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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
---------------
JULY 16, 1998
(Date of Report)
THE DWYER GROUP, INC.
(Exact name of registrant as specified in its chapter)
DELAWARE 0-15227 73-0941783
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation or
organization)
1010 N. UNIVERSITY PARKS DRIVE
WACO, TEXAS 76707
(Address of principal executive offices)
(254) 745-2400
(Registrant's telephone number,
including area code)
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ITEM 2. DISPOSITION OF ASSETS
On July 16, 1998, The Dwyer Group, Inc. (the "Company"), a Delaware corporation,
completed the sale of the majority of the assets of two of its subsidiaries,
General Business Services, Inc. ("GBS") and Edwin K. Williams & Co. ("EKW"), to
Century Business Services, Inc. ("Century"), a Delaware corporation and a
leading provider of outsourced business services to medium sized companies
throughout the United States.
The transaction was effected by means of an Asset Purchase Agreement by and
among the Company, Century, GBS, EKW and GBS Acquisition Corp., an Ohio
corporation and a subsidiary of Century ("Acquisition Sub"), by which
substantially all of the assets of GBS and EKW were sold or assigned to
Acquisition Sub. The Company received an aggregate of $3.8 million in cash and
up to 47,407 unregistered shares of Century common stock (the "Stock") subject
to certain contingencies. The Stock to be received is subject to a two-year
lock-up agreement. One-half of the stock will be earned based on the renewal of
certain GBS franchisees by December 31, 1998. Management believes that the
Company will receive substantially all of this portion of the Stock by May of
1999. The other half of the Stock will be held in escrow for two years and 90
days from the date of the agreement in order to facilitate the payment to
Century of any losses incurred by Century which are subject to indemnification
by the Company. At this time management cannot estimate the amount of this
portion of the Stock which will eventually be received by the Company.
Consideration for the transaction was determined on the basis of arm's length
negotiations by the parties.
ITEM 7(c). FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit 10.55 Asset Purchase Agreement by and among Century
Business Services, Inc., General Business
Services, Inc., General Tax Services, Inc.,
Edwin K. Williams & Co., GBS Acquisition Corp.
and The Dwyer Group, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE DWYER GROUP, INC.
Date: July 30, 1998 \s\ Thomas J. Buckley
-----------------------------------
Thomas J. Buckley
Chief Financial Officer and Treasurer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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10.55 Asset Purchase Agreement by and among Century Business
Services, Inc., General Business Services, Inc.,
General Tax Services, Inc., Edwin K. Williams & Co.,
GBS Acquisition Corp. and The Dwyer Group, Inc.
</TABLE>
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Exhibit 10.55
ASSET PURCHASE AGREEMENT
BY AND AMONG CENTURY BUSINESS SERVICES, INC.,
GENERAL BUSINESS SERVICES, INC.,
GENERAL TAX SERVICES, INC.,
EDWIN K. WILLIAMS & CO.
GBS ACQUISITION CORP.
AND THE DWYER GROUP, INC.
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TABLE OF CONTENTS
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ARTICLE 1 PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.3 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Assumed Liabilities and Obligations . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Closing Date Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF GBS, GTS, EKW
AND SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Representations and Warranties of Shareholder. . . . . . . . . . . . . . . . . . 7
3.1.1 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1.2 Title to the Shares . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1.3 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.1.4 Affiliated Transactions . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Representations and Warranties of GBS, GTS, EKW
and Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2.1 Organization and Qualification . . . . . . . . . . . . . . . . . . . . 8
3.2.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2.4 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . 9
3.2.5 Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2.7 Organizational Documents and Corporate Records . . . . . . . . . . . . 10
3.2.8 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2.9 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2.10 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2.11 Other Tangible Property . . . . . . . . . . . . . . . . . . . . . . . 11
3.2.12 Leasehold Interests . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2.13 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2.14 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2.16 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2.17 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2.18 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2.19 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . 13
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3.2.20 Franchisees and Licensees . . . . . . . . . . . . . . . . . . . . . . 15
3.2.21 Outstanding Commitments . . . . . . . . . . . . . . . . . . . . . . . 15
3.2.22 Labor Matters; Employees . . . . . . . . . . . . . . . . . . . . . . . 15
3.2.23 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2.24 Employee Compensation . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2.25 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.2.26 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 18
3.2.27 Actions and Proceedings . . . . . . . . . . . . . . . . . . . . . . . 18
3.2.28 Bank Accounts, Guarantees and Powers . . . . . . . . . . . . . . . . 19
3.2.29 Environmental and Safety Matters . . . . . . . . . . . . . . . . . . . 19
3.2.30 Absence of Changes . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.2.31 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CENTURY . . . . . . . . . . . . . . . . . . . . 20
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 The Century Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.4 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 Documents Delivered . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5 CONDITIONS PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Century's and Acquisition Sub's Conditions Precedent to Closing 22
5.1.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . 22
5.1.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1.3 Satisfactory Performance . . . . . . . . . . . . . . . . . . . . . . . 22
5.1.4 Continuation of Business . . . . . . . . . . . . . . . . . . . . . . 22
5.1.5 Legal Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1.6 Employment and Noncompete Agreements . . . . . . . . . . . . . . . . 22
5.1.7 Legal Limitations on Closing . . . . . . . . . . . . . . . . . . . . 23
5.1.8 Deliveries by Shareholder . . . . . . . . . . . . . . . . . . . . . . 23
5.1.9 Deliveries by GBS, GTS and EKW . . . . . . . . . . . . . . . . . . . . 23
5.1.10 Lease Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1.11 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 GBS's, GTS's, EKW's and Shareholder's Conditions
Precedent to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . 23
5.2.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2.3 Employment Agreement(s); Noncompete Agreement . . . . . . . . . . . . 24
5.2.4 Legal Limitations on Closing . . . . . . . . . . . . . . . . . . . . . 24
5.2.5 Legal Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2.6 Satisfactory Performance . . . . . . . . . . . . . . . . . . . . . . . 24
5.2.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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ARTICLE 6 CENTURY STOCK, REGISTRATION RIGHTS AND LOCK-UP . . . . . . . . . . . . . . . . . 24
6.1 Century Stock Not Registered . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.3 Removal of Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.4 Examination and Investment Representation . . . . . . . . . . . . . . . . . . . . 25
6.5 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5.1 Required Registration . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5.2 Transfer of Registration Rights . . . . . . . . . . . . . . . . . . . 26
6.5.3 Timing of Registration . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5.4 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . 26
6.5.5 Delay and Suspension . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5.7 Further Information . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5.8 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5.9 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.5.10 Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.6 Lock-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 7 OTHER COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.1 Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.5 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.7 Noninterference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.8 Securities-Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.9 Regional Director Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.10 Franchisees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 8 CERTAIN DELIVERIES AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Delivery of Century Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2.1 Court Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2.2 Mutual Written Agreement . . . . . . . . . . . . . . . . . . . . . . . 35
8.2.3 Delay in Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2.4 Breach by GBS, GTS, EKW or Shareholder . . . . . . . . . . . . . . . . 35
8.2.5 Breach by Century . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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ARTICLE 9 SURVIVAL, INDEMNIFICATION AND LIMITATION OF
LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.2 Nature of Indemnity; Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 Limit of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.4 Conditions of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.4.1 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.4.2 Failure to Assume Defense . . . . . . . . . . . . . . . . . . . . . . 37
9.4.3 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 10 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.1 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.2 Waiver of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.6 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.11 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.12 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
10.13 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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TABLE OF EXHIBITS
<TABLE>
<S> <C>
Earn-Out Formula Exhibit A
Escrow Agreement [Key Bank Approved Form] Exhibit B
Form of Employment Agreement Exhibit C
Noncompete Agreement Exhibit D
Form of Lock-Up Agreement Exhibit E
</TABLE>
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<PAGE> 7
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and
entered into as of this 15th day of July, 1998, by and among Century Business
Services, Inc., a Delaware corporation ("Century"), GBS Acquisition Corp, an
Ohio corporation ("Acquisition Sub"), General Business Services, Inc., a Texas
corporation ("GBS"), General Tax Services, Inc., a Texas corporation ("GTS"),
Edwin K. Williams & Co., a Colorado corporation ("EKW"), and The Dwyer Group,
Inc., a Delaware corporation, the sole shareholder of GBS (and indirectly, GTS
and EKW) (the "Shareholder").
