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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported) March 31, 1998
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CENTURY BUSINESS SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-2769024
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
0-25890
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(Commission File Number)
10055 Sweet Valley Drive
Cleveland, Ohio 44125
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (216) 447-9000.
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Item 2. Acquisition or Disposition of Assets.
On March 31, 1998, Century Business Services, Inc. (the "Company"), a Delaware
corporation, completed the acquisitions of The Continuous Learning Group, Inc.
("CLG"), a Delaware corporation, and Envision Development Group, Inc. ("EDG"),
a Delaware corporation, pursuant to an Agreement and Plan of Merger dated
March 31, 1998, by and among the Company, CLG Acquisition Corp. ("Merger Sub
A"), CLG, EDG Acquisition Corp. ("Merger Sub B"), EDG, and the shareholders of
CLG and EDG.
The transaction was effected by means of a merger of CLG with and into Merger
Sub A and EDG with and into Merger Sub B. The Company paid an aggregate of
$10,390,539 in cash and 916,805 unregistered shares of Common Stock of the
Company subject to a lock-up agreement for a two year period.
The Company also completed the acquisition of Multi-Dimensional International
Consultants, Ltd. ("MDI"), a Florida limited partnership, pursuant to an
Agreement and Plan of Merger dated March 31, 1998, by and among the Company,
MDI Acquisition Corp. ("Merger Sub C"), MDI, Multi-Dimensional International
Consultants, Inc. ("MDI Inc."), Multi-Dimensional International Consultants II,
Inc. ("MDI II"), and the shareholders of MDI Inc. and MDI II.
The transaction was effected by means of a merger of MDI Inc. and MDI II with
and into Merger Sub C. The Company paid an aggregate of $5,209,522 in cash
and 459,662 unregistered shares of Common Stock of the Company subject to
a lock-up agreement for a two year period.
The shareholders of Merger Sub A, Merger Sub B, and Merger Sub C,
(collectively, the "Shareholders"), will also have the opportunity to receive a
potential maximum earn-out amount of $4.8 million in cash and $7.2 million
worth of unregistered shares of Common Stock of the Company, to be subject to a
lock-up agreement for one year after issue, if the acquired companies increase
their 1998, 1999 and 2000 pre-tax earnings by a compounded annual rate of at
least 25% over the 1997 pre-tax earnings base.
Consideration for the aforementioned merger transactions was determined on the
basis of arm's length negotiations by the parties. The Company utilized
available cash resources to fund the cash portions of the transactions.
CLG and EDG supply a wide range of performance consulting and management
services, education, and training for all organizational levels, from the single
office to enterprise-wide level. Companies in the MDI group provide consulting
and training services for independent firms and the in-house operations of
Fortune 1000 companies in areas such as customer sales and service and employee
help desks. The Company will utilize the assets of the aforementioned companies
in a consistent fashion.
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The Company's press release issued March 9, 1998 announcing the aforementioned
acquisitions was filed previously on Form 8-K dated March 9, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired
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To be filed by amendment.
(b) Pro Forma Financial Information
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To be filed by amendment.
(c) Exhibits
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1. Agreement and Plan of Merger, dated March 31, 1998, by and among
Century Business Services, Inc., The Continuous Learning Group,
Inc., CLG Acquisition Corp., Envision Development Group, Inc.,
EDG Acquisition Corp., and the Shareholders of CLG and EDG.
2. Agreement and Plan of Merger, dated March 31, 1998, by and among
Century Business Services, Inc., Multi-Dimensional International
Consultants, Ltd., MDI Acquisition Corp., Multi-Dimensional
Consultants, Inc., Multi- Dimensional Consultants II, Inc., and
the Shareholders of MDI Inc. and MDI II.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTURY BUSINESS SERVICES, INC.
Date: April 15, 1998 By: /s/ Charles D. Hamm, Jr.
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Charles D. Hamm, Jr.
Chief Financial Officer
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Exhibit 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG CENTURY BUSINESS SERVICES, INC.,
THE CONTINUOUS LEARNING GROUP, INC. ("CLG"), CLG ACQUISITION CORP.,
ENVISION DEVELOPMENT GROUP, INC. ("EDG"), EDG ACQUISITION CORP.
AND THE SHAREHOLDERS OF CLG AND EDG
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TABLE OF CONTENTS
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Page
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ARTICLE 1 MERGERS................................................................................ 1
1.1 The Mergers............................................................................ 1
1.2 Effect of the Mergers.................................................................. 1
1.3 Articles of Incorporation and Regulations; Names....................................... 2
1.4 Directors.............................................................................. 2
1.5 Officers ........................................................................... 2
1.6 Merger Consideration; Conversion of Securities......................................... 2
1.7 Closing Date Net Worth................................................................. 3
ARTICLE 2 CONSUMMATION OF MERGERS................................................................ 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF
CLG, EDG AND THE SHAREHOLDERS.................................................................5
3.1 Representations and Warranties of the Shareholders..................................... 5
3.1.1 Authority.................................................................. 5
3.1.2 Title to the Shares........................................................ 5
3.1.3 No Brokers................................................................. 6
3.1.4 Affiliated Transactions.................................................... 6
3.2 Representations and Warranties
of CLG, EDG and the Shareholders....................................................... 6
3.2.1 Organization and Qualification............................................. 6
3.2.2 Authority.................................................................. 6
3.2.3 Capitalization............................................................. 7
3.2.4 Financial Statements....................................................... 7
3.2.5 Absence of Certain Changes or Events ...................................... 7
3.2.6 Net Worth.................................................................. 9
3.2.7 Subsidiaries .............................................................. 8
3.2.8 Organizational Documents and Corporate
Records.................................................................. 8
3.2.9 Consents .................................................................. 8
3.2.10 No Breach ................................................................. 8
3.2.11 Accounts Receivable ....................................................... 9
3.2.12 Other Tangible Property ................................................... 9
3.2.13 Leasehold Interests ....................................................... 9
3.2.14 Real Property ............................................................. 10
3.2.15 Assets .................................................................... 10
3.2.16 Intellectual Property ..................................................... 10
3.2.17 Tax Matters ............................................................... 10
3.2.18 Compliance with Laws....................................................... 11
3.2.19 Permits ................................................................... 11
3.2.20 Contracts and Agreements................................................... 11
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3.2.21 Customers, Suppliers and Sales
Representatives.......................................................... 13
3.2.22 Outstanding Commitments.................................................... 13
3.2.23 Labor Matters; Employees................................................... 13
3.2.24 Employee Benefits.......................................................... 14
3.2.25 Employee Compensation...................................................... 16
3.2.26 Insurance.................................................................. 16
3.2.27 Absence of Undisclosed Liabilities......................................... 16
3.2.28 Actions and Proceedings.................................................... 16
3.2.29 Bank Accounts, Guarantees and Powers ...................................... 17
3.2.30 Environmental and Safety Matters........................................... 17
3.2.31 Absence of Changes ........................................................ 17
3.2.32 Disclosure................................................................. 18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CENTURY.............................................. 18
4.1 Organization........................................................................... 18
4.2 Authority ............................................................................. 18
4.3 The Century Stock ..................................................................... 19
4.4 No Breach ............................................................................. 19
4.5 Documents Delivered ................................................................... 19
ARTICLE 5 CONDITIONS PRECEDENT TO CLOSING........................................................ 19
5.1 Century's Conditions Precedent to Closing.............................................. 19
5.1.1 Representations and Warranties............................................. 19
5.1.2 Covenants.................................................................. 19
5.1.3 Satisfactory Performance................................................... 19
5.1.4 Continuation of Business .................................................. 20
5.1.5 Legal Actions ............................................................. 20
5.1.6 Employment Agreements ..................................................... 20
5.1.7 Legal Limitations on Closing .............................................. 20
5.1.8 Deliveries by Shareholders................................................. 20
5.1.9 Deliveries by CLG and EDG.................................................. 20
5.1.10 Concurrent Closing of MDI.................................................. 21
5.1.11 Waiver..................................................................... 21
5.2 CLG's, EDG's and Shareholders' Conditions Precedent to Closing 21
5.2.1 Representations and Warranties............................................. 21
5.2.2 Covenants ................................................................. 21
5.2.3 Employment Agreements ..................................................... 21
5.2.4 Legal Limitations on Closing............................................... 21
5.2.5 Legal Actions.............................................................. 21
5.2.6 Satisfactory Performance................................................... 21
5.2.7 Waiver..................................................................... 22
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ARTICLE 6 CENTURY STOCK, REGISTRATION RIGHTS AND LOCK-UP......................................... 22
6.1 Century Stock Not Registered........................................................... 22
6.2 Legend ........................................................................... 22
6.3 Removal of Legend...................................................................... 23
6.4 Examination and Investment Representation.............................................. 23
6.5 Registration Rights.................................................................... 23
6.5.1 Required Registration...................................................... 23
6.5.2 Transfer of Registration Rights............................................ 23
6.5.3 Timing of Registration..................................................... 24
6.5.4 Registration Procedures.................................................... 24
6.5.5 Delay and Suspension....................................................... 25
6.5.6 Expenses................................................................... 26
6.5.7 Further Information........................................................ 26
6.5.8 Definition................................................................. 26
6.5.9 Indemnity.................................................................. 27
6.5.10 Documents.................................................................. 27
6.6 Lock-Up................................................................................ 27
ARTICLE 7 OTHER COVENANTS........................................................................ 27
7.1 Announcements.......................................................................... 27
7.2 Conduct of Business.................................................................... 28
7.3 Cooperation............................................................................ 29
7.4 Tax Matters............................................................................ 29
7.5 Access to Information.................................................................. 29
7.6 Confidentiality........................................................................ 29
7.7 Noninterference........................................................................ 30
7.8 Securities-Trading..................................................................... 31
7.9 Buy-Sell Agreement..................................................................... 31
7.10 Termination of Employment Agreement.................................................... 31
ARTICLE 8 CERTAIN DELIVERIES AND TERMINATION..................................................... 31
8.1 Delivery of Century Stock ............................................................. 31
8.2 Termination............................................................................ 31
8.2.4 Breach by CLG, EDG or Shareholders......................................... 32
8.2.5 Breach by Century.......................................................... 32
8.3 Effect of Termination.................................................................. 32
ARTICLE 9 SURVIVAL, INDEMNIFICATION AND
LIMITATION OF LIABILITY................................................................ 32
9.1 Survival............................................................................... 32
9.2 Nature of Indemnity; Losses............................................................ 33
9.3 Limit of Liability..................................................................... 33
9.4 Conditions of Indemnification.......................................................... 33
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9.4.1 Notice..................................................................... 33
9.4.2 Failure to Assume Defense.................................................. 33
9.4.3 Cooperation................................................................ 34
ARTICLE 10 MISCELLANEOUS PROVISIONS............................................................... 34
10.1 Amendment and Modification............................................................. 34
10.2 Waiver of Compliance................................................................... 34
10.3 Expenses............................................................................... 34
10.4 Notices ........................................................................... 34
10.5 Assignment............................................................................. 35
10.6 Third Parties.......................................................................... 36
10.7 Governing Law.......................................................................... 36
10.8 Severability........................................................................... 36
10.9 Counterparts........................................................................... 36
10.10 Headings............................................................................... 36
10.11 Disclosures............................................................................ 37
10.12 Knowledge.............................................................................. 37
10.13 Entire Agreement....................................................................... 32
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TABLE OF EXHIBITS
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Shareholder List/Purchase Price Allocation Exhibit A
Earn-out Formula Exhibit B
Form of Employment Agreements Exhibit C
Form of Lock-Up Agreement Exhibit D
LIST OF SCHEDULES
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[TO COME]
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AGREEMENT AND PLAN OF MERGER
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This Agreement and Plan of Merger (the "Agreement") is made
and entered into as of this 31st day of March, 1998, by and among Century
Business Services, Inc., a Delaware corporation ("Century"), CLG Acquisition
Corp., an Ohio corporation ("Merger Sub A"), The Continuous Learning Group,
Inc., a Delaware corporation ("CLG"), EDG Acquisition Corp., an Ohio corporation
("Merger Sub B"), Envision Development Group, Inc., a Delaware corporation
("EDG") and all of the shareholders of CLG and EDG as set forth on Exhibit A
hereto (collectively, the "Shareholders").
RECITALS
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1. The Shareholders own all of the outstanding capital stock
of CLG and EDG (collectively, the "Shares").
2. The Shareholders desire to sell to Century and Century
desires to purchase the Shares from the Shareholders on the terms set forth in
this Agreement.
3. In order to consummate the transactions contemplated
herein, Merger Sub A and Merger Sub B have been formed and (i) CLG will be
merged with and into Merger Sub A (with the Merger Sub A as the surviving
corporation) and (ii) EDG will be merged with and into Merger Sub B (with Merger
Sub B as the surviving corporation), all as specified in this Agreement.
4. These transactions shall constitute a plan of
reorganization within the meaning of Section 368(a)(1)(A) by application of
Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended.
ARTICLE 1
MERGER
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1.1 THE MERGERS. Subject to the terms and conditions of this
Agreement and in accordance with the Ohio General Corporation Law (the "OGCL")
and the Delaware General Corporation Law ("DGCL"), at the Effective Time (as
defined in Article 2 hereof) (i) CLG will be merged with and into Merger Sub A
and (ii) EDG will be merged with and into Merger Sub B (collectively, the
"Mergers"), and the separate existence of CLG and EDG will cease and Merger Sub
A and Merger Sub B will continue as the surviving corporations (individually,
"Surviving Corporation A" and "Surviving Corporation B", and collectively, the
"Surviving Corporations").
1.2 EFFECT OF THE MERGERS. The Mergers will have the effect
set forth in Section 1701.82 of the OGCL and Section 252 of the DGCL.
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1.3 ARTICLES OF INCORPORATION AND REGULATIONS; NAMES. At the
Effective Time, the Articles of Incorporation and the Regulations of each of
Merger Sub A and Merger Sub B prior to the Effective Time, including all
amendments thereto made prior to the Effective Time, will be the Articles of
Incorporation and Regulations of the respective Surviving Corporation. At the
Effective Time, the name of Surviving Corporation A will be changed to "The
Continuous Learning Group, Inc." and the name of Surviving Corporation B will be
changed to "Envision Development Group, Inc."
1.4 DIRECTORS. Each person serving as a director of CLG or EDG
prior to the Effective Time will tender a letter of resignation effective as of
the Effective Time. Keith W. Reeves will become the initial director of the
Surviving Corporations, to hold office in accordance with the Articles of
Incorporation until his respective successor is duly elected or appointed and
qualified or until his earlier death, resignation or removal.
1.5 OFFICERS. Each person serving as an officer of CLG or EDG
prior to the Effective Time will become the initial officers of their respective
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation until his or her respective successor is duly elected or appointed
and qualified or until their earlier death, resignation or removal.
1.6 MERGER CONSIDERATION; CONVERSION OF SECURITIES. At the
Effective Time, by virtue of the Mergers and without any action on the part of
the parties or the holders of any of the respective securities:
1.6.1 The Shares will be converted into the right to
receive on the Closing Date (as hereinafter defined), a
combination of cash and Century common stock, par value $.01
per share ("Century Stock"). The merger consideration ("Merger
Consideration") will consist of Ten Million Three Hundred
Ninety Thousand Five Hundred and Twenty-Nine Dollars and
Eleven Cents ($10,390,539.11) in cash via wire transfer of
immediately available funds to an account designated prior to
Closing and 916,805 shares of Century Stock (the "Closing Date
Payment"). In addition, the Shareholders will have the
opportunity to receive a combination of cash and Century Stock
based upon the earn-out formula set forth on Exhibit B and
made a part hereof (the "Earn-out Payment"). The Century Stock
that constitutes the Closing Date Payment shall be paid in
accordance with Section 8.1 hereof. The number of shares of
Century Stock issuable to the Shareholders was determined
based upon the closing price of Century Stock on the NASDAQ
System on February 12, 1998. The Closing Date Payment will be
delivered to the Shareholders in the respective amounts set
forth opposite each Shareholder's name on Exhibit A.
1.6.2 The Shares will be canceled immediately
following the payment of the Closing Date Payment. Each common
share of CLG and EDG held in the treasury of CLG or EDG will
automatically be canceled and retired without any conversion
thereof.
1.6.3 The Earn-out Payment shall be determined and
shall be payable in accordance with the provisions of Exhibit
B hereto. It is understood and agreed that there shall be one
Earn-out Payment payable with respect to the transactions
contemplated by this Agreement and the transactions
contemplated by that certain
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Agreement and Plan and Merger dated of even date herewith with
respect to Multi-Dimensional International Consultants, Ltd.
("MDI").
. 1.7 CLOSING DATE NET WORTH
1.7.1 The cash portion of the Closing Date Payment
payable to the Shareholders hereunder shall be reduced on a
dollar-for-dollar basis in the event that the aggregate
Estimated Closing Date Net Worth (as hereinafter defined) of
CLG and EDG is less than $333,333.
1.7.2 At Closing, CLG and EDG will deliver to Century
an estimate of the components of its aggregate net worth as of
the Closing, determined on an accrual basis including
provision for all income taxes, (current and deferred) in
accordance with generally accepted accounting principles
consistently applied ("GAAP") (the "Estimated Closing Date Net
Worth"). To the extent that the Estimated Closing Date Net
Worth is less than $333,333 (plus any earnings since February
1, 1998 as specified in Section 3.2.6 hereof), such difference
(the "Estimated Closing Date Net Worth Deficiency") shall be
deducted from cash portion of the Closing Date Payment.
1.7.2A Century, at its option may have an audit
performed with respect to CLG and EDG with respect to 1997.
1.7.3 As promptly as practicable (but in no event
later than 60 business days after the Closing Date), the
Shareholders shall deliver to Century (i) a balance sheet of
CLG and EDG dated as of the close of business on the Closing
(the "Closing Date Balance Sheet") prepared on an accrual
basis (including provision for all income taxes (current and
deferred) in accordance with GAAP and (ii) an accompanying
closing statement (the "Closing Statement") reasonably
detailing the Shareholders' determination of CLG's and EDG's
net worth as of the Closing (the "Closing Date Net Worth").
Century must, within ten (10) business days after Century's
receipt of the Closing Date Balance Sheet and Closing
Statement, give written notice (the "Notice") to the
Shareholders specifying in reasonable detail Century's
objections, if any, with respect thereto or the Shareholders'
determination of the Closing Date Balance Sheet and the
Closing Date Net Worth shall be final, binding and conclusive
on the parties. With respect to any disputed amounts, the
parties shall meet in person and negotiate in good faith
during the ten (10) business day period (the "Resolution
Period") after the date of the Shareholders' receipt of the
Notice to resolve any such disputes. If the parties are unable
to resolve all such disputes within the Resolution Period,
then within five (5) business days after the expiration of the
Resolution Period, all disputes shall be submitted to a
mutually agreed upon independent accountant (the "Independent
Accountant"), who shall be engaged to provide a final and
conclusive resolution of all unresolved disputes within
fifteen (15) business days after such engagement. The
determination of the Independent Accountant shall be final,
binding and conclusive on the parties hereto, and the fees and
expenses of the Independent Accountant shall be borne by the
party that the Independent Accountant determines is the
non-prevailing party.
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1.7.4 To the extent the Closing Date Net Worth is
less than the Estimated Closing Date Net Worth, the
Shareholders shall pay such deficiency (together with interest
at the rate of nine percent (9%) from the Closing Date) to
Century within five (5) business days after its final
determination pursuant to this Section 1.7. To the extent that
the Closing Date Net Worth is greater than $333,333 (plus any
earnings since February 1, 1998 as specified in Section 3.2.6
hereof), Century shall pay such excess (together with interest
at the rate of nine (9%) from the Closing Date) to the
Shareholders within five (5) business days after its final
determination pursuant to this Section 1.7.
ARTICLE 2
CONSUMMATION OF MERGER
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The Closing ("Closing") will take place on the Closing Date at
the offices of Squire, Sanders & Dempsey L.L.P., 4900 Key Tower, 127 Public
Square, Cleveland, Ohio 44114 (or such other place as the parties may agree) at
9:00 a.m. on March 31, 1998, or at or on such other time, date and place as
shall be mutually agreed to by Century and the Shareholders. (The date and time
of the Closing are hereinafter referred to as the "Closing Date"). At the time
of the Closing, the parties will cause the Mergers to be consummated by filing
Certificates of Merger with the Secretaries of the States of Ohio and Delaware,
in such form as required by and executed in accordance with the OGCL and DGCL.
The date and time of such filing will be the Effective Time.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
CLG, EDG AND THE SHAREHOLDERS
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3.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
of the Shareholders represents and warrants to Century that:
3.1.1 AUTHORITY. The Shareholder has the right,
power, authority and legal capacity to enter into and perform
such Shareholder's obligations under this Agreement and to
consummate the transactions contemplated hereby to be
performed by such Shareholder without any breach of any
agreement by which such Shareholder is bound. This Agreement
has been, and each other document ancillary to this Agreement
to which Shareholder is a party, will be at the Closing, duly
executed and delivered by such Shareholder and constitute, or
will when delivered, constitute, the legal, valid and binding
obligations of such Shareholders, enforceable against such
Shareholder, in accordance with their respective terms, except
as may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws and equitable principles
relating to or limiting creditors' rights generally.
3.1.2 TITLE TO THE SHARES. Each of the Shareholders
owns, of record and beneficially, all of the Shares set forth
opposite his or her name on Exhibit A hereto, free and clear
of all liens, encumbrances, taxes, security interests,
options, warrants and, except for that certain Buy-Sell
Agreement among the Shareholders dated February __, 1997 (the
"Buy-Sell Agreement"), and as provided in Article 15 of
By-
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Laws of each of CLG and EDG, which will be terminated prior to
Closing, restrictions on transfer of whatsoever nature or
kind.
3.1.3 NO BROKERS. Except for payments to be made by
Shareholders to CFOs, Inc., the Shareholder has not employed
any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby for which any of the
Shareholders, CLG, EDG or Century may be responsible.
3.1.4 AFFILIATED TRANSACTIONS. Except as specifically
set forth (including dollar amounts) on Schedule 3.1.4 as of
the date hereof, neither the Shareholder nor any Affiliate of
the Shareholder (as defined below) is indebted to, or is a
creditor of, or a guarantor of any obligation of, or a party
to any contract, agreement, license, option, commitment or
other arrangement, written or oral, express or implied with
CLG or EDG. For purposes of this Section, an "Affiliate of the
Shareholder" means any employee, officer or director of the
Shareholder, any spouse or family member (including in-laws)
of the Shareholder, or any corporation, partnership or other
entity in which the Shareholder (or spouse or family member)
has an equity or ownership interest exceeding twenty percent
(in the aggregate).
3.2 REPRESENTATIONS AND WARRANTIES OF CLG, EDG AND THE
SHAREHOLDERS. Shareholders, and Shareholders jointly with CLG and EDG, hereby
represent and warrant to Century that, except as described in the disclosure
schedules attached hereto and made a part hereof (the "Schedules"):
3.2.1 ORGANIZATION AND QUALIFICATION. CLG is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full
power and authority to own, lease and operate its properties
and to carry on is business as now being and as heretofore
conducted. EDG is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware with full power and authority to own, lease and
operate its properties and to carry on is business as now
being and as heretofore conducted. Each of CLG and EDG is duly
qualified and in good standing in each jurisdiction in which
the nature of its business or ownership or leasing of its
properties makes such qualifications necessary, as set forth
on Schedule 3.2.1 hereto.
3.2.2 AUTHORITY. The execution, delivery and
performance by each of CLG and EDG of this Agreement and the
consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate
action by CLG and EDG. This Agreement has been, and each other
document ancillary to this Agreement to which either of CLG or
EDG is a party will be at the Closing, duly executed and
delivered by CLG and EDG and constitutes, or will when
delivered, constitute, the legal, valid and binding obligation
of CLG and EDG enforceable against it in accordance with their
respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium, and other similar laws
and equitable principles relating to or limiting creditors'
rights generally. This Agreement and the other transactions
contemplated hereby have been approved and adopted by the
Board of Directors of CLG and EDG.
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3.2.3 CAPITALIZATION. The authorized capital stock of
CLG and EDG consists of 10,000 shares of common stock with a
par value of $10.00 per share, par value, and 10,000 of common
stock, par value $1.00 per share, respectively, of which the
Shares constitute all of the outstanding capital stock of CLG
and EDG. The Shares have been duly authorized and are validly
issued, fully paid and nonassessable, and there are no
outstanding rights, subscriptions, warrants, calls, options or
other agreements or commitments of any kind or character to
purchase or otherwise to acquire from CLG or EDG any of its
unissued shares of capital stock or any other security of CLG
or EDG.
