1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from Not Applicable to
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Commission file number 0-25890
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Century Business Services, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-2769024
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
6480 Rockside Woods Boulevard South, Suite 330, Cleveland, Ohio 44131
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(Address of Principal Executive Offices) (Zip Code)
(Registrant's Telephone Number, Including Area Code) 216-447-9000
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10055 Sweet Valley Drive, Valley View, Ohio 44125
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Former Name, Former Address and Former Fiscal Year, if Changed since Last Report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Outstanding At
Class of Common Stock April 30, 1998
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Par value $.01 per share 50,143,253
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Exhibit Index is on page 13 of this report.
Page 1 of 13 Pages
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CENTURY BUSINESS SERVICES, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION: Page
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 5
Notes to the Condensed Consolidated Financial Statements 6-7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-9
PART II. OTHER INFORMATION:
Item 2 - Changes in Securities 10
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit Index 13
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
1998 1997
----------- -----------
ASSETS (unaudited) (audited)
Cash and cash equivalents $ 46,488 $ 21,148
Accounts receivable, less allowance for doubtful
accounts of $1,525 and $1,472, respectively 46,726 32,235
Premiums receivable, less allowance for doubtful
accounts of $361 and $281, respectively 14,947 7,812
Investments:
Fixed maturities held to maturity, at amortized cost 13,917 14,528
Securities available for sale, at fair value 64,042 59,138
Other investments 1,849 6,054
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Total investments 79,808 79,720
Deferred policy acquisition costs 4,501 4,478
Reinsurance recoverables 17,909 15,215
Excess of cost over net assets of businesses
acquired, net of accumulated amortization of $2,292 and $1,264 132,739 89,856
Notes receivable 17,878 16,579
Other assets 30,716 20,524
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TOTAL ASSETS $ 391,712 $ 287,567
=========== ===========
LIABILITIES
Losses and loss expenses payable $ 54,940 $ 50,655
Unearned premiums 22,443 22,656
Notes payable, bank debt and capitalized leases 23,153 20,312
Income taxes 10,856 2,958
Accrued expenses 37,582 27,167
Other liabilities 21,482 15,909
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TOTAL LIABILITIES 170,456 139,657
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SHAREHOLDERS' EQUITY
Common stock 492 415
Additional paid-in capital 194,666 127,517
Retained earnings 24,933 18,372
Accumulated other comprehensive income 1,165 1,606
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TOTAL SHAREHOLDERS' EQUITY 221,256 147,910
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 391,712 $ 287,567
=========== ===========
See the accompanying notes to the condensed consolidated financial statements.
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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
1998 1997
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Revenues:
Business services fees and commissions $ 46,599 $ 6,133
Specialty insurance services (regulated):
Premiums earned 10,469 8,066
Net investment income 1,376 1,121
Net realized gain on investments 770 963
Other income 1 13
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Total revenues 59,215 16,296
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Expenses:
Operating expenses - business services 35,868 4,681
Losses and loss adjustment expenses 5,622 4,829
Policy acquisition and other expenses 4,983 3,324
Corporate general and administrative expenses 1,539 370
Depreciation and amortization expenses 1,634 316
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Total expenses 49,646 13,520
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Income from continuing operations before net corporate interest
income and income tax expense 9,569 2,776
Net corporate interest income 326 285
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Income from continuing operations before
income tax expense 9,895 3,061
Income tax expense 3,528 952
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Income from continuing operations 6,367 2,109
Loss from discontinued operations -- 534
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Net income $ 6,367 $ 1,575
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Earnings per share
Basic:
Income from continuing operations $ 0.14 $ 0.06
Loss from discontinued operations -- (0.01)
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Net income per share $ 0.14 $ 0.05
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Diluted:
Income from continuing operations $ 0.11 $ 0.04
Loss from discontinued operations -- (0.01)
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Net income per share $ 0.11 $ 0.03
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Weighted average common shares 45,528 34,507
========== ==========
Weighted average common and dilutive
potential common shares 59,876 48,059
========== ==========
See the accompanying notes to the condensed consolidated financial statements.
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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
Three Months Ended
March 31,
1998 1997
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $(10,159) $ 4,950
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed maturities, held to maturity -- (209)
Purchase of fixed maturities, available for sale (9,937) (5,869)
Purchase of equity securities (1,854) (2,133)
Redemption of fixed maturities, held to maturity 551 500
Sale of fixed maturities, available for sale 5,709 743
Sale of equity securities 681 229
Change in short-term investments 4,205 2,878
Business acquisitions, net of cash acquired (8,113) (7,403)
Acquisition of property and equipment (2,754) (236)
Proceeds from dispositions of property and equipment 109 --
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Net cash used in investing activities (11,403) (11,500)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 42,038 405
Repayment of debt (41,682) (589)
Proceeds from stock issuances, net 41,506 156
Proceeds from exercise of stock options and warrants, net 5,040 --
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Net cash provided by (used in) financing activities 46,902 (28)
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Net increase (decrease) in cash and cash equivalents 25,340 (6,578)
Cash and cash equivalents at beginning of period 21,148 39,874
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Cash and cash equivalents at end of period:
Continuing operations 46,488 33,296
Discontinued operations -- 527
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Total cash and cash equivalents at end of period $ 46,488 $ 33,823
======== ========
See the accompanying notes to the condensed consolidated financial statements.
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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited condensed
consolidated interim financial statements reflect all adjustments
necessary to present fairly the financial position of the Company as of
March 31, 1998 and December 31, 1997 and the results of its operations
and cash flows for the periods ended March 31, 1998 and 1997. The
results of operations for such interim periods are not necessarily
indicative of the results for the full year. The 1997 condensed
consolidated balance sheet was derived from the Company's audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1997.
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income", on January 1, 1998. As required
by the Statement, the Company displays the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the Balance Sheet. Items
considered to be other comprehensive income are the adjustments made
for unrealized holding gains and losses on available for sale
securities. Comprehensive income for the three months ended March 31,
1998 and 1997 was $5.9 million and $905,000, respectively.
2. EARNINGS PER SHARE
Earnings per share are based on the average number of shares of common
stock outstanding during each period and such shares issuable upon
assumed exercise of stock options and warrants, using the treasury
stock method. The following data show the amounts used in computing
earnings per share and the effect on the weighted-average number of
shares of dilutive potential common stock (in thousands, except per
share data):
Three Months Ended
March 31,
1998 1997
------ ------
Numerator:
Income used in basic and diluted earnings per share $6,367 $1,575
Denominator:
Basic weighted average shares 45,528 34,507
Effect of dilutive stock options and warrants 14,348 13,552
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Diluted weighted average shares 59,876 48,059
====== ======
Basic earnings per share $0.14 $0.05
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Diluted earnings per share $0.11 $0.03
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3. ACQUISITIONS
During the first quarter 1998, the Company continued its strategic
acquisition program, purchasing the businesses of seven complimentary
companies. These acquisitions comprised the following: four accounting
systems and tax advisory businesses, one benefits design and
administration firm, and two organizational consulting and training
firms.
These acquisitions, with the exception of Bass Consultants, Inc.
("BASS") were accounted for as a purchase, and accordingly, the
operating results of the acquired companies have been included in the
accompanying condensed consolidated financial statements since the
dates of acquisition. The Company's prior period financial statements
have not been restated for the BASS acquisition, as the transaction was
considered immaterial.