RECITALS
1. GBS, GTS and EKW (sometimes collectively referred to
herein as "Sellers") desire to sell and assign to Acquisition Sub and
Acquisition Sub desires to purchase and assume from Sellers substantially all
of the assets and certain liabilities of Sellers on the terms set forth in this
Agreement.
2. Immediately prior to the transactions contemplated
under this Agreement, Century will make a capital contribution to Acquisition
Sub of cash and Century Stock in the amounts set forth in Section 1.6, which
cash and Century Stock will be conveyed to Shareholder on the terms set forth
herein.
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 Purchased Assets.
Subject to the terms and conditions of this
Agreement, on the Closing Date Sellers shall sell, transfer, convey, assign and
deliver to Acquisition Sub, as buyer, and Acquisition Sub shall purchase and
accept from Sellers, all of Sellers' right, title and interest in and to all of
the following assets, properties and other rights (excluding the Excluded
Assets (as defined in Section 1.2)) (the "Assets") subject to the liens set
forth on Schedule 3.2.11 and the Assumed Liabilities (as defined in Section
1.4):
(a) any and all assets reflected on the Transfer
Statement (as defined in Section 1.7.3);
(b) the Leasehold Interests as defined in Section 3.2.12;
(c) the real property leasehold interests set forth on
Schedule 3.2.13, to the extent freely assignable;
(d) the Intellectual Property set forth on Schedule
3.2.15;
<PAGE> 8
(e) the Permits as defined in Section 3.2.18, to the
extent freely assignable;
(f) the rights arising under the Contracts (as
hereinafter defined) set forth on Schedule 3.2.19
(excluding rights under any Contract that is an
Excluded Asset or an Excluded Liability), to the
extent freely assignable;
(g) all of Sellers' other tangible assets, including
office furniture, office equipment and supplies,
computer hardware and software (software limited to
that listed on Schedule 1.1(g)), and leasehold
improvements (subject to any rights of lessors under
the applicable leases);
(h) all of Sellers' supplier, distributor and similar
agreements and other intangible assets incidental to
or used in performing the Contracts;
(i) all of Sellers' manuals, documents, correspondence,
sales and credit reports, customer lists, literature,
brochures, advertising materials and the like;
(j) all of Sellers' rights to the business of Sellers as
currently being conducted;
(k) all of Sellers' accounts receivable (including,
without limitation, unbilled accounts receivable) and
notes receivable, each as generated by the Contracts;
(l) all of the Sellers' computer and telecommunication
equipment, software programs, source codes, object
codes, information systems, proprietary interfaces,
routines, modules, procedures, functions, program
specifications and related documentation incidental
to or used in performing the Contracts, and all
rights under licenses relating to the use thereof;
(m) all of Sellers' written or electronic information
relating to the franchisees (including, without
limitation, franchise lists, franchise files and
other written accounts of Sellers) incidental to or
used in performing the Contracts, and other
reasonably and specifically requested information, in
each case, to the extent transferable, sales and
marketing data, principal contacts, and copies of
accounting records and information and contract
performance information;
(n) all of Sellers' permits, franchises and licenses
incidental to or used in performing the Contracts, to
the extent such licenses are transferable under
applicable law; and
(o) all of Sellers' goodwill and going concern value
relating to the Contracts and the business
appurtenant thereto.
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1.2 Excluded Assets. Sellers shall retain, and the
Assets shall not include, the following properties, assets and other rights of
Sellers (collectively, the "Excluded Assets");
(a) the Consideration to be delivered to Shareholder by
Century and Acquisition Sub pursuant to this
Agreement;
(b) Sellers' rights arising under this Agreement or under
any exhibit to this Agreement;
(c) all claims, defenses, choses in action, causes of
action and judgments in respect of any Actions
identified on Schedule 3.2.27, and with respect to
any other liability not assumed by Century or the
Acquisition Sub;
(d) all rights arising under any franchise or licensing
agreements or contracts not listed on Schedule
3.2.20; and
(e) those items listed on Schedule 1.2.
1.3 Transfer of Assets. On the Closing Date, Sellers
shall deliver to Acquisition Sub all documents that are necessary to convey the
Assets, including specific assignments of any such Assets, as Acquisition Sub
or Acquisition Sub's counsel reasonably may deem necessary to effect or
evidence the transfers contemplated hereby.
1.4 Assumed Liabilities and Obligations. Effective upon
the Closing Date, and subject to the terms and conditions of this Agreement,
Acquisition Sub shall assume, and agree to pay and perform (collectively, the
"Assumed Liabilities");
(a) those liabilities reflected on the Transfer
Statement;
(b) the Contracts (as defined in Section 3.2.19) and
those liabilities incurred pursuant to the terms of
the Contracts; and
(c) those liabilities incurred by Century or Acquisition
Sub in connection with Century's or Acquisition Sub's
operation of the business after the Closing Date.
1.5 Excluded Liabilities. Except as provided for in
Section 1.4, neither Century nor Acquisition Sub assumes or is responsible for
any liabilities or obligations of Sellers or Shareholder or any predecessor of
Sellers or Shareholder regardless of the nature, whether accrued, absolute,
contingent, known or unknown, including, but limited to, the following
liabilities or obligations (collectively, the "Excluded Liabilities"):
(a) those liabilities or obligations in connection with
any franchise and license agreement or contract not
listed on Schedule 3.2.20;
(b) those liabilities or obligations listed on Schedule
1.5; and
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(c) all claims, defenses, choses in action, causes of
action and judgments in respect of any Actions
identified on Schedule 3.2.27, and with respect to
any other liability not assumed by Century or the
Acquisition Sub.
1.6 Consideration.
1.6.1 The aggregate consideration for the Assets
shall not exceed Four Million Six Hundred Thousand Dollars
($4,600,000) (the "Consideration") consisting of a
combination of cash and Century common stock, par value $.01
per share ("Century Stock"), plus the assumption of the
Assumed Liabilities, and shall be payable as follows: (i)
Three Million Eight Hundred Thousand Dollars ($3,800,000) in
cash shall be paid on the Closing Date (as hereinafter
defined) (the "Closing Date Payment"); and (ii) Forty-Seven
Thousand Four Hundred and Seven (47,407) shares of Century
Stock (the "Earn-Out Shares") shall be payable in accordance
with the earn-out formula set forth on Exhibit A attached
hereto and made a part hereof (the "Earn-Out Payment"). The
Century Stock that constitutes the Earn-Out Shares shall be
issued within thirty (30) days of the Closing and placed in
escrow (as described more fully in Section 1.6.2) pending
payment in accordance with Exhibit A.