3.2.4 FINANCIAL STATEMENTS. Attached hereto as
Schedule 3.2.4 are true and correct copies, with respect to
each of CLG and EDG, of (a) an internally prepared balance
sheet statement and related statement of income for the
12-month period ended December 31, 1997, (b) the estimate of
CLG's and EDG's net worth required pursuant to Section 1.7.2
hereof, (c) the balance sheet statements and income statements
for each of the fiscal years ended 1994, 1995 and 1996, and
(d) the 1998 pro forma financial information and projections
provided to Century by CLG and EDG pursuant to that certain
Letter Agreement dated March 12, 1998. Each of (a), (b) (c)
and (d) (collectively, the "Financial Statements"), are true
and correct, are in accordance with the internal books and
records of CLG and EDG, fairly present the financial condition
and results of operations of CLG and EDG as of and at the
respective dates and for the respective periods covered
thereby and were prepared in conformity with generally
accepted accounting principles ("GAAP") (other than the
requirements with respect to footnote disclosure) consistently
applied over the periods referenced and from period to period.
CLG, EDG and the Shareholders further represent and warrant
that the actual consolidated gross revenue and earnings before
income taxes (after a mutually agreed upon one-time,
non-recurring adjustment of $559,000) of CLG and EDG for the
fiscal year ended December 31, 1997, determined on an accrual
basis in accordance with GAAP were at least $13,740,357 and
$5,135,690, respectively.
3.2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
January 1, 1998 each of CLG and EDG (i) has operated its
business in the usual and ordinary course consistent with past
practice, has not sold or otherwise disposed of any assets
(other than the sale of services or collection of receivables
in the ordinary course of its business); (ii) except as
described on Schedule 3.2.5, has not declared or paid any
dividends, or made any other distributions on its capital
stock or repurchased or agreed to repurchase any of its
capital stock; (iii) there has been no adverse change in the
business, results of operations, assets, liabilities,
financial condition or overall prospects of CLG and EDG; and
(iv) has not incurred any damage, destruction or loss (whether
or not covered by insurance) to its owned or leased property
or Assets (as defined in Section 3.2.15 hereof).
3.2.6 NET WORTH AND EARNINGS. Shareholders represent
and warrant that the consolidated tangible net worth of CLG
and EDG, determined on an accrual basis, including provision
for all income taxes (current and deferred) in accordance with
GAAP (i) as of January 31, 1998 was at least $333,333 and (ii)
on the Closing
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Date will be at least $333,333 (plus any earnings since
February 1, 1998 as specified below); subject, however, to the
provisions of Section 1.7.1 hereof. It is understood that the
Shareholders will be entitled to retain any amounts in excess
of the Closing Date Net Worth specified in (ii) above (other
than as a result of earnings since February 1, 1998 as
specified below). Furthermore, the consolidated Closing Date
Balance Sheet of CLG and EDG shall include a note payable to
the Shareholders on or about June 30, 1998 in the aggregate
amount of $1,239,114 (the "Shareholder Note"). It is further
understood and agreed that all earnings of CLG and EDG from
and after February 1, 1998 shall be retained by CLG and EDG
for the benefit of Century (less any tax liability of the
Shareholders with respect to such earnings).
3.2.7 SUBSIDIARIES. CLG and EDG have no subsidiaries.
3.2.8 ORGANIZATIONAL DOCUMENTS AND CORPORATE RECORDS.
The copies of the Articles of Incorporation and Regulations of
CLG and EDG heretofore delivered to Century are correct and
complete. The stock transfer, minute books and corporate
records of CLG and EDG, all of which have been made available
to Century, are correct and complete and constitute the only
written records and minutes of the meetings, proceedings, and
other actions of the shareholders and the Board of Directors
(including any committees thereof) of CLG and EDG from the
date of its organization to the date hereof. Each of CLG and
EDG has made available to Century all accounting, corporate
and financial books and records which relate to the business
of CLG and EDG.
3.2.9 CONSENTS. Except as set forth on Schedule
3.2.9, no consent, order, license, approval or authorization
of, or exemption by, or registration or declaration or filing
with, any governmental authority, bureau or agency, and no
consent or approval of any other person, is required to be
obtained or made in connection with the transactions
contemplated by this Agreement.
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14
3.2.10 NO BREACH. Neither the execution and delivery
of this Agreement and the other documents and agreements
contemplated hereby, nor the consummation of the transactions
contemplated hereby or thereby will (i) violate any provision
of the Articles of Incorporation or Regulations of CLG or EDG;
(ii) violate, conflict with or result in the breach or
termination of, or constitute an amendment to, or otherwise
give any person the right to terminate, or constitute (or with
notice or lapse of time or both would constitute) a default
(by way of substitution, novation or otherwise) under the
terms of, any contract, mortgage, lease, bond, indenture,
agreement, franchise or other instrument or obligation to
which CLG or EDG is a party or by which CLG or EDG or any of
their respective Assets or properties are bound or affected;
(iii) result in the creation of any liens upon the properties
or assets of CLG or EDG pursuant to the terms of any contract,
mortgage, lease, bond, indenture, agreement, franchise or
other instrument or obligation; (iv) violate any judgment,
order, injunction, decree or award of any court, arbitrator,
administrative agency or governmental or regulatory body
against, or binding upon, CLG or EDG or any of their
respective securities, properties, Assets or business; (v)
constitute a violation by CLG or EDG of any statute, law, rule
or regulation of any jurisdiction as such statute, law, rule
or regulation relates to CLG or EDG or to any of their
respective securities, properties, Assets or business; or (vi)
violate any of the Permits (as defined in Section 3.2.19
hereof).
3.2.11 ACCOUNTS RECEIVABLE. The accounts receivable
and unbilled work in process of CLG and EDG as reflected on
the Closing Date Balance Sheet are actual and bona fide
accounts receivable and unbilled work in process which arose
in the ordinary and usual course of CLG's and EDG's business,
represents valid obligations due to CLG and EDG, are
collectible in the aggregate recorded amounts thereof on the
books of CLG and EDG and will be fully collected in the
ordinary course, except to the extent reflected in the
allowance for doubtful accounts.
3.2.12 OTHER TANGIBLE PROPERTY. CLG and EDG have good
and marketable title to all of the Assets reflected on their
respective books and records and on the Closing Date Balance
Sheet, free and clear of all liens, other than those set forth
on Schedule 3.2.12. To the best knowledge of CLG, EDG and the
Shareholders, the owned tangible personal property material to
the businesses of CLG and EDG is in good operating condition
and repair, ordinary wear and tear excepted.
3.2.13 LEASEHOLD INTERESTS. Each of CLG and EDG has a
good and valid leasehold interest in all personal property
which is leased for use in its business (the "Leasehold
Interests"). All Leasehold Interests are used and operated in
compliance and conformity with all lease agreements creating
such Leasehold Interests. Neither CLG nor EDG has been
notified in writing of any claim that there is under any
leasehold interest, any existing default (including, but not
limited to any payment default or event of default or event
that would with the passage of time or the giving of notice
constitute such default) and to the best knowledge of the CLG,
EDG and the Shareholders, neither CLG nor EDG is in default.
No items of personal property under lease agreements are
subject to any charges for excessive usage or wear and
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tear (or would be subject to such charges if the current rate
of usage continued for the remainder of the term of such lease
agreement(s)).
3.2.14 REAL PROPERTY. Neither CLG nor EDG owns any
real property. Schedule 3.2.14 sets forth a true and correct
list of all leases, subleases or other agreements under which
either CLG or EDG is a lessee or lessor of any real property
or has any interest in real property and, except as set forth
in Schedule 3.2.14, there are no rights or options held by CLG
or EDG, or any contractual obligations on its part, to
purchase or otherwise acquire (including by way of lease or
sublease) any interest in or use of any real property, nor any
rights or options granted by CLG or EDG, or any contractual
obligations entered into by it, to sell or otherwise dispose
of (including by way of lease or sublease) any interest in or
use of any real property. All such leases, subleases and other
agreements grant the leasehold estates or other interests they
purport to grant with the right to quiet possession, are in
full force and effect and constitute legal, valid and binding
obligations of the respective parties hereto, with no existing
or claimed default or event of default (or event which with
notice or lapse of time or both would constitute a default or
event of default) by CLG or EDG or by any other party thereto.
Neither CLG nor EDG is in violation of any building, zoning,
health, safety, environmental or other law, rule or regulation
and no notice from any person has been served upon CLG or EDG
claiming any such violation.
3.2.15 ASSETS. The assets described in Section 3.2.12
and the leaseholds described in Sections 3.2.13 and 3.2.14,
respectively, (collectively, the "Assets"), constitute all of
the assets and properties used by and necessary for the
operations of CLG and EDG.
3.2.16 INTELLECTUAL PROPERTY. Schedule 3.2.16
contains a complete list of each of CLG's and EDG's
Intellectual Property (as defined herein). Except as listed on
Schedule 3.2.16, no person has made or to the best knowledge
of CLG, EDG and the Shareholders, threatened to make any claim
that the operations of CLG or EDG are in violation or
infringement of any patent, patent licenses, trade name,
trademark, service mark, copyright, software license, know-how
or other proprietary or trade rights (collectively,
"Intellectual Property") of any third party. Except as listed
on Schedule 3.2.16, each of CLG and EDG owns or has the right
to use all trademarks, trade names, trade secrets, computer
software, patents, inventions, processes, copyrights, or other
intellectual property (or applications therefor) used in the
conduct of its business.
3.2.17 TAX MATTERS. Except as set forth on Schedule
3.2.17 hereto, each of CLG and EDG has timely filed all
federal, state, county and local tax returns, estimates and
reports (collectively, "Returns") required to be filed by it
through the date hereof, copies of which have been made
available to Century for its inspection and review, which
Returns accurately reflect the taxes due for the periods
indicated; and CLG and EDG have paid in full all income, gross
receipts, value added, excise, property, franchise, sales,
use, employment, payroll and other taxes of any kind
whatsoever (collectively, "Taxes") shown to be due by such
Returns. The liabilities, if any, for Taxes accrued for
operations of CLG and EDG since December 31, 1997
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through the Closing Date are reflected on the Closing Date
Balance Sheet. There is no unassessed deficiency for Taxes
proposed to the best knowledge of CLG, EDG and the
Shareholders, threatened against CLG or EDG, and no taxing
authority has raised any issue with respect to CLG or EDG
which, if adversely determined, would result in a liability
for any Tax. There are not in force any extensions with
respect to the dates on which any Return was or is due to be
filed by CLG or EDG or any waivers or agreements by CLG or EDG
for the extension of time for the assessment or payment of any
Taxes. Each of CLG and EDG has not been, and currently is not
being, audited by any federal, state or local tax authority.
3.2.18 COMPLIANCE WITH LAWS. Neither CLG nor EDG is
in violation of any applicable law, rule or regulation, the
violation of which could adversely affect their respective
assets, properties, liabilities, business, results of
operations, or conditions (financial or otherwise).
3.2.19 PERMITS. Each of CLG and EDG (including,
without limitation, its employees) has duly obtained and holds
in full force and effect all consents, authorizations,
permits, licenses, orders or approvals of, and has made all
declarations and filings with, all federal, state or local
governmental or regulatory bodies that are material or
necessary in or to the conduct of its business (collectively,
the "Permits"); all of the Permits were duly obtained and are
in full force and effect; no violations are or have been
recorded in respect of any such Permit and no proceeding is
pending or, to the best knowledge of CLG, EDG and the
Shareholders, threatened to revoke, deny or limit any such
Permit.
3.2.20 CONTRACTS AND AGREEMENTS. Schedule 3.2.20
contains an accurate and complete list and description of all
plans, arrangements, leases, contracts, licenses and
agreements (collectively, the "Contracts") to which CLG or EDG
is a party, by which its property is bound or affecting its
business, whether written or oral, express or implied or
having any other legally binding basis, including:
(a) any contract involving commitments to make
expenditures, purchases or sales, any supplier contracts, any
client service contracts, broker contracts and marketing
agreements;
(b) any contract relating to any direct or indirect
indebtedness for borrowed money or securing the repayment
thereof or more;
(c) any contract directly or indirectly benefiting
any Affiliate of CLG, EDG or the Shareholders;
(d) any collective bargaining, union, employment, or
consulting contract;
(e) any pension, stock option, bonus, incentive
compensation, retirement, employee stock purchase, stock
ownership, profit sharing, fringe benefit, severance pay,
welfare, health, death benefit, disability, dental or any
other employee benefit contract;
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(f) any contract containing covenants limiting the
freedom of CLG or EDG to compete in any line of business, with
any person or entity, or in any territory;
(g) any contract relating to patents, trademarks,
trade names or other intellectual property;
(h) any executory contract with any sales agent,
manufacturer, dealer, distributor or licensee of any products
sold by CLG or EDG;
(i) any tax-sharing contract;
(j) any indemnity or hold harmless contract;
(k) any contract relating to the lease or sale to or
by others of any of real property;
(l) any contract relating to any account listed in
Schedule 3.2.21 hereof;
(m) any contract relating to equipment purchases or
capital expenditures; and
(n) any other contract not in the ordinary course.
True, complete and correct copies of all written contracts and
summaries of all oral or implied contracts listed on Schedule
3.2.20 hereto and samples of each type of client service
contract of CLG and EDG have been delivered to Century. All
Contracts constitute legal, valid and binding obligations of
CLG and EDG and are in full force and effect on the date
hereof, and CLG and EDG have paid in full all amounts due
thereunder which are currently due and payable and is not in
default under any of them nor, to the best knowledge of CLG
and EDG, is any other party to any such contract or other
agreement in default thereunder, nor, to the best knowledge of
CLG and EDG, does any condition exist that with notice or
lapse of time or both would constitute a default or event of
default thereunder by CLG or EDG or by any other Person.
Except as set forth in Schedule 3.2.9, no Contract requires
the consent or approval of a third party in connection with
the transactions contemplated by this Agreement.
3.2.21 CUSTOMERS. The customer list attached hereto
as Schedule 3.2.21 contains a listing of the twenty largest
customers (in dollar volume) of each of CLG and EDG for the 12
months ended December 31, 1997. Except as described in
Schedule 3.2.21, each of CLG and EDG is not aware of any
existing or anticipated changes in the policies or conditions,
financial or otherwise, of any of such customers, which will
adversely affect CLG's or EDG's business.
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3.2.22 OUTSTANDING COMMITMENTS. To the best knowledge
of CLG, EDG and the Shareholders, each of CLG and EDG is not
bound by any commitments for the performance of services or
delivery of products in excess of its ability to provide such
services or deliver such products during the time available to
satisfy such commitments and all outstanding commitments for
the performance of services or delivery of products were made
on a basis calculated to produce a profit under the
circumstances prevailing when such commitments were made.
3.2.23 LABOR MATTERS; EMPLOYEES.
3.2.23.1 Each of CLG and EDG is in compliance, in all
material respects, with all federal, state and local laws
respecting employment and employment practices (including the
Americans with Disabilities Act and the Family and Medical
Leave Act), terms and conditions of employment, wages and
hours, and nondiscrimination in employment, and has not and is
not engaged in any unfair labor practice.
3.2.23.2 In connection with the operations of its
business, neither CLG nor EDG is a party to, or subject to any
obligation, liability or commitment with respect to any
written or oral employment, compensation, consulting,
severance pay or similar agreement other than the agreements
listed on Schedule 3.2.23. Schedule 3.2.23 sets forth a
payroll list as of January 1, 1998, showing as of such date,
each employee of CLG and EDG, his or her social security
number, annual salary and date of hire.
3.2.23.3 None of CLG, EDG or the Shareholders know of
any employee who intends to terminate his or her employment
with CLG or EDG prior to or following the Closing Date.
3.2.24 EMPLOYEE BENEFITS.
3.2.24.1 Schedule 3.2.24 contains a list of all
"employee pension benefit plans" (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("Pension Plans")), "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA), bonus,
incentive, stock option, stock purchase, life (including any
individual life insurance policy as to which CLG, EDG or any
ERISA Affiliate is owner, beneficiary, or both of such
policy), deferred compensation plans or arrangements, excess
benefit plans, severance pay, holiday pay, vacation pay,
"cafeteria" or "flexible benefit" plans, fringe benefits,
perquisites, and other employee benefit plans, arrangements,
agreements, trusts, contracts, policies, or commitments (all
the foregoing, including the Pension Plans, being herein
called "Benefit Plans") now or heretofore maintained, or
contributed to, by CLG, EDG or by any ERISA Affiliate for the
benefit of any present or former employees, officers,
directors, or other persons. As used herein, "ERISA Affiliate"
means any subsidiary of CLG or EDG and any trade or business
(whether or not incorporated) that is part of the same
controlled group, or under common control with, or part of an
affiliated service group that includes, CLG and EDG within the
meaning of Code (as defined below) Sections 414(b), (c), (m)
or (o). Each of CLG
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and EDG has delivered to Century true, complete and correct
copies of (i) each Benefit Plan (or, in the case of any
unwritten Benefit Plans, descriptions thereof); (ii) the most
recent summary plan description for each Benefit Plan for
which such a summary plan description is required; (iii) each
trust agreement, group annuity contract or other funding and
financing arrangement relating to any Benefit Plan, if any
such arrangement was required or maintained; (iv) all
determination letters and letter rulings received from, and
applications pending with, the Internal Revenue Service
("IRS") with respect to Benefit Plans; and (v) all prohibited
transaction exemptions received from the Department of Labor
with respect to Benefit Plans.
3.2.24.2 Except as disclosed in Schedule 3.2.24, with
respect to the Benefit Plans: (I) there are no Benefit Plans
which are multiemployer plans as defined in Section 3(37) of
ERISA; (II) there is no ERISA Title IV liability incurred or
pending; (III) there are no Benefit Plans which promise or
provide health or life benefits to retirees or former
employees of CLG, EDG or any ERISA Affiliate other than as
required by Section 602 of ERISA or Section 4980B of the
Internal Revenue Code of 1986, as amended ("Code"); (IV) to
the best knowledge of CLG, EDG and the Shareholders, each
Benefit Plan has at all times been operated and administered
in compliance with the applicable requirements of ERISA, the
Code and all other Laws (including regulations and rulings
thereunder), and its terms; (V) each Pension Plan has received
a favorable determination letter from the IRS stating that
such Pension Plan meets all the requirements of the Code, and
that any trust or trusts associated with such Pension Plan are
tax exempt under Section 501(a) of the Code; (VI) there is no
reason why the tax-qualified status of any such Pension Plan
should be revoked, whether retroactively or prospectively, by
the IRS; (VII) all amendments to the Pension Plans which were
required to be made through the date hereof and the Closing
Date under Section 401(a) of the Code, and all other Laws,
subsequent to the issuance of each such Pension Plan's IRS
determination letter have been made; and there are no
amendments which are required to be made to such Pension Plans
which adversely affect, or may result in the revocation or
discontinuance of, the continuing tax-qualification status of
such Pension Plans under the Code; (VIII) no actual or
threatened disputes, lawsuits, claims (other than routine
claims for benefits), investigations, audits or complaints to,
or by, any person or governmental entity have been filed or
are pending or threatened with respect to any Benefit Plan or
its sponsor or any ERISA Affiliates, or the fiduciaries
responsible for such Benefit Plan, and no state of facts or
conditions exist which reasonably could be expected to subject
CLG, EDG or any ERISA Affiliate to any liability (other than
routine claims for benefits) in accordance with the terms of
such Benefit Plan or pursuant to any Laws; (IX) all filings,
notices, and disclosures, required by ERISA, the Code or any
other applicable laws have been timely filed and made; (X)
with respect to each Benefit Plan, there has not occurred, and
no person or entity is contractually bound to enter into, any
nonexempt "prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA; (XI) no
payment that is owed or may become due to any current or
former director, officer, employee or agent of CLG, EDG and
its ERISA Affiliates is subject to, and none shall result in
the imposition of, tax under Section 280(G) or 4999 of the
Code, nor is CLG or EDG obligated, orally or in writing, to
"gross up" or otherwise compensate any such person due to the
imposition of an excise or similar tax on payments made to
such
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person by CLG, EDG or their ERISA Affiliates; (XII) the
consummation of the transactions contemplated by this
Agreement will not accelerate or terminate, nor does there
exist any basis for the acceleration or termination of, (1)
benefits payable to current or former employees of, or other
compensated personnel at, CLG, EDG or an ERISA Affiliate under
any Benefit Plan, or other plan, arrangement, contract or
agreement, written or oral, (2) a participant's vesting
credits or years of service under any Benefit Plan, or (3)
accruals with respect to any other benefits or amounts
reserved under any such Benefit Plan or other plan,
arrangement, contract or agreement; and (XIII) only current
and former employees (excluding "leased employees" as defined
in Code Section 414(n)(2)) of CLG, EDG and their ERISA
Affiliates participate in, and are entitled to receive
benefits from, the Benefit Plans.
3.2.25 EMPLOYEE COMPENSATION. Each of CLG and EDG has
made available to Century for its inspection and review the
permanent files of all its employees, together with payroll
information pertinent to such employees.
3.2.26 INSURANCE. Schedule 3.2.26 lists all policies
of property, theft, fire, liability, workers' compensation,
title, professional liability or life insurance or reinsurance
or any other insurance owned or maintained by CLG or EDG or in
which CLG or EDG is a named insured or on which CLG or EDG is
paying any premiums, true and complete copies of which have
been provided to Century. All such policies are in full force
and effect at the date hereof, and none of the insured parties
thereunder is in default with respect to any provision
contained in any such insurance policy nor failed to give any
notice or present any claim thereunder in due and timely
fashion. Schedule 3.2.26 sets forth a summary of the claims
history for CLG and EDG under such policies since their
organization and, except as set forth on Schedule 3.2.26,
there are no claims outstanding under any such policies.
3.2.27 ABSENCE OF UNDISCLOSED LIABILITIES. Schedule
3.2.27 sets forth a true, complete and accurate list of all
liabilities involving in excess of $5,000 as of the Closing
Date, including all liens on any of CLG's or EDG's Assets and
any and all other liabilities, whether or not contingent.
Except as set forth on Schedule 3.2.27, as of the Closing
Date, neither CLG nor EDG has liabilities in excess of $5,000
arising from or relating to its respective businesses or
operations of any nature (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether
due or to become due) and any and all liabilities or
obligations incurred since December 31, 1997 were incurred in
the ordinary course of business and consistent with past
practice.
3.2.28 ACTIONS AND PROCEEDINGS. Except as provided on
Schedule 3.2.28, there are no claims, actions, suits,
arbitrations, proceedings, investigations or inquiries,
whether at law or in equity and whether or not before any
court, private body or group, governmental department,
commission, board, agency or instrumentality (collectively
"Actions"), pending, or to the best knowledge of CLG, EDG and
the Shareholders, threatened against CLG, EDG or any of their
Assets, whether or not fully or partially covered by
insurance, or which would give rise to any right of
indemnification by any person from CLG or EDG and there are no
outstanding orders, writs, injunctions, awards, sentences or
decrees of any court,
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private body or group, governmental department, commission,
board, agency or instrumentality against, involving or
affecting CLG or EDG. None of CLG, EDG or the Shareholders has
knowledge of any fact or circumstance which could reasonably
be expected to result in any claim, action, suit, inquiry or
order being filed against CLG or EDG which might have an
adverse effect on the business, operations or Assets of either
CLG or EDG.
3.2.29 BANK ACCOUNTS, GUARANTEES AND POWERS. Schedule
3.2.29 sets forth (i) a list of all accounts and deposit boxes
maintained by each of CLG and EDG at any bank or other
financial institution and the names of the person authorized
to effect transactions in such accounts, to borrow pursuant to
any resolutions creating such authorizations and with access
to such boxes; (ii) all agreements or commitments of CLG or
EDG guaranteeing the payment of money or the performance of
other contracts by any third persons; and (iii) the names of
all persons, firms, associations, corporations, or business
organizations holding general or special powers of attorney
from CLG or EDG, together with a summary of the terms thereof.
3.2.30 ENVIRONMENTAL AND SAFETY MATTERS. The business
and operations of each of CLG and EDG have been conducted and
are now being conducted in compliance with all laws, whether
federal, state or local, generally relating to protection of
the health, safety or the environment ("Environmental and
Safety Laws") and there are no environmental conditions on any
real property used by CLG or EDG that could reasonably be
expected to give rise to any cleanup obligations under any
Environmental and Safety Laws. Each of CLG and EDG has never
received any written notification of any violation of any
Environmental and Safety Laws.
3.2.31 ABSENCE OF CHANGES. Since December 31, 1997,
each of CLG and EDG has carried on its business in the
ordinary course, and except as set forth on Schedule 3.2.31
hereto, there has not been:
3.2.31.1 any adverse change in its business
condition (financial or otherwise), results of
operations or liabilities;
3.2.31.2 any pending or, to the best
knowledge of CLG, EDG and the Shareholders,
threatened amendment, modification, or termination of
any agreement, license or permit which is material to
its business;
3.2.31.3 any change in its method of
accounting or any election relating to taxes,
settlement of any claims, audits, etc.;
3.2.31.4 any disposition or acquisition of
any of its Assets or properties other than in the
ordinary course;
3.2.31.5 any damage, destruction or other
casualty loss (whether or not covered by insurance)
adversely affecting or that could reasonably be
expected to adversely affect its business or assets;
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3.2.31.6 any increase in the compensation
payable or to become payable to any director,
officer, manager or employee or any grant of any
severance or termination pay or any employment
agreement entered into with any director, officer or
employee or an adoption of or amendment of any
employee benefit plan or arrangement; or
3.2.31.7 except in the ordinary course, any
obligation or liability incurred.