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CENTURY BUSINESS SERVICES, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(continued)
3. ACQUISITIONS (continued)
The aggregate purchase price of the aforementioned acquisitions was
approximately $52.792 million, and includes future contingent
consideration of up to $5.518 million in cash and restricted common
stock of the Company with an estimated stock value at date of
acquisition of $5.919 million, based on the acquired companies' ability
to meet certain performance goals. The aggregate purchase price,
comprised of cash payments, issuance of promissory notes, and issuance
of Common Stock, has been allocated to the net assets of the Company
based upon their respective fair market values.
The unaudited pro forma information for the periods set forth below
give effect to the acquisitions as if they had occurred on January 1,
1998 and January 1, 1997. The pro forma information is presented for
informational purposes only and is not necessarily indicative of the
results of operations that actually would have been achieved had these
transactions been consummated at the beginning of the periods presented
(in thousands, except per share data):
Three Months Ended
March 31,
1998 1997
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Net revenues - pro forma $62,636 $27,499
Net income - pro forma $7,251 $4,557
Earnings per common share pro forma
- Basic $0.15 $0.12
- Diluted $0.12 $0.09
3. SUBSEQUENT EVENTS
Since March 31, 1998, the Company has closed four acquisitions and has
announced the acquisition of nine additional companies. The new
acquisitions include the following: five accounting, consulting and tax
advisory businesses, two benefits design, consulting and administration
firms, one employee benefits brokerage firm, one business valuation
firm, one pension administration and investment services firm, one
information technology company, one managed healthcare marketing and
administration firm, and a national franchisor of financial and tax
services. The combined cost of these transactions is approximately
$11.241 million in cash and $42.086 million of restricted Company
common stock.
4. RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 financial
statements to conform to the 1998 presentation.
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CENTURY BUSINESS SERVICES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Century Business Services, Inc. ("the Company") is a leading provider of
outsourced business services to small and medium sized companies throughout the
United States. The Company provides integrated services in the following areas:
accounting systems, advisory and tax, employee benefits design and
administration, human resources, information technology systems, payroll
administration, specialty insurance, valuation, and workers' compensation.
RESULTS OF OPERATIONS
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Revenues
Total revenues increased to $59.2 million for the three-month period
ended March 31, 1998 from $16.3 million for the comparable period in 1997,
representing an increase of $42.9 million, or 263%. The increase was primarily
attributable to the Company's acquisition activity in outsourced business
services.
Business service fees and commissions increased to $46.6 million for
the three-month period ended March 31, 1998 from $6.1 million for the comparable
period in 1997, representing an increase of $40.5 million or 664%. The increase
was primarily attributable to the acquisitions completed in 1998. Due to the
majority of recent acquisitions having been accounted for under the purchase
method, the Company's consolidated financial statements give effect to such
acquisitions only from their respective acquisition dates.
Premiums earned increased to $10.5 million for the three-month period
ended March 31, 1998 from $8.1 million for the comparable period in 1997,
representing an increase of $2.4 million, or 29.8%. Gross written premiums
increased to $20.2 million for the three-month period ended March 31, 1998 from
$11.3 million for the comparable period in 1997, representing an increase of
$8.9 million, or 78.2%. Net written premiums increased to $10.7 million for the
three-month period ended March 31, 1998 compared to $8.3 million for the
comparable period in 1997, representing an increase of $2.4 million, or 28.0%.
These increases were primarily attributable to the growth in commercial
liability premiums over 1997 levels, the introduction of workers compensation
coverage emanating from an August 1997 business transaction and the assumption
of contract surety premiums under a certain reinsurance agreement entered into
in 1997.
Net investment income increased to $1.4 million for the three-month
period ended March 31, 1998 from $1.1 million for the comparable period in 1997,
representing an increase of approximately $255,000, or 22.7%. This increase was
attributable to an increase in the average investments outstanding of $79.8
million for the three-month period ended March 31, 1998 from $70.1 million for
the comparable period in 1997.
Net realized gain on investments decreased to $770,000 for the
three-month period ended March 31, 1998 from $963,000 for the comparable period
in 1997. This decrease was primarily due to the composition of investments sold
during the three months ended March 31, 1998 versus the comparable period in
1997.
Expenses
Total expenses increased to $49.6 million for the three-month period
ended March 31, 1998 from $13.5 million for the comparable period in 1997,
representing an increase of $36.1 million, or 267%. Such increase was primarily
attributable to the increase in operating expenses, which reflects the impact of
the Company's acquisitions made in 1998 and the corresponding increase of
corporate staff and related integration costs. As a percentage of revenues,
total expenses increased to 83.8% for the three-month period ended March 31,
1998 from 83.0% for the comparable period in 1997.
Operating expenses for the business services operations increased to
$35.9 million for the three-month period ended March 31, 1998 from $4.7 million
for the comparable period in 1997, representing an increase of $31.2 million, or
664%. Such increase was attributable to business services acquisitions completed
in 1998. As a percentage of fees and commissions, operating expenses increased
to 77.0% for the three-month period ended March 31, 1998 from 76.3% for the
comparable period in 1997.
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Loss and loss adjustment expenses increased to $5.6 million for the
three-month period ended March 31, 1998 from $4.8 million for the comparable
period in 1997, representing an increase of approximately $800,000, or 16.4%.
Such increase was attributable to the increased premium volume for liability
coverages. As a percentage of premiums earned, loss and loss adjustment expenses
decreased to 53.7% for the three-month period ended March 31, 1998 from 59.9%
for the comparable period in 1997. Such decrease was the result of claims from
prior years that were settled and paid in 1998 for lower than reserved amounts,
as well as a reduction in average claims paid.
Policy acquisition and other expenses increased to $5.0 for the
three-month period ended March 31, 1998 from $3.3 million for the comparable
period in 1997, representing an increase of $1.7 million, or 49.9%. The increase
corresponds directly to the increase in premium volume. As a percentage of net
written premiums, policy acquisition expenses were 46.7% and 39.9% for the
three-month periods ended 1998 and 1997, respectively.
Corporate general and administrative expenses increased to $1.5 million
for the three-month period ended March 31, 1998 from $370,000 for the comparable
period in 1997. Such increase was attributable to the expanding of the corporate
function to accommodate the Company's acquisition strategy. Corporate general
and administrative expenses represented 2.6% and 2.3% of total revenues for the
three-month periods ended March 31, 1998 and 1997, respectively.
Depreciation and amortization expenses increased to $1.6 million for
the three-month period ended March 31, 1998 from $316,000 for the comparable
period in 1997, representing an increase of $1.3 million or 417%. The increase
is a result of the increase of goodwill amortization resulting from the
acquisitions completed by the Company in 1998 and 1997. As a percentage of total
revenues, depreciation and amortization expense increased to 2.8% for the
three-month period ended March 31, 1998 from 1.9% for the comparable period in
1997. Such increase was attributable to the implementation of the Company's
acquisition strategy.
Net Corporate Interest Income
Net corporate interest income increased to $326,000 for the three-month
period ended March 31, 1998 from $285,000 for the comparable period in 1997,
representing an increase of $41,000, or 14.4%. Such increase was attributable to
the increase in cash and cash equivalent balances for the Company, excluding
specialty insurance and outsourced business services.
