<PAGE>
UNITED STATES
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
Date of Report (Date of earliest event reported) January 27, 1998
DATA PROCESSING RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
California 0-27612 95-3931443
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) file number) Identification No.)
4400 Mac Arthur Boulevard, Suite 600
Newport Beach, CA 92660
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 553-1102
Not Applicable (Former name or former address, if changed since last report.)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On January 27, 1998, Data Processing Resources Corporation ("DPRC")
acquired substantially all of the assets, including the business (the
"Business"), and assumed certain liabilities of S3G, Inc., a Texas
corporation ("S3G"). The acquisition was achieved pursuant to an Agreement
of Purchase and Sale of Assets dated January 27, 1998 ("Asset Purchase
Agreement"), by and among DPRC, S3G and the sole shareholder of S3G,
Michael G. McCarthy ("McCarthy").
Under the terms of the Asset Purchase Agreement, the purchase price
was $32,239,000, consisting of $28,250,000 in cash, 204,552 shares of DPRC
common stock, valued at $3,989,000 (computed using a value of DPRC's common
stock of $4,985,000, less an adjustment of $996,000 to reflect the impact
of restrictions on disposition of the stock). In addition, S3G has a right
to receive certain additional consideration contingent upon the adjusted
earnings before interest and taxes of the Business through December 31,
1998. The purchase price was based on a multiple of adjusted earnings
before interest and taxes for the twelve months ended December 31, 1997. A
final determination of such consideration was arrived at by means of arm's
length bargaining among the parties to the Asset Purchase Agreement. This
transaction is to be accounted for as a purchase.
Under the Asset Purchase Agreement, S3G has certain registration
rights with respect to the 204,552 shares of DPRC common stock it received
in the acquisition and any additional shares of DPRC common stock which it
might receive as additional consideration. McCarthy and S3G have entered
into covenants not-to-compete with DPRC in the geographic areas in which
the Business was principally conducted.
At the time of the acquisition, there was no material relationship
between S3G (including its officers, directors and shareholders) and DPRC
or any of its affiliates, or any director or officer of DPRC, or any
associate of any such officer or director.
DPRC used a portion of the proceeds obtained from its January 1997
public offering of securities and $25.5 million of its line of credit to
pay the cash portion of the purchase price. The line of credit and the bank
syndicate responsible for extending such credit are further described on
page 17 of DPRC's Annual Report on Form 10-K for the fiscal year ended July
31, 1997, as filed with the Securities and Exchange Commission and Exhibit
10.11, thereto each of which is incorporated by reference herein.
(b) At the time of the acquisition, S3G, which also operated under the
name Spectrum Software Services Group, was engaged in the information
technology staffing business, which it operated from its facility in
Austin, Texas. DPRC presently intends to continue to engage in such
information technology staffing business in substantially the same manner
and for the same purposes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
As of the date hereof, it is impractical to provide the required
audited financial information. DPRC will file the required audited
financial information under the cover of Form 8-K/A as soon as
practicable, but not later than 60 days after the date of filing
hereof.
(b) Pro Forma Financial Information.
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As of the date hereof, it is impractical to provide the required pro
forma financial information. DPRC will file the required pro forma
financial information under the cover of Form 8-K/A as soon as
practicable, but not later than 60 days after the date of filing
hereof.
(c) Exhibits.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit No. Document
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<C> <S>
2.1 Agreement of Purchase and Sale of Assets dated January
27, 1998, by and among Data Processing Resources
Corporation, S3G, Inc. and Michael G. McCarthy.*+
2.2 Registration Rights Agreement dated January 27, 1998, by
and between Data Processing Resources Corporation and
S3G, Inc.+
10.1 Credit Agreement dated as of September 25, 1997 between
Data Processing Resources Corporation and Wells Fargo
Bank, National Association, as Administrative Agent.[X]
13.1 Annual Report on Form 10-K for the fiscal year ended
July 31, 1997, as filed with the Securities and Exchange
Commission on October 29, 1997.[XX]
99.1 Text of Press Release dated January 28, 1998.+
</TABLE>
* The registrant agrees to furnish supplementally a copy of any schedule or
exhibit to the Securities and Exchange Commission upon request.
+ Filed herewith
[X] Filed with the Securities and Exchange Commission on October 29, 1997 as an
exhibit to DPRC's Annual Report on Form 10-K for the fiscal year ended July 31,
1997 (File No. 0-27612) and incorporated by reference herein.
