty on European Union and as referred to in the EMU Legislation for the introduction of, changeover to or operation of the Euro in one or more member states. "EUROCURRENCY" when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bears interest at a rate determined by reference to the Adjusted LIBOR and the Applicable Margin. "EVENT OF DEFAULT" shall have the meaning provided in Article VIII. "EXCHANGE ACT" shall have the meaning provided in the defined term "Change of Control. "EXCLUDED TAXES" shall mean with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrowers hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which any of its offices is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which either Borrower is located and (c) in the case of a Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.23(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from a Borrower with respect to such withholding tax pursuant to Section 2.23(a). "EXISTING LENDERS" means each of SunTrust Bank and Citibank, N.A. "FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the next 1/100th of 1%) equal to the weighted average of the rates on overnight 8 Federal funds transactions with member banks of the Federal Reserve System arranged by Federal funds brokers, as published by the Federal Reserve Bank of New York on the next succeeding Business Day or if such rate is not so published for any Business Day, the Federal Funds Rate for such day shall be the average rounded upwards, if necessary, to the next 1/100th of 1% of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "FIXED CHARGE COVERAGE RATIO" shall mean, for any period of four consecutive fiscal quarters of Crawford, the ratio of (a) Consolidated EBITR for such period to (b) Consolidated Fixed Charges for such period. "FOREIGN CURRENCY" shall mean, individually and collectively, as the context requires, (i) Euros, (ii) the lawful currency of each of the following countries, provided that such currencies are not deemed unavailable to a Lender as a result of any of the circumstances relevant to such Lender as set forth in Sections 2.19, 2.20 or 2.21 (subject to the Borrowers' right to replace any such affected Lender under Section 2.25): Canada, Japan, Norway, Australia, United Kingdom of Great Britain, Northern Ireland, Switzerland, New Zealand, Mexico, Singapore and South Africa and (iii) any other currencies that are freely transferable and convertible into US Dollars; provided, however, that no such currency under this clause (iii) shall be included as a Foreign Currency hereunder, or included in a Notice of Revolving Borrowing, unless (x) the Borrowers have first submitted a request to the Administrative Agent and the Lenders that it be so included, and (y) the Administrative Agent and the Lenders, in their sole discretion, have agreed to such request. "FOREIGN CURRENCY PAYMENT ACCOUNTS" shall mean those bank accounts specified on Schedule 1.1 for receipt of payments in Foreign Currencies, both from the Lenders in accordance with Section 2.9(a) and the Borrowers in accordance with Section 2.24(a), or such other bank accounts as may hereafter be specified by the Administrative Agent in writing to the Borrowers and the Lenders as being the applicable bank accounts for receipt of payments in such currencies. "FOREIGN CURRENCY SUBLIMIT" shall mean $55,000,000, as such amount may be reduced from time to time pursuant to the terms of this Agreement. "FOREIGN LENDER" shall mean any Lender that is organized under the laws of a jurisdiction other than that of the Borrowers. For purposes of this definition, the United States of America or any political subdivision thereof shall constitute one jurisdiction. "FOREIGN SUBSIDIARY" shall mean any direct or indirect Subsidiary of Crawford that is organized under the laws of a jurisdiction other than the United States of America or any political subdivision thereof. "FUNDING DATE" shall mean the first day on which all of the conditions precedent set forth in Section 3.1 and Section 3.2 have been satisfied or waived in accordance with Section 10.2. "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis and subject to the terms of Section 1.3. 9 "GOVERNMENTAL AUTHORITY" shall mean the government of the United States of America, any other foreign country or nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (whether foreign or domestic). "GUARANTEE" of or by any Person (the "GUARANTOR") shall mean any legally binding obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly and including any obligation, direct or indirect, of the guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued in support of such Indebtedness or obligation; provided, that the term "Guarantee" shall not include endorsements for collection or deposits in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which Guarantee is made or, if not so stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. The term "Guarantee" used as a verb has a corresponding meaning. "HAZARDOUS MATERIALS" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "HEDGING AGREEMENTS" shall mean interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity agreements and other similar agreements or arrangements designed to protect against fluctuations in interest rates, currency values, stock values or commodity values. "INDEBTEDNESS" of any Person shall mean, without duplication: (i) obligations of such Person for borrowed money, (ii) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) obligations of such Person in respect of the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of business on terms customary in the trade), (iv) obligations of such Person under any conditional sale or other title retention agreement(s) relating to property acquired by such Person, (v) Capital Lease Obligations of such Person, (vi) obligations, contingent or otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of credit, (vii) guaranties by such Person of the type of 10 indebtedness described in clauses (i) through (v) immediately above, (viii) all indebtedness or other obligations of another Person secured by any Lien on property owned by such Person, whether or not such indebtedness or obligations have been assumed by such Person, (ix) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any capital stock or other security of such Person, (x) off-balance sheet liability retained in connection with asset securitization programs, Synthetic Leases, sale and leaseback transactions or other similar obligations arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries, and (xi) obligations under any Hedging Agreement or foreign exchange agreement. For purposes of determining Indebtedness under clause (xi) the obligations of either Borrower or any Subsidiary in respect to any Hedging Agreement or foreign exchange agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that such Borrower or such Subsidiary would be required to pay if such Hedging Agreement or foreign exchange agreement were terminated at such time. "INDEMNIFIED TAXES" shall mean Taxes imposed upon any payment made by either Borrower or any other Loan Party to any Lender under any Loan Document other than Excluded Taxes. "INTEREST PERIOD" shall mean (i) with respect to any Eurocurrency Borrowing, a period of one, two, three or six months and (ii) with respect to a Swingline Loan, a period of such duration not to exceed 7 days, as Crawford may request and the Swingline Lender may agree in accordance with Section 2.5; provided, that: (i) the initial Interest Period for such Borrowing shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of another Type) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (ii) if any Interest Period would otherwise end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day, unless, in the case of a Eurocurrency Borrowing, such Business Day falls in another calendar month, in which case such Interest Period would end on the next preceding Business Day; (iii) any Interest Period in respect of a Eurocurrency Borrowing which begins on the last Business Day of a calendar month or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of such calendar month; and (iv) no Interest Period may extend beyond the Commitment Termination Date or the Swingline Termination Date, as the case may be. "INVESTMENT" shall have the meaning given such term in Section 7.4. 11 "ISSUING BANK" shall mean SunTrust Bank, in its capacity as an issuer of Letters of Credit pursuant to Section 2.26, and its successors and assigns in such capacity. "LC COMMITMENT" shall mean that portion of the Aggregate Revolving Commitments that may be used by the Borrowers for the issuance of Letters of Credit in an aggregate stated amount not to exceed $15,000,000. "LC DISBURSEMENT" shall mean a payment made by the Issuing Bank pursuant to a Letter of Credit. "LC DOCUMENTS" shall mean the Letters of Credit and all applications, agreements and instruments relating to the Letters of Credit. "LC EXPOSURE" shall mean, at any time, the sum of (i) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (ii) the aggregate amount of all LC Disbursements that have not been reimbursed by or on behalf of the Borrowers at such time. The LC Exposure of any Lender shall be its Pro Rata Share of the total LC Exposure at such time. "LENDERS" shall have the meaning assigned to such term in the opening paragraph of this Agreement and shall include, where appropriate, the Swingline Lender. "LENDER DEFAULT" shall mean (a) the failure (which has not been cured) of any Lender to make available its portion of any Borrowing or to fund its portion of any unreimbursed payment under Section 2.26 or (b) a Lender having notified the Administrative Agent and/or the Borrowers that it does not intend to comply with the obligations under Sections 2.2, 2.5 and 2.26. "LETTER OF CREDIT" shall mean any standby letter of credit issued pursuant to Section 2.26 by the Issuing Bank for the account of a Borrower pursuant to the LC Commitment. "LEVERAGE RATIO" shall mean, as of any date of determination, the ratio of (i) Consolidated Total Funded Debt as of such date to (ii) Consolidated EBITDA for the four fiscal quarters ending on or most recently preceding the date of determination. "LIBOR" means the rate of interest per annum determined on the basis of the rate for deposits in Dollars or applicable Foreign Currency deposits, as the case may be, in minimum amounts of at least $100,000 for a period equal to the applicable Interest Period which appears for Dollar deposits and for Foreign Currency deposits, respectively, on the Dow Jones Markets page 3750 at approximately 11:00 a.m. (London time), two (2) Business Days prior to the first day of the applicable Interest Period (rounded upward, if necessary, to the nearest one-hundredth of one percent (1/100%)). If, for any reason, such rate does not appear on Dow Jones Markets page 3750, then LIBOR shall be determined by the Administrative Agent to be the arithmetic average (rounded upward, if necessary, to the nearest one-hundredth of one percent (1/100%)) of the rate per annum at which deposits in Dollars or the applicable Foreign Currency would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London 12 time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period and in an amount substantially equal to the amount of the applicable Loan. "LIEN" shall mean any mortgage, pledge, security interest, lien (statutory or otherwise), charge, encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the practical effect of the foregoing or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having the same economic effect as any of the foregoing). "LIQUIDATION CURRENCY" shall have the meaning assigned to such term in Section 2.6(d). "LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Notes, the LC Documents, all Notices of Borrowing, the Subsidiary Guaranty Agreement, the Pledge Agreement required to be entered into pursuant to the terms hereof, the Sharing Agreement, and any and all other instruments, agreements, documents and writings executed in connection with any of the foregoing. "LOAN PARTIES" shall mean the Borrowers and the Subsidiary Loan Parties. "LOANS" shall mean all Revolving Loans and Swingline Loans in the aggregate or any of them, as the context shall require. "MANDATORY COSTS RATE" shall have the meaning set forth in Section 2.21. "MARGIN REGULATIONS" shall mean Regulation T, Regulation U and Regulation X of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time. "MATERIAL ADVERSE EFFECT" shall mean, with respect to any event, act, condition or occurrence of whatever nature (including any adverse determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or events, act or acts, condition or conditions, occurrence or occurrences whether or not related, a material adverse change in, or a material adverse effect on, (i) the business, results of operations, financial condition, affairs, properties, assets or liabilities of the Consolidated Parties taken as a whole, (ii) the ability of either Borrower or any Subsidiary Loan Party to perform any of their respective obligations under the Loan Documents, (iii) the rights and remedies of the Administrative Agent, the Issuing Bank and/or the Lenders under any of the Loan Documents or (iv) the legality, validity or enforceability of any of the Loan Documents. "MOODY'S" shall mean Moody's Investors Service, Inc. "MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 4001(a)(3) of ERISA. 13 "NATIONAL CURRENCY UNIT" means the unit of currency (other than a Euro) of a Participating Member State "NET PROCEEDS" means the aggregate cash proceeds received by Crawford in respect of any Equity Offering, net of the direct costs relating to such Equity Offering (including, without limitation, legal, accounting and investment banking fees, printing, sales and distribution costs and expenses, and sales commissions). "NET WORTH" shall mean, as of any date, the total shareholders' equity of the Consolidated Parties that would be reflected on Crawford's consolidated balance sheet as of such date prepared in accordance with GAAP. "NON-DEFAULTING LENDER" shall mean and include each Lender other than a Defaulting Lender. "NON-INTERNATIONAL OWNED FOREIGN SUBSIDIARY" shall have the meaning as set forth in Section 5.10. "NOTES" shall mean, collectively, the Revolving Credit Notes and the Swingline Note. "NOTE PURCHASE AGREEMENT" shall mean that certain Note Purchase Agreement dated as of September 30, 2003 among the Borrowers and the Purchasers listed on Schedule A attached thereto, as amended, restated, supplemented or otherwise modified from time to time. "NOTICES OF BORROWING" shall mean, collectively, the Notices of Revolving Borrowing and the Notices of Swingline Borrowing. "NOTICE OF CONVERSION/CONTINUATION" shall mean the notice given by the Borrowers to the Administrative Agent in respect of the conversion or continuation of an outstanding Borrowing as provided in Section 2.10(b) hereof. "NOTICE OF REVOLVING BORROWING" shall have the meaning as set forth in Section 2.3. "NOTICE OF SWINGLINE BORROWING" shall have the meaning as set forth in Section 2.5. "OBLIGATIONS" shall mean all amounts owing by the Borrowers to the Administrative Agent, the Issuing Bank or any Lender (including the Swingline Lender) pursuant to or in connection with this Agreement or any other Loan Document, including without limitation, all principal, interest (including any interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to either Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), all reimbursement obligations, fees, expenses, indemnification and reimbursement payments, costs and expenses (including all actual and reasonable fees and expenses of counsel to the Administrative Agent and any Lender (including the Swingline Lender) incurred pursuant to this Agreement or any other Loan 14 Document), whether direct or indirect, absolute or contingent, liquidated or unliquidated, now existing or hereafter arising hereunder or thereunder, together with all renewals, extensions, modifications or refinancings thereof. "OTHER TAXES" shall mean any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from the execution, delivery or enforcement of this Agreement or any other Loan Document. "PARTICIPANT" shall have the meaning set forth in Section 10.4(c). "PARTICIPATING MEMBER STATE" means each state so described in any EMU Legislation. "PAYMENT OFFICE" shall mean the office of the Administrative Agent located at 303 Peachtree Street, N.E., 25th Floor, Atlanta, Georgia 30308, or such other location as to which the Administrative Agent shall have given written notice to the Borrowers and the other Lenders. "PAYOFF LETTER" means a letter, in form and substance reasonably satisfactory to the Administrative Agent, from all Existing Lenders, notifying the Administrative Agent and the Borrowers of the amount necessary to repay in full all of the obligations of the Borrowers to the Existing Lenders and committing to terminate and release any and all Liens existing in favor of the Existing Lenders in the properties and assets of the Borrowers or any Subsidiary. "PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and any successor entity performing similar functions. "PERMITTED ACQUISITIONS" shall mean any Acquisition so long as (a) at the time of such Acquisition, no Default or Event of Default is in existence, (b) such acquisition has been approved or recommended by the board of directors of the Person being acquired and (c) the Total Acquisition Consideration of such Acquisition, when aggregated with the Total Acquisition Consideration of all Acquisitions consummated by Crawford and the Consolidated Subsidiaries during the preceding 12 month period does not exceed the Permitted Acquisition Basket. "PERMITTED ACQUISITION BASKET" shall mean $15,000,000 minus the aggregate amount of Investments made under Section 7.4(i) during the 12 month period preceding the date of determination. "PERMITTED ENCUMBRANCES" shall mean: (i) Liens imposed by law for taxes not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law created in the ordinary course of business for 15 amounts not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (iii) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (iv) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (v) judgment and attachment liens not giving rise to an Event of Default or Liens created by or existing from any litigation or legal proceeding that are currently being contested in good faith by appropriate proceedings and with respect to which adequate reserves are being maintained in accordance with GAAP; (vi) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or materially interfere with the ordinary conduct of business of Crawford and its Subsidiaries taken as a whole; and (vii) Liens created under any Pledge Agreement; provided, that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness (except for clause vii above). "PERMITTED INVESTMENTS" shall mean: (i) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof; (ii) commercial paper having the highest rating, at the time of acquisition thereof, of S&P or Moody's and in either case maturing within 12 months from the date of acquisition thereof; (iii) certificates of deposit, bankers' acceptances and time deposits maturing within 360 days of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; 16 (iv) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (i) above and entered into with a financial institution satisfying the criteria described in clause (iii) above; (v) mutual funds investing solely in any one or more of the Permitted Investments described in clauses (i) through (iv) above; and (vi) any Investment made pursuant to, and in accordance with, the "Investment Guidelines" of Crawford set forth on Schedule II hereto. "PERSON" shall mean any individual, partnership, firm, corporation, association, joint venture, limited liability company, trust or other entity, or any Governmental Authority. "PLAN" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which either Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "PLEDGE AGREEMENT" shall mean a Pledge Agreement in favor of SunTrust Bank, as Collateral Agent, for the benefit of the Lenders and the Institutional Creditors (as defined therein), in substantially the form of Exhibit B, or such other forms as may be required by the Collateral Agent to properly perfect its interests under the laws of the applicable jurisdiction of a Non-International Owned Foreign Subsidiary. "PRIVATE PLACEMENT INDEBTEDNESS" shall mean the Indebtedness of the Obligors (as defined in the Note Purchase Agreement) owing to the "holders" (as defined in the Note Purchase Agreement) from time to time under the Note Purchase Agreement. "PRIVATE PLACEMENT LOAN DOCUMENTS" shall mean the documents and instruments evidencing the Private Placement Indebtedness, including, without limitation: (i) the Note Purchase Agreement and (ii) all other agreements, instruments and other documents executed and delivered in connection with the Note Purchase Agreement. "PRO RATA SHARE" shall mean, with respect to any Lender at any time, a percentage, the numerator of which shall be the sum of such Lender's Revolving Commitment and the denominator of which shall be the sum of all Lenders' Revolving Commitments; or if the Revolving Commitments have been terminated or expired or if the Loans have been declared to be due and payable, a percentage, the numerator of which shall be such Lender's Revolving Credit Exposure and the denominator of which shall be the aggregate Revolving Credit Exposure of all Lenders. "REGULATION D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be in effect from time to time, and any successor regulations. 17 "RELATED PARTIES" shall mean, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "RELEASE" means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture. "REQUIRED LENDERS" shall mean, at any time, Non-Defaulting Lenders holding 51% or more of the aggregate outstanding Revolving Credit Exposures of all Non-Defaulting Lenders at such time or if the Non-Defaulting Lenders have no Revolving Credit Exposure outstanding, then Non-Defaulting Lenders holding 51% or more of the Aggregate Revolving Commitments of all Non-Defaulting Lenders. "RESPONSIBLE OFFICER" shall mean any of the president, the chief executive officer, the chief operating officer, the chief financial officer, the treasurer, controller or a vice president in the finance division of Crawford or such other representative of Crawford as may be designated in writing by any one of the foregoing with the consent of the Administrative Agent; and, with respect to the financial covenants only, the chief financial officer or the treasurer of Crawford. "RESTRICTED INVESTMENT" shall mean Investments in joint ventures and in Subsidiaries that are not Consolidated Subsidiaries. "RESTRICTED PAYMENT" shall have the meaning set forth in Section 7.5. "REVOLVING COMMITMENT" shall mean, with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrowers and to participate in Letters of Credit and Swingline Loans in an aggregate principal amount not exceeding the amount set forth with respect to such Lender on the signature pages to this Agreement, or in the case of a Person becoming a Lender after the Closing Date, the amount of the assigned "Revolving Commitment" as provided in the Assignment and Acceptance Agreement executed by such Person as an assignee, as the same may be changed pursuant to the terms hereof. "REVOLVING CREDIT EXPOSURE" shall mean, with respect to any Lender at any time, the sum at such time, without duplication, of (i) the Dollar Equivalent of the outstanding principal amount of such Lender's Revolving Loans, (ii) the Dollar Equivalent of such Lender's LC Exposure and (iii) the Dollar Equivalent of such Lender's Swingline Exposure. "REVOLVING CREDIT NOTE" shall mean a promissory note of the Borrowers payable to the order of a requesting Lender in the principal amount of such Lender's Revolving Commitment, in substantially the form of Exhibit C. 18 "REVOLVING LOAN" shall mean a loan made by a Lender (other than the Swingline Lender) to the Borrowers under its Revolving Commitment, which may be either a Base Rate Loan or a Eurocurrency Loan. "S&P" shall mean Standard & Poor's. "SHARING AGREEMENT" shall mean that certain Collateral Sharing Agreement of even date herewith among SunTrust Bank, as Collateral Agent, the Lenders, the "Institutional Creditors" party thereto and each of the Borrowers. "SOLVENT" means, with respect to each Borrower as of a particular date, (i) such Borrower is able to pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (ii) such Borrower does not intend to, and does not believe that it will, incur debts or liabilities beyond such Borrower's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Borrower is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Borrower's assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Borrower is engaged or is to engaged, (iv) the fair value of the assets of such Borrower is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Borrower and (v) the aggregate fair saleable value of the assets of such Borrower will exceed its debts and other liabilities (including contingent, subordinated, unmatured and unliquidated debts and liabilities). For purposes of this definition, "debt" means any liability on a claim, and "claim" means (i) a right to a payment or (ii) a right to an equitable remedy for breach of performance, if in light of all of the facts and circumstances existing at such time, such right can reasonably be expected to give rise to an actual or matured liability. "STATEMENT OF FUNDS FLOW" shall mean that certain Statement of Funds Flow dated as of the Funding Date executed by each of the Borrowers. "STATUTORY RESERVE RATE" shall mean, with respect to any currency, a fraction (expressed as a decimal), the numerator of which is the number 1 and the denominator of which is the number 1 minus the aggregate of the maximum reserve, liquid asset or similar percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by any Governmental Authority of the United States or of the jurisdiction of such currency or any jurisdiction in which Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to loans in such currency are determined. Such reserve, liquid asset or similar percentages shall include those imposed pursuant to Regulation D of the Board of Governors of the Federal Reserve System. Eurocurrency Loans shall be deemed to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any other applicable law, rule or regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. 19 "SUBSIDIARY" shall mean, with respect to any Person (the "PARENT"), any corporation, partnership, joint venture, limited liability company, association or other entity the accounts of which would or should be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, partnership, joint venture, limited liability company, association or other entity of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, directly or indirectly, by the parent. Unless otherwise indicated, all references to "Subsidiary" hereunder shall mean a Subsidiary of Crawford. "SUBSIDIARY GUARANTY AGREEMENT" shall mean the Subsidiary Guaranty Agreement, substantially in the form of Exhibit D, made by the Subsidiary Loan Parties in favor of the Administrative Agent for the benefit of the Lenders. "SUBSIDIARY LOAN PARTY" shall mean any Subsidiary that is not a Foreign Subsidiary. "SWINGLINE COMMITMENT" shall mean the commitment of the Swingline Lender to make Swingline Loans in an aggregate principal amount at any time outstanding not to exceed $5,000,000. "SWINGLINE EXPOSURE" shall mean, with respect to each Lender, the principal amount of the Swingline Loans in which such Lender is legally obligated either to make a Base Rate Loan or to purchase a participation in accordance with Section 2.5, which shall equal such Lender's Pro Rata Share of all outstanding Swingline Loans. "SWINGLINE LENDER" shall mean SunTrust Bank, and its successors and assigns hereunder. "SWINGLINE LOAN" shall mean a loan made to the Borrowers by the Swingline Lender under the Swingline Commitment. "SWINGLINE NOTE" shall mean the promissory note of the Borrowers payable to the order of the Swingline Lender in the principal amount of the Swingline Commitment, substantially the form of Exhibit D. "SWINGLINE RATE" shall mean, for any Interest Period, the rate as offered by the Swingline Lender and accepted by Crawford in writing. "SWINGLINE TERMINATION DATE" shall mean the date that is five (5) Business Days prior to the Commitment Termination Date. "SYNTHETIC LEASE" shall mean any synthetic lease, tax retention operating lease 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 under GAAP. 20 "TARGET" shall mean the Trans-European Automated Real-Time Gross Settlement Express Transfer system. "TAXES" shall mean any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "TOTAL ACQUISITION CONSIDERATION" shall mean as at the date of any Acquisition, the sum of the following without duplication: (i) the amount of any cash and fair market value of other property given as consideration, including at such date the deferred payment of any such amounts, (ii) the amount (determined by using the outstanding amount or the amount payable at maturity, whichever is greater) of any obligations for money borrowed incurred, assumed or acquired by either Borrower or any Subsidiary in connection with such Acquisition, (iii) all amounts paid in respect of covenants not to compete and consulting agreements that should be recorded on the financial statements of Crawford and its Subsidiaries in accordance with GAAP, and (iv) the aggregate fair market value of all other consideration given by either Borrower or any Subsidiary (including any shares of capital stock of either Borrower or any Subsidiary) in connection with such Acquisition. "TREATY ON EUROPEAN UNION" means the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. "TYPE", when used in reference to a Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBOR or the Base Rate. "WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares, or, in the case of any Subsidiary which is not organized or created under the laws of the United States of America or any political subdivision thereof, such nominal ownership interests which are required to be held by third parties under the laws of the foreign jurisdiction under which such Subsidiary was incorporated or organized) are at the time directly or indirectly owned by Crawford. "WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.2. CLASSIFICATIONS OF LOANS AND BORROWINGS. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g. a "Revolving Loan") or by Type (e.g. a "Eurocurrency Loan" or "Base Rate Loan") or by Class and Type (e.g. "Revolving Eurocurrency Loan"). Borrowings also may be classified and referred to by Class (e.g. "Revolving Borrowing") or by Type (e.g. "Eurocurrency Borrowing") or by Class and Type (e.g. "Revolving Eurocurrency Borrowing"). 21 SECTION 1.3. ACCOUNTING TERMS AND DETERMINATION. Unless otherwise defined or specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP as in effect from time to time, applied on a basis consistent (except for such changes approved by Crawford's independent public accountants) with the most recent audited consolidated financial statement of Crawford delivered pursuant to Section 5.1(a); provided, that if Crawford notifies the Administrative Agent that Crawford wishes to amend any covenant in Article VI to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies Crawford that the Required Lenders wish to amend Article VI for such purpose), then Crawford's compliance with such covenant shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to Crawford and the Required Lenders. SECTION 1.4. TERMS GENERALLY; RULES OF INTERPRETATION. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the word "to" means "to but excluding". Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as it was originally executed or as it may from time to time be amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person's successors and permitted assigns, (iii) the words "hereof", "herein" and "hereunder" and words of similar import shall be construed to refer to this Agreement as a whole and not to any particular provision hereof, (iv) all references to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules to this Agreement and (v) all references to a specific time shall be construed to refer to the time in the city and state of the Administrative Agent's principal office, unless otherwise indicated. To the extent that any of the representations and warranties contained in Section IV under this Agreement, in any of the other Loan Documents or in the Note Purchase Agreement is qualified by "Material Adverse Effect", then the qualifier "in all material respects" contained in Section 3.2 and Section 4.18 and the qualifier "in any material respect" contained in Section 8.1 (c) shall not apply. Unless otherwise indicated, all references to time are references to Eastern Standard Time or Eastern Daylight Savings Time, as the case may be. Unless otherwise expressly provided herein, all references to dollar amounts shall mean Dollars. 22 ARTICLE II AMOUNT AND TERMS OF THE COMMITMENTS SECTION 2.1. GENERAL DESCRIPTION OF FACILITIES. Subject to and upon the terms and conditions herein set forth, (i) the Lenders hereby establish in favor of the Borrowers a revolving credit facility pursuant to which the Lenders severally agree (to the extent of each Lender's Pro Rata Share up to such Lender's Revolving Commitment) to make Revolving Loans to the Borrowers in accordance with Section 2.2, (ii) the Issuing Bank agrees to issue Letters of Credit in accordance with Section 2.26, (iii) the Swingline Lender agrees to make Swingline Loans in accordance with Section 2.4, and (iv) each Lender agrees to purchase a participation interest in the Letters of Credit and the Swingline Loans pursuant to the terms and conditions hereof; provided, that in no event shall the aggregate principal amount of all outstanding Revolving Loans, Swingline Loans and outstanding LC Obligations exceed at any time the Aggregate Revolving Commitments from time to time in effect. SECTION 2.2. REVOLVING LOANS. Subject to the terms and conditions set forth herein, each Lender severally agrees to make Revolving Loans to the Borrowers from time to time on any Business Day during the Availability Period, in an aggregate principal amount outstanding at any time (determined in the case of any Revolving Loan denominated in a Foreign Currency by reference to the Dollar Equivalent thereof on such Business Day) that will not result in (a) the Dollar Equivalent of such Lender's Revolving Credit Exposure exceeding such Lender's Revolving Commitment or (b) the Dollar Equivalent of the sum of the aggregate Revolving Credit Exposures of all Lenders exceeding the Aggregate Revolving Commitments. During the Availability Period, the Borrowers shall be entitled to borrow, prepay and reborrow Revolving Loans in accordance with the terms and conditions of this Agreement. Funding of any Revolving Loans shall be in any combination of Dollars or a Foreign Currency as specified by the Borrowers as set forth in Section 2.3; provided that the Dollar Equivalent amount of outstanding Revolving Loans funded in a Foreign Currency determined from time to time by the Administrative Agent in its discretion shall at no time exceed the Foreign Currency Sublimit then in effect. SECTION 2.3. PROCEDURE FOR REVOLVING BORROWINGS. The Borrowers shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Revolving Borrowing substantially in the form of Exhibit 2.3 attached hereto (a "NOTICE OF REVOLVING BORROWING") (x) prior to 11:00 a.m. one (1) Business Day prior to the requested date of each Base Rate Borrowing, (y) prior to 11:00 a.m. three (3) Business Days prior to the requested date of each Eurocurrency Borrowing and (z) prior to 11:00 a.m. four (4) Business Days prior to the requested date of each Borrowing denominated in a Foreign Currency. Each Notice of Revolving Borrowing shall be irrevocable and shall specify: (i) the aggregate principal amount of such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day), (iii) the Type of such Revolving Loan comprising such Borrowing, and (iv) in the case of a Eurocurrency Borrowing, the requested Foreign Currency (if such Borrowing is not denominated in Dollars) and the duration of the initial Interest Period applicable thereto (subject to the provisions of the definition of Interest Period). Each Revolving Borrowing shall consist entirely of Base Rate Loans or Eurocurrency Loans, as the Borrowers may request. The aggregate principal amount of each Eurocurrency Borrowing 23 shall be not less than $100,000 (or, if applicable, the Dollar Equivalent thereof in the Foreign Currency in which such Eurocurrency Borrowing is denominated) or a larger multiple of $100,000, (or, if applicable, the Dollar Equivalent thereof in the Foreign Currency in which such Eurocurrency Borrowing is denominated) and the aggregate principal amount of each Base Rate Borrowing shall not be less than $100,000 or a larger multiple of $100,000; provided, that Base Rate Loans made pursuant to Section 2.5 or Section 2.26(c) may be made in lesser amounts as provided therein. At no time shall the total number of Eurocurrency Borrowings outstanding at any time exceed thirty (30). In addition, at no time shall the total number of Borrowings outstanding at any time denominated in a Foreign Currency exceed thirty (30). Promptly following the receipt of a Notice of Revolving Borrowing in accordance herewith, the Administrative Agent shall advise each Lender of the details thereof and the amount of such Lender's Revolving Loan to be made as part of the requested Revolving Borrowing. SECTION 2.4. SWINGLINE COMMITMENT. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrowers, from time to time from the Funding Date to the Swingline Termination Date, in an aggregate principal amount outstanding at any time not to exceed the lesser of (i) the Swingline Commitment then in effect and (ii) the difference between the Aggregate Revolving Commitments and the aggregate Revolving Credit Exposures of all Lenders; provided, that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. The Borrowers shall be entitled to borrow, repay and reborrow Swingline Loans in accordance with the terms and conditions of this Agreement. Notwithstanding anything herein to the contrary, the Borrowers are under no obligation to accept any offer by the Swingline Lender to make a Swingline Loan, and the Swingline Lender is under no obligation whatsoever to offer to make a Swingline Loan to the Borrowers. SECTION 2.5. PROCEDURE FOR SWINGLINE BORROWING; ETC. (a) The Borrowers shall give the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of each Swingline Borrowing substantially in the form of Exhibit 2.5 attached hereto ("NOTICE OF SWINGLINE BORROWING") prior to 11:00 a.m. on the requested date of each Swingline Borrowing. Each Notice of Swingline Borrowing shall be irrevocable and shall specify: (i) the principal amount of such Swingline Loan, (ii) the date of such Swingline Loan (which shall be a Business Day) and (iii) the account to which the proceeds of such Swingline Loan should be credited. The Administrative Agent will promptly advise the Swingline Lender of each Notice of Swingline Borrowing. Each Swingline Loan shall accrue interest at the Swingline Rate and shall have an Interest Period (subject to the definition thereof) as agreed between Crawford and the Swingline Lender. The aggregate principal amount of each Swingline Loan shall be not less than $500,000 or a larger multiple of $100,000, or such other minimum amounts agreed to by the Swingline Lender and the Borrowers. The Swingline Lender will make the proceeds of each Swingline Loan available to the Borrowers in Dollars in immediately available funds at the account specified by the Borrowers in the applicable Notice of Swingline Borrowing not later than 3:00 p.m. on the requested date of such Swingline Loan. The Administrative Agent will notify the Lenders on a quarterly basis if any Swingline Loans occurred during such quarter. (b) If (i) any Swingline Loan matures and remains unpaid; (ii) any Default or Event of Default occurs or (iii) the Swingline Lender's total amount of outstanding aggregate 24 Revolving Credit Exposures and Swingline Loans exceed the Swingline Lender's Revolving Commitment, the Swingline Lender may, on behalf of the Borrowers (which hereby irrevocably authorize and direct the Swingline Lender to act on their behalf), give a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders (including the Swingline Lender) to make Base Rate Loans in an amount equal to the unpaid principal amount of any Swingline Loan. Each Lender will make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Swingline Lender in accordance with Section 2.9, which will be used solely for the repayment of such Swingline Loan. (c) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Swingline Lender) shall purchase an undivided participating interest in such Swingline Loan in an amount equal to its Pro Rata Share thereof on the date that such Base Rate Borrowing should have occurred. On the date of such required purchase, each Lender shall promptly transfer, in immediately available funds, the amount of its participating interest to the Administrative Agent for the account of the Swingline Lender. If such Swingline Loan bears interest at a rate other than the Base Rate, such Swingline Loan shall automatically become a Base Rate Loan on the effective date of any such participation and interest shall become payable on demand. (d) Each Lender's obligation to make a Base Rate Loan pursuant to Section 2.5(b) or to purchase the participating interests pursuant to Section 2.5(c) shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have or claim against the Swingline Lender, either Borrower or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of any Lender's Revolving Commitment, (iii) the existence (or alleged existence) of any event or condition which has had or could reasonably be expected to have a Material Adverse Effect, (iv) any breach of this Agreement or any other Loan Document by either Borrower, the Administrative Agent or any Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If such amount is not in fact made available to the Swingline Lender by any Lender, the Swingline Lender shall be entitled to recover such amount on demand from such Lender, together with accrued interest thereon for each day from the date of demand thereof at the Federal Funds Rate. Until such time as such Lender makes its required payment, the Swingline Lender shall be deemed to continue to have outstanding Swingline Loans in the amount of the unpaid participation for all purposes of the Loan Documents. In addition, such Lender shall be deemed to have assigned any and all payments made of principal and interest on its Loans and any other amounts due to it hereunder, to the Swingline Lender to fund the amount of such Lender's participation interest in such Swingline Loans that such Lender failed to fund pursuant to this Section, until such amount has been purchased in full. SECTION 2.6. MULTI-CURRENCY OPTIONS. (a) The Borrowers may request Borrowings of Revolving Loans in any Foreign Currency; provided, however, that the aggregate outstanding amount of Revolving Loans made in Foreign Currencies shall not exceed at any time the Foreign Currency Sublimit. Each Lender's Pro 25 Rata Share of each Revolving Loan made in a Foreign Currency shall be determined by reference to its Dollar Equivalent on the date each such Revolving Loan is made. As to any Revolving Loan made in a Foreign Currency, each Lender may elect to fulfill its commitment to make such Revolving Loan by causing an Alternate Lending Office to make such Revolving Loan; provided, however, that no such election shall be made if as a result thereof either Borrower would be required to pay United States withholding taxes or any additional amounts. Notwithstanding anything herein to the contrary, all Base Rate Loans and all Swingline Loans shall be funded only in Dollars. Eurocurrency Loans may be funded in either Dollars or in a Foreign Currency, in either case, as requested by the Borrowers pursuant to Section 2.3. (b) If, after the Funding Date, any Change in Law shall make it unlawful or impossible for Lenders to make or maintain or fund Loans in the applicable Foreign Currency, Administrative Agent shall notify Borrowers. Upon receipt of such notice, the applicable Eurocurrency Loan made in a Foreign Currency shall be repaid by the Borrowers and/or converted to an available Foreign Currency or Dollars on either: (i) the last day of the then current Interest Period for the affected Eurocurrency Loan, if Lenders may lawfully continue to maintain a Loan at such Foreign Currency to such day, or (ii) immediately, if Lenders may not lawfully continue to so maintain such Eurocurrency Loan. (c) All payments of Obligations under this Agreement, the Notes or any other Loan Document shall be made in Dollars, except for Eurocurrency Loans funded in a Foreign Currency, which shall be repaid, including interest thereon, in the applicable Foreign Currency. If any payment of any Obligation shall be made in a currency other than the currency required hereunder, such amount shall be converted into the currency required hereunder at the current market rate for the purchase of the currency required hereunder with the currency in which such Obligation was paid, as quoted by the Administrative Agent in accordance with the methods customarily used by the Administrative Agent for such purposes as the time of such determination. The parties hereto hereby agree, to the fullest extent that they may effectively do so under applicable law, that (i) if for the purposes of obtaining any judgment or award it becomes necessary to convert from any currency other than the currency required hereunder into the currency required hereunder any amount in connection with the Obligations, then the conversion shall be made as provided above on the Business Day before the day on which the judgment or award is given, (ii) in the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which the judgment or award is given and the date of payment, the Borrowers will pay to the Administrative Agent, for the benefit of the Lenders, such additional amounts (if any) as may be necessary, and the Administrative Agent, on behalf of the Lenders, will pay to the Borrowers such excess amounts (if any) as result from such change in the rate of exchange, to assure that the amount paid on such date is the amount in such other currency, which when converted at the rate of exchange described herein on the date of payment, is the amount then due in the currency required hereunder, and (iii) any amount due from the Borrowers under this Section 2.6(c) shall be due as a separate debt and shall not be affected by judgment or award being obtained for any other sum due. For the avoidance of doubt, the parties affirm and agree that neither the fixation of the conversion rate of any Foreign Currency against the Euro as a single currency, in accordance with the Treaty Establishing the European Economic Community, as amended by the Treaty on the European Union (The Maastricht Treaty), nor the conversion of the Obligations under this Agreement from any Foreign Currency into Euros 26 will be a reason for early termination or revision of this Agreement or repayment of any amount due under this Agreement or create any liability of any party towards any other party for any direct or consequential loss arising from any of these events. As of the date that any Foreign Currency is no longer the lawful currency of its respective country, all funding and payment Obligations to be made in such affected currency under this Agreement shall be satisfied in Euros. (d) If either Borrower shall wind up, liquidate, dissolve or become a debtor in bankruptcy while there remains outstanding: (i) any amounts owing to the Lenders hereunder or under the Notes, (ii) any damages owing to the Lenders in respect of a breach of any of the terms hereof, or (iii) any judgment or order rendered in respect of such amounts or damages, the Borrowers shall indemnify and hold the Lenders harmless against any deficiency with respect to the applicable Foreign Currency in the amounts received by the Lenders arising or resulting from any variation as between: (i) the rate of exchange at which the applicable Foreign Currency is converted into another currency (the "Liquidation Currency") for purposes of such winding-up, liquidation, dissolution or bankruptcy with regard to the amount in the applicable Foreign Currency due or contingently due hereunder or under the Notes or under any judgment or order to which the relevant Obligations hereunder or under the Notes shall have been merged and (ii) the rate of exchange at which Administrative Agent could, in accordance with normal banking procedures, be able to purchase the applicable Foreign Currency with the Liquidation Currency at the earlier of (A) the date of payment of such amounts or damages and (B) the final date or dates for the filing of proofs of a claim in a winding-up, liquidation, dissolution or bankruptcy. As used in the preceding sentence, the "final date" or dates for the filing of proofs of a claim in a winding-up, liquidation, dissolution or bankruptcy shall be the date fixed by the liquidator under the applicable law as being the last practicable date as of which the liabilities of the applicable Borrower may be ascertained for such winding-up, liquidation, dissolution or bankruptcy before payment by the liquidator or other appropriate person in respect thereof. (e) The Borrowers agree to indemnify the Administrative Agent and the Lenders against any loss or expense which the Administrative Agent or such Lenders may sustain or incur in liquidating or employing deposits from third parties acquired to effect, fund or maintain any Loan made in a Foreign Currency or any part thereof as a consequence of (i) the Borrowers' failure to make a payment on other than the due date of such Loan, or (ii) the Borrowers' failure to borrow under, convert to or renew under the applicable Foreign Currency on a binding effective date of such borrowing, conversion or renewal. The Administrative Agent's determination of an amount payable under this paragraph (e) shall, in the absence of error, be conclusive and shall be payable on demand. (f) The Administrative Agent may from time to time in its discretion calculate the Dollar Equivalent of any Revolving Loan denominated in a Foreign Currency. In the event that the aggregate Dollar Equivalent of the outstanding principal amount of the Revolving Loans denominated in a Foreign Currency at any time exceeds the Foreign Currency Sublimit, the Administrative Agent shall promptly give notice of such fact to the Borrowers and the Lenders, and the Borrowers shall be required to make a payment to the Administrative Agent to reduce the outstanding principal amount of the outstanding Revolving Loans denominated in a Foreign Currency so that the Dollar Equivalent thereof equals not more than the Foreign Currency Sublimit. Such payment shall be made within two (2) Business Days following the date of receipt of such 27 notice given by the Administrative Agent. Each such prepayment shall be accompanied by a payment of all accrued and unpaid interest on the Revolving Loans prepaid and any applicable breakage fees and funding losses pursuant to Section 2.22. SECTION 2.7. EUROPEAN ECONOMIC AND MONETARY UNION. (a) Effectiveness of Provisions. The provisions of subsections (b) through (j) below shall be effective upon the execution of this Agreement, provided, that if and to the extent that any such provision relates to any state (or the currency of such state) that is not a Participating Member State upon the execution of this Agreement, such provision shall become effective in relation to such state (and the currency of such state) at and from the date on which such state becomes a Participating Member State. (b) Redenomination and Foreign Currencies. Each Obligation of any party under this Agreement which has been denominated in the National Currency Unit of a non-member state which becomes a Participating Member State after the date of any Loan made in the National Currency Unit of such state shall be converted into the Euros at the exchange rate set in accordance with EMU Legislation, provided, that if and to the extent that any EMU Legislation provides that an amount denominated either in Euros or in the National Currency Unit of a Participating Member State and payable within that Participating Member State by crediting an account of a creditor can be paid by a debtor either in the Euros or in the National Currency Unit, each party to this Agreement shall be entitled to pay or repay any such amount either in Euros or in such National Currency Unit; provided, however, any amount paid in a National Currency Unit shall be paid at the fixed exchange rate in order to yield the required amount in Euros. (c) Loans. Any Loan in the currency of a Participating Member State shall be made in Euros, provided that any Loan may, if so requested by the Borrowers, be made in the National Currency Unit (based upon fixed exchange rate) of any Participating Member State so long as such National Currency Unit continues to be a Foreign Currency. (d) Business Days. With respect to any amount denominated or to be denominated in the Euro or a National Currency Unit, any reference to a "Business Day" shall be construed as a reference to a day (other than a Saturday or Sunday) on which banks are generally open for business in New York City and prime banks in London generally provide quotations for deposits denominated in the Euro and such National Currency Unit. (e) Payment to the Lenders. Sections of this Agreement which provide for payment or repayment in a National Currency Unit shall be construed so that, in relation to the payment of any amount of Euros or National Currency Units, such amount shall be made available to the Lenders, in immediately available, freely transferable, cleared funds to such account with each bank (in such principal financial center) as each Lender may from time to time nominate for this purpose in accordance with this Agreement. 28 (f) Payments by the Lenders Generally. With respect to the payment of any amount denominated in the Euro or in a National Currency Unit, the Lenders shall not be liable to the Borrowers in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by a Lender if such Lender has made reasonable efforts to effect all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds (in the Euros or, as the case may be, in a National Currency Unit) to the account with the bank in the principal financial center in the Participating Member State which the Borrowers shall have specified for such purpose. In this paragraph, "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as such Lender may from time to time select for the purpose of clearing or settling payment of the Euro. (g) Basis of Accrual. If the basis of accrual of interest or fees expressed in this Agreement with respect to the currency of any state that becomes a Participating Member State shall, in a Lender's reasonable judgment, be inconsistent with any convention or practice in the London Interbank Market for the basis of accrual of interest or fees in respect of the Euro, or if interest rate quotes for a National Currency Unit are no longer provided, such convention or practice shall replace such expressed basis effective as of and from the date on which such state becomes a Participating Member State; provided, that if any Loan in the currency of such state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Loan, at the end of the then current Interest Period. (h) Rounding and Other Consequential Changes. Without prejudice and in addition to any method of conversion or rounding prescribed by any EMU Legislation and without prejudice to the respective liabilities for indebtedness of the Borrowers to the Lenders and of the Lenders to the Borrowers under or pursuant to this Agreement, (i) each reference in this Agreement to a minimum amount (or an integral multiple thereof) in a National Currency Unit to be paid to or by a Lender shall be replaced by a reference to such reasonably comparable and convenient amount (or an integral multiple thereof) in Euros as such Lender may from time to time specify; and (ii) except as expressly provided in this Agreement, each provision of this Agreement, including, without limitation, the right to combine currencies to effect a setoff, shall be subject to such reasonable changes of interpretation as Lenders may from time to time specify to be necessary or appropriate to reflect the introduction of or changeover to the Euro in Participating Member States. (i) Exchange Indemnification and Increased Costs. The Borrowers shall from time to time, upon demand from the Lenders, pay to the Lenders the amount of any loss or cost or increased cost incurred by, or of any reduction in any amount payable to or in the effective return of its capital to, or of interest or other return, including principal foregone by any Lender or its holding company as a result of the introduction of, changeover to or operation of the Euro in any Participating Member State or Borrowers' election to borrow in a National Currency Unit and repay 29 in the Euro or to borrow in the Euro and repay in a National Currency Unit other than any such cost or reduction or amount foregone reflected in the associated interest rate. (j) Further Assurances. Borrowers agree, at the request of the Administrative Agent or a Lender, at the time of or at any time following the implementation of any EMU Legislation, to enter into an agreement amending this Agreement in order to reflect the implementation of the EMU Legislation and to place the parties hereto in the position they would have been in had such EMU Legislation not been implemented. SECTION 2.8. [RESERVED.] SECTION 2.9. FUNDING OF BORROWINGS. (a) Each Lender will make available each Borrowing in Dollars of Revolving Loans to be made by it hereunder on the proposed date thereof by wire transfer in immediately available funds by 11:00 a.m. to the Administrative Agent at the Payment Office. Swingline Loans will be made as set forth in Section 2.5. If any Borrowing is to be denominated in a Foreign Currency, not later than 11:00 a.m. each Lender will make available its Pro Rata Share of such Borrowing, in immediately available funds and in the Foreign Currency so requested by the Borrowers at the applicable Foreign Currency Payment Account for the benefit of the Administrative Agent and otherwise according to the payment instructions of the Administrative Agent. The Administrative Agent will make such Loans available to the Borrowers by promptly crediting the amounts that it receives, in like funds by the close of business on such proposed date, to an account maintained with the Administrative Agent or at the Borrowers' option, by effecting a wire transfer of such amounts to an account designated by the Borrowers to the Administrative Agent. (b) Unless the Administrative Agent shall have been notified by any Lender prior to 3:00 p.m. two (2) Business Day prior to the date of a Borrowing in which such Lender is participating that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date, and the Administrative Agent, in reliance on such assumption, may make available to the Borrowers on such date a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender on the date of such Borrowing, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest at a rate per annum equal to the Administrative Agent's cost of funds for such amount for up to two (2) days and thereafter at the rate specified for such Borrowing. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefore, the Administrative Agent shall promptly notify the Borrowers, and the Borrowers shall immediately pay such corresponding amount to the Administrative Agent together with interest at the rate specified for such Borrowing. Nothing in this subsection shall be deemed to relieve any Lender from its obligation to fund its Pro Rata Share of any Borrowing hereunder or to prejudice any rights which the Borrowers may have against any Lender as a result of any default by such Lender hereunder. 30 (c) All Revolving Loans shall be made by the Lenders on the basis of their respective Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in its obligations hereunder, and each Lender shall be obligated to make its Loans provided to be made by it hereunder, regardless of the failure of any other Lender to make its Loans hereunder. SECTION 2.10. INTEREST ELECTIONS; CONVERSIONS; CONTINUATIONS. (a) Each Borrowing initially shall be of the Type specified in the applicable Notice of Borrowing, and in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrowers may elect to convert such Borrowing into a different Type or to continue such Borrowing (subject to satisfaction of any conditions applicable to Borrowings of that Type), and in the case of a Eurocurrency Borrowing, may elect Interest Periods therefore, all as provided in this Section. The Borrowers may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section 2.10 shall not apply to Eurocurrency Borrowings denominated in a Foreign Currency (other than continuations in the same Foreign Currency which shall be permitted) or Swingline Borrowings, which may not be converted or continued. (b) To make an election pursuant to this Section, the Borrowers shall give the Administrative Agent prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing substantially in the form of Exhibit 2.10 attached hereto (a "NOTICE OF CONVERSION/CONTINUATION") that is to be converted or continued, as the case may be, (x) prior to 11:00 a.m. one (1) Business Day prior to the requested date of a conversion into a Base Rate Borrowing and (y) prior to 11:00 a.m. three (3) Business Days prior to a continuation of or conversion into a Eurocurrency Borrowing. Each such Notice of Conversion/Continuation shall be irrevocable and shall specify (i) the Borrowing to which such Notice of Continuation/Conversion applies and if different options are being elected with respect to different portions thereof, the portions thereof that are to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Notice of Continuation/Conversion, which shall be a Business Day, (iii) whether the resulting Borrowing is to be a Base Rate Borrowing or a Eurocurrency Borrowing; and (iv) if the resulting Borrowing is to be a Eurocurrency Borrowing, the requested currency which shall be the same currency as the original Borrowing and the duration of the Interest Period applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of "Interest Period". If any such Notice of Continuation/Conversion requests a Eurocurrency Borrowing but does not specify an Interest Period, the Borrowers shall be deemed to have selected an Interest Period of one month. The principal amount of any resulting Borrowing shall satisfy the minimum borrowing amount for Eurocurrency Borrowings and Base Rate Borrowings set forth in Section 2.3. (c) If, on the expiration of any Interest Period in respect of any Eurocurrency Borrowing, the Borrowers shall have failed to deliver a Notice of Conversion/Continuation, then, unless such Borrowing is repaid as provided herein, the Borrowers shall be deemed to have elected 31 to convert such Borrowing to a Base Rate Borrowing; provided, that if, on the expiration of any Interest Period in respect of any Eurocurrency Borrowing denominated in a Foreign Currency, the Borrowers shall have failed to deliver a Notice of Conversion/Continuation for such Borrowing in the same Foreign Currency, then, unless such Borrowing is repaid as provided herein, the Borrowers shall be deemed to have elected to convert such Borrowing to a Base Rate Borrowing in the Dollar Equivalent of such Borrowing. No Borrowing may be converted into, or continued as, a Eurocurrency Borrowing if a Default or an Event of Default exists, unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing. Further, any Eurocurrency Borrowing that may not be continued as a Eurocurrency Borrowing as a result of a Default or Event of Default shall automatically convert to a Base Rate Borrowing at the end of then applicable Interest Period, and such Borrowing shall be subject to the increased interest rate specified under Section 2.15(c) both before and after the conversion thereof. During the existence of a Default or an Event of Default (unless the Administrative Agent and each of the Lenders shall have otherwise consented in writing), all Eurocurrency Loans denominated in a Foreign Currency shall be converted into Dollars upon the expiration of Interest Period applicable thereto. No conversion of any Eurocurrency Loans shall be permitted except on the last day of the Interest Period in respect thereof. (d) Upon receipt of any Notice of Conversion/Continuation, the Administrative Agent shall promptly notify each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. SECTION 2.11. TERMINATION OF COMMITMENTS. Unless previously terminated, all Revolving Commitments shall terminate on the Commitment Termination Date, except that the Swingline Commitment shall terminate on the Swingline Termination Date. SECTION 2.12. REPAYMENT OF LOANS. (a) The outstanding principal amount of all Revolving Loans shall be due and payable (together with accrued and unpaid interest thereon) on the Commitment Termination Date; provided, however, the outstanding principal amount of all Eurocurrency Loans denominated in a Foreign Currency shall be due and payable (together with accrued and unpaid interest thereon) on the last day of the Interest Period (unless such Eurocurrency Loans denominated in Foreign Currency are continued in the same Foreign Currency in accordance with Section 2.10). (b) The principal amount of each Swingline Loan shall be due and payable (together with accrued interest thereon) on the earlier of (i) the last day of the Interest Period applicable to such Loan and (ii) the Swingline Termination Date. (c) If the Administrative Agent determines at any time that the sum of the Dollar Equivalent of the aggregate principal amount of outstanding Loans and LC Exposures exceeds the Aggregate Revolving Commitment then in effect, then the Borrowers shall prepay Revolving Loans in an aggregate amount sufficient to eliminate such excess no later than the second Business Day following such notice. Promptly upon determining the need to make any such prepayment, the 32 Administrative Agent shall notify the Borrowers of such required prepayment. Each such prepayment shall be accompanied by a payment of all accrued and unpaid interest on the Loans prepaid and any applicable breakage fees and funding losses pursuant to Section 2.22. SECTION 2.13. EVIDENCE OF INDEBTEDNESS. (a) Each Lender shall maintain in accordance with its usual practice appropriate records evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain appropriate records in which shall be recorded (i) the Revolving Commitment of each Lender, (ii) the amount and currency of each Loan made hereunder by each Lender, the Class and Type thereof and the Interest Period applicable thereto, (iii) the date of each continuation thereof pursuant to Section 2.10, (iv) the date of each conversion of all or a portion thereof to another Type pursuant to Section 2.10, (v) the date and amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder in respect of such Loans and (vi) both the date and amount of any sum received by the Administrative Agent hereunder from the Borrowers in respect of the Loans and each Lender's Pro Rata Share thereof. The entries made in such records shall be prima facie evidence of the existence and amounts of the obligations of the Borrowers therein recorded; provided, that the failure or delay of any Lender or the Administrative Agent in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Loans (both principal and unpaid accrued interest) of such Lender in accordance with the terms of this Agreement. (b) At the request of any Lender (including the Swingline Lender) at any time, the Borrowers agree that they will execute and deliver to such Lender a Revolving Credit Note and, in the case of the Swingline Lender only, a Swingline Note, payable to the order of such Lender. SECTION 2.14. OPTIONAL AND MANDATORY PREPAYMENTS. (a) Optional Prepayment. The Borrowers shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty, by giving irrevocable written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent no later than (i) in the case of prepayment of any Eurocurrency Borrowing, 11:00 a.m. not less than three (3) Business Days prior to any such prepayment, (ii) in the case of any prepayment of any Base Rate Borrowing, not less than one Business Day prior to the date of such prepayment, and (iii) in the case of Swingline Borrowings, prior to 11:00 a.m. on the date of such prepayment. Each such notice shall be irrevocable and shall specify the proposed date of such prepayment and the principal amount of each Borrowing or portion thereof to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each affected Lender of the contents thereof and of such Lender's Pro Rata Share of any such prepayment. If such notice is given, the aggregate amount specified in such notice shall be due and payable on the date designated in such notice, together with accrued interest to such date on the amount so prepaid in accordance with Section 2.15(d); provided, that if a Eurocurrency Borrowing is prepaid on a date other than the last day of an Interest Period applicable thereto, the Borrowers shall also pay all amounts required pursuant to Section 2.22. Each partial prepayment of any Loan (other than a Swingline Loan) shall 33 be in an amount that would be permitted in the case of an advance of a Revolving Borrowing of the same Type pursuant to Section 2.3. Each prepayment of a Borrowing shall be applied ratably to the Loans comprising such Borrowing. (b) Mandatory Prepayment. The Borrowers shall be required to make mandatory prepayments of Borrowings pursuant to and in accordance with Section 2.6(f) and Section 2.12(c). Any such prepayment shall be applied to such Loans as designated by the Borrowers and, in the event the Borrowers fail to designate such Loans, to such Loans with the earliest maturity dates, based upon the remaining terms of their respective Interest Periods, in any case, to the Lenders in accordance with their Pro Rata Share of such payment; provided, that the Borrowers shall also pay all amounts required pursuant to Section 2.22. SECTION 2.15. INTEREST ON LOANS. (a) The Borrowers shall pay interest (i) on each Base Rate Loan at the Base Rate in effect from time to time, and (ii) on each Eurocurrency Loan at the Adjusted LIBOR for the applicable Interest Period then in effect for such Eurocurrency Loan plus the Applicable Margin in effect from time to time. (b) The Borrowers shall pay interest on each Swingline Loan at the Swingline Rate in effect from time to time. (c) While an Event of Default exists and after acceleration, the Borrowers shall pay interest with respect to all Loans at the rates otherwise applicable to such Loans plus an additional 2% per annum. All interest payable under this clause (c) shall be due and payable on demand. While an Event of Default exists and after acceleration, the Applicable Percentage for the letter of credit fees provided for under Section 2.16(c) shall be increased by two percent (2.0%). All such letter of credit fees under this clause (c) shall be due and payable on demand. (d) Interest on the principal amount of all Loans shall accrue from and including the date such Loans are made to but excluding the date of any repayment thereof, provided such Loans are repaid within the times provided for hereunder. Interest on all outstanding Base Rate Loans shall be payable quarterly in arrears on the last day of each March, June, September and December and on the Commitment Termination Date. Interest on all outstanding Eurocurrency Loans shall be payable on the last day of each Interest Period applicable thereto, and, in the case of any Eurocurrency Loans having an Interest Period in excess of three months or 90 days, respectively, on each day which occurs every three months or 90 days, as the case may be, after the initial date of such Interest Period, and on the Commitment Termination Date. Interest on each Swingline Loan shall be payable on the maturity date of such Loan, which shall be the last day of the Interest Period applicable thereto, and on the Swingline Termination Date. Interest on any Loan which is converted into a Loan of another Type or which is repaid or prepaid shall be payable on the date of such conversion or on the date of any such repayment or prepayment (on the amount repaid or prepaid) thereof. 