OTHER
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The Company's 1998 condensed consolidated balance sheet includes an
increase in goodwill of $42.9 million since December 31, 1997 relates to
goodwill recorded in accordance with APB Opinion No. 16 upon the purchase of six
acquisitions completed during the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
During the first three months of 1998, cash and cash equivalents increased $25.3
million as cash generated from financing activities of $46.9 million exceeded
cash used in operating activities of $10.2 million and cash used in investing
activities of $11.4 million. The normal seasonal changes occurred between
year-end and the end of the first quarter and resulted in increased accounts
receivable and premiums receivable. Cash used in investing activities consisted
primarily of purchases of investments, new business acquisitions, and capital
expenditures. Cash provided by financing activities consisted primarily of
proceeds received from a private placement of 3.8 million shares, which together
with warrants exercised, raised approximately $46.5 million.
ITEM 3. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK
The Company does not engage in trading market risk sensitive instruments.
Neither does the Company purchase as investments, hedges or for purposes "other
than trading" instruments that are likely to expose the Company to market risk,
whether interest rate, foreign currency exchange, commodity price or equity
price risk. The Company has issued no debt instruments, entered into no forward
or futures contracts, purchased no options and entered into no swaps. The
Company's primary market risk exposure is that of interest rate risk. A change
in the Federal Funds Rate, or the Reference Rate set by the Bank of America (San
Francisco), would affect the rate at which the Company could borrow funds under
its Credit Facility.
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Statements included in the Form 10-Q, which are not historical in nature, are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The amount of the charges to
discontinued operation with respect to the Company's environmental services
business will depend on a number of factors, including the outcome of any
related negotiations and final determination of the net realizable values of
assets to be sold or transferred. In addition, the Company's Annual Report on
Form 10-K contains certain other detailed factors that could cause the Company's
actual results to differ materially from forward-looking statements made by the
Company.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(c) Issuance of unregistered shares during the three months ended
March 31, 1998:
All transactions listed below involve the issuance of shares of Common Stock by
the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended.
On January 2, 1998, in connection with the acquisition of Bass Consultants,
Inc., the Company issued 626,966 shares of Common Stock in exchange for all the
outstanding shares of Bass Consultants, Inc.
On January 6, 1998, in connection with the acquisition of Philip Rootberg & Co.,
LLP, the Company paid $5.1 million in cash and issued 482,353 shares of Common
Stock in exchange for all the outstanding shares Philip Rootberg & Co., LLP.
On January 30, 1998, in connection with the acquisition of Seitz, Kate, Medve,
Inc., the Company paid $362,000 in cash and issued 32,492 shares of Common Stock
in exchange for all the outstanding shares of Seitz, Kate, Medve, Inc.
On January 30, 1998, in connection with the acquisition of Braunsdorf, Carlson &
Clinkinbeard, CPA's P.A. and Bushman & Associates, CPA's P.A. ("BCC Group"), the
Company paid $1.6 million in cash and issued 159,352 shares of Common Stock in
exchange for all the outstanding shares of the BCC Group.
On March 23, 1998, in connection with the acquisition of Kaufman Davis LLP, the
Company paid $2.2 million in cash and issued 160,863 shares of Common Stock in
exchange for substantially all of the assets of Kaufman Davis LLP.
On March 31, 1998, in connection with the acquisition of The Continuous Learning
Group, Inc. and Envision Development Group, Inc., the Company paid $10.4 million
in cash and issued 916,805 shares of Common Stock in exchange for all the
outstanding shares of The Continuous Learning Group, Inc. and Envision
Development Group, Inc.
On March 31, 1998, in connection with the acquisition of Multi-Dimensional
International, Inc., the Company paid $5.2 million in cash and issued 459,662
shares of Common Stock in exchange for all the outstanding shares of
Multi-Dimensional International, Inc.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
1 Amended and Restated 1996 Employee Stock Option Plan
2 First Amendment, Consent and Waiver to Credit Facility
27.1 Financial Data Schedule
(b) Reports on Form 8-K
(i) The Company filed a Current Report on Form 8-K dated
February 20, 1998, reporting in Item 7 the following
financial statements:
(1) Audited Balance Sheet of Comprehensive Business
Services, Inc. as of December 31, 1996, and Audited
Statements of Operations, Stockholder's Equity, and
Cash Flows for the year ended December 31, 1996.
(2) Unaudited Statements of Operations and Cash Flows of
Comprehensive Business Services, Inc. for the period
January 1, 1997 to September 30, 1997.
(3) Audited Consolidated Balance Sheets of Valuation
Counselors Group, Inc. and Subsidiary as of December
31, 1996 and 1995, and Audited Consolidated Statements
of Operations, Stockholder's Equity, and Cash Flows for
the years then ended.
(4) Unaudited Consolidated Statements of Operations and
Cash Flows of Valuation Counselors Group, Inc. and
Subsidiary for the period January 1, 1997 to September
30, 1997.
(5) Audited Balance Sheet of Zelenkofske, Axelrod & Co.,
Ltd. as of June 30, 1997, and Audited Statements of
Operations and Retained Earnings, and Cash Flows for
the three months ended June 30, 1997.
(6) Audited Balance Sheet of Health Administration
Services, Inc. as of December 18, 1997, and Audited
Statements of Income, Changes in Stockholder's Equity,
and Cash Flows for the period January 1, 1997 to
December 18, 1997.
(7) Audited Consolidated Balance Sheet of Shenkin Kurtz
Baker & Co., P.C. and Subsidiary as of December 7,
1997, and Audited Consolidated Statements of Income,
Stockholder's Equity, and Cash Flows for the period
January 1, 1997 to December 7, 1997.
(8) Audited Combined Balance Sheet of Robert D. O'Byrne and
Associates, Inc. and The Grant Nelson Group, Inc. as of
December 31, 1997, and Audited Combined Statements of
Operations, Stockholder's Equity, and Cash Flows for
the year ended December 31, 1997.
(9) Audited Consolidated Balance Sheets of Environmental
Systems, Inc. and Subsidiaries as of December 31, 1996,
1995 and 1994, and Audited Consolidated Statements of
Operations, Stockholder's Equity, and Cash Flows for
the years then ended.
(10) Audited Balance Sheet of Smith & Radigan, P.C. as of
December 3, 1997, and Audited Statements of Operations
and Cash Flows for the period January 1, 1997 through
December 3, 1997.
(ii) The Company filed a Current Report on Form 8-K dated March
31, 1998, reporting in Item 2 that the Company completed
the acquisitions of The Continuous Learning Group, Inc.,
Envision Development Group, Inc. and Multi-Dimensional
International Consultants, Ltd. The Company noted in Item 7
that financial statements and pro forma information related
to the aforementioned acquisitions would be filed by
amendment.
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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 thereunto duly authorized.
Century Business Services, Inc.
-------------------------------
(Registrant)
Date: May 15, 1998 By: /s/ Charles D. Hamm, Jr.
------------ ------------------------
Charles D. Hamm, Jr.
Chief Financial Officer
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CENTURY BUSINESS SERVICES, INC.
-------------------------------
EXHIBIT INDEX
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Exhibit Number: Page No.
- - ---------------
1 Amended and Restated 1996 Employee Stock Option Plan . . . . . . 14-18
2 First Amendment, Consent and Waiver to Credit Facility . . . . . 19-29
27.1 Financial Data Schedule (SEC only) . . . . . . . . . . . . . . . 30
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Exhibit 1
EXHIBIT A
---------
CENTURY BUSINESS SERVICES, INC.