[XX] Filed with the Securities and Exchange Commission on October 29, 1997 (File
No. 0-27612) and incorporated by reference herein.
<PAGE>
SIGNATURE
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.
DATA PROCESSING RESOURCES CORPORATION
Date: February 11, 1998 By: /s/ Michael A. Piraino
----------------- ----------------------------------
Michael A. Piraino, Senior Vice President
and Chief Financial Officer (Principal
Financial and Accounting Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Document
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<C> <S>
2.1 Agreement of Purchase and Sale of Assets dated January
27, 1998, by and among Data Processing Resources
Corporation, S3G, Inc. and Michael G. McCarthy.*+
2.2 Registration Rights Agreement dated January 27, 1998, by
and between Data Processing Resources Corporation and
S3G, Inc.+
10.1 Credit Agreement dated as of September 25, 1997 between
Data Processing Resources Corporation and Wells Fargo
Bank, National Association, as Administrative Agent.[X]
13.1 Annual Report on Form 10-K for the fiscal year ended
July 31, 1997, as filed with the Securities and Exchange
Commission on October 29, 1997.[XX]
99.1 Text of Press Release dated January 28, 1998.+
</TABLE>
* The registrant agrees to furnish supplementally a copy of any schedule or
exhibit to the Securities and Exchange Commission upon request.
+ Filed herewith
[X] Filed with the Securities and Exchange Commission on October 29, 1997 as an
exhibit to DPRC's Annual Report on Form 10-K for the fiscal year ended July 31,
1997 (File No. 0-27612) and incorporated by reference herein.
[XX] Filed with the Securities and Exchange Commission on October 29, 1997 (File
No. 0-27612) and incorporated by reference herein.
<PAGE>
Exhibit 2.1
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AGREEMENT OF PURCHASE
AND SALE OF ASSETS
BY AND AMONG
DATA PROCESSING RESOURCES CORPORATION,
S3G, INC.
AND
MICHAEL G. McCARTHY
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
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ARTICLE 1 DEFINITIONS....................................... 1
1.1 Defined Terms..................................... 1
1.2 Other Defined Terms............................... 4
ARTICLE 2 PURCHASE AND SALE OF ASSETS....................... 6
2.1 Purchase and Sale of Assets....................... 6
2.2 Excluded Assets................................... 8
2.3 Purchased Assets Free of Liens.................... 8
2.4 Liabilities....................................... 8
2.5 Consideration for Purchased Assets................ 9
2.6 Escrowed Shares................................... 12
2.7 Taxes............................................. 13
2.8 Allocation of Purchase Price...................... 13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.......... 13
3.1 Organization and Qualification.................... 13
3.2 Authorization..................................... 13
3.3 Due Execution and Delivery; Binding Obligations... 14
3.4 No Conflict or Violation.......................... 14
3.5 Consents and Approvals............................ 14
3.6 Pending Litigation................................ 14
3.7 Capitalization of Seller.......................... 15
3.8 Financial Statements and Other Information........ 15
3.10 No Materially Adverse Change...................... 15
3.11 Absence of Certain Changes or Events.............. 16
3.12 Title to Purchased Assets......................... 17
3.13 Condition and Possession of Purchased Assets...... 17
3.14 Receivables and Unbilled Receivables.............. 17
3.15 Leases............................................ 17
3.16 Contracts......................................... 18
3.17 Intellectual Property............................. 19
3.18 Books and Records................................. 19
3.19 Insurance......................................... 19
3.20 Permits........................................... 20
3.21 Employees and Contractors......................... 20
3.22 Labor Matters..................................... 20
3.23 Employee Benefits................................. 20
3.24 Compliance with Laws.............................. 20
3.25 Transactions with Affiliated Parties.............. 21
3.26 Taxes............................................. 21
3.27 Certain Payments.................................. 21
3.28 No Finder......................................... 22
3.29 Securities Law Matters............................ 22
</TABLE>
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<TABLE>
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3.30 Full Disclosure................................... 22
3.31 Seller's Knowledge................................ 22
3.32 No Other Warranties or Representations............ 23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER..... 23
4.1 Authorization..................................... 23
4.2 Due Execution and Delivery; Binding Obligations... 23
4.3 No Conflict or Violation.......................... 23
4.4 Consents and Approvals............................ 23
4.5 Seller's Representations and Warranties........... 24
4.6 Full Disclosure................................... 24