34 (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder and shall promptly notify the Borrowers and the Lenders of such rate in writing (or by telephone, promptly confirmed in writing). Any such determination shall be conclusive and binding for all purposes, absent manifest error. SECTION 2.16. FEES. (a) Administrative Agent's Fees. The Borrowers shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon by the Borrowers and the Administrative Agent. (b) Commitment Fee. The Borrowers agree to pay to the Administrative Agent for the account of each Lender a commitment fee, which fee shall accrue at the Applicable Percentage on the average daily amount of the unused Revolving Commitment of such Lender during the Availability Period; provided, that if any Lender continues to have any Revolving Credit Exposure after the Commitment Termination Date, then the commitment fee shall continue to accrue on the amount of such Lender's unused Revolving Commitment from and after the Commitment Termination Date to the date that such Lender's Revolving Commitment has been terminated. Accrued commitment fees shall be payable in arrears on the last day of each March, June, September and December of each year and on the Commitment Termination Date, commencing on the first such date after the Funding Date; provided further, that any commitment fees accruing after the Commitment Termination Date shall be payable on demand. For purposes of computing commitment fees with respect to the Revolving Commitments, the Revolving Commitment of each Lender shall be deemed used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender. Any Swingline Loans outstanding shall be treated as if such Loan were unused for purposes of this clause (b). (c) Letter of Credit Fees. The Borrowers agree to pay (i) to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to its participation in each Letter of Credit, which shall accrue at the Applicable Percentage then in effect on the average daily amount of such Lender's LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) attributable to such Letter of Credit during the period from and including the date of issuance of such Letter of Credit to but excluding the date on which such Letter of Credit expires or is drawn in full (including without limitation any LC Exposure that remains outstanding after the Commitment Termination Date) and (ii) to the Issuing Bank for its own account a fronting fee, which shall accrue at the rate of 0.125% per annum on the average daily amount of the LC Exposure (excluding any portion thereof attributable to Unreimbursed LC Disbursements) during the Availability Period (or until the date that such Letter of Credit is irrevocably cancelled, whichever is later), as well as the Issuing Bank's standard fees with respect to issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. While an Event of Default exists or after acceleration, at the option of the Required Lenders, the Borrowers shall pay to the Administrative Agent, for the account of each Lender, a letter of credit fee with respect to its participation in each Letter of Credit, which shall accrue at the rate otherwise applicable plus an additional 2% per annum until the date on which such Letter of Credit expires or is drawn in full 35 (including without limitation any LC Exposure that remains outstanding after the Commitment Termination Date). (d) Payments. Accrued fees shall be payable quarterly in arrears on the last day of each of March, June, September and December, commencing on the first such date after the Funding Date and on the Commitment Termination Date (and if later, the date the Loans and LC Exposure shall be repaid in their entirety). SECTION 2.17. EFFECTIVE DATE FOR ADJUSTMENT TO APPLICABLE PERCENTAGE AND APPLICABLE MARGIN. The Applicable Percentage and Applicable Margin shall be determined and adjusted quarterly on the date that is two Business Days after the date on which the Borrowers provide the officer's certificate in accordance with the provisions of Section 5.1.(c) (each "Margin Calculation Date"); provided, however that (i) the Applicable Percentage and the Applicable Margin from the Closing Date until the first Margin Calculation Date subsequent to the Funding Date shall be at Level IV (as set forth in Schedule I), and, thereafter, such level shall be determined by the then current Leverage Ratio, and (ii) if the Borrowers fail to provide the officer's certificate to the Administrative Agent by the date such certificate is required to be delivered under Section 5.1.(c), the Applicable Percentage and the Applicable Margin from such date shall be at Level V until such time as an appropriate officer's certificate is provided, whereupon the level shall be determined by the then current Leverage Ratio. Except as set forth above, the Applicable Percentage and the Applicable Margin shall be effective from one Margin Calculation Date until the next Margin Calculation Date SECTION 2.18. COMPUTATION OF INTEREST AND FEES. Interest based on the prime lending rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and all fees shall be computed on the basis of a year of 360 days (except for any Eurocurrency Loans outstanding in British pounds sterling, Australia dollars, Canadian dollars, Hong Kong dollars and South Africa rand, each of which shall be computed on the basis of a year of 365 or 366 days, as the case may be) and paid for the actual number of days elapsed (including the first day but excluding the last day). Each determination by the Administrative Agent of an interest amount or fee hereunder shall be made in good faith and, except for manifest error, shall be final, conclusive and binding for all purposes. SECTION 2.19. INABILITY TO DETERMINE INTEREST RATES. If prior to the commencement of any Interest Period for any Eurocurrency Borrowing, (i) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrowers) that, by reason of circumstances affecting the relevant interbank market, adequate means do not exist for ascertaining the LIBOR for such Interest Period, or (ii) the Administrative Agent shall have received notice from the Required Lenders that the Adjusted LIBOR does not adequately and fairly reflect the cost to such 36 Lenders of making, funding or maintaining their Eurocurrency Loans for such Interest Period, the Administrative Agent shall give written notice (or telephonic notice, promptly confirmed in writing) to the Borrowers and to the Lenders as soon as practicable thereafter. In the case of Eurocurrency Loans, until the Administrative Agent shall notify the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist, (i) the obligations of the Lenders to make Eurocurrency Revolving Loans or to continue or convert outstanding Loans as or into Eurocurrency Loans shall be suspended and (ii) all such affected Loans shall automatically, on the last day of the then current Interest Period applicable thereto unless the Borrowers prepay such Loans in accordance with this Agreement, (A) if such Loans are Eurocurrency Loans, be converted into Base Rate Loans and (B) if such Loans are Eurocurrency Loans denominated in a Foreign Currency, be exchanged for the Dollar Equivalent thereof and converted into Base Rate Loans. Unless the Borrowers notify the Administrative Agent at least one Business Day before the date of any Eurocurrency Borrowing for which a Notice of Revolving Borrowing has previously been given that it elects not to borrow on such date, then such Borrowing shall be made as a Base Rate Borrowing. SECTION 2.20. ILLEGALITY. If any Change in Law shall make it unlawful or impossible for any Lender to make, maintain or fund any Eurocurrency Loan and such Lender shall so notify the Administrative Agent, the Administrative Agent shall promptly give notice thereof to the Borrowers and the other Lenders, whereupon until such Lender notifies the Administrative Agent and the Borrowers that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurocurrency Revolving Loans or to continue or convert outstanding Loans as or into Eurocurrency Loans shall be suspended. In the case of the making of a Eurocurrency Borrowing, such Lender's Revolving Loan shall be made as a Base Rate Loan as part of the same Borrowing for the same Interest Period and if the affected Eurocurrency Loan is then outstanding, such Loan shall be converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Eurocurrency Loan if such Lender may lawfully continue to maintain such Loan to such date or (ii) immediately if such Lender shall determine that it may not lawfully continue to maintain such Eurocurrency Loan to such date. In the case of the making of a Eurocurrency Borrowing denominated in a Foreign Currency, such Lender's Revolving Loan shall be made as a Base Rate Loan as part of the same Borrowing for the same Interest Period and if the affected Loan is then outstanding, such Loan shall be exchanged for the Dollar Equivalent thereof and converted to a Base Rate Loan either (i) on the last day of the then current Interest Period applicable to such Loan if such Lender may lawfully continue to maintain such Loan to such date or (ii) immediately if such Lender shall determine that it may not lawfully continue to maintain such Loan to such date. Notwithstanding the foregoing, the affected Lender shall, prior to giving such notice to the Administrative Agent, designate a different Applicable Lending Office if such designation would avoid the need for giving such notice and if such designation would not otherwise be disadvantageous to such Lender in the good faith exercise of its discretion. SECTION 2.21. INCREASED COSTS. (a) If any Change in Law shall: 37 (i) impose, modify or deem applicable any reserve, special deposit or similar requirement that is not otherwise included in the determination of the Adjusted LIBOR hereunder against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBOR ) or the Issuing Bank; or (ii) impose on any Lender or on the Issuing Bank or the eurocurrency interbank market any other condition affecting this Agreement or any Eurocurrency Loans made by such Lender or any Letter of Credit or any participation therein; and the result of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining a Eurocurrency Loan, or to increase the cost to such Lender or the Issuing Bank of participating in or issuing any Letter of Credit or to reduce the amount received or receivable by such Lender or the Issuing Bank hereunder (whether of principal, interest or any other amount), then the Borrowers shall promptly pay, upon written notice from and demand by such Lender on the Borrowers (with a copy of such notice and demand to the Administrative Agent), to the Administrative Agent for the account of such Lender, within five Business Days after the date of such notice and demand, additional amount or amounts sufficient to compensate such Lender or the Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender or the Issuing Bank shall have determined that on or after the date of this Agreement any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's or the Issuing Bank's capital (or on the capital of such Lender's or the Issuing Bank's parent corporation) as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation could have achieved but for such Change in Law (taking into consideration such Lender's or the Issuing Bank's policies or the policies of such Lender's or the Issuing Bank's parent corporation with respect to capital adequacy) then, from time to time, within five (5) Business Days after receipt by the Borrowers of written demand by such Lender (with a copy thereof to the Administrative Agent), the Borrowers shall pay to such Lender such additional amounts as will compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation for any such reduction suffered. (c) If and so long as any Lender is required to make special deposits with the Bank of England, to maintain reserve asset ratios or to pay fees, in each case in respect of such Lender's Eurocurrency Loans denominated in any Foreign Currency, such Lender may require the Borrowers to pay, contemporaneously with each payment of interest on each of such Loans, additional interest on such Loan at a rate per annum equal to the Mandatory Costs Rate calculated in accordance with the formula and in the manner set forth in Exhibit 2.21 hereto. (d) If and so long as any Lender is required to comply with reserve assets, liquidity, cash margin or other requirements of any monetary or other authority (including any such requirement imposed by the European Central Bank or the European System of Central Banks, but excluding requirements reflected in the Statutory Reserve Rate or the Mandatory Costs Rate) in respect of any of such Lender's Eurocurrency Loans denominated in a Foreign Currency, such 38 Lender may require the Borrowers to pay, contemporaneously with each payment of interest on each of such Loans subject to such requirements, additional interest on such Loan at a rate per annum specified by such Lender to be the cost to such Lender of complying with such requirement in relation to such Loan. (e) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or such Lender's or the Issuing Bank's parent corporation, as the case may be, specified in paragraph (a), (b), (c) or (d) of this Section shall be delivered to the Borrowers (with a copy to the Administrative Agent) and shall be conclusive, absent manifest error. The Borrowers shall pay any such Lender or the Issuing Bank, as the case may be, such amount or amounts within 10 days after receipt thereof. (f) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's or the Issuing Bank's right to demand such compensation; provided, that the Borrowers shall not be required to compensate a Lender or the Issuing Bank under this Section for any increased costs or reductions incurred more than 120 days prior to the date that such Lender or the Issuing Bank notifies the Borrowers of such increased costs or reductions and of such Lender's or the Issuing Bank's intention to claim compensation therefor. SECTION 2.22. FUNDING INDEMNITY. In the event of (a) the payment of any principal of a Eurocurrency Loan other than on the last day of the Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion or continuation of a Eurocurrency Loan other than on the last day of the Interest Period applicable thereto or (c) the failure by the Borrowers to borrow, prepay, convert or continue any Eurocurrency Loan on the date specified in any applicable notice (regardless of whether such notice is withdrawn or revoked), then, in any such event, the Borrowers shall compensate each Lender, within five (5) Business Days after written demand from such Lender, for any loss, cost or expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense shall be deemed to include an amount determined by such Lender to be the excess, if any, of (A) the amount of interest that would have accrued on the principal amount of such Eurocurrency Loan if such event had not occurred at the Adjusted LIBOR applicable to such Eurocurrency Loan for the period from the date of such event to the last day of the then current Interest Period therefor (or in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Eurocurrency Loan) over (B) the amount of interest that would accrue on the principal amount of such Eurocurrency Loan for the same period if the Adjusted LIBOR were set on the date such Eurocurrency Loan was prepaid or converted or the date on which the Borrowers failed to borrow, convert or continue such Eurocurrency Loan. A certificate as to any additional amount payable under this Section 2.22 submitted to the Borrowers by any Lender shall be conclusive, absent manifest error. SECTION 2.23. TAXES. (a) Any and all payments by or on account of any obligation of either Borrower hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided, that if either Borrower shall be required to deduct any Indemnified Taxes or Other 39 Taxes from such payments, then (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) the Administrative Agent, any Lender or the Issuing Bank (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, such Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Each Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within five (5) Business Days after written demand therefore, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of either Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrowers by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Borrower to a Governmental Authority, the Borrowers shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Each Foreign Lender shall deliver to the Borrowers (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law or reasonably requested by the Borrowers as will permit all payments under this Agreement to be made without withholding. Without limiting the generality of the foregoing, each Foreign Lender agrees that it will deliver to the Administrative Agent and the Borrowers (or in the case of a Participant, to the Lender from which the related participation shall have been purchased) (i) two (2) duly completed copies of Internal Revenue Service Form W-8ECI or W-8BEN, or any successor form thereto, as the case may be, certifying in each case that such Foreign Lender is entitled to receive payments made by the Borrowers hereunder and under the Notes payable to it, without deduction or withholding of any United States federal income taxes and (ii) a duly completed Internal Revenue Service Form W-8 or W-9, or any successor form thereto, as the case may be, to establish an exemption from United State backup withholding tax. Each such Foreign Lender shall deliver to the Borrowers and the Administrative Agent such forms on or before the date that it becomes a party to this Agreement (or in the case of a Participant, on or before the date such Participant purchases the related participation). In addition, each such Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Lender. Each such Lender shall promptly notify the Borrowers and the 40 Administrative Agent at any time that it determines that it is no longer in a position to provide any previously delivered certificate to the Borrowers (or any other form of certification adopted by the U.S. taxing authorities for such purpose) which notice shall create in Borrowers the right to replace such Lender pursuant to Section 2.25 hereof. (f) Each Lender agrees upon the request of the Borrowers and at the Borrowers' expense to complete, accurately and in a manner reasonably satisfactory to the Borrowers and the Administrative Agent, and to execute, arrange for any required certification of, and deliver to the Borrowers (with a copy to the Administrative Agent) (or to such government or taxing authority as the Borrowers or Administrative Agent reasonably directs), any other form or document that may be required under the laws of any jurisdiction outside the United States to allow the Borrowers to make a payment under this Agreement or the other Loan Documents without any deduction or withholding for or on account of any taxes of the type described in this Section 2.23 or with any such deduction or withholding for or on account of such taxes at a reduced rate, in each case so long as such Lender is (i) legally entitled to provide such certification and deliver such form or document and (ii) such action is consistent with its overall tax policies and is not otherwise, in the judgment of such Lender, impractical or disadvantageous in any material respect to such Lender. (g) Notwithstanding any provision of Section 2.23 above to the contrary, the Borrowers shall not have any obligations to pay any taxes or to indemnify any Lender for such taxes pursuant to this Section 2.23 to the extent that such taxes result from (i) the failure of any Lender to comply with its obligations pursuant to Section 2.23(f) or (ii) any representation made on Form 1001, 4224 or W-8 or successor applicable form or certification by any Lender incurring such taxes proving to have been incorrect, false or misleading in any material respect when so made or deemed to be made or (iii) such Lender changing its Applicable Lending Office to a jurisdiction in which such taxes arise, except to the extent in the judgment of such Lender such change was required by the terms of this Agreement. (h) To the extent that the payment of any Lender's Indemnified Taxes or Other Taxes by the Borrowers hereunder gives rise from time to time to a Tax Benefit to such lender in any jurisdiction other than the jurisdiction which imposed such Indemnified Taxes or Other Taxes, such Lender shall pay to the Borrowers the amount of each such Tax Benefit so recognized or received. The amount of each Tax Benefit and, therefore, payment to the Borrowers will be determined from time to time by the relevant Lender in its sole discretion, which determination shall be binding and conclusive on all parties hereto. Each such payment will be due and payable by such Lender to the Borrowers within a reasonable time after the filing of the tax return in which such Tax Benefit is recognized or, in the case of any tax refund, after the refund is received; provided, however, if at any time thereafter such Lender is required to rescind such Tax Benefit or such Tax Benefit is otherwise disallowed or nullified, the Borrowers shall promptly, after notice thereof from such Lender, repay to such Lender the amount of such Tax Benefit previously paid to such Lender and which has been rescinded, disallowed or nullified. For purposes hereof, the term "Tax Benefit" shall mean the amount by which any Lender's income tax liability for the taxable period in question is reduced below what would have been payable had the Borrowers not been required to pay such Lender's taxes hereunder. 41 SECTION 2.24. PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS. (a) The Borrowers shall make each payment required to be made by them hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.21, 2.22 or 2.23, or otherwise) (i) prior to 12:00 noon, in the case of payments in Dollars, and (ii) no later than 11:00 a.m. (at the Applicable Lending Office where the applicable Foreign Currency Payment Account is maintained) in the case of payments in a Foreign Currency, on the date when due, in immediately available funds, free and clear of any claims or defenses, and without deduction, set-off or counterclaim of any kind. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at the Payment Office or at the applicable Foreign Currency Payment Account, as the case may be, except payments to be made directly to the Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.21, 2.22 and 2.23 and 10.3 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be made payable for the period of such extension. All payments hereunder shall be made in Dollars; provided, however, that all payments of principal and interest with respect to Eurocurrency Loans denominated in a Foreign Currency shall be made in accordance with Section 2.6(c). (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in LC Disbursements or Swingline Loans that would result in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in LC Disbursements and Swingline Loans; provided, that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this 42 paragraph shall not be construed to apply to any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements or Swingline Loans to any assignee or participant, other than to the Borrowers or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each of the Borrowers consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against either Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of a Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrowers prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Bank, as the case may be, the amount or amounts due. In such event, if the Borrowers have not in fact made such payment, then each of the Lenders or the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.5(b), 2.9, 2.24(d) 2.26(d), or 10.3(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.25. MITIGATION OF OBLIGATIONS; REPLACEMENT OF LENDERS. (a) If any Lender requests compensation under Section 2.21, or if either Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.23, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable under Section 2.21 or Section 2.23, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers hereby agree to pay all costs and expenses incurred by any Lender in connection with such designation or assignment. (b) If any Lender requests compensation under Section 2.21, or if either Borrower is required to pay any additional amount to any Lender or any Governmental Authority of the account of any Lender pursuant to Section 2.23, or any Lender is unable to make Eurocurrency Loans 43 for the reasons set forth in Section 2.20 or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions set forth in Section 10.4(b) all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender); provided, that (i) the Borrowers shall have received the prior written consent of the Administrative Agent, which consent shall not be unreasonably withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal amount of all Loans owed to it, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (in the case of such outstanding principal and accrued interest) and from the Borrowers (in the case of all other amounts) and (iii) in the case of a claim for compensation under Section 2.21 or payments required to be made pursuant to Section 2.23, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply. SECTION 2.26. LETTERS OF CREDIT. (a) During the Availability Period, the Issuing Bank, in reliance upon the agreements of the other Lenders pursuant to Section 2.26(d), agrees to issue, at the request of the Borrowers, Letters of Credit for the account of the Borrowers on the terms and conditions hereinafter set forth; provided, that (i) each Letter of Credit shall be a standby letter of credit which shall expire on the earlier of (A) the date one year after the date of issuance of such Letter of Credit (or in the case of any renewal or extension thereof, one year after such renewal or extension) and (B) the date that is five (5) Business Days prior to the Commitment Termination Date; (ii) each Letter of Credit shall be in a stated amount of at least $100,000; and (iii) the Borrowers may not request any Letter of Credit, if, after giving effect to such issuance (A) the aggregate LC Exposure would exceed the LC Commitment or (B) the aggregate LC Exposure, plus the aggregate outstanding Revolving Loans of all Lenders would exceed the Aggregate Revolving Commitments. Upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Issuing Bank without recourse a participation in such Letter of Credit equal to such Lender's Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit. Each issuance of a Letter of Credit shall be deemed to utilize the Revolving Commitment of each Lender by an amount equal to the amount of such participation. (b) To request the issuance of a Letter of Credit (or any amendment, renewal or extension of an outstanding Letter of Credit), the Borrowers shall give the Issuing Bank and the Administrative Agent irrevocable written notice at least three (3) Business Days prior to the requested date of such issuance specifying the date (which shall be a Business Day) such Letter of Credit is to be issued (or amended, extended or renewed, as the case may be), the expiration date of such Letter of Credit, the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. In addition to the satisfaction of the conditions in Article III, the issuance of such Letter of Credit (or any amendment which increases the amount of such Letter of Credit) will be 44 subject to the further conditions that such Letter of Credit shall be in such form and contain such terms as the Issuing Bank shall approve and that the Borrowers shall have executed and delivered any additional applications, agreements and instruments relating to such Letter of Credit as the Issuing Bank shall reasonably require; provided, that in the event of any conflict between such applications, agreements or instruments and this Agreement, the terms of this Agreement shall control. (c) At least two Business Days prior to the issuance of any Letter of Credit, the Issuing Bank will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received such notice and if not, the Issuing Bank will provide the Administrative Agent with a copy thereof. Unless the Issuing Bank has received notice from the Administrative Agent on or before the Business Day immediately preceding the date the Issuing Bank is to issue the requested Letter of Credit (1) directing the Issuing Bank not to issue the Letter of Credit because such issuance is not then permitted hereunder because of the limitations set forth in Section 2.26(a) or that one or more conditions specified in Article III are not then satisfied, then, subject to the terms and conditions hereof, the Issuing Bank shall, on the requested date, issue such Letter of Credit in accordance with the Issuing Bank's usual and customary business practices. (d) The Issuing Bank shall examine all documents purporting to represent a demand for payment under a Letter of Credit promptly following its receipt thereof. The Issuing Bank shall notify the Borrowers and the Administrative Agent of such demand for payment and whether the Issuing Bank has made or will make a LC Disbursement thereunder; provided, that any failure to give or delay in giving such notice shall not relieve the Borrowers of their obligation to reimburse the Issuing Bank and the Lenders with respect to such LC Disbursement. The Borrowers shall be irrevocably and unconditionally obligated to reimburse the Issuing Bank for any LC Disbursements paid by the Issuing Bank in respect of such drawing, without presentment, demand or other formalities of any kind. Unless the Borrowers shall have notified the Issuing Bank and the Administrative Agent prior to 11:00 a.m. on the Business Day immediately prior to the date on which such drawing is honored that the Borrowers intend to reimburse the Issuing Bank for the amount of such drawing in funds other than from the proceeds of Revolving Loans, the Borrowers shall be deemed to have timely given a Notice of Revolving Borrowing to the Administrative Agent requesting the Lenders to make a Base Rate Borrowing on the date on which such drawing is honored in an exact amount due to the Issuing Bank; provided, that for purposes solely of such Borrowing, the conditions precedents set forth in Section 3.2 hereof shall not be applicable. The Administrative Agent shall notify the Lenders of such Borrowing in accordance with Section 2.3, and each Lender shall make the proceeds of its Base Rate Loan included in such Borrowing available to the Administrative Agent for the account of the Issuing Bank in accordance with Section 2.9. The proceeds of such Borrowing shall be applied directly by the Administrative Agent to reimburse the Issuing Bank for such LC Disbursement. (e) If for any reason a Base Rate Borrowing may not be (as determined in the sole discretion of the Administrative Agent), or is not, made in accordance with the foregoing provisions, then each Lender (other than the Issuing Bank) shall be obligated to fund the participation that such Lender purchased pursuant to subsection (a) in an amount equal to its Pro Rata Share of such LC Disbursement on and as of the date which such Base Rate Borrowing should have occurred. Each 45 Lender's obligation to fund its participation shall be absolute and unconditional and shall not be affected by any circumstance, including without limitation (i) any setoff, counterclaim, recoupment, defense or other right that such Lender or any other Person may have against the Issuing Bank or any other Person for any reason whatsoever, (ii) the existence of a Default or an Event of Default or the termination of the Aggregate Revolving Commitments, (iii) any adverse change in the condition (financial or otherwise) of either Borrower or any Subsidiary, (iv) any breach of this Agreement by either Borrower or any other Lender, (v) any amendment, renewal or extension of any Letter of Credit or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. On the date that such participation is required to be funded, each Lender shall promptly transfer, in immediately available funds, the amount of its participation to the Administrative Agent for the account of the Issuing Bank. Whenever, at any time after the Issuing Bank has received from any such Lender the funds for its participation in a LC Disbursement, the Issuing Bank (or the Administrative Agent on its behalf) receives any payment on account thereof, the Administrative Agent or the Issuing Bank, as the case may be, will distribute to such Lender its Pro Rata Share of such payment; provided, that if such payment is required to be returned for any reason to the Borrowers or to a trustee, receiver, liquidator, custodian or similar official in any bankruptcy proceeding, such Lender will return to the Administrative Agent or the Issuing Bank any portion thereof previously distributed by the Administrative Agent or the Issuing Bank to it. (f) To the extent that any Lender shall fail to pay any amount required to be paid pursuant to paragraph (d) of this Section 2.26 on the due date therefore, such Lender shall pay interest to the Issuing Bank (through the Administrative Agent) on such amount from such due date to the date such payment is made at a rate per annum equal to the Federal Funds Rate; provided, that if such Lender shall fail to make such payment to the Issuing Bank within three (3) Domestic Business Days of such due date, then, retroactively to the due date, such Lender shall be obligated to pay interest on such amount at the Default Rate. (g) If any Event of Default shall occur and be continuing, on the Business Day that the Borrowers receive notice from the Administrative Agent or the Required Lenders demanding the deposit of cash collateral pursuant to this paragraph, the Borrowers shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided, that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, with demand or notice of any kind, upon the occurrence of any Event of Default with respect to either Borrower described in clause (g) or (h) of Section 8.1. Such deposit shall be held by the Administrative Agent as collateral in an interest bearing account (which account shall be chosen in the sole discretion of the Administrative Agent and at the Borrowers' risk and expense) for the payment and performance of the obligations of the Borrowers under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Interest and profits on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it had not been reimbursed and to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrowers for the LC Exposure at such time or, if the maturity of the Loans has been accelerated, with the consent of the Required Lenders, be 46 applied to satisfy other obligations of the Borrowers under this Agreement. If the Borrowers are required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not so applied as aforesaid) shall be returned to the Borrowers within three (3) Business Days after all Events of Default have been cured or waived. (h) Promptly following the end of each fiscal quarter, the Issuing Bank shall deliver (through the Administrative Agent) to each Lender and the Borrowers a report describing the aggregate Letters of Credit outstanding at the end of such fiscal quarter. Upon the request of any Lender from time to time, the Issuing Bank shall deliver to such Lender any other information reasonably requested by such Lender with respect to each Letter of Credit then outstanding. (i) The Borrowers' obligation to reimburse LC Disbursements hereunder shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever and irrespective of any of the following circumstances: (i) Any lack of validity or enforceability of any Letter of Credit or this Agreement; (ii) The existence of any claim, set-off, defense or other right which either Borrower or any Subsidiary or Affiliate of either Borrower may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons or entities for whom any such beneficiary or transferee may be acting), any Lender (including the Issuing Bank) or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction; (iii) Any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect; (iv) Payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document to the Issuing Bank that does not comply with the terms of such Letter of Credit; (v) Any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrowers' obligations hereunder; or (vi) The existence of a Default or an Event of Default. Neither the Administrative Agent, the Issuing Bank, the Lenders nor any Related Party of any of the foregoing shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to above), or any error, omission, interruption, loss 47 or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided, that nothing in this Agreement, any Letter of Credit or any other Loan Document shall be construed to excuse the Issuing Bank from liability to the Borrowers to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable law) suffered by either Borrower that are caused by the Issuing Bank's failure to exercise care when determining whether drafts or other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree, that in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented that appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit. Unless otherwise expressly agreed by the Issuing Bank and the Borrowers when a Letter of Credit is issued and subject to applicable laws, performance under Letters of Credit by the Issuing Bank, its correspondents, and the beneficiaries thereof will be governed by the rules of the "International Standby Practices 1998" (ISP98) (or such later revision as may be published by the Institute of International Banking Law & Practice on any date any Letter of Credit may be issued) and to the extent not inconsistent therewith, the governing law of this Agreement set forth in Section 10.5. SECTION 2.27. BORROWERS' REPRESENTATIVE. Each of the Borrowers hereby appoints Crawford as, and Crawford shall act under this Agreement as, the agent, attorney-in-fact and legal representative of the Borrowers for all purposes hereunder, including, without limitation, requesting Borrowings and Letters of Credit and receiving account statements and other notices and communications to the Borrowers (or either of them) from the Administrative Agent or any Lender. Accordingly, the parties agree that any and all actions to be taken hereunder by the Borrowers may be taken by Crawford for and on behalf of the Borrowers, and any and all notices and communications permitted or required to be made by the Administrative Agent or any Lender hereunder to the Borrowers, shall be deemed made to each of the Borrowers if delivered to Crawford. The Administrative Agent and each Lender may rely, and shall be fully protected in relying, on any Notice of Borrowing, Notice of Conversion/Continuation, request for a Letter of Credit, disbursement instruction, report, information or any other notice or communication made or given by Crawford, whether in its own name, on behalf of the other Borrower or on behalf of "the Borrowers", and neither the Administrative Agent nor any Lender shall have any obligation to make any inquiry or request any confirmation from or on behalf of the other Borrower as to the binding effect on it of any such notice, request, instruction, report, information, other notice or communications. Crawford may from time to time tender to the Administrative Agent and the Lenders, representations or performance of covenants hereunder and take actions in respect of other matters on behalf of the Borrowers, and any such representations, performance or actions by 48 Crawford, if accepted by the Administrative Agent or any such Lender, as the case may be, shall (irrespective of whether the particular matter is otherwise authorized elsewhere herein) be conclusively deemed done with the authorization of and on behalf of the other Borrower, as the circumstances and the specific action taken may indicate. The Administrative Agent and each of the Lenders may in all cases rely on communications from, and representations and actions taken by, Crawford as though given, delivered, made or taken by or from the Borrowers, and all such communications, representations and actions shall be binding upon each Borrower on whose behalf such communications, representations or actions were purportedly taken by Crawford. SECTION 2.28. JOINT AND SEVERAL LIABILITY. (a) Each of the Borrowers acknowledges and agrees that (i) it is a co-borrower hereunder and shall be jointly and severally, with the other Borrower, directly and primarily liable for the Obligations regardless of which Borrower actually receives Loans or other extensions of credit hereunder or the amount of such Loans or other extensions of credit received or the manner in which the Administrative Agent and/or any Lender accounts for such Loans or other extensions of credit on its books and records, (ii) each of the Borrowers shall have the obligations of co-maker and shall be primary obligors with respect to all Loans, the Notes, the Letters of Credit and the other Obligations, it being agreed that such extensions of credit to each Borrower inure to the benefit of both Borrowers, and (iii) the Administrative Agent and each of the Lenders is relying on such joint and several liability of the Borrowers as co-makers in extending the Loans and issuing the Letters of Credit hereunder. Each Borrower's obligations with respect to Loans made to it or with respect to any Letters of Credit issued for its account, and each Borrower's obligations arising as a result of the joint and several liability of the Borrowers hereunder, with respect to Loans made to the other Borrower hereunder or with respect to any Letters of Credit issued for the account of the other Borrower hereunder, shall be separate and distinct obligations, but all such Obligations shall be primary obligations of each Borrower. Each Borrower hereby unconditionally and irrevocably agrees that upon default in the payment when due (whether at stated maturity, by acceleration or otherwise) of any principal of, or interest on, any Obligation payable by it to the Lender, it will forthwith pay the same, without notice of demand. (b) Each Borrower's obligations arising as a result of the joint and several liability of the Borrowers hereunder with respect to Obligations of the other Borrower hereunder shall, to the fullest extent permitted by law, be unconditional irrespective of (i) the validity or enforceability, avoidance or subordination of the Obligations of the other Borrower or of any Note or other document evidencing all or any part of the Obligations of the other Borrower, (ii) the absence of any attempt to collect the Secured Obligations from the other Borrower, or any other security therefore, or the absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance or granting of any indulgence by the Administrative Agent or any Lender with respect to any provision of any instrument evidencing the Obligations of the other Borrower, or any part thereof, or any other agreement now or hereafter executed by the other Borrower and delivered to the Administrative Agent or any Lender, (iv) the failure by the Administrative Agent or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security for the Obligations of the other Borrower, (v) any borrowing or grant of a security interest by the other Borrower, as debtors-in-possession under Section 364 of the Bankruptcy Code, (vi) the 49 disallowance of all or any portion of the Administrative Agent's or any Lender's claim(s) for the repayment of the Obligations of the other Borrower under Section 502 of the Bankruptcy Code, or (vii) any other circumstances which might constitute a legal or equitable discharge or defense of any other Borrower. (c) With respect to each Borrower's obligations arising as a result of the joint and several liability of the Borrowers hereunder with respect to Obligations any of the other Borrower hereunder, each Borrower waives, until the Obligations shall have been paid in full in cash and this Agreement and the other Loan Documents shall have terminated, any right to enforce any right of subrogation or any remedy which the Administrative Agent or any Lender now has or may hereafter have against such Borrower, any endorser or any guarantor of all or any part of the Obligations, and any benefit of, and any right to participate in, any security or collateral given to the Administrative Agent or any Lender to secure payment of the Obligations. (d) No payment or payments made by any of the Borrowers or any other Person or received or collected by the Administrative Agent or any Lender from either of the Borrowers or any other Person by virtue of any action or proceeding or any set-off-or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed (except to the extent Obligations are satisfied) to modify, release or otherwise affect the liability of each Borrower under this Agreement, which shall remain liable for the Obligations until the Obligations are paid in full in cash and this Agreement is terminated. ARTICLE III CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT SECTION 3.1. CONDITIONS TO EFFECTIVENESS. The obligations of the Lenders (including the Swingline Lender) to make Loans and the obligation of the Issuing Bank to issue any Letter of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2): (a) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel to the Administrative Agent) required to be reimbursed or paid by the Borrowers hereunder, under any other Loan Document and under any agreement with the Administrative Agent or SunTrust Robinson Humphrey, as Lead Arranger. (b) Contemporaneously with the effectiveness of this Agreement, the Note Purchase Agreement shall have become effective and the Borrowers shall have received the proceeds of the Private Placement Indebtedness pursuant to, and in accordance with, the terms and conditions of the Note Purchase Agreement, and the Administrative Agent (or its counsel) shall have received true and correct copies of each of the documents constituting the Private Placement Loan Documents as in effect on the Closing Date, certified as true and correct by a Responsible Officer of Crawford. 50 (c) The Administrative Agent (or its counsel) shall have received the following: (i) on or prior to the Closing Date, a counterpart of this Agreement signed by or on behalf of each party hereto or written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement; (ii) on or prior to the Funding Date, duly executed Notes payable to each Lender, as applicable; (iii) on or prior to the Funding Date, a duly executed Subsidiary Guaranty Agreement from each Subsidiary Loan Party; (iv) on or prior to the Funding Date, a Pledge Agreement duly executed by Crawford covering all of the capital stock of International, together with delivery of the original stock certificates evidencing such shares, undated stock powers executed in blank, and such documents shall be accompanied by such other documents as the Administrative Agent may reasonably request (including without limitation, certificates of incorporation, incumbency certificates of such entities, articles of incorporation, bylaws, other organizational documents, membership operating agreements, opinion letters (including legal opinions of foreign counsel to the relevant Consolidated Parties) and appropriate resolutions of the governing body of any such Foreign Subsidiary); (v) on or prior to the Funding Date, duly executed Payoff Letters, executed by each of the Existing Lenders; (vi) on or prior to the Closing Date, a certificate of the Secretary or Assistant Secretary of each Borrower and/or each Subsidiary Loan Party (or other similar officer for entities other than corporations), attaching and certifying copies of its bylaws, partnership or operating agreement, as the case may be, and of the resolutions of its boards of directors, Board of Managers or partnership resolutions, as the case may be, authorizing the execution, delivery and performance of the Loan Documents to which it is a party and certifying the name, title and true signature of each officer of such Borrower or Subsidiary Loan Party executing the Loan Documents to which it is a party; (vii) on or prior to the Closing Date, certified copies of the certificate or articles of incorporation or other documents of formation or organization of each Borrower and each Subsidiary Loan Party, together with certificates of good standing or existence, as may be available from the Secretary of State of the jurisdiction of incorporation or formation of each Borrower and each Subsidiary Loan Party and (x) each other jurisdiction where the ownership of property or the conduct of its business requires the Borrowers to be qualified (provided that any such foreign good standing certificates for Crawford which are not delivered by the Closing Date may be delivered after such date and shall be subject to 51 Section 5.12) and (y) each jurisdiction where such Subsidiary Loan Party maintains its principal place of business; (viii) on or prior to the Funding Date, a favorable written opinion of King & Spalding LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each of the Lenders, substantially in the form attached hereto as Exhibit F hereof; (ix) on the Funding Date, a certificate, dated the Funding Date and signed by a Responsible Officer of Crawford, confirming, among other things, compliance with the conditions of Section 3.1 and compliance with the conditions set forth in paragraphs (a), (b) and (c) of Section 3.2; (x) on or prior to the Funding Date, duly executed Notices of Borrowing, and duly executed Statement of Funds Flow; (xi) on or prior to the Funding Date, the consolidated financial statements of Crawford and its Consolidated Subsidiaries for the fiscal quarter ended June 30, 2003 including balance sheets, income and cash flow statements certified by the chief financial officer of Crawford and prepared in conformity with GAAP, and such other financial information as the Administrative Agent may request; (xii) on or prior to the Funding Date, delivery of certified copies of all consents, approvals, authorizations, registrations, or filings required to be made or obtained by either Borrower and any Subsidiary Loan Party in connection with the Loan Documents and the other transactions contemplated herein; and (xiii) Administrative Agent shall have received such other documents, certificates or information with respect to either Borrower and any Subsidiary Loan Party as it or the Required Lenders may reasonably request. SECTION 3.2. EACH CREDIT EVENT. The obligation of each Lender to make a Loan on the occasion of any Borrowing and of the Issuing Bank to issue, amend, renew or extend any Letter of Credit is subject to the satisfaction of the following conditions: (a) at the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default or Event of Default shall exist; and (b) all representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, extension or renewal of such Letter of Credit, in each case before and after giving effect thereto (except for such representations and warranties that expressly relate to a prior date); and 52 (c) since the date of the audited financial statements of Crawford described in Section 4.4(i), there shall have been no changes, events, acts, conditions or occurrences of any nature, singly or in the aggregate, that have had or could reasonably be expected to have a Material Adverse Effect. Each Borrowing and each issuance, amendment, extension or renewal of any Letter of Credit shall be deemed to constitute a representation and warranty by the Borrowers on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section 3.2. SECTION 3.3. DELIVERY OF DOCUMENTS. All of the Loan Documents, certificates, legal opinions and other documents and papers referred to in this Article III, unless otherwise specified, shall be delivered to the Administrative Agent for the account of each of the Lenders and, except for the Notes, in sufficient counterparts or copies for each of the Lenders and shall be in form and substance satisfactory in all respects to the Administrative Agent. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrowers represent and warrant to the Administrative Agent and each Lender as follows: SECTION 4.1. EXISTENCE; POWER. Each of the Borrowers and each of their Subsidiaries (other than Dormant Companies) (i) is duly organized or formed, validly existing and in good standing as a corporation, limited liability company or partnership, as the case may be, under the laws of the jurisdiction of its organization or formation, (ii) has all requisite power and authority to carry on its business and to execute, deliver and perform its respective obligations under each Loan Document to which it is a party, and (iii) is duly qualified to transact business, and is in good standing, in each jurisdiction where such qualification is required, except, in the case of clause (iii), where a failure to be so qualified could not reasonably be expected to result in a Material Adverse Effect. SECTION 4.2. ORGANIZATIONAL POWER; AUTHORIZATION. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party are within such Loan Party's organizational powers and have been duly authorized by all necessary organizational, and if required, stockholder, member or partner, action. This Agreement has been duly executed and delivered by each of the Borrowers, and constitutes, and each other Loan Document to which any Loan Party is a party, when executed and delivered by such Loan Party, will constitute, valid and binding obligations of each Borrower or such Loan Party (as the case may be), enforceable against it in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, or similar laws affecting the enforcement of creditors' rights generally and by general principles of equity. 53 SECTION 4.3. GOVERNMENTAL AND THIRD PARTY APPROVALS; NO CONFLICTS. The execution, delivery and performance by the Borrowers of this Agreement, and by each Loan Party of the other Loan Documents to which it is a party (a) do not require any consent or approval of, registration or filing with, or any action by, any Governmental Authority or any other Person, except those as have been obtained or made and are in full force and effect, (b) will not violate any applicable law, rule or regulation or any order or judgment of any Governmental Authority, (c) will not violate the articles or certificate of incorporation, operating agreement, partnership agreement, by-laws or other organizational documents of either Borrower or any Subsidiary, (d) will not violate or result in a default under any indenture, material agreement or other material instrument binding on either Borrower or any Subsidiary or any of its assets or give rise to a right thereunder to require any payment to be made by either Borrower or any Subsidiary and (e) will not result in the creation or imposition of any Lien on any asset of either Borrower or any Subsidiary, except Liens (if any) created under the Loan Documents. SECTION 4.4. FINANCIAL STATEMENTS. The Borrowers have furnished to each Lender (i) the audited consolidated balance sheet of Crawford as of December 31, 2002 and the related audited consolidated statements of income, changes in shareholders' equity and cash flows for the fiscal year then ended prepared by Ernst & Young LLP and (ii) the unaudited consolidated balance sheet of Crawford as at the end of June 30, 2003, and the related unaudited consolidated statements of income and cash flows for the fiscal quarter then ending, certified by a Responsible Officer. Such financial statements fairly present in all material respects the consolidated financial condition of Crawford as of such dates and the consolidated results of operations for such periods in conformity with GAAP consistently applied, subject to year end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii). Since December 31, 2002, there have been no changes, events, acts, conditions or occurrences of any nature, singly or in the aggregate that have had or could reasonably be expected to have a Material Adverse Effect. Since the December 31, 2002, no Consolidated Party has made any Restricted Payment except as permitted pursuant to Section 7.5. SECTION 4.5. LITIGATION AND ENVIRONMENTAL MATTERS. (a) Except for matters set forth on Schedule 4.5(a), no litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities is pending against or, to the knowledge of either Borrower, threatened against or affecting either Borrower or any Subsidiary (i) as to which there is a reasonable probability of an adverse determination that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect or (ii) which in any manner challenges the validity or enforceability of this Agreement or any other Loan Document. With respect to any pending litigation, investigation or proceeding of or before any arbitrators or Governmental Authorities, no events, acts or conditions have occurred in respect of or in relation to any such pending litigation, investigation or proceeding that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. (b) Except for the matters set forth on Schedule 4.5(b) and except for matters which could not reasonably be expected to have a Material Adverse Effect, neither either Borrower nor any Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or 54 comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability in each case. SECTION 4.6. COMPLIANCE WITH LAWS AND AGREEMENTS. Except where non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, each of the Borrowers and each Subsidiary is in compliance with (a) all applicable laws, rules, regulations and orders of any Governmental Authority, and (b) all indentures, agreements or other instruments binding upon it or its properties. SECTION 4.7. INVESTMENT COMPANY ACT, ETC. Neither the Borrower nor any Subsidiary is (a) an "investment company", as defined in, or is controlled by an "investment company" as defined in, or is subject to regulation under, the Investment Company Act of 1940, as amended, (b) a "holding company" as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935, as amended or (c) otherwise subject to any other regulatory scheme limiting its ability to incur debt. SECTION 4.8. TAXES. Each of the Borrowers and each Subsidiary has, as applicable, timely filed or caused to be filed all federal, state and foreign tax returns and all other tax returns or reports that are required to be filed by them except, in the case of tax returns or reports that may be required to be filed in jurisdictions other than the United States and political subdivisions thereof, those foreign tax returns or reports which, in the aggregate, would not reflect an amount of taxes owing that would be material. Each of the Borrowers and each Subsidiary has paid all taxes and other amounts shown to be due and payable on such returns or reports or on any assessments made against it or its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority, except where the same are currently being contested in good faith by appropriate proceedings and for which such Borrower or such Subsidiary, as the case may be, has set aside on its books adequate reserves. There is no proposed tax assessment against either of the Borrowers or any of their respective Subsidiaries that would, if made, have a Material Adverse Effect. SECTION 4.9. MARGIN REGULATIONS. None of the proceeds of any of the Loans or Letters of Credit will be used for "purchasing" or "carrying" any "margin stock" with the respective meanings of each of such terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the applicable Margin Regulations. SECTION 4.10. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. As determined by the Borrowers' actuary, the present value of the aggregate projected benefit obligation of all underfunded Plans subject to ERISA, as of January 1, 2003 (based on the assumptions used for purposes of Statement of Financial Standards No. 87), did not exceed by more than $67,000,000 the aggregate fair value of the assets of all such underfunded Plans as of January 1, 2003. 55 SECTION 4.11. OWNERSHIP OF PROPERTY. (a) Each of the Borrowers and each Subsidiary (other than any Dormant Company) has good title to, or valid leasehold interests in, all of its real and personal property material to the operation of its business. (b) Each of the Borrowers and each Subsidiary owns, or is licensed, or otherwise has the right, to use, all patents, trademarks, service marks, tradenames, copyrights and other intellectual property material to its business, and the use thereof by the Borrowers and the Subsidiaries does not infringe on the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not have a Material Adverse Effect. SECTION 4.12. DISCLOSURE. The Borrowers have disclosed to the Lenders all agreements, instruments, and corporate or other restrictions to which either Borrower or any Subsidiary is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports (including without limitation all reports that Crawford is required to file with the Securities and Exchange Commission), financial statements, certificates or other information furnished by or on behalf of the Borrowers to the Administrative Agent or any Lender in connection with the negotiation or syndication of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by any other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, taken as a whole, in light of the circumstances under which they were made, not misleading. SECTION 4.13. LABOR RELATIONS. There are no strikes, lockouts or other labor disputes or grievances against either Borrower or any Subsidiary, or, to either Borrower's knowledge, threatened against or affecting either Borrower or any Subsidiary, and no significant unfair labor practice, charges or grievances are pending against either Borrower or any Subsidiary, or to either Borrower's knowledge, threatened against any of them before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect. SECTION 4.14. SUBSIDIARIES. As of the Funding Date, Schedule 4.14 sets forth the exact legal name of, the percentage and type of ownership interest in, the name of the Person who is the record owner of, the jurisdiction of incorporation or formation of, and the type of, each Subsidiary, and identifies each Subsidiary that is a Subsidiary Loan Party and each Subsidiary that is a Dormant Company. SECTION 4.15. SOLVENCY. Each of the Borrowers is Solvent (including, without limitation, after giving effect to all Borrowings on the Funding Date and the issuance of the Private Placement Indebtedness). SECTION 4.16. INDEBTEDNESS. As of August 31, 2003, neither of the Borrowers nor any Consolidated Subsidiary has any Indebtedness except as set forth on Schedule 4.16. As of the Funding Date, neither of the Borrowers nor any Consolidated Subsidiary has any Indebtedness except for Indebtedness that is permitted under Section 7.1. 56 SECTION 4.17. DORMANT COMPANIES. Except as set forth on Schedule 4.17, none of the Dormant Companies own any material assets or has any outstanding Indebtedness or other material liabilities. The aggregate revenues and assets of the Dormant Companies are less than 1% of the aggregate revenues and assets of Crawford and its Subsidiaries on a consolidated basis. SECTION 4.18. NOTE PURCHASE AGREEMENT. Each of the representations and warranties set forth in Section 5 of the Note Purchase Agreement is true and correct in all material respects on and as of the Funding Date. ARTICLE V AFFIRMATIVE COVENANTS The Borrowers covenant and agree that, from and after the Closing Date, so long as any Lender has a Commitment hereunder or the principal of and interest on any Loan or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 5.1. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrowers will deliver to the Administrative Agent: (a) as soon as available and in any event within 90 days after the end of each fiscal year of Crawford, a copy of the annual audited report for such fiscal year for Crawford and its Subsidiaries, containing a consolidated balance sheet of Crawford and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, stockholders' equity and cash flows (together with all footnotes thereto) of Crawford and its Consolidated Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and reported on by Ernst & Young LLP or other independent public accountants of nationally recognized standing (without a "going concern" or like qualification, exception or explanation and without any qualification or exception as to scope of such audit); provided, that the delivery required by this clause (a) shall not be required so long as Crawford delivers to the Administrative Agent and each Lender, within the time frame set forth above, its periodic filing on Form 10-K of the Securities Act of 1934 as filed with the Securities and Exchange Commission; provided, further, that, if Crawford no longer files such financial information with the Securities and Exchange Commission, then Crawford shall cause to be delivered to the Administrative Agent at such time a certificate from Ernst & Young LLP or other independent public accountants of nationally recognized standing to the effect that such financial statements present fairly in all material respects the financial condition and the results of operations of Crawford and its Consolidated Subsidiaries for such fiscal year on a consolidated basis in accordance with GAAP and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards; (b) as soon as available and in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of Crawford, an unaudited consolidated balance sheet 57 of Crawford and its Consolidated Subsidiaries as of the end of such fiscal quarter and (A) the related unaudited consolidated statements of income of Crawford and its Consolidated Subsidiaries for such fiscal quarter and the then elapsed portion of such fiscal year and (B) the related unaudited consolidated statements of cash flows of Crawford and its Consolidated Subsidiaries for the then elapsed portion of such fiscal year, setting forth in each case in comparative form the figures for the corresponding quarter (except in the case of statements of cash flows) and the corresponding portion of Crawford's previous fiscal year; provided, that the delivery required by this clause (b) shall not be required so long as Crawford delivers to the Administrative Agent and each Lender, within the time frame set forth above, its periodic filing on Form 10-Q of the Securities Act of 1934 as filed with the Securities and Exchange Commission; provided, further, that, if Crawford no longer files such financial information with the Securities and Exchange Commission, then Crawford shall provide to the Administrative Agent at such time a certificate of the chief financial officer or treasurer of Crawford certifying that the foregoing financials present fairly in all material respects the financial condition and results of operations of Crawford and its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with the delivery of the financial statements referred to in clauses (a) and (b) above, a certificate of a Responsible Officer, (i) certifying as to whether there exists a Default or Event of Default on the date of such certificate, and if a Default or an Event of Default then exists, specifying the details thereof and the action which the Borrowers have taken or proposes to take with respect thereto, (ii) setting forth in reasonable detail calculations demonstrating compliance with Article VI and (iii) stating whether any change in GAAP or the application thereof has occurred since the date of Crawford's audited financial statements referred to in Section 4.4 and, if any change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; provided, however, that no action shall be required by the Borrowers under this clause (iii) to the extent any such change in GAAP or the application thereof does not affect or apply to the Borrowers and their Subsidiaries, including the presentation by such Persons of their financial statements; (d) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by Crawford with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all functions of said Commission, or with any national securities exchange, or distributed by Crawford to its shareholders generally, as the case may be; (e) to the extent not provided above in this Section 5.1, all reports, statements, certificates, notices or other writings required to be delivered pursuant to Section 7.1 and 7.2 of the Note Purchase Agreement within the times required therein; and (f) promptly following any request therefore, such other information regarding the results of operations, business affairs and financial condition of Crawford or any Subsidiary as the Administrative Agent or any Lender may reasonably request. 