AMENDED AND RESTATED
1996 EMPLOYEE STOCK OPTION PLAN
1. STATEMENT OF PURPOSE. This 1996 Employee Stock Option Plan (the
"Plan") is to benefit Century Business Services, Inc. fka International Alliance
Services, Inc., a Delaware corporation and its subsidiaries (collectively, the
"Company"), through the maintenance and development of their respective
businesses by offering certain present and future key employees and officers,
non-employee directors and independent contractors providing services to the
Company, a favorable opportunity to become holders of stock in the Company over
a period of years, thereby giving them a permanent stake in the growth and
prosperity of the Company and encouraging the continuance of their involvement
with the Company.
2. ELIGIBILITY. Options shall be granted only to key employees,
including officers and independent contractors or consultants and non-employee
directors performing services for the Company (the "Employees") selected from
time to time by the Committee (or, in the case of awards to non-employee
directors, the Board of Directors (the "Board")) on the basis of their
importance to the business of the Company (collectively, the "Participants"or
"Optionees").
3. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee"), consisting of two or more persons appointed by the Board who are
both outside directors (as defined under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code")) and non-employee directors within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "1934
Act"). The Committee's interpretation of the terms and provisions of the Plan
shall be final and conclusive. The selection of Employees, for participation in
the Plan and all decisions concerning the terms, timing, pricing and amount of
any grant or award to Employees under the Plan shall be made solely by the
Committee. The selection, terms, timing, pricing and amount of any grant or
award to non-employee directors, including members of the Committee, shall be
made solely by the Board.
4. GRANTING OF OPTIONS. Options under which a total of not in excess of
2,500,000 shares of the $.01 par value common stock of the Company ("Common
Stock") may be purchased from the Company, subject to adjustment as provided in
Section 10. In the event that an option expires or is terminated, canceled or
unexercised as to any shares, such released shares may again be optioned
(including a grant in substitution for a canceled option). Shares subject to
options may be made available from unissued or reacquired shares of Common
Stock. Nothing contained in the Plan or in any option granted pursuant thereto
shall confer upon any Optionee any right to be continued in the employment of
the Company or as a director or consultant to the Company, or interfere in any
way with the right of the Company to terminate his employment or consulting
relationship at any time.
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5. OPTION PRICE. The option price shall be determined by the Committee
(or, in the case of awards to non-employee directors, the Board) at the time the
option is granted and, subject to the provisions of Section 10 hereof, shall be
not less than the fair market value at the time the option is granted of the
shares of Common Stock subject to the Option. The date of grant shall be the
date of the Committee or Board action, unless a subsequent date is specified by
the Committee.
6. DURATION OF OPTIONS, INCREMENTS AND EXTENSIONS. Subject to the
provisions of Section 8 hereof, each option shall be for such term of not more
than six years, as shall be determined by the Committee (or, in the case of
awards to non-employee directors, the Board) at the time the option is granted,
which termination date shall be set forth in the Option Agreement. Each option
shall vest and become exercisable with respect to 20% of the total number of
shares subject to the option on the first anniversary of its grant and with
respect to each additional 20% at the end of each of the succeeding four such
anniversary dates. Notwithstanding the foregoing, the Committee (or, in the case
of awards to non-employee directors, the Board) may in its discretion: (i)
specifically provide for another time or times of exercise at the time the
option is granted; (ii) accelerate the exerciseability of any option subject to
such terms and conditions as the Committee (or, in the case of awards to
non-employee directors, the Board) deems necessary and appropriate; or (iii) at
any time prior to the expiration or termination of any option previously
granted, extend the term of any option (including such options held by officers)
for such additional period as the Committee (or, in the case of awards to
non-employee directors, the Board) in its discretion shall determine. In no
event, however, shall the aggregate option period with respect to any option,
including the original term of the option and any extensions thereof, exceed six
years. Subject to the foregoing, all or any part of the shares to which the
right to purchase has vested may be purchased at the time of such vesting or at
any time or times thereafter during the option period. Without limiting the
foregoing, the Committee (or, in the case of awards to non-employee directors,
the Board), subject to the terms and conditions of the Plan, may in its sole
discretion, provide that an option may be exercised immediately upon grant or
that it may not be exercised in whole or in part for any period or periods of
time during which such option is outstanding; provided, however, that any
vesting requirement or other such limitation on the exercise of an option may be
rescinded, modified or waived by the Committee (or, in the case of awards to
non-employee directors, the Board), in its sole discretion, at any time and from
time to time after the date of grant of such option, so as to accelerate the
time at which the option may be exercised.
7. EXERCISE OF OPTION. As a condition to the exercise of any option,
the "Quoted Price" (as defined below) per share of Common Stock on the date of
exercise must be equal to or exceed the option price referred to in Section 5
hereof. An option may be exercised by giving written notice to the Company,
attention of the Secretary, in the form of an Exercise Notice, specifying the
number of shares to be purchased, accompanied by the full purchase price for the
shares to be purchased either: (i) in cash; (ii) by check; (iii) if so approved
by the Committee, by a promissory note in a form specified by the Company and
payable to the Company no later than fifteen business days after the date of
exercise of the option; (iv) if so approved by the Committee, by shares of the
Common Stock of the Company; or (v) by a combination of these methods of
payment. The "Quoted Price" and the per share value of Common Stock for purposes
of paying the option price in accordance with the immediately preceding sentence
shall equal the closing selling price per share of Common Stock
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on the date in question on the Nasdaq Stock Market or the principal stock
exchange upon which the Company's Common Stock is listed (the "Exchange"). The
right to pay the purchase price of shares by delivery of a promissory note shall
not be available to any Optionee who is a person described in Section 16(a) of
the 1934 Act.
At the time of the exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the Optionee (or his
heirs, legatees, or legal representatives, as the case may be) as a condition
upon the exercise thereof, to deliver to the Company a written representation of
present intention to purchase the shares for investment and not for
distribution. In the event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the Optionee
upon his exercise of part or all of the option and a stop transfer order may be
placed with the transfer agent. Each option shall also be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the shares subject to the option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of or in connection with, the issue or purchase of shares thereunder,
the option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
At the time of the exercise of any option the Committee may require, as
a condition of the exercise of such option, the Optionee to: (i) pay the Company
an amount equal to the amount of tax the Company may be required to withhold for
federal income tax purposes as a result of the exercise of such option by the
Optionee; (ii) make such other arrangements with the Company which would enable
the Company to pay such withholding tax, including, without limitation, holding
back a number of shares issuable upon exercise of the option equal to the amount
of such withholding tax, or permitting the Optionee to deliver a promissory note
in a form specified by the Committee or withhold taxes from other compensation
payable to the Optionee by the Company; or (iii) a combination of the foregoing.
8. TERMINATION OF RELATIONSHIP-EXERCISE THEREAFTER. Except as otherwise
specifically provided in any Option Agreement evidencing an option granted
hereunder (or an amendment thereto), in the event the relationship between the
Company and an Optionee is terminated for any reason other than death, permanent
disability, voluntary termination or willful misconduct, gross negligence or
other termination for cause, such Optionee's unvested options shall immediately
terminate and the Optionee's vested options shall thereafter expire and all
rights to purchase shares pursuant thereto shall terminate three (3) months
following the date of termination of the relationship, but in no event after the
expiration date of the option. Temporary absence from employment or as a
consultant because of illness, vacation, approved leaves of absence, and
transfers of employment among the Company and its subsidiaries, shall not be
considered to terminate employment or consulting relationship or to interrupt
continuous employment or consulting relationship. Notwithstanding the foregoing
provisions of this Section 8, the Committee, in its sole discretion, may provide
that following the termination of employment or service of an Optionee with the
Company absent cause (such as in the case of a sale or transfer of a unit or
division of the
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Company or the spin-off of a corporation of the Company), such Optionee may
exercise an option, in whole or in part, at any time subsequent to such
termination of employment or service and prior to expiration of the option
pursuant to its original terms (as specified in the Option Agreement setting
forth the terms of such option grant) either subject to or without regard to any
vesting or other limitations on exercise. The Committee shall be specifically
empowered to extend the term of an option (but not beyond six years from the
date of grant thereof) and modify the vesting provisions of the option in the
event the corporation or unit or division for whom the Optionee provides
services is sold or otherwise transferred such that it is no longer a part of
the Company.