1.6.2 Within thirty (30) days of the Closing,
Acquisition Sub shall deliver to Key Trust Company of Ohio,
N.A., as escrow agent (the "Escrow Agent"), the Earn-Out
Shares. The share certificates shall be held by the Escrow
Agent subject to the terms of an escrow agreement (the
"Escrow Agreement") to be dated as of the Closing Date among
Century, Acquisition Sub, Shareholder and the Escrow Agent in
substantially the form attached hereto as Exhibit B.
1.6.3 Acquisition Sub or Century, as the case may
be, shall, within sixty (60) days of the first anniversary of
the Closing Date, give written notice to Shareholder
reasonably detailing Century's determination of the number of
shares of Century Stock that Shareholder is entitled to
receive as the Earn-Out Payment. Shareholder must, within
ten (10) business days after Shareholder's receipt of the
notice, give written notice ("Earn-Out Notice") to Century
specifying in reasonable detail Shareholder's objections, if
any, to Century's determination of the Earn-Out Payment. If
Shareholder does not dispute Century's determination, then
Century, Acquisition Sub and Shareholder shall immediately
send joint written instructions to the Escrow Agent, in
accordance with Section 2(a) or 2(b), as the case may be, of
the Escrow Agreement. The parties shall meet in person and
negotiate in good faith during the ten (10) business day
period (the "Earn-Out Resolution Period") after the date of
Century's receipt of the Earn-Out Notice to resolve
Shareholder's objections. If the parties are able to resolve
all such disputes within the Earn-Out Resolution Period, then
the parties shall immediately send joint written instructions
to the Escrow Agent, in accordance with Section 2(a) or 2(b),
as the case may be, of the Escrow Agreement. If the parties
are unable to resolve all such disputes within the Earn-Out
Resolution Period, then within five (5) business days after
the
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<PAGE> 11
expiration of the Earn-Out Resolution Period, all disputes
shall be submitted to a mutually agreeable national
accounting firm (the "Independent Accountant") who shall be
engaged to provide a final and conclusive resolution of all
unresolved disputes within fifteen (15) days after such
engagement. Immediately upon the Independent Accountant's
determination, Century, Acquisition Sub and Shareholder shall
send joint written instructions to the Escrow Agent, in
accordance with Section 2(a) or 2(b), as the case may be, of
the Escrow Agreement. The Independent Accountant's
determination shall be limited to the specific components of
the earn-out formula that are in dispute and shall not result
in a recalculation by the Independent Accountant of the
earn-out formula set forth in Exhibit A hereto. The
determination of the Independent Accountant, or such other
mutual agreement expressed in a joint written instruction to
the Escrow Agent, 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.
1.6.4 The parties hereto agree that the defined term
"Escrowed Stock," as used in the Escrow Agreement, shall
include any dividends or distributions in stock or property
or any securities of Century in respect thereof, including,
without limitation, any shares issued pursuant to any stock
dividend, stock split, reverse stock split, combination or
reclassification thereof.
1.6.5 If there is a reduction in the Consideration
pursuant to the earn-out provisions on Exhibit A hereto, any
shares of Century Stock which the Escrow Agent returns to
Century or Acquisition Sub shall be valued at $16.875 per
share, adjusted for any stock split, reverse stock split,
combination or reclassification (the "Valuation Price").
1.7 Closing Date Net Assets.
1.7.1 The Closing Date Payment shall be reduced on a
dollar-for-dollar basis in the event that the Estimated
Closing Date Net Assets (as hereinafter defined) of Sellers
are less than the Target Net Assets (as defined in Section
3.2.5).
1.7.2 At Closing, Sellers will deliver to Century
and Acquisition Sub an estimate of the net book value of the
Assets being acquired by Acquisition Sub less the Assumed
Liabilities (as provided in Section 3.2.5) as of the Closing
Date, determined on an accrual basis in accordance with
generally accepted accounting principles ("GAAP")
consistently applied (the "Estimated Closing Date Net
Assets"). To the extent that the Estimated Closing Date Net
Assets are less than the Target Net Assets, such difference
(the "Estimated Closing Date Net Asset Deficiency") shall be
deducted from the Closing Date Payment.
1.7.3 As promptly as practicable (but in no event
later than 15 days after the Closing Date), Shareholder shall
deliver to Century (i) a statement of Assets acquired and
Assumed Liabilities dated as of the close of business on the
Closing
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<PAGE> 12
Date (the "Transfer Statement") prepared on an accrual basis
in accordance with GAAP and (ii) an accompanying closing
statement (the "Closing Statement") reasonably detailing
Shareholder's determination of each of Sellers' net assets
(as defined in Section 3.2.5) as of the Closing Date (the
"Closing Date Net Assets"). Century must, within ten (10)
business days after Century's receipt of the Transfer
Statement and the Closing Statement, give written notice (the
"Notice") to Shareholder specifying in reasonable detail
Century's objections, if any, with respect thereto or
Shareholder's determination of the Transfer Statement and the
Closing Date Net Assets 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 Shareholder's receipt
of the Notice to resolve any such disputes. If the parties
are able to resolve all such disputes within the Resolution
Period, then such mutually agreeable determination of the
Closing Date Net Assets shall be final, binding and
conclusive on the parties. 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 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.
1.7.4 To the extent the net book value of the
Closing Date Net Assets is less than the net book value of
the Estimated Closing Date Net Assets, Shareholder shall pay
such deficiency to Century within five (5) business days
after its final determination pursuant to this Section 1.7;
provided, however, Shareholder shall not be required to pay
any such deficiency to the extent the net book value of the
Closing Date Net Assets exceeds the Target Net Assets. To
the extent the net book value of the Closing Date Net Assets
is greater than the net book value of the Estimated Closing
Date Net Assets, Century shall pay Shareholder within five
(5) business days after its final determination such increase
up to that amount by which the Closing Date Payment was
reduced pursuant to Section 1.7. If Shareholder fails to pay
such deficiency within such 5-day period, such deficiency
shall bear interest at the rate of eight percent (8%) from
the Closing Date to the date such deficiency is paid.
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ARTICLE 2
CLOSING
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 July 15, 1998, if all of the conditions to Closing have been
satisfied or waived, or at or on such other time, date and place as shall be
mutually agreed to by Century and Shareholder. (The date and time of the
Closing are referred to herein as the "Closing Date.")
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
GBS, GTS and EKW AND SHAREHOLDER
3.1 Representations and Warranties of Shareholder.
Shareholder represents and warrants to Century that:
3.1.1 Authority. The execution, delivery and
performance by Shareholder of this Agreement and the
consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary
corporate actions by Shareholder. 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 Shareholder, 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. Shareholder owns, of
record and beneficially, all of the outstanding capital stock
of GBS and (indirectly) EKW and GTS, free and clear of all
liens, encumbrances, taxes, security interests, options,
warrants and restrictions on transfer of whatsoever nature or
kind. William D. Morice has waived his right of first
refusal to acquire the stock or assets of GBS and/or GTS.