3.2.32 DISCLOSURE. Each of CLG and EDG has disclosed
to Century any and all facts which are material to CLG's and
EDG's businesses, results of operations, assets, liabilities,
and financial condition. No representation or warranty by CLG,
EDG or the Shareholders in this Agreement and no statement by
CLG, EDG or the Shareholders in any of the other documents or
agreements previously disclosed to Century contains any untrue
statement of a material fact or omits to state any material
fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CENTURY
-----------------------------------------
Century represents and warrants to the Shareholders, CLG and
EDG that:
4.1 ORGANIZATION. Century is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power and authority to own, lease and operate its properties and to
carry on its business as now being and as heretofore conducted by it, and is
duly qualified or otherwise authorized as a foreign corporation to transact
business and is in good standing in each jurisdiction in which it is required to
be so qualified or authorized.
4.2 AUTHORITY. This Agreement has been duly authorized,
executed and delivered by Century and is the valid and binding agreement of
Century enforceable against Century in accordance with its terms. This Agreement
has been, and each other document ancillary to this Agreement to which Century
is a party will be at the Closing, duly executed and delivered by Century and
constitute, or will when delivered, constitute, the legal, valid and binding
obligations of each of Century enforceable against Century in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, and other similar laws and equitable principles
relating to or limiting creditors' rights generally. This Agreement and other
transactions contemplated hereby have been approved and adopted by the Board of
Directors of Century.
4.3 THE CENTURY STOCK. The Century Stock being delivered
pursuant to this Agreement is validly issued, fully paid and non-assessable.
4.4 NO BREACH. The authorization, execution, delivery and
performance of this Agreement by Century will not violate any provision of its
certificate of incorporation or by-laws or
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violate, conflict with or result in the breach or termination of, or
otherwise give any Person the right to terminate, any agreement to which it is
a party.
4.5 DOCUMENTS DELIVERED. Century has delivered to the Shareholders
Century's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997 and
its Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 (collectively the "SEC Documents"). The SEC
Documents were true and complete in all material respects as
at their respective dates, did not contain any untrue
statement of a material fact nor omit to state any material
fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances
under which they were made, not misleading, and since the
filing of Form 10-K for the fiscal year ended December 31,
1997, there has not been any material adverse change in
Century's business condition (financial or otherwise), results
of operations or liabilities, not reflected in the SEC
Documents.
4.6 CONTINUITY OF BUSINESS ENTERPRISE. It is the present
intention of Merger Sub A (i.e., CLG Acquisition Corp.) and Merger Sub B (i.e.,
EDG Acquisition Corp.), as the surviving corporations, to continue at least one
significant historic business line of CLG and EDG, respectively, or to use at
least a significant portion of CLG and EDG's respective historic business assets
in a business, in each case within the meaning of Treasury Regulation
ss.1.368-1(d) promulgated under the Internal Revenue Code.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
5.1 CENTURY'S CONDITIONS PRECEDENT TO CLOSING. The obligation
of Century to close the transactions herein contemplated is subject to the
following express conditions precedent:
5.1.1 REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in Article 3 of this
Agreement shall be true and correct in all material respects
at and as of the Closing Date.
5.1.2 COVENANTS. CLG, EDG and the Shareholders shall
have performed and complied with all of their covenants under
this Agreement in all material respects through the Closing
Date.
5.1.3 SATISFACTORY PERFORMANCE. All actions to be
taken by CLG, EDG and the Shareholders in connection with
consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to
effect the transactions contemplated hereby have been
completed in a manner which is reasonably satisfactory in form
and substance to Century.
5.1.4 CONTINUATION OF BUSINESS. Between December 31,
1997 and the Closing Date, except as otherwise provided
herein, each of CLG and EDG has been operated in the normal
course, consistent with prior practice, and has not suffered
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any damage, destruction, loss or occurrence, whether covered
by insurance or not, which may adversely affect the value of
CLG or EDG.
5.1.5 LEGAL ACTIONS. No suit, action, or other
proceeding shall be pending or threatened before any court or
governmental agency seeking to restrain, prohibit or obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated herein and
there shall have been no investigation or inquiry made or
commenced by any governmental agency in connection with this
Agreement or the transactions contemplated herein.
5.1.6 EMPLOYMENT AGREEMENTS. Each of the
Shareholders, Mr. Stephen V. Jacobs and Mr. William Redmon,
shall have signed and delivered to Century an employment
agreement (containing five (5) year non-competition provisions
following termination of employment and non-interference
provisions for the length of the applicable statute of
limitations) substantially in the form of Exhibit C attached
hereto (individually, an "Employment Agreement" and
collectively, the "Employment Agreements").
5.1.7 LEGAL LIMITATIONS ON CLOSING. There shall not
be in effect any statute, rule or regulation which makes it
illegal for Century to consummate the transactions
contemplated herein or any order, decree or judgment which
enjoins Century from consummating the transactions
contemplated hereby.
5.1.8 DELIVERIES BY SHAREHOLDERS. Shareholders will
have delivered the stock certificates representing the Shares,
duly endorsed for transfer, the written resignations of the
directors of CLG and EDG requested by Century and the Lock-up
Agreement contemplated by Section 6.6 of this Agreement and in
the form attached hereto as Exhibit D.
5.1.9 DELIVERIES BY CLG AND EDG. Each of CLG and EDG
will have delivered its minute book, stock book and stock
ledger, and a good standing certificate, dated as of a date
not more than three (3) days prior to the Closing Date as to
corporate existence and good standing, as certified by the
Secretary of State of the States of Delaware, Pennsylvania and
West Virginia, respectively.
5.1.10 CONCURRENT CLOSING OF MDI. Concurrent with the
closing of this transaction, Century shall also consummate its
purchase of MDI.
5.1.11 WAIVERS. Century may waive one or more of said
conditions but such waiver shall be effective only if in
writing and signed on behalf of Century by one of its duly
authorized officers and may be conditioned in any manner
Century sees fit.
5.2 CLG's, EDG'S AND SHAREHOLDERS' CONDITIONS PRECEDENT TO
CLOSING. The obligations of CLG, EDG and the Shareholders to close the
transactions herein contemplated is subject to the following express conditions
precedent:
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5.2.1 REPRESENTATIONS AND WARRANTIES. Representations
and warranties set forth in Article 4 of this Agreement shall
be true and correct in all material respects at and as of the
Closing Date.
5.2.2 COVENANTS. Century will have performed and
complied with all of its covenants under this Agreement in all
material respects through the Closing Date.
5.2.3 EMPLOYMENT AGREEMENTS. Century will have caused
to be signed and delivered to the Shareholders, Mr. Stephen V.
Jacobs and Mr. William Redmon, the Employment Agreements.
5.2.4 LEGAL LIMITATIONS ON CLOSING. There shall not
be in effect any statute, rule or regulation which makes it
illegal for CLG, EDG or the Shareholders to consummate the
transactions contemplated herein or any order, decree or
judgment which enjoins CLG, EDG or the Shareholders from
consummating the transactions contemplated hereby.
5.2.5 LEGAL ACTIONS. No suit, action, or other
proceeding shall be pending or threatened before any court or
governmental agency seeking to restrain, prohibit or obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated herein and
there shall have been no investigation or inquiry made or
commenced by any governmental agency in connection with this
Agreement or the transactions contemplated herein.
5.2.6 SATISFACTORY PERFORMANCE. All actions to be
taken by Century in connection with consummation of the
transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the
transactions contemplated hereby have been completed in a
manner which is reasonably satisfactory in form and substance
to CLG, EDG and the Shareholders.
5.2.7 WAIVER. CLG, EDG and the Shareholders may waive
one or more of the foregoing conditions but such waiver shall
only be effective if in writing and signed by CLG, EDG and the
Shareholders and may be conditioned in any manner and the
Shareholders see fit.
ARTICLE 6
CENTURY STOCK, REGISTRATION RIGHTS AND LOCK-UP
----------------------------------------------
6.1 CENTURY STOCK NOT REGISTERED. Each of the Shareholders
acknowledges that the Century Stock has not been registered under the Securities
Act (as herein defined) and cannot be sold, transferred, pledged or otherwise
distributed by Shareholders unless a registration statement registering such
Century Stock has been filed and becomes effective or unless the Century Stock
is sold or distributed in a transaction in respect of which Century has
previously received an opinion of counsel, reasonably satisfactory to Century,
as the issuer of such Century Stock (for purposes of Article 6 hereof the
"Issuer"), stating that such transaction is in conformity with the Securities
Act of 1933 as amended, and the rules and regulations promulgated thereunder
(the "Securities Act").
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6.2 LEGEND. Any certificate or certificates representing
Century Stock will bear the following legend unless and until removal thereof is
permitted pursuant to the terms of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT FOR THESE SHARES OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE
ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER OR UNDER APPLICABLE STATE SECURITIES LAWS.
SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS
SPECIFIED IN THE LOCK-UP AGREEMENT DATED AS OF MARCH
31, 1998 BETWEEN CENTURY BUSINESS SERVICES, INC. AND
THE INITIAL HOLDER OF THE SECURITIES NAMED THEREIN, A
COPY OF WHICH WILL BE FURNISHED WITHOUT CHARGE TO THE
HOLDER HEREOF UPON WRITTEN REQUEST, AND THE HOLDER OF
THIS CERTIFICATE AGREES TO BE BOUND THEREBY.
6.3 REMOVAL OF LEGEND. Upon any transfer permitted by Section
6.1 above, which transfer does not require the legend in Section 6.2 above,
Issuer agrees to cause the removal of such legend for any Century Stock so
transferred upon their reissuance to the transferee.
6.4 EXAMINATION AND INVESTMENT REPRESENTATION. Each of the
Shareholders, severally, represents and warrants to Century that each of them:
i. is acquiring the Century Stock for his or her own
account for investment within the contemplation of the
Securities Act and not with a view to the transfer or
resale thereof, except to the extent otherwise
expressly permitted by the Securities Act;
ii. has been advised by counsel of the legal implications
and effect of the foregoing Sections 6.1, 6.2 and 6.3
under the Securities Act and of the circumstances
under which he may dispose of its Century Stock under
the Securities Act;
iii. has examined Issuer's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997
and September 30, 1997 and its Annual Report on Form
10-K for the fiscal year ended December 31, 1997,
including the financial statements contained therein;
iv. has sufficient knowledge and experience in business
and financial matters as to be capable of evaluating
the merits and risks of an investment in Century;
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v. prior to signing this Agreement, was given access to and
information regarding Century and the Century Stock to
the extent the Shareholder believes is necessary in
connection with the Shareholder's decision to invest in
the Century Stock and was given the opportunity to ask
detailed questions and receive satisfactory answers
concerning (i) the terms and conditions of this
Agreement pursuant to which Century is offering to sell
Century Stock to Shareholder, and (ii) Century, its
business and the risks associated with Century and an
investment in the Century Stock. All such questions have
been answered to Shareholder's satisfaction, and
Shareholder has been supplied with all additional
information and documents requested and deemed necessary
by Shareholder to make an investment decision with
respect to the Century Stock being acquired pursuant to
this Agreement; and
vi. prior to signing this Agreement, Shareholder had the
opportunity to consult with Shareholder's legal counsel
or other advisors to the extent desired by Shareholder
as to Shareholder's investment in the Century Stock.
6.5 REGISTRATION RIGHTS. Each of the Shareholders shall have
the following registration rights with respect to the Century Stock:
6.5.1 REQUIRED REGISTRATION. The Issuer agrees to
promptly register pursuant to a registration statement on Form
S-3 or if Form S-3 is not available to the Issuer, such form
as is available (the "Registration Statement") upon demand,
any Registrable Securities (as such term is defined in Section
6.5.8 hereof), issued in connection with the transactions
contemplated by this Agreement, provided that such demand may
not be made with respect to any such Registrable Securities
earlier than one (1) month prior to the date such Registrable
Securities are free from the restriction on sale described in
Section 6.6 below.
6.5.2 TRANSFER OF REGISTRATION RIGHTS. Each of the
Shareholders may assign his/her registration rights with
respect to the Century Stock to any party or parties to which
he may from time to time transfer the Century Stock. Upon
assignment of any registration rights pursuant to this Section
6.5.2, Shareholders shall deliver to Issuer a notice of such
assignment which includes the identity and address of any
assignee (collectively, Shareholders and each such subsequent
holder is referred to as a "Holder").
6.5.3 TIMING OF REGISTRATION. Issuer shall use its
best efforts to cause the Registration Statement to be
declared effective as quickly as practicable after the period
of time or demand described in Section 6.5.1 above, and to
maintain the effectiveness of the Registration Statement until
such time as Issuer reasonably determines based on an opinion
of counsel that the Holders will be eligible to sell all of
the Registrable Securities then owned by the Holders without
the need for continued registration of the Century Stock in
the three-month period immediately following the termination
of the effectiveness of the Registration Statement. Issuer's
obligations contained in Section 6.5 shall terminate on the
third anniversary of the Closing Date, or in the case of
Registrable Securities issued as part of the Earn-out Payment,
on the first anniversary of the termination of the Lock-up
Agreement with
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respect to such Registrable Securities, provided that if Issuer
has not fulfilled its obligations with respect to any demand
made before such date, its obligations will continue with
respect to such demand until satisfied or registration is no
longer required to sell Registrable Securities covered by such
demand.
6.5.4 REGISTRATION PROCEDURES. In case of each
registration, qualification or compliance effected by Issuer
subject to this Section 6.5, Issuer shall keep Holder advised
in writing as to the initiation of each such registration,
qualification and compliance and as to the completion thereof.
In addition, Issuer shall at its own expense:
(1) subject to this Section 6.5.4, before filing a
registration or prospectus or any amendment or
supplements thereto, furnish to counsel selected by
Holder copies of all such documents proposed to be
filed and the portions of such documents provided in
writing by Holder for use therein, subject to such
Holder's approval, and with respect to which Holder
shall indemnify Issuer;
(2) prepare and file with the SEC such amendments and
supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective
and comply with provisions of the Securities Act with
respect to the disposition of all securities covered
thereby during the period referred to in Section 6.5.3
above;
(3) update, correct, amend and supplement the Registration
Statement as necessary;
(4) if such offering is to be underwritten, in whole or in
part, enter into a written agreement in form and
substance reasonably satisfactory to the managing
underwriter and the registering Holder;
(5) furnish to Holder such number of prospectuses,
including preliminary prospectuses, and other
documents that are included in the Registration
Statement as Holder may reasonably request from time
to time;
(6) use its best efforts to register to qualify such
Registrable Securities under such other securities or
blue sky laws of such jurisdictions of the United
States as Holder may request to enable it to
consummate the disposition in such jurisdiction of the
Registrable Securities (provided that Issuer will not
be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required
to qualify but for this Section 6.5);
(7) notify holder, at any time when the prospectus
included the Registration Statement relating to the
Registrable Securities is required to be delivered
under the Securities Act, of the happening of any
event which would cause such prospectus to contain an
untrue statement of a material fact or omit any fact
necessary to make the statement therein in light of
the circumstances under which they are made not
misleading and, at the request of Holder, prepare a
supplement or amendment to such prospectus, so that,
as thereafter
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delivered to purchasers of such shares, such
prospectus will not contain any untrue statements of
a material fact or omit to state any fact necessary to
make the statements therein in light of the
circumstances under which they are made not
misleading;
(8) use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange on
which similar securities issued by Issuer are then
listed and obtain all necessary approvals from the
exchange or the National Association of Securities
Dealers for trading thereon; and
(9) upon the sale of any Registrable Securities pursuant
to the Registration, remove all restrictive legends
from all certificates or other instruments evidencing
such Registrable Securities (to the extend permitted
by the Securities Act).
6.5.5 DELAY AND SUSPENSION. If Issuer is aware of any
event which has occurred or which it reasonably expects might
occur within the next ninety days, and such event would cause
(or Issuer believes might cause) the Registration Statement
(or any prospectus) to contain any untrue statements of a
material fact or omit to state any fact necessary to make the
statements therein in light of the circumstances under which
they are made not misleading, or if Issuer, in its discretion,
makes a determination that a Registration Statement should not
be filed, then notwithstanding any other provision of this
Section 6.5, Issuer, upon notice to Holder, may delay filing
any Registration Statement otherwise required hereunder or may
withdraw or suspend any then pending Registration Statement.
Upon any such delay or suspension no further demand need be
made with respect to those Registrable Securities subject to
such delay or suspension, and the period with respect to
Issuer's obligation to maintain the effectiveness of a
Registration Statement, set forth in Section 6.5.3 will be
extended with respect to such Registrable Securities for the
period of such delay or suspension.
6.5.6 EXPENSES. Except as required by law, all
expenses incurred by in complying with this Section 6.5,
including but not limited to, all registration, qualification
and filing fees, printing expenses, fees and disbursements of
counsel and accountants for Issuer, blue sky fees and expenses
(including fees and disbursements of counsel related to all
blue sky matters) ("Registration Expenses") incurred in
connection with any registration, qualification or compliance
pursuant this Section 6.5 will be borne by Issuer. All
underwriting discounts and selling commissions and any fees of
Holder's own attorneys or other advisors applicable to a sale
incurred in connection with any registration of Registrable
Shares shall be borne by Holder.
6.5.7 FURTHER INFORMATION. If Registrable Securities
owned by Holder are included in any registration, such Holder
shall use reasonable efforts to cooperate with Issuer and
shall furnish Issuer such information regarding itself as
Issuer may reasonably request and as shall be required in
connection with any registration, qualification or compliance
referred to in this Agreement.
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6.5.8 DEFINITION. For purposes of this Section 6.5,
"Registrable Securities" will mean the Century Stock and all
common stock or other securities issued in respect of such
Century Stock by way of a stock dividend or stock split or in
connection with a combination or subdivision of shares,
recapitalization, merger or consolidation or reorganization,
and any securities issued in respect of the Century Stock by
way of stock dividend or stock split or in connection with any
combination or subdivision of shares, recapitalization, merger
or consolidation or reorganization; provided, however, as to
any particular Registrable Securities, such Registrable
Securities will cease to be subject to this Article when they
have been sold pursuant to an effective registration statement
or in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under
Section 4(1) thereof, with the result that all transfer
restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale after the purchaser
and seller have received an opinion of counsel from the seller
or the purchaser, which opinion shall be in form and substance
reasonably satisfactory to the other party and Issuer and
their respective counsel, to the effect that such stock in the
hands of the purchaser is freely transferable without
restriction or registration under the Securities Act in any
public or private transaction.
6.5.9 INDEMNITY. Issuer shall indemnify Shareholders
from and against any and all liabilities to which they may
become subject as a result of any untrue statement or alleged
untrue statement of a material fact contained in the related
registration statement, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, other
than a statement or omission made in reliance on and
consistent with information furnished in writing by the
Shareholders for use in such registration statement, PROVIDED,
HOWEVER, that each Shareholder shall indemnify Issuer and the
underwriters of any offering, if any, from and against any and
all liabilities to which Issuer may become subject as a result
of any untrue statement or alleged untrue statement of a
material fact contained in the related registration statement,
or the omission or alleged omissions to state therein a
material fact required to be stated therein or necessary to
make the statement not misleading, but only insofar as such
statement or omission was made in reliance by Issuer on and
consistent with information furnished in writing by such
Shareholder.
If the indemnification provided for in this Section
6.5.9 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage, or expense referred to therein, then
the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such
loss, liability, claim damage, or expense in such proportion
as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material act or the omission to state a
material fact relates to information supplied by the
indemnifying party or by the indemnified
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party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such
statement or omission.
6.5.10 DOCUMENTS. Issuer shall furnish to the
Shareholders one copy of the registration statement and any
amendments thereto and such number of copies of the final
prospectus as they may reasonably request, and shall deliver
to the appropriate exchange such number of copies of the final
prospectus required to comply with the prospectus delivery
requirements and permit the sale of the registered Century
Stock on such exchange.
6.6 LOCK-UP. Each Shareholder agrees that he or she:
6.6.1 subject to the exceptions set forth in the
Lock-Up Agreement, will not sell, transfer, pledge, engage in
any hedging transaction with respect to, or otherwise dispose
of the Century Stock (or any derivative security thereof)
prior to (i) with respect to the Century Stock included in the
Closing Date Payment, the expiration of a twenty-four (24)
month period following the Closing Date, and (ii) with respect
to any Century Stock paid pursuant to the Earn-out Payment,
the expiration of a twelve (12) month period following the
issuance thereof to the Shareholders.
6.6.2 on the Closing Date, will enter into a Lock-Up
Agreement in the form set forth in Exhibit D hereto.
ARTICLE 7
OTHER COVENANTS
---------------
7.1 ANNOUNCEMENTS. Prior to the Closing, none of the parties
will make any public release of information regarding this Agreement or the
transactions contemplated hereto, except that it is understood and agreed that
Century may issue a press release, to be mutually agreed upon, following (i) the
execution of this Agreement, (ii) the Closing and (iii) as otherwise required by
law.
7.2 CONDUCT OF BUSINESS. During the period from the date
hereof to the Closing Date, unless Century consents otherwise in writing (which
consent will not be unreasonably withheld), and except as otherwise provided in
this Agreement or disclosed in the Schedules, each of CLG and EDG will:
7.2.1 conduct its business only in the ordinary
course of business consistent with past practice, except as
contemplated by this Agreement;
7.2.2 use its best efforts to preserve the goodwill
of those suppliers, customers, clients and distributors having
business relations with it;
7.2.3 maintain any insurance coverages as of the date
of this Agreement against loss or damage to the Assets;
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7.2.4 not transfer or encumber any of the Assets
except for the transfer in the ordinary course of business;
7.2.5 maintain the Assets in conditions comparable to
their current condition, reasonable wear and tear excepted,
except for these Assets sold or consumed during the ordinary
course of business;
7.2.6 except for the Shareholder Note, not create,
incur, assume, or guarantee any indebtedness, including
capitalized lease obligations;
7.2.7 not make capital expenditures or series of
related capital expenditures, or make any capital investment
in, any loan to, or any acquisition of the securities or
assets of any other person or entity or persons or entities;
7.2.8 not make or pledge to make any charitable
contribution (including for capital or building purposes) in
amounts or to types of organizations not consistent with past
practice;
7.2.9 not make any recapitalization, reorganization,
merger, consolidation, reclassification (voting or nonvoting),
dissolution or liquidation of CLG or EDG, or sale of a
substantial portion of the assets of CLG or EDG outside the
ordinary course of its respective business;
7.2.10 not pay any bonuses or any other extraordinary
compensation unless the amount thereof has actually been paid
or accrued as a liability of CLG or EDG.
7.3 COOPERATION. Each party hereto agrees that before and
after the Closing to execute any and all further documents and writings and to
perform such other reasonable actions which may be or become necessary or
expedient to effectuate and carry out this Agreement.
7.4 TAX MATTERS. After Closing, CLG, EDG and Century will
coordinate the preparation of all necessary tax returns. Each party agrees to
timely furnish to the other any records and other information reasonably
requested by it in connection therewith. CLG and EDG will be responsible for the
cost of preparing tax returns for the fiscal year ended December 31, 1997.
Notwithstanding anything in this Agreement to the contrary, the Shareholders
will remain solely liable for any tax consequences to them as a result of the
transactions contemplated by this Agreement. It is the intent of the parties
that the exchange of the Shares for the Century Stock be a tax free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended. Century will use all reasonable efforts to consummate the Merger in
such fashion, but Century makes no representation as to the tax treatment of the
Shareholders or any agreement with respect to refraining from taking any future
action which could adversely affect the tax treatment of this transaction.
Notwithstanding anything in this Agreement to the contrary, the Shareholders
will remain solely liable for any tax consequences to them a result of the
transactions contemplated by this Agreement.
7.5 ACCESS TO INFORMATION. Each of CLG and EDG will, during
ordinary business hours and upon reasonable notice from Century, permit Century
and its authorized
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representatives to have access to all assets, personnel books, records,
accounts, documents and other materials relating in any way to its respective
business. Each of CLG and EDG will furnish to Century such information in
possession of its respective officers, employees and the Shareholders as Century
may from time to time reasonably request. CLG and EDG will otherwise cooperate
in the examination of CLG and EDG by Century.
7.6 CONFIDENTIALITY.
7.6.1 Any non-public information received by any
party hereto as a result of discussions and investigations
pursuant to or in furtherance of this Agreement or otherwise
received prior to the Closing Date, will be kept confidential
by the recipient and will be used only for the purposes of
evaluating the transactions contemplated herein. The parties
may make disclosure information available to attorneys,
accountants and advisors, provided such parties agree to be
bound by the terms of this Section 7.6.