58 SECTION 5.2 NOTICES OF MATERIAL EVENTS. The Borrowers will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default or Event of Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of either Borrower, affecting either Borrower or any Subsidiary which, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any event or any other development (which individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect) by which either Borrower or any Consolidated Subsidiary (i) fails to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) becomes subject to any Environmental Liability, (iii) receives notice of any claim with respect to any Environmental Liability, or (iv) becomes aware of any basis for any Environmental Liability; (d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrowers and the Consolidated Subsidiaries in an aggregate amount exceeding $1,000,000; and (e) any development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a written statement of a Responsible Officer setting forth the details of the event or development requiring such notice and, if applicable, any action taken or proposed to be taken with respect thereto. SECTION 5.3. EXISTENCE. Each of the Borrowers will, and will cause each of the Subsidiaries (other than any Dormant Company) to, do or cause to be done all things necessary to preserve, renew and maintain in full force and effect its legal existence and its respective rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business; provided, that nothing in this Section shall prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.3 or any disposition permitted by Section 7.6. SECTION 5.4. COMPLIANCE WITH LAWS, ETC. Each of the Borrowers will, and will cause each of the Subsidiaries to, comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its properties, except where the failure to do so, either individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. Each of the Borrowers will comply at all times with the Margin Regulations. 59 SECTION 5.5. PAYMENT OF OBLIGATIONS. (a) The Borrowers will duly and punctually pay or cause to be paid the principal and interest on the Loans and all other Obligations provided for in this Agreement and the other Loan Documents to which the Borrowers are a party, all in accordance with the terms of this Agreement and such other Loan Documents. (b) Each of the Borrowers will, and will cause each of the Subsidiaries to, pay and discharge at or before maturity, all of its obligations and liabilities (including without limitation all tax liabilities and claims that could result in a statutory Lien) before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.6. BOOKS AND RECORDS. Each of the Borrowers will, and will cause each of the Subsidiaries to, keep proper books of record and account in which full, true and correct entries shall be made of all material dealings and transactions in relation to its business and activities to the extent necessary to prepare the consolidated financial statements of Crawford in conformity with GAAP. SECTION 5.7. VISITATION, INSPECTION, ETC. Each of the Borrowers will, and will cause each of the Subsidiaries to, permit any representative of the Administrative Agent or any Lender, to visit and inspect its properties, to examine its books and records and to make copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of its officers and with its independent certified public accountants, all at such reasonable times and as often as the Administrative Agent or any Lender may reasonably request after reasonable prior notice to the Borrowers; provided, that, so long as no Default or Event of Default has occurred and is continuing, no more than one (1) such visit, inspection and examination in any fiscal year shall be at the expense of the Borrowers and; provided, further, that, if a Default or Event of Default has occurred and is continuing, each such visit, inspection and examination shall be at the expense of the Borrowers and shall be at such times and as often as the Administrative Agent or any Lender may request. SECTION 5.8. MAINTENANCE OF PROPERTIES; INSURANCE. Each of the Borrowers will, and will cause each of the Subsidiaries (other than any Dormant Company) to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, subject to ordinary wear and tear, and (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Subsidiaries, against loss or damage of the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations. SECTION 5.9. USE OF PROCEEDS AND LETTERS OF CREDIT. The Borrowers will use the proceeds of all Loans solely to refinance Indebtedness owing to the Persons referenced in the Statement of Funds Flow on the Funding Date, and thereafter to finance Acquisitions that are permitted hereunder, to finance working capital needs of the Borrowers and their Subsidiaries and 60 for other general corporate purposes of the Borrowers and their Subsidiaries including loans from Borrowers to their Subsidiaries to the extent permitted herein. All Letters of Credit will be used solely for general corporate purposes. Notwithstanding the foregoing, the Borrowers will not, directly or indirectly, use the proceeds of any Loan or any Letter of Credit to make any loan or other advance to, or Investment in, any Dormant Company. SECTION 5.10. ADDITIONAL SUBSIDIARIES; DORMANT COMPANIES. (a) If any Subsidiary is acquired, formed or created after the Closing Date, or if any Foreign Subsidiary that is not a Wholly-Owned Subsidiary of International (such Foreign Subsidiary, a "Non-International Owned Foreign Subsidiary") at any time becomes a "significant subsidiary" within the meaning of Regulation S-X of the Exchange Act, the Borrowers will, within fifteen (15) Business Days, notify the Administrative Agent and the Lenders thereof and (i) if such Subsidiary is not a Foreign Subsidiary, will cause such Subsidiary to become a Subsidiary Loan Party by executing an agreement in the form of Annex I to Exhibit D, (ii) if any Non-International Owned Foreign Subsidiary is or becomes a "significant subsidiary" within the meaning of Regulation S-X of the Exchange Act, will pledge or caused to be pledged the Applicable Pledge Amount of the capital stock or other equity interest of such Non-International Owned Foreign Subsidiary pursuant to a Pledge Agreement, and will deliver or cause to be delivered the original stock certificate(s) evidencing such shares, and undated stock powers executed in blank, and (iii) will cause such Subsidiary to deliver simultaneously therewith similar documents applicable to such Subsidiary required under Section 3.1 as reasonably requested by the Administrative Agent. (b) If, at any time after the Closing Date, the Borrowers decide that any Subsidiary that is a Dormant Company at such time shall cease being a Dormant Company, such Subsidiary shall cease to be a Dormant Company for all purposes of this Agreement and the other Loan Documents upon the satisfaction of each of the following conditions: (i) the Borrowers shall notify the Administrative Agent and the Lenders of the proposed change in the status of such Subsidiary, which notice shall contain a certification by a Responsible Officer of each of the Borrowers to the effect that (A) such Subsidiary is in full compliance with all provisions of this Agreement applicable to it as a Subsidiary that is not a Dormant Company, (B) each of the representations and warranties set forth in Article IV that are applicable to a Subsidiary that is not a Dormant Company are true and correct with respect to such Subsidiary and (C) no Default or Event of Default would result from such change in status of such Subsidiary. (ii) Schedule 4.14 hereto shall be revised to reflect that such Subsidiary is no longer a Dormant Company; and (iii) the Borrowers shall have delivered to the Administrative Agent and the Lenders such information (financial and otherwise) as is reasonably requested by the Administrative Agent. 61 (c) If, at any time after the Closing Date, the Borrowers decide that any Subsidiary that is not a Dormant Company at such time shall become a Dormant Company, such Subsidiary shall become a Dormant Company for all purposes of this Agreement and the other Loan Documents upon the satisfaction of each of the following conditions: (i) the Borrowers shall notify the Administrative Agent and the Lenders of the proposed change in the status of such Subsidiary, which notice shall contain a certification by a Responsible Officer of each of the Borrowers to the effect that (A) such Subsidiary is in full compliance with all provisions of this Agreement applicable to it as a Subsidiary that is a Dormant Company, (B) after giving effect to such Subsidiary becoming a Dormant Company, the aggregate revenues and assets of all Dormant Companies is less than 1% of the aggregate revenues and assets of Crawford and its Consolidated Subsidiaries and (C) no Default or Event of Default would result from such change in status of such Subsidiary; (ii) Schedule 4.14 hereto shall be revised to reflect that such Subsidiary has after such time become a Dormant Company; and (iii) the Borrowers shall have delivered to the Administrative Agent and the Lenders such information (financial and otherwise) as is reasonably requested by the Administrative Agent. SECTION 5.11. AMENDMENT TO PRIVATE PLACEMENT LOAN DOCUMENTS. If at any time on or after the Closing Date either Borrower or any Subsidiary enters into, assumes or otherwise becomes bound or obligated under, or agrees to any new agreement with the holders of the Private Placement Indebtedness or, without derogating from any of the restrictions contained herein, any amendment, modification or supplement of any agreement which relates to the Private Placement Loan Documents in any manner the effect of which would be (i) to create, amend or add covenants or obligations of the Borrowers and the Subsidiaries which are in addition to those contained herein or (ii) more restrictive on the Borrowers or any Subsidiary than are the covenants contained herein, then this Agreement shall, without any further action on the part of either Borrower, any Subsidiary, the Administrative Agent or any Lender, be deemed to be amended automatically to include each such additional covenant or provision; provided, that the Administrative Agent, the Required Lenders and the Borrowers may agree in writing not to so amend this Agreement. Each of the Borrowers further covenants to promptly, and in any event within 30 Business Days, execute and deliver at its expense (including, without limitation, the fees and expenses of counsel for the Administrative Agent) a document which amends this Agreement in form and substance satisfactory to the Administrative Agent to reflect any amendment, modification or supplement of any covenants or provision in this Agreement pursuant to this Section 5.11, provided that the execution and delivery of such document shall not be a precondition to the effectiveness of such amendment, modification or supplement. The provisions of this Section 5.11 shall apply successively to each amendment, modification or supplement so that the Lenders shall have the benefit of every such amendment, modification or supplement. In the event that the terms of any Private Placement Loan Documents are amended, modified or supplemented, the Borrowers shall promptly deliver to the Administrative Agent a certified copy of such amendment, modification or supplement. For the purposes of clause (ii) above, in the event that (A) any such amendment, modification or supplement reduces a 62 percentage in the Private Placement Loan Documents, which reduction has the effect of making a covenant in the Private Placement Loan Documents more restrictive than a covenant contained herein and (B) the corresponding covenant contained herein is a sum certain dollar amount rather than a percentage, then such sum certain dollar amount contained herein shall be reduced and shall thereafter be equal to the product of (x) such sum certain dollar amount, multiplied by (y) a fraction, the numerator of which is the percentage in the Private Placement Loan Documents after giving effect to such amendment, modification or supplement and the denominator of which is the stated percentage in the Private Placement Loan Documents immediately prior to giving effect to such amendment, modification or supplement. By way of example, if the definition of Permitted Acquisition in the Note Purchase Agreement were amended to reduce the percentage to 6% from 10% (a 40% reduction), then the dollar amount in the definition of the Permitted Acquisition Basket herein would be reduced to $9,000,000 from $15,000,000 (a 40% reduction). SECTION 5.12. POST CLOSING REQUIREMENTS. No later than 60 days following the Closing Date, the Borrowers will deliver or cause to be delivered to the Administrative Agent (i) certificates of good standing from the office of the Secretary of State from each jurisdiction where the ownership of property or the conduct of its business requires Crawford to be qualified to transact business as a foreign corporation and (ii) certificates of good standing from the office of the Secretary of State of the jurisdiction of incorporation of Qirra Custom Software, Inc. and the jurisdiction where such Subsidiary maintains its principal place of business. No later than 75 days following the Closing Date, the Borrowers will cause the following Subsidiaries to be dissolved and shall provide the Administrative Agent with reasonably satisfactory evidence of such dissolution: (i) Brocklehursts, Inc., (ii) Brocklehurst Holdings, Inc., and (iii) Graham Miller, Inc. No later than 30 days following the Closing Date, the Borrowers will cause all Liens in favor of Royal Bank of Canada set forth on Schedule 7.2 to be terminated and released of record, and will promptly provide the Administrative Agent written evidence of such termination and release. The Borrowers will, within 30 days following a request therefore by the Required Lenders, cause the documents and instrument described on Schedule 7.8 as item 1, to be terminated, or otherwise cause the restrictive agreements or arrangements therein requiring such items to be disclosed pursuant to Section 7.8 to be terminated and released, and will promptly provide the Administrative Agent written evidence of such termination and release. ARTICLE VI FINANCIAL COVENANTS The Borrowers covenant and agree that, from and after the Closing Date, so long as any Lender has a Commitment hereunder or the principal of or interest on or any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 6.1. LEVERAGE RATIO. Crawford will not permit the Leverage Ratio, as at the end of each fiscal quarter of Crawford set forth below, to exceed the ratio set forth opposite such period: 63
PERIOD RATIO ------ ----- Closing Date through June 30, 2004 2.75 to 1.00 July 1, 2004 through June 30, 2005 2.50 to 1.00 July 1, 2005 and thereafter 2.25 to 1.00
SECTION 6.2. FIXED CHARGE COVERAGE RATIO. Crawford will not permit the Fixed Charge Coverage Ratio, as at the end of each fiscal quarter of Crawford set forth below, to be less than the ratio set forth opposite such period:
PERIOD RATIO ------ ----- Closing Date through June 30, 2004 1.25 to 1.00 September 30, 2004 and thereafter 1.50 to 1.00
SECTION 6.3. MINIMUM NET WORTH. Crawford will maintain a Net Worth in an amount equal to or greater than the sum of (i) $135,516,350, plus (ii) 50% of cumulative positive Consolidated Net Income accrued after December 31, 2002, plus (iii) 100% of the Net Proceeds from any Equity Offering; provided, that the Net Proceeds of an Equity Offering of a debt security that is convertible into or exchangeable for capital stock of Crawford or a debt security that is issued with a warrant or other instrument to purchase capital stock of Crawford shall not be required to be added under this clause (iii) unless and until such debt security is converted into or exchanged for, or such warrant or other instrument is exercised for, capital stock of Crawford. For purposes of determining Net Worth on any date after December 31, 2002, (A) any non-cash adjustment after December 31, 2002 (whether such adjustment is an increase or decrease) to shareholders' investment related to pension fund liabilities, (B) any non-cash adjustment after December 31, 2002 (whether such adjustment is an increase or decrease) to shareholders' investment related to goodwill and (C) any non-cash adjustment after December 31, 2002 (whether such adjustment is an increase or decrease) to shareholders' investment related to foreign currency translations shall, in each case, be excluded. The foregoing covenant shall be calculated and tested quarterly on the last day of each fiscal quarter of Crawford commencing with the fiscal quarter ending September 30, 2003. ARTICLE VII NEGATIVE COVENANTS 64 The Borrowers covenant and agree that, from and after the Closing Date, so long as any Lender has a Commitment hereunder or the principal of or interest on any Loan remains unpaid or any fee or any LC Disbursement remains unpaid or any Letter of Credit remains outstanding: SECTION 7.1. INDEBTEDNESS. The Borrowers will not, and will not permit any Subsidiaries to, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness created pursuant to the Loan Documents; (b) Private Placement Indebtedness, including refundings, refinancings and replacements thereof, and amendments or modifications to the Private Placement Loan Documents; provided, however, that the aggregate principal amount of such Private Placement Indebtedness shall not at any time exceed $50,000,000 plus the aggregate amount of Indebtedness available to be incurred at such time pursuant to clause (i) immediately below (which additional Indebtedness may be secured to the same extent as the Private Placement Indebtedness); (c) Indebtedness on the Funding Date set forth on Schedule 7.1 and borrowings, reborrowings and refinancings of such amounts up to the "Available" amounts set forth on such Schedule 7.1; (d) Indebtedness of any Loan Party incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations; provided, that (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvements and extensions, renewals, and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof (immediately prior to giving effect to such extension, renewal or replacement) or shorten the maturity or the weighted average life thereof and (ii) such Indebtedness does not, in the aggregate, exceed $5,000,000 at any time outstanding; (e) Indebtedness of any Consolidated Subsidiary (other than a Dormant Company) owing to a Loan Party to the extent permitted under Section 7.4(d); (f) Guarantees by any Consolidated Subsidiary of Indebtedness of the Borrowers and guarantees by a Borrower of Indebtedness of any Consolidated Subsidiary (other than a Dormant Company); provided, that any Indebtedness of a Borrower which is guaranteed by a Consolidated Subsidiary and any Indebtedness of any Consolidated Subsidiary which is guaranteed by a Borrower must otherwise be permitted under this Section 7.1; (g) Indebtedness of the Borrowers in respect of obligations under Hedging Agreements permitted by Section 7.10; (h) Indebtedness of Crawford & Company (Australia) Pty Limited in an aggregate amount not to exceed $2,750,000 at any time; and 65 (i) up to an aggregate principal amount of $5,000,000 of Indebtedness of the Borrowers and the Consolidated Subsidiaries (other than a Dormant Company) which shall be (A) unsecured and/or (B) additional Private Placement Indebtedness incurred pursuant to clause (b) above; provided, however, that the aggregate principal amount of all Indebtedness outstanding at any one time pursuant to this clause (i) shall not exceed $5,000,000. SECTION 7.2. NEGATIVE PLEDGE. The Borrowers will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or hereafter acquired or, except: (a) Permitted Encumbrances; (b) any Liens on any property or asset of the Borrowers or any Subsidiary existing on the Closing Date set forth on Schedule 7.2; provided, that such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary; (c) purchase money Liens to secure Indebtedness permitted pursuant to Section 7.1(d); provided, that (i) such Lien attaches to such asset concurrently or within 90 days after the acquisition, improvement or completion of the construction thereof and (ii) such Lien does not extend to any other asset (other than replacement assets of the same type); (d) Liens on the assets of Crawford & Company (Australia) Pty Limited solely to secure Indebtedness permitted under Section 7.1(h); and (e) extensions, renewals, or replacements of any Lien referred to in paragraphs (a) through (d) of this Section; provided, that the Indebtedness secured thereby is not increased and that any such extension, renewal or replacement is limited to the assets originally encumbered thereby. SECTION 7.3. FUNDAMENTAL CHANGES; LINE OF BUSINESS. (a) The Borrowers will not, and will not permit any Subsidiary (other than any Dormant Company) to, merge into or consolidate into any other Person, or permit any other Person to merge into or consolidate with it, or sell, lease, transfer or otherwise dispose of (in a single transaction or a series of transactions) all or substantially all of its assets (in each case, whether now owned or hereafter acquired) or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired) or liquidate or dissolve; provided, that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) a Borrower or any Subsidiary (other than a Dormant Company) may merge with a Person that is not a Subsidiary if a Borrower (or such Subsidiary if a Borrower is not a party to such merger) is the surviving Person, (ii) any Subsidiary may merge into another Subsidiary (other than a Dormant Company); provided, that if any party to such merger is a Subsidiary Loan Party (other than a Dormant Company), the Subsidiary Loan Party shall be the surviving Person, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to a Borrower or to a Subsidiary (other than a Dormant Company); provided, that a Subsidiary Loan Party may only sell, lease or otherwise dispose of all or substantially all of its assets to a Borrower or 66 another Subsidiary Loan Party (other than a Dormant Company), (iv) any Subsidiary may liquidate or dissolve if the Borrowers determine in good faith that such liquidation or dissolution is in the best interests of the Borrowers and is not materially disadvantageous to the Lenders and (v) any Subsidiary may be sold so long as such sale is permitted under Section 7.6; provided, that any merger involving a Person that is not a Wholly-Owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 7.4. (b) The Borrowers will not, and will not permit any Subsidiary to, engage to any substantial extent in any business other than businesses of the type conducted by the Borrowers and the Subsidiaries on the Closing Date and businesses reasonably related thereto. The Borrowers will not permit any Dormant Company to own any material assets or incur any Indebtedness or other material liabilities. The Borrowers will not at any time permit the aggregate revenues and assets of the Dormant Companies to exceed 1% of the aggregate revenues and assets of Crawford and its Subsidiaries on a consolidated basis. SECTION 7.4. INVESTMENTS, LOANS, ACQUISITIONS, ETC. The Borrowers will not, and will not permit any Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a Wholly-Owned Subsidiary prior to such merger), any capital stock, evidence of Indebtedness or other securities (including any option, warrant, or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to (including intercompany loans or advances), Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any Person (all of the foregoing being collectively called "INVESTMENTS"), or consummate any Acquisitions or make any Restricted Investments, except: (a) Permitted Investments; (b) Guarantees constituting Indebtedness not prohibited by Section 7.1; provided, that the aggregate principal amount of Indebtedness of Subsidiaries that are not Subsidiary Loan Parties that is Guaranteed by any Loan Party shall be subject to the limitations set forth in clause (d) hereof, as applicable; (c) Investments made by any Consolidated Subsidiary (other than a Dormant Company) in or to any Loan Party (other than a Dormant Company); (d) Investments made by the Borrowers in the form of Indebtedness of any Consolidated Subsidiary owing to the Borrowers (or either of them) and Guarantees by the Borrowers of Indebtedness of any Consolidated Subsidiary; provided, that (i) the aggregate amount of (A) Investments (determined at book value without giving effect to any consolidation of accounts) by the Borrowers in Indebtedness of any Consolidated Subsidiary that is not a Subsidiary Loan Party (excluding Investments existing on the Funding Date and which are identified on Schedule 7.4 hereto) and (B) Guarantees (determined in accordance with the definition thereof without giving effect to any consolidation of accounts) by the Borrowers of Indebtedness of any Consolidated Subsidiary that is not a Subsidiary Loan Party (excluding such Guarantees existing on the Funding Date which are identified on Schedule 7.4 hereto) shall not exceed $15,000,000 in any period of 12 consecutive months and not more than $45,000,000 in the aggregate during the Availability Period, 67 (ii) the aggregate amount of (A) Investments (determined at book value without giving effect to any consolidation of accounts) by the Borrowers in Indebtedness of any single Consolidated Subsidiary that is not a Subsidiary Loan Party (excluding Investments existing on the Funding Date and which are identified on Schedule 7.4 hereto) and (B) Guarantees (determined in accordance with the definition thereof without giving effect to any consolidation of accounts) by the Borrowers of Indebtedness of any single Consolidated Subsidiary that is not a Loan Party (excluding such Guarantees existing on the Funding Date which are identified on Schedule 7.4 hereto) shall not exceed $10,000,000 and (iii) no Investment shall be made, directly or indirectly, by the Borrowers (or either of them) or any of their Subsidiaries in any Dormant Company; (e) loans or advances to employees, officers or directors of the Borrowers or any Consolidated Subsidiary (other than a Dormant Company) in the ordinary course of business for travel, relocation and other business related expenses; (f) Hedging Agreements permitted by Section 7.10; (g) Permitted Acquisitions; (h) Investments (other than Permitted Investments) existing on the Closing Date and set forth on Schedule 7.4 (including Investments in Consolidated Subsidiaries); provided, that, with respect to any Investment set forth on Schedule 7.4 consisting of Indebtedness owing by a Subsidiary that is not a Subsidiary Loan Party to any Consolidated Party, such Indebtedness, upon repayment, may not be reborrowed; (i) Investments in joint ventures that are not Subsidiaries of the Borrowers (other than a Dormant Company) made after the Funding Date; provided, that (a) no Default or Event of Default shall exist prior to or after giving effect to such Investment and (b) the total amount of all such Investments (determined at book value) made under this clause (i) during the preceding 12 month period, when aggregated with such Investment, does not exceed the lesser of (x) $5,000,000 and (y) the Permitted Acquisition Basket minus the aggregate amount of Total Acquisition Consideration of all Acquisitions consummated by Crawford and the Consolidated Subsidiaries during such preceding 12 month period; and (j) other Investments in and to a Subsidiary Loan Party (other than a Dormant Company). SECTION 7.5. RESTRICTED PAYMENTS. (a) The Borrowers will not, and will not permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any dividend on any class of its stock, or make any payment or prepayment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, retirement, defeasance or other acquisition of, any shares of capital stock, or Indebtedness subordinated in any manner to the Obligations, or any options, warrants, or other rights to purchase such capital stock or such Indebtedness, whether now or hereafter outstanding (each, a "RESTRICTED PAYMENT"), except for (i) dividends payable by Crawford solely in shares of any class of its capital stock; (ii) Restricted Payments made by any Subsidiary to either Borrower or to another Subsidiary (other than a Dormant 68 Company) and (iii) cash dividends paid on, and cash redemptions of, the common stock of Crawford in an amount not to exceed 100% of Consolidated Net Income (if greater than $0) earned during the immediately preceding fiscal year of Crawford; provided, that, in the case of clauses (i) and (iii) above, no Default or Event of Default has occurred and is continuing at the time such dividend is paid or redemption is made or would be caused thereby; provided, further, that in the case of clause (ii) above, no Default or Event of Default has occurred and is continuing at the time any such Restricted Payment is made or would be caused thereby if such Restricted Payment is to be made to any Person other than a Loan Party. (b) The Borrowers will not, and will not permit any Subsidiary to, settle or compromise, or enter into any agreement to settle or compromise, any pending or threatened suit, investigation, cause of action or other proceeding described on Schedule 4.5(a) with any Person or Governmental Authority, as to any single or related series of claims, involving payment by a Consolidated Party (or a group of them) of $10,000,000 or more, without the obtaining the prior written consent of the Administrative Agent. SECTION 7.6. SALE OF ASSETS. Except as permitted under Section 7.3, the Borrowers will not, and will not permit any Subsidiary (other than a Dormant Company) to, convey, sell, lease, assign, transfer or otherwise dispose of, any of their respective assets, business or property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's capital stock to any Person other than Crawford or any Wholly-Owned Subsidiary of Crawford other than a Dormant Company (or to qualify directors if required by applicable law), except: (a) the sale or other disposition for fair market value of obsolete or worn out property or other property not necessary for operations disposed of in the ordinary course of business; (b) the sale of inventory and Permitted Investments in the ordinary course of business; (c) the sale or other disposition of such assets (which may include the capital stock of any Subsidiary of the Borrowers or all or substantially all of the assets of any Subsidiary of the Borrowers) in an aggregate amount in any fiscal year of Crawford not to exceed $7,500,000. SECTION 7.7. TRANSACTIONS WITH AFFILIATES. The Borrowers will not, and will not permit any Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrowers or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrowers and Wholly-Owned Subsidiaries not involving any other Affiliates (subject to limitations in Section 7.4) and (c) any Restricted Payment permitted by Section 7.5. Notwithstanding the foregoing, the Borrowers will not, and will not permit any Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or 69 otherwise engage in any other transactions with, any Dormant Company, unless (i) such transaction is at prices and on terms and conditions not less favorable to the Borrowers or such Subsidiary (other than the Dormant Company) than could be obtained on an arm's length basis from unrelated third parties or involves maintaining the corporate existence, good standing or properties of any Dormant Company and (ii) after giving effect to such transaction, the representations and warranties contained in Section 4.17 shall be true and correct. SECTION 7.8. RESTRICTIVE AGREEMENTS. The Borrowers will not, and will not permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition upon (a) the ability of either Borrower or any Subsidiary to create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its capital stock, to make or repay loans or advances to either Borrower or any other Subsidiary, to Guarantee Indebtedness of either Borrower or any other Subsidiary or to transfer any of its property or assets to either Borrower or any Subsidiary; provided, that (i) the foregoing shall not apply to restrictions or conditions imposed by law or by this Agreement, or any other Loan Document or the Private Placement Loan Documents, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a) above shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions and conditions apply only to the property or assets securing such Indebtedness, and (iv) clause (a) above shall not apply to restrictions or conditions imposed by the agreements listed on Schedule 7.8. SECTION 7.9. SALE AND LEASEBACK TRANSACTIONS. The Borrowers will not, and will not permit any Subsidiaries to, enter into any arrangement, directly or indirectly, whereby they shall sell or transfer any property, real or personal, used or useful in their business, whether now owned or hereinafter acquired, and thereafter rent or lease such property or other property that they intend to use for substantially the same purpose or purposes as the property sold or transferred, except for any such sale of any fixed or capital assets that is made for cash consideration in an amount not less than the cost of such fixed or capital asset and is consummated within 90 days after the Borrowers or such Subsidiary acquires or completes the construction of such fixed or capital asset. SECTION 7.10. HEDGING AGREEMENTS. The Borrowers will not, and will not permit any of the Subsidiaries to, enter into any Hedging Agreement, other than non-speculative Hedging Agreements entered into in the ordinary course of business to hedge or mitigate risks to which a Borrower or any Subsidiary is exposed in the conduct of its business or the management of its liabilities. SECTION 7.11. AMENDMENT TO ORGANIZATIONAL DOCUMENTS. The Borrowers will not, and will not permit any Subsidiary to, amend, modify or waive any of their rights in a manner materially adverse to the Lenders under their articles or certificate of incorporation, bylaws or other organizational documents. 70 SECTION 7.12. ACCOUNTING CHANGES; CHANGE OF FISCAL YEAR. The Borrowers will not, and will not permit any Subsidiary to, change their respective fiscal year ends or make any significant change in accounting treatment or reporting practices, except as permitted or required by GAAP or applicable law. SECTION 7.13. MINIMUM CASH. At all times prior to the payment and satisfaction in full by the Borrowers of all claims made by the Department of Justice or any Governmental Authority in respect of the Department of Justice litigation described in Schedule 4.5(a), the Borrowers will not permit cash on hand to be less than $10,000,000, less any amount paid to such Persons in satisfaction of such claims. SECTION 7.14. NO LIMITATION ON PREPAYMENTS OR AMENDMENTS TO CERTAIN LOAN DOCUMENTS. The Borrowers will not, and will not permit any Subsidiary to, be a party to any agreement or instrument limiting its rights (a) to make payments or prepayments on the Notes, whether optional or mandatory, under this Agreement or (b) to amend or waive any term or provision of this Agreement, the Notes or the Subsidiary Guaranty Agreement. ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. EVENTS OF DEFAULT. If any of the following events (each an "Event of Default") shall occur: (a) the Borrowers shall fail to pay any principal of any Loan or of any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise; or (b) the Borrowers shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount payable under clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three (3) Business Days; or (c) any representation or warranty made or deemed made by or on behalf of either Borrower or any Subsidiary in or in connection with this Agreement or any other Loan Document (including the Schedules attached thereto) and any amendments or modifications hereof or waivers hereunder, or in any certificate, report, financial statement or other document submitted to the Administrative Agent or the Lenders by either Borrower or any Subsidiary or any representative of either Borrower or any Subsidiary pursuant to or in connection with this Agreement or any other Loan Document shall prove to be incorrect in any material respect when made or deemed made or submitted; or 71 (d) the Borrowers shall fail to observe or perform any covenant or agreement contained in Sections 5.1, 5.2, 5.3 (with respect to the Borrowers' existence), 5.10, 5.12 or Articles VI or VII; or (e) the Borrowers or any Subsidiary shall fail to observe or perform any covenant or agreement contained in this Agreement or any other Loan Document (other than those referred to in clauses (a), (b) and (d) above and other than the Sharing Agreement), and such failure shall remain unremedied for 30 days after the earlier of (i) any Responsible Officer of either Borrower becomes aware of such failure, or (ii) notice thereof shall have been given to the Borrowers by the Administrative Agent or any Lender; or (f) any Consolidated Party (whether as primary obligor or as guarantor or other surety) shall fail to pay any principal of or premium or interest on any Indebtedness which exceeds $5,000,000 individually or in the aggregate, when and as the same shall become due and payable (whether at scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument evidencing such Indebtedness; or any other event shall occur or condition shall exist under any agreement or instrument relating to such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or permit the acceleration of, the maturity of such Indebtedness; or any such Indebtedness shall be declared to be due and payable; or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof; or (g) either Borrower or any Subsidiary shall (i) commence a voluntary case or other proceeding or file any petition seeking liquidation, reorganization or other relief under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar official of it or any substantial part of its property, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (i) of this Section, (iii) apply for or consent to the appointment of a custodian, trustee, receiver, liquidator or other similar official for either Borrower or any such Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, or (vi) take any action for the purpose of effecting any of the foregoing; or (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of either Borrower or any Subsidiary or its debts, or any substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in effect or (ii) the appointment of a custodian, trustee, receiver, liquidator or other similar official for either Borrower or any Subsidiary or for a substantial part of its assets, and in any such case, such proceeding or petition shall remain undismissed for a period of 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or 72 (i) either Borrower or any Subsidiary Loan Party shall become unable to pay, shall admit in writing its inability to pay, or shall fail generally to pay, its debts as they become due; or (j) an ERISA Event shall have occurred that, when taken together with other ERISA Events that have occurred, could reasonably be expected to result in liability to either Borrower or any Consolidated Subsidiary in an aggregate amount exceeding $5,000,000; or (k) any judgment or order for the payment of money in excess of $10,000,000 shall be rendered against either Borrower or any Consolidated Subsidiary, and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (l) a Consolidated Party is enjoined, restrained or in any way prevented by the order of any Governmental Authority from conducting all or a material part of its business and such order continues for more than 30 days; or (m) any non-monetary judgment shall have been rendered against any Consolidated Party that could reasonably be expected to have a Material Adverse Effect and there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (n) a Change in Control shall occur or exist; or (o) an "Event of Default" under and as defined in the Note Purchase Agreement shall have occurred; or (p) the Subsidiary Guaranty Agreement or any Pledge Agreement shall for any reason cease to be valid and binding on, or enforceable against, any Loan Party, or any Loan Party shall so state in writing, or any Loan Party or other Person shall challenge the validity of or seek to terminate the Subsidiary Guarantee Agreement or a Pledge Agreement or any provision of this Agreement or any other Loan Document, then, and in every such event (other than an event with respect to either Borrower described in clause (g) or (h) of this Section) and at any time thereafter during the continuance of such event, the Administrative Agent may, and upon the written request of the Required Lenders shall, by notice to the Borrowers, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, whereupon the Commitment of each Lender shall terminate immediately; (ii) declare the principal of and any accrued interest on the Loans, and all other Obligations owing hereunder, to be, whereupon the same shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower and (iii) exercise all remedies contained in any other Loan Document; and that, if an Event of Default specified in either clause (g) or (h) shall occur, the Commitments shall 73 automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon, and all fees, and all other Obligations shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower. ARTICLE IX THE ADMINISTRATIVE AGENT SECTION 9.1. APPOINTMENT OF ADMINISTRATIVE AGENT. (a) Each Lender irrevocably appoints SunTrust Bank as the Administrative Agent and authorizes it to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent under this Agreement and the other Loan Documents, together with all such actions and powers that are reasonably incidental thereto. The Administrative Agent may perform any of its duties hereunder by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions set forth in this Article shall apply to any such sub-agent and the Related Parties of the Administrative Agent and any such sub-agent and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. (b) The Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as the Administrative Agent may agree at the request of the Required Lenders to act for the Issuing Bank with respect thereto; provided, that the Issuing Bank shall have all the benefits and immunities (i) provided to the Administrative Agent in this Article IX with respect to any acts taken or omissions suffered by the Issuing Bank in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as the term "Administrative Agent" as used in this Article IX included the Issuing Bank with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to the Issuing Bank. SECTION 9.2. NATURE OF DUTIES OF ADMINISTRATIVE AGENT. The Administrative Agent shall not have any duties or obligations except those expressly set forth in this Agreement and the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except those discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrowers or any of their Subsidiaries that is communicated to or obtained by the Administrative Agent or any 74 of its Affiliates in any capacity. The Administrative Agent shall not be liable (provided that the Borrowers reserve any and all rights and claims against any Lender, including the Administrative Agent in its capacity as a Lender) for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall not be deemed to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrowers or any Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements, or other terms and conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article III or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. SECTION 9.3. LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT. Each of the Lenders, the Swingline Lender and the Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each of the Lenders, the Swingline Lender and the Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, continue to make its own decisions in taking or not taking of any action under or based on this Agreement, any related agreement or any document furnished hereunder or thereunder. SECTION 9.4. CERTAIN RIGHTS OF THE ADMINISTRATIVE AGENT. If the Administrative Agent shall request instructions from the Required Lenders with respect to any action or actions (including the failure to act) in connection with this Agreement, the Administrative Agent shall be entitled to refrain from such act or taking such act, unless and until it shall have received instructions from such Lenders; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders where required by the terms of this Agreement. SECTION 9.5. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed, sent or made by the proper Person. The Administrative Agent may also rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (including counsel for the Borrowers), independent public accountants and other 75 experts selected by it and shall not be liable for any action taken or not taken by it in accordance with the advice of such counsel, accountants or experts. SECTION 9.6. THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The bank serving as the Administrative Agent shall have the same rights and powers under this Agreement and any other Loan Document in its capacity as a Lender as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent; and the terms "Lenders", "Required Lenders", "holders of Notes", or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity. The bank acting as the Administrative Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with either Borrower or any Subsidiary or Affiliate of either Borrower as if it were not the Administrative Agent hereunder. SECTION 9.7. SUCCESSOR ADMINISTRATIVE AGENT. (a) The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval by the Borrowers provided that no Event of Default shall exist at such time. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be a commercial bank organized under the laws of the United States of America or any state thereof or a bank which maintains an office in the United States, having a combined capital and surplus of at least $500,000,000. (b) Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. If within 45 days after written notice is given of the retiring Administrative Agent's resignation under this Section 9.7 no successor Administrative Agent shall have been appointed and shall have accepted such appointment, then on such 45th day (i) the retiring Administrative Agent's resignation shall become effective, (ii) the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under the Loan Documents and (iii) the Required Lenders shall thereafter perform all duties of the retiring Administrative Agent under the Loan Documents until such time as the Required Lenders appoint a successor Administrative Agent as provided above. After any retiring Administrative Agent's resignation hereunder, the provisions of this Article IX shall continue in effect for the benefit of such retiring Administrative Agent and its representatives and agents in respect of any actions taken or not taken by any of them while it was serving as the Administrative Agent. ARTICLE X 76 MISCELLANEOUS SECTION 10.1. NOTICES. (a) Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications to any party herein to be effective shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: To either Borrower: Crawford & Company 5620 Glenridge Drive NE Atlanta, GA 30342 Attention: Joe Caporaso Telecopy Number: (404) 845-3127 With a copy to: King & Spalding 191 Peachtree Street Atlanta, GA 30303-1763 Attention: John J. Kelley Telecopy Number: (404) 572-5100 To the Administrative Agent: SunTrust Robinson Humphrey c/o Agency Services 303 Peachtree Street, N. E./ 25th Floor Atlanta, Georgia 30308 Attention: Agency Services Telecopy Number: (404) 724-3879 With a copy to: SunTrust Bank 303 Peachtree Street, N. E., 2nd Floor Atlanta, Georgia 30308 Attention: David Penter Telecopy Number: (404) 588-8833 To the Issuing Bank: SunTrust Bank 25 Park Place, N. E./Mail Code 3706 Atlanta, Georgia 30303 Attention: Jon Conley Telecopy Number: (404) 588-8129 To the Swingline Lender: SunTrust Bank 303 Peachtree Street, N.E./2nd Floor Atlanta, Georgia 30308 Attention: Agency Services Telecopy Number: (404) 724-3879
77 Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the mails or if delivered, upon delivery; provided, that notices delivered to the Administrative Agent, the Issuing Bank or the Swingline Bank shall not be effective until actually received by such Person at its address specified in this Section 10.1. (b) Any agreement of the Administrative Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrowers. The Administrative Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrowers to give such notice and the Administrative Agent and Lenders shall not have any liability to the Borrowers or other Person on account of any action taken or not taken by the Administrative Agent or the Lenders in reliance upon such telephonic or facsimile notice. The obligation of the Borrowers to repay the Loans and all other Obligations hereunder shall not be affected in any way or to any extent by any failure of the Administrative Agent and the Lenders to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a confirmation which is at variance with the terms understood by the Administrative Agent and the Lenders to be contained in any such telephonic or facsimile notice. SECTION 10.2. WAIVER; AMENDMENTS. (a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or any other Loan Document, and no course of dealing between either Borrower and the Administrative Agent or any Lender, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power hereunder or thereunder. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document or consent to any departure by either Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default or Event of Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default or Event of Default at the time. (b) No amendment or waiver of any provision of this Agreement or the other Loan Documents, nor consent to any departure by either Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by each Borrower and the Required Lenders 78 or each Borrower and the Administrative Agent with the consent of the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, that no amendment or waiver shall: (i) increase the Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the date fixed for any payment of any principal of, or interest on, any Loan or LC Disbursement or interest thereon or any fees hereunder or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date for the termination or reduction of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.24(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders which are required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the consent of each Lender; (vi) release any guarantor or limit the liability of any such guarantor under any guaranty agreement; provided, that the consent of the Administrative Agent or the Lenders shall not be required for the release of a guarantor under any guaranty agreement so long as such guarantor (A) is a Dormant Company and (B) will be dissolved simultaneously with such release under such guaranty agreement; and (vii) release all or substantially all of the capital stock subject to a Pledge Agreement; provided, further, that no such agreement shall amend, modify or otherwise affect the rights, duties or obligations of the Administrative Agent, the Swingline Bank or the Issuing Bank without the prior written consent of such Person. SECTION 10.3. EXPENSES; INDEMNIFICATION. (a) The Borrowers shall pay (i) all reasonable out-of-pocket costs and expenses of the Administrative Agent and its Affiliates as previously agreed upon by the Borrowers and the Administrative Agent, including, subject to such previously agreed upon arrangement, the reasonable fees, charges and disbursements of counsel for the Administrative Agent and its Affiliates in connection with the syndication of the credit facilities provided for herein, the preparation and administration of the Loan Documents and any amendments, modifications or waivers thereof (whether or not the transactions contemplated in this Agreement or any other Loan Document shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all out-of-pocket costs and expenses (including, without limitation, the fees, charges and disbursements of outside counsel) of the Administrative Agent, the Issuing Bank or any Lender in connection with the enforcement or protection of its rights in connection with this Agreement, including its rights under this Section, or in connection with the Loans made or any Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. (b) The Borrowers shall indemnify the Administrative Agent, the Issuing Bank and each Lender, and each Related Party of any of the foregoing (each, an "INDEMNITEE") against, and hold each of them harmless from, any and all costs, losses, liabilities, claims, damages and 79 related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, which may be incurred by or asserted against any Indemnitee arising out of, in connection with or as a result of (i) the execution or delivery of this Agreement or any other agreement or instrument contemplated hereby, the performance by the parties hereto of their respective obligations hereunder or the consummation of any of the transactions contemplated hereby, (ii) any Loan or Letter of Credit or any actual or proposed use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned by either Borrower or any Subsidiary or any Environmental Liability related in any way to either Borrower or any Subsidiary or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided, that the Borrowers shall not be obligated to indemnify any Indemnitee for any of the foregoing arising out of such Indemnitee's gross negligence or willful misconduct as determined by a court of competent jurisdiction in a final and nonappealable judgment. (c) The Borrowers shall pay, and hold the Administrative Agent and each of the Lenders harmless from and against, any and all present and future Other Taxes and Indemnified Taxes, and save the Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes. (d) To the extent that either Borrower fails to pay any amount required to be paid to the Administrative Agent, the Issuing Bank or the Swingline Lender under clauses (a), (b) or (c) hereof, each Lender severally agrees to pay to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the case may be, such Lender's Pro Rata Share (determined as of the time that the unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided, that the unreimbursed expense or indemnified payment, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, the Issuing Bank or the Swingline Lender in its capacity as such. (e) To the extent permitted by applicable law, no Borrower shall assert, and each such Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out of, in connection with or as a result of, this Agreement or any agreement or instrument contemplated hereby, the transactions contemplated therein, any Loan or any Letter of Credit or the use of proceeds thereof. (f) All amounts due under this Section shall be payable promptly after written demand therefore. SECTION 10.4. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no Borrower may 80 assign or transfer any of its rights hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any such Borrower without such consent shall be null and void). (b) Any Lender may at any time assign to one or more banks or other financial institutions all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment and the Loans and LC Exposure at the time owing to it); provided, that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender, the Borrowers and the Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment or any Lender's obligations in respect of its LC Exposure or Swingline Exposure, the Issuing Bank and the Swingline Lender) must give their prior written consent (which consent shall not be unreasonably withheld or delayed), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire amount of the assigning Lender's Commitment hereunder or an assignment while an Event of Default has occurred and is continuing, the amount of the Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (unless the Borrowers and the Administrative Agent shall otherwise consent), (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement and the other Loan Documents, (iv) the assigning Lender and the assignee shall (unless otherwise waived by the Administrative Agent) execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee payable by the assigning Lender or the assignee (as determined between such Persons) in an amount equal to $1,000 (unless otherwise waived by the Administrative Agent) and (v) such assignee, if it is not a Lender, shall deliver a duly completed Administrative Questionnaire to the Administrative Agent; provided, that any consent of the Borrowers otherwise required hereunder shall not be required in connection with the initial syndication of the Loans or if an Event of Default has occurred and is continuing. Upon the execution and delivery of the Assignment and Acceptance and payment by such assignee to the assigning Lender of an amount equal to the purchase price agreed between such Persons, such assignee shall become a party to this Agreement and any other Loan Documents to which such assigning Lender is a party and, to the extent of such interest assigned by such Assignment and Acceptance, shall have the rights and obligations of a Lender under this Agreement, and the assigning Lender shall be released from its obligations hereunder to a corresponding extent (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.20, 2.21, 2.22, 2.23 and 10.3). Upon the consummation of any such assignment hereunder, the assigning Lender, the Administrative Agent and the Borrowers shall make appropriate arrangements to have new Notes issued. Any assignment or other transfer by a Lender that does not fully comply with the terms of this clause (b) shall be treated for purposes of this Agreement as a sale of a participation pursuant to clause (c) below. (c) Any Lender may at any time, without the consent of either Borrower, the Administrative Agent, the Issuing Bank or the Swingline Lender, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitment, the Loans owing to it and its LC 81 Exposure); provided, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of its obligations hereunder, and (iii) the Borrowers, the Administrative Agent, the Swingline Bank, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. Any agreement between such Lender and the Participant with respect to such participation shall provide that such Lender shall retain the sole right and responsibility to enforce this Agreement and the other Loan Documents and the right to approve any amendment, modification or waiver of this Agreement and the other Loan Documents; provided, that such participation agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver of this Agreement described in the first proviso of Section 10.2(b) that affects the Participant. Each of the Borrowers agrees that each Participant shall be entitled to the benefits of Sections 2.20, 2.21, 2.22 and 2.23 to the same extent as if it were a Lender hereunder and had acquired its interest by assignment pursuant to paragraph (b); provided, that no Participant shall be entitled to receive any greater payment under Section 2.19 or 2.21 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant. To the extent permitted by law, the Borrowers agree that each Participant shall be entitled to the benefits of Section 2.23 as though it were a Lender, provided, that such Participant agrees to share with the Lenders the proceeds thereof in accordance with Section 2.24 as fully as if it were a Lender hereunder. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.23 unless the Borrowers are notified of such participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 2.23(e) as though it were a Lender hereunder. (d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement and its Notes (if any) to secure its obligations to a Federal Reserve Bank without complying with this Section; provided, that no such pledge or assignment shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. (e) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPV"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrowers, the option to provide to the Borrowers all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrowers pursuant to this Agreement; provided, that (i) nothing herein shall constitute a commitment by any SPV to make any Loan and (ii) if an SPV elects not to exercise such option or otherwise fails to provide all or any part of any Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPV shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPV, it will not institute against, or join any other person in 82 instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State. Notwithstanding anything to the contrary in this Section 10.4, any SPV may (i) with notice to, but without the prior written consent of, the Borrowers and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrowers and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans and (ii) disclose on a confidential basis any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPV. As this Section 10.4(e) applies to any particular SPV, this Section may not be amended without the written consent of such SPV. SECTION 10.5. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) This Agreement and the other Loan Documents shall be construed in accordance with and be governed by the law (without giving effect to the conflict of law principles thereof) of the State of New York. (b) Each of the Borrowers hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the United States District Court of the Northern District of Georgia, and of any state court of the State of Georgia located in Fulton County and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions contemplated hereby or thereby, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Georgia state court or, to the extent permitted by applicable law, such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against either Borrower or their properties in the courts of any jurisdiction. (c) Each of the Borrowers irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding described in paragraph (b) of this Section and brought in any court referred to in paragraph (b) of this Section. Each of the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to the service of process in the manner provided for notices in Section 10.1. Nothing in this Agreement or in any other Loan Document will affect the right of any party hereto to serve process in any other manner permitted by law. 83 SECTION 10.6. WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.7. RIGHT OF SETOFF. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each Lender and the Issuing Bank shall have the right, at any time or from time to time upon the occurrence and during the continuance of an Event of Default, without prior notice to either Borrower, any such notice being expressly waived by each Borrower to the extent permitted by applicable law, to set off and apply against all deposits (general or special, time or demand, provisional or final) of either Borrower at any time held or other obligations at any time owing by such Lender and the Issuing Bank to or for the credit or the account of either Borrower against any and all Obligations held by such Lender or the Issuing Bank, as the case may be, irrespective of whether such Lender or the Issuing Bank shall have made demand hereunder and although such Obligations may be unmatured. Each Lender and the Issuing Bank agree promptly to notify the Administrative Agent and the Borrowers after any such set-off and any application made by such Lender and the Issuing Bank, as the case may be; provided, that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 10.8. COUNTERPARTS; INTEGRATION. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Agreement, the other Loan Documents, and any separate letter agreement(s) relating to any fees payable to the Administrative Agent constitute the entire agreement among the parties hereto and thereto regarding the subject matters hereof and thereof and supersede all prior agreements and understandings, oral or written, regarding such subject matters. SECTION 10.9. SURVIVAL. All covenants, agreements, representations and warranties made by either Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is 84 outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.21, 2.22, 2.23, and 10.3 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof. All representations and warranties made herein, in the certificates, reports, notices, and other documents delivered pursuant to this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents, and the making of the Loans and the issuance of the Letters of Credit. SECTION 10.10. SEVERABILITY. Any provision of this Agreement or any other Loan Document held to be illegal, invalid or unenforceable in any jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity or unenforceability without affecting the legality, validity or enforceability of the remaining provisions hereof or thereof; and the illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 10.11. INTEREST RATE LIMITATION. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which may be treated as interest on such Loan under applicable law (collectively, the "CHARGES"), shall exceed the maximum lawful rate of interest (the "MAXIMUM RATE") which may be contracted for, charged, taken, received or reserved by a Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefore) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender. SECTION 10.12. CONFIDENTIALITY. The Administrative Agent and each Lender agrees to keep confidential all non-public information identified as such in writing and provided to it by the Borrowers or any of their Subsidiaries; provided that nothing herein shall prevent the Administrative Agent or any Lender from disclosing such information: (a) to the Administrative Agent, any other Lender or any Affiliate thereof, (b) to prospective transferees, assignees, SPVs or participants that sign a document containing the provisions of this Section prior to disclosure, (c) its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its Affiliates that are made aware of the provisions of this Section prior to disclosure, (d) in response to any order of any court or other Governmental Authority or as may be required by law or regulation, (e) if requested or required to do so in connection with any litigation or similar proceeding, (f) that has been publicly disclosed, (g) to any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (h) in connection with the exercise of any remedy hereunder or under any other Loan Document. The parties hereto agree and acknowledge that the U.S. tax treatment and U.S. tax structure of the transactions contemplated by this Agreement are not to be kept confidential and are expressly excluded from treatment as such under this Section 10.12. 85 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal in the case of the Borrowers by their respective authorized officers as of the day and year first above written. CRAWFORD & COMPANY By /s/ John F. Giblin ------------------------------------- Name: John F. Giblin Title: Executive Vice President [SEAL] CRAWFORD & COMPANY INTERNATIONAL, INC. By /s/ John F. Giblin ------------------------------------- Name: John F. Giblin Title: Executive Vice President [SEAL] SUNTRUST BANK AS ADMINISTRATIVE AGENT, AS ISSUING BANK, AS SWINGLINE LENDER AND AS A LENDER By ------------------------------------- Name: ---------------------------------- Title: --------------------------------- Revolving Commitment: $30,000,000 LC Commitment: $15,000,000 Swingline Commitment: $ 5,000,000 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 86 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under seal in the case of the Borrowers by their respective authorized officers as of the day and year first above written. CRAWFORD & COMPANY By ------------------------------------- Name: Title: [SEAL] CRAWFORD & COMPANY INTERNATIONAL, INC. By ------------------------------------- Name: Title: [SEAL] SUNTRUST BANK AS ADMINISTRATIVE AGENT, AS ISSUING BANK, AS SWINGLINE LENDER AND AS A LENDER By /s/ Kelly Gunter ------------------------------------- Name: Kelly Gunter Title: Vice President Revolving Commitment: $30,000,000 LC Commitment: $15,000,000 Swingline Commitment: $ 5,000,000 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 87 [Signature page to Revolving Credit Agreement dated as of September 30, 2003 among Crawford & Company, Crawford & Company International, Inc., the Lenders from time to time party hereto, Bank of America, N.A., as Syndication Agent, and SunTrust Bank, as Administrative Agent.] BANK OF AMERICA, N.A. AS SYNDICATION AGENT AND AS A LENDER By /s/ Brian L. Martin ------------------------------------- Name: Brian L. Martin Title: Vice President Revolving Commitment: $25,000,000 CITIBANK, N.A. AS A LENDER By ------------------------------------- Name: ---------------------------------- Title: --------------------------------- Revolving Commitment: $15,000,000 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 88 [Signature page to Revolving Credit Agreement dated as of September 30, 2003 among Crawford & Company, Crawford & Company International, Inc., the Lenders from time to time party hereto, Bank of America, N.A., as Syndication Agent, and SunTrust Bank, as Administrative Agent.] BANK OF AMERICA, N.A. AS SYNDICATION AGENT AND AS A LENDER By ------------------------------------- Name: ---------------------------------- Title: --------------------------------- Revolving Commitment: $25,000,000 CITIBANK, N.A. AS A LENDER By /s/ David L. Harris ------------------------------------- Name: David L. Harris Title: Vice President Revolving Commitment: $15,000,000 [SIGNATURE PAGE TO REVOLVING CREDIT AGREEMENT] 89 SCHEDULE I APPLICABLE MARGIN AND APPLICABLE PERCENTAGE
Applicable Margin Applicable Applicable Pricing for Eurocurrency Percentage for Percentage for Letter Level Leverage Ratio Loans Commitment Fee of Credit Fees ------- -------------- ----------------- -------------- --------------------- I Less than 0.50:1.00 .50% p.a. .20% p.a. .50% p.a. II Less than 1.00:1.00 but greater than or equal to 0.50:1.00 .75% p.a. .20% p.a. .75% p.a. III Less than 1.50:1.00 but greater than or equal to 1.00:1.00 .875% p.a. .25% p.a. .875% p.a. IV Less than 2.00:1.00 but greater than or equal to 1.50:1.00 1.00% p.a. .25% p.a. 1.00% p.a. V Greater than or equal to 2.00:1.00 1.25% p.a. .375% p.a. 1.25% p.a.