3.1.3 No Brokers. 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
Shareholder, GBS, GTS, EKW 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 Shareholder nor any
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<PAGE> 14
Affiliate of 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 GBS, GTS and EKW. For purposes of this Section,
an "Affiliate of Shareholder" means any employee, officer or
director of Shareholder, any spouse or family member
(including in-laws) of Shareholder, or any corporation,
partnership or other entity in which Shareholder (or spouse
or family member) has an equity or ownership interest
exceeding twenty percent (in the aggregate).
3.2 Representations and Warranties of GBS, GTS, EKW and
Shareholder. Shareholder, and Shareholder jointly with Sellers, 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. GBS, GTS and
EKW are corporations duly organized, validly existing and in
good standing under the laws of their respective states of
incorporation, 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. GBS, GTS and EKW are duly
qualified and in good standing in each jurisdiction in which
the nature of their business or ownership or leasing of their
properties makes such qualifications necessary as set forth
on Schedule 3.2.1 hereto.
3.2.2 Authority. The execution, delivery and
performance by GBS, GTS and EKW of this Agreement and the
consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary
corporate actions by each of GBS, GTS and EKW. This
Agreement has been, and each other document ancillary to this
Agreement to which GBS, GTS and EKW are a party will be at
the Closing, duly executed and delivered by each of GBS, GTS
and EKW and constitutes, or will when delivered, constitute,
the legal, valid and binding obligation of each of GBS, GTS
and EKW enforceable against them 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 each of GBS, GTS and
EKW.
3.2.3 Financial Statements. Attached hereto as
Schedule 3.2.3 are true and correct copies, with respect to
GBS, GTS and EKW, of (a) an internally prepared balance sheet
statement as of May 31, 1998, and the related statement of
operations for the five-month period ended May 31, 1998 (the
"Profit and Loss Statement"), (b) balance sheets and income
statements for the fiscal years ended 1995, 1996 and 1997,
and (c) the Transfer Statement. Each of (a), (b) and (c)
(collectively, the "Financial Statements"), are true and
correct, are in accordance with the internal books and
records of GBS, GTS and EKW, fairly present the financial
condition and results of operations of GBS, GTS and EKW as of
and at the respective dates and for the respective periods
covered thereby and were prepared in conformity
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<PAGE> 15
with GAAP (other than the requirements with respect to
footnote disclosure) consistently applied over the periods
referenced and from period to period.
3.2.4 Absence of Certain Changes or Events. Except
for any settlement reached as contemplated in Section 7.9,
since December 31, 1997, each of GBS, GTS and EKW (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 3.2.4, 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 GBS, GTS and EKW; and (iv) has not incurred any damage,
destruction or loss (whether or not covered by insurance) to
its owned or leased property or Assets.
3.2.5 Net Assets. On the Closing Date, the net
book value of the Assets acquired by Acquisition Sub less the
Assumed Liabilities, calculated on an accrual basis, in
accordance with GAAP consistently applied, will be at least
Three Hundred Sixty Thousand Dollars ($360,000) (the "Target
Net Assets").
3.2.6 Subsidiaries. GBS, GTS and EKW have no
subsidiaries, except that GTS is a wholly-owned subsidiary
of GBS.
3.2.7 Organizational Documents and Corporate
Records. The copies of the Articles of Incorporation and
Bylaws of GBS, GTS and EKW heretofore delivered to Century
are correct and complete. The stock transfer, minute books
and corporate records of GBS, GTS and EKW, 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 GBS, GTS and EKW from the date of its organization to the
date hereof. GBS, GTS and EKW have made available to Century
all accounting, corporate and financial books and records
which relate to the business of GBS, GTS and EKW.
3.2.8 Consents. Except as set forth on Schedule
3.2.8, 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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3.2.9 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 Bylaws of
GBS, GTS and EKW; (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 GBS, GTS and EKW are a party or by which
GBS, GTS, EKW or any of their Assets or properties are bound
or affected; (iii) result in the creation of any liens upon
the properties or assets of GBS, GTS and EKW 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, GBS, GTS, EKW or
any of their respective securities, properties, assets or
business; (v) constitute a violation by GBS, GTS and EKW of
any statute, law, rule or regulation of any jurisdiction as
such statute, law, rule or regulation relates to GBS, GTS, EKW
or to any of their securities, properties, assets or business;
or (vi) violate any of the Permits (as defined in Section
3.2.18 hereof).
3.2.10 Accounts Receivable. The accounts
receivable and notes receivable of GBS, GTS and EKW as
reflected on the Transfer Statement are actual and bona fide
accounts receivable and notes receivable which arose in the
ordinary and usual course of GBS's, GTS's and EKW's respective
business, represent valid obligations due to GBS, GTS and EKW,
are collectible in the aggregate recorded amounts thereof on
the books of GBS, GTS and EKW and will be fully collected in
the ordinary course, except to the extent reflected in the
allowance for doubtful accounts.
3.2.11 Other Tangible Property. GBS, GTS and EKW
have good and legal title to all of the Assets reflected on
their books and records and on the Transfer Statement, free
and clear of all liens, other than those set forth on Schedule
3.2.11. Schedule 3.2.11 lists all tangible personal property
and computer system inventory to be transferred to Acquisition
Sub as of the Closing Date. To the best knowledge of GBS, GTS
and EKW, the owned tangible personal property material to the
business of GBS, GTS and EKW is in good operating condition
and repair, ordinary wear and tear excepted.
3.2.12 Leasehold Interests. GBS, GTS and EKW have
a good and valid leasehold interest in all personal property
which is leased for use in their business (the "Leasehold
Interests"). All Leasehold Interests are used and operated in
compliance and conformity with all lease agreements creating
such Leasehold Interests. GBS, GTS and EKW have not been
notified in writing of any claim that there is under any
leasehold interest, any existing default (including, but not
limited
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<PAGE> 17
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 Shareholder and
GBS, GTS and EKW, GBS, GTS and EKW are 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)).
3.2.13 Real Property. Except as listed on
Schedule 3.2.13, GBS, GTS and EKW do not own any real
property. Schedule 3.2.13 sets forth a true and correct list
of all leases, subleases or other agreements under which GBS,
GTS and EKW are a lessee or lessor of any real property or
have any interest in real property and, except as set forth in
Schedule 3.2.13, there are no rights or options held by GBS,
GTS and EKW, or any contractual obligations on their 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 GBS, GTS and EKW, or any
contractual obligations entered into by them, 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
thereto, 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 GBS, GTS,
EKW or by any other party thereto. GBS, GTS and EKW are 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 GBS, GTS and EKW claiming
any such violation.
3.2.14 Assets. The Assets constitute all of the
assets and properties used by and necessary for the operations
of GBS, GTS and EKW.
3.2.15 Intellectual Property. Schedule 3.2.15
contains a complete list of GBS's, GTS's and EKW's
Intellectual Property (as defined herein). Except as listed
on Schedule 3.2.15, no person has made or to the best
knowledge of GBS, GTS, EKW and Shareholder, threatened to make
any claim that the operations of GBS, GTS and EKW are in
violation or infringement of any patent, patent license, 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 3.2.15, GBS, GTS and EKW own or have 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 their business.