In the event of termination of said relationship because of death or
permanent disability (as that term is defined in Section 22(e)(3) of the Code,
as now in effect or as subsequently amended), the option may be exercised in
full, without regard to any installments established under Section 6 hereof, by
the Optionee or, if he is not living, by his heirs, legatees or legal
representative (as the case may be) during its specified term prior to three
years after the date of death, permanent disability or retirement, or such
longer period as the Committee may prescribe, but in no event after the
expiration date of the option.
If the employment or rendering of services to the Company, of a
Participant to whom an option shall have been granted under this Plan
terminates: (i) for any reason prior to the vesting of such option; (ii) as a
result of such person's willful misconduct, gross negligence, or any other
termination for cause; or (iii) as a result of the voluntary termination of
employment or service by the Participant, then anything to the contrary herein
notwithstanding, all such unvested options or portions of options held by such
Participant shall terminate on the date notice is given either to or from the
Company of termination of employment by or service to the Company; provided,
however, that in the event of a termination under clause (iii) above, the
Committee may, but shall not be required to, allow the Participant to exercise
the Option (to the extent exercisable on the date of termination) at any time
within three (3) months after the date of termination (but not beyond the
original term of the Option). All factual determinations with respect to the
termination of a Participant's employment by, or rendering of services to, the
Company that may be relevant under this Section 8 shall be made by the Committee
in its sole discretion.
9. NON-TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
options shall be exercisable only by the Optionee, and options shall not be
assignable or transferable by the Optionee otherwise than by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
as defined by the Code, or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder.
10. ADJUSTMENT. The number of shares available under the Plan and
available for grant to any Employee shall be adjusted as follows: (a) in the
event that the number of outstanding shares of Common Stock of the Company is
changed by any stock dividend, stock split or combination of shares, the number
of shares subject to the Plan and to options granted hereunder shall be
proportionately adjusted; (b) in the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations, there
may be substituted, on an equitable basis as determined by the Committee in its
sole discretion, for each share of Common Stock then subject
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to the Plan, whether or not at the time subject to outstanding options, the
number and kind of shares of stock or other securities to which the holders of
shares of Common Stock of the Company will be entitled pursuant to the
transaction, if any; and (c) in the event of any other relevant change in the
capitalization of the Company, the Committee may provide for such adjustment in
the number of shares of Common Stock then subject to the Plan as the Committee
shall in its sole discretion determine, whether or not then subject to
outstanding options. In the event of any such adjustment, the purchase price per
share shall be proportionately adjusted.
11. NO IMPAIRMENT OF RIGHTS. Nothing contained in the Plan or any
option granted pursuant to the Plan shall confer upon any Optionee any right to
be continued in the employment of the Company or to be continued as a director
or consultant to the Company or interfere in any way with the right of the
Company to terminate such employment or consulting relationship and/or to remove
any Optionee who is a director from service on the Board at any time in
accordance with the provisions of applicable law.
12. AMENDMENT OF PLAN. The Board may amend or discontinue the Plan at
any time. However, no such amendments or discontinuance shall be made without
the requisite stockholder approval of the stockholders of the Company if
stockholder approval is required as a condition to the Plan continuing to comply
with the provisions of Rule 16b-3 or Section 162(m) of the Code. No amendment to
the Plan or any Option shall impair the rights of any outstanding Option holder,
without such holder's consent.
13. GOVERNANCE. The Plan is intended to comply with the provisions of
Rule 16b-3 promulgated under the 1934 Act. The Plan shall be governed by and
construed in accordance with the laws of the State of Delaware.
14. EFFECTIVE DATE OF THE PLAN. The Plan has been adopted by the Board
at its meeting on December 9, 1996. The Plan shall become effective when
approved by the Company's stockholders. Options may be granted under the Plan
prior to its approval by the Company's stockholders, provided that such options
may not be exercised prior to the stockholders' approval, and all such options
shall expire if the stockholders fail to approve the Plan on or prior to
November 30, 1997.
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Exhibit 2
FIRST AMENDMENT, CONSENT AND WAIVER TO CREDIT AGREEMENT
-------------------------------------------------------
This First Amendment , Consent and Waiver to Credit Agreement (this
"Amendment") is entered into as of May 8, 1998 among Century Business Services,
Inc., (f/k/a International Alliance Services, Inc.), a Delaware corporation (the
"Company"), the Banks (as defined below) and Bank of America National Trust &
Savings Association, individually as a Bank and as agent (the "Agent").
RECITALS
--------
A. The Company, the Agent and certain financial institutions (the
"Banks") are party to that certain Credit Agreement, dated as of October 3, 1997
( as previously amended, the "Credit Agreement"). Unless otherwise specified
herein, capitalized terms used in this Amendment shall have the meanings
ascribed to them by the Credit Agreement.
B. The Company, the Agent and the Banks wish to amend the Credit
Agreement on the terms and conditions set forth below.
Now, therefore, in consideration of the mutual execution hereof and
other good and valuable consideration, the parties hereto agree as follows:
1. Amendments to Credit Agreement.
(a) SECTION 1.01 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY
DELETING THE FOLLOWING DEFINITIONS IN THEIR ENTIRETY:
"Attorney Costs"
"Cash Collateralize"
"Change of Control"
"GAAP"
"Material Adverse Effect"
"Other Taxes"
"Permitted Acquisition Threshold"
"Responsible Officer"
"Statutory Surplus"
(b) SECTION 1.01 OF THE CREDIT AGREEMENT IS HEREBY FURTHER
AMENDED BY INSERTING THE FOLLOWING DEFINITIONS IN APPROPRIATE
ALPHABETICAL ORDER:
"ATTORNEY COSTS" means and includes all reasonable and
customary fees and disbursements of any law firm or other
external counsel, the allocated cost of internal
2
legal services and all disbursements of internal counsel
RELATED TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
"CASH COLLATERALIZE" means to pledge and deposit with or
deliver to the Agent, for the benefit of the Agent, the
Issuing Bank and the Banks, as additional collateral for the
L/C Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the Agent
and the Issuing Bank (which documents are hereby consented to
by the Banks). [DELETION] The Company hereby grants the Agent,
for the benefit of the Agent, the Issuing Bank and the Banks,
a security interest in all such cash and deposit account
balances. Cash collateral shall be maintained in blocked
deposit accounts at B of A.