90 EX-10.12 3 g93630exv10w12.txt EX-10.12 NOTE PURCHASE AGREEMENT Exhibit 10.12 Execution Version CRAWFORD & COMPANY CRAWFORD & COMPANY INTERNATIONAL, INC. ------------------------------------- NOTE PURCHASE AGREEMENT ------------------------------------- DATED AS OF SEPTEMBER 30, 2003 $50,000,000 6.08% SENIOR GUARANTIED NOTES DUE OCTOBER 10, 2010 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- 1. AUTHORIZATION OF NOTES.................................................... 1 2. SALE AND PURCHASE OF NOTES................................................ 1 3. CLOSING................................................................... 2 4. CONDITIONS TO CLOSING..................................................... 2 4.1. REPRESENTATIONS AND WARRANTIES......................................... 2 4.2. PERFORMANCE; NO DEFAULT................................................ 2 4.3. COMPLIANCE CERTIFICATES................................................ 3 4.4. OPINIONS OF COUNSEL.................................................... 3 4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC.............................. 3 4.6. SALE OF OTHER NOTES.................................................... 4 4.7. PAYMENT OF SPECIAL COUNSEL FEES........................................ 4 4.8. PRIVATE PLACEMENT NUMBER............................................... 4 4.9. CHANGES IN CORPORATE STRUCTURE......................................... 4 4.10. SUBSIDIARY GUARANTY AGREEMENT....................................... 4 4.11. PLEDGE AGREEMENT.................................................... 5 4.12. BANK CREDIT AGREEMENT............................................... 5 4.13. SHARING AGREEMENT................................................... 5 4.14. PROCEEDINGS AND DOCUMENTS........................................... 5 4.15. OFFEREE LETTER...................................................... 5 5. REPRESENTATIONS AND WARRANTIES OF THE ISSUERS............................. 5 5.1. ORGANIZATION; POWER AND AUTHORITY...................................... 6 5.2. AUTHORIZATION, ETC..................................................... 6 5.3. DISCLOSURE............................................................. 6 5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES....... 7 5.5. FINANCIAL STATEMENTS................................................... 8 5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC........................... 8 5.7. GOVERNMENTAL AUTHORIZATIONS, ETC....................................... 9 5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS.............. 9 5.9. TAXES.................................................................. 9 5.10. TITLE TO PROPERTY; LEASES........................................... 10 5.11. LICENSES, PERMITS, ETC.............................................. 10 5.12. COMPLIANCE WITH ERISA............................................... 10 5.13. PRIVATE OFFERING BY THE ISSUERS..................................... 11 5.14. USE OF PROCEEDS; MARGIN REGULATIONS................................. 11 5.15. EXISTING INDEBTEDNESS; FUTURE LIENS................................. 12 5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC............................. 12 5.17. STATUS UNDER CERTAIN STATUTES....................................... 13 5.18. ENVIRONMENTAL MATTERS............................................... 13 5.19. PARI PASSU RANKING.................................................. 13
i 5.20. NOT SUBJECT TO IMMUNITY............................................. 13 5.21. DORMANT COMPANIES................................................... 14 5.22. BANK CREDIT AGREEMENT REPRESENTATIONS............................... 14 6. REPRESENTATIONS OF THE PURCHASERS......................................... 14 6.1. PURCHASE FOR INVESTMENT................................................ 14 6.2. SOURCE OF FUNDS........................................................ 14 6.3. PURCHASER ACTION....................................................... 16 7. INFORMATION AS TO ISSUERS................................................. 16 7.1. FINANCIAL AND BUSINESS INFORMATION..................................... 16 7.2. OFFICER'S CERTIFICATES................................................. 19 7.3. INSPECTION............................................................. 20 8. PREPAYMENT OF THE NOTES................................................... 21 8.1. REQUIRED PREPAYMENTS................................................... 21 8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT............................ 21 8.3. ALLOCATION OF PARTIAL PREPAYMENTS...................................... 22 8.4. MATURITY; SURRENDER, ETC............................................... 22 8.5. PURCHASE OF NOTES...................................................... 22 8.6. MAKE-WHOLE AMOUNT...................................................... 22 9. AFFIRMATIVE COVENANTS..................................................... 24 9.1. COMPLIANCE WITH LAW.................................................... 24 9.2. INSURANCE.............................................................. 24 9.3. MAINTENANCE OF PROPERTIES.............................................. 25 9.4. PAYMENT OF TAXES AND CLAIMS............................................ 25 9.5. CORPORATE EXISTENCE, ETC............................................... 25 9.6. NEW SUBSIDIARY GUARANTOR; ADDITIONAL PLEDGED STOCK..................... 26 9.7. PARI PASSU RANKING..................................................... 26 9.8. MOST FAVORED LENDER PROVISIONS......................................... 27 9.9. COVENANT TO SECURE NOTES EQUALLY....................................... 28 9.10. POST-CLOSING REQUIREMENTS........................................... 29 9.11. DORMANT COMPANIES................................................... 29 10. NEGATIVE COVENANTS........................................................ 30 10.1. TRANSACTIONS WITH AFFILIATES; DORMANT COMPANIES..................... 31 10.2. MERGER, CONSOLIDATION, ETC.......................................... 31 10.3. LIMITATION ON LIENS................................................. 32 10.4. SALE OF ASSETS, ETC................................................. 35 10.5. LEVERAGE RATIO...................................................... 35 10.6. FIXED CHARGES COVERAGE RATIO........................................ 36 10.7. CONSOLIDATED NET WORTH.............................................. 36 10.8. PRIORITY DEBT....................................................... 37 10.9. LINE OF BUSINESS.................................................... 37 10.10. RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS; ACQUISITIONS........ 37 10.11. LIMITATIONS ON CERTAIN SUBSIDIARY ACTIONS........................... 39
ii 10.12. HEDGING ARRANGEMENTS......................................................... 40 10.13. ACCOUNTING CHANGES; CHANGE OF FISCAL YEAR.................................... 40 10.14. MINIMUM CASH................................................................. 40 10.15. LITIGATION................................................................... 40 10.16. AMENDMENTS TO ORGANIZATIONAL DOCUMENTS....................................... 41 10.17. NO LIMITATION ON PREPAYMENTS OR AMENDMENTS TO CERTAIN FINANCING DOCUMENTS.... 41 11. EVENTS OF DEFAULT................................................................... 41 12. REMEDIES ON DEFAULT, ETC............................................................ 44 12.1. ACCELERATION.................................................................. 44 12.2. OTHER REMEDIES................................................................ 45 12.3. RESCISSION.................................................................... 45 12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC............................. 45 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES....................................... 46 13.1. REGISTRATION OF NOTES......................................................... 46 13.2. TRANSFER AND EXCHANGE OF NOTES................................................ 46 13.3. REPLACEMENT OF NOTES.......................................................... 47 14. PAYMENTS ON NOTES................................................................... 48 14.1. PLACE OF PAYMENT.............................................................. 48 14.2. HOME OFFICE PAYMENT........................................................... 48 15. EXPENSES, ETC....................................................................... 48 15.1. TRANSACTION EXPENSES.......................................................... 48 15.2. SURVIVAL...................................................................... 49 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT........................ 49 17. AMENDMENT AND WAIVER................................................................ 50 17.1. REQUIREMENTS.................................................................. 50 17.2. SOLICITATION OF HOLDERS OF NOTES.............................................. 50 17.3. BINDING EFFECT, ETC........................................................... 51 17.4. NOTES HELD BY THE ISSUERS, ETC................................................ 51 18. NOTICES............................................................................. 51 19. REPRODUCTION OF DOCUMENTS........................................................... 52 20. CONFIDENTIAL INFORMATION............................................................ 52 21. SUBSTITUTION OF PURCHASER........................................................... 53 22. MISCELLANEOUS....................................................................... 54
iii 22.1. SUCCESSORS AND ASSIGNS........................................................ 54 22.2. PAYMENTS DUE ON NON-BUSINESS DAYS............................................. 54 22.3. SEVERABILITY.................................................................. 54 22.4. CONSTRUCTION.................................................................. 54 22.5. COUNTERPARTS.................................................................. 55 22.6. JURISDICTION; SERVICE OF PROCESS.............................................. 55 22.7. GOVERNING LAW................................................................. 56 22.8. WAIVER OF TRIAL BY JURY....................................................... 56
SCHEDULE A -- Information Relating to Purchasers SCHEDULE B -- Defined Terms SCHEDULE C -- Investment Guidelines SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.3 -- Disclosure Materials SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.8 -- Certain Litigation SCHEDULE 5.14 -- Use of Proceeds SCHEDULE 5.15 -- Existing Indebtedness SCHEDULE 5.18 -- Environmental Matters SCHEDULE 5.21 -- Assets of Dormant Companies SCHEDULE 10.3 -- Existing Liens SCHEDULE 10.10 -- Existing Investments SCHEDULE 10.11 -- Existing Restrictive Agreements EXHIBIT 1 -- Form of 6.08% Senior Guarantied Note due October 10,2010 iv EXHIBIT 4.3(a) -- Form of Officer's Certificate for Company EXHIBIT 4.3(b) -- Form of Officer's Certificate for Co-Issuer EXHIBIT 4.3(c) -- Form of Secretary's Certificate for each Issuer and each Initial Guarantor EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Obligors EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers EXHIBIT 4.10 -- Form of Guaranty Agreement EXHIBIT 4.11 -- Form of Pledge Agreement EXHIBIT 4.13 -- Form of Sharing Agreement v CRAWFORD & COMPANY CRAWFORD & COMPANY INTERNATIONAL, INC. 5620 GLENRIDGE DRIVE, N.E. ATLANTA, GA 30342 $50,000,000 6.08% SENIOR GUARANTIED NOTES DUE OCTOBER 10, 2010 September 30, 2003 To Each of the Persons Listed in the Attached Schedule A (the "PURCHASERS"): Ladies and Gentlemen: Crawford & Company, a Georgia corporation (together with its successors and assigns, the "COMPANY"), and Crawford & Company International, Inc., a Georgia corporation (together with its successors and assigns, the "CO-ISSUER" and together with the Company, the "ISSUERS"), jointly and severally agree with each Purchaser as follows: 1. AUTHORIZATION OF NOTES. The Issuers will authorize the joint and several issue and sale of $50,000,000 aggregate principal amount of their joint and several 6.08% Senior Guarantied Notes due October 10, 2010 (the "NOTES", such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement). The Notes shall be substantially in the form set out in Exhibit 1, with such changes therefrom, if any, as may be approved by the Purchasers and the Issuers. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, references to a Schedule or an Exhibit attached to this Agreement; references to Sections are, unless otherwise specified, references to Sections of this Agreement. 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Issuers will issue and sell to each Purchaser and each Purchaser will purchase from the Issuers, at the Closing provided for in Section 3, Notes in the principal amount specified opposite each Purchaser's name in Schedule A at the purchase price of 100% of the principal amount thereof. The obligations of the Purchasers hereunder are several and not joint and no Purchaser shall have any liability to any Person for the performance or non-performance by any other Purchaser hereunder. 3. CLOSING. The sale and purchase of the Notes to be purchased by each of the Purchasers shall occur at the offices of Bingham McCutchen LLP, One State Street, Hartford, CT 06103, at 10:00 a.m., local time, at a closing (the "CLOSING") on October 10, 2003 or on such other Business Day thereafter on or prior to October 31, 2003 as may be agreed upon by the Issuers and the Purchasers. At the Closing the Issuers will deliver to each Purchaser the Notes to be purchased by it in the form of a single Note (or such greater number of Notes in denominations of at least $100,000 as each such Purchaser may request) dated the date of the Closing and registered in such Purchaser's name (or in the name of its nominee), against delivery by such Purchaser to the Issuers or their order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Issuers to account number ___________ at SunTrust Bank, Atlanta, GA, ____ ________________________________ for the benefit of Crawford & Company. If at the Closing either Issuer shall fail to tender such Notes to any Purchaser as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to each Purchaser's satisfaction, such Purchaser shall, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights each such Purchaser may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. Each Purchaser's obligation to purchase and pay for the Notes to be sold to it at the Closing is subject to the fulfillment to each such Purchaser's satisfaction, prior to or at the Closing, of the following conditions: 4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of each Obligor contained in the Financing Documents shall be correct when made and at the time of the Closing. 4.2. PERFORMANCE; NO DEFAULT. Each Obligor shall have performed and complied with all agreements and conditions contained in the Financing Documents required to be performed or complied with by it prior to or at the Closing and after giving effect to the issuance and sale of the Notes (and the application of the proceeds thereof as contemplated -2- by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing. Neither of the Issuers nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Sections 10.1, 10.2, 10.3, 10.4, 10.8, 10.10, 10.11, 10.12, 10.13 or 10.15 hereof had such Sections applied since such date. 4.3. COMPLIANCE CERTIFICATES. (a) Officer's Certificate. The Company shall have delivered to each Purchaser an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled, substantially in the form of Exhibit 4.3(a) hereto. (b) Officer's Certificate. The Co-Issuer shall have delivered to each Purchaser an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled, substantially in the form of Exhibit 4.3(b) hereto. (c) Secretary's Certificates. Each Issuer and each Initial Guarantor shall have delivered to each Purchaser a certificate of its secretary or its assistant secretary (or, in the case of certain Initial Guarantors, a certificate of the secretary of its sole shareholder or general partner, as the case may be) dated the date of the Closing certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Financing Documents to which such Person is a party, substantially in the form of Exhibit 4.3(c) hereto. 4.4. OPINIONS OF COUNSEL. Each Purchaser shall have received opinions in form and substance satisfactory to it, dated the date of the Closing (a) from King & Spalding LLP counsel for the Obligors, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as such Purchaser or its counsel may reasonably request (and the Issuers hereby instruct their counsel to deliver such opinion to each Purchaser) and (b) from Bingham McCutchen LLP, the Purchasers' special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as any Purchaser may reasonably request. 4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the date of the Closing, each Purchaser's purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which it is subject, -3- without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the United States Federal Reserve System) and (c) not subject any Purchaser to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by any Purchaser, such Purchaser shall have received an Officer's Certificate certifying as to such matters of fact as such Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so permitted. 4.6. SALE OF OTHER NOTES. Contemporaneously with the Closing the Issuers shall sell to each Purchaser and each such Purchaser shall purchase the Notes to be purchased by it at the Closing as specified in Schedule A. 4.7. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of Section 15.1, the Issuers shall have paid on or before the Closing the fees, charges and disbursements of the Purchasers' special counsel referred to in Section 4.4(b) to the extent reflected in a statement of such counsel rendered to the Issuers at least one Business Day prior to the Closing. 4.8. PRIVATE PLACEMENT NUMBER. A Private Placement number issued by the CUSIP Service Bureau of Standard & Poor's, a division of The McGraw-Hill Companies (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners (the "SVO")) shall have been obtained for the Notes. 4.9. CHANGES IN CORPORATE STRUCTURE. Except as specified in Schedule 4.9, neither Issuer shall have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10. SUBSIDIARY GUARANTY AGREEMENT. Each Initial Guarantor shall have executed and delivered to the Purchasers a guaranty agreement (as may be amended, restated or modified from time to time, the "GUARANTY AGREEMENT"), substantially in the form of Exhibit 4.10. -4- 4.11. PLEDGE AGREEMENT. The Company shall have executed and delivered to the Purchasers a pledge agreement (as may be amended, restated or modified from time to time, the "PLEDGE AGREEMENT"), substantially in the form of Exhibit 4.11. 4.12. BANK CREDIT AGREEMENT. The Issuers shall have delivered to each Purchaser true and correct copies of each of the documents constituting the Bank Credit Agreement as in effect on the date of the Closing, certified as true and correct by a Senior Financial Officer. 4.13. SHARING AGREEMENT. The Agent, on behalf of itself and the other lenders under the Bank Credit Agreement and as collateral agent for the holders of Notes, shall have entered into a collateral sharing agreement with the Purchasers, in form and substance satisfactory to each of the Purchasers, substantially in the form of Exhibit 4.13 (as may be amended, restated or modified from time to time, the "SHARING AGREEMENT"). 4.14. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated by this Agreement, the other Financing Documents and all documents and instruments incident to such transactions shall be satisfactory to each Purchaser and its special counsel, and each Purchaser and its special counsel shall have received all such counterpart originals or certified or other copies of such documents as such Purchaser or its counsel may reasonably request. 4.15. OFFEREE LETTER. Sun Trust Capital Markets, Inc. shall have delivered to the Issuers, their counsel, each of the Purchasers and the Purchasers' special counsel an offeree letter, in form and substance satisfactory to each Purchaser, confirming the manner of the offering of the Notes by Sun Trust Capital Markets, Inc. 5. REPRESENTATIONS AND WARRANTIES OF THE ISSUERS. Each of the Issuers represents and warrants, as of the date hereof and as of the date of the Closing, to each Purchaser that: -5- 5.1. ORGANIZATION; POWER AND AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver the Financing Documents to which it is a party and to perform the provisions hereof and thereof. 5.2. AUTHORIZATION, ETC. (a) This Agreement, the Notes and the other Financing Documents to which either Issuer is a party have been duly authorized by all necessary corporate action on the part of such Issuer, and the Financing Documents to which such Issuer is a party constitute, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of such Issuer enforceable against such Issuer in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (b) The Guaranty Agreement has been duly authorized by all necessary corporate action on the part of each Initial Guarantor, and the Guaranty Agreement constitutes a legal, valid and binding obligation of each Initial Guarantor enforceable against each Initial Guarantor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3. DISCLOSURE. The Issuers, through their agent, SunTrust Capital Markets, Inc. have delivered to each Purchaser a copy of a Confidential Private Placement Memorandum, dated July 2003 (the "MEMORANDUM"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Issuers and their Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the -6- Memorandum, the documents, certificates or other writings delivered to each Purchaser by or on behalf of the Obligors in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since December 31, 2002, there has been no change in the financial condition, operations, business, properties or prospects of either of the Issuers or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Issuers that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to each Purchaser by or on behalf of the Issuers specifically for use in connection with the transactions contemplated hereby. 5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES; AFFILIATES. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary and whether or not such Subsidiary is a Dormant Company, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of each of the Issuer's directors and senior officers. (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and the Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien in the case of the capital stock of the Co-Issuer, and in the case of the capital stock or other equity interests of all other Subsidiaries, free and clear of any Lien except Liens that would be permitted by Section 10.3 or as otherwise disclosed in Schedule 5.4). (c) Each Subsidiary identified in Schedule 5.4 other than any Dormant Company is a corporation or other legal entity duly organized, validly existing and (to the extent such concept is recognized in such jurisdiction) in good standing under the laws of its jurisdiction of organization, and (to the extent such concepts are recognized in such jurisdictions) is duly qualified as a foreign corporation or other legal entity -7- and (to the extent such concept is recognized in such jurisdictions) is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact, to execute and deliver the Financing Documents to which such Subsidiary is a party and to perform the provisions thereof. (d) No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any Subsidiary that owns outstanding shares of capital stock or similar equity interests of such Subsidiary. 5.5. FINANCIAL STATEMENTS. The Company has delivered to each Purchaser copies of the financial statements of the Company and the Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and the Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments) and additional information set forth in year-end financial statements. 5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution, delivery and performance by each Obligor of the Financing Documents to which such Obligor is a party will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, memorandum or articles of association, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or -8- Governmental Authority applicable to the Company or any Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 5.7. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by (a) each of the Issuers of the Financing Documents to which such Issuer is a party and (b) each Initial Guarantor of the Guaranty Agreement. 5.8. LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of either Issuer, threatened against or affecting either of the Issuers or any Subsidiary or any property of either of the Issuers or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither of the Issuers nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.9. TAXES. (a) Each of the Issuers and the Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction except for any such returns that may be required to be filed in jurisdictions other than the United States and political subdivisions thereof, which returns, in the aggregate, would not reflect an amount of Taxes owing that would be Material. Each of the Issuers and the Subsidiaries has paid all Taxes required to have been paid on all returns that have been filed and all other Taxes levied upon them or their properties, assets, income or franchises, to the extent such Taxes have become due and payable and before they have become delinquent, except for any Taxes (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which such Issuer or a Subsidiary, as the -9- case may be, has established adequate reserves in accordance with GAAP. Neither Issuer knows of any basis for any other Tax that could reasonably be expected to have a Material Adverse Effect. (b) The charges, accruals and reserves on the books of the Issuers and their Subsidiaries in respect of all Taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and the Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended December 31, 1999. 5.10. TITLE TO PROPERTY; LEASES. Each of the Issuers and the Subsidiaries (other than any Dormant Company) has good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by either of the Issuers or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11. LICENSES, PERMITS, ETC. Each of the Issuers and the Subsidiaries owns, or is licensed, or otherwise has the right, to use, all patents, trademarks, service marks, tradenames, copyrights and other intellectual property Material to its business, and the use thereof by the Issuers and the Subsidiaries does not infringe on the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not have a Material Adverse Effect. 5.12. COMPLIANCE WITH ERISA. (a) The Company and each ERISA Affiliate have operated and administered each US Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the US Tax Code relating to employee pension benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any -10- of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the US Tax Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) As determined by the Company's actuary, the present value of the aggregate projected benefit obligation of all underfunded US Plans determined as of January 1, 2003 (based on the assumptions used for purposes of Statement of Financial Standards No. 87) did not exceed the aggregate fair value of the assets of all such underfunded US Plans by more than $67,000,000 as of such date. (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The execution and delivery of this Agreement and the issuance and sale of the Notes to each Purchaser hereunder will not involve any transaction that is subject to the prohibitions of section 406(a)(1)(A)-(E) of ERISA or in connection with which a tax could be imposed by sections 4975(a) and (b) of the US Tax Code by reason of section 4975(c)(1)(A)-(D) of the US Tax Code. The representation by the Company in the first sentence of this Section 5.12(d) is made in reliance upon and subject to the accuracy of the representation in Section 6.2 from each Purchaser and each transferee of a Note as to the sources of the funds used to pay the purchase price of the Notes to be purchased by such Purchaser or acquired by such transferee. 5.13. PRIVATE OFFERING BY THE ISSUERS. Neither the Issuers nor anyone acting on their behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, in each case within one year of the date of the Closing, any Person other than the Purchasers, each of whom has been offered the Notes at a private sale for investment. Neither the Issuers nor anyone acting on their behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of section 5 of the Securities Act or to the provisions of any securities or Blue Sky law of any applicable jurisdiction. 5.14. USE OF PROCEEDS; MARGIN REGULATIONS. The Issuers will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14 and none of the proceeds will be used to make any loan or other -11- Investment in any Dormant Company. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the United States Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Issuers in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 5% of the value of the consolidated assets of the Issuers and their Subsidiaries and neither Issuer has any present intention that margin stock will constitute more than 5% of the value of such assets. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said Regulation U. 5.15. EXISTING INDEBTEDNESS; FUTURE LIENS. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Issuers and their Subsidiaries as of August 31, 2003, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of either of the Issuers or any Subsidiary. Neither of the Issuers nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of either of the Issuers or any Subsidiary and no event or condition exists with respect to any Indebtedness of either of the Issuers or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, neither of the Issuers nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien that would not be permitted by Section 10.3. 5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale of the Notes by the Issuers hereunder nor their use of the proceeds thereof will violate the Trading with the Enemy Act of the United States of America, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. -12- 5.17. STATUS UNDER CERTAIN STATUTES. Neither of the Issuers nor any Subsidiary: (a) is subject to regulation under the Investment Company Act of 1940 of the United States of America, as amended, the Public Utility Holding Company Act of 1935 of the United States of America, as amended, or the Federal Power Act of 1920 of the United States of America, as amended; (b) is or will become a Person or entity described by section 1 of Executive Order 13224 of September 24, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism, 31 CFR Part 595 et seq., and, to the best knowledge and belief of each Issuer, neither of the Issuers nor any Subsidiary does or will engage in any dealings or transactions, or be otherwise associated, with any such Persons or entities; or (c) is in violation of the USA Patriot Act. 5.18. ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 5.18 and except for matters which could not reasonably be expected to have a Material Adverse Effect, neither of the Issuers nor any Subsidiary (a) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (b) has become subject to any Environmental Liability, (c) has received notice of any claim with respect to any Environmental Liability or (d) knows of any basis for any Environmental Liability in each case. 5.19. PARI PASSU RANKING. Each of the Issuer's obligations under the Notes and this Agreement do and will, upon issuance of the Notes, rank at least pari passu, without preference or priority, with all of its other outstanding unsecured and unsubordinated obligations, except for those obligations that are mandatorily preferred by law and not by reason of contract (other than as provided in the Sharing Agreement). 5.20. NOT SUBJECT TO IMMUNITY. Each of the Issuers represents and warrants that neither it nor any other Obligor is entitled to immunity from judicial proceedings and agrees that, if judicial proceedings are brought by any holder of Notes to enforce any right or remedy under any Financing Documents, no immunity from such proceedings will be claimed by or on behalf of any Obligor or with respect to it or its respective properties. -13- 5.21. DORMANT COMPANIES. Except as set forth in Schedule 5.21, no Dormant Company owns any Material assets or has any outstanding Indebtedness or other Material liabilities. The aggregate revenues and assets of the Dormant Companies are less than 1% of the aggregate revenue and assets of the Company and its Consolidated Subsidiaries. 5.22. BANK CREDIT AGREEMENT REPRESENTATIONS. Each of the representations and warranties set forth in section 4 of the Bank Credit Agreement is true and correct in all Material respects on and as of the date of the Closing. 6. REPRESENTATIONS OF THE PURCHASERS. 6.1. PURCHASE FOR INVESTMENT. Each Purchaser represents that (a) it is a Qualified Institutional Buyer and (b) it is purchasing the Notes for its own account or for one or more separate accounts or investment funds maintained or managed by such Purchaser or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of such Purchaser's property shall at all times be within such Purchaser's control. Each Purchaser understands that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Issuers are not required to register the Notes. 6.2. SOURCE OF FUNDS. Each Purchaser represents that at least one of the following statements is an accurate representation as to each source of funds (a "SOURCE") to be used by such Purchaser to pay the purchase price of the Notes to be purchased by it hereunder: (a) the Source is an "insurance company general account" (as the term is defined in the United States Department of Labor's Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the "NAIC ANNUAL STATEMENT")) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) -14- held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser's state of domicile; or (b) the Source is a separate account that is maintained solely in connection with such Purchaser's fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or (c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of PTE 91-38 (issued July 1, 1991, as corrected November 25, 1991) and, except as disclosed by such Purchaser to the Issuers in writing prior to the Closing (or, in the case of a transferee of Notes, prior to its acquisition of such Notes) pursuant to this clause (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (d) the Source constitutes assets of an "investment fund" (within the meaning of Part V of PTE 84-14 (issued March 13, 1984, as corrected October 10, 1985) (the "QPAM EXEMPTION")) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM and the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in section V(e) of the QPAM Exemption) owns a 5% or more interest in either Issuer and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Issuers in writing pursuant to this clause (d); or -15- (e) the Source constitutes assets of a "plan(s)" (within the meaning of Section IV of PTE 96-23 (issued April 10, 1996) (the "INHAM EXEMPTION")) managed by an "in-house asset manager" or "INHAM" (within the meaning of Part IV of the INHAM exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of "control" in Section IV(h) of the INHAM Exemption) owns a 5% or more interest in either Issuer and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Issuers in writing pursuant to this clause (e); or (f) the Source is a governmental plan and the purchase of the Notes is not otherwise restricted by applicable law; or (g) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Issuers in writing prior to the Closing (or, in the case of a transferee of Notes, prior to its acquisition of such Notes) pursuant to this clause (g); or (h) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN," "GOVERNMENTAL PLAN," AND "SEPARATE ACCOUNT" shall have the respective meanings assigned to such terms in section 3 of ERISA. 6.3. PURCHASER ACTION. No Purchaser has taken or will take any action that would subject the issuance or sale of the Notes to the registration requirements of section 5 of the Securities Act or to the provisions of any securities or Blue Sky law of any applicable jurisdiction. 7. INFORMATION AS TO ISSUERS. 7.1. FINANCIAL AND BUSINESS INFORMATION. The Company shall deliver to each holder of Notes that is an Institutional Investor: (a) Quarterly Statements -- within 45 days after the end of each quarterly fiscal period in each Fiscal Year (other than the last quarterly fiscal period of each such Fiscal Year), duplicate copies of, -16- (i) an unaudited consolidated balance sheet of the Company and the Subsidiaries as at the end of such quarter, and (ii) unaudited consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Consolidated Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (b) Annual Statements -- within 90 days after the end of each Fiscal Year, duplicate copies of, (i) a consolidated balance sheet of the Company and the Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and the Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances (without a "going concern" or like qualification, exception or explanation and without any qualification or exception as to scope of such audit), and provided that the delivery within the time period -17- specified above of the Company's Annual Report on Form 10-K for such Fiscal Year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice, proxy statement or circular sent by the Company to public securities holders generally or its creditors generally (or any class thereof generally), and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company with the Securities and Exchange Commission; (d) Notice of Default or Event of Default -- promptly, and in any event within five Business Days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA Matters - promptly, and in any event within fifteen days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any US Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any US Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate -18- pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the US Tax Code relating to employee pension benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) Notices from Governmental Authority -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to either of the Issuers or any Subsidiary from any Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (g) Rule 144A - promptly after any holder of Notes so requests, such information regarding the Issuers required to satisfy the requirements of 17 C.F.R. Section 230.144A, as amended from time to time, in connection with any contemplated transfer of the Notes, provided that the delivery of the Company's Annual Report on Form 10-K pursuant to Section 7.1(b) for the most recent Fiscal Year shall be deemed to satisfy the requirements of this Section 7.1(g); (h) Bank Credit Agreement -- to the extent not provided above in this Section 7.1, all reports, statements, certificates, notices or other writings required to be delivered pursuant to section 5.2 of the Bank Credit Agreement only so long as the Bank Credit Agreement (or any equivalent provision following any amendment or refinancing of the original Bank Credit Agreement) remains operative within the times required therein; and (i) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of either of the Issuers or any Subsidiary or relating to the ability of any Obligor to perform its obligations hereunder and under the Financing Documents to which such Obligor is a party, as from time to time may be reasonably requested by any such holder of Notes. 7.2. OFFICER'S CERTIFICATES. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer of the Company setting forth: -19- (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Issuers were in compliance with the requirements of Section 10.3 through Section 10.8, inclusive, Section 10.10 and Section 10.14 hereof, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Issuers and their Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of either of the Issuers or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 7.3. INSPECTION. Each of the Issuers shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the applicable Issuer, to visit the principal executive office of such Issuer, to discuss the affairs, finances and accounts of such Issuer and its Subsidiaries with such Issuer's officers, and (with the consent of such Issuer, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of such Issuer, which consent will not be unreasonably withheld) to visit the other offices and properties of such Issuer and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (b) Default -- if a Default or Event of Default then exists, at the expense of the Issuers to visit and inspect any of the offices or properties of either of the Issuers or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with -20- their respective officers and independent public accountants (and by this provision each of the Issuers authorizes said accountants to discuss the affairs, finances and accounts of such Issuer and its Subsidiaries), all at such times and as often as may be requested. 8. PREPAYMENT OF THE NOTES. 8.1. REQUIRED PREPAYMENTS. On October 10, 2006 and on April 10, 2007 and each October 10 and April 10 thereafter to and including April 10, 2010, the Issuers will prepay $5,555,555.56 principal amount (or such lesser principal amount as shall then be outstanding) of the Notes at par and without payment of the Make-Whole Amount or any premium, provided that upon any partial prepayment of the Notes pursuant to Section 8.2 the principal amount of each required prepayment of the Notes becoming due under this Section 8.1 on and after the date of such prepayment or any purchase thereof pursuant to Section 8.5 shall be reduced in the same proportion as the aggregate unpaid principal amount of the Notes is reduced as a result of such prepayment or purchase. Subject to Section 12.1, any remaining principal of, and the interest then accrued and unpaid on, the Notes shall be due and payable on October 10, 2010. 8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT. The Issuers may, at their option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in an aggregate principal amount of not less than $1,000,000 in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Issuers will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Issuers shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. -21- 8.3. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial prepayment of the Notes pursuant to Section 8.2 and each purchase of Notes pursuant to Section 8.5, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 8.4. MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Issuers shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Issuers and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.5. PURCHASE OF NOTES. Neither Issuer will, and neither Issuer will permit any Affiliate to, purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except (a) upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes or (b) pursuant to an offer to purchase made by the Issuers or an Affiliate pro rata to the holders of all Notes at the time outstanding upon the same terms and conditions. Any such offer shall provide each holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least 30 days. If the holders of more than 50% of the principal amount of the Notes then outstanding accept such offer, the Issuers shall promptly notify the remaining holders of such fact and the expiration date for the acceptance by holders of Notes of such offer shall be extended by the number of days necessary to give each such remaining holder at least five (5) Business Days from its receipt of such notice to accept such offer. The Issuers will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 8.6. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining -22- Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on such Note is payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, 0.50% over the yield to maturity implied by (a) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal on the display designated as "Page 678" on the Moneyline Telerate Service (or such other display as may replace Page 678 on the Moneyline Telerate Service) for actively traded on the run US Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (b) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded US Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (i) converting US Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (ii) interpolating linearly between (x) the actively traded US Treasury Security with the maturity closest to and greater than the Remaining Average Life and (y) the actively traded US Treasury Security with the maturity closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to the Called Principal of any Note, the number of years (calculated to the nearest one- -23- twelfth year) obtained by dividing (a) such Called Principal into (b) the sum of the products obtained by multiplying (i) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (ii) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of such Note, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or Section 12.1. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. 9. AFFIRMATIVE COVENANTS. Each of the Issuers covenants that so long as any of the Notes are outstanding: 9.1. COMPLIANCE WITH LAW. Each of the Issuers will and will cause each Subsidiary to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, ERISA and Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.2. INSURANCE. -24- Each of the Issuers will and will cause each Subsidiary to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3. MAINTENANCE OF PROPERTIES. Each of the Issuers will and will cause each Subsidiary other than any Dormant Company to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent either of the Issuers or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and such Issuer has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 9.4. PAYMENT OF TAXES AND CLAIMS. Each of the Issuers will and will cause each Subsidiary to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes required to be paid on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of either of the Issuers or any Subsidiary, provided that neither of the Issuers nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by such Issuer or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and such Issuer or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of such Issuer or such Subsidiary or (b) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect. 9.5. CORPORATE EXISTENCE, ETC. Each of the Issuers will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 9.3, 10.2 and 10.4, each of the Issuers will at all times preserve and keep in full force and effect the corporate existence of -25- each Subsidiary other than any Dormant Company (unless merged into an Issuer or a Subsidiary (other than a Dormant Company)) and all rights and franchises of such Issuer and its Subsidiaries (other than a Dormant Company) unless, in the good faith judgment of such Issuer, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 9.6. NEW SUBSIDIARY GUARANTOR; ADDITIONAL PLEDGED STOCK. (a) The Issuers will (i) cause each Person that, after the date of the Closing, becomes a Domestic Subsidiary that is a "significant subsidiary" within the meaning of Regulation S-X of the Exchange Act, and each Subsidiary that ceases to be a Dormant Company pursuant to Section 9.11, to become, promptly and in any event within fifteen (15) Business Days of becoming a Domestic Subsidiary or ceasing to be a Dormant Company, as the case may be, an additional guarantor pursuant to the terms of the Guaranty Agreement and (ii) deliver to each of the holders of Notes, to the extent reasonably requested by the Required Holders, copies of authorizing resolutions, bylaws and other constitutive documents and financial information of such Person, as well as an opinion of independent counsel reasonably satisfactory to the Required Holders, as to the due execution, delivery and enforceability of such Person's obligations as a Guarantor, in form and substance reasonably satisfactory to the Required Holders. (b) The Company will promptly, and in any event within fifteen (15) Business Days of any Person becoming (i) a Foreign Subsidiary of the Company or (ii) a Foreign Subsidiary that is not a Wholly-Owned Subsidiary of either Issuer that, in each case, is a "significant subsidiary" within the meaning of Regulation S-X of the Exchange Act, after the date of the Closing, (A) pledge, or cause to be pledged, the Applicable Pledge Amount of any equity interests of such Foreign Subsidiary pursuant to the Pledge Agreement, and (B) deliver or cause to be delivered to the Agent, on behalf of the holders of Notes, the original stock or membership certificate(s) evidencing such equity interests and undated stock powers executed in blank. 9.7. PARI PASSU RANKING. Each of the Issuers shall ensure that its payment obligations under this Agreement and the Notes rank and will at all times rank at least pari passu in all respects with the claims of all of its other unsecured and unsubordinated creditors, respectively, except as may be otherwise provided for in the Sharing Agreement with respect to the Debt under the Bank Credit Agreement, save those whose claims are preferred by any bankruptcy, insolvency, liquidation, administration or other similar laws of general application. -26- 9.8. MOST FAVORED LENDER PROVISIONS. (a) NEW AND AMENDED COVENANTS. If at any time and from time to time on or after the date of the Closing either of the Issuers or any Subsidiary enters into, assumes or otherwise becomes bound or obligated under, or agrees to any new agreement with the lenders under the Bank Credit Agreement or, without derogating from any of the restrictions contained herein, any amendment, modification of or supplement to the Bank Credit Agreement or any agreement which relates to the Bank Credit Agreement in any manner the effect of which would be (i) to create, amend or add covenants or obligations of the Issuers and the Subsidiaries which are in addition to those contained in the Bank Credit Agreement (as in effect on the date of the Closing) or (ii) more restrictive on the Issuers or any Subsidiary than are the equivalent covenants (other than the Specified Financial Covenants) contained herein (the "NEW/AMENDED COVENANT PROVISIONS"), then this Agreement shall, without any further action on the part of either Issuer, any Subsidiary or any holder of Notes, be deemed to be amended automatically to include each such New/Amended Covenant Provision, effective as of the effective date of such New/Amended Covenant Provision; provided, that the Required Holders and the Issuers may agree in writing not to so amend this Agreement. For the purposes of clause (ii) above, in the event that (A) any such amendment, modification or supplement reduces a sum certain dollar amount in the Bank Credit Agreement, which reduction has the effect of making a covenant in the Bank Credit Agreement more restrictive than a covenant contained herein and (B) the corresponding covenant contained herein is a percentage rather than a sum certain dollar amount, then such percentage contained herein shall be reduced and shall thereafter be equal to the product (expressed as a percentage) of (x) such percentage herein immediately before giving effect to such amendment, modification or supplement, multiplied by (y) a fraction, the numerator of which is the sum certain dollar amount in the Bank Credit Agreement immediately after giving effect to such amendment, modification or supplement and the denominator of which is the sum certain dollar amount stated in the Bank Credit Agreement immediately prior to giving effect to such amendment, modification or supplement. By way of example, if the definition of the "Permitted Acquisition Basket" in the Bank Credit Agreement were amended to reduce the sum certain dollar amount from $15,000,000 to $9,000,000 (a 40% reduction), then the percentage in the definition of Permitted Acquisition herein would be reduced to 6% from 10% (a 40% reduction). (b) SPECIFIED FINANCIAL COVENANTS. If at any time and from time to time after the date of the Closing, either Issuer or any Subsidiary enters -27- into, assumes or otherwise becomes bound or obligated under, or agrees to, any modification of or amendment or supplement to the Bank Credit Agreement in respect of or that contains provisions (the "SPECIFIED PROVISIONS") that are the same as or similar to the covenants set forth in Sections 10.5, 10.6 or 10.7 (as in effect from time to time after giving effect to this Section 9.8, the "SPECIFIED FINANCIAL COVENANTS"), and one or more of such Specified Provisions is more restrictive on the Issuers or any Subsidiary than the equivalent Specified Financial Covenants, then such equivalent Specified Financial Covenants shall, without any further action on the part of either Issuer, any Subsidiary or any holder of Notes, be deemed to be amended automatically to be as restrictive as the relevant Specified Provision as of the effective date of such Specified Provision; provided, however, that at all times subsequent to the date of the DOJ Settlement Payment, the required ratios of Consolidated Funded Debt to Consolidated EBITDA set forth in Section 10.5 shall each have a numerator that is the lesser of (i) the relevant numerator set forth in such section (as of the date of the Closing) or (ii) a numerator that is 0.25 higher than that specified in the Bank Credit Agreement (after giving effect to any applicable Specified Provision) for the relevant time period (after converting, if necessary, the ratios in the Bank Credit Agreement to the method of presentation in Section 10.5). (c) WRITTEN AMENDMENT; SUCCESSIVE CHANGES. Each of the Issuers further covenants to promptly, and in any event within 30 days, execute and deliver at its expense (including, without limitation, the fees and expenses of counsel for the holders of the Notes) a document which amends this Agreement in form and substance satisfactory to the Required Holders to reflect any change to this Agreement made effective by this Section 9.8, provided that the execution and delivery of such document shall not be a precondition to the effectiveness of such amendment, waiver or termination. The provisions of this Section 9.8 shall apply successively to each New/Amended Covenant Provision and each change in a Specified Provision. 