3.2.16 Tax Matters. GBS, GTS and EKW have timely
filed, either individually or on a consolidated basis with
Shareholder, all federal, state, county and local tax returns,
estimates and reports (collectively, "Returns") required to be
filed by each of them through the date hereof, copies of which
have been made
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<PAGE> 18
available to Century for its inspection and review, which
Returns accurately reflect the taxes due for the periods
indicated; and GBS, GTS and EKW 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 GBS, GTS and EKW since December 31, 1997 through
the Closing Date are reflected on the Transfer Statement.
There is no unassessed deficiency for Taxes proposed to the
best knowledge of GBS, GTS and EKW and Shareholder, threatened
against GBS, GTS and EKW, and no taxing authority has raised
any issue with respect to GBS, GTS and EKW which, if adversely
determined, would result in a liability for any Tax. Except
as provided in Schedule 3.2.16, there are not in force any
extensions with respect to the dates on which any Return was
or is due to be filed by GBS, GTS and EKW or any waivers or
agreements by GBS, GTS and EKW for the extension of time for
the assessment or payment of any Taxes. GBS, GTS and EKW have
not been, and currently are not being, audited by any federal,
state or local tax authority.
3.2.17 Compliance with Laws. GBS, GTS and EKW are
not 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).
3.2.18 Permits. GBS, GTS and EKW (including,
without limitation, their employees) have duly obtained and
hold in full force and effect all consents, authorizations,
permits, licenses, orders or approvals of, and have 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 their businesses
(collectively, the "Permits"); all of the Permits were duly
obtained and are in full force and effect; except as provided
in Schedule 3.2.18, no violations are or have been recorded in
respect of any such Permit and no proceeding is pending or, to
the best knowledge of GBS, GTS, EKW and Shareholder,
threatened to revoke, deny or limit any such Permit.
3.2.19 Contracts and Agreements. Schedule 3.2.19
contains an accurate and complete list and description of all
material plans, arrangements, leases, contracts, franchises,
licenses and agreements (collectively, the "Contracts") to
which GBS, GTS and EKW are a party, by which their property is
bound or affecting their 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;
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<PAGE> 19
(c) any contract directly or indirectly benefiting
any Affiliate of GBS, GTS, EKW or Shareholder;
(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;
(f) any contract containing covenants limiting the
freedom of GBS, GTS and EKW 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 GBS, GTS and EKW restricting the rights, operations or
business of GBS, GTS and EKW, or containing a grant of rights
to or by GBS, GTS and EKW;
(i) any tax-sharing contract;
(j) any indemnity or hold harmless contract (other
than indemnity provisions in Articles of Incorporation or
Bylaws);
(k) any contract relating to the lease or sale to or
by others of any of real property;
(l) any contract relating to any franchisee or
licensee listed in Schedule 3.2.20 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
3.2.19 hereto and samples of each type of franchise or license
agreement of GBS, GTS and EKW have been delivered to Century.
All Contracts constitute legal, valid and binding obligations
of GBS, GTS and EKW and are in full force and effect on the
date hereof, and GBS, GTS and EKW have paid in full all
amounts due thereunder which are currently due and payable and
are not in default under any of them nor, to the best
knowledge of GBS,
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<PAGE> 20
GTS and EKW, is any other party to any such contract or other
agreement in default thereunder, nor, to the best knowledge of
GBS, GTS and EKW, does any condition exist that with notice or
lapse of time or both would constitute a default or event of
default thereunder by GBS, GTS and EKW or by any other person.
Except as set forth in Schedule 3.2.8, no Contract requires
the consent or approval of a third party in connection with
the transactions contemplated by this Agreement.
3.2.20 Franchisees and Licensees. The franchisee
list attached hereto as Schedule 3.2.20 contains a listing of
all franchisees and licensees of each of GBS, GTS and EKW as
of the Closing Date. Except as described in Schedule 3.2.20,
GBS, GTS and EKW are not aware of any existing or anticipated
changes in the policies or conditions, financial or otherwise,
of any of such franchisees or licensees, which will adversely
affect GBS's, GTS's and EKW's business.
3.2.21 Outstanding Commitments. To the best
knowledge of GBS, GTS, EKW and Shareholder, GBS, GTS and EKW
are not bound by any commitments for the performance of
services or delivery of products in excess of their 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.
3.2.22 Labor Matters; Employees.
3.2.22.1 GBS, GTS and EKW are 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 have not and
are not engaged in any unfair labor practice.
3.2.22.2 In connection with the operations of their
businesses, GBS, GTS and EKW are 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 3.2.22. Schedule 3.2.22 sets forth a
payroll list as of June 30, 1998, showing as of such date,
each employee of GBS, GTS and EKW, his or her social security
number, annual salary and date of hire.
3.2.22.3 None of GBS, GTS, EKW or Shareholder knows
of any management employee who intends to terminate his or her
employment with GBS, GTS or EKW prior to or following the
Closing Date.
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3.2.23 Employee Benefits.
3.2.23.1 Schedule 3.2.23 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 GBS, GTS, EKW 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 GBS, GTS, EKW 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 GBS, GTS and EKW 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, GBS, GTS
and EKW within the meaning of Code (as defined below) Sections
414(b), (c), (m) or (o). GBS, GTS and EKW have 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.
3.2.23.2 Except as disclosed in Schedule 3.2.23,
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 GBS, GTS, EKW 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 GBS, GTS, EKW and Shareholder, 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,
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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
GBS, GTS, EKW 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 GBS, GTS, EKW,
and their ERISA Affiliates is subject to, and none shall
result in the imposition of, tax under Section 280(G) or 4999
of the Code, nor are GBS, GTS and EKW 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 person by GBS, GTS, EKW 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, GBS, GTS, EKW
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 GBS, GTS,
EKW and their ERISA Affiliates participate in, and are
entitled to receive benefits from, the Benefit Plans.
3.2.24 Employee Compensation. GBS, GTS and EKW
have made available to Century for its inspection and review
the permanent files of all their employees, together with
payroll information pertinent to such employees.
3.2.25 Insurance. Schedule 3.2.25 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
GBS, GTS, EKW or in which GBS, GTS and EKW are a named insured
or on which GBS, GTS and EKW are 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
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thereunder in due and timely fashion. Schedule 3.2.25 sets
forth a summary of the claims history for GBS, GTS and EKW
under such policies since their respective organization and,
except as set forth on Schedule 3.2.25, there are no claims
outstanding under any such policies.
3.2.26 Absence of Undisclosed Liabilities.
Schedule 3.2.26 sets forth a true, complete and accurate list
of each liability involving in excess of $5,000 as of the
Closing Date, including all liens on any of GBS's, GTS's or
EKW's Assets and any and all other liabilities, whether or not
contingent. Except as set forth on Schedule 3.2.26 or the
Transfer Statement, as of the Closing Date, GBS, GTS and EKW
have no liabilities arising from or relating to their
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.
3.2.27 Actions and Proceedings. Except as
provided on Schedule 3.2.27, 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 GBS, GTS, EKW
and Shareholder, threatened against GBS, GTS or EKW or any of
the Assets, whether or not fully or partially covered by
insurance, or which would give rise to any right of
indemnification by any person from GBS, GTS or EKW 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 GBS, GTS or
EKW. None of GBS, GTS, EKW or Shareholder 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 GBS, GTS or EKW which might have an adverse
effect on the respective businesses, operations or Assets of
GBS, GTS or EKW.