7.6.2 CLG and EDG will not disclose any confidential
information of its clients to Century unless such information
is necessary for the evaluation of the transactions
contemplated herein. If any such information is disclosed,
Century, and their respective employees and agents agree that
such information will not be given to any employee or agent
who does not have a need to know, will not be disclosed to any
third party whatsoever (unless required by law) and will not
be used for any purpose other than the evaluation of the
transactions contemplated by this Agreement, and will be
returned to CLG or EDG upon completion of such evaluation.
7.6.3 If this Agreement is terminated for any reason,
the parties will promptly return any copies of confidential
information to the person who supplied it.
7.7 NONINTERFERENCE. Each of the Shareholders severally agrees
that he or she will not at any time, without the prior written consent of
Century, either directly or indirectly (i) solicit (or attempt to solicit),
induce (or attempt to induce), cause, or facilitate any employee, director,
agent, consultant, independent contractor, representative or associate of
Century or Century's subsidiaries and affiliates including, without limitation,
CLG and EDG (collectively, the "Century Group") to terminate or change his, her
or its employment or services to, or relationship with the Century Group, or
(ii) solicit (or attempt to solicit), induce (or attempt to induce), cause, or
facilitate any supplier of services or products to the Century Group to
terminate or change his, her or its relationship with the Century Group, or
otherwise interfere with any relationship by the Century Group and any of its
suppliers, (iii) have any Customer become a client or customer of any
Shareholder (or any family member of Shareholder) or of any entity that any
Shareholder (or any family member of Shareholder) renders services to or owns,
in whole or in part; or solicit (or attempt to solicit), induce (or attempt to
induce), cause or facilitate any customer, or client, or prospective customer or
client of the Century Group ("Customer(s)") to terminate or change his, her, or
its relationship with the Century Group, or take away, attempt to take away, or
otherwise interfere with the Century Group's relationship with any Customer; or
(iv) will not (except as required by law or as authorized in writing by Century)
directly or indirectly copy, disseminate or use for the Shareholder's personal
benefit or for the benefit of any third party, any information or knowledge
belonging to, used by, or which is in the possession of the Century Group
relating to the
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Century Group's business, business plans, strategies, pricing, sales methods,
customers or prospective customers, technology, programs, finances, costs,
employees, employee compensation rates or policies, marketing plans, development
plans, computer programs, computer systems, inventions, developments, trade
secrets, know how or confidences of the Century Group or its businesses, without
regard to whether any of such information may be deemed confidential or material
to any third party. All of the Shareholders acknowledge and agree that all
Customers (and the income generated from rendering services thereto) are
important assets of the business of the Century Group, and that Century has
agreed to pay the Merger Consideration on the condition that Customers,
including, without limitation, Customers of CLG and EDG, shall continue to be
Customers of the Century Group. If any Shareholder violates the provisions of
subparagraph (iii) above and a Customer ceases to be a Customer of the Century
Group, in addition to any legal or equitable remedy available to Century and the
Century Group, under this Agreement or otherwise, each of the Shareholders
severally agrees to pay to Century a cash amount equal to the greater of (a) one
hundred percent (100%) of the gross revenues, commissions, payments and/or fees
earned with respect to a Customer (whether or not collected as of the end of the
period specified in this subsection (a)) by CLG and EDG and the Century Group
during the twenty-four (24) month period preceding the date such Customer ceases
to be a Customer of the Century Group, or (b) an amount equal to one hundred
percent (100%) of the gross revenues, commissions, payments or fees earned with
respect to a Customer (whether or not collected as of the end of the period
specified in this subsection (b)) received by such Shareholder (or any Family
Member of Shareholder as herein defined), or by an entity that Shareholder (or
any Family Member of Shareholder as herein defined) renders services to or that
is owned, in whole or in part, by Shareholder (or any family member of
Shareholder), during the twenty-four (24) month period following the date such
Customer ceases to be a Customer of the Century Group. For purposes of this
Section 7.7, it is understood and agreed that the term "Family Member" shall
mean a Shareholder's spouse, child, parent or sibling.
7.8 SECURITIES-TRADING. During the period from the date of the
Agreement to the Closing Date, each of CLG, EDG and the Shareholders agree to
refrain, and will use its/his/her respective best efforts to cause CLG, EDG and
its affiliates to refrain from any securities trading activities with respect to
the securities of Century.
7.9 WAIVERS AND TERMINATION OF BUY-SELL AGREEMENT. Prior to
the Closing, Shareholders shall have terminated the Buy-Sell Agreement and
waived their respective rights of first refusal under Article 15 of the CLG and
EDG By-laws.
7.10 TERMINATION OF EMPLOYMENT AGREEMENTS. The Shareholders
shall cause the termination of the employment agreement with John Kealey.
ARTICLE 8
CERTAIN DELIVERIES AND TERMINATION
----------------------------------
8.1 DELIVERY OF CENTURY STOCK. Century will deliver the
Century Stock to the Shareholders within thirty (30) days of the Closing Date.
8.2 TERMINATION. This Agreement may be terminated at any time
on or prior to the Effective Time:
-28-
35
8.2.1 by Century or by CLG or EDG if any court of
competent jurisdiction issues any order (other than temporary
restraining order) restraining, enjoining or prohibiting the
transactions;
8.2.2 by mutual written agreement of Century, CLG and
EDG;
8.2.3 by Century or by CLG or EDG if the Closing Date
will not have occurred on or before July 31, 1998, time being
of the essence; provided that the right to terminate this
Agreement pursuant to this section will not be available to
any party whose failure to fulfill any obligation of this
Agreement has been the cause or resulted in the failure of the
Closing Date to occur on or before such date;
8.2.4 BREACH BY CLG, EDG OR SHAREHOLDERS. By Century
if there has been a material breach on the part of CLG, EDG or
the Shareholders in their respective representations,
warranties or covenants set forth herein, provided however
that if such breach is susceptible to cure, then will have 30
days after receipt of written notice from Century, of their
intent to terminate this Agreement, in which to cure such
breach; and
8.2.5 BREACH BY CENTURY. By CLG, EDG and Shareholders
if there has been a material breach on the part of Century in
its respective representations, warranties or covenants set
forth herein, provided however that if such breach is
susceptible to cure, then Century will have 30 days after
receipt of written notice from CLG, EDG and the Shareholders
of their intent to terminate this Agreement, in which to cure
such breach.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to this Article, all obligations of the parties under this Agreement
will terminate (except for this Article and Section 7.6), and no party hereto
will have any further liability to the other parties hereto, except that such
termination will be without prejudice to any claim which a party may have
against another for breach of this Agreement that occurred prior to the date of
termination.
ARTICLE 9
SURVIVAL, INDEMNIFICATION AND LIMITATION OF LIABILITY
-----------------------------------------------------
9.1 SURVIVAL. All of the representations or warranties
contained in Articles 3 and 4 hereof will survive until May 30, 2001 and will
then expire. Upon the expiration of representations and warranties pursuant to
this section, unless written notice of a claim based on such representation and
warranty specifying in reasonable detail the facts on which the claim is based
will have been delivered to the indemnifying party prior to expiration of such
representation and warranty, such representation and warranty will be of no
further force or effect, as if never made and no action may be brought based on
the same, whether for breach of contract or any other legal theory; provided,
however, that claims based on fraud, willful misrepresentation or with respect
to the representations and warranties set forth in Section 3.1.1 and 3.1.2 may
be asserted at any time within one year after Century learns of such fraud,
willful misrepresentation or breach. Notwithstanding the foregoing or any
provision of this Agreement to the contrary, the covenants contained in Section
7.7 shall survive for a period of ten (10) years after the Closing Date.
-29-
36
9.2 NATURE OF INDEMNITY; LOSSES. Each of the Shareholders,
severally (each an "Indemnifying Party") agrees to indemnify, defend and hold
Century and its respective employees, directors, officers, shareholders and
agents (collectively, the "Century Indemnified Parties"), harmless from and
against all Losses (as defined herein) incurred by the Century Indemnified
Parties resulting from or on account of a breach of any representation, warranty
or covenant of CLG, EDG and the Shareholders made in this Agreement. "Losses"
shall include any and all expenses, losses, costs, deficiencies, liabilities and
damages, including, but not limited to, legal and professional fees and expenses
suffered or incurred in any manner, including investigation and defense of
claims. To the extent that the Shareholders are required to indemnify any of the
Century Indemnified Parties hereunder, such indemnification shall be satisfied
in cash and any Losses in excess of the cash received by the Shareholders
hereunder shall be payable at Century's option in cash or Century Stock upon
termination of the Lock-Up Agreements.
9.3 LIMIT OF LIABILITY. The Shareholders will be severally
liable to the Century Indemnified Parties under this Agreement, for Losses of up
to the aggregate of the Merger Consideration and Earn-out Payment (collectively,
the "Limit"); provided, however, that Shareholders will not be liable for Losses
hereunder rules and until a Loss or series thereof exceed(s) $66,667 (the
"Basket"); and provided further that in the event of a Loss or series thereof
exceed(s) the Basket, the Century Indemnified Parties will be entitled to be
indemnified for all Losses up to the Limit (less the Basket) and further
provided that the Century Indemnified Parties will have a right of set off
against the Earn-out Payment in connection with any Losses incurred hereunder.
9.4 CONDITIONS OF INDEMNIFICATION. The respective obligations
and liabilities of the indemnifying parties to the indemnified party under this
Article will be subject to the following terms and conditions:
9.4.1 NOTICE. Within 15 days after receipt of notice
of commencement of any action or the assertion of any claim by
a third party (but in any event at least 10 days preceding the
date on which an answer or other pleading must be served in
order to prevent a judgment by default in favor of the parties
asserting the claim), the Century Indemnified Parties will
give the Indemnifying Party written notice thereof, together
with a copy of such claim, process or other legal pleading and
the Indemnifying Party will have the right to undertake
defense thereof, by representatives of his or her own
choosing, that are reasonably satisfactory to the Century
Indemnified Parties. Notwithstanding the Indemnifying Party's
undertaking of such defense, the Century Indemnified Parties
will have the right to engage its own counsel, at its own
expense and participate in the defense of claims; provided,
however that the Indemnifying Party will retain the right in
its sole and absolute discretion to make all decisions with
respect to the defense, settlement or compromise of such
claim, provided that the indemnifying party remains liable for
any payments due under any such settlement or compromise.
-30-
37
9.4.2 FAILURE TO ASSUME DEFENSE. If the Indemnifying
Party by the 15th day after receipt of notice of such claim
(or if earlier by the 5th day preceding the day on which the
answer or other pleading must be filed in order to prevent
judgment by default in favor of the person asserting such
claim), does not elect to defend against such claim, the
indemnified party will (upon further notice to Indemnifying
Party) have the right to undertake defense, compromise or
settlement of such claim on behalf of and for the account and
risk of the Indemnifying Party; provided however, that the
Century Indemnified Parties will not settle or compromise such
claim without the Indemnifying Party's consent, which consent
will not be unreasonably withheld; and provided further, that
the Indemnifying Party will have the right to assume the
defense of such claim with counsel of its own choosing at any
time prior to settlement, compromise or final termination
thereof.
9.4.3 COOPERATION. In connection with any
indemnification, the indemnified party will cooperate with all
reasonable requests of the indemnifying party, and will be
reimbursed all its out of pocket expenses.
ARTICLE 10
MISCELLANEOUS PROVISIONS
------------------------
10.1 AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified and supplemented only by a writing signed by Century, CLG, EDG
and the Shareholders.
10.2 WAIVER OF COMPLIANCE. Any failure of Century, CLG, EDG or
the Shareholders to comply with any obligation, covenant, agreement or condition
herein contained may only be waived in writing by (i) Century in the case of any
failure of CLG, EDG or the Shareholders or (ii) CLG, EDG and the Shareholders in
the case of any failure of Century. Such waiver shall be effective only in the
specific instance and for the specific purpose for which made or given.
10.3 EXPENSES. Each party will pay its own expenses incurred
in connection with this Agreement or any transaction contemplated by this
Agreement. The foregoing shall not be construed as limiting any other rights
which any party may have as a result of misrepresentation of or breach by any
other party.
10.4 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand, or when mailed by
certified or registered mail (return receipt requested), postage prepaid or when
delivered by fax (evidenced by confirmation of successful transmission), as
follows:
-31-
38
A. If to Century:
Century Business Services, Inc.
10055 Sweet Valley Drive
Valley View, Ohio 44125
Phone: (216) 447-9000; Fax: (216) 447-9137
Attn: Keith W. Reeves, Senior Vice President
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
(216) 479-8500
Attn: M. Patricia Oliver, Esq.
or to such other person or place as Century shall designate by notice in the
manner provided in this Section 10.4:
B. If to Shareholders, CLG or EDG:
The Continuous Learning Group, Inc.
Envision Development Group, Inc.
c/o Cherrington Corporate Center
Suite No. 130
Corapolis, PA 15108
(904) 273-4435
Attn: Leslie A. Wilk Braksick, President
With a copy to:
Foley & Lardner
P.O. Box 240
The Greenleaf Building
200 Laura Street
Jacksonville, FL 32202-3510
(904) 359-8700
Attn: Robert S. Bernstein, Esq.
or to such other person as the Shareholders shall designate by notice in the
manner provided in this Section 10.4.
10.5 ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of Century and its successors and assigns, and to
Shareholders and their respective heirs and executors, as the case may be, but
neither this Agreement nor any of the rights, interests and obligations
hereunder shall be assigned by any of the parties without the prior written
consent of all of the other parties.
-32-
39
10.6 THIRD PARTIES. This Agreement is not intended to and
shall not be construed to give any person other than the parties hereto any
interest or rights (including, without limitation, any third party beneficiary
rights) with respect to or in connection with this Agreement or any provision
contained herein or contemplated hereby.
10.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without regard to
principles of conflicts of laws. Century and the Shareholders hereby irrevocably
submit to the jurisdiction of the courts of the State of Ohio, with venue in
Cuyahoga County, over any dispute arising out of this Agreement and agree that
all claims in respect of such dispute or proceeding shall be heard and
determined in such court. Century and the Shareholders hereby irrevocably waive,
to the fullest extent permitted by applicable law, any objection which they may
have to the venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Century and the
Shareholders hereby consent to process being served by them in any suit, action
or proceeding by delivering it in the manner specified by the provisions of
Section 10.4 of this Agreement.
10.8 SEVERABILITY. The invalidity or unenforceability in whole
or in part of any covenant, promise or undertaking, or any section, subsection,
sentence, clause, phrase, word, or any of the provisions of this Agreement will
not affect the validity or enforceability of the remaining portions of this
Agreement. If for any reason, any provision is determined to be invalid or in
conflict with any existing, or future law or regulation by a court or agency
having valid jurisdiction, such will not impair the operation or have any other
effect upon such other provisions of this Agreement as may remain otherwise
valid, and the latter will continue to be given full force and effect and bind
the parties hereto.
10.9 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
10.10 HEADINGS. The headings of the sections, schedules and
articles of this Agreement are inserted for the sake of convenience only and
shall not constitute a part hereof.
10.11 DISCLOSURES. Any disclosure in any Schedule to this
Agreement will be deemed a disclosure for all purposes under this Agreement and
shall be considered a disclosure under all other schedules of this Agreement;
provided, however, that information in documents referenced in but not included
as part of a schedule will not be deemed disclosure for purposes of this section
and this Agreement.
10.12 KNOWLEDGE. Whenever a representation or warranty is made
herein as being to the "best knowledge of" a party, it is understood that such
persons have made or caused to be made (and the results thereof reported to
them) an investigation which provides them with a reasonable basis upon which to
determine the accuracy of such representation or warranty by personnel or
representatives competent to determine the accuracy thereof.
10.13 ENTIRE AGREEMENT. This Agreement, including the
schedules and exhibits, contains the entire understanding of the parties in
respect of the subject matter contained herein and
-33-
40
therein and there are no other terms or conditions, representations or
warranties, written or oral, express or implied, except as set forth herein.
[The remainder of this page has been intentionally left blank]
-34-
41
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year above written.
CENTURY BUSINESS SERVICES, INC.
By: /s/ Charles D. Hamm, Jr.
----------------------------------------------
Charles D. Hamm, Jr., Senior Vice President
and Chief Financial Officer
CLG ACQUISITION CORP.
By: /s/ Keith W. Reeves
----------------------------------------------
Keith W. Reeves, President
EDG ACQUISITION CORP.
By: /s/ Keith W. Reeves
----------------------------------------------
Keith W. Reeves, President
THE CONTINUOUS LEARNING GROUP, INC.
By: /s/ Leslie A. Wilk Braksick
----------------------------------------------
Leslie A. Wilk Braksick, President
ENVISION DEVELOPMENT GROUP, INC.
By: /s/ Leslie A. Wilk Braksick
----------------------------------------------
Leslie A. Wilk Braksick, President
SHAREHOLDERS OF THE CONTINUOUS LEARNING GROUP
/s/ D. Larry Lemasters /s/ Leslie A. Wilk Braksick
------------------------------ -----------------------------------
D. Larry Lemasters Leslie A. Wilk Braksick
/s/ Julie M. Smith
------------------------------
Julie M. Smith
SHAREHOLDERS OF ENVISION DEVELOPMENT GROUP, INC.
/s/ D. Larry Lemasters /s/ Leslie A. Wilk Braksick
------------------------------ -----------------------------------
D. Larry Lemasters Leslie A. Wilk Braksick
/s/ Julie M. Smith /s/ Royce H. Heiskell
------------------------------ -----------------------------------
Julie M. Smith Royce H. Heiskell
/s/ Thomas P. Wrenn
------------------------------
Thomas P. Wrenn
S-1
42
ADDITIONAL SHAREHOLDERS OF THE CONTINUOUS LEARNING GROUP, INC.
/s/ JOHN M. KEALEY
---------------------------------------
JOHN M. KEALEY
/s/ WILLIAM K. REDMON
---------------------------------------
WILLIAM K. REDMON
/s/ STEPHEN V. JACOBS
---------------------------------------
STEPHEN V. JACOBS
ADDITIONAL SHAREHOLDER OF ENVISION DEVELOPMENT GROUP, INC.
/s/ JOHN M. KEALEY
---------------------------------------
JOHN M. KEALEY
S-2
43
EXHIBIT A
TO
AGREEMENT AND PLAN OF MERGER
----------------------------
===================================== =================== ============================= ========================
CLOSING CLOSING DATE
NUMBER OF SHARES DATE CENTURY
SHAREHOLDERS CASH STOCK
===================================== =================== ============================= ========================
Shares
------------------------------------- ------------------- ----------------------------- ------------------------
CLG
------------------------------------- ------------------- ----------------------------- ------------------------
D. Larry Lemasters 2,000 $2,807,416.32 251,149
------------------------------------- ------------------- ----------------------------- ------------------------
Leslie A. Wilk Braksick 2,000 $2,807,416.32 251,149
------------------------------------- ------------------- ----------------------------- ------------------------
Julie M. Smith 2,000 $2,807,416.32 251,149
------------------------------------- ------------------- ----------------------------- ------------------------
Stephen V. Jacobs 1 $654,682.89 57,764
------------------------------------- ------------------- ----------------------------- ------------------------
John M. Kealey/CFOs, Inc. 1 $116,833.55 -0-
------------------------------------- ------------------- ----------------------------- ------------------------
William Redman 1 $152,954.94 13,494
------------------------------------- ------------------- ----------------------------- ------------------------
EDG
------------------------------------- ------------------- ----------------------------- ------------------------
D. Larry Lemasters 2,000 $274,872.29 24,560
------------------------------------- ------------------- ----------------------------- ------------------------
Leslie A. Wilk Braksick 2,000 $274,872.29 24,560
------------------------------------- ------------------- ----------------------------- ------------------------
Julie M. Smith 2,000 $274,872.29 24,560
------------------------------------- ------------------- ----------------------------- ------------------------
Royce H. Heiskell 400 $51,538.55 4,605
------------------------------------- ------------------- ----------------------------- ------------------------
Thomas P. Wrenn 1,200 $154,615.66 13,815
------------------------------------- ------------------- ----------------------------- ------------------------
John M. Kealey/CFOs, Inc. 1 $13,047.68 -0-
--------------------------------------------------------------------------------------- ------------------------
TOTAL $10,390,539.10 916,805
===================================== =================== ============================= ========================
A-1
44
EXHIBIT B
EARN-OUT FORMULA
1. GENERAL. In addition to the Merger Consideration payable to the
Shareholders of CLG, EDG and MDI (collectively, the "Shareholders"), as set
forth in each of the respective Agreements, up to $4,799,990 in cash and
$7,200,010 in aggregate value of CENTURY Stock (i.e. 423,530 shares based upon
an agreed price of $17.00 per share) (the "Earn-Out") is payable pursuant to an
Earn-Out formula based on CLG, EDG and MDI (i.e., in each case, the surviving
entities in the Mergers), achieving certain agreed upon consolidated, cumulative
increases in earnings before income taxes during the three year period
commencing February 1, 1998 (the "Earn-Out Period"). The Earn-Out will be
distributable among the Shareholders on May 30, 2001, in accordance with the
provisions of this Exhibit B. In the event the Earn-Out is earned by the
Shareholders (in whole or in part), the Shareholders shall agree as to how to
allocate the Earn-Out among themselves and shall advise CENTURY of such
allocation in writing.
2. CALCULATION OF EARNINGS BEFORE INCOME TAXES.
(a) The independent auditors regularly employed by CENTURY shall
conduct an audit of the financial statements (which will be prepared in
accordance with generally accepted accounting principles on a consolidated basis
with appropriate intercompany eliminations) of CLG, EDG and MDI for each of the
calendar years 1997, 1998, 1999, and 2000 and the month of January, 2001. Such
audit shall be conducted in accordance with generally accepted auditing
standards. In connection therewith, the auditors shall prepare a report (the
"Report") setting forth the consolidated earnings before income taxes ("EBIT")
of CLG and EDG and of MDI for each twelve (12) month period, and adding back
purchase price goodwill amortization of the acquisitions of CLG, EDG and MDI and
any other overhead or charges (other than charges that would have normally been
incurred in the ordinary course of business, which shall be passed through at
cost) from CENTURY. It is understood and agreed that services provided by CLG,
EDG and MDI to Century will be rendered at market rates (less a 50% discount)
and 50% of the service fees will be included in EBIT during each twelve (12)
month period in the Earnout Period. It is further understood and agreed that
CLG, EDG and/or MDI, as applicable, will accrue certain expenses as of January
31, 1998, in connection with the closing of these transactions with respect to
payments made to John M. Kealey, Stephen V. Jacobs and William K. Redmon.
(b) Earnings before income taxes from any acquisition of a business by
CLG, EDG and/or MDI (an "Acquired Business") shall be included in (or subtracted
from, as the case may be) the CLG, EDG and MDI consolidated EBIT only after
CENTURY has been repaid an amount equal to 20% in annualized return on all cash
and the face value (as of the date of pricing of the acquisition) of all common
stock used in such acquisition(s).
(c) The Report shall be delivered simultaneously to (i) D. Larry
Lemasters (the "Shareholder Representative") and (ii) a representative of
CENTURY and shall be final, binding and conclusive upon the parties unless the
CENTURY representative or the Shareholders' Representative notifies the other in
writing of an objection within five (5) days after delivery of the Report. In
that event, the CENTURY representative and the Shareholder Representative shall,
in good faith, attempt to settle the objection. If settlement cannot be achieved
within a fifteen (15) day period, the matter shall be submitted to a mutually
agreed upon independent accounting firm, which shall render a final and binding
decision with respect to specific items in dispute within ten (10) days. The
Shareholders agree to indemnify and hold CENTURY harmless in connection with any
disputes between or among the Shareholders in connection with the Earn-Out
determination or the allocation or distribution thereof.
B-1
45
3. CALCULATION OF EARN-OUT
The determination of the amount of the Earn-Out payable to the
Shareholders shall be calculated by the CENTURY representative and the
Shareholder Representative on the basis of the Report, as follows:
(a) If the consolidated EBIT of CLG, EDG and MDI for each of the
twelve month periods in the Earn-Out Period exceeds the
consolidated EBIT for the immediately preceding twelve month
period by at least 25% per annum compounded, then the
Shareholders will be entitled to receive the maximum Earn-Out
(which in no event shall exceed, in the aggregate, $4,799,990
in cash and 423,530 shares of CENTURY Stock). Based upon 1997
consolidated EBIT of $7,710,586, the 25% twelve month EBIT
growth specified above will be considered to have been
achieved if the targeted consolidated EBITS set forth in 4(i)
below are reached. It is understood and agreed that any excess
EBIT (i.e. any amount above the 25% twelve month EBIT growth
level set forth above) may be applied to make up a deficiency
in any other period in the Earn-Out Period in which 25% twelve
month EBIT growth was not achieved and that any such excess
EBIT shall be for the benefit of CENTURY and shall not result
in the payment of any additional Earn-Out.
(b) In the event that there is any shortage in CLG, EDG and MDI
consolidated EBIT for any twelve month period in the Earn-Out
Period (i.e. below the 25% twelve month EBIT growth level
specified above), the Earn-Out will be earned by the
Shareholders on a prorata basis based upon the amount by which
the actual combined cumulative EBIT of CLG, EDG and MDI during
the Earn-Out Period exceeds the cumulative base EBIT
established using the 1997 combined EBIT of CLG and EDG and
MDI on a consolidated basis. (See Illustration below).