9.9. COVENANT TO SECURE NOTES EQUALLY. Each Issuer covenants that, if it or any Subsidiary shall create or assume any Lien to secure the Debt under the Bank Credit Agreement upon any of its property or assets, whether now owned or hereafter acquired, it will make or cause to be made effective provision whereby the Notes will be secured by such Lien equally and ratably with any and all Debt under the Bank Credit Agreement thereby secured so long as any such other Debt shall be so secured. -28- 9.10. POST-CLOSING REQUIREMENTS. No later than 60 days following the date of the Closing, the Issuers will deliver or cause to be delivered to the holders of Notes (a) certificates of good standing from the office of the Secretary of State from each jurisdiction where the ownership of property or the conduct of its business requires the Company to be qualified to transact business as a foreign corporation and (b) certificates of good standing from the office of the Secretary of State of the jurisdiction of incorporation of Qirra Custom Software, Inc. and the jurisdiction where such Subsidiary maintains its principal place of business. No later than 75 days following the date of the Closing, the Issuers will cause the following Subsidiaries to be dissolved and shall provide the Required Holders with reasonably satisfactory evidence of such dissolution: (i) Brocklehursts, Inc., (ii) Brocklehurst Holdings, Inc. and (iii) Graham Miller, Inc. No later than 30 days following the date of the Closing, the Issuers will cause all Liens in favor of the Royal Bank of Canada set forth on Schedule 10.3 to be terminated and released of record, and will promptly provide each holder of Note written evidence of such termination and release. The Issuers will, within 30 days following a request therefore by the Required Holders, cause the documents and instruments described on Schedule 10.11 as item 1, to be terminated, or otherwise cause the restrictive agreements or arrangements therein requiring such items to be disclosed pursuant to Section 10.11 to be terminated and released, and will promptly provide the holders of Notes written evidence of such termination and release. 9.11. DORMANT COMPANIES. (a) If, at any time after the date of the Closing, the Company decides that any Subsidiary that is a Dormant Company at such time shall cease being a Dormant Company, such Subsidiary shall cease to be a Dormant Company for all purposes of this Agreement and the other Financing Documents upon the satisfaction of the following conditions: (i) the Company shall notify the holders of Notes of the proposed change in the status of such Subsidiary, which notice shall contain a certification by a Responsible Officer to the effect that (A) such Subsidiary is in full compliance with all provisions of this Agreement applicable to it as a Subsidiary that is not a Dormant Company, (B) each of the representations and warranties set forth in Section 5 that are applicable to a Subsidiary that is not a Dormant Company is true and correct with respect to such Subsidiary as of the date of such notice, and (C) no Default or Event of Default would result from such change in status of such Subsidiary; -29- (ii) if such Subsidiary is a Domestic Subsidiary and is not already a Guarantor, the Issuers shall cause it to become a Guarantor pursuant to Section 9.6(a); (iii) Schedule 5.4 hereto shall be revised to reflect that such Subsidiary is no longer a Dormant Company; and (iv) the Issuers shall have delivered such information as is required by Section 9.6(a). (b) If, at any time after the date of the Closing, the Company decides that any Subsidiary that is not a Dormant Company at such time shall become a Dormant Company, such Subsidiary shall become a Dormant Company for all purposes of this Agreement and the other Financing Documents upon the satisfaction of the following conditions: (i) the Company shall notify the holders of Notes of the proposed change in the status of such Subsidiary, which notice shall contain a certification by a Responsible Officer to the effect that (A) such Subsidiary is in full compliance with all provisions of this Agreement applicable to it as a Subsidiary that is a Dormant Company, (B) after giving effect to such Subsidiary becoming a Dormant Company, the aggregate revenues and assets of all Dormant Companies is less than 1% of the aggregate revenues and assets of the Company and its Consolidated Subsidiaries, and (C) no Default or Event of Default would result from such change in status of such Subsidiary; (ii) if the Subsidiary is a party to the Guaranty Agreement and is not a "significant subsidiary" within the meaning of Regulations S-X of the Exchange Act, the Required Holders shall release it from the Guaranty Agreement; (iii) Schedule 5.4 hereto shall be revised to reflect that such Subsidiary has after such time become a Dormant Company; and (iv) the Issuers shall have delivered such information (financial and otherwise) as is reasonably requested by the Required Holders with respect to such Subsidiary. 10. NEGATIVE COVENANTS. Each of the Issuers covenants that so long as any of the Notes are outstanding: -30- 10.1. TRANSACTIONS WITH AFFILIATES; DORMANT COMPANIES. Neither Issuer will, and neither Issuer will permit any Subsidiary to, enter into directly or indirectly any transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than an Issuer or a Wholly-Owned Subsidiary subject to the limitations set forth in Section 10.10(b)), except (a) in the ordinary course and pursuant to the reasonable requirements of an Issuer's or such Subsidiary's business and upon fair and reasonable terms no less favorable to such Issuer or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate and (b) any Restricted Payment permitted by Section 10.10(a). Notwithstanding the foregoing, the Issuers will not, and will not permit any Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, make any Investment in, or otherwise engage in any other transactions with, any Dormant Company unless (i) such transaction is at prices and on terms and conditions no less favorable to the Issuers or such Subsidiary (other than the Dormant Company) than could be obtained on an arm's-length basis from unrelated third parties or involves maintaining the corporate existence, good standing or properties of any Dormant Company and (ii) after giving effect to such transaction, the representations and warranties contained in Section 5.21 shall be deemed remade and shall be true and correct. 10.2. MERGER, CONSOLIDATION, ETC. Neither Issuer will, and neither Issuer will permit any Subsidiary (other than any Dormant Company) to, consolidate with or merge with any other Person or convey, Transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person or liquidate or dissolve (except that if at the time thereof and immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing (i) subject to Section 10.4, any Subsidiary may liquidate or dissolve if the Issuers determine in good faith that such liquidation or dissolution is in the best interests of the Issuers and is not materially disadvantageous to the holders of Notes, (ii) any Subsidiary (other than a Dormant Company) may merge with any Person that is not a Subsidiary if such Subsidiary is the surviving Person, (iii) any Subsidiary may merge into another Subsidiary (other than a Dormant Company), provided, that if any party to such merger is a Guarantor (other than a Dormant Company), such Guarantor shall be the surviving Person, (iv) any Subsidiary may sell, transfer, lease or otherwise dispose of all or substantially all of its assets to an Issuer or to a Subsidiary (other than a Dormant Company); provided, that a Guarantor may only sell, lease or otherwise dispose of all or substantially all of its assets to an Issuer or another Guarantor (other than a Dormant Company), and (v) any Subsidiary may be sold so long as such sale is -31- permitted under Section 10.4; provided, that any merger involving a Person that is not a Wholly-Owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 10.10(b)), provided that the foregoing restriction does not apply to the consolidation or merger of either Issuer with, or the conveyance, transfer or lease of all or substantially all of the assets of either Issuer in a single transaction or series of transactions to, any Person so long as: (a) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, Transfer or lease all or substantially all of the assets of such Issuer as an entirety, as the case may be (the "SUCCESSOR CORPORATION"), shall be a solvent corporation organized and existing under the laws of the United States or any state thereof (including the District of Columbia); (b) if such Issuer is not the Successor Corporation, such corporation shall have executed and delivered to each holder of Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement, the Notes and each other Financing Document to which such Issuer is a party (pursuant to such agreements and instruments governed by New York law and otherwise in form and substance as shall be reasonably satisfactory to the Required Holders), and the Company shall have caused to be delivered to each holder of Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; and (c) immediately prior to and after giving effect to such transaction no Default or Event of Default would exist. No such conveyance, Transfer or lease of all or substantially all of the assets of either Issuer shall have the effect of releasing such Issuer or any Successor Corporation that shall theretofore have become such in the manner prescribed in this Section 10.2 from its liability under the Financing Documents to which such Issuer is a party. 10.3. LIMITATION ON LIENS. Neither Issuer will, and neither Issuer will permit any Subsidiary to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property (including, without limitation, any document or instrument in respect of goods or accounts receivable or book debts) of either of the Issuers or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom or -32- assign or otherwise convey any right to receive income or profits, except: (a) Liens for taxes or assessments or other governmental charges or levies not yet due and payable or which are being contested as permitted by Section 9.4; (b) statutory liens, common law liens, carriers', warehousemen's, mechanics', materialmen's, landlord's, repairmen's or other like Liens arising in the ordinary course of business and securing obligations (other than Debt) which are not overdue for a period of more than sixty (60) days or which are actively being contested in good faith by appropriate proceedings and for which reasonable book reserves in accordance with GAAP have been established; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other types of social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements, provided, however, that such Liens were not incurred or made in connection with the borrowing of money or the obtaining of advances or credit; (d) Liens incurred or deposits to secure the performance of bids, tenders, contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business, provided, however, that such Liens were not incurred or made in connection with the borrowing of money or the obtaining of advances or credit; (e) any attachment or judgment Lien, unless the judgment it secures shall not, within 60 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after the expiration of any such stay; (f) Liens on any property of the Company and the Subsidiaries in existence on the date of the Closing including Liens securing the Notes and the Debt evidenced by the Bank Credit Agreement and other Liens so long as such Liens are described on Schedule 10.3; provided, such Lien shall not apply to any other property of either of the Issuers or any Subsidiary; (g) leases or subleases granted to others, zoning restrictions, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Issuers or any of their Subsidiaries, -33- provided that such Liens do not, in the aggregate, materially detract from the value of such property; (h) any Lien created to secure all or any part of the purchase price or cost of construction, of property (or any improvement thereon) acquired or constructed by either of the Issuers or a Subsidiary after the date of the Closing, provided that (i) any such Lien shall extend solely to the item or items of such property (or improvement thereon) so acquired or constructed (and replacement assets of the same type) and, if required by the terms of the instrument originally creating such Lien, other property (or improvement thereon) which is an improvement to or is acquired for specific use in connection with such acquired or constructed property (or improvement thereon) or which is real property being improved by such acquired or constructed property (or improvement thereon), (ii) the principal amount of the Debt secured by any such Lien shall at no time exceed an amount equal to 100% of the lesser of (A) the cost to such Issuer or such Subsidiary of the property (or improvement thereon) so acquired or constructed and (B) the Fair Market Value (as determined in good faith by the board of directors of such Issuer or such Subsidiary) of such property (or improvement thereon) at the time of such acquisition or construction, and (iii) any such Lien shall be created contemporaneously with, or within 90 days after, the acquisition or construction of such property; (i) any Liens renewing extending or refunding any Lien permitted by the foregoing clauses (a) through (h), provided that (i) the principal amount of Debt secured by such Lien immediately prior to such extension, renewal or refunding is not increased or the maturity thereof reduced, (ii) such Lien is not extended to any other property, and (iii) immediately after such extension, renewal or refunding no Default or Event of Default would exist; (j) Liens created under the Pledge Agreement in favor of the Agent as collateral agent for the Creditors (as defined in the Pledge Agreement); and -34- (k) other Liens (not otherwise permitted by clauses (a) through (j)) so long as the Debt secured by such Liens is permitted by Section 10.8. 10.4. SALE OF ASSETS, ETC. Except as permitted under Section 10.2, neither Issuer will, and neither Issuer will permit any Subsidiary (other than any Dormant Company) to, make any Asset Disposition unless: (a) in the good faith opinion of the Company, the Asset Disposition is in exchange for consideration having a Fair Market Value at least equal to that of the property exchanged and is in the best interest of such Issuer or such Subsidiary; and (b) immediately after giving effect to the Asset Disposition, no Default or Event of Default would exist; and (c) immediately after giving effect to the Asset Disposition, the aggregate Disposition Value of all Asset Dispositions made (i) during the period commencing with the first day of the then current Fiscal Year to and including the date of such Transfer does not exceed an amount equal to 5% of Consolidated Net Worth determined as of the last day of the then most recently ended fiscal quarter of the Company and (ii) during the period commencing on the date of the Closing to and including the date of such Transfer does not exceed an amount equal to 25% of Consolidated Net Worth determined as of the last day of the then most recently ended fiscal quarter of the Company; except that the Disposition Value of an Asset Disposition will be excluded from this clause (c) at such time as the Net Proceeds Amount with respect to such transaction is applied to a Property Reinvestment Application within 120 days after such Transfer. 10.5. LEVERAGE RATIO. The Issuers will not, as of the last day of the fiscal quarter of the Company ending on (or closest to) each date specified below, permit the ratio of Consolidated Funded Debt outstanding on such day to Consolidated EBITDA for the four consecutive fiscal quarter period ending on such day to be greater than the ratio set forth below opposite such date:
Fiscal Quarter Ending Dates Ratio - --------------------------------------------------------- ------------ September 30, 2003, December 31, 2003, March 31, 2004 and 2.75 to 1.00 June 30, 2004
-35- September 30, 2004, December 31, 2004, 2.50 to 1.00 March 31, 2005, June 30, 2005, and the last day of each fiscal quarter of the Company thereafter if such last day is subsequent to the DOJ Settlement Payment September 30, 2005, if such date is 2.25 to 1.00 prior to the DOJ Settlement Payment, and the last day of each fiscal quarter of the Company thereafter, if such last day is prior to the DOJ Settlement Payment
10.6. FIXED CHARGES COVERAGE RATIO. The Issuers will not, as of the last day of the fiscal quarter of the Company ending on (or closest to) each date specified below, permit the Fixed Charges Coverage Ratio to be less than the ratio set forth below opposite such date:
Fiscal Quarter Ending Dates Ratio - -------------------------------------- ------------ September 30, 2003, December 31, 2003, 1.25 to 1.00 March 31, 2004 and June 30, 2004 September 30, 2004 and the last day of 1.50 to 1.00 each fiscal quarter of the Company thereafter
10.7. CONSOLIDATED NET WORTH. The Issuers will not, as of the last day of each fiscal quarter of the Company commencing with the fiscal quarter ending September 30, 2003, permit Consolidated Net Worth to be less than the sum of (a) $135,516,350, plus (b) an aggregate amount equal to 50% of its Consolidated Net Income (but, in each case, only if a positive number) accrued after December 31, 2002 plus (c) to the extent, but only to the extent that such aggregate amount was not included in the computation of Consolidated Net Worth for such period, 100% of the net proceeds received from the sale, pursuant to an effective registration statement, of the Company's capital stock (an "EQUITY OFFERING"); provided, that the net proceeds of an Equity Offering of a debt Security that is convertible into or exchangeable for capital stock of the Company or a debt Security that is issued with a warrant or -36- other instrument to purchase capital stock of the Company shall not be required to be added under this clause (c) unless and until such debt Security is converted into or exchanged for, or such warrant or other instrument is exercised for, capital stock of the Company. For purposes of determining Consolidated Net Worth on any date after December 31, 2002, (i) any non-cash adjustment after December 31, 2002 (whether such adjustment is an increase or decrease) to shareholders' investment related to pension fund liabilities, (B) any non-cash adjustment after December 31, 2002 (whether such adjustment is an increase or decrease) to shareholders' investment related to goodwill and (C) any non-cash adjustment after December 31, 2002 (whether such adjustment is an increase or decrease) to shareholders' investment related to foreign currency translations shall, in each case, be excluded. 10.8. PRIORITY DEBT. The Issuers will not, at any time, permit Priority Debt determined at such time to exceed 15% of Consolidated Net Worth determined as of the last day of the then most recently ended fiscal quarter of the Company. 10.9. LINE OF BUSINESS. Neither Issuer will, and neither Issuer will permit any Subsidiary to, engage to any substantial extent in any business other than businesses of the type in which the Issuers and the Subsidiaries are engaged on the date of the Closing, as described in the Memorandum, and businesses reasonably related thereto or in furtherance thereof. Neither Issuer will permit (a) any Dormant Company to own any Material assets or have any outstanding Indebtedness or other Material liabilities and (b) the aggregate revenues and assets of the Dormant Companies at any time to be more than 1% of the aggregate revenue and assets of the Company and its Consolidated Subsidiaries. 10.10. RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS; ACQUISITIONS. (a) RESTRICTED PAYMENTS. Neither Issuer will, and neither Issuer will permit any Subsidiary to, at any time, declare or make, or incur any liability to declare or make, any Restricted Payment (other than (i) Distributions payable by the Company solely in shares of any class of its capital stock; provided, that prior to, and immediately after giving effect to any such Distribution, no Default or Event of Default exists, and (ii) Restricted Payments made by any Subsidiary to either of the Issuers or any other Subsidiary (other than a Dormant Company) so long as Restricted Payments may only be made to an Obligor during the existence of a Default or an Event of Default), unless immediately after giving effect to such actions the aggregate amount of all Restricted Payments of the Company and the -37- Subsidiaries declared or made during the current Fiscal Year would not exceed 100% of Consolidated Net Income (if greater than $0) for the immediately preceding Fiscal Year and no Default or Event of Default would exist. (b) RESTRICTED INVESTMENTS; ACQUISITIONS. Neither Issuer will, and neither Issuer will permit any Subsidiary to, make or authorize any Restricted Investment or consummate any Acquisition; provided, that the following Restricted Investments and Acquisitions are permitted: (i) Guaranties; provided, that the aggregate principal amount of Indebtedness of Subsidiaries that are not Guarantors that is Guarantied by either of the Issuers or any Guarantor shall be subject to the limitations set forth in clause (iii) hereof; (ii) Investments made by any Consolidated Subsidiary (other than a Dormant Company) in either of the Issuers or any Guarantor; (iii) Investments made by either Issuer in the form of Indebtedness owed by any Consolidated Subsidiary to either Issuer and Guaranties by either Issuer of Indebtedness of any Consolidated Subsidiary; provided, that (A) the aggregate amount of Investments (determined at book value (except for Guaranties) without giving effect to any consolidation of accounts) by the Issuers in Indebtedness of any Consolidated Subsidiary (including by means of Guaranties thereof which shall be valued at the amount of their maximum contingent obligation) that is not a Guarantor (excluding Investments existing on the date of the Closing and which are identified on Schedule 10.10 hereto) shall not exceed an amount equal to 15% of Consolidated Net Worth (determined as of the end of the then most recently ended fiscal quarter of the Company at the time of any such Investment) in any period of 12 consecutive months and not more than 50% of Consolidated Net Worth (determined as of the end of the then most recently ended fiscal quarter of the Company at any time of determination) in the aggregate subsequent to the date of the Closing and (B) the aggregate amount of Investments (determined at book value (except for Guaranties) without giving effect to any consolidation of accounts) by the Issuers in Indebtedness of any single Consolidated Subsidiary (including by means of Guaranties thereof which shall be valued at the amount of their maximum contingent obligation) that is not a Guarantor (excluding Investments existing on the date of the Closing and which are identified on Schedule 10.10 hereto) shall not exceed at any time $10,000,000; -38- (iv) loans or advances to employees, officers or directors of either Issuer or any Consolidated Subsidiary (other than a Dormant Company) in the ordinary course of business for travel, relocation and other business related expenses; (v) Investments permitted by Section 10.12; (vi) Permitted Investments; (vii) Permitted Acquisitions; (viii) other Investments existing on the date of the Closing and set forth on Schedule 10.10 (including Investments in Consolidated Subsidiaries); provided, that any Investment set forth on Schedule 10.10 consisting of Indebtedness owing by a Subsidiary that is not an Obligor to any Obligor or any other Consolidated Subsidiary may not be reborrowed after repayment; (ix) Investments in joint ventures that are not Subsidiaries made after the date of the Closing; provided, that (A) no Default or Event of Default shall exist prior to or after giving effect to such Investment and (B) the total amount of all Investments (determined at book value) made under this clause (ix) during the preceding 12 month period, when aggregated with such Investment, does not exceed the lesser of (1) $5,000,000 and (2) the result (if positive) of 10% of Consolidated Net Worth (determined as of the end of the then most recently ended fiscal quarter of the Company) minus the aggregate amount of Total Acquisition Consideration of all Acquisitions consummated by the Issuers and the Consolidated Subsidiaries during such preceding 12 month period; and (x) other Investments in and to any Domestic Subsidiary that is an Obligor (other than a Dormant Company). 10.11. LIMITATIONS ON CERTAIN SUBSIDIARY ACTIONS. Neither Issuer will, and neither Issuer will permit any Subsidiary to, be a party to any contract, agreement or business arrangement that restricts or limits in any manner, or incur or permit to exist any restriction (other than customary restrictions imposed by corporate law) on, any Subsidiary's ability to (i) create, incur or permit any Lien upon any of its assets or properties, whether now owned or hereafter acquired, (ii) pay dividends or make other Distributions on or with respect to its capital stock to either of the Issuers or any Subsidiary, (iii) pay any Debt or other obligations owing to either of the Issuers or any Subsidiary or (iv) transfer -39- property to either of the Issuers or any Subsidiary, except for such limitations or restrictions existing under or by reason of: (a) applicable law; (b) the Financing Documents or the Bank Credit Agreement or those agreements in the form existing on the date of the Closing and listed on Schedule 10.11; (c) customary restrictions and conditions of any contract relating to the Transfer of any Subsidiary permitted by this Agreement or any lease governing a leasehold interest of any Subsidiary; or (d) Liens permitted by Section 10.3. 10.12. HEDGING ARRANGEMENTS. Neither Issuer will, and neither Issuer will permit any Subsidiary to, enter into any Swap, commodity, foreign exchange risk, currency risk, or other hedging or risk protection arrangements which are for speculative purposes or which are not effected in the ordinary course of business of such Issuer or such Subsidiary. 10.13. ACCOUNTING CHANGES; CHANGE OF FISCAL YEAR. Neither Issuer will, and neither Issuer will permit any Subsidiary to, change its fiscal year end or make any significant change in accounting treatment or reporting practices, except as permitted or required by GAAP or as required by applicable law. 10.14. MINIMUM CASH. At all times prior to the DOJ Settlement Payment, the Issuers will not, at any time, permit cash on hand to be less than $10,000,000 less any amount paid in satisfaction of the DOJ Settlement Payment. 10.15. LITIGATION. Neither Issuer will, and neither Issuer will permit any Subsidiary to, settle or compromise, or enter into any agreement to settle or compromise, any pending or threatened suit, investigation, cause of action or other proceeding described in Schedule 5.8 with any Person or Governmental Authority, as to any single or related series of claims, involving payment by an Obligor or a Consolidated Subsidiary (or a group of them) of $10,000,000 or more, without obtaining the prior written consent of the Required Holders. -40- 10.16. AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Neither Issuer will, and neither Issuer will permit any Subsidiary to, amend, modify or waive any of its rights in a manner materially adverse to the holders of Notes under its articles or certificate of incorporation, bylaws or other organizational documents. 10.17. NO LIMITATION ON PREPAYMENTS OR AMENDMENTS TO CERTAIN FINANCING DOCUMENTS. Neither Issuer will, and neither Issuer will permit any Subsidiary to, be a party to any agreement or instrument limiting its rights (a) to make payments or prepayments on the Notes, whether optional or mandatory, under this Agreement or (b) to amend or waive any term or provision of this Agreement, the Notes or the Guaranty Agreement. 11. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if any of the following conditions or events shall occur and be continuing: (a) either Issuer defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) either Issuer defaults in the payment of any interest on any Note for more than three Business Days after the same becomes due and payable; or (c) either Issuer defaults in the performance of or compliance with any term contained in Sections 7.1, 7.2, 9.6, 9.10 and 10; or (d) either of the Issuers or any Subsidiary defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) or in any other Financing Document (other than the Sharing Agreement) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11); or -41- (e) any representation or warranty made in writing by or on behalf of any Obligor or any other Subsidiary or by any officer of any Obligor in this Agreement or any other Financing Documents or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) any Obligor or any other Consolidated Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $5,000,000 (or its equivalent) beyond any period of grace provided with respect thereto, or (ii) any Obligor or any other Consolidated Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $5,000,000 (or its equivalent) or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) any Obligor or any other Consolidated Subsidiary has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000 (or its equivalent), or (y) one or more Persons have the right to require an Obligor or any other Consolidated Subsidiary so to purchase or repay such Indebtedness; or (g) any Obligor or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as bankrupt or insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or -42- (h) a court or Governmental Authority of competent jurisdiction enters an order appointing, without consent by any Obligor or any Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property (or any such Person is appointed by one or more creditors of any Obligor or any Subsidiary), or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency, law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of any Obligor or any Subsidiary, or any such petition shall be filed against any Obligor or any Subsidiary and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $10,000,000 (or its equivalent) are rendered against one or more of the Obligors or any other Consolidated Subsidiary and which judgments are not, within 30 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 30 days after the expiration of such stay; or (j) any non-monetary judgment shall have been rendered against any Obligor or other Consolidated Subsidiary that could reasonably be expected to have a Material Adverse Effect and there shall be a period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (k) any Financing Document shall for any reason cease to be valid and binding on, or enforceable against, any Obligor that is a party thereto or any Obligor shall so state in writing, or any Obligor or other Person shall challenge the validity of or seek to terminate any Financing Document or any provision of this Agreement or the Notes; or (l) any Obligor or any other Consolidated Subsidiary is enjoined, restrained or in any way prevented by the order of any Governmental Authority from conducting all or a material part of its business and such order continues for more than 30 days; or (m) a Change in Control shall occur or exist; or (n) an "Event of Default" under and as defined in the Bank Credit Agreement shall have occurred; or (o) if (i) any US Plan shall fail to satisfy the minimum funding standards of ERISA or the US Tax Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or -43- granted under section 412 of the US Tax Code, (ii) a notice of intent to terminate any US Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any US Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a US Plan may become a subject of any such proceedings, (iii) there shall exist with respect to any US Plan an "accumulated funding deficiency" (as defined in section 412 of the US Tax Code or section 302 of ERISA, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the US Tax Code relating to employee benefit plans, or (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan; and any such event or events described in clauses (i) through (v) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect. As used in Section 11(o), the term "EMPLOYEE BENEFIT PLAN" shall have the meaning assigned to such term in section 3 of ERISA. 12. REMEDIES ON DEFAULT, ETC. 12.1. ACCELERATION. (a) If an Event of Default described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, the Required Holders may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest -44- thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. Each of the Issuers acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Issuers (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Issuers in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2. OTHER REMEDIES. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 12.3. RESCISSION. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the Required Holders, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Issuers have paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy -45- conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Issuers under Section 15, the Issuers will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1. REGISTRATION OF NOTES. The Issuers shall keep at the Company's principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Issuers shall not be affected by any notice or knowledge to the contrary. The Issuers shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Issuers shall execute and deliver, at the Issuers' expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Issuers may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $100,000 and there shall be no more than twenty-five holders of Notes at any time, provided that any group of two or more holders whose investments in the Notes are managed by the same Person -46- shall be deemed to be one holder of Notes solely for purposes of determining whether such limitation on the number of holders has been exceeded, provided further that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $100,000. Subject to the provisions of this Section 13.2, any Purchaser may transfer or exchange any Note if, in the case of a transfer, the representations set forth in Section 6.1 (except that a transferee shall not be deemed to have made the representation that its purchase of such Notes is not with a view to distribution thereof) and Section 6.2 are true and correct, with the word "Purchaser" used in such section referring to the transferee. The Company shall not be obligated to register a transfer of Notes pursuant to this Section 13.2 if the transferee has given notice to the Company of the names of employee benefit plans pursuant to Section 6.2(c) or Section 6.2(g) and the Company has determined that an acquisition of Notes by the insurance company pooled separate account or bank collective investment fund in which such employee benefit plans have an interest, or by the employee benefit plan disclosed pursuant to Section 6.2(g), is reasonably likely to result in a transaction prohibited by section 406 of ERISA, provided that the Company gives notice of such determination to the registered holder of such Notes and the proposed transferee within 5 Business Days after delivery to the Company of such notice setting forth the names of the relevant employee benefit plans and a brief written description of the prohibited transaction that the Company has determined is reasonably likely to result from such transfer. 13.3. REPLACEMENT OF NOTES. Upon receipt by the Issuers of evidence reasonably satisfactory to them of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net worth of at least $50,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Issuers at their own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. -47- 14. PAYMENTS ON NOTES. 14.1. PLACE OF PAYMENT. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Atlanta, Georgia at the principal office of the Company in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 14.2. HOME OFFICE PAYMENT. So long as any Purchaser or its nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Issuers will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below each Purchaser's name in Schedule A, or by such other method or at such other address as such Purchaser shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Issuers made concurrently with or reasonably promptly after payment or prepayment in full of any Note, such Purchaser shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by it pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by any Purchaser or its nominee such Purchaser will, at its election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Issuers in exchange for a new Note or Notes pursuant to Section 13.2. The Issuers will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by any Purchaser under this Agreement and that has made the same agreement relating to such Note as such Purchaser has made in this Section 14.2. 15. EXPENSES, ETC. 15.1. TRANSACTION EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Issuers will pay all reasonable out-of-pocket costs and expenses (including, without limitation, reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by each Purchaser or holder of a Note in -48- connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or any other Financing Document (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or any other Financing Document or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or any other Financing Document, or by reason of being a holder of any Note, and (b) the costs and expenses, including, without limitation, financial advisors' and accountants' fees, incurred in connection with the insolvency or bankruptcy of either of the Issuers or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Issuers will pay, and will save each Purchaser and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by any Purchaser). The Issuers will promptly pay or reimburse each Purchaser or holder of a Note (upon demand, in accordance with each such Purchaser's or holder's written instructions) for all fees and costs paid or payable by such Purchaser or holder to the SVO in connection with the initial filing of this Agreement and all related documents and financial information, and all subsequent annual and interim filings of documents and financial information related to this Agreement, with the SVO or any successor organization acceding to the authority thereof. 15.2. SURVIVAL. The joint and several obligations of the Issuers under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or any other Financing Document, and the termination of this Agreement. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement, the Notes and the other Financing Documents, the purchase or transfer by any Purchaser of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of such Purchaser or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of any Obligor pursuant to any Financing Document shall be deemed representations and warranties of the Issuers under this Agreement. Subject to the preceding sentence, this Agreement and the other Financing Documents embody the entire agreement -49- and understanding among each Purchaser and the Obligors and supersede all prior agreements and understandings relating to the subject matter hereof. 17. AMENDMENT AND WAIVER. 17.1. REQUIREMENTS. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Issuers and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Sections 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to each Purchaser unless consented to by each Purchaser in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or change the rate or the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. 17.2. SOLICITATION OF HOLDERS OF NOTES. (a) Solicitation. The Issuers will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Issuers will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) Payment. Neither Issuer will directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. -50- 17.3. BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon each of the Issuers without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between either Issuer and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4. NOTES HELD BY THE ISSUERS, ETC. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by either of the Issuers or any of its Affiliates shall be deemed not to be outstanding. 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (i) by telecopy if the sender on the same day sends a confirming copy of such notice by a nationally recognized overnight delivery service (charges prepaid), or (ii) by registered or certified mail with return receipt requested (postage prepaid), or (iii) by a nationally recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (a) if to a Purchaser or its nominee, to such Purchaser or its nominee at the address specified for such communications in Schedule A, or at such other address as such Purchaser or its nominee shall have specified to the Issuers in writing, (b) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (c) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of Joe Caporaso at fax number 404-845- -51- 3127, or at such other address as the Company shall have specified to the holder of each Note in writing; or (d) if to the Co-Issuer, to the Co-Issuer at the address specified in clause (c) above (or such other address as the Co-Issuer shall have specified to the holder of each Note in writing). Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) Financing Documents and documents received by each Purchaser at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to each Purchaser, may be reproduced by each Purchaser by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and each Purchaser may destroy any original document so reproduced. The Issuers agree and stipulate that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by each Purchaser in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Issuers or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means information delivered to any Purchaser by or on behalf of either of the Issuers or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by such Purchaser as being confidential information of the Issuers or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to such Purchaser prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such Purchaser or any Person acting on its behalf, (c) otherwise becomes known to such Purchaser other than through disclosure by the Issuers or any Subsidiary or (d) constitutes financial statements delivered to such Purchaser under Section 7.1 that are otherwise publicly available. Each Purchaser will maintain the confidentiality -52- of such Confidential Information in accordance with procedures adopted by such Purchaser in good faith to protect confidential information of third parties delivered to it, provided that such Purchaser may deliver or disclose Confidential Information to (i) its directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by its Notes), (ii) its financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which such Purchaser sells or offers to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which such Purchaser offers to purchase any Security of either Issuer (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over such Purchaser, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about such Purchaser's investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to such Purchaser, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which such Purchaser is a party or (z) if an Event of Default has occurred and is continuing, to the extent such Purchaser may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under such Purchaser's Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Issuers in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Issuers embodying the provisions of this Section 20. 21. SUBSTITUTION OF PURCHASER. Each Purchaser shall have the right to substitute, prior to the Closing, any one of its Affiliates as the purchaser of the Notes that such Purchaser has agreed to purchase hereunder, by written notice to the Issuers, which notice shall be signed by such Purchaser and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6 as to such Affiliates and an affirmation of the acknowledgment contained in such Notes. Upon -53- receipt of such notice, wherever the word "Purchaser" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of such original Purchaser. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to such Purchaser all of the Notes then held by such Affiliate in accordance with Section 13.2, upon the effectiveness of such transfer, wherever the word "Purchaser" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to the original Purchaser, and such Purchaser shall have all the rights of an original holder of the Notes under this Agreement. 22. MISCELLANEOUS. 22.1. SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 22.2. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 22.3. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 22.4. CONSTRUCTION. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is -54- prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. 22.5. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 22.6. JURISDICTION; SERVICE OF PROCESS. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY NOTE OR OTHER FINANCING DOCUMENT, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH THEREOF, BROUGHT BY ANY HOLDER OF A NOTE AGAINST ANY OBLIGOR OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY SUCH HOLDER OF A NOTE IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN AS SUCH HOLDER OF A NOTE MAY IN ITS SOLE DISCRETION ELECT, AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE JURISDICTION OF EACH SUCH COURT; AND AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED MAIL SHALL, TO THE EXTENT PERMITTED BY LAW, CONSTITUTE ADEQUATE SERVICE OF PROCESS IN ANY SUCH SUIT. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE OR OTHER FINANCING DOCUMENT BROUGHT IN THE SAID COURTS, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY HOLDER OF A NOTE TO SERVE ANY SUCH WRITS, PROCESS OR SUMMONSES, IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN JURISDICTION OVER THE ISSUERS, IN SUCH OTHER JURISDICTION, AND IN SUCH MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW. -55- 22.7. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. 22.8. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HERETO WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES, THE FINANCING DOCUMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THEREWITH. [Remainder of page intentionally left blank; next page is signature page.] -56- If each Purchaser is in agreement with the foregoing please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Issuers, whereupon the foregoing shall become a binding agreement between the Purchasers and the Issuers. Very truly yours, CRAWFORD & COMPANY By: /s/ John F. Giblin --------------------------------------- Name: John F. Giblin Title: Executive Vice President CRAWFORD & COMPANY INTERNATIONAL, INC. By: /s/ John F. Giblin --------------------------------------- Name: John F. Giblin Title: Executive Vice President -1- The foregoing is hereby agreed to as of the date thereof. THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: /s/ Billy Greer - ---------------------------- Name: Billy Greer Title: Vice President PRUCO LIFE INSURANCE COMPANY By: /s/ Billy Greer - ---------------------------- Name: Billy Greer Title: Vice President PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY By: /s/ Billy Greer - ----------------------------- Name: Billy Greer Title: Vice President RGA REINSURANCE COMPANY RELIASTAR LIFE INSURANCE COMPANY BY: PRUDENTIAL PRIVATE PLACEMENT INVESTORS, L.P., AS INVESTMENT ADVISOR BY: PRUDENTIAL PRIVATE PLACEMENT INVESTORS, INC., GENERAL PARTNER By: /s/ Billy Greer --------------------------------------- Name: Billy Greer Title: Vice President -2- SCHEDULE A
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA - -------------- ------------------------------------------- Name in Which Notes are to be Registered THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Note Registration Number; Principal Amount R-1; $20,782,000 Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank of New York New York, New York ABA No.: 021-000-018 Account No. ____________ Re: (see "Accompanying Information" below) Accompanying Information Names of Issuers: CRAWFORD & COMPANY CRAWFORD & COMPANY INTERNATIONAL, INC. Description of 6.08% Senior Guarantied Notes Security: Due October 10, 2010 PPN: 22464# AA 7 Accompanying Due Date and Application (as among Information: principal, Make-Whole Amount and interest) of the payment being made Address for Notices Related to Payments The Prudential Insurance Company of America c/o Prudential Investment Management, Operations & Systems Gateway Center Two, 10th Floor 100 Mulberry Street Newark, New Jersey 07102 Attention: Manager, Billings and Collections For telephonic prepayment notices: Manager, Trade Management Group Tel: 973-802-4222 Fax: 800-224-2278 Address for All Other Notices (including The Prudential Insurance Company of America copies of all notices relating to payments) c/o Prudential Capital Group 1170 Peachtree Street, Suite 500 Atlanta, GA 30309 Fax: 404-870-3741 Attn: Managing Director
Schedule A-1
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA - -------------- ------------------------------------------- Signature Block THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: __________________________________ Instructions re Delivery of Notes The Prudential Insurance Company of America 1114 Avenue of the Americas, 30th Floor New York, New York 10036 Attn: Suzanne Lui, Esq. Tax Identification Number 22-1211670
Schedule A-2
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA - -------------- ------------------------------------------- Name in Which Notes are to be Registered THE PRUDENTIAL INSURANCE COMPANY OF AMERICA Note Registration Number; Principal Amount R-2; $9,650,000 Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank of New York New York, New York ABA No.: 021-000-018 Account No. ____________ Re: (see "Accompanying Information" below) Accompanying Information Names of Issuers: CRAWFORD & COMPANY CRAWFORD & COMPANY INTERNATIONAL, INC. Description of 6.08% Senior Guarantied Notes Security: Due October 10, 2010 PPN: 22464# AA 7 Accompanying Due Date and Application (as among Information: principal, Make-Whole Amount and interest) of the payment being made Address for Notices Related to Payments The Prudential Insurance Company of America c/o Prudential Investment Management, Operations & Systems Gateway Center Two, 10th Floor 100 Mulberry Street Newark, New Jersey 07102 Attention: Manager, Billings and Collections For telephonic prepayment notices: Manager, Trade Management Group Tel: 973-802-4222 Fax: 800-224-2278 Address for All Other Notices (including The Prudential Insurance Company of America copies of all notices relating to payments) c/o Prudential Capital Group 1170 Peachtree Street, Suite 500 Atlanta, GA 30309 Fax: 404-870-3741 Attn: Managing Director Signature Block THE PRUDENTIAL INSURANCE COMPANY OF AMERICA By: __________________________________
Schedule A-3
PURCHASER NAME THE PRUDENTIAL INSURANCE COMPANY OF AMERICA - -------------- ------------------------------------------- Instructions re Delivery of Notes The Prudential Insurance Company of America 1114 Avenue of the Americas, 30th Floor New York, New York 10036 Attn: Suzanne Lui, Esq. Tax Identification Number 22-1211670
Schedule A-4
PURCHASER NAME PRUCO LIFE INSURANCE COMPANY - -------------- ---------------------------- Name in Which Notes are to be Registered PRUCO LIFE INSURANCE COMPANY Note Registration Number; Principal Amount R-3; $3,218,000 Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank of New York New York, New York ABA No.: 021-000-018 Account No. ____________ Re: (see "Accompanying Information" below) Accompanying Information Names of Issuers: CRAWFORD & COMPANY CRAWFORD & COMPANY INTERNATIONAL, INC. Description of 6.08% Senior Guarantied Notes Security: Due October 10, 2010 PPN: 22464# AA 7 Accompanying Due Date and Application (as among Information: principal, Make-Whole Amount and interest) of the payment being made Address for Notices Related to Payments Pruco Life Insurance Company c/o Prudential Investment Management, Operations & Systems Gateway Center Two, 10th Floor 100 Mulberry Street Newark, New Jersey 07102 Attention: Manager, Billings and Collections For telephonic prepayment notices: Manager, Trade Management Group Tel: 973-802-4222 Fax: 800-224-2278 Address for All Other Notices (including The Prudential Insurance Company of America copies of all notices relating to payments) c/o Prudential Capital Group 1170 Peachtree Street, Suite 500 Atlanta, GA 30309 Fax: 404-870-3741 Attn: Managing Director Signature Block PRUCO LIFE INSURANCE COMPANY By: __________________________________
Schedule A-5
PURCHASER NAME PRUCO LIFE INSURANCE COMPANY - -------------- ---------------------------- Instructions re Delivery of Notes The Prudential Insurance Company of America 1114 Avenue of the Americas, 30th Floor New York, New York 10036 Attn: Suzanne Lui, Esq. Tax Identification Number 22-1944557
Schedule A-6
PURCHASER NAME PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY - -------------- ------------------------------------------ Name in Which Notes are to be Registered PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY Note Registration Number; Principal Amount R-4; $1,000,000 Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank of New York New York, New York ABA No.: 021-000-018 Account No. ____________ Re: (see "Accompanying Information" below) Accompanying Information Names of Issuers: CRAWFORD & COMPANY CRAWFORD & COMPANY INTERNATIONAL, INC. Description of 6.08% Senior Guarantied Notes Security: Due October 10, 2010 PPN: 22464# AA 7 Accompanying Due Date and Application (as among Information: principal, Make-Whole Amount and interest) of the payment being made Address for Notices Related to Payments Pruco Life Insurance Company of New Jersey c/o Prudential Investment Management, Operations & Systems Gateway Center Two, 10th Floor 100 Mulberry Street Newark, New Jersey 07102 Attention: Manager, Billings and Collections For telephonic prepayment notices: Manager, Trade Management Group Tel: 973-802-4222 Fax: 800-224-2278 Address for All Other Notices (including The Prudential Insurance Company of America copies of all notices relating to payments) c/o Prudential Capital Group 1170 Peachtree Street, Suite 500 Atlanta, GA 30309 Fax: 404-870-3741 Attn: Managing Director Signature Block PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY By: __________________________________
Schedule A-7
PURCHASER NAME PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY - -------------- ------------------------------------------ Instructions re Delivery of Notes The Prudential Insurance Company of America 1114 Avenue of the Americas, 30th Floor New York, New York 10036 Attn: Suzanne Lui, Esq. Tax Identification Number 22-2426091
Schedule A-8
PURCHASER NAME RGA REINSURANCE COMPANY - -------------- ----------------------- Name in Which Notes are to be Registered HARE & CO. Note Registration Number; Principal Amount R-5; $8,100,000 Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank of New York New York, New York ABA No.: 021-000-018 Account No. ______ RGA Private Placement Account Re: (see "Accompanying Information" below) Accompanying Information Names of Issuers: CRAWFORD & COMPANY CRAWFORD & COMPANY INTERNATIONAL, INC. Description of 6.08% Senior Guarantied Notes Security: Due October 10, 2010 PPN: 22464# AA 7 Accompanying Due Date and Application (as among Information: principal, Make-Whole Amount and interest) of the payment being made Address for Notices Related to Payments RGA Reinsurance Company 1370 Timberlake Manor Parkway Chesterfield, MO 63017-6039 Attn: Banking Department Address for All Other Notices Prudential Private Placement Investors, L.P. Gateway Center Four 100 Mulberry Street Newark, New Jersey 07102 Attention: Mr. Albert Trank, Senior Vice President Tel: 973-802-8608 Fax: 973-624-6432 Signature Block RGA REINSURANCE COMPANY By: Prudential Private Placement Investors, L.P., As Investment Advisor By: Prudential Private Placement Investors, Inc., General Partner By: __________________________________ Instructions re Delivery of Notes The Prudential Insurance Company of America 1114 Avenue of the Americas, 30th Floor New York, New York 10036 Attn: Suzanne Lui, Esq.