3.2.28 Bank Accounts, Guarantees and Powers.
Schedule 3.2.28 sets forth (i) a list of all accounts and
deposit boxes maintained by GBS, GTS and EKW at any bank or
other financial institution and the names of the person(s)
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 GBS, GTS and EKW 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 GBS, GTS and EKW, together with a summary of the
terms thereof.
3.2.29 Environmental and Safety Matters. The
business and operations of GBS, GTS and EKW have been
conducted and are now being conducted in compliance with all
laws, whether federal, state or local, generally relating to
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protection of the health, safety or the environment
("Environmental and Safety Laws") and there are no
environmental conditions on any real property used by GBS, GTS
and EKW that could reasonably be expected to give rise to any
cleanup obligations of GBS, GTS and EKW under any
Environmental and Safety Laws. GBS, GTS and EKW has never
received any written notification of any violation of any
Environmental and Safety Laws.
3.2.30 Absence of Changes. Since December 31,
1997, GBS, GTS and EKW have carried on their respective
business in the ordinary course, and there has not been:
3.2.30.1 any adverse change in their
business condition (financial or otherwise), results
of operations or liabilities;
3.2.30.2 any pending or, to the best
knowledge of GBS, GTS, EKW and Shareholder,
threatened amendment, modification, or termination of
any agreement, license or permit which is material to
their business;
3.2.30.3 any change in their method of
accounting or any election relating to taxes,
settlement of any claims, audits, etc.;
3.2.30.4 any disposition (other than
that contemplated by this Agreement) or acquisition
of any of their Assets or properties other than in
the ordinary course;
3.2.30.5 any damage, destruction or
other casualty loss (whether or not covered by
insurance) adversely affecting or that could
reasonably be expected to adversely affect their
business or assets;
3.2.30.6 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
3.2.30.7 except in the ordinary course,
any obligation or liability incurred.
3.2.31 Disclosure. GBS, GTS and EKW have disclosed
to Century any and all facts known to GBS, GTS, EKW or
Shareholder to be material to GBS's, GTS's and EKW's
respective businesses, results of operations, assets,
liabilities, and financial conditions. No representation or
warranty by GBS, GTS, EKW or Shareholder in this Agreement and
no statement by GBS, GTS, EKW or Shareholder 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
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<PAGE> 25
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 Shareholder and GBS, GTS
and EKW that:
4.1 Organization. Century and Acquisition Sub are
corporations duly organized, validly existing and in good standing under the
laws of their state of incorporation and each 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 Acquisition Sub and is the legal, valid
and binding agreement of Century and Acquisition Sub enforceable against each
in accordance with its terms. This Agreement has been, and each other document
ancillary to this Agreement to which Century or Acquisition Sub is a party will
be at the Closing, duly executed and delivered by Century and Acquisition Sub
and constitute, or will when delivered, constitute, the legal, valid and
binding obligation of Century and Acquisition Sub, enforceable against each 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 and Acquisition Sub.
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
Shareholder Century's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997, September 30, 1997 and March 31, 1998, 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 the Form 10-Q for the three months ended
March 31, 1998, and any Form 8-K filed subsequent thereto, 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
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SEC Documents. To Century's knowledge, Century has timely complied with all of
the requirements of the Exchange Act and the rules and regulations promulgated
thereunder.
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
5.1 Century's and Acquisition Sub's Conditions Precedent
to Closing. The obligation of Century and Acquisition Sub 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 at and as of the Closing
Date.
5.1.2 Covenants. GBS, GTS, EKW and Shareholder
shall have performed and complied with all of their covenants
under this Agreement through the Closing Date.
5.1.3 Satisfactory Performance. All actions to
be taken by GBS, GTS, EKW and Shareholder 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 and Acquisition Sub.
5.1.4 Continuation of Business. Between December
31, 1997 and the Closing Date, except as otherwise provided
herein, GBS, GTS and EKW have been operated in the normal
course, consistent with prior practice, and have not suffered
any damage, destruction, loss or occurrence, whether covered
by insurance or not, which may adversely affect the respective
value of GBS, GTS or EKW.
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 and Noncompete Agreements.
David Bethea, current President of GBS and EKW shall have
signed and delivered a three (3) year 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) in the
form of Exhibit D attached hereto (individually, an
"Employment Agreement" and collectively, the "Employment
Agreements") and Shareholder shall have signed and delivered a
ten (10) year
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secrecy and noncompete agreement substantially in the form of
Exhibit E 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 Shareholder. Shareholder
will have delivered (i) written waiver of the right of first
refusal to acquire the stock or assets of GBS or GTS executed
by William D. Morice, (ii) the Lock-up Agreements contemplated
by Section 6.6 of this Agreement and in the form attached
hereto as Exhibit G and (iii) the Lease Amendments
contemplated by Section 5.1.10.
5.1.9 Deliveries by GBS, GTS and EKW. GBS, GTS
and EKW will have delivered their organizational documents,
minute books, and good standing certificates, 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 their respective states of
incorporation.
5.1.10 Lease Amendments. GBS, EKW and Shareholder
will have executed amendments to each lease agreement listed
on Schedule 5.1.10, which such amendments shall provide for a
termination date in each lease of no later than December 31,
1998.
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 GBS's, GTS's, EKW's and Shareholder's Conditions
Precedent to Closing. The obligation of GBS, GTS, EKW and Shareholder to close
the transactions herein contemplated is subject to the following express
conditions precedent:
5.2.1 Representations and Warranties. The
representations and warranties set forth in Article 4 of this
Agreement shall be true and at and as of the Closing Date.
5.2.2 Covenants. Each of Century and Acquisition
Sub 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(s); Noncompete
Agreement. Century will have caused to be signed and
delivered (i) to David Bethea, the Employment Agreement(s) and
(ii) to Shareholder, the Noncompete Agreement.
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5.2.4 Legal Limitations on Closing. There shall
not be in effect any statute, rule or regulation which makes
it illegal for GBS, GTS, EKW or Shareholder to consummate the
transactions contemplated herein or any order, decree or
judgment which enjoins GBS, GTS, EKW or Shareholder 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 or Acquisition Sub 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 GBS, GTS, EKW and Shareholder.
5.2.7 Waiver. GBS, GTS, EKW and Shareholder may
waive one or more of the foregoing conditions but such waiver
shall only be effective if in writing and signed by GBS, GTS,
EKW and Shareholder and may be conditioned in any manner as
GBS, GTS, EKW and Shareholder see fit.
ARTICLE 6
CENTURY STOCK, REGISTRATION RIGHTS AND LOCK-UP
6.1 Century Stock Not Registered. Shareholder
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 Shareholder 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 registration is not required under 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:
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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 JULY
15, 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.
Shareholder represents and warrants to Century that Shareholder:
i. is acquiring the Century Stock for its 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. is an "accredited investor" as such term is defined in
Regulation D promulgated under the Securities Act;
iii. 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 it may dispose of the Century Stock under
the Securities Act; and
iv. has examined Issuer's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1997, June 30, 1997,
September 30, 1997 and March 31, 1998 and its Annual
Report on Form 10-K for the fiscal year ended December
31, 1997, including the financial statements contained
therein.
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6.5 Registration Rights. Shareholder 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 (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. Shareholder
may assign its 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,
Shareholder shall deliver to Issuer a notice of such
assignment which includes the identity and address of any
assignee (collectively, Shareholder 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 Holder will be eligible to sell all of the
Registrable Securities then owned by the Holder 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, 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;
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<PAGE> 31
(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 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).