4. ILLUSTRATION OF EARN-OUT CALCULATION
(i) Based on 1997 consolidated EBIT of $7,710,586, CLG, EDG and
MDI target consolidated EBIT shall be as follows: $9,638,232
for the twelve month period ending January 31, 1999,
$12,047,790 for the twelve month period ending January 31,
2000 and $15,059,738 for the twelve month period ending
January 31, 2001, for a total of $36,745,885 in target
cumulative EBIT ("Target Cumulative EBIT")
(ii) 1997 Base EBIT is $7,710,586 x Earn-Out Period (i.e., 3 years)
= $23,131,758 ("Base Cumulative EBIT")
(iii) Target Cumulative EBIT - Base Cumulative EBIT = X; $36,745,885
- $23,131,758 = $13,614,127; X = $13,614,127
(iv) Actual Combined Cumulative EBIT - Base Cumulative EBIT (i.e.
$23,131,758) = Y
(v) (Y/X) x % = the Percentage of the Earn-Out earned by the
Shareholders (of which 40% will be paid in cash and 60% will
be paid in CENTURY Stock and which can be no greater than
100%)
B-2
46
Forexample: Assume Actual Combined Cumulative EBIT of CLG, EDG and MDI =
$29,938,822
(Actual) (Base)
$29,938,822 - $23,131,758 = Y
Y = $ 6,807,064
-----------
X = $13,614,127
$ 6,807,064
-----------
$13,614,127 x % = 50% of Earn-Out is payable to the
Shareholders
50% of Earn-Out is comprised of $2,399,995 ($4,799,990 x .5) in cash and 211,176
(423,530 x .5) shares of CENTURY Stock to be allocated among the Shareholders.
B-3
1
Exhibit 2
AGREEMENT AND PLAN OF MERGER
BY AND AMONG CENTURY BUSINESS SERVICES, INC.,
MULTI-DIMENSIONAL INTERNATIONAL CONSULTANTS, LTD. ("MDI"),
MDI ACQUISITION CORP.,
MULTI-DIMENSIONAL INTERNATIONAL CONSULTANTS, INC. ("MDI INC.")
MULTI-DIMENSIONAL INTERNATIONAL CONSULTANTS II, INC. ("MDI II")
AND THE SHAREHOLDERS OF MDI INC. AND MDI II
2
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1 MERGER................................................................................. 1
1.1 The Merger............................................................................. 1
1.2 Effect of the Merger................................................................... 1
1.3 Articles of Incorporation and Regulations; Name........................................ 2
1.4 Directors.............................................................................. 2
1.5 Officers ........................................................................... 2
1.6 Merger Consideration; Conversion of Securities......................................... 2
1.7 Closing Date Net Worth................................................................. 3
ARTICLE 2 CONSUMMATION OF MERGER................................................................. 4
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF
MDI AND THE SHAREHOLDERS......................................................................5
3.1 Representations and Warranties of the Shareholders..................................... 5
3.1.1 Authority.................................................................. 5
3.1.2 Title to the Shares........................................................ 5
3.1.3 No Brokers................................................................. 5
3.1.4 Affiliated Transactions.................................................... 5
3.2 Representations and Warranties
of MDI and the Shareholders............................................................ 6
3.2.1 Organization and Qualification............................................. 6
3.2.2 Authority.................................................................. 6
3.2.3 Capitalization............................................................. 6
3.2.4 Financial Statements....................................................... 7
3.2.5 Absence of Certain Changes or Events ...................................... 7
3.2.6 Net Worth.................................................................. 7
3.2.7 Subsidiaries .............................................................. 8
3.2.8 Organizational Documents and Corporate
Records.................................................................. 8
3.2.9 Consents .................................................................. 8
3.2.10 No Breach ................................................................. 8
3.2.11 Accounts Receivable ....................................................... 9
3.2.12 Other Tangible Property ................................................... 9
3.2.13 Leasehold Interests ....................................................... 9
3.2.14 Real Property ............................................................. 9
3.2.15 Assets .................................................................... 10
3.2.16 Intellectual Property ..................................................... 10
3.2.17 Tax Matters ............................................................... 10
3.2.18 Compliance with Laws....................................................... 11
3.2.19 Permits ................................................................... 11
3.2.20 Contracts and Agreements................................................... 11
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3.2.21 Customers, Suppliers and Sales
Representatives.......................................................... 12
3.2.22 Outstanding Commitments.................................................... 13
3.2.23 Labor Matters; Employees................................................... 13
3.2.24 Employee Benefits.......................................................... 13
3.2.25 Employee Compensation...................................................... 15
3.2.26 Insurance.................................................................. 15
3.2.27 Absence of Undisclosed Liabilities......................................... 16
3.2.28 Actions and Proceedings.................................................... 16
3.2.29 Bank Accounts, Guarantees and Powers ...................................... 16
3.2.30 Environmental and Safety Matters........................................... 17
3.2.31 Absence of Changes ........................................................ 17
3.2.32 Disclosure................................................................. 17
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CENTURY.............................................. 18
4.1 Organization........................................................................... 18
4.2 Authority ............................................................................. 18
4.3 The Century Stock ..................................................................... 18
4.4 No Breach ............................................................................. 18
4.5 Documents Delivered ................................................................... 18
ARTICLE 5 CONDITIONS PRECEDENT TO CLOSING........................................................ 19
5.1 Century's Conditions Precedent to Closing.............................................. 19
5.1.1 Representations and Warranties............................................. 19
5.1.2 Covenants.................................................................. 19
5.1.3 Satisfactory Performance................................................... 19
5.1.4 Continuation of Business .................................................. 19
5.1.5 Legal Actions ............................................................. 19
5.1.6 Employment and Noncompete Agreements....................................... 19
5.1.7 Legal Limitations on Closing .............................................. 20
5.1.8 Deliveries by Shareholders................................................. 20
5.1.9 Deliveries by MDI.......................................................... 20
5.1.10 Waivers.................................................................... 20
5.2 MDI's and Shareholders' Conditions Precedent to Closing................................ 20
5.2.1 Representations and Warranties............................................. 20
5.2.2 Covenants ................................................................. 20
5.2.3 Employment Agreement; Noncompete Agreements ............................... 21
5.2.4 Legal Limitations on Closing............................................... 21
5.2.5 Legal Actions.............................................................. 21
5.2.6 Satisfactory Performance................................................... 21
5.2.7 Waiver..................................................................... 21
ARTICLE 6 CENTURY STOCK, REGISTRATION RIGHTS AND LOCK-UP......................................... 21
6.1 Century Stock Not Registered........................................................... 21
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6.2 Legend ........................................................................... 22
6.3 Removal of Legend...................................................................... 22
6.4 Examination and Investment Representation.............................................. 22
6.5 Registration Rights.................................................................... 23
6.5.1 Required Registration...................................................... 23
6.5.2 Transfer of Registration Rights............................................ 23
6.5.3 Timing of Registration..................................................... 23
6.5.4 Registration Procedures.................................................... 23
6.5.5 Delay and Suspension....................................................... 25
6.5.6 Expenses................................................................... 25
6.5.7 Further Information........................................................ 25
6.5.8 Definition................................................................. 26
6.5.9 Indemnity.................................................................. 26
6.5.10 Documents.................................................................. 26
6.6 Lock-Up................................................................................ 27
ARTICLE 7 OTHER COVENANTS........................................................................ 27
7.1 Announcements.......................................................................... 27
7.2 Conduct of Business.................................................................... 27
7.3 Cooperation............................................................................ 28
7.4 Tax Matters............................................................................ 28
7.5 Access to Information.................................................................. 28
7.6 Confidentiality........................................................................ 29
7.7 Noninterference........................................................................ 29
7.8 Securities Trading..................................................................... 29
ARTICLE 8 CERTAIN DELIVERIES AND TERMINATION..................................................... 31
8.1 Delivery of Century Stock ............................................................. 31
8.2 Termination............................................................................ 31
8.2.4 Breach by MDI or Shareholders.............................................. 31
8.2.5 Breach by Century.......................................................... 31
8.3 Effect of Termination.................................................................. 27
ARTICLE 9 SURVIVAL, INDEMNIFICATION AND
LIMITATION OF LIABILITY................................................................ 32
9.1 Survival............................................................................... 32
9.2 Nature of Indemnity; Losses............................................................ 32
9.3 Limit of Liability..................................................................... 32
9.4 Conditions of Indemnification.......................................................... 32
9.4.1 Notice..................................................................... 32
9.4.2 Failure to Assume Defense.................................................. 33
9.4.3 Cooperation................................................................ 33
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ARTICLE 10 MISCELLANEOUS PROVISIONS............................................................... 33
10.1 Amendment and Modification............................................................. 33
10.2 Waiver of Compliance................................................................... 33
10.3 Expenses............................................................................... 34
10.4 Notices ........................................................................... 34
10.5 Assignment............................................................................. 35
10.6 Third Parties.......................................................................... 35
10.7 Governing Law.......................................................................... 35
10.8 Severability........................................................................... 35
10.9 Counterparts........................................................................... 36
10.10 Headings............................................................................... 36
10.11 Disclosures............................................................................ 36
10.12 Knowledge.............................................................................. 36
10.13 Entire Agreement....................................................................... 36
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TABLE OF EXHIBITS
Shareholder List/Purchase Price Allocation Exhibit A
Earn-out Formula Exhibit B
Form of Employment Agreement Exhibit C
Form of Noncompetition Agreements Exhibit D
Form of Lock-Up Agreement Exhibit E
LIST OF SCHEDULES
-----------------
[TO COME]
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AGREEMENT AND PLAN OF MERGER
----------------------------
This Agreement and Plan of Merger (the "Agreement") is made
and entered into as of this 31st day of March, 1998, by and among Century
Business Services, Inc., a Delaware corporation ("Century"), MDI Acquisition
Corp, an Ohio corporation ("Merger Sub"), Multi-Dimensional International
Consultants, Ltd., a Florida limited partnership ("MDI"), Multi-Dimensional
International Consultants, Inc., a Florida corporation ("MDI Inc."),
Multi-Dimensional International Consultants II, Inc., a Virginia corporation
("MDI II") and those persons listed on Exhibit A attached hereto (collectively,
the "Shareholders").
RECITALS
--------
1. MDI Inc. and MDI II are the owners of all of the
outstanding partnership interests of MDI. The Shareholders own all of the
outstanding capital stock of MDI Inc. and MDI II (collectively, the "Shares").
2. The Shareholders desire to sell to Century and Century
desires to purchase the Shares from the Shareholders on the terms set forth in
this Agreement.
3. In order to consummate the transactions contemplated
herein, the Merger Sub has been formed and MDI Inc. and MDI II will be merged
with and into the Merger Sub (with the Merger Sub as the surviving corporation),
all as specified in this Agreement.
4. These transactions shall constitute a plan of
reorganization within the meaning of Section 368(a)(1)(A) by application of
Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended.
ARTICLE 1
MERGER
------
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement and in accordance with the Ohio General Corporation Law (the "OGCL"),
the Florida Business Corporation Act ("FBCA") and the Virginia Stock Corporation
Act ("VSCA") at the Effective Time (as defined in Article 2 hereof) MDI Inc. and
MDI II will be merged with and into the Merger Sub (the "Merger") and the
separate existence of MDI Inc. and MDI II will cease and the Merger Sub will
continue as the surviving corporation (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger will have the effect set
forth in Section 1701.82 of the OGCL, Section 607.1106 of the FBCA and Section
13.1-721 of the VSCA.
8
1.3 ARTICLES OF INCORPORATION AND REGULATIONS; NAME. At the
Effective Time, the Articles of Incorporation and the Regulations of the Merger
Sub prior to the Effective Time, including all amendments thereto made prior to
the Effective Time, will be the Articles of Incorporation and Regulations of the
Surviving Corporation. At the Effective Time, the name of the Surviving
Corporation will be changed to "Multi-Dimensional International Consultants,
Inc.".
1.4 DIRECTORS. Each person serving as a director of MDI Inc.
or MDI II prior to the Effective Time will tender a letter of resignation
effective as of the Effective Time. Keith W. Reeves will become the initial
director of the Surviving Corporation, to hold office in accordance with the
Articles of Incorporation until his respective successor is duly elected or
appointed and qualified or until his earlier death, resignation or removal.
1.5 OFFICERS. Each person serving as an officer of MDI Inc.
prior to the Effective Time will become the initial officers of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation until his or her respective successor is duly elected or appointed
and qualified or until their earlier death, resignation or removal.
1.6 MERGER CONSIDERATION; CONVERSION OF SECURITIES. At the
Effective Time, by virtue of the Merger and without any action on the part of
the parties or the holders of any of the respective securities:
1.6.1 The Shares will be converted into the right to
receive, on the Closing Date (as hereinafter defined), a
combination of cash and Century common stock, par value $.01
per share ("Century Stock"). The merger consideration ("Merger
Consideration") will consist off Five Million Two Hundred Nine
Thousand Five Hundred and Twenty-One Dollars and Eighty-Eight
Cents ($5,209,521.88) in cash via wire transfer of immediately
available funds to an account designated prior to Closing and
459,662 shares of Century Stock (the "Closing Date Payment").
In addition, the Shareholders will have the opportunity to
receive a combination of cash and Century Stock based upon the
earn-out formula set forth on Exhibit B attached hereto and
made a part hereof (the "Earn-out Payment"). The Century Stock
that constitutes the Closing Date Payment shall be paid in
accordance with Section 8.1 hereof. The number of shares of
Century Stock issuable to the Shareholders was determined
based upon the closing price of Century Stock on the NASDAQ
System on February 12, 1998. The Closing Date Payment will be
delivered to the Shareholders in the respective amounts set
forth opposite each Shareholder's name on Exhibit A.
1.6.2 The Shares will be canceled immediately
following the payment of the Closing Date Payment. Each common
share of MDI Inc. and MDI II held in the treasury of MDI Inc.
or MDI II will automatically be canceled and retired without
any conversion thereof.
1.6.3 The Earn-out Payment shall be determined and
shall be payable in accordance with the provisions of Exhibit
B hereto. It is understood and agreed that there shall be one
Earn-out Payment payable with respect to the transactions
contemplated by this Agreement and the transactions
contemplated by that certain Agreement and Plan of Merger
dated of even date herewith with respect to the
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Continuous Learning Group, Inc. ("CLG") and Envision
Development Group, Inc. ("EDG").
1.7 CLOSING DATE NET WORTH
1.7.1 The cash portion of the Closing Date Payment
payable to the Shareholders hereunder shall be reduced on a
dollar-for-dollar basis in the event that the Estimated
Closing Date Net Worth (as hereinafter defined) of MDI is less
than $166,667.
1.7.2 At Closing, MDI will deliver to Century an
estimate of the components of its aggregate net worth as of
the Closing, determined on an accrual basis including
provisions for all income taxes (current and deferred) in
accordance with generally accepted accounting principles
consistently applied ("GAAP") (the "Estimated Closing Date Net
Worth"). To the extent that the Estimated Closing Date Net
Worth is less than $166,667 (plus any earnings since February
1, 1998 as specified in Section 3.2.6 hereof), such difference
(the "Estimated Closing Date Net Worth Deficiency") shall be
deducted from the Closing Date Payment.
1.7.2A Century, at its option, may have an audit
performed with respect to CLG and EDG with respect to 1997.
1.7.3 As promptly as practicable (but in no event
later than 60 business days after the Closing Date), the
Shareholders shall deliver to Century (i) a balance sheet of
MDI dated as of the close of business on the Closing (the
"Closing Date Balance Sheet") prepared on an accrual basis
(including provisions for all income taxes (current and
deferred) in accordance with GAAP and (ii) an accompanying
closing statement (the "Closing Statement") reasonably
detailing the Shareholders' determination of MDI's net worth
as of the Closing (the "Closing Date Net Worth"). Century
must, within ten (10) business days after Century's receipt of
the Closing Date Balance Sheet and Closing Statement, give
written notice (the "Notice") to the Shareholders specifying
in reasonable detail Century's objections, if any, with
respect thereto or the Shareholders' determination of the
Closing Date Balance Sheet and the Closing Date Net Worth
shall be final, binding and conclusive on the parties. With
respect to any disputed amounts, the parties shall meet in
person and negotiate in good faith during the ten (10)
business day period (the "Resolution Period") after the date
of the Shareholders' receipt of the Notice to resolve any such
disputes. If the parties are unable to resolve all such
disputes within the Resolution Period, then within five (5)
business days after the expiration of the Resolution Period,
all disputes shall be submitted to a mutually agreed upon
independent accountant (the "Independent Accountant") who
shall be engaged to provide a final and conclusive resolution
of all unresolved disputes within fifteen (15) business days
after such engagement. The determination of the Independent
Accountant shall be final, binding and conclusive on the
parties hereto, and the fees and expenses of the Independent
Accountant shall be borne by the party that the Independent
Accountant determines is the non-prevailing party.
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1.7.4 To the extent the Closing Date Net Worth is
less than the Estimated Closing Date Net Worth, the
Shareholders shall pay such deficiency (together with interest
at the rate of nine percent (9%) from the Closing Date) to
Century within five (5) business days after its final
determination pursuant to this Section 1.7. To the extent the
Closing Date Net Worth is greater than $166,667 (plus any
earnings since February 1, 1998 as specified in Section 3.2.6
hereof), Century shall pay such excess (together with interest
at the rate of nine percent (9%) from the Closing Date) to the
Shareholders within five (5) business days after its final
determination pursuant to this Section 1.7.
ARTICLE 2
CONSUMMATION OF MERGER
----------------------
The Closing ("Closing") will take place on the Closing Date at
the offices of Squire, Sanders & Dempsey L.L.P., 4900 Key Tower, 127 Public
Square, Cleveland, Ohio 44114 (or such other place as the parties may agree) at
9:00 a.m. on March 31, 1998, or at or on such other time, date and place as
shall be mutually agreed to by Century and the Shareholders. (The date and time
of the Closing are hereinafter referred to as the "Closing Date"). At the time
of the Closing, the parties will cause the Merger to be consummated by filing
(i) a Certificate of Merger with the Secretary of State of Ohio, (ii) Articles
of Merger with the Secretary of the State of Florida and (iii) Articles of
Merger with the Secretary of the State of Virginia, in such form as required by
and executed in accordance with the OGCL, FBCA and VSCA. The date and time of
such filing will be the Effective Time.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
MDI AND THE SHAREHOLDERS
------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
of the Shareholders represents and warrants to Century that:
3.1.1 AUTHORITY. The Shareholder has the right,
power, authority and legal capacity to enter into and perform
such Shareholder's obligations under this Agreement and to
consummate the transactions contemplated hereby to be
performed by such Shareholder without any breach of any
agreement by which such Shareholder is bound. This Agreement
has been, and each other document ancillary to this Agreement
to which Shareholder is a party, will be at the Closing, duly
executed and delivered by such Shareholder and constitute, or
will when delivered, constitute, the legal, valid and binding
obligations of such Shareholders, enforceable against such
Shareholder, in accordance with their respective terms, except
as may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws and equitable principles
relating to or limiting creditors' rights generally.
3.1.2 TITLE TO THE SHARES. MDI Inc. and MDI II are
the owners of all the outstanding partnership interests in
MDI. D. Larry Lemasters is the owner of all of the issued and
outstanding shares of capital stock of MDI Inc. The Tara Ann
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Lemasters 1997 Trust, the David Larry Lemasters, Jr. 1997
Trust and the Dirken Edgar Lemasters 1997 Trust (the "Trusts")
are the owners of all the of the issued and outstanding shares
of capital stock of MDI II. D. Larry Lemasters is the sole
trustee of each of the Trusts. Each of the Shareholders owns,
of record and beneficially, all of the Shares set forth
opposite his or her name on Exhibit A hereto, free and clear
of all liens, encumbrances, taxes, security interests,
options, warrants and restrictions on transfer of whatsoever
nature or kind.
3.1.3 NO BROKERS. The Shareholder has not employed
any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby for which any of the
Shareholders, MDI, MDI Inc., MDI II or Century may be
responsible.
3.1.4 AFFILIATED TRANSACTIONS. Except as specifically
set forth (including dollar amounts) on Schedule 3.1.4 as of
the date hereof, neither the Shareholder nor any Affiliate of
the Shareholder (as defined below) is indebted to, or is a
creditor of, or a guarantor of any obligation of, or a party
to any contract, agreement, license, option, commitment or
other arrangement, written or oral, express or implied with
MDI, MDI Inc. or MDI II. For purposes of this Section, an
"Affiliate of the Shareholder" means any employee, officer or
director of the Shareholder, any spouse or family member
(including in-laws) of the Shareholder, or any corporation,
partnership or other entity in which the Shareholder (or
spouse or family member) has an equity or ownership interest
exceeding twenty percent (in the aggregate).
3.2 REPRESENTATIONS AND WARRANTIES OF MDI, MDI INC., MDI II
AND THE SHAREHOLDERS. Shareholders, and Shareholders jointly with MDI, MDI Inc.
and MDI II hereby represent and warrant to Century that, except as described in
the disclosure schedules attached hereto and made a part hereof (the
"Schedules"):
3.2.1 ORGANIZATION AND QUALIFICATION. MDI Inc. is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Florida with full
power and authority to own, lease and operate its properties
and to carry on its business as now being and as heretofore
conducted. MDI II is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Virginia. MDI is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of
Florida with full power and authority to own, lease and
operate its properties and to carry on its business as now
being and as heretofore conducted. Each of MDI, MDI Inc. and
MDI II is duly qualified and in good standing in each
jurisdiction in which the nature of its business or ownership
or leasing of its properties makes such qualifications
necessary, as set forth in Schedule 3.2.1 hereto.
3.2.2 AUTHORITY. The execution, delivery and
performance by MDI, MDI Inc. and MDI II of this Agreement and
the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate
action by MDI, MDI Inc. and MDI II. This Agreement has
been,and each other document ancillary to this Agreement to
which any of MDI, MDI Inc. or MDI II is a party will be at the
Closing, duly executed and delivered by MDI, MDI Inc. or
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MDI II and constitutes, or will when delivered, constitute,
the legal, valid and binding obligation of MDI, MDI Inc. or
MDI II enforceable against it in accordance with their
respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium, and other similar laws
and equitable principles relating to or limiting creditors'
rights generally. This Agreement and the other transactions
contemplated hereby have been approved and adopted by the
Board of Directors of MDI, MDI Inc. and MDI II.
3.2.3 PARTNERSHIP INTERESTS; CAPITALIZATION OF
GENERAL PARTNERS. The authorized capital stock of MDI Inc. and
MDI II consists of 7,500 shares of common stock with a par
value of $1.00 per share, and 5,000 shares of common stock
with a par value of $1.00 per share, respectively, of which
the Shares constitute all of the outstanding capital stock of
MDI Inc. and MDI II. The Shares have been duly authorized and
are validly issued, fully paid and nonassessable, and there
are no outstanding rights, subscriptions, warrants, calls,
options or other agreements or commitments of any kind or
character to purchase or otherwise to acquire from MDI any of
its unissued shares of capital stock or any other security of
MDI. MDI Inc. and MDI II own all of the outstanding
partnership interests in MDI.
3.2.4 FINANCIAL STATEMENTS. Attached hereto as
Schedule 3.2.4 are true and correct copies, with respect to
MDI, of (a) an internally prepared balance sheet statement and
related statement of income for the fiscal year ended December
31, 1997, (b) the estimate of MDI's net worth required
pursuant to Section 1.7.2 hereof, (c) the balance sheet
statements and income statements for each of the fiscal years
1994, 1995 and 1996, and (d) the 1998 pro forma financial
information and projections provided to Century by MDI
pursuant to that certain Letter Agreement dated March 12,
1998. Each of (a), (b), (c) and (d) (collectively, the
"Financial Statements"), are true and correct, are in
accordance with the internal books and records of MDI, fairly
present the financial condition and results of operations of
MDI as of and at the respective dates and for the respective
periods covered thereby and were prepared in conformity with
generally accepted accounting principles ("GAAP") (other than
the requirements with respect to footnote disclosure)
consistently applied over the periods referenced and from
period to period. MDI and the Shareholders further represent
and warrant that the actual gross revenues and earnings before
income taxes (after a mutually agreed upon one-time,
non-recurring adjustment of $282,000) of MDI for the fiscal
year ended December 31, 1997, determined on an accrual basis
in accordance with GAAP were at least $8,428,892 and
$2,574,896, respectively.
3.2.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
January 1, 1998, each of MDI, MDI Inc. and MDI II (i) has
operated its business in the usual and ordinary course
consistent with past practice, has not sold or otherwise
disposed of any assets (other than the sale of services or
collection of receivables in the ordinary course of its
business); (ii) except as described on Schedule 3.2.5, has not
declared or paid any dividends, or made any other
distributions on its capital stock or partnership interests or
repurchased or agreed to repurchase any of its capital stock;
(iii) there has been no adverse change in the business,
results of operations, assets, liabilities, financial
condition or overall prospects of MDI; and (iv) has not
incurred any damage,
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destruction or loss (whether or not covered by insurance) to
its owned or leased property or Assets (as defined in Section
3.2.15 hereof).