Schedule A-9
PURCHASER NAME RGA REINSURANCE COMPANY - -------------- ----------------------- Tax Identification Number 43-1235868
Schedule A-10
PURCHASER NAME RELIASTAR LIFE INSURANCE COMPANY - -------------- -------------------------------- Name in Which Notes are to be Registered RELIASTAR LIFE INSURANCE COMPANY Note Registration Number; Principal Amount R-6; $7,250,000 Payment on Account of Note Method Federal Funds Wire Transfer Account Information Bank of New York New York, New York ABA No.: 021-000-018 IOC566 - Inst'l Custody Ref: ReliaStar Life Insurance Company, Account No. ______ and "Accompanying Information" below. Accompanying Information Names of Issuers: CRAWFORD & COMPANY CRAWFORD & COMPANY INTERNATIONAL, INC. Description of 6.08% Senior Guarantied Notes Security: Due October 10, 2010 PPN: 22464# AA 7 Accompanying Due Date and Application (as among Information: principal, Make-Whole Amount and interest) of the payment being made Address for Notices Related to Payments ING Investment Management LLC 5780 Powers Ferry Road, NW, Suite 300 Atlanta, GA 30327-4349 Attn: Securities Accounting Fax: 770-690-4899 Address for All Other Notices (including Prudential Private Placement Investors, L.P. copies of all notices relating to payments) Gateway Center Four 100 Mulberry Street Newark, New Jersey 07102 Attention: Mr. Albert Trank, Senior Vice President Tel: 973-802-8608 Fax: 973-624-6432 Signature Block RELIASTAR LIFE INSURANCE COMPANY By: Prudential Private Placement Investors, L.P., As Investment Advisor By: Prudential Private Placement Investors, Inc., General Partner By: __________________________________
Schedule A-11
PURCHASER NAME RELIASTAR LIFE INSURANCE COMPANY - -------------- -------------------------------- Instructions re Delivery of Notes The Prudential Insurance Company of America 1114 Avenue of the Americas, 30th Floor New York, New York 10036 Attn: Suzanne Lui, Esq. Tax Identification Number 41-0451140
Schedule A-12 SCHEDULE B DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "ACQUISITION" means any acquisition, whether by cash, stock (or other equity purchase), asset purchase, merger, consolidation or otherwise of a Person, all or substantially all of the property of a Person or a business line or division of a Person. "AFFILIATE" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of either of the Issuers or any Subsidiary or any Person of which one or more of the Issuers and the Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of an Issuer. "AGENT" means SunTrust Bank or its successors or assigns acting as administrative agent for all lenders under the Bank Credit Agreement. "AGREEMENT, THIS" is defined in Section 17.3. "APPLICABLE PLEDGE AMOUNT" means, in respect of the amount of capital stock or other equity interest of any Foreign Subsidiary to be pledged to the Agent, for the benefit of the holders of Notes, pursuant to the Pledge Agreement, the lesser of (a) 65% of all outstanding capital stock or other equity interest of such Foreign Subsidiary and (b) the total amount of all outstanding capital stock or other equity interest of such Foreign Subsidiary owned by the Issuers and their other Subsidiaries. "ASSET DISPOSITION" means any Transfer (including, without limitation, a Transfer in connection with a Sale and Leaseback Transaction) except: (a) any Schedule B-1 (i) Transfer from a Subsidiary to an Issuer or a Wholly-Owned Subsidiary (other than a Dormant Company); (ii) Transfer from an Issuer to a Wholly-Owned Subsidiary (other than a Dormant Company) ; and (iii) Transfer from an Issuer to a Subsidiary (other than a Wholly-Owned Subsidiary that is not a Dormant Company) or from a Subsidiary to another Subsidiary (other than a Dormant Company), which in either case is for Fair Market Value, so long as immediately before and immediately after the consummation of any such Transfer and after giving effect thereto, no Default or Event of Default exists; and (b) any Transfer made in the ordinary course of business and involving only property that is either (i) inventory held for sale or (ii) equipment, fixtures, supplies or materials of a type no longer required in the operation of the business of an Issuer or any Subsidiary or that are obsolete. "ATTRIBUTABLE DEBT" means as to any particular lease relating to a Sale and Leaseback Transaction, the greater of (a) the present value of all Lease Rentals required to be paid by the Company or any Subsidiary under such lease during the remaining term thereof (determined in accordance with generally accepted financial practice using a discount factor equal to the interest rate implicit in such lease if known or, if not known, of 8% per annum) and (b) the Fair Market Value of the property subject to such Sale and Leaseback Transaction as determined at the time of consummation of such Sale and Leaseback Transaction. "BANK CREDIT AGREEMENT" means the Revolving Credit Agreement by and among the Company and the Co-Issuer as borrowers, the Agent and the various lenders party thereto, dated the date of the Closing, as amended from time to time, together with all agreements and documents related thereto as the same may be refinanced or refunded from time to time in accordance with the provisions thereof and hereof (except that "Bank Credit Agreement" shall mean the Revolving Credit Agreement in effect on the date of the Closing where so specified). "BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Atlanta, Georgia or New York, New York are required or authorized to be closed. Schedule B-2 "CAPITAL LEASE" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "CAPITAL LEASE OBLIGATION" means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person. "CHANGE IN CONTROL" means the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in a single transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or "group" (within the meaning of the Exchange Act and the rules of the Securities and Exchange Commission from time to time issued thereunder); (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or "group" (as defined immediately above) of 30% or more of the outstanding shares of the voting stock of the Company; (c) the Company ceases to own 100% of the outstanding capital stock of the Co-Issuer; or (d) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by persons who were neither (i) nominated by the then current board of directors or (ii) appointed by directors so nominated. "CLOSING" is defined in Section 3. "CO-ISSUER" is defined in the introductory paragraph of this Agreement. "COMPANY" is defined in the introductory paragraph of this Agreement. "CONFIDENTIAL INFORMATION" is defined in Section 20. "CONSOLIDATED EBITDA" means, for any period, the sum of: (a) Consolidated Net Income for such period; plus (b) to the extent, and only to the extent, that such amount was deducted in the computation of Consolidated Net Income for such period, the amount of: (i) Consolidated Interest Expense for such period; (ii) with respect to the pending litigation involving the Department of Justice as described in Schedule 5.8, any non-recurring charges related to the costs and settlement of such litigation (including the DOJ Settlement Payment), provided that the amount added back to Consolidated Net Income Schedule B-3 subsequent to the date of the Closing pursuant to this clause (ii) does not exceed $10,000,000 (or its equivalent); (iii) income tax expense, depreciation expense and amortization expense of the Issuers and their Consolidated Subsidiaries, in each case, for such period; and (iv) other non-cash charges as approved by the Required Holders (including, if so approved, non-cash charges for such period taken for the impairment of goodwill in accordance with Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" issued by the Financial Accounting Standards Board) minus (c) all software costs that are capitalized in respect of such period (other than software purchased or acquired from software vendors), in each case determined on a consolidated basis in accordance with GAAP for such period. "CONSOLIDATED EBITR" means, for any period, the sum of: (a) Consolidated Net Income for such period; plus (b) to the extent, and only to the extent, that such amount was deducted in the computation of Consolidated Net Income for such period, the amount of: (i) Consolidated Interest Expense for such period; (ii) with respect to the pending litigation involving the Department of Justice as described in Schedule 5.8, any non-recurring charges related to the costs and settlement of such litigation (including the DOJ Settlement Payment), provided that the amount added back to Consolidated Net Income subsequent to the date of the Closing pursuant to this clause (ii) does not exceed $10,000,000 (or its equivalent); (iii) income tax expense of the Issuers and their Consolidated Subsidiaries, in each case, for such period; (iv) Consolidated Lease Expense for such period; and (v) other non-cash charges as approved by the Required Holders (including, if so approved, non-cash charges for such period taken for the impairment of goodwill in accordance with Statement of Financial Schedule B-4 Accounting Standards No. 142 "Goodwill and Other Intangible Assets" issued by the Financial Accounting Standards Board) minus (c) all software costs that are capitalized in respect of such period (other than software purchased or acquired from software vendors), in each case determined on a consolidated basis in accordance with GAAP for such period. "CONSOLIDATED FUNDED DEBT" means, as of any date of determination, the total of all Indebtedness of the Issuers and their Consolidated Subsidiaries outstanding on such date, after eliminating all offsetting debits and credits between the Issuers and their Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Issuers and their Subsidiaries in accordance with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for the Issuers and their Consolidated Subsidiaries, with respect to any period, the sum (without duplication) of the following (in each case, eliminating all offsetting debits and credits between the Issuers and their Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Issuers and their Consolidated Subsidiaries in accordance with GAAP): (a) all interest paid in cash in respect of Debt of the Issuers and their Subsidiaries (including, however, imputed interest on Capital Lease Obligations whether paid in cash or capitalized or expensed during such period) and (b) the net amount payable (or minus the net amount receivable) under Swaps during such period (whether or not actually paid or received during such period). "CONSOLIDATED LEASE EXPENSE" means, for the Issuers and their Consolidated Subsidiaries, with respect to any period, the sum of the fixed and contingent Lease Rentals determined on a consolidated basis in accordance with GAAP for such period, provided that, if at the date of determination, any such rental or other obligations (or portion thereof) are contingent or not otherwise definitely determinable by the terms of the related lease, the amount of such obligations (or such portion thereof) (a) shall be assumed to be equal to the amount of such obligations for the period of 12 consecutive calendar months immediately preceding the date of determination or (b) if the related lease was not in effect during such preceding 12-month period, shall be the amount estimated by a Senior Financial Officer on a reasonable basis and in good faith. "CONSOLIDATED NET INCOME" means, with reference to any period, the net income (or loss) of the Issuers and their Consolidated Subsidiaries for such period (taken as a cumulative whole), as determined in accordance with GAAP, after Schedule B-5 eliminating all offsetting debits and credits between the Issuers and their Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Issuers and their Subsidiaries in accordance with GAAP, provided that there shall be excluded (to the extent otherwise included therein): (a) any extraordinary gains or losses, (b) any gains resulting from any write-up of any assets (but not any loss resulting from any write-down of any assets), (c) the income (or loss) of any Person (other than a Subsidiary) in which the Issuers or any Consolidated Subsidiary has an ownership interest, except to the extent that any such income has been actually received by either of the Issuers or such Consolidated Subsidiary in the form of cash dividends or similar cash distributions, (d) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with an Issuer or a Subsidiary, and the income (or loss) of any Person, substantially all of the assets of which have been acquired in any manner, realized by such other Person prior to the date of acquisition, and (e) the undistributed earnings of any Subsidiary (other than any Guarantor) to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Subsidiary. "CONSOLIDATED NET WORTH" means, at any time, (a) the sum of (i) the par value (or value stated on the books of the corporation) of the capital stock (but excluding treasury stock and capital stock subscribed and unissued) of the Company and the Subsidiaries plus (ii) the amount of the paid-in capital and retained earnings of the Company and the Subsidiaries, in each case as such amounts would be shown on a consolidated balance sheet of the Company and the Subsidiaries as of such time prepared in accordance with GAAP, minus, (b) to the extent included in clause (a), all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, Schedule B-6 "CONSOLIDATED SUBSIDIARY" means, at any date, any Person that, in accordance with GAAP, would or should be consolidated in the Company's consolidated financial statements on such date. "DEBT" means, with respect to any Person, without duplication, (a) its liabilities for borrowed money; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capital Lease Obligations; (d) its liabilities (whether or not contingent) for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and (e) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (d) hereof. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (e) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "DEFAULT" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "DEFAULT RATE" means that rate of interest that is the greater of (a) 8.08% per annum or (b) 2% over the rate of interest publicly announced by The Bank of New York in New York, New York as its "base" or "prime" rate. "DISPOSITION VALUE" means, at any time, with respect to any property (a) in the case of property that does not constitute Subsidiary Stock, the book value thereof, valued at the time of such disposition in good faith by the Company, and Schedule B-7 (b) in the case of property that constitutes Subsidiary Stock, an amount equal to that percentage of the book value of the assets of the Subsidiary that issued such stock as is equal to the percentage that the book value of such Subsidiary Stock represents of the book value of all of the outstanding capital stock of such Subsidiary (assuming, in making such calculations, that all Securities convertible into such capital stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion) determined at the time of the disposition thereof, in good faith by the Company. "DISTRIBUTION" means, in respect of any Person: (a) dividends or other distributions or payments on capital stock or other equity interests of such Person (except distributions in such stock or other equity interest); and (b) the redemption or acquisition of such stock or other equity interests or of warrants, rights or other options to purchase such stock or other equity interests (except when solely in exchange for such stock or other equity interests) unless made, contemporaneously, from the net proceeds of a sale of such stock or other equity interests. "DOJ SETTLEMENT PAYMENT" means the payment and satisfaction in full by the Issuers of all claims made by the Department of Justice or any Governmental Authority in respect of the Department of Justice litigation described in Schedule 5.8. "DOLLARS" OR "$" means the lawful currency of the United States of America. "DOMESTIC SUBSIDIARY" means a direct or indirect Subsidiary of an Issuer organized under the laws of, or holding any assets located in any jurisdiction of, the United States of America, any State thereof or the District of Columbia. "DORMANT COMPANY" means each of the Subsidiaries of the Company specifically designated as "dormant" on Schedule 5.4 hereto, as amended from time to time. "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. Schedule B-8 "ENVIRONMENTAL LIABILITY" shall mean any liability, contingent or otherwise (including any liability for damages, costs of environmental investigation and remediation, costs of administrative oversight, fines, natural resource damages, penalties or indemnities), of either Issuer or any Subsidiary directly or indirectly resulting from or based upon (a) any actual or alleged violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. As used in this definition, "RELEASE" means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within any building, structure, facility or fixture. "EQUITY OFFERING" is defined in Section 10.7. "EQUIVALENT" means, on any given date when one currency (the "FIRST CURRENCY") of a certain amount is denominated in another currency (the "SECOND CURRENCY"), the amount of the First Currency which could be purchased with the amount of the Second Currency at the spot rate of exchange quoted by The Bank of New York at or about 9:15 a.m. (New York time) on such date for the purchase of the First Currency with the Second Currency. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that is treated as a single employer together with an Issuer (a) under Section 414(b) or (c) of the US Tax Code or (b) solely for the purpose of section 302 of ERISA and section 412 of the US Tax Code, under section 414 of the US Tax Code. "EVENT OF DEFAULT" is defined in Section 11. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FAIR MARKET VALUE" means, at any time with respect to any property, the sale value of such property that would be realized in an arm's-length sale at such time between an informed and willing buyer, and an informed and willing seller, under no compulsion to buy or sell, respectively. Schedule B-9 "FINANCING DOCUMENTS" means the Notes, this Agreement, the Guaranty Agreement, the Sharing Agreement and the Pledge Agreement, as each may be amended, restated or otherwise modified from time to time. "FISCAL YEAR" means the 12 month period of the Company ending on the 31st day of December in each year. "FIXED CHARGES" means, with respect to the Issuers and their Consolidated Subsidiaries for any period, the sum of (a) Consolidated Interest Expense for such period and (b) Consolidated Lease Expense for such period. "FIXED CHARGES COVERAGE RATIO" means, as of the last day of each fiscal quarter, the ratio of (a) Consolidated EBITR for the period of four consecutive fiscal quarters ending on such day to (b) Fixed Charges for such period. "FOREIGN SUBSIDIARY" means any Subsidiary organized under the laws of, or holding any assets located in (other than inventory it has acquired for shipment to the United States), any jurisdiction other than the United States of America, any state thereof or the District of Columbia. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "GOVERNMENTAL AUTHORITY" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which either of the Issuers or any Subsidiary other than any Dormant Company conducts all or any part of its business, or which asserts jurisdiction over any properties of either of the Issuers or any Subsidiary other than any Dormant Company, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "GUARANTORS" means each Initial Guarantor and each other Person that enters into the Guaranty Agreement pursuant to Section 9.6(a). Schedule B-10 "GUARANTY" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to make payment of the Indebtedness or obligation; or (d) otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof. In any computation of the Indebtedness or other liabilities of the obligor under any Guaranty, the Indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "GUARANTY AGREEMENT" is defined in Section 4.10. "HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). "HOLDER" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Issuers pursuant to Section 13.1. "INDEBTEDNESS" means, with respect to any Person at any time, without duplication, Schedule B-11 (a) its obligations for borrowed money (whether evidenced by bonds, debentures, notes or similar instruments); (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) its Capital Lease Obligations; (d) its liabilities (whether or not contingent) in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (e) its liabilities (whether or not contingent) for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (f) its redemption obligations (whether or not contingent) in respect of redeemable capital stock or other Security of such Person; (g) any off-balance sheet liability it has retained in connection with asset securitization programs, synthetic leases, sale and leaseback transactions or other similar obligations arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person and its Subsidiaries; (h) Swaps of such Person; and (i) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (h) hereof. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (i) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "INHAM EXEMPTION" is defined in Section 6.2(e). Schedule B-12 "INITIAL GUARANTORS" means each The Garden City Group, Inc., Crawford-THG, Inc., Crawford Leasing Services, Inc., Crawford & Company Healthcare Management, Inc., The PRISM Network, Inc., Crawford Investigation Services, Inc., Calesco, Inc., Crawford & Company of New York, Inc., Risk Sciences Group, Inc., Crawford & Company of California, Crawford & Company, L.P., Crawford & Company of Illinois, Crawford & Company of Florida, Crawford & Company Employment Services, Inc., Crawford Healthcare Management of Norfolk and Baltimore, Inc., Qirra Custom Software, Inc. and Brocklehurst Miller, Inc. "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form. "INVESTMENT" means any investment, made in cash or by delivery of property, by the Company or any Subsidiary (a) in any Person, whether by acquisition of stock, Indebtedness or other obligation or Security, or by loan, Guaranty, advance, capital contribution or otherwise, or (b) in any property. "ISSUERS" is defined in the introductory paragraph of this Agreement. "LEASE RENTALS" means, with respect to any period, the sum of the rental and other obligations required to be paid during such period by the Issuers or any Consolidated Subsidiary as lessee under all leases of real or personal property (other than Capital Leases). "LIEN" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "MAKE-WHOLE AMOUNT" is defined in Section 8.6. "MATERIAL" means material in relation to the business, operations, affairs, financial condition, assets, properties, or prospects of the Company and the Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company Schedule B-13 and the Subsidiaries taken as a whole, or (b) the ability of either Issuer to perform its obligations under any Financing Document to which it is a party, or (c) the ability of any Guarantor to perform its obligations under the Guaranty Agreement, or (d) the validity or enforceability of any Financing Document. "MEMORANDUM" is defined in Section 5.3. "MULTIEMPLOYER PLAN" means any US Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "NAIC ANNUAL STATEMENT" is defined in Section 6.2(a). "NET PROCEEDS AMOUNT" means, with respect to any Transfer of any property by any Person, an amount equal to the difference of: (a) the aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such Transfer) received by such Person in respect of such Transfer, minus (b) all ordinary and reasonable out-of-pocket costs and expenses, and taxes in respect of, such Transfer actually incurred by such Person, minus (c) all amounts applied to Debt secured by such property which is repaid contemporaneously and in connection with such Transfer. "NEW/AMENDED COVENANT PROVISIONS" is defined in Section 9.8(a). "NOTES" is defined in Section 1. "OBLIGORS" means, collectively, both Issuers, all Guarantors and each Person that becomes a pledgor under Section 9.6(b). "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "PERMITTED ACQUISITIONS" means any Acquisition so long as (a) at the time of such Acquisition, no Default or Event of Default is in existence, (b) such acquisition has been approved or recommended by the board of directors of the Person being Schedule B-14 acquired and (c) the Total Acquisition Consideration of such Acquisition, when aggregated with the Total Acquisition Consideration of all Acquisitions consummated by the Company and the Consolidated Subsidiaries during the preceding 12 month period does not exceed 10% of Consolidated Net Worth determined as of the last day of the then most recently ended fiscal quarter of the Company. "PERMITTED INVESTMENTS" means the following Investments: (a) Investments in United States Governmental Securities, provided that such obligations mature within one year from the date of acquisition thereof; (b) Investments in certificates of deposit or banker's acceptances issued by an Acceptable Bank, provided that such obligations mature within 180 days from the date of acquisition thereof; (c) Investments in commercial paper given the highest rating by a credit rating agency of recognized national standing and maturing not more than one year from the date of creation thereof; (d) Investments in fully collateralized Repurchase Agreements; (e) mutual funds investing solely in one or more of the Investments permitted in clauses (a) through (d) above; and (f) any Investment made pursuant to, and in accordance with, the "Investment Guidelines" of the Company set forth on Schedule C hereto. As used in this definition of "Permitted Investments": "Acceptable Bank" means any bank or trust company (i) which is organized under the laws of the United States of America or any State thereof, (ii) which has capital, surplus and undivided profits aggregating at least $500,000,000, and (iii) whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank or trust company) shall have been given a rating of "A" or better by S&P, "A2" or better by Moody's or an equivalent rating by any other credit rating agency of recognized national standing. "Acceptable Broker-Dealer" means any Person other than a natural person (i) which is registered as a broker or dealer pursuant to the Exchange Act and (ii) whose long-term unsecured debt obligations Schedule B-15 shall have been given a rating of "A" or better by S&P, "A2" or better by Moody's or an equivalent rating by any other credit rating agency of recognized national standing. "Moody's" means Moody's Investors Service. "Repurchase Agreement" means any written agreement that provides for (i) the transfer of one or more United States Governmental Securities in an aggregate principal amount at least equal to the amount of the Transfer Price (defined below) to the Company or any Subsidiary from an Acceptable Bank or an Acceptable Broker-Dealer against a transfer of funds (the "Transfer Price") by the Company or such Subsidiary to such Acceptable Bank or Acceptable Broker-Dealer, and (ii) a simultaneous agreement by the Company or such Subsidiary, in connection with such transfer of funds, to transfer to such Acceptable Bank or Acceptable Broker-Dealer the same or substantially similar United States Governmental Securities for a price not less than the Transfer Price plus a reasonable return thereon at a date certain not later than 30 days after such transfer of funds. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Companies. "United States Governmental Security" means any direct obligation of, or obligation guaranteed by, the United States of America, or any agency controlled or supervised by or acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America, so long as such obligation or guarantee shall have the benefit of the full faith and credit of the United States of America which shall have been pledged pursuant to authority granted by the Congress of the United States of America. "PERSON" means an individual, partnership, corporation, limited liability company, firm, association, joint venture, trust, unincorporated organization, or a government or agency or political subdivision thereof. "PLEDGE AGREEMENT" is defined in Section 4.11 and shall include each additional Pledge Agreement that is required by Section 9.6(b). "PREFERRED STOCK" means any class of capital stock or other equity interests of a Person that is preferred over any other class of capital stock or equity interests of Schedule B-16 such Person as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such Person. "PRIORITY DEBT" means as of any date, without duplication, the sum of (a) all Debt of the Obligors secured by any Lien with respect to any property owned by the Company or any Subsidiary (other than pursuant to the Pledge Agreement), (b) all Debt of Subsidiaries (except Debt of the Co-Issuer or a Guarantor or Debt of any Subsidiary owing solely to the Company or a Wholly-Owned Subsidiary), and (c) Attributable Debt of the Company and the Subsidiaries. "PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "PROPERTY REINVESTMENT APPLICATION" means, with respect to any Transfer of property, the application of an amount equal to the Net Proceeds Amount with respect to such Transfer to the acquisition by either of the Issuers or any Guarantor of machinery, equipment or other similar operating assets of either of the Issuers or any Guarantor to be used in the ordinary course of business of such Person (excluding, for the avoidance of doubt, cash and cash equivalents). "PTE" is defined in Section 6.2(a). "PURCHASERS" is defined at the commencement of this Agreement. "QPAM EXEMPTION" is defined in Section 6.2(d). "QUALIFIED INSTITUTIONAL BUYER" means a "Qualified Institutional Buyer" as defined in Rule 144A under the Securities Act and any investment company or fund that invests on a discretionary basis at least $100,000,000 in Securities of issuers that are not affiliated with such investment company or fund. "REQUIRED HOLDERS" means, at any time, the holders of at least a majority in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Issuers or any of its Affiliates). "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement. "RESTRICTED INVESTMENTS" means all Investments, including without limitation, Investments in joint ventures and in Subsidiaries that are not Consolidated Subsidiaries. Schedule B-17 "RESTRICTED PAYMENTS" means: (a) any Distribution in respect of the Company or any Subsidiary of the Company (other than on account of capital stock or other equity interests of a Subsidiary of the Company owned legally and beneficially by the Company or another Subsidiary of the Company), including, without limitation, any Distribution resulting in the acquisition by the Company of Securities which would constitute treasury stock, and (b) any payment, repayment, redemption, retirement, repurchase or other acquisition, direct or indirect, by the Company or any Subsidiary of, on account of, or in respect of, the principal of any Subordinated Debt (or any installment thereof) prior to the regularly scheduled maturity date thereof (as in effect on the date such Subordinated Debt was originally incurred). For purposes of this Agreement, the amount of any Restricted Payment made in property shall be the greater of (x) the Fair Market Value of such property (as determined in good faith by the board of directors (or equivalent governing body) of the Person making such Restricted Payment) and (y) the net book value thereof on the books of such Person, in each case determined as of the date on which such Restricted Payment is made. "SALE AND LEASEBACK TRANSACTION" means a transaction or series of transactions pursuant to which an Issuer or any Subsidiary shall sell or transfer to any Person (other than the Issuers or a Subsidiary) any property, whether now owned or hereafter acquired, and, as part of the same transaction or series of transactions, such Issuer or such Subsidiary shall rent or lease as lessee (other than pursuant to a Capital Lease), or similarly acquire the right to possession or use of, such property or one or more properties which it intends to use for the same purpose or purposes as such property. "SECURITIES ACT" means the Securities Act of 1933 of the United States of America, as amended from time to time. "SECURITY" is defined in section 2(a) of the Securities Act. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "SHARING AGREEMENT" is defined in Section 4.13. "SOURCE" is defined in Section 6.2. Schedule B-18 "SPECIFIED FINANCIAL COVENANTS" is defined in Section 9.8(b). "SPECIFIED PROVISIONS" is defined in Section 9.8(b). "SUBORDINATED DEBT" means any Debt that is in any manner subordinated in right of payment or security in any respect to Debt evidenced by the Notes. "SUBSIDIARY" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "SUBSIDIARY STOCK" means, with respect to any Person, the share capital or other equity interest (or any options or warrants to purchase share capital or other equity interests or other securities exchangeable for or convertible into share capital or other equity interests) of any Subsidiary of such Person. "SUCCESSOR CORPORATION" is defined in Section 10.2(a). "SVO" is defined in Section 4.8. "SWAPS" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "TAX" means any present or future tax, levy, impost, withholding, duty, charge, assessment or fee of any nature that is imposed by any Governmental Authority or any taxing authority thereof. Schedule B-19 "TOTAL ACQUISITION CONSIDERATION" means as at the date of any Acquisition, the sum of the following without duplication: (a) the amount of any cash and Fair Market Value of other property given as consideration, including at such date the deferred payment of any such amounts, (b) the amount (determined by using the outstanding amount or the amount payable at maturity, whichever is greater) of any obligations for money borrowed incurred, assumed or acquired by either of the Issuers or any Subsidiary in connection with such Acquisition, (c) all amounts paid in respect of covenants not to compete and consulting agreements that should be recorded on the financial statements of the Company and the Subsidiaries in accordance with GAAP, and (d) the aggregate Fair Market Value of all other consideration given by either of the Issuers or any Subsidiary (including any shares of capital stock of either of the Issuers or any Subsidiary) in connection with such Acquisition. "TRANSFER" means and includes, with respect to any property, any sales, exchanges, conveyances, leases, transfers, assignments or other dispositions of such property; the term "Transfer," when used as a verb with respect to any property, means to sell, exchange, convey, lease as lessor, transfer, assign or otherwise dispose of such property; and the term "Transferred" has a correlative meaning. "USA PATRIOT ACT" means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001 of the United States of America. "US PLAN" means an "employee pension benefit plan" (as defined in section 3(2) of ERISA) subject to the provisions of Title IV of ERISA, section 412 of the US Tax Code or section 302 of ERISA that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "US TAX CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Issuers and each of such Issuer's other Wholly-Owned Subsidiaries at such time. Schedule B-20 SCHEDULE C INVESTMENT GUIDELINES 1. INTRODUCTION The main goal of Crawford & Company's (the "Company") investment strategy is to provide a competitive return on the operating funds of the Company, while providing safety of principal and providing for the Company's regular cash needs. 2. INVESTMENT OBJECTIVES A. The primary investment objective shall be safety of principal. B. The secondary investment objective shall be to maximize income and investment returns. C. The overall character of the portfolio shall be of above average quality, and holdings shall be well diversified as to issuer and maturity. D. It is anticipated that liquidity needs generally will be met through maturities and portfolio structure rather than depend upon the marketability of individual holdings. 3. GENERAL INVESTMENT GUIDELINES A. The Treasurer is authorized and responsible for the investment decisions and changes as deemed necessary and in accordance with the objectives and guidelines set forth herein. 4. SPECIFIC INVESTMENT GUIDELINES A. The average maturity of the portfolio shall not exceed two (2.0) years. B. The maturity of any individual holding shall not exceed three (3.0) years. C. At least twenty-five percent (25%) of the portfolio shall have a maturity of 90 days or less. D. For purpose of determining maturities, the next reset date will be used for floating rate securities. Schedule C-1 E. Investments shall be limited to the following classes of securities: 1. Obligations of the U.S. Government and Government Agencies including but not limited to U.S. Treasury Notes and bills, Federal Mortgage Association, Student Loan Marketing Association and the Federal Home Loan Bank Board. 2. Debt obligations of U.S. Corporations. 3. U.S. Dollar denominated Debt obligations of multi-national corporations. 4. Short term Investment Company (STIC) or other institutional money market fund shares (i.e. Lehman Brothers Money Market Funds, Dreyfus Institutional Funds). 5. Permissible investment instruments shall include: a. Repurchase Agreements b. Commercial paper (A3A paper) including private placement commercial paper (4-2 paper) c. Certificates of deposit and time deposits d. Loan Sales Participation e. Variable rate demand notes f. Eurodollar commercial paper g. Eurodollar and time deposits of domestic and foreign banks h. U.S. dollar denominated foreign commercial paper i. Bankers' Acceptances j. Master Notes F. Corporate obligations with long-term debt rating of single A or better by at least one recognized rating agency and short-term ratings of A1 or P1. Schedule C-2 5. RESTRICTIONS A. Except for U.S. Treasury securities (securities backed by the full faith and credit of the U.S. Government), and money-market mutual funds, no more than 15% of the total assets of the account may be invested in the securities of any single issuer. B. Investment in Eurodollar securities shall be limited to 10% of the portfolio. C. Investment in any form of hedging, interest swaps and/or derivatives which hedge interest rates (either floating to fixed rate or fixed to floating rate) must have the prior approval of the Chief Financial Officer (CFO) and the Chief Executive Officer (CEO) of the Company. Schedule C-3 EX-13.1 4 g93630exv13w1.txt EX-13.1 PORTIONS OF THE REGISTRANT'S ANNUAL REPORT 2004 FINANCIAL REVIEW Management's Discussion and Analysis 18 Consolidated Statements of Income 35 Consolidated Balance Sheets 36 Consolidated Statements of Shareholders' Investment 38 Consolidated Statements of Cash Flows 39 Notes to Consolidated Financial Statements 40 Management's Report on Responsibility for Financial Reporting 57 Management's Report on Internal Controls over Financial Reporting 58 Report of Independent Registered Public Accounting Firm on Financial Statements 59 Report of Independent Registered Public Accounting Firm on Management's Assessment of Internal Control over Financial Reporting 60 Selected Financial Data 61 Quarterly Financial Data (unaudited) 62 Shareholder Information, Board of Directors and Officers Inside Back Cover MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS OVERVIEW Crawford & Company provides claims management services to insurance companies, self-insured entities and class action settlement funds. Major service lines include workers' compensation claims administration and healthcare management services, property and casualty claims management, class action services, and risk management information services. Insurance companies, which represent the major source of our revenues, customarily manage their own claims administration function but require limited services which we provide, primarily field investigation and evaluation of property and casualty insurance claims. Self-insured entities typically require a broader range of services from us. In addition to field investigation and evaluation of their claims, we may also provide initial loss reporting services for their claimants, loss mitigation services such as medical case management and vocational rehabilitation, risk management information services, and administration of the trust funds established to pay their claims. Finally, we also perform the administrative functions related to securities, product liability, bankruptcy and other class action settlements, including identifying and qualifying class members, determining and dispensing settlement payments, and administering the settlement funds. The claims management services market, both in the United States ("U.S.") and internationally, is highly competitive and comprised of a large number of companies of varying size and scope of services. The demand from insurance companies and self-insured entities for services provided by independent claims service firms like us is largely dependent on industry-wide claims volumes, which are affected by the insurance underwriting cycle, weather-related events, general economic activity, and overall employment levels and associated workplace injury rates. We generally earn our revenues on an individual fee per claim basis. Accordingly, the volume of claim referrals to us is a key driver of our revenues. When the insurance underwriting market is soft, insurance companies are generally more aggressive in the risks they underwrite, and insurance premiums and policy deductibles decline. This usually results in an increase in industry-wide claim referrals which will increase claim referrals to us provided we maintain at least our existing share of the overall claim services market. During a hard insurance underwriting market, as we've experienced since the September 11, 2001 terrorist attacks, insurance companies become very selective in the risks they underwrite, and insurance premiums and policy deductibles increase, sometimes quite dramatically. This results in a reduction in industry-wide claims volumes, which reduces claims referrals to us unless we can offset the decline in claim referrals with growth in our share of the overall claims services market. Our ability to grow our market share in such a highly fragmented, competitive market is primarily dependent on the delivery of superior quality service and effective, properly focused sales efforts. RESULTS OF OPERATIONS Consolidated net income was $25,172,000 for 2004 as compared to $7,662,000 in 2003 and $24,512,000 in 2002. Consolidated net income for 2004 included a gain of $5.2 million, net of related income taxes, on the sale of an undeveloped parcel of real estate. Consolidated net income for 2003 included an after-tax payment of $8.0 million under an agreement reached with the U.S. Department of Justice to resolve an investigation into our billing practices. Consolidated net income for 2002 included a payment received from a former vendor in full settlement of a business dispute of $3.8 million, net of related income tax expense. Operating earnings is one of the key performance measures our senior management and chief decision maker use to evaluate the performance of our business and make resource allocation decisions. We believe this measure is useful to investors in that it allows them to evaluate our performance using the same criteria our management uses. Crawford & Company ANNUAL REPORT 2004 Following is a reconciliation of consolidated net income on a GAAP (generally accepted accounting principles) basis to operating earnings for the years ended December 31, 2004, 2003, 2002, 2001, and 2000:
(In thousands) 2004 2003 2002 2001 2000 - --------------------------------- -------- -------- -------- -------- -------- Net income $ 25,172 $ 7,662 $ 24,512 $ 29,445 $ 25,348 Add/(deduct): Special (credits) and charges (8,573) 8,000 (6,000) - 16,740 Amortization of goodwill - - - 3,448 3,203 Net corporate interest expense 3,536 5,414 4,706 4,779 4,476 Income tax expense 12,251 8,964 14,029 18,356 15,802 -------- -------- -------- -------- -------- Operating earnings $ 32,386 $ 30,040 $ 37,247 $ 56,028 $ 65,569 ======== ======== ======== ======== ========
Consolidated 2000 net income included a charge related to the write down of the carrying value associated with internal use software formerly under development. Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), eliminated amortization of goodwill after 2001. The following is a discussion and analysis of the results of operations of our two reportable segments: U.S. operations and international operations. Our reportable segments represent components of our business for which separate financial information is available that is evaluated regularly by our chief decision maker in deciding how to allocate resources and in assessing performance. The individual services listed in this annual report do not represent separate reportable segments. Rather, they describe the various claims administration services performed within our approximately 700 field branches around the world. Revenue amounts exclude reimbursements for out-of-pocket expenses. Expense amounts exclude reimbursed out-of-pocket expenses, special credits and charges, net corporate interest expense, and income taxes. Our discussion and analysis of operating expenses is comprised of two components. Compensation and Fringe Benefits includes all compensation, payroll taxes, and benefits provided to our employees which, as a service company, represents our most significant and variable expense. Expenses Other Than Reimbursements, Compensation and Fringe Benefits include office rent and occupancy costs, other office operating expenses, amortization and depreciation. This discussion should be read in conjunction with our consolidated financial statements and the accompanying notes. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating results for our U.S. and international operations were as follows:
% Change (in thousands) From Prior Year - -------------- --------------- Years Ended December 31 2004 2003 2002 2004 2003 - ----------------------- ---- ---- ---- ---- ---- REVENUES: U.S. $ 478,137 $ 471,847 $ 508,734 1.3% (7.3)% International 255,430 219,086 190,656 16.6% 14.9% --------- --------- --------- Total $ 733,567 $ 690,933 $ 699,390 6.2% (1.2)% COMPENSATION & FRINGE BENEFITS: U.S. $ 295,152 $ 292,357 $ 320,475 1.0% (8.8)% % of Revenues 61.7% 62.0% 62.9% International 177,159 152,950 130,886 15.8% 16.9% % of Revenues 69.4% 69.8% 68.6% --------- --------- --------- Total $ 472,311 $ 445,307 $ 451,361 6.1% (1.3)% % of Revenues 64.4% 64.5% 64.5% EXPENSES OTHER THAN REIMBURSEMENTS, COMPENSATION & FRINGE BENEFITS: U.S. $ 162,185 $ 156,201 $ 158,998 3.8% (1.8)% % of Revenues 33.9% 33.1% 31.3% International 66,685 59,385 51,784 12.3% 14.7% % of Revenues 26.1% 27.1% 27.2% --------- --------- --------- Total $ 228,870 $ 215,586 $ 210,782 6.2% 2.3% % of Revenues 31.2% 31.2% 30.2% OPERATING EARNINGS: (1) U.S. $ 20,800 $ 23,289 $ 29,261 (10.7)% (20.4)% % of Revenues 4.4% 4.9% 5.8% International 11,586 6,751 7,986 71.6% (15.5)% % of Revenues 4.5% 3.1% 4.2% --------- --------- --------- Total $ 32,386 $ 30,040 $ 37,247 7.8% (19.3)% % of Revenues 4.4% 4.3% 5.3%
(1) Earnings before special credits and charges, net corporate interest expense, and income taxes. Crawford & Company ANNUAL REPORT 2004 U.S. OPERATIONS Years Ended December 31, 2004 and 2003 REVENUES U.S. revenues before reimbursements, by market type, for 2004 and 2003 were as follows:
(in thousands) 2004 2003 Variance - ---------------------- --------- --------- -------- Insurance companies $ 233,531 $ 229,781 1.6 % Self-insured entities 158,190 167,526 (5.6)% Class action services 86,416 74,540 15.9 % --------- --------- Total U.S. Revenues $ 478,137 $ 471,847 1.3 % ========= =========
Revenues from insurance companies increased 1.6% to $233.5 million in 2004 compared to $229.8 million in 2003, due to an $18.1 million increase in revenues generated by our catastrophe adjuster unit in response to the hurricanes which struck the southeastern United States during the 2004 third quarter. This increase was partially offset by a decline in referrals for high-frequency, low-severity claims from our insurance company clients during 2004. Revenues from our catastrophe adjusters totaled $42.5 million in 2004 compared to $24.4 million in 2003. Revenues from self-insured entities decreased 5.6%, to $158.2 million in 2004 from $167.5 million in 2003, due primarily to a reduction in claim referrals from our existing clients, only partially offset by new business gains. See the following analysis of U.S. cases received. Class action services revenues, including administration and inspection services, increased 15.9%, from $74.5 million in 2003 to $86.4 million in 2004. This increase was due to work performed on several major projects awarded during 2004. These revenues can fluctuate significantly depending on the timing and size of project awards. Excluding the impact of class action services, U.S. unit volume, measured principally by cases received, decreased 5.5% from 2003 to 2004. This decrease was partially offset by a 4.3% revenue increase from changes in the mix of services provided and in the rates charged for those services, resulting in a net 1.2% decrease in U.S. revenues from 2003 to 2004, excluding revenues from class action services. Growth in class action services increased U.S. revenues by 2.5% in 2004. Excluding the impact of class action services, U.S. unit volume by major service line, as measured by cases received, for 2004 and 2003 was as follows:
(whole numbers) 2004 2003 Variance - ------------------------- ------- ------- -------- Casualty 209,110 213,980 (2.3)% Workers' Compensation 148,902 180,787 (17.6)% Property 255,030 224,432 13.6 % Vehicle 144,306 184,266 (21.7)% Other 20,808 20,107 3.5 % ------- ------- Total U.S. Cases Received 778,156 823,572 (5.5)% ======= =======
The increase in property claims was due to the four hurricanes that struck Florida and other southeastern states during August and September of 2004. The decline in vehicle claims was due to a decline in referrals of high-frequency, low-severity claims from our insurance company clients. Conservative underwriting by insurance companies, including significant increases in policy deductibles, contributed to an industry-wide decline in property and casualty claims frequency, exclusive of recent hurricane-related claims. Our decline in workers' compensation claims referrals was due to a reduction in claims from our existing clients, only partially offset by new business gains, and reflected a continued weakness in U.S. employment levels and associated workplace injury rates. COMPENSATION AND FRINGE BENEFITS Our most significant expense was the compensation of employees, including related payroll taxes and fringe benefits. U.S. compensation expense as a percent of revenues decreased to 61.7% in 2004 as compared to 62.0% in 2003, reflecting a reduction in operating capacity from the catastrophe claims in the 2004 third quarter. In response to the decline in U.S. claims volume, we reduced our U.S. full-time equivalent employees by 6.3% as compared to 2003. Average full-time equivalent employees totaled 4,263 in 2004, down from 4,548 in 2003. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS U.S. salaries and wages increased 2.9%, to $244.9 million in 2004 from $237.9 million in 2003. This increase reflected higher compensation expense in our catastrophe unit due to the hurricanes which struck the southeastern United States during the 2004 third quarter. Payroll taxes and fringe benefits for U.S. operations totaled $50.3 million in 2004, decreasing 7.7% from 2003 costs of $54.5 million. This decrease primarily reflected a reduction in pension expense of $6.7 million in 2004, net of an increase in self-insured workers' compensation costs. EXPENSES OTHER THAN REIMBURSEMENTS, COMPENSATION AND FRINGE BENEFITS U.S. expenses other than reimbursements, compensation and related payroll taxes and fringe benefits increased as a percent of revenues to 33.9% in 2004 from 33.1% in 2003. This increase reflected higher outsourced administration fees associated with growth in class action services revenues during 2004. REIMBURSEMENTS Reimbursements in our U.S. operations increased slightly to $49.1 million in 2004 from $49.0 million in 2003. Years Ended December 31, 2003 and 2002 REVENUES U.S. revenues before reimbursements, by market type, for 2003 and 2002 were as follows:
(in thousands} 2003 2002 Variance - --------------------- ---------- --------- -------- Insurance companies $ 229,781 $ 259,090 (11.3)% Self-insured entities 167,526 191,278 (12.4)% Class action services 74,540 58,366 27.7 % ---------- --------- Total U.S. Revenues $ 471,847 $ 508,734 (7.3)% ========== =========
Revenues from insurance companies decreased 11.3% to $229.8 million in 2003 compared to $259.1 million in 2002, due to a continued softening in our U.S. insurance company referrals for high-frequency, low-severity claims. Lower medical bill auditing revenues associated with the non-renewal of a contract with a major domestic insurer contributed $8.4 million of this decline. In addition, lower revenues from the winding down of two projects associated with mold-related claims and reopened Northridge earthquake claims accounted for $7.6 million of the decline. Revenues from self-insured entities decreased 12.4% to $167.5 million in 2003 from $191.3 million in 2002, due primarily to a decline in workers' compensation claim referrals. See the following analysis of U.S. cases received. Revenues from class action services, including administration and inspection services, which can fluctuate significantly based on the timing and size of project awards, increased 27.7% to $74.5 million in 2003 from $58.4 million in 2002. Excluding the impact of class action services, U.S. unit volume, measured principally by cases received, decreased 14.1% from 2002 to 2003. This decrease was partially offset by a 3.6% revenue increase from changes in the mix of services provided and in the rates charged for those services, resulting in a net 10.5% decrease in U.S. revenues from 2002 to 2003, excluding revenues from class action services. Growth in class action services increased U.S. revenues by 3.2% in 2003. Excluding the impact of class action services, U.S. unit volume by major service line, as measured by cases received, for 2003 and 2002 was as follows:
(whole numbers) 2003 2002 Variance - --------------------- ------- ------- -------- Casualty 213,980 225,705 (5.2)% Workers' compensation 180,787 229,925 (21.4)% Property 224,432 219,936 2.0 % Vehicle 184,266 249,019 (26.0)% Other 20,107 33,696 (40.3)% ------- ------- Total U.S. Cases Received 823,572 958,281 (14.1)% ======= =======
Our decline in workers' compensation claim referrals was primarily due to declines in U.S. employment levels and associated workplace injury rates. The declines in casualty and vehicle claims were largely due to an industry-wide reduction in referrals from U.S. insurance companies for high-frequency, low-severity claims. Conservative underwriting by our insurance company clients, including significant increases in policy deductibles, contributed to this decline Crawford & Company ANNUAL REPORT 2004 in property and casualty claims frequency. The increase in property claims was largely due to increases in referrals to our Contractor Connection(SM) direct repair network. COMPENSATION AND FRINGE BENEFITS Our most significant expense was the compensation of employees, including related payroll taxes and fringe benefits. In response to the ongoing decline in U.S. claims volume, we successfully implemented cost-cutting initiatives to reduce our operating costs by nearly $31 million from 2002 levels. Our level of U.S. full-time equivalent employees decreased by 13.6% as compared to employment levels in 2002. There was an average of 4,548 full-time equivalent employees in 2003, compared to an average of 5,266 in 2002. U.S. compensation expense as a percent of revenues decreased to 62.0% in 2003 as compared to 62.9% in 2002. U.S. salaries and wages decreased 9.2%, to $237.9 million in 2003 from $261.9 million in 2002. Payroll taxes and fringe benefits for U.S. operations totaled $54.5 million in 2003, decreasing 7.0% from 2002 costs of $58.6 million. These decreases reflected the reduction in full-time equivalent employees during 2003, net of an increase in pension expense of $4.9 million in 2003. Under SFAS 87, "Employers' Accounting for Pensions" ("SFAS 87"), unrecognized gains and losses that exceed certain thresholds are included in pension expense and amortized over the average remaining service life of plan participants. As our U.S. defined benefit pension plan was frozen at December 31, 2002, the amortization of previously unrecognized losses comprised substantially all of our pension expense related to this plan in 2003. The amortization of unrecognized losses totaled $7.9 million during 2003 compared to $3.6 million for the 2002 period. EXPENSES OTHER THAN REIMBURSEMENTS, COMPENSATION AND FRINGE BENEFITS U.S. expenses other than reimbursements, compensation and related payroll taxes and fringe benefits increased as a percent of revenues to 33.1% in 2003 from 31.3% in 2002. This increase reflected higher outsourced administration fees associated with growth in class action services revenues in 2003. REIMBURSEMENTS Reimbursements in our U.S. operations increased to $49.0 million in 2003 from $38.5 million in 2002, reflecting higher reimbursed expenses in our class action services unit. INTERNATIONAL OPERATIONS Years Ended December 31, 2004 and 2003 REVENUES Substantially all international revenues were derived from the insurance company market. Revenues before reimbursements from our international operations totaled $255.4 million in 2004, a 16.6% increase from the $219.1 million reported in 2003. Excluding acquisitions, international unit volume, measured principally by cases received, increased 1.5% in 2004 compared to 2003. Our third quarter 2004 acquisition of the net assets of Cabinet Mayoussier, Cabinet Tricaud, and TMA in France increased international revenues by 0.7% in 2004. Revenues increased 4.3% due to changes in the mix of services provided and in the rates charged for those services. Revenues reflected a 10.1% increase during 2004 due to the positive effect of a weak U.S. dollar, primarily as compared to the British pound and the euro. Excluding the impact of acquisitions on 2004 cases received, international unit volume by region for 2004 and 2003 was as follows:
(whole numbers) 2004 2003 Variance - --------------------- ------- ------- -------- Americas 113,701 117,789 (3.5)% CEMEA 84,831 86,504 (1.9)% Asia/Pacific 36,488 39,475 (7.6)% United Kingdom 110,361 96,429 14.4 % ------- ------- Total International Cases Received 345,381 340,197 1.5 % ======= =======
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The increase in the United Kingdom ("U.K.") was largely due to an increase in claims received from new contracts entered into in late 2003 and during 2004. The decrease in the Americas was due to the receipt of approximately 6,000 low-value property claims in Brazil during 2003. There was no such receipt of claims during 2004. This decline was partially offset by an increase in weather-related claims in the Caribbean. The decrease in Continental Europe, Middle East, and Africa ("CEMEA") was due to the loss of a client in South Africa which referred approximately 3,200 high-frequency, low-value claims to us during 2003. The decrease in Asia/Pacific was primarily due to a decline in weather-related claims in Australia during 2004. COMPENSATION AND FRINGE BENEFITS As a percent of revenues, compensation expense, including related payroll taxes and fringe benefits, decreased to 69.4% in 2004 from 69.8% in 2003 due primarily to a reduction of capacity within our U.K. unit as a result of an increase in claims. Average full-time equivalent employees totaled 3,158 in 2004 (including approximately 41 full-time equivalent employees added by our acquisition in France), up from 3,115 in 2003. Salaries and wages of international personnel increased 15.6% to $150.0 million in 2004 compared to $129.8 million in 2003, decreasing as a percent of revenues from 59.2% in 2003 to 58.7% in 2004. Payroll taxes and fringe benefits increased 17.2% to $27.2 million in 2004 compared to $23.2 million in 2003, remaining constant as a percent of revenues at 10.6% in 2003 and 2004. The increases in these costs were largely the result of a decline in the value of the U.S. dollar against other major currencies, primarily the British pound and euro, and staffing increases in the U.K. to handle claims received from new contracts entered into in late 2003 and during 2004. EXPENSES OTHER THAN REIMBURSEMENTS, COMPENSATION AND FRINGE BENEFITS Expenses other than reimbursements, compensation and related payroll taxes and fringe benefits decreased as a percent of revenues from 27.1% in 2003 to 26.1% in 2004 due primarily to an increase in profit sharing earned from a third-party Caribbean entity that we provided claims adjusters to on an outsourced basis. REIMBURSEMENTS Reimbursements in our international operations increased to $29.0 million in 2004 from $28.1 million in 2003. This increase was due to an increase in the use of outside experts associated with handling hurricane claims in the Caribbean during 2004. Years Ended December 31, 2003 and 2002 REVENUES Revenues before reimbursements from our international operations totaled $219.1 million in 2003, a 14.9% increase from the $190.7 million reported in 2002. Excluding acquisitions, international unit volume, measured principally by cases received, decreased 0.4% in 2003 compared to 2002. Our third quarter 2002 acquisition of the loss adjusting business of Robertson & Company in Australia increased international revenues by 4.1% in 2003. Revenues decreased 0.4% due to changes in the mix of services provided and in the rates charged for those services. Revenues reflected an 11.6% increase during 2003 due to the positive effect of a weak U.S. dollar, primarily as compared to the British pound and the euro. Excluding the impact of acquisitions on 2003 cases received, international unit volume by region for 2003 and 2002 was as follows:
(whole numbers) 2003 2002 Variance - --------------------- ------- ------- -------- Americas 117,789 128,164 (8.1)% CEMEA 86,504 84,087 2.9 % Asia/Pacific 27,020 26,543 1.8 % United Kingdom 96,429 90,355 6.7 % ------- ------- Total International Cases Received 327,742 329,149 (0.4)% ======= =======