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PURCHASER....... 24
5.1 Organization...................................... 24
5.2 Authorization..................................... 24
5.3 Due Execution and Delivery; Binding Obligations... 24
5.4 No Conflict or Violation.......................... 24
5.5 Consents and Approvals............................ 25
5.6 Financial Statements and Other Information........ 25
5.7 Compliance with Securities Laws................... 25
5.8 No Material Adverse Change........................ 25
5.9 Financing Available for Additional Consideration.. 25
5.10 Purchaser's Investigation......................... 25
ARTICLE 6 THE CLOSING....................................... 26
6.1 Closing........................................... 26
6.2 Seller's Obligations.............................. 26
6.3 Purchaser's Obligations........................... 27
ARTICLE 7 POST CLOSING...................................... 28
7.1 Survival of Representations and Warranties........ 28
7.2 Indemnification Obligations....................... 28
7.3 Extent of Operational Autonomy.................... 31
7.4 Stock Options..................................... 31
7.5 Employees and Contractors......................... 32
7.6 Further Assurances................................ 32
7.7 Expenses.......................................... 32
ARTICLE 8 MISCELLANEOUS PROVISIONS.......................... 33
8.1 Entire Agreement.................................. 33
8.2 Governing Law..................................... 33
8.3 Interpretation.................................... 33
8.4 Dispute Resolution................................ 33
8.5 Waiver and Amendment.............................. 35
8.6 Assignment........................................ 35
8.7 Successors and Assigns............................ 36
</TABLE>
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<TABLE>
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8.8 Notices........................................... 36
8.9 Severability...................................... 36
8.10 Further Action.................................... 36
8.11 Specific Performance.............................. 36
8.12 Cumulative Remedies............................... 36
8.13 Warranty of Authority............................. 37
8.14 Counterparts...................................... 37
</TABLE>
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<PAGE>
EXHIBITS
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A Seller Adjusted EBIT at the Balance Sheet Date
B Seller Adjusted Net Worth at the Balance Sheet Date
C Seller Adjusted Working Capital at the Balance Sheet Date
D Form of Noncompetition Agreement
E Form of Escrow Agreement
F Parameters for Allocation of Purchase Price
G Form of Bill of Sale
H Form of Assignment and Assumption
I Form of Executive Employment Agreement
J Form of Other Employment Agreements
K Form of Registration Rights Agreement
L Form of Opinion of Graves, Dougherty, Hearon & Moody
M Form of Opinion of Riordan & McKinzie
SCHEDULES
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2.1(a) FF&E
2.1(b) Vehicles
2.1(e) Receivables
2.1(f) Unbilled Receivables
2.1(i) Prepaid Items
2.1(m) Numbers and Addresses
2.2 Excluded Assets
2.4(a)(iii) Transferred Employee Liabilities
2.5(a)(iv) Allocation of Noncompetition Payments
3.1 Seller's Articles and Bylaws
3.4 Conflicts or Violations
3.5 Seller's Consents and Approvals
3.6 Pending Litigation
3.7 Capitalization of Seller
3.8 Financial Statements
3.9 Undisclosed Liabilities
3.11 Certain Changes or Events
3.15 Leases
3.16 Contracts and Major Customers
3.17 List of Intellectual Property
3.19 List of Seller's Insurance
3.20 List of Permits
3.21 Employee Information
3.23 Employee Benefit Plans
3.25 Affiliate Transactions
3.26 Tax Matters
5.5 Purchaser's Consents and Approvals
7.4 List of Stock Options
iv
<PAGE>
AGREEMENT OF PURCHASE AND SALE OF ASSETS
----------------------------------------
This AGREEMENT OF PURCHASE AND SALE OF ASSETS (this "Agreement") is made
---------
and entered into as of this 27th day of January 1998 (the "Effective Date"), by
--------------
and among Data Processing Resources Corporation, a California corporation
("Purchaser"), S3G, Inc., a Texas corporation ("Seller"), and Michael G.
--------- ------
McCarthy, an individual ("Shareholder").
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R E C I T A L S
- - - - - - - -
A. Seller owns and operates a software consulting business providing its
clients with planning, customizing, implementing and support services with
respect to software information systems with applications in financial, human
resources and materials management (the "Business"), and desires to sell to
--------
Purchaser, on the terms and subject to the conditions of this Agreement,
substantially all of the assets of Seller used by Seller in connection with the
Business.
B. Purchaser desires to purchase from Seller, on the terms and subject to
the conditions of this Agreement, substantially all of the assets of Seller used
in connection with the Business, and to assume certain enumerated liabilities of
Seller in connection therewith.