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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 three
year period 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.
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,
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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 Shareholder
and the underwriters, if any, retained by Shareholder from and
against any and all liabilities to which it 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
Shareholder for use in such registration statement, provided,
however, that 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
Shareholder.
6.5.10 Documents. Issuer shall furnish to
Shareholder and the underwriters, if any, retained by
Shareholder 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. Shareholder agrees that it:
6.6.1 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 the expiration of a twenty-four (24) month period following
the Closing Date. Notwithstanding the foregoing, in the event
of a merger, sale of substantially all of the assets, or
corporate reorganization of Shareholder, Shareholder may
Transfer (as such term is defined in the Lock-Up Agreement set
forth as Exhibit E hereto) the Century Stock to the acquiring
or surviving entity upon written consent of Century, which
consent shall not be unreasonably withheld.
6.6.2 on the Closing Date, will enter into a Lock-Up
Agreement in the form set forth in Exhibit E hereto.
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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 and/or Shareholder 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 GBS, GTS and EKW 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, franchisees, licensees 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 transfers 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 those 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, for any
amount whatsoever outside the ordinary course of business;
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 GBS, GTS
and EKW, respectively, or sale of a substantial portion of the
assets of
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each of GBS, GTS and EKW outside the ordinary course of their
respective business;
7.2.10 not pay any bonuses or any other
extraordinary compensation unless the amount thereof has
actually been paid prior to the date of this Agreement or
accrued as a liability of GBS, GTS or EKW.
7.3 Cooperation. Each party hereto agrees 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, GBS, GTS, EKW,
Shareholder 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.
Notwithstanding anything in this Agreement to the contrary, Shareholder will
remain solely liable for any tax consequences to it as a result of the
transactions contemplated by this Agreement.
7.5 Access to Information. GBS, GTS and EKW 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. GBS, GTS and EKW will furnish to Century such
information in possession of its respective officers, employees and Shareholder
as Century may from time to time reasonably request. GBS, GTS and EKW will
otherwise cooperate in the examination of GBS, GTS and EKW 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 GBS, GTS and EKW will not disclose any
confidential information of their respective franchisees or
licensees 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 GBS,
GTS and EKW upon completion of such evaluation.
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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.
7.7.1 Shareholder agrees that it 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,
each of GBS, GTS and EKW (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 or franchisee of the
Century Group become a franchisee, client or customer of
Shareholder (or any affiliate of Shareholder) or of any entity
that Shareholder (or any affiliate 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 franchisee, customer, or client, or prospective
franchisee, customer or client of the Century Group 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 franchisee, customer or client; or (iv) will not (except
as required by law or as authorized in writing by Century)
directly or indirectly copy, disseminate or use for
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. Shareholder acknowledges and agrees that all
franchisee, customers and clients of Century Group (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 Consideration on the
condition that franchisees, customers and clients, including,
without limitation, franchisees, customers and clients of each
of GBS, GTS and EKW shall continue to be franchisees,
customers and clients of the Century Group. If Shareholder
violates the provisions of subparagraph (iii) above and a
franchisee, customer or client ceases to be a franchisee,
customer or client of the Century Group, in addition to any
legal or equitable remedy available to Century and the Century
Group, under this Agreement or otherwise, Shareholder agrees
to pay to Century a cash amount equal to the greater of (a)
one hundred percent (100%) of the gross revenues, royalties,
commissions, payments and/or fees earned (whether or not
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collected as of the end of the period specified in this
subsection (a)) by each of GBS, GTS and EKW and the Century
Group during the twenty-four (24) month period preceding the
date such franchisee, customer or client ceases to be a
franchisee, customer or client of the Century Group, or (b) an
amount equal to one hundred percent (100%) of the gross
revenues, commissions, payments or fees earned (whether or not
collected as of the end of the period specified in this
subsection (b)) received by Shareholder (or any affiliate of
Shareholder), or by an entity that Shareholder renders
services to or that is owned, in whole or in part, by
Shareholder, during the twenty-four (24) month period
following the date such franchisee, customer or client ceases
to be a franchisee, customer or client of the Century Group.
7.7.2 Each of Century and Acquisition Sub agree
that it will not at any time, without the prior written
consent of Shareholder, 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 Shareholder or Shareholder's subsidiaries and
affiliates to terminate or change his, her or its employment
or services to, or relationship with Shareholder.
7.8 Securities-Trading. During the period from the date
of the Agreement to the Closing Date, each of the GBS, GTS, EKW and Shareholder
agree to refrain, and will use its respective best efforts to cause GBS, GTS
and EKW and their respective affiliates to refrain from any securities trading
activities with respect to the securities of Century. During the period from
the date of the Agreement to the Closing Date, Century and Acquisition Sub
agree to refrain, and will use its respective best efforts to cause Century and
Acquisition Sub and their respective affiliates to refrain from any securities
trading activities with respect to the securities of Shareholder.
7.9 Regional Director Agreements. It is agreed and
understood by the parties that Sellers are parties to the regional director
contracts and agreements listed on Schedule 7.9 hereto (each a "Regional
Director Contract"). The parties acknowledge that as of the date of this
Agreement, some Regional Director Contracts are in default. Acquisition Sub
agrees to assume the rights and obligations under each Regional Director
Contract in effect as of the Closing Date, provided Shareholder indemnifies
Century and Acquisition Sub with respect to these Regional Director Contracts
as provided in Section 9.2 herein. To the extent Shareholder delivers to
Century, prior to the Closing Date, a written settlement and release with
respect to any Regional Director Contract, the Target Net Assets shall be
reduced by one-half the amount of any cash consideration, forgiveness of debt
or liabilities assumed pursuant to such settlement and release up to a maximum
aggregate reduction of $200,000.
7.10 Franchisees. It is understood and agreed by the
parties that the franchise agreements listed on Schedule 7.10 hereto have
expired and the franchisees are operating on a month-to-month basis. In the
event any of these franchisees, at any time during the twelve-month period
commencing on the Closing Date, terminates its relationship with Century or
Acquisition Sub or fails to pay royalties equal to those amounts provided on
Schedule 7.10, Shareholder shall promptly pay to Century the difference between
the amount paid by such franchisee during such twelve- month period and the
amount provided on Schedule 7.10 up to an aggregate amount of
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$50,000. Century or Acquisition Sub shall have the right to offset any amounts
owing under this Section against any Earn-Out Payment due Shareholder. In the
event amounts owing under this Section exceed the value of the remaining Earn-
Out Shares, Shareholder shall pay such excess to Century in cash (i) in the
case of specific termination by franchisee, within 15 days after such
termination date, and (ii) in every other case, within 15 days after the
expiration of the twelve-month period referenced above.
ARTICLE 8
CERTAIN DELIVERIES AND TERMINATION
8.1 Delivery of Century Stock. Century will deliver the
Century Stock included in the Earn-Out Payment to the Escrow Agent pursuant to
the Escrow Agreement within thirty (30) days after the Closing Date.