The decrease in the Americas was due to the receipt of approximately 18,000 product liability claims in Canada during the 2002 second and third quarters. There was no such large intake of claims in the 2003 period. There was also an increase in low-value property claims in Brazil of approximately 6,000 cases during 2003. The increase in the U.K. was due to claims received from new contracts, primarily take-over claims associated with a new client agreement entered into during the third quarter of 2003. The increase in CEMEA was largely due to an increase in small loss claims in South Africa. COMPENSATION AND FRINGE BENEFITS As a percent of revenues, compensation expense, including related payroll taxes and fringe benefits, increased to 69.8% in 2003 from 68.6% in 2002, primarily due to an increase in capacity in our U.K. and Canadian operating units. This increased capacity was the result of anticipated increases in claims volume from new client agreements and was expected to decline as claims under these agreements were referred to us. There was an average of 3,115 full-time equivalent employees in 2003 (including approximately 110 full-time equivalent employees added by our acquisition in Australia), compared to an average of 3,003 in 2002. Salaries and wages of international personnel totaled $129.8 million in 2003 compared to $112.6 million in 2002, increasing slightly as a percent of revenues, from 59.1% in 2002 to 59.2% in 2003. Payroll taxes and fringe benefits totaled $23.2 million in 2003 compared to $18.3 million in 2002, increasing as a percent of revenues from 9.6% in 2002 to 10.6% in 2003. The increases in these costs reflected the effect of a weak U.S. dollar, primarily as compared to the British pound and the euro, and the third quarter 2002 acquisition in Australia. EXPENSES OTHER THAN REIMBURSEMENTS, COMPENSATION AND FRINGE BENEFITS Expenses other than reimbursements, compensation and related payroll taxes and fringe benefits decreased slightly as a percent of revenues from 27.2% in 2002 to 27.1% in 2003. REIMBURSEMENTS Reimbursements in our international operations increased to $28.1 million in 2003 from $19.7 million in 2002. This increase was due to the effect of a weak U.S. dollar, and an increase in the use of outside experts to handle flood claims in CEMEA, typhoon related claims in Asia, and certain Canadian healthcare claims. SPECIAL CREDITS AND CHARGES, NET CORPORATE INTEREST EXPENSE, AND INCOME TAXES During September 2004, we completed the sale of an undeveloped parcel of real estate. We received net cash of $2.0 million and a $7.6 million first lien mortgage note receivable, at an effective interest rate of approximately 4% per annum, due in its entirety in 270 days. A pretax gain of $8.6 million was recognized on the sale. After reflecting income taxes, this special credit increased 2004 net income by $5.2 million, or $0.11 per share. During November 2003, we made an after-tax payment of $8.0 million in connection with the settlement of a U.S. Department of Justice investigation. This special charge reduced 2003 net income per share by $0.16. During the 2002 first quarter, we received a cash payment of $6.0 million from a former vendor in full settlement of a business dispute. This special credit, net of related income tax expense, increased 2002 net income per share by $0.08. During June 2004, we settled a tax credit refund claim with the Internal Revenue Service and recorded a receivable of $3.5 million comprised of a tax refund of $1.7 million and associated interest of $1.8 million. Including interest income of $1.8 million associated with the tax refund claim discussed above, net corporate interest expense totaled $3.5 million, $5.4 million, and $4.7 million for 2004, 2003, and 2002, respectively. Our effective tax rate may change periodically due to fluctuations in the mix of income earned from our various international operations. Excluding the $8.0 million after-tax MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS charge in 2003 disclosed above, our effective tax rate was 36.4% of pretax income in 2003 and 2002. Our effective tax rate for calendar year 2004 was 37.4%, excluding the tax refund of $1.7 million disclosed above. Taxes on income, including the expected tax refund for 2004, totaled $12.3 million, $9.0 million, and $14.0 million for 2004, 2003, and 2002, respectively. LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION At December 31, 2004, current assets exceeded current liabilities by approximately $130.4 million, an increase of $14.9 million from the working capital balance at December 31, 2003. Cash and cash equivalents at the end of 2004 totaled $43.6 million, decreasing $2.2 million from $45.8 million at the end of 2003. Cash was generated primarily from operating activities. The principal uses of cash were for dividends paid to shareholders, acquisitions of property and equipment, payments on short-term borrowings, and capitalization of computer software. Cash dividends to shareholders approximated 58.7% of net income (before special credits and charges) in 2004, compared to 74.6% in 2003. The Board of Directors declares cash dividends to shareholders each quarter based on an assessment of current and projected earnings and cash flows. During 2004, we did not repurchase any shares of our Class A or Class B Common Stock. As of December 31, 2004, 705,863 shares remain to be repurchased under the discretionary 1999 share repurchase program authorized by the Board of Directors. We believe it is unlikely that we will repurchase shares under this program in the foreseeable future due to the decline in the funded status of our defined benefit pension plans (see Note 2 of the consolidated financial statements). We maintain a $70.0 million committed revolving credit line with a syndication of banks in order to meet seasonal working capital requirements and other financing needs that may arise. This committed revolving credit line expires in October 2006. We expect to renew our revolving credit line on or before October 2006 on terms similar to those under the current commitment. As a component of this credit line, we maintain a letter of credit facility to satisfy certain contractual obligations. Including $12.2 million committed under the letter of credit facility, the balance of our unused line of credit totaled $20.4 million at December 31, 2004. Short-term borrowings outstanding, including bank overdraft facilities, as of December 31, 2004 totaled $37.4 million, decreasing from $43.0 million at the end of 2003. Long-term borrowings outstanding, excluding current installments, totaled $50.9 million as of December 31, 2004, compared to $50.7 million at December 31, 2003. We have historically used the proceeds from our long-term borrowings to finance business acquisitions, primarily in our international segment. Refer to the Debt Covenants discussion under the "Factors That May Affect Future Results" section of this report for a further discussion of our borrowing capabilities. We believe our current financial resources, together with funds generated from operations and existing and potential borrowing capabilities, will be sufficient to maintain our current operations for the next twelve months. We have not engaged in any hedging activities to compensate for the effect of exchange rate fluctuations on the operating results of our foreign subsidiaries. Foreign currency denominated debt serves to hedge the currency exposure of our net investment in foreign operations. During 2004, we recorded an adjustment to Accumulated Other Comprehensive Loss, a component of Shareholders' Investment, to increase our minimum pension liability by $2.2 million, net of related tax benefit. During 2003, we recorded an adjustment to reduce our minimum pension liability by $6.0 million, net of related tax expense. These non-cash items resulted primarily from fluctuations in the fair market value of our pension investments as of the plans' respective measurement dates and a decline in interest rates during 2003 and 2004. Crawford & Company ANNUAL REPORT 2004 Shareholders' investment at the end of 2004 was $194.8 million, compared with $172.6 million at the end of 2003. This increase was a result of net income and a positive translation adjustment, net of dividends paid to shareholders and an increase in our minimum pension liability. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management's Discussion and Analysis of Financial Condition and Results of Operations addresses our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates these estimates and judgements based upon historical experience and various other factors that are believed to be reasonable under the circumstances. The results of these evaluations form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies for revenue recognition, allowance for doubtful accounts, valuation of goodwill and other long-lived assets, defined benefit pension plans, determination of our effective tax rate, and self-insured reserves require significant judgments and estimates in the preparation of the consolidated financial statements. Changes in these underlying estimates could potentially materially affect consolidated results of operations, financial position and cash flows in the period of change. Although some variability is inherent in these estimates, the amounts provided for are based on the best information available to us and we believe these estimates are reasonable. We have discussed the development and selection of the following critical accounting policies and estimates with the Audit Committee of our Board of Directors, and the Audit Committee has reviewed our related disclosure in this Management's Discussion and Analysis of Financial Condition and Results of Operations. REVENUE RECOGNITION Our revenues are primarily comprised of claims processing or program administration fees. Fees for professional services are recognized in unbilled revenues at the time such services are rendered at estimated collectible amounts. Substantially all unbilled revenues are billed within one year. Out-of-pocket costs incurred in administering a claim are passed on to our clients and included in our revenues. Deferred revenues represent the estimated unearned portion of fees related to future services under certain fixed-fee service arrangements. Deferred revenues are recognized based on the estimated rate at which the services are provided. These rates are primarily based on an historical evaluation of actual claim closing rates by major lines of coverage. Additionally, recent claim closing rates are evaluated to ensure that current claim closing history does not indicate a significant deterioration or improvement in the longer-term historical closing rates used. Our fixed-fee service arrangements typically call for us to handle claims on either a one- or two-year basis, or for the lifetime of the claim. In cases where we handle a claim on a non-lifetime basis, we typically receive an additional fee on each anniversary date that the claim remains open. For service arrangements where we provide services for the life of the claim, we are only paid one fee for the life of the claim, regardless of the ultimate duration of the claim. As a result, our deferred revenues for claims handled for one or two years are not as sensitive to changes in claim closing rates since the revenues are ultimately recognized in the near future and additional fees are generated for handling long-lived claims. Deferred revenues for lifetime claim handling are considered more sensitive to changes in claim closing rates since we are obligated to handle these claims to their ultimate conclusion with no additional fees for long-lived claims. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Based upon our historical averages, we close approximately 99% of all cases referred under lifetime claim service arrangements within the first five years from the date of referral. Also, within that five-year period, the percentage of claims remaining open in any one particular year has remained relatively consistent from period to period. Each quarter we evaluate our historical claim closing rates by major line of insurance coverage and make adjustments as necessary. Any changes in estimates are recognized in the period in which they are determined. As of December 31, 2004, deferred revenues related to lifetime claim handling arrangements approximated $15.5 million. If the rate at which we close cases changes, the amount of revenues recognized within a period could be affected. In addition, given the competitive environment in which we operate, we may be unable to raise our prices to offset the additional expense associated with handling longer-lived claims. Absent an increase in per claim fees from our clients, a 1% decrease in claim closing rates for lifetime claims would have resulted in the deferral of additional revenues of approximately $413,000, or less than $0.01 per share for the year ended December 31, 2004. If our average claim closing rates for lifetime claims increased by 1%, we would have recognized additional revenues of approximately $346,000, or less than $0.01 per share for the year ended December 31, 2004. The estimate for deferred revenues is a critical accounting estimate for our U.S. segment. ALLOWANCE FOR DOUBTFUL ACCOUNTS We maintain allowances for doubtful accounts, relating to our billed and unbilled receivables, for estimated losses resulting primarily from adjustments clients may make to invoiced amounts and the inability of our clients to make required payments. These allowances are established by using historical write-off information to project future experience and by considering the current credit worthiness of our clients, any known specific collection problems, and our assessment of current property and casualty insurance industry conditions. Each quarter we evaluate the adequacy of the assumptions used in determining these allowances and make adjustments as necessary. Changes in estimates are recognized in the period in which they are determined. As of December 31, 2004, our allowance for doubtful accounts totaled $23.0 million or approximately 7.6% of gross billed and unbilled receivables. If the financial condition of our clients deteriorated, resulting in an inability to make required payments to us, additional allowances may be required. If the allowance for doubtful accounts changed by 1% of gross billed and unbilled receivables, reflecting either an increase or decrease in expected future write-offs, the impact to 2004 pretax income would have been approximately $3.0 million, or $0.04 per share. The estimate for the allowance for doubtful accounts is a critical accounting estimate for both our U.S. and international segments. VALUATION OF GOODWILL AND OTHER LONG-LIVED ASSETS We regularly evaluate whether events and circumstances have occurred which indicate that the carrying amounts of goodwill and other long-lived assets (primarily property and equipment, deferred income tax assets, and capitalized software) may warrant revision or may not be recoverable. When factors indicate that such assets should be evaluated for possible impairment, we perform an impairment test in accordance with SFAS 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), for goodwill, SFAS 109, "Accounting for Income Taxes" ("SFAS 109"), for deferred income tax assets, and SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), for other long-lived assets. In the opinion of management, goodwill and other long-lived assets were appropriately valued and not impaired at December 31, 2004. We perform an annual impairment analysis of goodwill in accordance with SFAS 142 where we compare the book value of our operating segments to the estimated market value of those units as determined by discounting future projected cash flows. Based upon our analysis completed in the 2004 fourth quarter, we did not have an impairment Crawford & Company ANNUAL REPORT 2004 of goodwill in 2004. The estimated market values of our segments are based upon certain assumptions made by management. If the growth or weighted average cost of capital assumptions used to calculate the market value of our operating segments changed, impairment could result. If the growth rate assumption used to value our operating segments declined to zero from 3.5%, or our weighted average cost of capital assumption increased by 300 basis points to 13%, we would have a potential impairment in our international operating segment. We would then be required to perform a detailed analysis to measure the amount of impairment loss, if any. No potential impairment would exist in our U.S. segment for these same assumption changes. The valuation of goodwill and other long-lived assets is a critical accounting estimate for both our U.S. and international segments. DEFINED BENEFIT PENSION PLANS We sponsor various defined benefit pension plans in the U.S. and U.K. which cover a substantial number of employees in each location. Our U.S. defined benefit retirement plan was frozen on December 31, 2002. Benefits payable under our U.S. defied benefit retirement plan are generally based on career compensation, while the U.K. plans are generally based on an employee's final salary. Our funding policy is to make cash contributions in amounts sufficient to maintain the plans on an actuarially sound basis, but not in excess of deductible amounts permitted under applicable income tax regulations. Plan assets are invested in equity and fixed income securities, with a target allocation of approximately 60 percent to equity securities and 40 percent to fixed income investments. The estimated liability for our defined benefit pension plans is sensitive to changes in the underlying assumptions for the expected return on plan assets and the discount rate used to determine the present value of projected benefits payable under the plans. If our assumption for the expected return on plan assets of our U.S. and U.K. defined benefit pension plans changed by 0.50%, representing either an increase or decrease in expected returns, the impact to 2004 pretax income would have been approximately $2.0 million, or $0.03 per share. If our assumption for the discount rate changed by 0.25%, representing either an increase or decrease in interest rates, the impact to 2004 pretax income would have been approximately $1.6 million, or $0.02 per share. The estimates for our defined benefit pension plans are critical accounting estimates for both our U.S. and international segments. DETERMINATION OF EFFECTIVE TAX RATE We account for certain income and expense items differently for financial reporting and income tax purposes. Provisions for deferred taxes are made in recognition of these temporary differences. The most significant differences relate to minimum pension liability, unbilled and deferred revenues, self-insurance, and depreciation and amortization. For financial reporting purposes, in accordance with the liability method of accounting for income taxes as specified in SFAS 109, the provision for income taxes is the sum of income taxes both currently payable and deferred. Currently payable income taxes represent the liability related to our income tax returns for the current year, while the net deferred tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reported on the Consolidated Balance Sheets. The changes in deferred tax assets and liabilities are determined based upon changes between the basis of assets and liabilities for financial reporting purposes and the basis of assets and liabilities for income tax purposes, measured by the statutory tax rates that management estimates will be in effect when these differences reverse. In addition to estimating the future tax rates applicable to the reversal of tax differences, management must also make certain assumptions regarding whether tax differences are permanent or temporary. If the differences are temporary, management must estimate the timing of their reversal, and whether taxable income in future periods will be sufficient to MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS fully recognize any gross deferred tax assets. Other factors which influence the effective tax rate include changes in the composition of taxable income from the countries in which we operate and our ability to recover prior net operating losses in certain of our international subsidiaries. Our effective tax rate was 37.4% of pretax income for 2004. If our effective tax rate changed by 1%, we would have recognized an increase or decrease to income tax expense of approximately $374,000, or $0.01 per share for the year ended December 31, 2004. The estimate for income taxes is a critical accounting estimate for both our U.S. and international segments. SELF-INSURANCE RESERVES We self-insure certain insurable risks consisting primarily of professional liability, employee medical and disability, workers' compensation, and auto liability. Insurance coverage is obtained for catastrophic property and casualty exposures, including professional liability on a claims-made basis, as well as those risks required to be insured by law or contract. We record a liability for claims incurred under these self-insured programs based on our estimate of the ultimate aggregate exposure and discount that liability using an average of published medium-quality corporate bond yields of an appropriate duration. The estimated liability is calculated based on historical claim payment experience, the expected life of the claims, and the reserves established on the claims. In addition, reserves are established for losses that have occurred but have not been reported and for the adverse development of reserves on reported losses. Each quarter, we evaluate the adequacy of the assumptions used in developing these reserves and make adjustments as necessary. Changes in estimates are recognized in the period in which they are determined. As of December 31, 2004, our estimated liability for self-insured risks totaled $29.9 million. The estimated liability is most sensitive to changes in the ultimate reserve for a claim and the interest rate used to discount the liability. We believe the provision for self-insured losses is adequate to cover the ultimate net cost of losses incurred; however, this provision is an estimate and amounts ultimately settled may be significantly greater or less than the provision established. If the average discount rate we used to determine the present value of our self-insured liability changed by 1%, reflecting either an increase or decline in underlying interest rates, our estimated liability for self-insured risks would have been impacted by approximately $1.9 million, resulting in an increase or decrease to 2004 net income of approximately $1.2 million, or $0.02 per share. The estimate for self-insured reserves is a critical accounting estimate for our U.S. segment. MARKET RISK DERIVATIVES We did not enter into any transactions using derivative financial instruments or derivative commodity instruments during the year ended December 31, 2004. FOREIGN CURRENCY EXCHANGE Our international operations expose us to foreign currency exchange rate changes that can impact translations of foreign-denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. Our revenues from international operations were 34.8%, 31.7%, and 27.3% of total revenues at December 31, 2004, 2003, and 2002, respectively. Except for borrowings in foreign currencies, we do not presently engage in any hedging activities to compensate for the effect of exchange rate fluctuations on the net assets or operating results of our foreign subsidiaries. We measure currency earnings risk related to our international operations based on changes in foreign currency rates using a sensitivity analysis. The sensitivity analysis measures the potential loss in earnings based on a hypothetical 10% change in currency exchange rates. Exchange rates and currency positions as of December 31, 2004 were used to perform the sensitivity analysis. Such analysis indicated that a hypothetical 10% change in foreign currency exchange Crawford & Company ANNUAL REPORT 2004 rates would have decreased pretax income by approximately $663,000, or $0.01 per share during 2004, had the U.S. dollar exchange rate increased relative to the currencies to which we had exposure. INTEREST RATES We are exposed to interest rate fluctuations on certain of our variable rate borrowings. Depending on general economic conditions, we use variable rate debt for short-term borrowings and fixed rate debt for long-term borrowings. At December 31, 2004, we had $37.4 million in short-term loans outstanding, including bank overdraft facilities, with an average variable interest rate of 5.2%. If the average interest rate increased or decreased by 1%, the impact to 2004 pretax income would have been approximately $374,000, or less than $0.01 per share. Changes in the projected benefit obligations of our defined benefit pension plans are largely dependent on changes in prevailing interest rates as of the plans' respective measurement dates that we use to value these obligations under SFAS 87. If our assumption for the discount rate changed by 0.25%, representing either an increase or decrease in the rate, the projected benefit obligation of our U.S. and U.K. defined benefit plans would have changed by approximately $19.0 million. The impact of this change to 2004 pretax income would have been approximately $1.6 million, or $0.02 per share. CREDIT RISK We process payments for claims settlements, primarily on behalf of our self-insured clients. The liability for the settlement cost of claims processed, which is generally prefunded, remains with the client. Accordingly, we do not incur significant credit risk in the performance of these services. FACTORS THAT MAY AFFECT FUTURE RESULTS Certain of the statements contained in this and other sections of this Annual Report are forward-looking. While management believes that these statements are accurate, our business is dependent upon general economic conditions and various conditions specific to our industry. Future trends and these factors could cause actual results to differ materially from the forward-looking statements that have been made. In particular, the following issues and uncertainties should be considered in evaluating our prospects: LEGAL PROCEEDINGS In the normal course of the claims administration services business, we are named as a defendant in suits by insureds or claimants contesting decisions made by us or our clients with respect to the settlement of claims. Additionally, our clients have brought actions for indemnification on the basis of alleged negligence on our part, our agents, or our employees in rendering service to clients. The majority of these claims are of the type covered by insurance we maintain; however, we are self-insured for the deductibles under various insurance coverages. In our opinion, adequate reserves have been provided for such self-insured risks. We have received a subpoena from the State of New York, Office of the Attorney General, requesting various documents relating to our operations. We are responding to the subpoena and do not know if the Office of the Attorney General will request additional documents. We cannot predict when the Attorney General's investigation will be completed, its ultimate outcome or its effect on our financial condition, results of operations, or cash flows. We have received two related federal grand jury subpoenas which we understand have been issued as part of a possible conflicts of interest investigation involving a public entity client of one of our New York offices for Risk Management Services and Healthcare Management. We have completed our responses to both of these subpoenas. These subpoenas do not relate to our billing practices. We cannot predict when the government's investigation will be completed, its ultimate outcome or its effect on our financial condition, results of operations, or cash flows, including the effect, if any, on our contract with the client. Although the loss of revenues from this client would not be material to our financial condition, results of operations, and cash flows, the investigation could result in the imposition of civil, administrative, or criminal fines or sanctions. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We have received notice and anticipate that we will be the subject of an audit under California Labor Code Sections 129 and 129.5 by the Audit Unit, Division of Workers' Compensation, Department of Industrial Relations, State of California ("Audit Unit"). The Audit Unit seeks to audit workers' compensation files which we handled on behalf of our clients in our El Segundo, California office in 2001 and 2002. This audit relates to a previous audit that we underwent in El Segundo in 2000 wherein we agreed to the imposition of a civil penalty pursuant to California Labor Code Section 129.5 and submission to this current follow-up audit, among other items. With respect to this current audit, we cannot predict when it will be completed, its ultimate outcome, or its effect on our financial condition, results of operations, or cash flows. CONTINGENT PAYMENTS We normally structure acquisitions to include earnout payments, which are contingent upon the acquired entity reaching certain revenue and operating earnings targets. The amount of the contingent payments and length of the earnout period varies for each acquisition, and the ultimate payments when made will vary, as they are dependent on future events. Based on 2004 levels of revenues and operating earnings, additional payments under existing earnout agreements approximate $4.1 million through 2009, as follows: 2005 - $291,000; 2006 - $88,000; 2007 - $88,000; 2008 - $3.3 million; and 2009 - $298,000. At December 31, 2004, we have committed $12.2 million under letters of credit to satisfy certain contractual requirements. As noted in our discussion of Debt Covenants, these letter of credit commitments were outstanding under our $70.0 million Revolving Credit Agreement. CONTRACTUAL OBLIGATIONS The impact that our contractual obligations (excluding payments for interest and short-term borrowings) as of December 31, 2004 are expected to have on our liquidity and cash flow in future periods is as follows:
Payments Due by Period ------------------------------------------------------------------------- More Than (in thousands) Less Than 1 Year 1-3 Years 3-5 Years 5 Years Total - -------------- ---------------- --------- --------- ---------- --------- Long-term debt, including current portion (Note 5) $ 1,390 $ 16,930 $ 22,222 $ 11,111 $ 51,653 Operating lease obligations (Note 4) 29,324 39,915 22,177 19,202 110,618 Capital lease obligations (Note 5) 510 526 77 9 1,122 Outsourced services obligation 11,900 14,875 - - 26,775 ---------- -------- --------- --------- -------- Total $ 43,124 $ 72,246 $ 44,476 $ 30,322 $190,168 ========== ======== ========= ========= ========
The obligation for outsourced services relates to certain information technology functions handled by a third-party provider under a contract with an initial term that will expire during the first quarter of 2007. PENSION EXPENSE We use a September 30 measurement date to determine pension expense under SFAS 87 for our U.S. defined benefit pension plan and an October 31 measurement date for our U.K. defined benefit pension plans. As a result of significant declines in the fair market value of our pension plan investments, as well as declines in interest rates, effective December 31, 2002, we froze our U.S. defined benefit pension plan and replaced it with a defined contribution retirement plan. Cash contributions to the U.S. defined contribution plan of approximately $5.8 million will be made in the 2005 first quarter. Future cash funding of our U.S. and U.K. defined benefit pension plans will depend largely on future investment performance and interest rates. For 2005, we expect to make contributions of approximately $3.3 million to our U.K. defined benefit pension plans. We are not required to make any contributions to the U.S. defined benefit pension plan in 2005. Crawford & Company ANNUAL REPORT 2004 DEBT COVENANTS In October 2003, we entered into a committed $70.0 million revolving credit line pursuant to a revolving credit agreement (the "Revolving Credit Agreement") and issued $50.0 million in 6.08% senior notes pursuant to a notes purchase agreement (the "Notes Purchase Agreement"). As of December 31, 2004, there was $35.5 million outstanding on the revolving credit line with an average variable interest rate of 5.2%. In addition, letters of credit of $12.2 million were also outstanding under this revolving credit line. The $50.0 million senior notes have scheduled principal repayments of approximately $5.6 million beginning October 2006 and continuing semi-annually through 2009 with the final payment due April 2010. The stock of Crawford & Company International, Inc. is pledged as security under these agreements and our U.S. subsidiaries have guaranteed our obligations under these agreements. Both of these agreements contain various provisions which require us to maintain defined leverage ratios, fixed charge coverage ratios, and minimum net worth thresholds. We must maintain, on a rolling four quarter basis, a leverage ratio of consolidated debt to earnings before interest, income taxes, depreciation, amortization, certain nonrecurring charges, and the capitalization of internally developed software costs ("EBITDA") of no more than 2.50 times EBITDA. This ratio is reduced to a maximum allowable of 2.25 times EBITDA at September 30, 2005 and thereafter. We must also maintain a fixed charge coverage ratio of EBITDA less depreciation and amortization plus lease expense ("EBITR") to total fixed charges, consisting of interest expense and lease expense, of no less than 1.50 times fixed charges. Additionally, we are required to maintain a minimum net worth equal to $135,516,350 plus 50% of our cumulative positive consolidated net income earned after December 31, 2002, plus 100% of the net proceeds from any equity offering, subject to certain terms and conditions. For purposes of determining minimum net worth, any noncash adjustments after December 31, 2002 related to our pension fund liabilities, goodwill, or foreign currency translations are excluded. We were in compliance with these debt covenants as of December 31, 2004. If we do not meet the covenant requirements in the future, we would be in default under these agreements. In such an event, we would need to obtain a waiver of the default or repay the outstanding indebtedness under the agreements. If we could not obtain a waiver on satisfactory terms, we could be required to renegotiate this indebtedness. Any such renegotiations could result in less favorable terms, including higher interest rates and accelerated payments. Based upon our business plan for 2005, we expect to remain in compliance with the financial covenants contained in the Revolving Credit Agreement and the Notes Purchase Agreement throughout 2005. However, there can be no assurance that our actual financial results will match our planned results or that we will not violate the covenants. NEW ACCOUNTING PRONOUNCEMENTS In December 2004, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision Within the American Jobs Creation Act of 2004." The FASB issued this Staff Position to provide accounting and disclosure guidance for the repatriation provision of the American Jobs Creation Act of 2004 ("the Act") which allows a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer. The related SFAS 109 requires companies to recognize in the period of enactment the effect of changes in the tax law. However, the FASB believes the Treasury Department will subsequently provide needed clarification on key elements of the repatriation provision of the Act. For purposes of applying SFAS 109, FASB Staff Position 109-2 permits a delayed implementation of the repatriation provision of the Act beyond the financial reporting period of enactment (2004) so that companies can properly evaluate the effect of the Act (and any forthcoming clarifications) on any plan for reinvestment or repatriation of foreign earnings. Accordingly, we have not recognized any potential impact of the repatriation provision of the Act in our consolidated financial position at December 31, 2004, or in our consolidated results of operations or cash flows for the year ended December 31, 2004. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On December 16, 2004, the FASB issued SFAS 123 (revised 2004), "Share Based Payments" ("SFAS 123R"), which is a revision of SFAS 123, "Accounting for Stock-Based Compensation." SFAS 123R supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and amends SFAS 95, "Statement of Cash Flows." Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. However, SFAS 123R requires companies to measure compensation cost for all share-based payments based on the fair value of the shares, including employee stock options. Pro forma disclosure will not be permitted under SFAS 123R. SFAS 123R is effective for public companies for the first interim or annual periods beginning after June 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. We expect to adopt SFAS 123R at the beginning of our 2005 third quarter. SFAS 123R permits public companies to adopt its requirements using one of two methods: 1) a modified prospective method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date, or 2) a modified retrospective method which includes the requirements of the modified prospective method described above, but also permits companies to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption. We plan to adopt SFAS 123R using the modified prospective method. As permitted by SFAS 123, we currently account for share-based payments to employees using APB 25's intrinsic value method and, as such, generally recognize no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123R's fair value method will have an impact on our results of operations, although it will have no impact on our financial position. The impact of adoption of SFAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net income and earnings per share in Note 1 to the consolidated financial statements. Based on employee stock options issued through December 31, 2004, adoption of SFAS 123R in the 2005 third quarter, and use of the modified prospective method, we expect the adoption of SFAS 123R to reduce net income by approximately $525,000 in the year of adoption, or $0.01 per share. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current generally accepted accounting principles. Any additional impact on our future net income or cash flows cannot be predicted at this time because it will depend on levels of share-based payments granted in the future and on employee exercises of stock options. On May 19, 2004, the FASB issued Staff Position 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." This legislation was passed in December 2003, and provides for a federal subsidy to employers who offer retiree prescription drug benefits that are at least actuarially equivalent to those offered under the government sponsored Medicare Part D. We adopted the provisions of Staff Position 106-2 during the 2004 third quarter, which reduced our accumulated post-retirement benefit obligation by approximately $2.0 million, resulting in an unrecognized net gain to the Company's postretirement medical plan. This unrecognized net gain is being amortized over the remaining life expectancy of the Plan participants, and through December 31, 2004, such amortization reduced our post-retirement liability and related expense by $96,000. Crawford & Company ANNUAL REPORT 2004 Consolidated Statements of Income
(in thousands, except per share data) For the years ended December 31, 2004 2003 2002 - ------------------------------------- ---- ---- ---- REVENUES: Revenues before reimbursements $ 733,567 $ 690,933 $ 699,390 Reimbursements 78,095 77,077 58,228 --------- --------- --------- TOTAL REVENUES 811,662 768,010 757,618 COSTS AND EXPENSES: Costs of services provided, before reimbursements 565,863 530,362 532,411 Reimbursements 78,095 77,077 58,228 --------- --------- --------- Costs of services 643,958 607,439 590,639 Selling, general, and administrative expenses 135,318 130,531 129,732 Special (credits) and charges (Note 8) (8,573) 8,000 (6,000) Corporate interest expense, net of interest income of $2,363, $444, and $264, respectively 3,536 5,414 4,706 --------- --------- --------- TOTAL COSTS AND EXPENSES 774,239 751,384 719,077 --------- --------- --------- INCOME BEFORE INCOME TAXES 37,423 16,626 38,541 PROVISION FOR INCOME TAXES 12,251 8,964 14,029 --------- --------- --------- NET INCOME $ 25,172 $ 7,662 $ 24,512 ========= ========= ========= NET INCOME PER SHARE: Basic $ 0.52 $ 0.16 $ 0.50 ========= ========= ========= Diluted $ 0.51 $ 0.16 $ 0.50 ========= ========= ========= WEIGHTED-AVERAGE SHARES OUTSTANDING: Basic 48,773 48,668 48,580 ========= ========= ========= Diluted 48,996 48,776 48,664 ========= ========= ========= CASH DIVIDENDS PER SHARE: Class A Common Stock $ 0.24 $ 0.24 $ 0.32 ========= ========= ========= Class B Common Stock $ 0.24 $ 0.24 $ 0.32 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. Consolidated Balance Sheets
(in thousands) As of December 31, 2004 2003 - ------------------ ---- ---- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 43,571 $ 45,805 Accounts receivable, less allowance for doubtful accounts of $21,859 in 2004 and $20,832 in 2003 176,187 142,273 Unbilled revenues, at estimated billable amounts 103,586 101,557 Prepaid expenses and other current assets 21,363 13,028 --------- --------- TOTAL CURRENT ASSETS 344,707 302,663 --------- --------- PROPERTY AND EQUIPMENT, AT COST: Land 1,394 2,445 Buildings and improvements 22,832 22,090 Furniture and fixtures 67,835 66,212 Data processing equipment 57,281 59,044 Automobiles 5,580 4,995 --------- --------- 154,922 154,786 Less accumulated depreciation (120,079) (117,618) --------- --------- NET PROPERTY AND EQUIPMENT 34,843 37,168 --------- --------- OTHER ASSETS: Goodwill arising from acquisitions, net 109,410 104,523 Capitalized software costs, net 32,550 31,540 Deferred income tax assets 32,172 28,505 Other 17,578 12,840 --------- --------- TOTAL OTHER ASSETS 191,710 177,408 --------- --------- $ 571,260 $ 517,239 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. Crawford & Company ANNUAL REPORT 2004
(in thousands) As of December 31, 2004 2003 - ------------------ ---- ---- LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Short-term borrowings $ 37,401 $ 43,007 Accounts payable 41,730 36,152 Accrued compensation and related costs 45,961 37,870 Self-insured risks 18,976 18,040 Accrued income taxes 22,760 7,406 Other accrued liabilities 22,913 22,418 Deferred revenues 22,682 19,172 Current installments of long-term debt 1,900 3,106 --------- --------- TOTAL CURRENT LIABILITIES 214,323 187,171 --------- --------- NONCURRENT LIABILITIES: Long-term debt, less current installments 50,875 50,664 Deferred revenues 10,179 10,559 Self-insured risks 10,958 11,920 Minimum pension liability 73,893 67,846 Postretirement medical benefit obligation 5,544 6,077 Other 10,655 10,408 --------- --------- TOTAL NONCURRENT LIABILITIES 162,104 157,474 --------- --------- SHAREHOLDERS' INVESTMENT: Class A common stock, $1.00 par value, 50,000 shares authorized; 24,157 and 24,027 shares issued and outstanding in 2004 and 2003 24,157 24,027 Class B common stock, $1.00 par value, 50,000 shares authorized; 24,697 shares issued and outstanding in 2004 and 2003 24,697 24,697 Additional paid-in capital 1,441 840 Retained earnings 201,213 187,747 Accumulated other comprehensive loss (56,675) (64,717) --------- --------- TOTAL SHAREHOLDERS' INVESTMENT 194,833 172,594 --------- --------- $ 571,260 $ 517,239 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statements of Shareholders' Investment
Common Stock ------------------- Accumulated Additional Other Total Class A Class B Paid-in Retained Comprehensive Shareholders' (in thousands) Non-Voting Voting Capital Earnings Loss Investment - ---------------------------- ---------- ------- ---------- --------- ------------- ------------ BALANCE AT DECEMBER 31, 2001 $ 23,843 $24,697 $ 27 $186, 683 $ (46,950) $ 183,300 Comprehensive loss: Net income - - - 24,512 - 24,512 Translation adjustment - - - - 4,465 4,465 Tax benefit from exercise of stock options - - - - 4,165 4.165 Minimum pension liability adjustment (net of $ 23.2 million income tax benefit) - - - - (43,161) (43,161) ---------- ------- ---------- --------- ------------- ------------ Total comprehensive loss (10,019) Dividends paid - - - (19,428) - (19,428) Shares issued in connection with employee benefit plans 82 - 496 - - 578 ---------- ------- ---------- --------- ------------- ------------ BALANCE AT DECEMBER 31, 2002 23,925 24,697 523 191,767 (81,481) 159,431 Comprehensive income: Net income - - - 7,662 - 7,662 Translation adjustment - - - - 10,806 10,806 Minimum pension liability adjustment (net of $3.4 million income tax expense) - - - - 5,958 5,958 ---------- ------- ---------- --------- ------------- ------------ Total comprehensive income 24,426 Dividends paid - - - (11,682) - (11,682) Shares issued in connection with employee benefit plans 102 - 317 - - 419 ---------- ------- ---------- --------- ------------- ------------ BALANCE AT DECEMBER 31, 2003 24,027 24,697 840 187,747 (64,717) 172,594 Comprehensive income: Net income - - - 25,172 - 25,172 Translation adjustment - - - - 10,260 10,260 Minimum pension liability adjustment (net of $1.3 million income tax benefit) - - - - (2,218) (2,218) ---------- ------- ---------- --------- ------------- ------------ Total comprehensive income 33,214 Dividends paid - - - (11,706) - (11,706) Shares issued in connection with employee benefit plans 130 - 601 - - 731 ---------- ------- ---------- --------- ------------- ------------ BALANCE AT DECEMBER 31, 2004 $ 24,157 $24,697 $ 1,441 $ 201,213 $ (56,675) $ 194,833 ========== ======= ========== ========= ============= ============
The accompanying notes are an integral part of these consolidated financial statements. Consolidated Statements of Cash Flows
(in thousands) For the years ended December 31, 2004 2003 2002 - -------------------------------- -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 25,172 $ 7,662 $ 24,512 Reconciliation of net income to net cash provided by operating activities: Depreciation and amortization 18,177 16,642 17,734 Deferred income taxes 3,758 1,603 3,643 (Gain) loss on sales of land, property and equipment (7,786) 54 (18) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable, net (30,726) 18 5,473 Unbilled revenues 3,191 1,042 (1,369) Prepaid or accrued income taxes 11,246 (4,640) (3,193) Accounts payable and accrued liabilities 9,950 11,980 3,435 Accrued restructuring charges (506) (291) (335) Deferred revenues 2,947 345 (1,579) Prepaid and accrued pension costs 1,647 5,600 6,020 Prepaid expenses and other assets (1,319) (2,814) (2,292) -------- -------- -------- Net cash provided by operating activities 35,751 37,201 52,031 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of property and equipment (10,666) (11,136) (9,189) Acquisitions of businesses, net of cash acquired (617) (277) (13,569) Capitalization of software costs (7,574) (12,681) (11,093) Proceeds from sale of undeveloped land 2,028 - - Proceeds from sales of property and equipment 250 373 480 -------- -------- -------- Net cash used in investing activities (16,579) (23,721) (33,371) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (11,706) (11,682) (19,428) Proceeds from exercise of stock options 731 419 578 Increase in short-term borrowings 84 39,790 18,345 Payments on short-term borrowings (10,031) (33,094) (24,657) Proceeds from long-term debt - 50,272 14,247 Payments on long-term debt (1,347) (50,973) (184) Capitalized loan costs 31 891 - -------- -------- -------- Net cash used in financing activities (22,238) (4,377) (11,099) -------- -------- -------- Effects of exchange rate changes on cash and cash equivalents 832 1,768 972 -------- -------- -------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,234) 10,871 8,533 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 45,805 34,934 26,401 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 43,571 $ 45,805 $ 34,934 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statement. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. MAJOR ACCOUNTING AND REPORTING POLICIES NATURE OF OPERATIONS AND INDUSTRY CONCENTRATION The Company is the world's largest independent provider of claims management solutions to insurance companies and self-insured entities, with a global network of more than 700 offices in 63 countries. Major service lines include workers' compensation claims administration and healthcare management services, property and casualty claims management, class action services, and risk management information services. Substantial portions of the Company's revenues and accounts receivable are derived from United States ("U.S.") claims services provided to the property and casualty insurance industry. PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. and include the accounts of the Company and its subsidiaries after elimination of all significant intercompany transactions. The financial statements of the Company's international subsidiaries outside Canada and the Caribbean are included in the Company's consolidated financial statements on a two-month delayed basis in order to provide sufficient time for accumulation of their results. PRIOR YEAR RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current year presentation. The Company receives reimbursements from clients for pass-through expenses related to the cost of media advertising and postage incurred during advertising and noticing campaigns related to class action settlements administered by the Company. The Company previously recorded certain of these reimbursements as a reduction of cost of services rather than reimbursement revenue. Accordingly, the Company revised the accompanying Consolidated Statements of Income for the years ended December 31, 2003 and 2002 in order to correctly reflect total reimbursements. The impact of these revisions increased reimbursement revenues and expenses by $35,129,000 and $21,311,000 for the years ending December 31, 2003 and 2002, respectively. The following table reconciles the Company's total revenues as previously reported in each year to total revenues after reflecting the effects of the revisions:
(in thousands) 2003 2002 ---------- --------- Total revenues, as previously reported $ 732,881 $ 736,307 Effect of revision 35,129 21,311 ---------- --------- Total revenues, revised $ 768,010 $ 757,618 ========== =========
The following table reconciles the Company's costs of services as previously reported in each year to costs of services after reflecting the effects of the revisions:
(in thousands) 2003 2002 - -------------- --------- --------- Costs of services, as previously reported $ 572,310 $ 569,328 Effect of revision 35,129 21,311 --------- --------- Costs of services, revised $ 607,439 $ 590,639 ========= =========
These revisions had no effect on the Company's consolidated revenues before reimbursements, net income, financial position, or cash flows as previously reported. MANAGEMENT'S USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of financial instruments classified as current assets or liabilities, including cash and cash equivalents, receivables, accounts payable, and short-term borrowings Crawford & Company ANNUAL REPORT 2004 approximates carrying value due to the short-term maturity of the instruments. The fair value of long-term debt approximates carrying value based on the effective interest rates compared to current market rates. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on hand and marketable securities with original maturities of three months or less. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS The Company extends credit based on an evaluation of a client's financial condition and, generally, collateral is not required. Accounts receivable are typically due within 30 days and are stated at amounts due from clients net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company maintains allowances for doubtful accounts, relating to billed and unbilled receivables, for estimated losses resulting primarily from adjustments clients may make to invoiced amounts, and the inability of clients to make required payments. These allowances are established using historical write-off information to project future experience and by considering the current credit worthiness of clients, any known specific collection problems, and an assessment of current property and casualty insurance industry conditions. The Company writes off accounts receivable when they become uncollectible, and any payments subsequently received are accounted for as recoveries. The Company's allowances for doubtful accounts on billed receivables were $21,859,000, $20,832,000, and $19,633,000, and write-offs, net of recoveries, including revenue adjustments, were $7,911,000, $9,333,000, and $11,085,000, respectively, for the years ended December 31, 2004, 2003, and 2002. GOODWILL AND OTHER LONG-LIVED ASSETS Goodwill represents the excess of the purchase price over the fair value of the separately identifiable net assets acquired. The Company performs a goodwill impairment test as of October 1 each year and regularly evaluates whether events and circumstances have occurred which indicate that the carrying amounts of goodwill and other long-lived assets (primarily property and equipment, deferred income tax assets, and capitalized software) may warrant revision or may not be recoverable. When factors indicate that such assets should be evaluated for possible impairment, the Company performs an impairment test in accordance with Statement of Financial Accounting Standards ("SFAS") 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), for goodwill, SFAS 109, "Accounting for Income Taxes" ("SFAS 109"), for deferred income tax assets, and SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), for other long-lived assets. PROPERTY AND EQUIPMENT The Company depreciates the cost of property and equipment over the estimated useful lives of the related assets, primarily using the straight-line method. The estimated useful lives for the principal property and equipment classifications are as follows:
Classification Estimated Useful Lives - -------------- ---------------------- Furniture and fixtures 3-10 years Data processing equipment 3-5 years Automobiles 3-4 years Buildings and improvements 7-40 years
Depreciation expense on property and equipment, including capitalized leases, was $12,257,000, $11,711,000, and $13,508,000 for 2004, 2003, and 2002, respectively. CAPITALIZED SOFTWARE Capitalized software reflects costs related to internally developed or purchased software that are capitalized and amortized on a straight-line basis over periods ranging from three to ten years. Amortization expense for capitalized software was $5,920,000, $4,931,000, and $4,226,000 for 2004, 2003, and 2002, respectively. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SELF-INSURED RISKS The Company self-insures certain insurable risks consisting primarily of professional liability, employee medical and disability, workers' compensation, and auto liability. Insurance coverage is obtained for catastrophic property and casualty exposures (including professional liability on a claims-made basis), as well as those risks required to be insured by law or contract. Provision for claims under the self-insured program is made based on the Company's estimate of the aggregate liability for claims incurred and is discounted using an average of published medium-quality corporate bond yields of an appropriate duration. The estimated liability is calculated based on historical claim payment experience, the expected life of the claims, and the reserves established on the claims. In addition, reserves are established for losses that have occurred but have not been reported and for the adverse development of reserves on reported losses. At December 31, 2004 and 2003, accrued self-insured risks totaled $29,934,000 and $29,960,000, respectively, including current liabilities of $18,976,000 and $18,040,000, respectively. REVENUE RECOGNITION The Company's revenues are primarily comprised of claims processing or program administration fees. Fees for professional services are recognized in unbilled revenues at the time such services are rendered at estimated collectible amounts. Substantially all unbilled revenues are billed within one year. Certain out-of-pocket costs incurred in administering claims are passed on by the Company to its clients and included in total revenues as "Reimbursements." Deferred revenues represent the estimated unearned portion of fees derived from certain fixed-rate claim service agreements. The Company's fixed-fee service arrangements typically call for the Company to handle claims on either a one- or two-year basis, or for the lifetime of the claim. In cases where the claim is handled on a non-lifetime basis, an additional fee is typically received on each anniversary date that the claim remains open. For service arrangements where services are provided for the life of the claim, the Company only receives one fee for the life of the claim, regardless of the ultimate duration of the claim. Deferred revenues are recognized based on the estimated rate at which the services are provided. These rates are primarily based on an historical evaluation of actual claim closing rates by major line of coverage. INCOME TAXES The Company accounts for certain income and expense items differently for financial reporting and income tax purposes. Provisions for deferred taxes are made in recognition of these temporary differences. The most significant differences relate to minimum pension liability, unbilled and deferred revenues, self-insurance, and depreciation and amortization. For financial reporting purposes, in accordance with the liability method of accounting for income taxes as specified in SFAS 109, the provision for income taxes is the sum of income taxes both currently payable and deferred. Currently payable income taxes represent the liability related to the income tax returns for the current year, while the net deferred tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reported on the Consolidated Balance Sheets. The changes in deferred tax assets and liabilities are determined based upon changes between the basis of assets and liabilities for financial reporting purposes and the basis of assets and liabilities for income tax purposes, measured by the statutory tax rates that management estimates will be in effect when these differences reverse. In addition to estimating the future tax rates applicable to the reversal of tax differences, management must also make certain assumptions regarding whether tax differences are permanent or temporary. If the differences are temporary, management must estimate the timing of their reversal, and whether taxable operating income in future periods will be sufficient to fully recognize any gross deferred tax assets. Others factors which influence the effective tax rate include changes in the composition of taxable income from the Crawford & Company ANNUAL REPORT 2004 countries in which the Company operates and the ability of the Company to recover prior net operating losses in certain of its international subsidiaries. NET INCOME PER SHARE Basic net income per share is computed based on the weighted-average number of total common shares outstanding during the respective periods. Diluted net income per share is computed based on the weighted-average number of total common shares outstanding plus the dilutive effect of outstanding stock options using the "treasury stock" method. Below is the calculation of basic and diluted net income per share:
(in thousands, except per share data) 2004 2003 2002 - -------------------------------- ---------- --------- ---------- Net income available to common shareholders $ 25,172 $ 7,662 $ 24,512 ========== ========= ========== Weighted-average common shares outstanding-basic 48,773 48,668 48,580 Dilutive effect of stock options 223 108 84 ---------- --------- ---------- Weighted-average common shares outstanding -diluted 48,996 48,776 48,664 ========== ========= ========== Basic net income per share $ 0.52 $ 0.16 $ 0.50 ========== ========= ========== Diluted net income per share $ 0.51 $ 0.16 $ 0.50 ========== ========= ==========
Additional options to purchase 4,315,048 shares of Class A Common Stock at $5.74 to $19.50 per share were outstanding at December 31, 2004, but were not included in the computation of diluted net income per share because the options' exercise prices were greater than the average market price of the common shares. To include these shares would have been antidilutive. FOREIGN CURRENCY TRANSLATION For operations outside the U.S. that prepare financial statements in currencies other than the U.S. dollar, results from operations and cash flows are translated at average exchange rates during the period, and assets and liabilities are translated at end-of-period exchange rates. The resulting translation adjustments are included in Comprehensive Income (Loss) in the Consolidated Statements of Shareholders' Investment, and the accumulated translation adjustment is reported as a component of Accumulated Other Comprehensive Loss in the Consolidated Balance Sheets. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) for the Company consists of the total of net income, foreign currency translation adjustments, tax benefit from the exercise of stock options, and minimum pension liability adjustments. The Company reports comprehensive income (loss) in the Consolidated Statements of Shareholders' Investment. Ending accumulated balances for each item in Accumulated Other Comprehensive Loss included in the Company's Consolidated Statements of Shareholders' Investment were as follows:
(in thousands) 2004 2003 2002 - --------------------------- ---------- --------- --------- Minimum pension liability $ (107,281) $(103,741) $(113,109) Tax benefit on minimum pension liability 39,083 37,761 41,171 ---------- --------- --------- Minimum pension liability, net of tax benefit (68,198) (65,980) (71,938) Cumulative translation adjustment 7,358 (2,902) (13,708) Tax benefit from exercise of stock options 4,165 4,165 4,165 ---------- --------- --------- Total accumulated other comprehensive loss $ (56,675) $ (64,717) $ (81,481) ========== ========= =========
ACCOUNTING FOR STOCK-BASED COMPENSATION The Company accounts for stock-based compensation utilizing the intrinsic value method in accordance with the provisions of Accounting Principles Board Opinion ("APB") 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related interpretations. Accordingly, no compensation expense has been recognized for the option plans because the exercise prices of the stock options equal the market prices of the underlying stock on the dates of grant. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company provides the annual disclosures required under SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS 123" ("SFAS 148"). Had compensation cost for these plans been determined based on the fair value at the grant dates for awards under those plans consistent with SFAS 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company's net income and net income per share would have been reduced to the pro forma amounts indicated below:
(in thousands, except per share data) 2004 2003 2002 - ------------------------------------------------------------------ -------- ------- -------- Net income As reported $ 25,172 $ 7,662 $ 24,512 Less: compensation expense using the fair value method, net of tax 946 1,384 1,688 -------- ------- -------- Pro forma $ 24,226 $ 6,278 $ 22,824 ======== ======= ======== Net income per share - basic As reported $ 0.52 $ 0.16 $ 0.50 Pro forma $ 0.50 $ 0.13 $ 0.47 Net income per share - diluted As reported $ 0.51 $ 0.16 $ 0.50 Pro forma $ 0.49 $ 0.13 $ 0.47 ======== ======= ========