3.2.6 NET WORTH AND EARNINGS. Shareholders represent
and warrant that MDI's tangible net worth, determined on an
accrual basis including provision for all income taxes
(current and deferred) in accordance with GAAP (i) as of
January 31, 1998 was at least $166,667 and (ii) on the Closing
Date will be at least $166,667 (plus any earnings since
February 1, 1998 as specified below); subject, however, to the
provisions of Section 1.7.1 hereof. It is understood and
agreed that the Shareholders will be entitled to retain any
amounts in excess of the Closing Date Net Worth specified in
(ii) above (other than as a result of earnings since February
1, 1998 as specified below). It is further understood and
agreed that all earnings of MDI from and after February 1,
1998 shall be retained by MDI for the benefit of Century (less
any tax liability of the Shareholders with respect to such
earnings).
3.2.7 SUBSIDIARIES. MDI, MDI Inc. and MDI II have no
subsidiaries.
3.2.8 ORGANIZATIONAL DOCUMENTS AND CORPORATE RECORDS.
The copies of the Articles of Incorporation and By-laws of MDI
Inc. and MDI II and the limited partnership agreement of MDI
heretofore delivered to Century are correct and complete. The
stock transfer, minute books, corporate records and limited
partnership documents and certificate of limited partnership
of MDI, MDI Inc. and MDI II, as applicable, all of which have
been made available to Century, are correct and complete and
constitute the only written records and minutes of the
meetings, proceedings, and other actions of the shareholders,
the partners and the Board of Directors (including any
committees thereof) of MDI, MDI Inc. and MDI II from the date
of its organization to the date hereof. Each of MDI, MDI Inc.
and MDI II has made available to Century all accounting,
corporate and financial books and records which relate to the
business of MDI.
3.2.9 CONSENTS. Except as set forth on Schedule
3.2.9, no consent, order, license, approval or authorization
of, or exemption by, or registration or declaration or filing
with, any governmental authority, bureau or agency, and no
consent or approval of any other person, is required to be
obtained or made in connection with the transactions
contemplated by this Agreement.
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14
3.2.10 NO BREACH. Neither the execution and delivery
of this Agreement and the other documents and agreements
contemplated hereby, nor the consummation of the transactions
contemplated hereby or thereby will (i) violate any provision
of any charter document or partnership agreement, as
applicable, of MDI, MDI Inc. or MDI II; (ii) violate, conflict
with or result in the breach or termination of, or constitute
an amendment to, or otherwise give any person the right to
terminate, or constitute (or with notice or lapse of time or
both would constitute) a default (by way of substitution,
novation or otherwise) under the terms of, any contract,
mortgage, lease, bond, indenture, agreement, franchise or
other instrument or obligation to which MDI, MDI Inc. or MDI
II is a party or by which MDI, MDI Inc. or MDI II or any of
their respective Assets or properties are bound or affected;
(iii) result in the creation of any liens upon the properties
or assets of MDI, MDI Inc. or MDI II pursuant to the terms of
any contract, mortgage, lease, bond, indenture, agreement,
franchise or other instrument or obligation; (iv) violate any
judgment, order, injunction, decree or award of any court,
arbitrator, administrative agency or governmental or
regulatory body against, or binding upon, MDI, MDI Inc. or MDI
II or any of their respective securities, properties, Assets
or business; (v) constitute a violation by MDI, MDI Inc. or
MDI II of any statute, law, rule or regulation of any
jurisdiction as such statute, law, rule or regulation relates
to MDI, MDI Inc. or MDI II or to any of their respective
securities, properties, Assets or business; or (vi) violate
any of the Permits (as defined in Section 3.2.19 hereof).
3.2.11 ACCOUNTS RECEIVABLE. The accounts receivable
and unbilled work in process of MDI as reflected on the
Closing Date Balance Sheet are actual and bona fide accounts
receivable and unbilled work in process which arose in the
ordinary and usual course of MDI's, business, represents valid
obligations due to MDI, are collectible in the aggregate
recorded amounts thereof on the books of MDI and will be fully
collected in the ordinary course, except to the extent
reflected in the allowance for doubtful accounts.
3.2.12 OTHER TANGIBLE PROPERTY. MDI has good and
marketable title to all of the Assets reflected on its books
and records and on the Balance Sheet, free and clear of all
liens, other than those set forth on Schedule 3.2.12. To the
best knowledge of MDI, the owned tangible personal property
material to the business of MDI is in good operating condition
and repair, ordinary wear and tear excepted.
3.2.13 LEASEHOLD INTERESTS. MDI has a good and valid
leasehold interest in all personal property which is leased
for use in its business (the "Leasehold Interests"). All
Leasehold Interests are used and operated in compliance and
conformity with all lease agreements creating such Leasehold
Interests. MDI has not been notified in writing of any claim
that there is under any leasehold interest, any existing
default (including, but not limited to any payment default or
event of default or event that would with the passage of time
or the giving of notice constitute such default) and to the
best knowledge of the Shareholders and MDI, MDI is not in
default. No items of personal property under lease agreements
are subject to any charges for excessive usage or wear and
tear (or would be subject to such charges if the current rate
of usage continued for the remainder of the term of such lease
agreement(s)).
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3.2.14 REAL PROPERTY. MDI does not own any real
property. Schedule 3.2.14 sets forth a true and correct list
of all leases, subleases or other agreements under which MDI
is a lessee or lessor of any real property or has any interest
in real property and, except as set forth in Schedule 3.2.14,
there are no rights or options held by MDI, or any contractual
obligations on its part, to purchase or otherwise acquire
(including by way of lease or sublease) any interest in or use
of any real property, nor any rights or options granted by
MDI, or any contractual obligations entered into by it, to
sell or otherwise dispose of (including by way of lease or
sublease) any interest in or use of any real property. All
such leases, subleases and other agreements grant the
leasehold estates or other interests they purport to grant
with the right to quiet possession, are in full force and
effect and constitute legal, valid and binding obligations of
the respective parties hereto, with no existing or claimed
default or event of default (or event which with notice or
lapse of time or both would constitute a default or event of
default) by MDI or by any other party thereto. MDI is not in
violation of any building, zoning, health, safety,
environmental or other law, rule or regulation and no notice
from any person has been served upon MDI claiming any such
violation.
3.2.15 ASSETS. The assets described in Section 3.2.12
and the leaseholds described in Sections 3.2.13 and 3.2.14,
respectively, (collectively, the "Assets"), constitute all of
the assets and properties used by and necessary for the
operations of MDI.
3.2.16 INTELLECTUAL PROPERTY. Schedule 3.2.16
contains a complete list of MDI's, MDI Inc.'s and MDI II's
Intellectual Property (as defined herein). Except as listed on
Schedule 3.2.16, no person has made or to the best knowledge
of MDI, MDI Inc., MDI II and the Shareholders, threatened to
make any claim that the operations of MDI, MDI Inc. and MDI II
are in violation or infringement of any patent, patent
licenses, trade name, trademark, service mark, copyright,
software license, know-how or other proprietary or trade
rights (collectively, "Intellectual Property") of any third
party. Except as listed on Schedule 3.2.16, each of MDI, MDI
Inc. and MDI II owns or has the right to use all trademarks,
trade names, trade secrets, computer software, patents,
inventions, processes, copyrights, or other intellectual
property (or applications therefor) used in the conduct of its
business.
3.2.17 TAX MATTERS. Except as disclosed on Schedule
3.2.17 hereto, each of MDI, MDI Inc. and MDI II has timely
filed all federal, state, county and local tax returns,
estimates and reports (collectively, "Returns") required to be
filed by it through the date hereof, copies of which have been
made available to Century for its inspection and review, which
Returns accurately reflect the taxes due for the periods
indicated; and each of MDI, MDI Inc. and MDI II has paid in
full all income, gross receipts, value added, excise,
property, franchise, sales, use, employment, payroll and other
taxes of any kind whatsoever (collectively, "Taxes") shown to
be due by such Returns. The liabilities, if any, for Taxes
accrued for operations of each of MDI, MDI Inc. and MDI II
since December 31, 1997 through the Closing Date are reflected
on the Closing Date Balance Sheet. There is no unassessed
deficiency for Taxes proposed to the best knowledge of MDI and
the Shareholders, threatened
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against MDI, MDI Inc. or MDI II, and no taxing authority has
raised any issue with respect to MDI, MDI Inc. or MDI II
which, if adversely determined, would result in a liability
for any Tax. There are not in force any extensions with
respect to the dates on which any Return was or is due to be
filed by MDI, MDI Inc. or MDI II or any waivers or agreements
by MDI, MDI Inc. or MDI II for the extension of time for the
assessment or payment of any Taxes. Each of MDI, MDI Inc. and
MDI II has not been, and currently is not being, audited by
any federal, state or local tax authority.
3.2.18 COMPLIANCE WITH LAWS. Each of MDI, MDI Inc.
and MDI II is not in violation of any applicable law, rule or
regulation, the violation of which could adversely affect its
assets, properties, liabilities, business, results of
operations, or conditions (financial or otherwise).
3.2.19 PERMITS. Each of MDI, MDI Inc. and MDI II
(including, without limitation, its employees) has duly
obtained and holds in full force and effect all consents,
authorizations, permits, licenses, orders or approvals of, and
has made all declarations and filings with, all federal, state
or local governmental or regulatory bodies that are material
or necessary in or to the conduct of its business
(collectively, the "Permits"); all of the Permits were duly
obtained and are in full force and effect; no violations are
or have been recorded in respect of any such Permit and no
proceeding is pending or, to the best knowledge of MDI, MDI
Inc. and MDI II and the Shareholders, threatened to revoke,
deny or limit any such Permit.
3.2.20 CONTRACTS AND AGREEMENTS. Schedule 3.2.20
contains an accurate and complete list and description of all
plans, arrangements, leases, contracts, licenses and
agreements (collectively, the "Contracts") to which MDI, MDI
Inc. or MDI II is a party, by which its property is bound or
affecting its business, whether written or oral, express or
implied or having any other legally binding basis, including:
(a) any contract involving commitments to make
expenditures, purchases or sales, any supplier contracts, any
client service contracts, broker contracts and marketing
agreements;
(b) any contract relating to any direct or indirect
indebtedness for borrowed money or securing the repayment
thereof;
(c) any contract directly or indirectly benefiting
any Affiliate of MDI or the Shareholders;
(d) any collective bargaining, union, employment, or
consulting contract;
(e) any pension, stock option, bonus, incentive
compensation, retirement, employee stock purchase, stock
ownership, profit sharing, fringe benefit, severance pay,
welfare, health, death benefit, disability, dental or any
other employee benefit contract;
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(f) any contract containing covenants limiting the
freedom of MDI to compete in any line of business, with any
person or entity, or in any territory;
(g) any contract relating to patents, trademarks,
trade names or other intellectual property;
(h) any executory contract with any sales agent,
manufacturer, dealer, distributor or licensee of any products
sold by MDI, restricting the rights, operations or business of
MDI, or containing a grant of rights to or by MDI;
(i) any tax-sharing contract;
(j) any indemnity or hold harmless contract;
(k) any contract relating to the lease or sale to or
by others of any of real property;
(l) any contract relating to any account listed in
Schedule 3.2.21 hereof;
(m) any contract relating to equipment purchases or
capital expenditures; and
(n) any other contract not in the ordinary course.
True, complete and correct copies of all written contracts and
summaries of all oral or implied contracts listed on Schedule
3.2.20 hereto and samples of each type of client service
contract of MDI have been delivered to Century. All Contracts
constitute legal, valid and binding obligations of MDI, MDI
Inc. or MDI II, as the case may be, and are in full force and
effect on the date hereof, and MDI has paid in full all
amounts due thereunder which are currently due and payable and
is not in default under any of them nor, to the best knowledge
of MDI, MDI Inc. or MDI II, is any other party to any such
contract or other agreement in default thereunder, nor, to the
best knowledge of MDI, MDI Inc. or MDI II, does any condition
exist that with notice or lapse of time or both would
constitute a default or event of default thereunder by MDI,
MDI Inc. or MDI II or by any other Person. Except as set forth
in Schedule 3.2.9, no Contract requires the consent or
approval of a third party in connection with the transactions
contemplated by this Agreement.
3.2.21 CUSTOMERS. The customer list attached hereto
as Schedule 3.2.21 contains a listing of the twenty largest
customers (in dollar volume) of each of MDI, MDI Inc. and MDI
II for the 12 months ended December 31, 1997. Except as
described in Schedule 3.2.21, none of MDI, MDI Inc. or MDI II
is aware of any existing or anticipated changes in the
policies or conditions, financial or otherwise, of any of such
customers, which will adversely affect MDI's business.
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3.2.22 OUTSTANDING COMMITMENTS. To the best knowledge
of MDI, MDI Inc. and MDI II and the Shareholders, each of MDI,
MDI Inc. and MDI II is not bound by any commitments for the
performance of services or delivery of products in excess of
its ability to provide such services or deliver such products
during the time available to satisfy such commitments and all
outstanding commitments for the performance of services or
delivery of products were made on a basis calculated to
produce a profit under the circumstances prevailing when such
commitments were made.
3.2.23 LABOR MATTERS; EMPLOYEES.
3.2.23.1 Each of MDI, MDI Inc. and MDI II is in
compliance, in all material respects, with all federal, state
and local laws respecting employment and employment practices
(including the Americans with Disabilities Act and the Family
and Medical Leave Act), terms and conditions of employment,
wages and hours, and nondiscrimination in employment, and has
not and is not engaged in any unfair labor practice.
3.2.23.2 In connection with the operations of its
business, each of MDI, MDI Inc. and MDI II is not a party to,
or subject to any obligation, liability or commitment with
respect to any written or oral employment, compensation,
consulting, severance pay or similar agreement other than the
agreements listed on Schedule 3.2.23. Schedule 3.2.23 sets
forth a payroll list as of January 1, 1998, showing as of such
date, each employee of MDI, MDI Inc. and MDI II, his or her
social security number, annual salary and date of hire.
3.2.23.3 None of MDI, MDI Inc. and MDI II or the
Shareholders know of any employee who intends to terminate his
or her employment with MDI, MDI Inc. and MDI II prior to or
following the Closing Date.
3.2.24 EMPLOYEE BENEFITS.
3.2.24.1 Schedule 3.2.24 contains a list of all
"employee pension benefit plans" (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("Pension Plans")), "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA), bonus,
incentive, stock option, stock purchase, life (including any
individual life insurance policy as to which MDI or any ERISA
Affiliate is owner, beneficiary, or both of such policy),
deferred compensation plans or arrangements, excess benefit
plans, severance pay, holiday pay, vacation pay, "cafeteria"
or "flexible benefit" plans, fringe benefits, perquisites, and
other employee benefit plans, arrangements, agreements,
trusts, contracts, policies, or commitments (all the
foregoing, including the Pension Plans, being herein called
"Benefit Plans") now or heretofore maintained, or contributed
to, by MDI or by any ERISA Affiliate for the benefit of any
present or former employees, officers, directors, or other
persons. As used herein, "ERISA Affiliate" means any
subsidiary of MDI, MDI Inc. and MDI II and any trade or
business (whether or not incorporated) that is part of the
same controlled group, or under common control with, or part
of an affiliated service group that includes, MDI within the
meaning of
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Code (as defined below) Sections 414(b), (c), (m) or (o). MDI
has delivered to Century true, complete and correct copies of
(i) each Benefit Plan (or, in the case of any unwritten
Benefit Plans, descriptions thereof); (ii) the most recent
summary plan description for each Benefit Plan for which such
a summary plan description is required; (iii) each trust
agreement, group annuity contract or other funding and
financing arrangement relating to any Benefit Plan, if any
such arrangement was required or maintained; (iv) all
determination letters and letter rulings received from, and
applications pending with, the Internal Revenue Service
("IRS") with respect to Benefit Plans; and (v) all prohibited
transaction exemptions received from the Department of Labor
with respect to Benefit Plans.
3.2.24.2 Except as disclosed in Schedule 3.2.24, with
respect to the Benefit Plans: (I) there are no Benefit Plans
which are multiemployer plans as defined in Section 3(37) of
ERISA; (II) there is no ERISA Title IV liability incurred or
pending; (III) there are no Benefit Plans which promise or
provide health or life benefits to retirees or former
employees of MDI or any ERISA Affiliate other than as required
by Section 602 of ERISA or Section 4980B of the Internal
Revenue Code of 1986, as amended ("Code"); (IV) to the best
knowledge of MDI and the Shareholders, each Benefit Plan has
at all times been operated and administered in compliance with
the applicable requirements of ERISA, the Code and all other
Laws (including regulations and rulings thereunder), and its
terms; (V) each Pension Plan has received a favorable
determination letter from the IRS stating that such Pension
Plan meets all the requirements of the Code, and that any
trust or trusts associated with such Pension Plan are tax
exempt under Section 501(a) of the Code; (VI) there is no
reason why the tax-qualified status of any such Pension Plan
should be revoked, whether retroactively or prospectively, by
the IRS; (VII) all amendments to the Pension Plans which were
required to be made through the date hereof and the Closing
Date under Section 401(a) of the Code, and all other Laws,
subsequent to the issuance of each such Pension Plan's IRS
determination letter have been made; and there are no
amendments which are required to be made to such Pension Plans
which adversely affect, or may result in the revocation or
discontinuance of, the continuing tax-qualification status of
such Pension Plans under the Code; (VIII) no actual or
threatened disputes, lawsuits, claims (other than routine
claims for benefits), investigations, audits or complaints to,
or by, any person or governmental entity have been filed or
are pending or threatened with respect to any Benefit Plan or
its sponsor or any ERISA Affiliates, or the fiduciaries
responsible for such Benefit Plan, and no state of facts or
conditions exist which reasonably could be expected to subject
MDI or any ERISA Affiliate to any liability (other than
routine claims for benefits) in accordance with the terms of
such Benefit Plan or pursuant to any Laws; (IX) all filings,
notices, and disclosures, required by ERISA, the Code or any
other applicable laws have been timely filed and made; (X)
with respect to each Benefit Plan, there has not occurred, and
no person or entity is contractually bound to enter into, any
nonexempt "prohibited transaction" within the meaning of
Section 4975 of the Code or Section 406 of ERISA; (XI) no
payment that is owed or may become due to any current or
former director, officer, employee or agent of MDI and its
ERISA Affiliates is subject to, and none shall result in the
imposition of, tax under Section 280(G) or 4999 of the Code,
nor is MDI obligated, orally or in writing, to "gross up" or
otherwise compensate any such person due to the
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imposition of an excise or similar tax on payments made to
such person by MDI or its ERISA Affiliates; (XII) the
consummation of the transactions contemplated by this
Agreement will not accelerate or terminate, nor does there
exist any basis for the acceleration or termination of, (1)
benefits payable to current or former employees of, or other
compensated personnel at, MDI or an ERISA Affiliate under any
Benefit Plan, or other plan, arrangement, contract or
agreement, written or oral, (2) a participant's vesting
credits or years of service under any Benefit Plan, or (3)
accruals with respect to any other benefits or amounts
reserved under any such Benefit Plan or other plan,
arrangement, contract or agreement; and (XIII) only current
and former employees (excluding "leased employees" as defined
in Code Section 414(n)(2)) of MDI and its ERISA Affiliates
participate in, and are entitled to receive benefits from, the
Benefit Plans.
3.2.25 EMPLOYEE COMPENSATION. Each of MDI, MDI Inc.
and MDI II has made available to Century for its inspection
and review the permanent files of all its employees, together
with payroll information pertinent to such employees.
3.2.26 INSURANCE. Schedule 3.2.26 lists all policies
of property, theft, fire, liability, workers' compensation,
title, professional liability or life insurance or reinsurance
or any other insurance owned or maintained by MDI, MDI Inc.
and MDI II or in which MDI, MDI Inc. and MDI II is a named
insured or on which MDI, MDI Inc. and MDI II is paying any
premiums, true and complete copies of which have been provided
to Century. All such policies are in full force and effect at
the date hereof, and none of the insured parties thereunder is
in default with respect to any provision contained in any such
insurance policy nor failed to give any notice or present any
claim thereunder in due and timely fashion. Schedule 3.2.26
sets forth a summary of the claims history for MDI, MDI Inc.
and MDI II under such policies since its organization and,
except as set forth on Schedule 3.2.26, there are no claims
outstanding under any such policies.
3.2.27 ABSENCE OF UNDISCLOSED LIABILITIES. Schedule
3.2.27 sets forth a true, complete and accurate list of all
liabilities involving in excess of $5,000 as of the Closing
Date, including all liens on any of MDI's, MDI Inc.'s or MDI
II's Assets and any and all other liabilities, whether or not
contingent. Except as set forth on Schedule 3.2.27, as of the
Closing Date, each of MDI, MDI Inc. and MDI II has no
liabilities in excess of $5,000 arising from or relating to
its respective business or operations of any nature (whether
absolute, accrued, fixed, contingent, liquidated, unliquidated
or otherwise and whether due or to become due) and any and all
liabilities or obligations incurred since December 31, 1997
were incurred in the ordinary course of business and
consistent with past practice.
3.2.28 ACTIONS AND PROCEEDINGS. Except as provided on
Schedule 3.2.28, there are no claims, actions, suits,
arbitrations, proceedings, investigations or inquiries,
whether at law or in equity and whether or not before any
court, private body or group, governmental department,
commission, board, agency or instrumentality (collectively
"Actions"), pending, or to the best knowledge of MDI, MDI
Inc., MDI II and the Shareholders, threatened against MDI, MDI
Inc. or MDI II or any of the Assets, whether or not fully or
partially covered by insurance, or
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which would give rise to any right of indemnification by any
person from MDI, MDI Inc. or MDI II and there are no
outstanding orders, writs, injunctions, awards, sentences or
decrees of any court, private body or group, governmental
department, commission, board, agency or instrumentality
against, involving or affecting MDI, MDI Inc. or MDI II.
Neither MDI, MDI Inc., MDI II nor the Shareholders has
knowledge of any fact or circumstance which could reasonably
be expected to result in any claim, action, suit, inquiry or
order being filed against MDI, MDI Inc. or MDI II which might
have an adverse effect on the business, operations or Assets
of MDI, MDI Inc. or MDI II.
3.2.29 BANK ACCOUNTS, GUARANTEES AND POWERS. Schedule
3.2.29 sets forth (i) a list of all accounts and deposit boxes
maintained by MDI, MDI Inc. or MDI II at any bank or other
financial institution and the names of the person authorized
to effect transactions in such accounts, to borrow pursuant to
any resolutions creating such authorizations and with access
to such boxes; (ii) all agreements or commitments of MDI, MDI
Inc. or MDI II guaranteeing the payment of money or the
performance of other contracts by any third persons; and (iii)
the names of all persons, firms, associations, corporations,
or business organizations holding general or special powers of
attorney from MDI, MDI Inc. or MDI II, together with a summary
of the terms thereof.
3.2.30 ENVIRONMENTAL AND SAFETY MATTERS. The business
and operations of each of MDI, MDI Inc. and MDI II have been
conducted and are now being conducted in compliance with all
laws, whether federal, state or local, generally relating to
protection of the health, safety or the environment
("Environmental and Safety Laws") and there are no
environmental conditions on any real property used by MDI, MDI
Inc. or MDI II that could reasonably be expected to give rise
to any cleanup obligations under any Environmental and Safety
Laws. None of MDI, MDI Inc. and MDI II has never received any
written notification of any violation of any Environmental and
Safety Laws.
3.2.31 ABSENCE OF CHANGES. Since December 31, 1997,
each of MDI, MDI Inc. and MDI II has carried on its business
in the ordinary course, and except as set forth on Schedule
3.2.31 hereto, there has not been:
3.2.31.1 any adverse change in its business
condition (financial or otherwise), results of
operations or liabilities;
3.2.31.2 any pending or, to the best
knowledge of MDI, MDI Inc., MDI II and the
Shareholders, threatened amendment, modification, or
termination of any agreement, license or permit which
is material to its business;
3.2.31.3 any change in its method of
accounting or any election relating to taxes,
settlement of any claims, audits, etc.;
3.2.31.4 any disposition or acquisition of
any of its Assets or properties other than in the
ordinary course;
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3.2.31.5 any damage, destruction or other
casualty loss (whether or not covered by insurance)
adversely affecting or that could reasonably be
expected to adversely affect its business or assets;
3.2.31.6 any increase in the compensation
payable or to become payable to any director,
officer, manager or employee or any grant of any
severance or termination pay or any employment
agreement entered into with any director, officer or
employee or an adoption of or amendment of any
employee benefit plan or arrangement; or
3.2.31.7 except in the ordinary course, any
obligation or liability incurred.