8.2 Termination. This Agreement may be terminated at any
time on or prior to the Effective Time:
8.2.1 Court Order. By Century or by GBS, GTS or
EKW if any court of competent jurisdiction issues any order
(other than temporary restraining order) restraining,
enjoining or prohibiting the transactions;
8.2.2 Mutual Written Agreement. By mutual
written agreement of Century and GBS, GTS and EKW;
8.2.3 Delay in Closing. By Century or by GBS,
GTS or EKW 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 GBS, GTS, EKW or Shareholder. By
Century if there has been a material breach on the part of
GBS, GTS, EKW or Shareholder in its respective
representations, warranties or covenants set forth herein,
provided however that if such breach is susceptible to cure,
then GBS, GTS and EKW 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 GBS, GTS, EKW and
Shareholder 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 GBS, GTS, EKW and
Shareholder of their intent to terminate this Agreement, in
which to cure such breach.
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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 and warranties
contained in Articles 3 and 4 hereof will survive for a period of two (2) years
after the Closing Date 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 upon 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.
(a) Shareholder 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 (i) resulting from or on account of a breach of any representation,
warranty or covenant of GBS, GTS, EKW and/or Shareholder made in this
Agreement, (ii) with respect to all Losses incurred by Century Indemnified
Parties resulting from or related to any Excluded Asset or Excluded Liability,
and (iii) with respect to all Losses incurred by Century Indemnified Parties
resulting from or related to any Regional Director Contract, other than those
Losses caused solely by the actions of Century or Acquisition Sub.
(b) Century agrees to indemnify, defend and hold
Shareholder and its respective employees, directors, officers, shareholders and
agents (collectively, the "Shareholder Indemnified Parties"), harmless from
and against all Losses (as defined herein) incurred by the Shareholder
Indemnified Parties with respect to all Losses incurred by Shareholder which
are (i) in connection with any Regional Director Contract or any merger of the
GBS and EKW franchise systems or any merger of either or both of the GBS or EKW
franchise systems with the Comprehensive franchise system, and (ii) caused
solely by the actions of Century or Acquisition Sub.
(c) "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.
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9.3 Limit of Liability. Only with respect to the
indemnification provided in Section 9.2(a)(i), 9.2(a)(iii) and 9.2(b),
Shareholder or Century, as the case may be, will be liable under this Agreement
for Losses (i) for a period of six (6) months after the Closing Date, up to the
Consideration (as adjusted pursuant to Section 1.7), and (ii) for a period
after six (6) months through twenty-four (24) months after the Closing Date, up
to the amount of One Million Dollars ($1,000,000) (the "Limit").
9.4 Conditions of Indemnification. The obligations and
liabilities of Shareholder to Century Indemnified Parties under this Article
will be subject to the following terms and conditions:
9.4.1 Notice. Within 10 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 20 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 Shareholder written notice thereof, together
with a copy of such claim, process or other legal pleading and
Shareholder will have the right to undertake defense thereof,
by representatives of its own choosing, that are reasonably
satisfactory to the Century Indemnified Parties.
Notwithstanding Shareholder'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 Shareholder 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 Shareholder remains
liable for any payments due under any such settlement or
compromise.
9.4.2 Failure to Assume Defense. If Shareholder
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 Century
Indemnified Party will (upon further notice to Shareholder)
have the right to undertake defense, compromise or settlement
of such claim on behalf of and for the account and risk of
Shareholder; provided, however, that the Century Indemnified
Parties will not settle or compromise such claim without
Shareholder's consent, which consent will not be unreasonably
withheld; and provided further, that Shareholder 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 Century Indemnified Parties will
cooperate with all reasonable requests of Shareholder, and
will be reimbursed all its out of pocket expenses.
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ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. This Agreement may be
amended, modified and supplemented only by a writing signed by Century, GBS,
GTS, EKW and Shareholder.
10.2 Waiver of Compliance. Any failure of Century, GBS,
GTS, EKW or Shareholder 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 GBS, GTS, EKW or Shareholder or (ii) GBS, GTS, EKW and
Shareholder 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:
A. If to Century:
Century Business Services, Inc.
6480 Rockside Woods Blvd. - South
Suite 330
Cleveland, Ohio 44131
Phone: (216) 447-9000; Fax: (216) 447-9007
Attn: Keith W. Reeves
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:
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B. If to Shareholder or to GBS, GTS or EKW:
The Dwyer Group
1010 North University Parks Drive
Waco, Texas 76707
(254) 745-2400
Attn: Michaele (Shelley) Weatherbie, General Counsel
With a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street
3000 Thanksgiving Tower
Dallas, Texas 75201-4761
(214) 999-3000
Attn: John T. Kipp, Esq.
or to such other person as Shareholder 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
Shareholder and its successors and assigns, 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, which consent shall not be unreasonably withheld.
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.
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.
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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, unless such document was provided to Century prior
to the Closing Date.
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 therein and supersedes that
certain letter agreement dated April 21, 1998 and there are no other terms or
conditions, representations or warranties, written or oral, express or implied,
except as set forth herein.
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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:
----------------------------------------------
Keith W. Reeves, Senior Vice President
GBS ACQUISITION CORP.
By:
----------------------------------------------
Keith W. Reeves, President
GENERAL BUSINESS SERVICES, INC.
By:
----------------------------------------------
David Bethea, President
GENERAL TAX SERVICES, INC.
By:
----------------------------------------------
David Bethea, President
EDWIN K. WILLIAMS & CO.
By:
----------------------------------------------
David Bethea, President
THE DWYER GROUP, INC.
By:
----------------------------------------------
Robert Tunmire, President
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<PAGE> 45
EXHIBIT A
EARN-OUT FORMULA
Within 30 days after the Closing Date, Century or Acquisition Sub
shall place into escrow the Earn-Out Shares pending possible reductions in the
Consideration resulting from (i) the application of the formula described below
relating to the renewal/non-renewal of franchisees and (ii) in order to
facilitate the payment to Century of any Losses incurred by Century, as
provided for in Article 9 of the Agreement. Specifically, the parties agree
that the amount attributable to (i) above is $400,000 and to (ii) above is
$400,000. The parties further agree that the reduction in the Consideration
attributable to (i) above, and the issuance of any of the Earn-Out Shares to
Shareholder shall be determined as follows:
Based on information supplied by Shareholder, the sum of the 1997
royalty revenue for 110 GBS franchises up for renewal in December of 1998 is
approximately $400,000. For such franchises that are renewed prior to the
Closing Date, an amount of Earn-Out Shares equal in value to the 1997 royalty
revenue of the renewed franchises will be issued to Shareholder at the Closing
Date. An amount equal to the 1997 royalty revenues of any further franchises
that have renewed during the period from the Closing Date to March 31, 1999,
will be deducted from the escrow and the equivalent shares of Century Stock
will be issued to Shareholder by May 31, 1999. Any Earn-Out Shares left in the
escrow on May 31, 1999 attributable to (i) above will be released to Century.
Century hereby agrees to timely renew any franchisee that wishes to renew on
substantially the same terms and conditions as such franchisees' existing
agreements.
ALL CALCULATIONS TO BE MADE IN ACCORDANCE WITH THIS EXHIBIT A SHALL BE
DETERMINED BASED ON THE VALUATION PRICE. The Escrow Agreement will provide
that the remaining $400,000 of Earn-Out Shares, less any Losses incurred by
Century [(offset by any Losses suffered by Shareholder)], shall be released to
Shareholder within ninety (90) days after the second anniversary of the Closing
Date.
Nothing in this Exhibit A shall affect Century's right to be
indemnified up to the Limit as set forth in Article 9 of the Agreement.
A-1