RECENT ACCOUNTING PRONOUNCEMENTS In December 2003, the FASB issued SFAS 132 (Revised), "Employers' Disclosures about Pensions and Other Post-retirement Benefits" ("SFAS 132R"). This Statement amends SFAS 132 to provide additional disclosure requirements about pension plans and other postretirement benefit plans. The Company adopted the annual disclosure provisions of SFAS 132R for the year ended December 31, 2003. The adoption of SFAS 132R did not have a material impact on the Company's consolidated results of operations, financial position, or cash flows. In December 2003, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 104, "Revenue Recognition" ("SAB 104"). SAB 104 updates interpretive guidance in the codification of other related SEC Staff Accounting Bulletins (mainly SAB 101) to provide consistent accounting guidance on revenue recognition for SEC registrants. The adoption of SAB 104 did not have a material impact on the Company's results of operations, financial position, or cash flows. On May 19, 2004, the FASB issued Staff Position 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." The referenced legislation was passed in December 2003, and provides for a federal subsidy to employers who offer retiree prescription drug benefits that are at least actuarially equivalent to those offered under the government sponsored Medicare Part D. The Company adopted the provisions of FASB Staff Position 106-2 during the third quarter of 2004, which reduced the accumulated post-retirement benefit obligation by approximately $2.0 million, resulting in an unrecognized net gain to the Company's post-retirement medical plan ("the Plan"). This unrecognized net gain is being amortized over the remaining life expectancy of the Plan participants and through December 31, 2004, such amortization reduced the Company's post-retirement liability and expense by $96,000. On December 16, 2004, the FASB issued SFAS 123 (revised 2004), "Share Based Payments"("SFAS 123R"), which is a revision of SFAS 123. SFAS 123R supersedes APB 25, and amends SFAS 95, "Statement of Cash Flows." Generally, the approach in SFAS 123R is similar to the approach described in SFAS 123. However, SFAS 123R requires companies to measure compensation cost for all share-based payments based on the fair value of the shares, including employee stock options. Pro forma disclosure will not be permitted under SFAS 123R. SFAS 123R is effective Crawford & Company ANNUAL REPORT 2004 for public companies for the first interim or annual periods beginning after June 15, 2005. Early adoption will be permitted in periods in which financial statements have not yet been issued. The Company expects to adopt SFAS 123R at the beginning of its 2005 third quarter. SFAS 123R permits public companies to adopt its requirements using one of two methods: 1) a modified prospective method in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date, or 2) a modified retrospective method which includes the requirements of the modified prospective method described above, but also permits companies to restate based on the amounts previously recognized under SFAS 123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods of the year of adoption. The Company plans to adopt SFAS 123R using the modified prospective method. As permitted by SFAS 123, the Company currently accounts for share-based payments to employees using APB 25's intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS 123R's fair value method will have an impact on the Company's results of operations, although it will have no impact on the Company's financial position. The impact of adoption of SFAS 123R cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS 123R in prior periods, the impact of that standard would have approximated the impact of SFAS 123 as described in the disclosure of pro forma net income and earnings per share under "Accounting for Stock-Based Compensation" in Note 1 to the consolidated financial statements. Based on employee stock options issued through December 31, 2004, adoption of SFAS 123R in the 2005 third quarter, and use of the modified prospective method, the Company expects the adoption of SFAS 123R to reduce net income by approximately $525,000 in the year of adoption, or $0.01 per share. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current generally accepted accounting principles. Any additional impact on the Company's future net income or cash flows cannot be predicted at this time because it will depend on levels of share-based payments granted in the future and on employee exercises of stock options. In December 2004, the FASB issued FASB Staff Position 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004." The FASB issued this Staff Position to provide accounting and disclosure guidance for the repatriation provision of the American Jobs Creation Act of 2004 ("the Act") which allows a special one-time dividends received deduction on the repatriation of certain foreign earnings to a U.S. taxpayer. The related SFAS 109 requires companies to recognize in the period of enactment the effect of changes in the tax law. However, the FASB believes the Treasury Department will subsequently provide needed clarification on key elements of the repatriation provision of the Act. For purposes of applying SFAS 109, FASB Staff Position 109-2 permits a delayed implementation of the repatriation provision of the Act beyond the financial reporting period of enactment (2004) so that companies can properly evaluate the effect of the Act (and any forthcoming clarifications) on any plan for reinvestment or repatriation of foreign earnings. Accordingly, the Company has not recognized any potential impact of the repatriation provision of the Act in its consolidated financial position at December 31, 2004 or in its consolidated results of operations or cash flows for the year ended December 31, 2004. As disclosed in Note 3 to the consolidated financial statements, "Income Taxes," the Company considers undistributed earnings of foreign subsidiaries to be indefinitely reinvested. Until the necessary NOTES TO CONSOLIDATED FINANCIAL STATEMENTS clarifications are subsequently issued by the Treasury Department, the Company cannot reasonably determine if it will continue to indefinitely reinvest the earnings of its foreign subsidiaries. Consequently, the Company cannot currently estimate a potential range of any related income tax effects. 2. RETIREMENT PLANS The Company and its subsidiaries sponsor various defined contribution and defined benefit retirement plans covering substantially all employees. Effective December 31, 2002, the Company elected to freeze its U.S. defined benefit plan and replace it with a non-contributory defined contribution plan. Employer contributions under the Company's defined contribution plans are determined annually based on employee contributions, a percentage of each covered employee's compensation, and years of service. The cost of these defined contribution plans totaled $14,153,000, $13,683,000, and $5,879,000 in 2004, 2003, and 2002, respectively. Certain retirees and a fixed number of long-term employees are entitled to receive postretirement medical benefits under the Company's various medical benefit plans. The postretirement medical benefit obligation was $5,544,000 and $6,077,000 for 2004 and 2003, respectively. Benefits payable under the Company's U.S. defined benefit pension plan are generally based on career compensation, while its United Kingdom ("U.K.") plans are based on an employee's final salary. The U.S. plan has a September 30 measurement date and the U.K. plans have October 31 measurement dates. The Company's funding policy is to make cash contributions in amounts sufficient to maintain the plans on an actuarially sound basis, but not in excess of deductible amounts permitted under applicable income tax regulations. The Company is not required to make any contributions to its frozen U.S. defined benefit pension plan during 2005. Cash contributions to the Company's U.K. defined benefit plans are expected to total approximately $3,275,000 during 2005. The following schedule reconciles the funded status of the U.S. and U.K. defined benefit plans with amounts reported in the Company's Consolidated Balance Sheets at December 31, 2004 and 2003:
(in thousands) 2004 2003 - ------------------------------------- --------- --------- Change in Benefit Obligation: Benefit obligation at beginning of year $ 472,340 $ 466,676 Service cost 1,719 1,983 Interest cost 29,940 29,791 Actuarial loss (gain) 13,002 (16,807) Benefits paid (22,285) (19,470) Foreign currency effects 9,457 10,167 --------- --------- Benefit obligation at end of year 504,173 472,340 --------- --------- Change in Plan Assets: Fair value of plan assets at beginning of year 402,943 354,686 Actual return on plan assets 32,629 45,976 Employer contributions 4,836 12,961 Benefits paid (22,285) (19,470) Foreign currency effects 8,713 8,790 --------- --------- Fair value of plan assets at end of year 426,836 402,943 --------- --------- Funded status of plan (77,337) (69,397) Unrecognized net loss 108,774 102,750 Unrecognized prior service cost 174 243 --------- --------- Net amount recognized $ 31,611 $ 33,596 ========= ========= Amounts recognized in the Consolidated Balance Sheets consist of: Minimum pension liability- U.S. pension plan $ (62,991) $ (56,332) Minimum pension liability- U.K. pension plans (10,902) (11,514) Pension obligations included in other accrued liabilities (3,443) (3,112) Intangible assets included in other assets 1,666 813 Accumulated other comprehensive loss 107,281 103,741 --------- --------- Net amount recognized $ 31,611 $ 33,596 ========= =========
Crawford & Company ANNUAL REPORT 2004 Net periodic benefit cost related to the U.S. and U.K. defined benefit pension plans in 2004, 2003, and 2002 included the following components:
(in thousands) 2004 2003 2002 - -------------- --------- -------- --------- Service cost $ 1,719 $ 1,983 $ 12,566 Interest cost 29,940 29,791 30,327 Expected return on assets (31,026) (30,579) (27,026) Net amortization - 1,607 (3,208) Recognized net actuarial loss 7,026 10,181 3,557 --------- -------- --------- Net periodic benefit cost $ 7,659 $ 12,983 $ 16,216 ========= ======== =========
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the retirement plans with accumulated benefit obligations in excess of plan assets were as follows:
(in thousands) 2004 2003 - -------------- --------- ---------- Projected benefit obligation $ 504,173 $ 472,340 Accumulated benefit obligation 504,173 472,340 Fair value of plan assets 426,836 402,943
The Company reviews the actuarial assumptions of its defined benefit pension plans on an annual basis as of each plan's respective measurement date. Major assumptions used in accounting for the plans were:
2004 2003 ---- ---- Discount rate 6.30% 6.34% Expected return on plan assets 8.50% 8.50%
The expected long-term rate of return on plan assets was based on the plans' asset mix and historical returns on equity securities and fixed income investments. Plan assets are invested in equity and fixed income securities, with a target allocation of approximately 60 percent to equity securities and 40 percent to fixed income investments. The plans' asset allocation at the respective measurement dates, by asset category for the Company's U.S. and U.K. defined benefit pension plans, was as follows:
2004 2003 ---- ---- Equity securities 68.6% 60.4% Fixed income investments 27.6% 33.3% Cash 3.8% 6.3% ----- ----- Total asset allocation 100.0% 100.0% ----- -----
The following benefit payments are expected to be paid from the Company's U.S. and U.K. defined benefit pension plans:
(in thousands) Expected Benefit Payments - -------------- ------------------------- 2005 $ 21,445 2006 22,252 2007 23,228 2008 24,294 2009 25,743 2010-2014 150,543
3. INCOME TAXES Income before provision for income taxes consisted of the following:
(in thousands) 2004 2003 2002 - ------------------- -------- -------- -------- U.S. $ 27,779 $ 12,153 $ 32,029 Foreign 9,644 4,473 6,512 -------- -------- -------- Income before taxes $ 37,423 $ 16,626 $ 38,541 ======== ======== ========
The provision (benefit) for income taxes consisted of the following:
(in thousands) 2004 2003 2002 - ------------------------- -------- ------- ------- Current: U.S. federal and state $ 5,775 $ 4,545 $ 7,264 Foreign 2,718 2,816 3,122 Deferred: U.S. federal and state 3,149 2,602 4,564 Foreign 609 (999) (921) -------- ------- -------- Provision for income taxes $ 12,251 $ 8,964 $ 14,029 ======== ======= ========
Cash payments for income taxes were $3,365,000 in 2004, $11,077,000 in 2003, and $9,518,000 in 2002. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The provision for income taxes is reconciled to the federal statutory rate of 35% as follows:
(in thousands) 2004 2003 2002 - ------------------------------ -------- -------- -------- Federal income taxes at statutory rate $ 13,098 $ 5,819 $ 13,490 State income taxes net of federal benefit 791 216 501 Effect of nondeductible government settlement - 2,912 - Foreign taxes (572) 912 838 Research credit settlement (1,745) - - Net operating loss utilization - (1,073) (159) Other 679 178 (641) -------- -------- -------- Provision for income taxes $ 12,251 $ 8,964 $ 14,029 ======== ======== ========
The Company does not provide for additional U.S. and foreign income taxes on undistributed earnings of foreign subsidiaries because they are considered to be indefinitely reinvested. At December 31, 2004, such undistributed earnings totaled $65,864,000. Determination of the deferred income tax liability on these unremitted earnings is not practicable, since such liability, if any, is dependent on circumstances existing when remittance occurs. As disclosed in Note 1 to the consolidated financial statements under "Recent Accounting Pronouncements," the Company is awaiting needed clarifications from the Treasury Department concerning the provision in the American Jobs Creation Act of 2004 ("the Act") related to a special one-time tax deduction for the repatriation of certain foreign dividends to a U.S. taxpayer. In accordance with FASB Staff Position 109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004," the Company has delayed recognition of any potential impact of the repatriation provision of the Act beyond the period of enactment (2004), pending clarifications from the Treasury Department. Deferred income taxes consisted of the following at December 31, 2004 and 2003: (in thousands) 2004 2003 - ----------------------------------------- ---------- --------- Accrued compensation $ 6,003 $ 5,632 Minimum pension liability 39,083 37,761 Self-insured risks 11,296 11,073 Deferred revenues 5,770 9,090 Postretirement benefits 2,074 2,212 Net operating loss carryforwards 9,358 10,551 Other 723 838 ---------- --------- Gross deferred tax assets 74,307 77,157 ---------- --------- Accounts receivable reserve 4,533 2,577 Prepaid pension cost 10,116 14,469 Unbilled revenues 17,277 17,514 Depreciation and amortization 11,064 9,351 Installment sale 2,528 - Other 513 838 ---------- --------- Gross deferred tax liabilities 46,031 44,749 ---------- --------- Net deferred tax assets before valuation allowance 28,276 32,408 Less: valuation allowance (8,091) (7,350) ---------- --------- Net deferred tax asset $ 20,185 $ 25,058 ========== ========= Amounts recognized in the Consolidated Balance Sheets consist of: Current deferred tax assets included in accrued income taxes $ 13,048 $ 17,480 Current deferred tax liabilities included in accrued income taxes (25,035) (20,927) Long-term deferred tax assets included in deferred income tax assets 43,235 37,857 Long-term deferred tax liabilities included in deferred income tax assets (11,063) (9,352) ---------- --------- Net deferred tax assets $ 20,185 $ 25,058 ========== =========
Crawford & Company ANNUAL REPORT 2004 A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company recorded a valuation allowance related to certain net operating loss carryforwards generated primarily in its international operations. Net operating loss carryforwards not subject to a valuation allowance are expected to be fully realized by the Company in 2005. 4. COMMITMENTS UNDER OPERATING LEASES The Company and its subsidiaries lease office space, certain computer equipment, and its automobile fleet under operating leases. License and maintenance costs related to the leased vehicles are paid by the Company. Rental expense for all operating leases consisted of the following:
(in thousands) 2004 2003 2002 - ---------------------- --------- -------- --------- Office space $ 30,071 $ 30,483 $ 29,203 Automobiles 7,884 9,040 8,925 Computers & equipment 284 274 209 --------- -------- --------- Total operating leases $ 38,239 $ 39,797 $ 38,337 ========= ======== =========
At December 31, 2004, future minimum payments under non-cancelable operating leases with terms of more than 12 months are as follows: 2005 - $29,324,000; 2006 - $22,488,000; 2007 - $17,427,000; 2008 - $12,943,000; 2009 - $9,234,000; and thereafter - $19,202,000. 5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT The Company maintains a $70.0 million committed revolving credit line with a syndication of banks in order to meet working capital requirements and other financing needs that may arise. This committed revolving credit line expires October 2006. The Company expects to renew the revolving credit line on or before October 2006 on terms similar to those under the current commitment. As a component of this credit line, the Company maintains a letter of credit facility to satisfy certain contractual obligations. Including $12.2 million committed under the letter of credit facility, the balance of unused lines of credit totaled $20,400,000 at December 31, 2004. Short-term borrowings, including bank overdraft facilities, totaled $37,401,000 and $43,007,000 at December 31, 2004 and 2003, respectively. The weighted-average interest rate worldwide on short-term borrowings was 5.2% during 2004 and 4.8% during 2003. Long-term debt consisted of the following at December 31, 2004 and 2003:
(in thousands) 2004 2003 - -------------------------------------------------------------------- -------- --------- Senior debt, semi-annual principal repayments of $5,556 due each April and October beginning October 2006 through April 2010, and interest payable semi-annually at 6.08% $ 50,000 $ 50,000 Term loans payable to bank: Principal and interest at 4.55%, payable monthly through June 2005 1,390 2,089 Principal and interest at 4.75%, payable monthly through March 2006 263 564 Capital lease obligations 1,122 1,117 -------- --------- Total debt 52,775 53,770 Less: current installments (1,900) (3,106) -------- --------- Total long-term debt $ 50,875 $ 50,664 ======== =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company leases certain computer and office equipment under capital leases with terms ranging from 24 to 60 months and depreciates these assets over the expected useful life. The senior debt and term loans payable contain various provisions that, among other things, require the Company to maintain defined leverage ratios, fixed charge coverage ratios, and minimum net worth thresholds. These provisions also limit the incurrence of certain liens, encumbrances, and disposition of assets in excess of defined amounts, none of which are expected to restrict future operations. Based on these provisions, approximately $18,100,000 of the Company's retained earnings at December 31, 2004 is available for the payment of future cash dividends. The Company was in compliance with its debt covenants as of December 31, 2004. Scheduled principal repayments of long-term debt, including capital leases, as of December 31, 2004 are as follows:
Payments Due by Period ----------------------------------------------------------- Less than More (in thousands) 1 Year 1-3 Years 3-5 Years than 5 Years Total - ----------------------------------------- --------- --------- --------- ------------ --------- Long-term debt, including current portion $ 1,390 $ 16,930 $ 22,222 $ 11,111 $ 51,653 Capital lease obligations 510 526 77 9 1,122 --------- -------- -------- --------- --------- Total $ 1,900 $ 17,456 $ 22,299 $ 11,120 $ 52,775 ========= ======== ======== ========= =========
Under the Company's long-term debt and short-term borrowing agreements, the stock of Crawford & Company International, Inc. is pledged as security, and the Company's U.S. subsidiaries have guaranteed certain borrowings of the Company's foreign subsidiaries. Interest expense on the Company's short-term and long-term borrowings was $5,899,000, $5,858,000, and $4,970,000 for 2004, 2003, and 2002, respectively. Interest paid on the Company's short-term and long-term borrowings was $5,892,000, $5,513,000, and $4,225,000 for 2004, 2003, and 2002, respectively. 6. SEGMENT AND GEOGRAPHIC INFORMATION The Company has two reportable segments: one which provides various claims administration services through branch offices located in the United States ("U.S. Operations") and the other which provides similar services through branch or representative offices located in 62 other countries ("International Operations"). The Company's reportable segments represent components of the business for which separate financial information is available that is evaluated regularly by the chief decision maker in deciding how to allocate resources and in assessing performance. Intersegment sales are recorded at cost and are not material. The Company measures segment profit based on operating earnings, defined as earnings before special credits and charges, net corporate interest expense, and income taxes. Crawford & Company ANNUAL REPORT 2004 Financial information as of and for the years ended December 31, 2004, 2003, and 2002 covering the Company's reportable segments is presented below:
U.S. International Consolidated (in thousands) Operations Operations Totals - -------------- ---------- ------------- ------------ 2004 REVENUES BEFORE REIMBURSEMENTS $ 478,137 $ 255,430 $ 733,567 OPERATING EARNINGS 20,800 11,586 32,386 DEPRECIATION AND AMORTIZATION 11,687 6,490 18,177 CAPITAL EXPENDITURES 11,390 6,850 18,240 ASSETS 314,384 256,876 571,260 ========= =========== ========== 2003 Revenues before reimbursements $ 471,847 $ 219,086 $ 690,933 Operating earnings 23,289 6,751 30,040 Depreciation and amortization 10,762 5,880 16,642 Capital expenditures 18,265 5,552 23,817 Assets 280,460 236,779 517,239 ========= =========== ========== 2002 Revenues before reimbursements $ 508,734 $ 190,656 $ 699,390 Operating earnings 29,261 7,986 37,247 Depreciation and amortization 12,449 5,285 17,734 ========= =========== ==========
The Company's most significant international operations are in the U.K. and Canada, as presented below:
(in thousands) U.K. Canada Other Total - -------------- ---- ------ ------- --------- 2004 REVENUES BEFORE REIMBURSEMENTS $ 82,392 $ 64,339 $ 108,699 $ 255,430 LONG-LIVED ASSETS 53,477 27,209 23,919 104,605 ======== ======== ======== ========= 2003 Revenues before reimbursements $ 65,412 $ 60,143 $ 93,531 $ 219,086 Long-lived assets 57,797 25,743 15,460 99,000 ======== ======== ======== ========= 2002 Revenues before reimbursements $ 56,736 $ 55,870 $ 78,050 $ 190,656 ======== ======== ======== =========
Revenues before reimbursements by market type for the years ended December 31, 2004, 2003, and 2002 are presented below:
(in thousands) 2004 2003 2002 - -------------- ---- ---- ---- Insurance companies $ 233,531 $ 229,781 $ 259,090 Self-insured entities 158,190 167,526 191,278 Class action services 86,416 74,540 58,366 --------- --------- --------- Total U.S. revenues 478,137 471,847 508,734 Total international revenues 255,430 219,086 190,656 --------- --------- --------- Total revenues before reimbursements $ 733,567 $ 690,933 $ 699,390 ========= ========= =========
Substantially all international revenues were derived from the insurance company market. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. ACQUISITIONS The Company's acquisitions for the years presented were not material individually, or in the aggregate, to the Company's consolidated financial statements. Accordingly, pro forma results of operations are not presented. The Company uses the purchase method of accounting for all acquisitions. The Company considers the purchase price allocations of all acquisitions to be preliminary for the 12 months following the acquisition date and are subject to change during that period. Results of operations of acquired companies are included in the Company's consolidated results as of the acquisition date. During 2004, the Company acquired the net assets of France-based loss adjusting firms Cabinet Mayoussier, Cabinet Tricaud, and TMA ("Mayoussier") for an initial purchase price of $1.4 million, including deferred consideration of $828,000. This acquisition was made to strengthen the Company's position in the French loss adjusting market. The market strength of Mayoussier, the established locations, and the assembled workforce supported a premium above the fair value of separately identifiable net assets. This premium was recorded as goodwill. Additional contingent payments due under this agreement may be made through October 2009. During 2003, the Company recorded the acquisition of Robco Claims Management PTY LTD, a Papau, New Guinea claims adjusting company, for a purchase price of $116,000 in cash, excluding cash acquired. The Company also recorded additional payments of $316,000 to the former owners of Certiser, SA, under the terms of a purchase agreement originally executed in 1999. During 2002, the Company recorded the acquisition of the operations of Robertson & Company Group ("Robertson") in Australia, a claims adjusting company, for an aggregate initial purchase price of $10,194,000 in cash, excluding cash acquired. This acquisition was made in order to expand the Company's presence in the Australian market. The market strength of Robertson, the established locations, and the assembled workforce supported a premium above the fair value of separately identifiable net assets. This premium was recorded as goodwill. The purchase price of Robertson was reduced by $542,000 in 2003 due to a refund received from the Australian government for Goods & Services Taxes associated with the acquisition. The purchase price of Robertson may be further increased based on future earnings through October 31, 2008. During 2001, the Company recorded the following acquisitions: Leonard, Hirst & Miller Adjusters (1997), Ltd. ("LH&M"), a Canadian multi-line adjusting firm; Central Victorian Loss Adjusters ("CVLA"), an Australian claims administrator; SVS Experts B.V. ("SVS"), a Dutch independent adjuster; and Resin, an independent adjuster in Brazil, for an aggregate initial purchase price of $6,433,000 in cash, excluding cash acquired. In 2002, an additional payment of $138,000 was paid to the former owners of Resin pursuant to the purchase agreement. In 2004, 2003 and 2002, additional payments of $41,000, $91,000 and $96,000, respectively, were paid to the former owners of SVS pursuant to the purchase agreement. There are no additional contingent payments due under the Resin, SVS, LH&M, or CVLA agreements. During 2000, the Company recorded the acquisition of Greentree Investigations, Inc. ("Greentree"), a provider of surveillance services, for an aggregate initial purchase price of $900,000 in cash, excluding cash acquired. Additional payments of $203,000, $296,000, $230,000, $239,000 and $42,000 in 2004, 2003, 2002, 2001, and 2000, respectively, were paid to the former owner of Greentree, pursuant to the purchase agreement. The purchase price of Greentree may be further increased based on future earnings through April 3, 2005. Crawford & Company ANNUAL REPORT 2004 The goodwill recognized, fair values of assets acquired, liabilities assumed, and net cash paid for the acquisitions detailed above were as follows:
(in thousands) 2004 2003 2002 --------------- ------ ------ ------- Goodwill recognized: U.S. operations $ 492 $ 296 $ 3,102 International operations 1,704 36 7,992 ------ ------ ------- Total goodwill recognized 2,196 332 11,094 Fair values of assets acquired 1,164 87 5,155 Other liabilities assumed (2,743) (142) (2,680) ------ ------ ------- Cash paid, net of cash acquired $ 617 $ 277 $13,569 ====== ====== =======
The changes in the carrying amount of goodwill for the years ended December 31, 2003 and 2004 were as follows:
U.S. International (in thousands) Segment Segment Total - ----------------- ---------- ------------- ---------- Balance at December 31, 2002 $ 27,463 $ 70,335 $ 97,798 Acquired goodwill 296 36 332 Foreign currency effect - 6,393 6,393 ---------- ------------- ---------- Balance at December 31, 2003 27,759 76,764 104,523 ACQUIRED GOODWILL 492 1,704 2,196 FOREIGN CURRENCY EFFECT - 2,691 2,691 ---------- ------------- ---------- BALANCE AT DECEMBER 31, 2004 $ 28,251 $ 81,159 $ 109,410 ========== ============= ==========
8. SPECIAL CREDITS AND CHARGES During September 2004, the Company completed the sale of an undeveloped parcel of real estate to a limited liability company wholly owned and controlled by a member of the Company's Board of Directors, for a purchase price of $9.7 million. This purchase price represented a premium over an independent appraised value of the property. The Company received net cash of $2.0 million and a $7.6 million first lien mortgage note receivable, at an effective interest rate of approximately 4% per annum, due in its entirety in 270 days. A pretax gain of $8.6 million was recognized on the sale. This credit, net of related income tax expense, increased net income per share by $0.11 per share during 2004. During November 2003, the Company made an after-tax payment of $8,000,000, or $0.16 per share, under an agreement reached with the U.S. Department of Justice to resolve an investigation of the Company's billing practices. During 2002, the Company received a cash payment of $6,000,000 from a former vendor in full settlement of a business dispute. This credit, net of related income tax expense, increased net income per share by $0.08 during 2002. 9. CONTINGENCIES The Company maintains funds in trust to administer claims for certain clients. These funds are not available for the Company's general operating activities and, as such, have not been recorded in the accompanying Consolidated Balance Sheets. The amount of these funds totaled approximately $217,910,000 and $178,158,000 at December 31, 2004 and 2003, respectively. The Company normally structures its acquisitions to include earnout payments which are contingent upon the acquired entity reaching certain targets for revenues and operating earnings. The amount of the contingent payments and length of the earnout period varies for each acquisition, and the ultimate payments when made will vary, as they are dependent on future events. Based on 2004 levels of revenues and operating earnings, additional payments under existing earnout agreements approximate $4,065,000 through 2009, as follows: 2005 - $291,000; 2006 - $88,000; 2007 - $88,000; 2008 - $3,300,000; and 2009 - $298,000. As part of the $70.0 million Revolving Credit Agreement (disclosed in Note 5 to the consolidated financial statements), the Company maintains a letter of credit facility to satisfy certain contractual requirements. At December 31, 2004, the aggregate amount committed under the facility was $12,200,000. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has received two related federal grand jury subpoenas which the Company understands have been issued as part of a possible conflicts of interest investigation involving a public entity client of one of the Company's New York offices for Risk Management Services and Healthcare Management. The Company has completed its responses to both of these subpoenas. These subpoenas do not relate to the billing practices of the Company. The Company cannot predict when the government's investigation will be completed, its ultimate outcome or its effect on the Company's financial condition, results of operations, or cash flows, including the effect, if any, on the contract with the client. Although the loss of revenues from this client would not be material to the Company's financial condition, results of operations, and cash flows, the investigation could result in the imposition of civil, administrative or criminal fines or sanctions. The Company has received a subpoena from the State of New York, Office of the Attorney General, requesting various documents relating to its operations. The Company does not know the full scope or subject matter of the subpoena or any related investigation and cannot predict when the Attorney General's investigation will be completed, its ultimate outcome or its effect on the Company's financial condition, results of operations, or cash flows. The Company has received notice and anticipates that it will be the subject of an audit under California Labor Code Sections 129 and 129.5 by the Audit Unit, Division of Workers' Compensation, Department of Industrial Relations, State of California ("Audit Unit"). The Audit Unit seeks to audit workers' compensation files which the Company handled on behalf of clients in its El Segundo, California office in 2001 and 2002. This audit relates to a previous audit that the Company underwent in El Segundo in 2000 wherein the Company agreed to the imposition of a civil penalty pursuant to California Labor Code Section 129.5 and submission to this current follow-up audit, among other items. With respect to this current audit, the Company cannot predict when it will be completed, its ultimate outcome, or its effect on the Company's financial condition, results of operations, or cash flows. 10. COMMON STOCK The Company has two classes of Common Stock outstanding, Class A Common Stock and Class B Common Stock. These two classes of stock have essentially identical rights, except that shares of Class A Common Stock generally do not have any voting rights. Under the Company's Articles of Incorporation, the Board of Directors may pay higher (but not lower) cash dividends on the non-voting Class A Common Stock than on the voting Class B Common Stock. SHARE REPURCHASES In April 1999, the Company's Board of Directors authorized a discretionary share repurchase program of an aggregate of 3,000,000 shares of Class A and Class B Common Stock through open market purchases. Through December 31, 2004, the Company has reacquired 2,150,876 shares of its Class A Common Stock and 143,261 shares of its Class B Common Stock at an average cost of $10.99 and $12.21 per share, respectively. No shares were repurchased in 2004 or 2003. EMPLOYEE STOCK PURCHASE PLAN Under the 1996 Employee Stock Purchase Plan, the Company is authorized to issue up to 1,500,000 shares of Class A Common Stock to U.S. and Canadian employees, nearly all of whom are eligible to participate. Under the terms of the Plan, employees can choose each year to have up to $21,000 of their annual earnings withheld to purchase the Company's Class A Common Stock. The purchase price of the stock is 85% of the lesser of the closing price for a share of stock on the first day of the purchase period or the last day of the purchase period. During 2004, 2003, and 2002, the Company issued 94,454, 101,520, and 57,652 shares, respectively, to employees under this Plan. Crawford & Company ANNUAL REPORT 2004 Under the 1999 U.K. Sharesave Scheme, the Company is authorized to issue up to 500,000 shares of Class A Common Stock to eligible employees in the U.K. The Scheme has terms comparable to the 1996 Employee Stock Purchase Plan. As of December 31, 2004, there were 944 shares issued under this Scheme. STOCK OPTION PLANS The Company has various stock option plans for employees and directors that provide for nonqualified and incentive stock option grants. The option exercise price cannot be less than the fair market value of the Company's stock at the date of grant, and an option's maximum term is 10 years. Options generally vest ratably over five years or, with respect to certain nonqualified options granted to key executives, upon the attainment of specified prices of the Company's stock. At December 31, 2004, there were 1,695,545 shares available for future option grants under the plans. The fair value of options, as discussed in Note 1 to the consolidated financial statements, was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
2004 2003 2002 ------- ------- ------- Expected dividend yield 3.4% 3.6% 3.6% Expected volatility 36% 34% 33% Risk-free interest rate 3.8% 3.6% 3.7% Expected life of options 7 years 7 years 7 years
All of the outstanding and exercisable options as of December 31, 2004 were for Class A Common Stock. A summary of the status of the Company's stock option plans is as follows:
2004 2003 2002 ------------------------- --------------------------- ------------------------- Weighted-Average Weighted-Average Weighted-Average Exercise Exercise Exercise (shares in thousands) Shares Price Shares Price Shares Price - ------------------------------ ------ ---------------- -------- ---------------- ------ ---------------- Outstanding, beginning of year 5,320 $ 11 5,495 $ 12 5,282 $ 13 Options granted 1,597 6 456 5 891 9 Options exercised (36) 3 - - (24) 4 Options forfeited and expired (1,658) 11 (631) 12 (654) 12 ------ -------- ----- Outstanding, end of year 5,223 10 5,320 11 5,495 12 ====== ======== ===== Exercisable, end of year 2,548 12 2,015 12 1,631 12 ====== ======== ===== Weighted-average fair value of options granted during the year: Incentive stock options $ 1.27 $ 1.27 $ 2.23 Nonqualified stock options 1.48 1.21 2.35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes information about stock options outstanding at December 31, 2004 (shares in thousands):
Options Outstanding Options Exercisable ------------------------------------------ ----------------------------- Weighted- Weighted- Number Average Average Number Weighted- Outstanding Remaining Exercise Exercisable Average Range of Exercise Prices at 12/31/04 Contractual Life Price at 12/31/04 Exercise Price - ------------------------ ----------- ---------------- --------- ----------- -------------- $ 2.40 to 8.50 1,820 8.8 $ 5.76 183 $ 4.76 8.51 to 12.50 2,025 4.6 10.32 1,187 10.60 12.51 to 17.50 1,244 2.1 13.99 1,044 14.23 17.51 to 19.50 134 3.0 18.93 134 18.93 ----------- ----------- 2.40 to 19.50 5,223 5.4 9.83 2,548 12.11 =========== ===========
11. SUBSEQUENT EVENTS On February 1, 2005, the Company's Board of Directors approved, subject to shareholder approval, the creation of a new "Crawford & Company Executive Stock Bonus Plan" and authorized the Company to issue up to four million shares of the Company's Class A Common Stock for this new plan. Compensation expense under the new plan will be recognized in accordance with SFAS 123R. Under SFAS 123R, compensation expense is recognized ratably over the service period of the stock award, based on the grant date value of the stock. The new plan has two separate components consisting of the Crawford Performance Share Plan and the Crawford Restricted Stock Plan. The Crawford Performance Share Plan component is intended to substantially replace the existing Crawford Stock Option Plan. Stock options outstanding under the existing Crawford Stock Option Plan will continue to vest in accordance with the existing provisions. Under the new plan, key employees of the Company will be eligible to receive shares of the Company's Class A Common Stock upon the achievement of certain individual and corporate objectives. Shares granted under this component of the new plan will be determined at the discretion of the Compensation Committee of the Company's Board of Directors at the beginning of each year and will vest ratably over five years, subject to the required service period of each award recipient. Under the Crawford & Company Restricted Stock Plan component, the Company may elect to pay up to 25% of certain employee bonus plans in restricted shares of the Company's Class A Common Stock. Employees receiving shares under this component of the plan will have restrictions on the ability to sell the shares. Such restrictions will lapse at the rate of one-half the shares awarded for each year the employee remains employed by the Company following the incentive plan year. Shares awarded under this component of the plan will be eligible for dividends declared on the Company's Class A Common Stock during the vesting period. Crawford & Company ANNUAL REPORT 2004 MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING The management of Crawford & Company is responsible for the integrity and objectivity of the financial information in this annual report. These consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, using informed judgements and estimates where appropriate. The Company maintains a system of internal accounting policies, procedures, and controls designed to provide reasonable assurance that assets are safeguarded and transactions are executed and recorded in accordance with management's authorization. The internal accounting control system is augmented by a program of internal audits and reviews by management, written policies and guidelines, and the careful selection and training of qualified personnel. Management believes it maintains an effective system of internal accounting controls. The Audit Committee of the Board of Directors, comprised solely of outside directors, is responsible for monitoring the Company's accounting and reporting practices. The Audit Committee meets regularly with management, the internal auditors, and the independent auditors to review the work of each and to assure that each performs its responsibilities. The independent auditors, Ernst & Young LLP are recommended by the Audit Committee of the Board of Directors, and appointed by the Board of Directors. Both the internal auditors and Ernst & Young LLP have unrestricted access to the Audit Committee allowing open discussion, without management present, on the quality of financial reporting and the adequacy of internal accounting controls. /s/ THOMAS W. CRAWFORD /s/ JOHN F. GIBLIN /s/ W. BRUCE SWAIN - --------------------- ------------------- --------------------- Thomas W. Crawford John F. Giblin W. Bruce Swain President and Executive Vice President Senior Vice President, Chief Executive Officer and Chief Financial Officer Controller, and Chief Accounting Officer
Atlanta, Georgia March 11, 2005 MANAGEMENT'S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING The management of Crawford & Company is responsible for establishing and maintaining adequate internal controls over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company's internal controls over financial reporting are a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal controls over financial reporting include those policies and procedures that: (i) pertain to maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the Company's assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company's management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. Because of their inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of the Company's internal controls over financial reporting as of December 31, 2004. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework and the Public Company Accounting Oversight Board ("PCAOB"). Based on this assessment, management determined that the Company maintained effective internal controls over financial reporting as of December 31, 2004. Management's assessment of the effectiveness of the Company's internal controls over financial reporting as of December 31, 2004 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report dated March 11, 2005, which is included herein. /s/ THOMAS W. CRAWFORD /s/ JOHN F. GIBLIN /s/ W. BRUCE SWAIN - ----------------------- ------------------- --------------------- Thomas W. Crawford John F. Giblin W. Bruce Swain President and Executive Vice President Senior Vice President, Chief Executive Officer and Chief Financial Officer Controller, and Chief Accounting Officer
Atlanta, Georgia March 11, 2005 Crawford & Company ANNUAL REPORT 2004 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENTS To the Shareholders and Board of Directors of Crawford & Company: We have audited the accompanying consolidated balance sheets of Crawford & Company as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders' investment, and cash flows for each of the three years in the period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Crawford & Company at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Crawford & Company's internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2005 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Atlanta, Georgia March 11, 2005 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON MANAGEMENT'S ASSESSMENT OF INTERNAL CONTROL OVER FINANCIAL REPORTING To the Shareholders and Board of Directors of Crawford & Company: We have audited management's assessment, included in the accompanying Management's Report on Internal Controls Over Financial Reporting, that Crawford & Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Crawford & Company management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assessment that Crawford & Company maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Crawford & Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Crawford & Company as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders' investment, and cash flows for each of the three years in the period ended December 31, 2004, and our report dated March 11, 2005 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Atlanta, Georgia March 11, 2005 Crawford & Company ANNUAL REPORT 2004 SELECTED FINANCIAL DATA
For the years ended December 31, 2004 2003 2002 2001 2000 - ----------------------------------------- --------- --------- --------- --------- --------- (in thousands, except per share data) Revenues Before Reimbursements $ 733,567 $ 690,933 $ 699,390 $ 725,539 $ 712,174 Operating Earnings (1) 32,386 30,040 37,247 56,028 65,569 Net income 25,172 7,662 24,512 29,445 25,348 Net Income Per Share: Basic 0.52 0.16 0.50 0.61 0.52 Diluted 0.51 0.16 0.50 0.61 0.52 Operating Margin 4.4% 4.3% 5.3% 7.7% 9.2% Current Assets 344,707 302,663 272,025 261,284 264,187 Total Assets 571,260 517,239 474,776 431,415 458,351 Current Liabilities 214,323 187,171 148,249 156,307 157,639 Long-Term Debt, Less Current Installments 50,875 50,664 49,976 36,378 36,662 Total Debt 90,176 96,777 81,488 73,144 81,298 Shareholders' Investment 194,833 172,594 159,431 188,300 217,767 Total Capital 285,009 269,371 240,919 261,444 299,065 Current Ratio 1.6:1 1.6:1 1.8:1 1.7:1 1.7:1 Total Debt-to-Total Capital 31.6% 35.9% 33.8% 28.0% 27.2% Return on Average Shareholders' Investment 13.7% 4.6% 14.1% 14.5% 10.8% Cash Flows from Operating Activities 35,751 37,201 52,031 63,072 55,094 Cash Flows from Investing Activities (16,579) (23,721) (33,371) (28,275) (28,297) Cash Flows from Financing Activities (22,238) (4,377) (11,099) (34,126) (21,421) Shareholders' Equity Per Share 3.99 3.54 3.28 3.88 4.49 Cash Dividends Per Share: Class A Common Stock 0.24 0.24 0.32 0.56 0.55 Class B Common Stock 0.24 0.24 0.32 0.56 0.55 Weighted-Average Shares Outstanding: Basic 48,773 48,668 48,580 48,492 48,845 Diluted 48,996 48,776 48,664 48,559 48,933
- ------------------------ (1) Earnings before special credits and charges, amortization of goodwill, net corporate interest expense, minority interest, and income taxes. For a reconciliation of operating earnings to net income, see page 19 of this annual report. QUARTERLY FINANCIAL DATA (UNAUDITED) DIVIDEND INFORMATION AND COMMON STOCK QUOTATIONS
FULL 2004 FIRST SECOND THIRD FOURTH YEAR - --------------------------------------- ----------- ----------- ----------- ----------- ----------- (in thousands, except per share data) REVENUES BEFORE REIMBURSEMENTS $ 169,855 $ 172,016 $ 185,870 $ 205,826 $ 733,567 SPECIAL CREDIT - - 8,573 - 8,573 PRETAX INCOME 3,757 6,265 15,478 11,923 37,423 NET INCOME 2,389 5,540 9,525 7,718 25,172 NET INCOME PER SHARE - BASIC 0.05 0.11 0.20 0.16 0.52 NET INCOME PER SHARE - DILUTED (A) 0.05 0.11 0.20 0.16 0.51 CASH DIVIDENDS PER SHARE: Class A Common Stock 0.06 0.06 0.06 0.06 0.24 Class B Common Stock 0.06 0.06 0.06 0.06 0.24 COMMON STOCK QUOTATIONS: (B) Class A - High 7.07 5.24 6.50 7.68 7.68 Class A - Low 4.73 4.50 4.55 6.26 4.50 Class B - High 7.23 5.56 6.76 8.28 8.28 Class B - Low 4.75 4.60 4.53 6.48 4.53
Full 2003 First Second Third Fourth Year - --------------------------------------- ----------- ----------- ----------- ----------- ----------- (in thousands, except per share data) Revenues before reimbursements $ 167,258 $ 176,310 $ 172,234 $ 175,131 $ 690,933 Special charge - - - (8,000) (8,000) Pretax income (loss) 5,108 9,514 (1,279) 3,283 16,626 Net income (loss) 3,249 6,051 (3,726) 2,088 7,662 Net income (loss) per share - basic (A) 0.07 0.12 (0.08) 0.04 0.16 Net income (loss) per share - diluted (A) 0.07 0.12 (0.08) 0.04 0.16 Cash dividends per share: Class A Common Stock 0.06 0.06 0.06 0.06 0.24 Class B Common Stock 0.06 0.06 0.06 0.06 0.24 Common stock quotations:(B) Class A - High 4.90 5.55 7.02 7.39 7.39 Class A - Low 3.41 3.87 4.90 6.92 3.41 Class B - High 5.91 6.49 7.10 7.36 7.36 Class B - Low 3.90 4.16 4.95 6.92 3.90
(A) Due to the method used in calculating per share data as prescribed by SFAS 128, "Earnings Per Share," the quarterly per share data does not total to the full year per share data. (B) The quotations listed in this table set forth the high and low closing prices per share of Crawford & Company Class A Common Stock and Class B Common Stock, respectively, as reported on the NYSE Composite Tape. The approximate number of record holders of the Company's stock as of December 31, 2004: Class A - 2,043 and Class B - 714. Crawford & Company ANNUAL REPORT 2004 EX-21.1 5 g93630exv21w1.txt EX-21.1 SUBSIDIARIES OF CRAWFORD & COMPANY . . . EXHIBIT 21.1 CRAWFORD & COMPANY LISTING OF SUBSIDIARY CORPORATIONS*
Jurisdiction in Subsidiary Which Organized ---------- --------------- Crawford & Company of California Delaware Crawford & Company of Florida Delaware Crawford & Company of Illinois Delaware Crawford & Company of New York, Inc. New York Crawford & Company Employment Services, Inc. Delaware Risk Sciences Group, Inc. Delaware Crawford & Company (Bermuda) Limited Bermuda Crawford & Company HealthCare Management, Inc. Delaware Crawford & Company International, Inc. Georgia Crawford & Company Subrogation and Recovery, Inc. Georgia Crawford & Company Adjusters Limited England Crawford Adjusters Canada Incorporated Canadian Federal Crawford Healthcare Management of Norfolk and Baltimore, Inc. Virginia Crawford Investigation Services, Inc. Georgia The Garden City Group, Inc. Delaware The PRISM Network, Inc. Georgia
* Excludes subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of the year ended December 31, 2004. EX-23.1 6 g93630exv23w1.txt EX-23.1 CONSENT OF ERNST & YOUNG LLP EXHIBIT 23.1 CRAWFORD & COMPANY CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in this Annual Report (Form 10-K) of Crawford & Company of our reports dated March 11, 2005 with respect to the consolidated financial statements of Crawford & Company, Crawford & Company management's assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Crawford & Company, included in the 2004 Annual Report to Shareholders of Crawford & Company. We consent to the incorporation by reference in the Registration Statements (Form S-8: Nos. 33-47536, 33-36116, 333-02051, 333-24425, 333-24427, 333-87465, 333-87467 and 333-43740) of Crawford & Company our reports dated March 11, 2005, with respect to the consolidated financial statements of Crawford & Company, Crawford & Company management's assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Crawford & Company, incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 2004. /s/ ERNST & YOUNG LLP Atlanta, Georgia March 11, 2005 EX-24.1 7 g93630exv24w1.txt EX-24.1 POWERS OF ATTORNEY EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the "Corporation"), hereby constitutes and appoints PETER J. RESCIGNO and JOHN F. GIBLIN, and each of them, his or her true and lawful attorney-in-fact and agent to sign (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2004; (2) any other reports or registration statements to be filed by the Corporation with the Securities and Exchange Commission and/or any national securities exchange under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and any and all instruments and documents filed as part of or in connection with any such reports or registration statements or reports or amendments thereto; and in connection with the foregoing, to do any and all acts and things and execute any and all instrument which such attorneys-in-fact and agents may deem necessary or advisable to enable this Corporation to comply with the securities laws of the United States and of any State or other political subdivision thereof; hereby ratifying and confirming all that such attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 1st day of February, 2005. /s/ Jesse C. Crawford EX-24.2 8 g93630exv24w2.txt EX-24.2 POWERS OF ATTORNEY EXHIBIT 24.2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the "Corporation"), hereby constitutes and appoints PETER J. RESCIGNO and JOHN F. GIBLIN, and each of them, his or her true and lawful attorney-in-fact and agent to sign (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2004; (2) any other reports or registration statements to be filed by the Corporation with the Securities and Exchange Commission and/or any national securities exchange under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and any and all instruments and documents filed as part of or in connection with any such reports or registration statements or reports or amendments thereto; and in connection with the foregoing, to do any and all acts and things and execute any and all instrument which such attorneys-in-fact and agents may deem necessary or advisable to enable this Corporation to comply with the securities laws of the United States and of any State or other political subdivision thereof; hereby ratifying and confirming all that such attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 1st day of February, 2005. /s/ J. Hicks Lanier EX-24.3 9 g93630exv24w3.txt EX-24.3 POWERS OF ATTORNEY EXHIBIT 24.3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the "Corporation"), hereby constitutes and appoints PETER J. RESCIGNO and JOHN F. GIBLIN, and each of them, his or her true and lawful attorney-in-fact and agent to sign (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2004; (2) any other reports or registration statements to be filed by the Corporation with the Securities and Exchange Commission and/or any national securities exchange under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and any and all instruments and documents filed as part of or in connection with any such reports or registration statements or reports or amendments thereto; and in connection with the foregoing, to do any and all acts and things and execute any and all instrument which such attorneys-in-fact and agents may deem necessary or advisable to enable this Corporation to comply with the securities laws of the United States and of any State or other political subdivision thereof; hereby ratifying and confirming all that such attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 1st day of February, 2005. /s/ E. Jenner Wood, III EX-24.4 10 g93630exv24w4.txt EX-24.4 POWERS OF ATTORNEY EXHIBIT 24.4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the "Corporation"), hereby constitutes and appoints PETER J. RESCIGNO and JOHN F. GIBLIN, and each of them, his or her true and lawful attorney-in-fact and agent to sign (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2004; (2) any other reports or registration statements to be filed by the Corporation with the Securities and Exchange Commission and/or any national securities exchange under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and any and all instruments and documents filed as part of or in connection with any such reports or registration statements or reports or amendments thereto; and in connection with the foregoing, to do any and all acts and things and execute any and all instrument which such attorneys-in-fact and agents may deem necessary or advisable to enable this Corporation to comply with the securities laws of the United States and of any State or other political subdivision thereof; hereby ratifying and confirming all that such attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 1st day of February, 2005. /s/ John A. Williams EX-24.5 11 g93630exv24w5.txt EX-24.5 POWERS OF ATTORNEY EXHIBIT 24.5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the "Corporation"), hereby constitutes and appoints PETER J. RESCIGNO and JOHN F. GIBLIN, and each of them, his or her true and lawful attorney-in-fact and agent to sign (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2004; (2) any other reports or registration statements to be filed by the Corporation with the Securities and Exchange Commission and/or any national securities exchange under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and any and all instruments and documents filed as part of or in connection with any such reports or registration statements or reports or amendments thereto; and in connection with the foregoing, to do any and all acts and things and execute any and all instrument which such attorneys-in-fact and agents may deem necessary or advisable to enable this Corporation to comply with the securities laws of the United States and of any State or other political subdivision thereof; hereby ratifying and confirming all that such attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 1st day of February, 2005. /s/ Larry L. Prince EX-24.6 12 g93630exv24w6.txt EX-24.6 POWERS OF ATTORNEY EXHIBIT 24.6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the "Corporation"), hereby constitutes and appoints PETER J. RESCIGNO and JOHN F. GIBLIN, and each of them, his or her true and lawful attorney-in-fact and agent to sign (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2004; (2) any other reports or registration statements to be filed by the Corporation with the Securities and Exchange Commission and/or any national securities exchange under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and any and all instruments and documents filed as part of or in connection with any such reports or registration statements or reports or amendments thereto; and in connection with the foregoing, to do any and all acts and things and execute any and all instrument which such attorneys-in-fact and agents may deem necessary or advisable to enable this Corporation to comply with the securities laws of the United States and of any State or other political subdivision thereof; hereby ratifying and confirming all that such attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 1st day of February, 2005. /s/ Clarence H. Ridley EX-24.7 13 g93630exv24w7.txt EX-24.7 POWERS OF ATTORNEY EXHIBIT 24.7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the "Corporation"), hereby constitutes and appoints PETER J. RESCIGNO and JOHN F. GIBLIN, and each of them, his or her true and lawful attorney-in-fact and agent to sign (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2004; (2) any other reports or registration statements to be filed by the Corporation with the Securities and Exchange Commission and/or any national securities exchange under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and any and all instruments and documents filed as part of or in connection with any such reports or registration statements or reports or amendments thereto; and in connection with the foregoing, to do any and all acts and things and execute any and all instrument which such attorneys-in-fact and agents may deem necessary or advisable to enable this Corporation to comply with the securities laws of the United States and of any State or other political subdivision thereof; hereby ratifying and confirming all that such attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 1st day of February, 2005. /s/ Robert T. Johnson EX-24.8 14 g93630exv24w8.txt EX-24.8 POWERS OF ATTORNEY EXHIBIT 24.8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director or officer, or both, of CRAWFORD & COMPANY, a Georgia corporation (the "Corporation"), hereby constitutes and appoints PETER J. RESCIGNO and JOHN F. GIBLIN, and each of them, his or her true and lawful attorney-in-fact and agent to sign (1) the Corporation's Annual Report on Form 10-K for the year ended December 31, 2004; (2) any other reports or registration statements to be filed by the Corporation with the Securities and Exchange Commission and/or any national securities exchange under the Securities Exchange Act of 1934, as amended, and any and all amendments thereto, and any and all instruments and documents filed as part of or in connection with any such reports or registration statements or reports or amendments thereto; and in connection with the foregoing, to do any and all acts and things and execute any and all instrument which such attorneys-in-fact and agents may deem necessary or advisable to enable this Corporation to comply with the securities laws of the United States and of any State or other political subdivision thereof; hereby ratifying and confirming all that such attorneys-in-fact and agents, or any one of them, shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 1st day of February, 2005. /s/ James D. Edwards EX-31.1 15 g93630exv31w1.txt EX-31.1 SECTION 302 CERTIFICATION OF THE CEO Exhibit 31.1 CERTIFICATION I, Thomas W. Crawford, certify that: 1. I have reviewed this Annual Report on Form 10-K of Crawford & Company; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-145(e) and 15d-145(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: March 14, 2005 /s/ Thomas W. Crawford ----------------------------------------------- Thomas W. Crawford, President and Chief Executive Officer (Principal Executive Officer) EX-31.2 16 g93630exv31w2.txt EX-31.2 SECTION 302 CERTIFICATION OF THE CFO Exhibit 31.2 CERTIFICATION I, John F. Giblin, certify that: 1. I have reviewed this Annual Report on Form 10-K of Crawford & Company; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-145(e) and 15d-145(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: March 14, 2005 /s/ John F. Giblin ------------------------------------------ John F. Giblin, Executive Vice President - Finance (Principal Financial Officer) EX-32.1 17 g93630exv32w1.txt EX-32.1 SECTION 906 CERTIFICATION OF THE CEO Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Crawford & Company (the "Company") on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Thomas W. Crawford, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 14, 2005 /s/ Thomas W. Crawford --------------------------------- Thomas W. Crawford Chief Executive Officer EX-32.2 18 g93630exv32w2.txt EX-32.2 SECTION 906 CERTIFICATION OF THE CFO Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Crawford & Company (the "Company") on Form 10-K for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John F. Giblin, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 14, 2005 /s/ John F. Giblin -------------------------------------- John F. Giblin Executive Vice President -- Finance Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----