3.2.32 DISCLOSURE. Each of MDI, MDI Inc. and MDI II
has disclosed to Century any and all facts which are material
to its respective business, results of operations, assets,
liabilities, and financial condition. No representation or
warranty by MDI, MDI Inc. and MDI II or the Shareholders in
this Agreement and no statement by MDI, MDI Inc. and MDI II or
the Shareholders in any of the other documents or agreements
previously disclosed to Century contains any untrue statement
of a material fact or omits to state any material fact
necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CENTURY
-----------------------------------------
Century represents and warrants to the Shareholders and MDI
that:
4.1 ORGANIZATION. Century is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power and authority to own, lease and operate its properties and to
carry on its business as now being and as heretofore conducted by it, and is
duly qualified or otherwise authorized as a foreign corporation to transact
business and is in good standing in each jurisdiction in which it is required to
be so qualified or authorized.
4.2 AUTHORITY. This Agreement has been duly authorized,
executed and delivered by Century and is the valid and binding agreement of
Century enforceable against Century in accordance with its terms. This Agreement
has been, and each other document ancillary to this Agreement to which Century
is a party will be at the Closing, duly executed and delivered by Century and
constitute, or will when delivered, constitute, the legal, valid and binding
obligations of each of Century enforceable against Century in accordance with
their respective terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, and other similar laws and equitable principles
relating to or limiting creditors' rights generally. This Agreement and other
transactions contemplated hereby have been approved and adopted by the Board of
Directors of Century.
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4.3 THE CENTURY STOCK. The Century Stock being delivered
pursuant to this Agreement is validly issued, fully paid and non-assessable.
4.4 NO BREACH. The authorization, execution, delivery and
performance of this Agreement by Century will not violate any provision of its
certificate of incorporation or by-laws or violate, conflict with or result in
the breach or termination of, or otherwise give any Person the right to
terminate, any agreement to which it is a party.
4.5 DOCUMENTS DELIVERED. Century has delivered to the
Shareholders Century's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997 and June 30,
1997 and September 30, 1997, and its Annual Report on
Form 10-K for the fiscal year ended December 31, 1997
(collectively the "SEC Documents"). The SEC Documents
were true and complete in all material respects as at
their respective dates, did not contain any untrue
statement of a material fact nor omit to state any
material fact required to be stated therein or
necessary to make the statements contained therein,
in light of the circumstances under which they were
made, not misleading, and since the filing of Form
10-K for the fiscal year ended December 31, 1997,
there has not been any material adverse change in
Century's business condition (financial or
otherwise), results of operations or liabilities, not
reflected in the SEC Documents.
4.6 CONTINUITY OF BUSINESS ENTERPRISE. It is the present
intention of the Merger Sub, as the surviving corporation, to continue at least
one significant historic business line of MDI, or to use at least a significant
portion of MDI's respective historic business assets in a business, in each case
within the meaning of Treasury Regulation ss.1.368-1(d) promulgated under the
Internal Revenue Code.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
5.1 CENTURY'S CONDITIONS PRECEDENT TO CLOSING. The obligation
of Century to close the transactions herein contemplated is subject to the
following express conditions precedent:
5.1.1 REPRESENTATIONS AND WARRANTIES. The
representations and warranties set forth in Article 3 of this
Agreement shall be true and correct in all material respects
at and as of the Closing Date.
5.1.2 COVENANTS. MDI and the Shareholders shall have
performed and complied with all of their covenants under this
Agreement in all material respects through the Closing Date.
5.1.3 SATISFACTORY PERFORMANCE. All actions to be
taken by MDI and the Shareholders in connection with
consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to
effect the transactions contemplated hereby have been
completed in a manner which is reasonably satisfactory in form
and substance to Century.
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5.1.4 CONTINUATION OF BUSINESS. Between December 31,
1997 and the Closing Date, except as otherwise provided
herein, MDI has been operated in the normal course, consistent
with prior practice, and has not suffered any damage,
destruction, loss or occurrence, whether covered by insurance
or not, which may adversely affect the value of MDI.
5.1.5 LEGAL ACTIONS. No suit, action, or other
proceeding shall be pending or threatened before any court or
governmental agency seeking to restrain, prohibit or obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated herein and
there shall have been no investigation or inquiry made or
commenced by any governmental agency in connection with this
Agreement or the transactions contemplated herein.
5.1.6 EMPLOYMENT AGREEMENT AND NONCOMPETITION
AGREEMENTS. D. Larry Lemasters shall have signed and delivered
an employment agreement (containing a five (5) year
non-competition provision following the termination of
employment and non-interference provisions based on the
applicable statute of limitations) substantially in the form
of Exhibit C attached hereto (the "Employment Agreement") and
the beneficiaries of the Shareholder Trusts created by D.
Larry Lemasters shall have signed and delivered a three (3)
year secrecy and noncompete agreement substantially in the
form of Exhibit D attached hereto (the "Noncompete Agreement).
5.1.7 LEGAL LIMITATIONS ON CLOSING. There shall not
be in effect any statute, rule or regulation which makes it
illegal for Century to consummate the transactions
contemplated herein or any order, decree or judgment which
enjoins Century from consummating the transactions
contemplated hereby.
5.1.8 DELIVERIES BY SHAREHOLDERS. Shareholders will
have delivered the stock certificates representing the Shares,
duly endorsed for transfer, the written resignations of the
directors of MDI, MDI Inc. and MDI II requested by Century and
the Lock-up Agreement contemplated by Section 6.6 of this
Agreement and in the form attached hereto as Exhibit E.
5.1.9 DELIVERIES BY MDI. Each of MDI, MDI Inc. and
MDI II will have delivered its minute book, stock book and
stock ledger, and a good standing certificate, dated as of a
date not more than three (3) days prior to the Closing Date as
to corporate existence and good standing, as certified by the
Secretary of State of the State of Florida and the Secretary
of State of the State of Virginia.
5.1.10 CONCURRENT CLOSING OF CLG AND EDG. Concurrent
with the closing of this transaction, Century shall also
consummate its purchase of CLG and EDG.
5.1.11 WAIVERS. Century may waive one or more of said
conditions but such waiver shall be effective only if in
writing and signed on behalf of Century by
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one of its duly authorized officers and may be conditioned in
any manner Century sees fit.
5.2 MDI'S AND SHAREHOLDERS' CONDITIONS PRECEDENT TO CLOSING.
The obligation of MDI and the Shareholders to close the transactions herein
contemplated is subject to the following express conditions precedent:
5.2.1 REPRESENTATIONS AND WARRANTIES. Representations
and warranties set forth in Article 4 of this Agreement shall
be true and correct in all material respects at and as of the
Closing Date.
5.2.2 COVENANTS. Century will have performed and
complied with all of its covenants under this Agreement in all
material respects through the Closing Date.
5.2.3 EMPLOYMENT AGREEMENT; NONCOMPETITION AGREEMENT.
Century will have caused to be signed and delivered to D.
Larry Lemasters the Employment Agreement and to the remaining
Shareholders the Noncompetition Agreement.
5.2.4 LEGAL LIMITATIONS ON CLOSING. There shall not
be in effect any statute, rule or regulation which makes it
illegal for MDI, MDI Inc. or MD II or the Shareholders to
consummate the transactions contemplated herein or any order,
decree or judgment which enjoins MDI or the Shareholders from
consummating the transactions contemplated hereby.
5.2.5 LEGAL ACTIONS. No suit, action, or other
proceeding shall be pending or threatened before any court or
governmental agency seeking to restrain, prohibit or obtain
damages or other relief in connection with this Agreement or
the consummation of the transactions contemplated herein and
there shall have been no investigation or inquiry made or
commenced by any governmental agency in connection with this
Agreement or the transactions contemplated herein.
5.2.6 SATISFACTORY PERFORMANCE. All actions to be
taken by Century in connection with consummation of the
transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the
transactions contemplated hereby have been completed in a
manner which is reasonably satisfactory in form and substance
to MDI and the Shareholders.
5.2.7 WAIVER. MDI and the Shareholders may waive one
or more of the foregoing conditions but such waiver shall only
be effective if in writing and signed by MDI and the
Shareholders and may be conditioned in any manner as the
Shareholders see fit.
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ARTICLE 6
CENTURY STOCK, REGISTRATION RIGHTS AND LOCK-UP
----------------------------------------------
6.1 CENTURY STOCK NOT REGISTERED. Each of the Shareholders
acknowledges that the Century Stock has not been registered under the Securities
Act (as herein defined) and cannot be sold, transferred, pledged or otherwise
distributed by Shareholders unless a registration statement registering such
Century Stock has been filed and becomes effective or unless the Century Stock
is sold or distributed in a transaction in respect of which Century has
previously received an opinion of counsel, reasonably satisfactory to Century,
as the issuer of such Century Stock (for purposes of Article 6 hereof the
"Issuer"), stating that such transaction is in conformity with the Securities
Act of 1933 as amended, and the rules and regulations promulgated thereunder
(the "Securities Act").
6.2 LEGEND. Any certificate or certificates representing
Century Stock will bear the following legend unless and until removal thereof is
permitted pursuant to the terms of this Agreement:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR UNDER ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT FOR THESE SHARES OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE
ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER OR UNDER APPLICABLE STATE SECURITIES LAWS.
SUCH SECURITIES ARE SUBJECT TO THE RESTRICTIONS
SPECIFIED IN THE LOCK-UP AGREEMENT DATED AS OF MARCH
31, 1998 BETWEEN CENTURY BUSINESS SERVICES, INC. AND
THE INITIAL HOLDER OF THE SECURITIES NAMED THEREIN, A
COPY OF WHICH WILL BE FURNISHED WITHOUT CHARGE TO THE
HOLDER HEREOF UPON WRITTEN REQUEST, AND THE HOLDER OF
THIS CERTIFICATE AGREES TO BE BOUND THEREBY.
6.3 REMOVAL OF LEGEND. Upon any transfer permitted by Section
6.1 above, which transfer does not require the legend in Section 6.2 above,
Issuer agrees to cause the removal of such legend for any Century Stock so
transferred upon their reissuance to the transferee.
6.4 EXAMINATION AND INVESTMENT REPRESENTATION. Each of the
Shareholders, severally, represents and warrants to Century that each of them:
i. is acquiring the Century Stock for his or her own
account for investment within the contemplation of
the Securities Act and not with a view to the
transfer or resale thereof, except to the extent
otherwise expressly permitted by the Securities Act;
ii. has been advised by counsel of the legal implications
and effect of the foregoing Sections 6.1, 6.2 and 6.3
under the Securities Act and of the
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circumstances under which he may dispose of its
Century Stock under the Securities Act;
iii. has examined Issuer's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997
and September 30, 1997 and its Annual Report on Form
10-K for the fiscal year ended December 31, 1997,
including the financial statements contained therein;
iv. has sufficient knowledge and experience in business
and financial matters as to be capable of evaluating
the merits and risks of an investment in Century;
v. prior to signing this Agreement, was given access to
and information regarding Century and the Century
Stock to the extent the Shareholder believes is
necessary in connection with the Shareholder's
decision to invest in the Century Stock and was given
the opportunity to ask detailed questions and receive
satisfactory answers concerning (i) the terms and
conditions of this Agreement pursuant to which
Century is offering to sell Century Stock to
Shareholder, and (ii) Century, its business and the
risks associated with Century and an investment in
the Century Stock. All such questions have been
answered to Shareholder's satisfaction, and
Shareholder has been supplied with all additional
information and documents requested and deemed
necessary by Shareholder to make an investment
decision with respect to the Century Stock being
acquired pursuant to this Agreement; and
vi. prior to signing this Agreement, Shareholder had the
opportunity to consult with Shareholder's legal
counsel or other advisors to the extent desired by
Shareholder as to Shareholder's investment in the
Century Stock.
6.5 REGISTRATION RIGHTS. Each of the Shareholders shall have
the following registration rights with respect to the Century Stock:
6.5.1 REQUIRED REGISTRATION. The Issuer agrees to
promptly register pursuant to a registration statement on Form
S-3, of if Form S-3 is not available to the Issuer, on such
form as is available (the "Registration Statement") upon
demand, any Registrable Securities (as such term is defined in
Section 6.5.8 hereof), issued in connection with the
transactions contemplated by this Agreement, provided that
such demand may not be made with respect to any such
Registrable Securities earlier than one (1) month prior to the
date such Registrable Securities are free from the restriction
on sale described in Section 6.6 below.
6.5.2 TRANSFER OF REGISTRATION RIGHTS. Each of the
Shareholders may assign his/her registration rights with
respect to the Century Stock to any party or parties to which
he may from time to time transfer the Century Stock. Upon
assignment of any registration rights pursuant to this Section
6.5.2, Shareholders shall deliver to Issuer a notice of such
assignment which includes the identity and address of any
assignee (collectively, Shareholders and each such subsequent
holder is referred to as a "Holder").
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6.5.3 TIMING OF REGISTRATION. Issuer shall use its
best efforts to cause the Registration Statement to be
declared effective as quickly as practicable after the period
of time or demand described in Section 6.5.1 above, and to
maintain the effectiveness of the Registration Statement until
such time as Issuer reasonably determines based on an opinion
of counsel that the Holders will be eligible to sell all of
the Registrable Securities then owned by the Holders without
the need for continued registration of the Century Stock in
the three-month period immediately following the termination
of the effectiveness of the Registration Statement. Issuer's
obligations contained in Section 6.5 shall terminate on the
third anniversary of the Closing Date, or in the case of
Registrable Securities issued as part of the Earn-out Payment,
on the first anniversary of the termination of the Lock-up
Agreement with respect to such Registrable Securities,
provided that if Issuer has not fulfilled its obligations with
respect to any demand made before such date, its obligations
will continue with respect to such demand until satisfied or
registration is no longer required to sell Registrable
Securities covered by such demand.
6.5.4 REGISTRATION PROCEDURES. In case of each
registration, qualification or compliance effected by Issuer
subject to this Section 6.5, Issuer shall keep Holder advised
in writing as to the initiation of each such registration,
qualification and compliance and as to the completion thereof.
In addition, Issuer shall at its own expense:
(1) subject to this Section 6.5.4, before filing a
registration or prospectus or any amendment or
supplements thereto, furnish to counsel selected by
Holder copies of all such documents proposed to be
filed and the portions of such documents provided in
writing by Holder for use therein, subject to such
Holder's approval, and with respect to which Holder
shall indemnify Issuer;
(2) prepare and file with the SEC such amendments and
supplements to the Registration Statement as may be
necessary to keep the Registration Statement
effective and comply with provisions of the
Securities Act with respect to the disposition of all
securities covered thereby during the period referred
to in Section 6.5.3 above;
(3) update, correct, amend and supplement the
Registration Statement as necessary;
(4) if such offering is to be underwritten, in whole or
in part, enter into a written agreement in form and
substance reasonably satisfactory to the managing
underwriter and the registering Holder;
(5) furnish to Holder such number of prospectuses,
including preliminary prospectuses, and other
documents that are included in the Registration
Statement as Holder may reasonably request from time
to time;
(6) use its best efforts to register to qualify such
Registrable Securities under such other securities or
blue sky laws of such jurisdictions of the United
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States as Holder may request to enable it to
consummate the disposition in such jurisdiction of
the Registrable Securities (provided that Issuer will
not be required to qualify generally to do business
in any jurisdiction where it would not otherwise be
required to qualify but for this Section 6.5);
(7) notify holder, at any time when the prospectus
included the Registration Statement relating to the
Registrable Securities is required to be delivered
under the Securities Act, of the happening of any
event which would cause such prospectus to contain an
untrue statement of a material fact or omit any fact
necessary to make the statement therein in light of
the circumstances under which they are made not
misleading and, at the request of Holder, prepare a
supplement or amendment to such prospectus, so that,
as thereafter delivered to purchasers of such shares,
such prospectus will not contain any untrue
statements of a material fact or omit to state any
fact necessary to make the statements therein in
light of the circumstances under which they are made
not misleading;
(8) use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange
on which similar securities issued by Issuer are then
listed and obtain all necessary approvals from the
exchange or the National Association of Securities
Dealers for trading thereon; and
(9) upon the sale of any Registrable Securities pursuant
to the Registration, remove all restrictive legends
from all certificates or other instruments evidencing
such Registrable Securities (to the extend permitted
by the Securities Act).
6.5.5 DELAY AND SUSPENSION. If Issuer is aware of any
event which has occurred or which it reasonably expects might
occur within the next ninety days, and such event would cause
(or Issuer believes might cause) the Registration Statement
(or any prospectus) to contain any untrue statements of a
material fact or omit to state any fact necessary to make the
statements therein in light of the circumstances under which
they are made not misleading, or if Issuer, in its discretion,
makes a determination that a Registration Statement should not
be filed, then notwithstanding any other provision of this
Section 6.5, Issuer, upon notice to Holder, may delay filing
any Registration Statement otherwise required hereunder or may
withdraw or suspend any then pending Registration Statement.
Upon any such delay or suspension no further demand need be
made with respect to those Registrable Securities subject to
such delay or suspension, and the periods with respect to
Issuer's obligation to maintain the effectiveness of a
Registration Statement set forth in Section 6.5.3 will be
extended with respect to such Registrable Securities for the
period of such delay or suspension.
6.5.6 EXPENSES. Except as required by law, all
expenses incurred by in complying with this Section 6.5,
including but not limited to, all registration, qualification
and filing fees, printing expenses, fees and disbursements of
counsel and accountants for Issuer, blue sky fees and expenses
(including fees and disbursements of counsel related to all
blue sky matters) ("Registration Expenses")
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incurred in connection with any registration, qualification or
compliance pursuant this Section 6.5 will be borne by Issuer.
All underwriting discounts and selling commissions and any
fees of Holder's own attorneys or other advisors applicable to
a sale incurred in connection with any registration of
Registrable Shares shall be borne by Holder.
6.5.7 FURTHER INFORMATION. If Registrable Securities
owned by Holder are included in any registration, such Holder
shall use reasonable efforts to cooperate with Issuer and
shall furnish Issuer such information regarding itself as
Issuer may reasonably request and as shall be required in
connection with any registration, qualification or compliance
referred to in this Agreement.
6.5.8 DEFINITION. For purposes of this Section 6.5,
"Registrable Securities" will mean the Century Stock and all
common stock or other securities issued in respect of such
Century Stock by way of a stock dividend or stock split or in
connection with a combination or subdivision of shares,
recapitalization, merger or consolidation or reorganization,
and any securities issued in respect of the Century Stock by
way of stock dividend or stock split or in connection with any
combination or subdivision of shares, recapitalization, merger
or consolidation or reorganization; provided, however, as to
any particular Registrable Securities, such Registrable
Securities will cease to be subject to this Article when they
have been sold pursuant to an effective registration statement
or in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under
Section 4(1) thereof, with the result that all transfer
restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale after the purchaser
and seller have received an opinion of counsel from the seller
or the purchaser, which opinion shall be in form and substance
reasonably satisfactory to the other party and Issuer and
their respective counsel, to the effect that such stock in the
hands of the purchaser is freely transferable without
restriction or registration under the Securities Act in any
public or private transaction.
6.5.9 INDEMNITY. Issuer shall indemnify Shareholders
from and against any and all liabilities to which they may
become subject as a result of any untrue statement or alleged
untrue statement of a material fact contained in the related
registration statement, or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, other
than a statement or omission made in reliance on and
consistent with information furnished in writing by the
Shareholders for use in such registration statement, PROVIDED,
HOWEVER, that each Shareholder shall indemnify Issuer and the
underwriters of any offering, if any, from and against any and
all liabilities to which Issuer may become subject as a result
of any untrue statement or alleged untrue statement of a
material fact contained in the related registration statement,
or the omission or alleged omissions to state therein a
material fact required to be stated therein or necessary to
make the statement not misleading, but only insofar as such
statement or omission was made in reliance by Issuer on and
consistent with information furnished in writing by such
Shareholder.
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If the indemnification provided for in this Section
6.5.9 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage, or expense referred to therein, then
the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such
loss, liability, claim, damage or expense in such proportion
as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a
material fact relates to information supplied by the
indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to information,
and opportunity to correct or prevent such statement or
omission.
6.5.10 DOCUMENTS. Issuer shall furnish to the
Shareholders one copy of the registration statement and any
amendments thereto and such number of copies of the final
prospectus as they may reasonably request, and shall deliver
to the appropriate exchange such number of copies of the final
prospectus required to comply with the prospectus delivery
requirements and permit the sale of the registered Century
Stock on such exchange.
6.6 LOCK-UP. Each Shareholder agrees that he:
6.6.1 subject to the exceptions set forth in the
Lock-Up Agreement, will not sell, transfer, pledge, engage in
any hedging transaction with respect to, or otherwise dispose
of the Century Stock prior to (i) with respect to the Century
Stock included in the Closing Date Payment, the expiration of
a twenty-four (24) month period following the Closing Date and
(ii) with respect to any Century Stock paid pursuant to the
Earn-out Payment, the expiration of a twelve (12) month period
following the issuance thereof to the Shareholders.
6.6.2 on the Closing Date, will enter into a Lock-Up
Agreement in the form set forth in Exhibit E hereto.
ARTICLE 7
OTHER COVENANTS
---------------
7.1 ANNOUNCEMENTS. Prior to the Closing, none of the parties
will make any public release of information regarding this Agreement or the
transactions contemplated hereto, except that it is understood and agreed that
Century may issue a press release, to be mutually agreed upon, following (i) the
execution of this Agreement, (ii) the Closing and (iii) as otherwise required by
law.
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7.2 CONDUCT OF BUSINESS. During the period from the date
hereof to the Closing Date, unless Century consents otherwise in writing (which
consent will not be unreasonably withheld), and except as otherwise provided in
this Agreement or disclosed in the Schedules, each of MDI, MDI Inc. and MDI II
will:
7.2.1 conduct its business only in the ordinary
course of business consistent with past practice, except as
contemplated by this Agreement;
7.2.2 use its best efforts to preserve the goodwill
of those suppliers, customers, clients and distributors having
business relations with it;
7.2.3 maintain any insurance coverages as of the date
of this Agreement against loss or damage to the Assets;
7.2.4 not transfer or encumber any of the Assets
except for the transfer in the ordinary course of business;
7.2.5 maintain the Assets in conditions comparable to
their current condition, reasonable wear and tear excepted,
except for these Assets sold or consumed during the ordinary
course of business;
7.2.6 not create, incur, assume, or guarantee any
indebtedness, including capitalized lease obligations;
7.2.7 not make capital expenditures or series of
related capital expenditures, or make any capital investment
in, any loan to, or any acquisition of the securities or
assets of any other person or entity or persons or entities;
7.2.8 not make or pledge to make any charitable
contribution (including for capital or building purposes) in
amounts or to types of organizations not consistent with past
practice;
7.2.9 not make any recapitalization, reorganization,
merger, consolidation, reclassification (voting or nonvoting),
dissolution or liquidation of MDI, or sale of a substantial
portion of the assets of MDI outside the ordinary course of
its respective business;
7.2.10 not pay any bonuses or any other extraordinary
compensation unless the amount thereof has actually been paid
or accrued as a liability of MDI.
7.3 COOPERATION. Each party hereto agrees that before and
after the Closing to execute any and all further documents and writings and to
perform such other reasonable actions which may be or become necessary or
expedient to effectuate and carry out this Agreement.
7.4 TAX MATTERS. After Closing, MDI, MDI Inc., MDI II and
Century will coordinate the preparation of all necessary tax returns. Each party
agrees to timely furnish to the other any records and other information
reasonably requested by it in connection therewith. MDI, MDI Inc. and MDI II
will be responsible for the cost of preparing tax returns for the fiscal year
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ended December 31, 1997. Notwithstanding anything in this Agreement to the
contrary, the Shareholders will remain solely liable for any tax consequences to
them as a result of the transactions contemplated by this Agreement. It is the
intent of the parties that the exchange of the Shares for the Century Stock be a
tax free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended. Century will use all reasonable efforts to consummate the Merger in
such fashion, but Century makes no representation as to the tax treatment of the
Shareholders or any agreement with respect to refraining from taking any future
action which could adversely affect the tax treatment of this transaction.
Notwithstanding anything in this Agreement to the contrary, the Shareholders
will remain solely liable for any tax consequences to them a result of the
transactions contemplated by this Agreement.
7.5 ACCESS TO INFORMATION. MDI will, during ordinary business
hours and upon reasonable notice from Century, permit Century and its authorized
representatives to have access to all assets, personnel books, records,
accounts, documents and other materials relating in any way to its respective
business. MDI will furnish to Century such information in possession of its
respective officers, employees and the Shareholders as Century may from time to
time reasonably request. MDI will otherwise cooperate in the examination of MDI
by Century.
7.6 CONFIDENTIALITY.
7.6.1 Any non-public information received by any
party hereto as a result of discussions and investigations
pursuant to or in furtherance of this Agreement or otherwise
received prior to the Closing Date, will be kept confidential
by the recipient and will be used only for the purposes of
evaluating the transactions contemplated herein. The parties
may make disclosure information available to attorneys,
accountants and advisors, provided such parties agree to be
bound by the terms of this Section 7.6.