"CHANGE OF CONTROL" means (a) any Person or any two or more
Persons (IN EACH CASE OTHER THAN A PERSON THAT IS A
STOCKHOLDER OF THE COMPANY AS OF THE DATE OF THIS AGREEMENT)
acting in concert acquiring beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Exchange Act), directly or indirectly, of
capital stock of the Company (or other securities convertible
into such capital stock) representing 25% or more of the
combined voting power of all capital stock of the Company
entitled to vote in the election of directors, other than
capital stock having such power only by reason of the
happening of a contingency, or (b) during any period of twelve
consecutive calendar months, individuals who at the beginning
of such period constituted the Company's board of directors
(together with any new directors whose election by the
Company's board of directors or whose nomination for election
by the Company's stockholders was approved by a vote of at
least a majority of the directors then still in office who
either were directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reasons other than death or disability
to constitute a majority of the directors then in office, or
(c) during any period of twelve consecutive calendar months,
the ceasing of more than 25% of the individuals (i) who hold
an office possessing the title SENIOR Vice President or
Executive Vice President or such title that ranks senior
thereto of the Company, the Company's direct Subsidiaries and
parent Insurance Subsidiaries and (ii) who are the principal
operating manager or manager, or such other title possessing
equivalent duties of Subsidiaries not described in clause (i)
(collectively, "Senior Management"), on the first day of each
such period to be part of the Senior Management of the Company
and its Subsidiaries taken as a whole.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within
the U.S. accounting profession), which are IN EFFECT AND
applicable to the circumstances as of the date of
determination; PROVIDED, HOWEVER, that for purposes of all
computations required to be made with respect to compliance by
the Company with SECTIONS 8.15, 8.16, and 8.17, such term
shall mean
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generally accepted accounting principles as in effect on the
date of this Agreement, applied in a manner consistent with
those used in preparing the financial statements referred to
in SECTION 6.11 (x) and (y).
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change
in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole
or as to the Insurance Subsidiaries and their Subsidiaries
taken as a whole; (b) a material impairment of the ability of
the Company or any GUARANTOR to perform under any Loan
Document and to avoid any Event of Default; or (c) a material
adverse effect upon the legality, validity, binding effect or
enforceability against the Company or any GUARANTOR of any
Loan Document.
"OTHER TAXES" means any present or future stamp, court or
documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made
hereunder or from the execution, delivery, performance, OR
enforcement [DELETION] of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"PERMITTED ACQUISITION THRESHOLD" means either (a) the total
consideration to be paid by the Company or any of its
Subsidiaries in connection with an Acquisition (as determined
by the Company) is equal to or in excess of $35,000,000 or (b)
the total cash consideration to be paid by the Company or any
of its Subsidiaries in connection with an Acquisition is equal
to or in excess of $20,000,000.
"RESPONSIBLE OFFICER" means the chief executive officer, the
president, THE EXECUTIVE VICE PRESIDENT OR THE CHIEF FINANCIAL
OFFICER of the Company, or any other officer having
substantially the same authority and responsibility as the
executive vice president and chief financial officer; or, with
respect to compliance with financial covenants, the chief
financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and
responsibility.
"STATUTORY SURPLUS" means, with respect to any Insurance
Subsidiary at any time, the statutory capital and surplus of
such Insurance Subsidiary at such time, as determined in
accordance with SAP ("Liabilities, Surplus and Other Funds"
statement page 3, line 25 of the Annual Statement).
(c) CLAUSE (c) OF SECTION 3.05 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING SAID CLAUSE (c) IN ITS ENTIRETY AND
INSERTING IN LIEU THEREOF THE FOLLOWING NEW CLAUSE (C):
"(c) The Company hereby assumes all risks of the acts
or omissions of any beneficiary or transferee with respect to
its use of any Letter of Credit; PROVIDED, however, that this
assumption is not intended to, and shall not, preclude the
Company's
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pursuing such rights and remedies as it may have against the
beneficiary or transferee at law or under any other agreement.
No Agent-Related Person, nor any of the respective
correspondents, participants or assignees of the Issuing Bank,
shall be liable or responsible for any of the matters
described in clauses (i) through (vii) of Section 3.06;
PROVIDED, however, anything in such clauses to the contrary
notwithstanding, that the Company may have a claim against the
Issuing Bank, and the Issuing Bank may be liable to the
Company, to the extent, but only to the extent, of any direct,
as opposed to consequential or exemplary, damages suffered by
the Company which the Company proves were caused by the
Issuing Bank's willful misconduct or gross negligence or the
Issuing Bank's willful failure to pay under any Letter of
Credit after the presentation to it by the beneficiary of a
sight draft and certificate(s) strictly complying with the
terms and conditions of a Letter of Credit. In furtherance and
not in limitation of the foregoing: (i) the Issuing Bank may
accept documents that appear on their face to be in order,
without responsibility for further investigation, UNLESS IT
RECEIVED A notice or information to the contrary; and (ii) the
Issuing Bank shall not be responsible for the validity or
sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or
in part, which APPEAR TO BE IN ORDER WHEN PRESENTED.".
(d) CLAUSES (b), (c) AND (d) OF SECTION 6.01 OF THE CREDIT
AGREEMENT ARE HEREBY AMENDED BY DELETING SAID CLAUSES IN THEIR ENTIRETY
AND INSERTING IN LIEU THEREOF THE FOLLOWING NEW CLAUSES (b), (c), AND
(d):
"(b) has the power and authority and all MATERIAL
governmental licenses, authorizations, consents and MATERIAL
approvals to own its assets, carry on its business and to
execute, deliver, and perform its obligations under the Loan
Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such
qualification or license, EXCEPT IN EACH CASE TO THE EXTENT
THAT THE FAILURE TO DO SO COULD NOT REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT.
(d) is in compliance with all Requirements of Law,
except [DELETION] to the extent that the failure to do so
could not reasonably be expected to have a Material Adverse
Effect.".
(e) SECTION 7.01 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY
DELETING SAID SECTION 7.01 IN ITS ENTIRETY AND INSERTING IN LIEU
THEREOF THE FOLLOWING NEW SECTION 7.01:
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"(a) as soon as available, but not later than 90 days
after the end of each fiscal year (commencing with the fiscal
year ended December 31, 1997), TO THE EXTENT PREPARED TO
COMPLY WITH SEC REQUIREMENTS, A COPY OF SEC FORM 10-K'S FILED
BY THE COMPANY WITH THE SEC FOR SUCH FISCAL YEAR, OR IF NO
SUCH FORM 10-K WAS FILED BY THE COMPANY FOR SUCH FISCAL YEAR,
a copy of the audited consolidated [DELETION] balance sheet of
the Company and its Subsidiaries as at the end of such year
and the related consolidated [DELETION] statements of income
or operations and [DELETION] shareholders' equity and cash
flows for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, and accompanied
by the opinion of KPMG Peat Marwick or another
nationally-recognized independent public accounting firm
("INDEPENDENT AUDITOR") which report shall state that such
consolidated financial statements present fairly the financial
position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years. Such opinion
shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material
portion of the Company's or any Subsidiary's records;
(b) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of
each fiscal year (commencing with the fiscal quarter ended
September 30, 1997), TO THE EXTENT PREPARED TO COMPLY WITH SEC
REQUIREMENTS, A COPY OF THE SEC FORM 10-QS FILED BY THE
COMPANY WITH THE SEC FOR SUCH FISCAL QUARTER, OR IF NO SUCH
FORM 10-Q WAS FILED BY THE COMPANY FOR SUCH FISCAL QUARTER, a
copy of the unaudited consolidated [DELETION] balance sheet of
the Company and its Subsidiaries as of the end of such quarter
and the related consolidated [DELETION] statements of income
and [DELETION] shareholders' equity and cash flows for the
period commencing on the first day and ending on the last day
of such quarter, and certified by a Responsible Officer as
fairly presenting, in accordance with GAAP (subject to
ordinary, good faith year-end audit adjustments), the
financial position and the results of operations of the
Company and the Subsidiaries;
(c) (i) as soon as available, IF REQUIRED, but not
later than 90 days after the end of each fiscal year of each
Insurance Subsidiary, a copy of the Annual Statement of such
Insurance Subsidiary, setting forth in each case in
comparative form the figures for the previous fiscal year, and
(ii) as soon as available, but not later than 180 days after
the end of each fiscal year of each Insurance Subsidiary, a
copy of the audited financial statements of such Insurance
Subsidiary, setting forth in each case in comparative form the
figures of the previous fiscal year, accompanied by the
opinion of an Independent Auditor, which report shall state
that such financial statements present fairly the financial
position for the periods indicated in conformity with SAP
applied on a basis consistent with prior years. Such opinion
shall not be qualified or limited because of a restricted or
limited examination by the Independent Auditor of any material
portion of any Subsidiary's records; and
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(d) as soon as available, IF REQUIRED, but not later
than the earlier of (i) ten days after the regulatory filing
date or (ii) 50 days after the end of each of the first three
fiscal quarters of each fiscal year of each Insurance
Subsidiary, a copy of the Quarterly Statement of such
Insurance Subsidiary certified by a Responsible Officer of
such Insurance Subsidiary as fairly presenting, in accordance
with SAP (subject to ordinary, good faith year-end audit
adjustments), the financial position and the results of
operations of such Insurance Subsidiary.".