7.6.2 MDI will not disclose any confidential
information of its clients to Century unless such information
is necessary for the evaluation of the transactions
contemplated herein. If any such information is disclosed,
Century, and their respective employees and agents agree that
such information will not be given to any employee or agent
who does not have a need to know, will not be disclosed to any
third party whatsoever (unless required by law) and will not
be used for any purpose other than the evaluation of the
transactions contemplated by this Agreement, and will be
returned to MDI upon completion of such evaluation.
7.6.3 If this Agreement is terminated for any reason,
the parties will promptly return any copies of confidential
information to the person who supplied it.
7.7 NONINTERFERENCE. Each of the Shareholders severally agrees
that he or she will not at any time, without the prior written consent of
Century, either directly or indirectly (i) solicit (or attempt to solicit),
induce (or attempt to induce), cause, or facilitate any employee, director,
agent, consultant, independent contractor, representative or associate of
Century or Century's subsidiaries and affiliates including, without limitation,
MDI, MDI Inc. and MDI II (collectively, the "Century Group") to terminate or
change his, her or its employment or services to, or relationship with the
Century Group, or (ii) solicit (or attempt to solicit), induce (or attempt to
induce), cause, or facilitate any supplier of services or products to the
Century Group to terminate or
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change his, her or its relationship with the Century Group, or otherwise
interfere with any relationship by the Century Group and any of its suppliers,
(iii) have any Customer become a client or customer of any Shareholder (or any
family member of Shareholder) or of any entity that any Shareholder (or any
family member of Shareholder) renders services to or owns, in whole or in part;
or solicit (or attempt to solicit), induce (or attempt to induce), cause or
facilitate any customer, or client, or prospective customer or client of the
Century Group ("Customer(s)") to terminate or change his, her, or its
relationship with the Century Group, or take away, attempt to take away, or
otherwise interfere with the Century Group's relationship with any Customer; or
(iv) will not (except as required by law or as authorized in writing by Century)
directly or indirectly copy, disseminate or use for the Shareholder's personal
benefit or for the benefit of any third party, any information or knowledge
belonging to, used by, or which is in the possession of the Century Group
relating to the Century Group's business, business plans, strategies, pricing,
sales methods, customers or prospective customers, technology, programs,
finances, costs, employees, employee compensation rates or policies, marketing
plans, development plans, computer programs, computer systems, inventions,
developments, trade secrets, know how or confidences of the Century Group or its
businesses, without regard to whether any of such information may be deemed
confidential or material to any third party. All of the Shareholders acknowledge
and agree that all Customers (and the income generated from rendering services
thereto) are important assets of the business of the Century Group, and that
Century has agreed to pay the Merger Consideration on the condition that
Customers, including, without limitation, Customers of MDI, MDI Inc. and MDI II,
shall continue to be Customers of the Century Group. If any Shareholder violates
the provisions of subparagraph (iii) above and a Customer ceases to be a
Customer of the Century Group, in addition to any legal or equitable remedy
available to Century and the Century Group, under this Agreement or otherwise,
each of the Shareholders severally agrees to pay to Century a cash amount equal
to the greater of (a) one hundred percent (100%) of the gross revenues,
commissions, payments and/or fees earned with respect to a Customer (whether or
not collected as of the end of the period specified in this subsection (a)) by
the MDI, MDI Inc. and MDI II and the Century Group during the twenty-four (24)
month period preceding the date such Customer ceases to be a Customer of the
Century Group, or (b) an amount equal to one hundred percent (100%) of the gross
revenues, commissions, payments or fees earned with respect to a Customer
(whether or not collected as of the end of the period specified in this
subsection (b)) received by such Shareholder (or any Family Member of
Shareholder as herein defined), or by an entity that Shareholder (or any Family
Member of Shareholder as herein defined) renders services to or that is owned,
in whole or in part, by Shareholder (or any family member of Shareholder),
during the twenty-four (24) month period following the date such Customer ceases
to be a Customer of the Century Group. For purposes of this Section 7.7, it is
understood and agreed that the term "Family Member" shall mean a Shareholder's
spouse, child, parent or sibling.
7.8 SECURITIES-TRADING. During the period from the date of the
Agreement to the Closing Date, each of MDI, MDI Inc. and MDI II and the
Shareholders agree to refrain, and will use its/his/her respective best efforts
to cause MDI, MDI Inc. and MDI II and its affiliates to refrain from any
securities trading activities with respect to the securities of Century.
7.9 WAIVERS. Prior to the Closing Date, the Shareholders shall
have waived their respective rights of first refusal under Article 5 of the MDI
Inc. and MDI II Articles of Incorporation.
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ARTICLE 8
CERTAIN DELIVERIES AND TERMINATION
----------------------------------
8.1 DELIVERY OF CENTURY STOCK. Century will deliver the
Century Stock to the Shareholders within thirty (30) days of the Closing Date.
8.2 TERMINATION. This Agreement may be terminated at any time
on or prior to the Effective Time:
8.2.1 by Century or by MDI if any court of competent
jurisdiction issues any order (other than temporary
restraining order) restraining, enjoining or prohibiting the
transactions;
8.2.2 by mutual written agreement of Century and MDI;
8.2.3 by Century or by MDI if the Closing Date will
not have occurred on or before July 31, 1998, time being of
the essence; provided that the right to terminate this
Agreement pursuant to this section will not be available to
any party whose failure to fulfill any obligation of this
Agreement has been the cause or resulted in the failure of the
Closing Date to occur on or before such date;
8.2.4 BREACH BY MDI OR SHAREHOLDERS. By Century if
there has been a material breach on the part of MDI or the
Shareholders in its respective representations, warranties or
covenants set forth herein, provided however that if such
breach is susceptible to cure, then MDI will have 30 days
after receipt of written notice from Century, of their intent
to terminate this Agreement, in which to cure such breach; and
8.2.5 BREACH BY CENTURY. By MDI and Shareholders if
there has been a material breach on the part of Century in its
respective representations, warranties or covenants set forth
herein, provided however that if such breach is susceptible to
cure, then Century will have 30 days after receipt of written
notice from MDI and the Shareholders of their intent to
terminate this Agreement, in which to cure such breach.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to this Article, all obligations of the parties under this Agreement
will terminate (except for this Article and Section 7.6), and no party hereto
will have any further liability to the other parties hereto, except that such
termination will be without prejudice to any claim which a party may have
against another for breach of this Agreement that occurred prior to the date of
termination.
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ARTICLE 9
SURVIVAL, INDEMNIFICATION AND LIMITATION OF LIABILITY
-----------------------------------------------------
9.1 SURVIVAL. All of the representations or warranties
contained in Articles 3 and 4 hereof will survive until May 30, 2001 and will
then expire. Upon the expiration of representations and warranties pursuant to
this section, unless written notice of a claim based on such representations and
warranty specifying in reasonable detail the facts on which the claim is based
will have been delivered to the indemnifying party prior to expiration of such
representation and warranty, such representation and warranty will be of no
further force or effect, as if never made and no action may be brought based on
the same, whether for breach of contract or any other legal theory; provided,
however, that claims based on fraud, willful misrepresentation or with respect
to the representations and warranties set forth in Section 3.1.1 and 3.1.2 may
be asserted at any time within one year after Century learns of such fraud,
willful misrepresentation or breach. Notwithstanding the foregoing or any
provision of this Agreement to the contrary, the covenants contained in Section
7.7 shall survive for a period of ten (10) years after the Closing Date.
9.2 NATURE OF INDEMNITY; LOSSES. Each of the Shareholders,
severally (each an "Indemnifying Party") agrees to indemnify, defend and hold
Century and its respective employees, directors, officers, shareholders and
agents (collectively, the "Century Indemnified Parties"), harmless from and
against all Losses (as defined herein) incurred by the Century Indemnified
Parties resulting from or on account of a breach of any representation, warranty
or covenant of MDI and the Shareholders made in this Agreement. "Losses" shall
include any and all expenses, losses, costs, deficiencies, liabilities and
damages, including, but not limited to, legal and professional fees and expenses
suffered or incurred in any manner, including investigation and defense of
claims. To the extent that the Shareholders are required to indemnify any of the
Century Indemnified Parties hereunder, such indemnification shall be satisfied
in cash and any Losses in excess of the cash received by the Shareholders
hereunder shall be payable at Century's option in cash or Century Stock upon
termination of the Lock-Up Agreements.
9.3 LIMIT OF LIABILITY. The Shareholders will be severally
liable to the Century Indemnified Parties under this Agreement, for Losses of up
to an aggregate of the Merger Consideration and Earn-out Payment (collectively,
the "Limit"); provided, however, that Shareholders will not be liable for Losses
hereunder rules and until a Loss or series thereof exceed(s) $33,334 (the
"Basket"); and provided further that in the event of a Loss or series thereof
exceed(s) the Basket, the Century Indemnified Parties will be entitled to be
indemnified for all Losses up to the Limit (less the Basket) and further
provided that the Century Indemnified Parties will have a right of set off
against the Earn-out Payment in connection with any Losses incurred hereunder.
9.4 CONDITIONS OF INDEMNIFICATION. The respective obligations
and liabilities of the indemnifying parties to the indemnified party under this
Article will be subject to the following terms and conditions:
9.4.1 NOTICE. Within 15 days after receipt of notice
of commencement of any action or the assertion of any claim by
a third party (but in any event at least 10 days preceding the
date on which an answer or other pleading must be served in
order to prevent a judgment by default in favor of the parties
asserting the claim), the Century Indemnified Parties will
give the Indemnifying Party written notice thereof,
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37
together with a copy of such claim, process or other legal
pleading and the Indemnifying Party will have the right to
undertake defense thereof, by representatives of his or her
own choosing, that are reasonably satisfactory to the Century
Indemnified Parties. Notwithstanding the Indemnifying Party's
undertaking of such defense, the Century Indemnified Parties
will have the right to engage its own counsel, at its own
expense and participate in the defense of claims; provided,
however that the Indemnifying Party will retain the right in
its sole and absolute discretion to make all decisions with
respect to the defense, settlement or compromise of such
claim, provided that the indemnifying party remains liable for
any payments due under any such settlement or compromise.
9.4.2 FAILURE TO ASSUME DEFENSE. If the Indemnifying
Party by the 15th day after receipt of notice of such claim
(or if earlier by the 5th day preceding the day on which the
answer or other pleading must be filed in order to prevent
judgment by default in favor of the person asserting such
claim), does not elect to defend against such claim, the
indemnified party will (upon further notice to Indemnifying
Party) have the right to undertake defense, compromise or
settlement of such claim on behalf of and for the account and
risk of the Indemnifying Party; provided however, that the
Century Indemnified Parties will not settle or compromise such
claim without the Indemnifying Party's consent, which consent
will not be unreasonably withheld; and provided further, that
the Indemnifying Party will have the right to assume the
defense of such claim with counsel of its own choosing at any
time prior to settlement, compromise or final termination
thereof.
9.4.3 COOPERATION. In connection with any
indemnification, the indemnified party will cooperate with all
reasonable requests of the indemnifying party, and will be
reimbursed all its out of pocket expenses.
ARTICLE 10
MISCELLANEOUS PROVISIONS
------------------------
10.1 AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified and supplemented only by a writing signed by Century, MDI and
the Shareholders.
10.2 WAIVER OF COMPLIANCE. Any failure of Century, MDI or the
Shareholders to comply with any obligation, covenant, agreement or condition
herein contained may only be waived in writing by (i) Century in the case of any
failure of MDI or the Shareholders or (ii) MDI and the Shareholders in the case
of any failure of Century. Such waiver shall be effective only in the specific
instance and for the specific purpose for which made or given.
10.3 EXPENSES. Each party will pay its own expenses incurred
in connection with this Agreement or any transaction contemplated by this
Agreement. The foregoing shall not be construed as limiting any other rights
which any party may have as a result of misrepresentation of or breach by any
other party.
10.4 NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when
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38
delivered by hand, or when mailed by certified or registered mail (return
receipt requested), postage prepaid or when delivered by fax (evidenced by
confirmation of successful transmission), as follows:
A. If to Century:
Century Business Services, Inc.
10055 Sweet Valley Drive
Valley View, Ohio 44125
Phone: (216) 447-9000; Fax: (216) 447-9137
Attn: Keith W. Reeves, Senior Vice President
With a copy to:
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower
127 Public Square
Cleveland, Ohio 44114-1304
(216) 479-8500
Attn: M. Patricia Oliver, Esq.
or to such other person or place as Century shall designate by notice in the
manner provided in this Section 10.4:
B. If to Shareholders or to MDI:
Multi-Dimensional International Consultants, Ltd.
221 Deer Haven Drive
Ponte Vedra Beach, Florida 32082
(904) 273-4435
Attn: D. Larry Lemasters, President
With a copy to:
Foley & Lardner
P.O. Box 240
The Greenleaf Building
200 Laura Street
Jacksonville, FL 32202-3510
(904) 359-2000
Attn: Robert S. Bernstein, Esq.
or to such other person as the Shareholders shall designate by notice in the
manner provided in this Section 10.4.
10.5 ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of Century and its successors and assigns, and to
Shareholders and their respective heirs and executors, as the case may be, but
neither this Agreement nor any of the rights, interests and
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39
obligations hereunder shall be assigned by any of the parties without the prior
written consent of all of the other parties.
10.6 THIRD PARTIES. This Agreement is not intended to and
shall not be construed to give any person other than the parties hereto any
interest or rights (including, without limitation, any third party beneficiary
rights) with respect to or in connection with this Agreement or any provision
contained herein or contemplated hereby.
10.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without regard to
principles of conflicts of laws. Century and the Shareholders hereby irrevocably
submit to the jurisdiction of the courts of the State of Ohio, with venue in
Cuyahoga County, over any dispute arising out of this Agreement and agree that
all claims in respect of such dispute or proceeding shall be heard and
determined in such court. Century and the Shareholders hereby irrevocably waive,
to the fullest extent permitted by applicable law, any objection which they may
have to the venue of any such dispute brought in such court or any defense of
inconvenient forum for the maintenance of such dispute. Century and the
Shareholders hereby consent to process being served by them in any suit, action
or proceeding by delivering it in the manner specified by the provisions of
Section 10.4 of this Agreement.
10.8 SEVERABILITY. The invalidity or unenforceability in whole
or in part of any covenant, promise or undertaking, or any section, subsection,
sentence, clause, phrase, word, or any of the provisions of this Agreement will
not affect the validity or enforceability of the remaining portions of this
Agreement. If for any reason, any provision is determined to be invalid or in
conflict with any existing, or future law or regulation by a court or agency
having valid jurisdiction, such will not impair the operation or have any other
effect upon such other provisions of this Agreement as may remain otherwise
valid, and the latter will continue to be given full force and effect and bind
the parties hereto.
10.9 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
10.10 HEADINGS. The headings of the sections, schedules and
articles of this Agreement are inserted for the sake of convenience only and
shall not constitute a part hereof.
10.11 DISCLOSURES. Any disclosure in any Schedule to this
Agreement will be deemed a disclosure for all purposes under this Agreement and
shall be considered a disclosure under all other schedules of this Agreement;
provided, however, that information in documents referenced in but not included
as part of a schedule will not be deemed disclosure for purposes of this section
and this Agreement.
10.12 KNOWLEDGE. Whenever a representation or warranty is made
herein as being to the "best knowledge of" a party, it is understood that such
persons have made or caused to be made (and the results thereof reported to
them) an investigation which provides them with a reasonable basis upon which to
determine the accuracy of such representation or warranty by personnel or
representatives competent to determine the accuracy thereof.
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10.13 ENTIRE AGREEMENT. This Agreement, including the
schedules and exhibits, contains the entire understanding of the parties in
respect of the subject matter contained herein and therein and there are no
other terms or conditions, representations or warranties, written or oral,
express or implied, except as set forth herein.
[The remainder of this page has been left blank intentionally]
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year above written.
CENTURY BUSINESS SERVICES, INC.
By: /s/ Charles D. Hamm, Jr.
------------------------------------------------
Charles D. Hamm, Jr., Senior Vice President
and Chief Financial Officer
MDI ACQUISITION CORP.
By: /s/ Keith W. Reeves
------------------------------------------------
Keith W. Reeves, President
PARTNERS OF MULTI-DIMENSIONAL INTERNATIONAL CONSULTANTS, LTD.
Multi-Dimensional International Consultants, Inc.
By: /s/ D. Larry Lemasters
------------------------------------------------
D. Larry Lemasters, President
Multi-Dimensional International Consultants II, Inc.
By: /s/ D. Larry Lemasters
------------------------------------------------
D. Larry Lemasters, President
SHAREHOLDER OF MULTI-DIMENSIONAL INTERNATIONAL CONSULTANTS, INC.
By: /s/ D. Larry Lemasters
------------------------------------------------
D. Larry Lemasters
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SHAREHOLDERS OF MULTI-DIMENSIONAL INTERNATIONAL CONSULTANTS II, INC.
Trust FBO David Larry Lemasters, Jr., pursuant to Trust Agreement dated
October 1, 1997.
By: /s/ D. Larry Lemasters
------------------------------------------------
D. Larry Lemasters, Trustee
Trust FBO Tara Ann Lemasters, pursuant to Trust Agreement dated
October 1, 1997.
By: /s/ D. Larry Lemasters
------------------------------------------------
D. Larry Lemasters, Trustee
Trust FBO Dirkin Edgar Lemasters, pursuant to Trust Agreement dated October
1, 1997.
By: /s/ D. Larry Lemasters
------------------------------------------------
D. Larry Lemasters, Trustee
S-2
42
ADDITIONAL SHAREHOLDER OF MULTIDIMENSIONAL
INTERNATIONAL CONSULTANTS, INC.
/s/ JOHN M. KEALEY
---------------------------------------
JOHN M. KEALEY
S-3
43
EXHIBIT A
TO
AGREEMENT AND PLAN OF MERGER
----------------------------
NUMBER CLOSING CLOSING DATE
OF DATE CENTURY
SHAREHOLDERS SHARES CASH STOCK
Shares
MDI INC.
D. Larry Lemasters 4000 $3,601,082.18 321,764
John M. Kealey/CFOs, Inc. 1 $65,118.77 -0-
MDI II
Tara Ann Lemasters 1997 Trust 333.33 $514,440.31 45,966
David Larry Lemasters Jr. 1997 Trust 333.33 $514,440.31 45,966
Dirkin Edgar Lemasters 333.34 $514,440.31 45,966
1997 Trust
TOTAL $5,209,521.88 459,662
A-1
44
EXHIBIT B
EARN-OUT FORMULA
1. GENERAL. In addition to the Merger Consideration payable to the
Shareholders of CLG, EDG and MDI (collectively, the "Shareholders"), as set
forth in each of the respective Agreements, up to $4,799,990 in cash and
$7,200,010 in aggregate value of CENTURY Stock (i.e. 423,530 shares based upon
an agreed price of $17.00 per share) (the "Earn-Out") is payable pursuant to an
Earn-Out formula based on CLG, EDG and MDI (i.e., in each case, the surviving
entities in the Mergers), achieving certain agreed upon consolidated, cumulative
increases in earnings before income taxes during the three year period
commencing February 1, 1998 (the "Earn-Out Period"). The Earn-Out will be
distributable among the Shareholders on May 30, 2001, in accordance with the
provisions of this Exhibit B. In the event the Earn-Out is earned by the
Shareholders (in whole or in part), the Shareholders shall agree as to how to
allocate the Earn-Out among themselves and shall advise CENTURY of such
allocation in writing.
2. CALCULATION OF EARNINGS BEFORE INCOME TAXES.
(a) The independent auditors regularly employed by CENTURY shall conduct
an audit of the financial statements (which will be prepared in accordance with
generally accepted accounting principles on a consolidated basis with
appropriate intercompany eliminations) of CLG, EDG and MDI for each of the
calendar years 1997, 1998, 1999, and 2000 and the month of January, 2001. Such
audit shall be conducted in accordance with generally accepted auditing
standards. In connection therewith, the auditors shall prepare a report (the
"Report") setting forth the consolidated earnings before income taxes ("EBIT")
of CLG and EDG and of MDI for each twelve (12) month period, and adding back
purchase price goodwill amortization of the acquisitions of CLG, EDG and MDI and
any other overhead or charges (other than charges that would have normally been
incurred in the ordinary course of business, which shall be passed through at
cost) from CENTURY. It is understood and agreed that services provided by CLG,
EDG and MDI to Century will be rendered at market rates (less a 50% discount)
and 50% of the service fees will be included in EBIT during each twelve (12)
month period in the Earnout Period. It is further understood and agreed that
CLG, EDG and/or MDI, as applicable, will accrue certain expenses as of January
31, 1998, in connection with the closing of these transactions with respect to
payments made to John M. Kealey, Stephen V. Jacobs and William K. Redmon.
(b) Earnings before income taxes from any acquisition of a business by
CLG, EDG and/or MDI (an "Acquired Business") shall be included in (or subtracted
from, as the case may be) the CLG, EDG and MDI consolidated EBIT only after
CENTURY has been repaid an amount equal to 20% in annualized return on all cash
and the face value (as of the date of pricing of the acquisition) of all common
stock used in such acquisition(s).
(c) The Report shall be delivered simultaneously to (i) D. Larry
Lemasters (the "Shareholder Representative") and (ii) a representative of
CENTURY and shall be final, binding
B-1
45
and conclusive upon the parties unless the CENTURY representative or the
Shareholders' Representative notifies the other in writing of an objection
within five (5) days after delivery of the Report. In that event, the CENTURY
representative and the Shareholder Representative shall, in good faith, attempt
to settle the objection. If settlement cannot be achieved within a fifteen (15)
day period, the matter shall be submitted to a mutually agreed upon independent
accounting firm, which shall render a final and binding decision with respect to
specific items in dispute within ten (10) days. The Shareholders agree to
indemnify and hold CENTURY harmless in connection with any disputes between or
among the Shareholders in connection with the Earn-Out determination or the
allocation or distribution thereof.
3. CALCULATION OF EARN-OUT
The determination of the amount of the Earn-Out payable to the
Shareholders shall be calculated by the CENTURY representative and the
Shareholder Representative on the basis of the Report, as follows:
(a) If the consolidated EBIT of CLG, EDG and MDI for each of the
twelve month periods in the Earn-Out Period exceeds the
consolidated EBIT for the immediately preceding twelve month
period by at least 25% per annum compounded, then the
Shareholders will be entitled to receive the maximum Earn-Out
(which in no event shall exceed, in the aggregate, $4,799,990 in
cash and 423,530 shares of CENTURY Stock). Based upon 1997
consolidated EBIT of $7,710,586, the 25% twelve month EBIT
growth specified above will be considered to have been achieved
if the targeted consolidated EBITS set forth in 4(i) below are
reached. It is understood and agreed that any excess EBIT (i.e.
any amount above the 25% twelve month EBIT growth level set
forth above) may be applied to make up a deficiency in any other
period in the Earn-Out Period in which 25% twelve month EBIT
growth was not achieved and that any such excess EBIT shall be
for the benefit of CENTURY and shall not result in the payment
of any additional Earn-Out.
(b) In the event that there is any shortage in CLG, EDG and MDI
consolidated EBIT for any twelve month period in the Earn-Out
Period (i.e. below the 25% twelve month EBIT growth level
specified above), the Earn-Out will be earned by the
Shareholders on a prorata basis based upon the amount by which
the actual combined cumulative EBIT of CLG, EDG and MDI during
the Earn-Out Period exceeds the cumulative base EBIT established
using the 1997 combined EBIT of CLG and EDG and MDI on a
consolidated basis. (See Illustration below).
B-2
46
4. ILLUSTRATION OF EARN-OUT CALCULATION
(i) Based on 1997 consolidated EBIT of $7,710,586, CLG, EDG and MDI
target consolidated EBIT shall be as follows: $9,638,232 for the
twelve month period ending January 31, 1999, $12,047,790 for the
twelve month period ending January 31, 2000 and $15,059,738 for
the twelve month period ending January 31, 2001, for a total of
$36,745,885 in target cumulative EBIT ("Target Cumulative EBIT")
(ii) 1997 Base EBIT is $7,710,586 x Earn-Out Period (i.e., 3 years) =
$23,131,758 ("Base Cumulative EBIT")
(iii) Target Cumulative EBIT - Base Cumulative EBIT = X; $36,745,885 -
$23,131,758 = $13,614,127; X = $13,614,127
(iv) Actual Combined Cumulative EBIT - Base Cumulative EBIT (i.e.
$23,131,758) = Y
(v) (Y/X) x % = the Percentage of the Earn-Out earned by the
Shareholders (of which 40% will be paid in cash and 60% will be
paid in CENTURY Stock and which can be no greater than 100%)
For example: Assume Actual Combined Cumulative EBIT of CLG, EDG and MDI =
$29,938,822
(Actual) (Base)
$29,938,822 - $23,131,758 = Y
Y = $ 6,807,064
-----------
X = $13,614,127
$ 6,807,064
-----------
$13,614,127 x % = 50% of Earn-Out is payable to the
Shareholders
50% of Earn-Out is comprised of $2,399,995 ($4,799,990 x .5) in cash and 211,176
(423,530 x .5) shares of CENTURY Stock to be allocated among the Shareholders.
B-3