(f) CLAUSE (d) OF SECTION 7.02 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING SAID CLAUSE (d) IN ITS ENTIRETY AND
INSERTING IN LIEU THEREOF THE FOLLOWING NEW CLAUSE (d):
"(d) as soon as available, but in any event not later
than the 30th day prior to the end of each fiscal year, a copy
of the plan and forecast (including a projected consolidated
[DELETION] balance sheet, income statement and cash flow
statement BY BUSINESS SEGMENT) of the Company and its
Subsidiaries for the next fiscal year;".
(g) (X) THE TEXT OF CLAUSE (e) OF SECTION 7.02 OF THE CREDIT
AGREEMENT IS HEREBY AMENDED BY DELETING SAID TEXT IN ITS ENTIRETY AND
INSERTING IN LIEU THEREOF THE PHRASE "[INTENTIONALLY OMITTED]".
(Y) THE PARENTHETICAL LANGUAGE CONTAINED IN CLAUSE
(g) OF SECTION 7.02 OF THE CREDIT AGREEMENT IS HEREBY DELETED IN ITS
ENTIRETY.
(h) CLAUSE (a), (i) AND (j) OF SECTION 8.01 OF THE CREDIT
AGREEMENT ARE EACH HEREBY AMENDED BY DELETING SAID CLAUSES IN THEIR
ENTIRETY AND INSERTING IN LIEU THEREOF THE FOLLOWING NEW CLAUSES (a),
(i) AND (j):
"(a) any Lien (other than as described in SECTION
8.01(m)) existing on property of the Company or any Subsidiary
on the Closing Date and set forth in Schedule 8.01 securing
Indebtedness outstanding on such date and described therein
(other than Indebtedness in a principal amount not exceeding
INDIVIDUALLY $50,000 OR IN THE AGGREGATE $250,000, it being
understood and agreed that any such Lien shall be permitted to
exist pursuant to this clause (a) notwithstanding the absence
thereof on Schedule 8.01);"
* * *
"(i) Liens on assets of corporations which become
Subsidiaries after the date of this Agreement, PROVIDED,
HOWEVER, that such Liens existed at the time the respective
corporations became Subsidiaries and were not created in
anticipation thereof and do not in the aggregate at any time
outstanding exceed $10,000,000;
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(j) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the
cost of acquiring such property; PROVIDED THAT (i) any such
Lien attaches to such property concurrently with or within 20
days after the acquisition thereof, (ii) such Lien attaches
solely to the property so acquired in such transaction and
(iii) the principal amount of the Indebtedness secured by any
and all such purchase money security interests shall not at
any time exceed, together with Indebtedness permitted under
Section 8.05(d), $10,000,000;".
(i) CLAUSE (d) OF SECTION 8.02 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING SAID CLAUSE (d) IN ITS ENTIRETY AND
INSERTING IN LIEU THEREOF THE FOLLOWING NEW CLAUSE (d):
"(d) dispositions not otherwise permitted hereunder
which are made for fair market value; PROVIDED that (i) at the
time of any disposition, no Event of Default shall exist or
shall result from such disposition, (ii) not less than 80% of
the aggregate sales price from such disposition shall be paid
in cash, and (iii) the aggregate value of all assets so sold
by the Company and its Subsidiaries, together, shall not
exceed (x) 5% of the net tangible assets of the Company and
its Subsidiaries on a consolidated basis during any twelve
month period with net tangible assets to be measured as of the
beginning of such period, and (y) 15% of the net tangible
assets of the Company and its Subsidiaries on a consolidated
basis during the term of this Agreement, with net tangible
assets to be measured as of the Closing Date.".
(j) CLAUSE (d) OF SECTION 8.05 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING SAID CLAUSE (d) IN ITS ENTIRETY AND
INSERTING IN LIEU THEREOF THE FOLLOWING NEW CLAUSE (d):
"(d) other Indebtedness in an aggregate amount
outstanding not to exceed $10,000,000 (including Indebtedness
secured by Liens permitted by SECTION 8.01(i) and (j));".
(k) CLAUSE (C) OF SECTION 8.08 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING SAID CLAUSE (C) IN ITS ENTIRETY AND
INSERTING IN LIEU THEREOF THE FOLLOWING NEW CLAUSE (C):
"(c) Contingent Obligations (x) of the Company and
its subsidiaries existing as of the Closing Date and listed in
SCHEDULE 8.08 AND (y) OF THE COMPANY WITH RESPECT TO PAYMENTS
TO BE MADE BY A SUBSIDIARY OF THE COMPANY PURSUANT TO
OPERATING LEASES ENTERED INTO BY SUCH SUBSIDIARY IN THE
ORDINARY COURSE OF BUSINESS;".
-7-
8
(l) SECTION 8.09 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY
DELETING SAID SECTION 8.09 IN ITS ENTIRETY AND INSERTING IN LIEU
THEREOF THE FOLLOWING NEW SECTION 8.09:
"8.09 JOINT VENTURES. The Company shall not, and
shall not suffer or permit any Subsidiary to enter into any
Joint Venture; PROVIDED, HOWEVER that the Company and its
Wholly-Owned Subsidiaries (other than Excluded Subsidiaries)
shall be permitted to make Investments in Joint Ventures so
long as (x) no Default or Event of Default has occurred and is
continuing or would result therefrom, (y) after giving effect
to any such Investment, the Company and/or a Wholly-Owned
Subsidiary of the Company shall control 51% or more of the
interests in such Joint Venture and (z) after giving effect to
any such Investment, the aggregate net amount expended by the
Company and/or any Wholly-Owned Subsidiary of the Company in
connection with all such Investments made after the date of
the Agreement shall not at any time exceed $10,000,000.".
(m) CLAUSES (b) AND (c) OF SECTION 8.10 OF THE CREDIT
AGREEMENT ARE EACH HEREBY AMENDED BY DELETING SAID CLAUSES IN THEIR
ENTIRETY AND INSERTING IN LIEU THEREOF THE FOLLOWING NOW CLAUSES (b)
AND (c):
"(b) operating leases entered into by the Company or
any Subsidiary after the Closing Date in the ordinary course
of business; [DELETION] and
(c) Capital Leases other than those permitted under
clause (a) of this Section, entered into by the Company or any
Subsidiary after the Closing Date to finance the acquisition
of equipment; PROVIDED that the aggregate Capital Lease
Obligations for all such Capital Leases shall not at any time
exceed $10,000,000.".
(n) SECTION 8.13 OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY
DELETING SAID SECTION 8.13 IN ITS ENTIRETY AND INSERTING IN LIEU
THEREOF THE FOLLOWING NEW SECTION 8.13:
"8.13 Change in Business. The Company shall not, and
shall not suffer or permit any Subsidiary to, engage in any
material line of business substantially different from those
lines of business carried on by the Company and its
Subsidiaries taken as a whole on the CLOSING DATE AND
REASONABLE EXTENSIONS THEREOF.".
(o) CLAUSES (c), (e) AND, (j), OF SECTION 9.01 OF THE CREDIT
AGREEMENT ARE HEREBY AMENDED BY DELETING SAID CLAUSES IN THEIR ENTIRETY
AND INSERTING IN LIEU THEREOF THE FOLLOWING NEW CLAUSES (c), (e), AND
(j),:
"(c) Specific Defaults. The Company fails to perform
or observe any term, covenant or agreement contained in any of
Section 7.01, 7.02, 7.03 (a), (b), (c) OR (f) or 7.08
[DELETION] or in Article VIII; or"
* * *
-8-
9
"(e) CROSS-DEFAULT. (i) The Company or any Subsidiary
(A) fails to make any payment in respect of any Indebtedness
or Contingent Obligation (other than in respect of Swap
Contracts), having an aggregate principal amount (including
undrawn committed or available amounts and including amounts
owing to all creditors under any combined or syndicated credit
arrangement) of more than $3,000,000 when due (whether by
scheduled maturity, required prepayment, acceleration, demand,
or otherwise) and such failure continues after the applicable
grace or notice period, if any, specified in the relevant
document on the date of such failure; or (B) fails to perform
or observe any other condition or covenant, or any other event
shall occur or condition exist with respect to the obligations
of the Company or such Subsidiary, under any agreement or
instrument relating to any Indebtedness or Contingent
Obligation of more than $3,000,000, and such failure continues
after the applicable grace or notice period, if any, specified
in the relevant document on the date of such failure if the
effect of such failure, event or condition is to cause, or to
permit the holder or holders of such Indebtedness or
beneficiary or beneficiaries of such Indebtedness (or a
trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be
declared to be due and payable prior to its stated maturity,
or such Contingent Obligation to become payable or cash
collateral in respect thereof to be demanded; or (ii) there
occurs under any Swap Contract an Early Termination Date (as
defined in such Swap Contract) resulting from (1) any event of
default under such Swap Contract as to which the Company or
any Subsidiary is the Defaulting Party (as defined in such
Swap Contract) or (2) any Termination Event (as so defined) as
to which the Company or any Subsidiary is an Affected Party
(as so defined), and, in either event, the Swap Termination
Value owed by the Company or such Subsidiary as a result
thereof is greater than $3,000,000; or"
* * *
"(j) NON-MONETARY JUDGMENTS. Any non-monetary
judgment, order or decree is entered against the Company or
any Subsidiary which does or would reasonably be expected to
have a Material Adverse Effect, and there shall be any period
of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or".
(p) THE TEXT OF SECTION 11.11 OF THE CREDIT AGREEMENT IS
HEREBY AMENDED BY DELETING SAID TEXT IN ITS ENTIRETY AND INSERTING IN LIEU
THEREOF THE PHRASE "[INTENTIONALLY OMITTED"]".
2. CONSENT AND WAIVER. Notwithstanding the prohibition
contained in SECTION 8.04(d)(i) of the Credit Agreement, the Banks hereby
consent to the acquisition by the Company of 100% of the capital stock of The
Continuous Learning Group, Inc. and of Envision Development Group, Inc. (the
"Continuous Acquisition"), and hereby waive any Default or Event of Default
which
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10
may have resulted solely from the Company's failure to comply with said
SECTION 8.04(d)(i) in connection with the Continuous Acquisition on or prior to
the date of this Amendment.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants that:
(a) The execution, delivery and performance by the Company
of this Amendment have been duly authorized by all necessary corporate
action and that this Amendment constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in
accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability;
(b) Each of the representations and warranties contained in
the Credit Agreement is true and correct in all material respects on
and as of the date hereof as if made on the date hereof (except to the
extent such representations and warranties expressly refer to an
earlier date, in which case they are true and correct as of such
earlier date); and
(c) After giving effect to this Amendment, no Default or
Unmatured Default has occurred and is continuing.
4. EFFECTIVE DATE. Section 1 of this Amendment shall
become effective upon the date (the "Effective Date") of the execution and
delivery hereof by the Company, the Agent and each of the Banks.
5. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT.
(a) Except as specifically amended above, the Credit
Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy
of the Agent or any Bank under the Credit Agreement or any Loan
Document, nor constitute a waiver of any provision of the Credit
Agreement or any Loan Document, except as specifically set forth
herein. Upon the effectiveness of this Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", "hereof", "herein"
or words of similar import shall mean and be a reference to the Credit
Agreement as amended hereby.
6. COSTS AND EXPENSES. The Company hereby affirms its
obligation under SECTION 11.04 of the Credit Agreement to reimburse the Agent
for all reasonable out-of-pocket costs and expenses incurred by the Agent in
connection with the preparation and execution of this Amendment, including but
not limited to the attorneys' fees and time charges of attorneys for the Agent
with respect thereto.
-10-
11
7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED THAT
THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
8. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
9. Counterparts. This Amendment may be executed in any number
of counterparts, each of which when so executed shall be deemed an original but
all such counterparts shall constitute one and the same instrument.
[Signature Pages Follow]
-11-
DEBT
12
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
CENTURY BUSINESS SERVICES, INC. (f/k/a
International Alliance Services, Inc.)
By: /s/ Charles D. Hamm, Jr.
------------------------------------
Name: Charles D. Hamm, Jr.
----------------------------------
Title: Senior Vice President & CFO
---------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: /s/ Jay McKeown
------------------------------------
Name: Jay McKeown
----------------------------------
Title: Assistant Vice President
---------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: /s/ Timothy J. Pepowski
------------------------------------
Name: Timothy J. Pepowski
----------------------------------
Title: SVP
---------------------------------
STAR BANK, N.A.
By: /s/ David J. Dannemiller
------------------------------------
Name: David J. Dannemiller
----------------------------------
Title: Vice President
---------------------------------
S-1
[TO FIRST AMENDMENT]
7
0000944148
CENTURY BUSINESS SERVICES
3-MOS
DEC-31-1998
JAN-01-1998
MAR-31-1998
55,750
13,917
13,970
8,292
1,839
0
79,808
46,488
17,909
4,501
391,712
54,940
22,443
0
0
23,153
0
0
492
220,764
391,712
10,469
1,376
770
1
5,622
2,852
2,131
9,895
3,528
6,367
0
0
0
6,367
0.14
0.11
0
0
0
0
0
0
0