C. Shareholder owns all of the issued and outstanding shares of capital
stock of Seller, and desires that Seller sell to Purchaser such assets, on the
terms and subject to the conditions of this Agreement.
A G R E E M E N T
- - - - - - - - -
In consideration of the foregoing recitals and the respective covenants,
agreements, representations and warranties contained herein, the parties,
intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
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1.1 Defined Terms. For purposes of this Agreement, the following terms
-------------
shall have the following meanings:
"Action" shall mean any action, claim, suit, litigation, proceeding,
------
arbitration, mediation or other dispute.
"Additional Consideration Multiplier" shall be 7.0; provided, however,
-----------------------------------
that if Shareholder voluntarily terminates his employment under the Executive
Employment Agreement at any time before the second anniversary of the Closing
Date, the Additional Consideration Multiplier shall be automatically and
retroactively reduced to 6.5.
"Books and Records" shall mean all books, ledgers, files, records,
-----------------
manuals and other materials (in any form or medium) related to the Business,
including, but not limited to, all correspondence, personnel records, data base
of current, former and prospective technical
<PAGE>
contractors, purchasing materials and records, vendor lists, operation and
quality control records and procedures, research and development files,
Intellectual Property disclosures and documentation, accounting records and
systems, litigation files, sales order files, purchase order files, advertising
materials, catalogs, product brochures, mailing lists, customer lists,
distribution lists, sales and promotional materials and all other records
utilized by Seller in connection with the Business and all computer hardware,
software and data files necessary to access or review or continue to compile or
utilize any of the foregoing; provided, however, that, notwithstanding the
-------- -------
foregoing, "Books and Records" shall not include (i) any Tax Returns or Tax
-----------------
records of Seller, (ii) minute books or other corporate records of Seller, or
(iii) any records or documents relating exclusively to any Excluded Asset or
Excluded Liability.
"Business Adjusted EBIT" shall mean the earnings of Seller and or
----------------------
Purchaser with respect to the Business for the relevant accounting period,
before deductions for interest and taxes, as determined in accordance with
generally accepted accounting principles, consistently applied in accordance
with Seller's prior practice, plus or minus the type of adjustments set forth on
Exhibit A hereto. Business Adjusted EBIT for the 1997 calendar year, including
- ---------
all adjustments thereto, is shown on Exhibit A attached hereto. Business
---------
Adjusted EBIT for each relevant accounting period shall be determined in the
same manner used by the parties to determine Business Adjusted EBIT for the 1997
calendar year. Business Adjusted EBIT shall in no event include any overhead
allocation by Purchaser or other expenses of Purchaser not agreed to by
Shareholder in writing prior to such expense being incurred. Business Adjusted
EBIT for the 1997 and 1998 calendar years shall not include any expense of the
transaction contemplated by this Agreement, including, without limitation, any
expense arising out of or relating to any audit or dispute hereunder or relating
to any of the Special Bonus Agreements described in Schedule 3.4 hereto.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Damages" shall mean, subject to section 7.2(h), below, any claim,
-------
demand, loss, liability, damage or expense, including without limitation
interest, penalties and reasonable attorneys', accountants' and experts' fees
and costs of investigation incurred as a result thereof.
"DPRC Average Closing Price" shall mean the average closing price of
--------------------------
the DPRC Common Shares, as publicly reported by the Nasdaq National Market as of
4:00 p.m., Eastern Time, over the following periods of time: (i) With respect to
the Initial Consideration, the period shall be the last 20 trading days ending
on (and including) the trading day immediately prior to the Effective Date; (ii)
with respect to the first installment of the Additional Consideration, the
period shall be the last 20 trading days ending on (and including) the trading
day immediately prior to July 1, 1998; and (iii) with respect to the second
installment of the Additional Consideration, the period shall be the last 20
trading days ending on (and including) the trading day immediately prior to
January 1, 1999.
"DPRC Common Shares" shall mean the common stock, no par value, of
------------------
Purchaser.
"Employee Benefit Plan(s)" shall mean: (a) Any "employee welfare
------------------------
benefit plan," as defined in Section 3(1) of ERISA, (i) which Seller sponsors or
to which such Seller contributes or is required to contribute, or under which
such Seller may incur any liability, and (ii) which covers an employee or former
employee of such Seller including each multi-employer welfare benefit plan; (b)
2
<PAGE>
any "multi-employer plan," as defined in Section 4001(a)(3) of ERISA, (i) to
which Seller (or any person which is a member of a "controlled group of
corporations" with or under "common control" with such Seller as defined in
Section 414(b) or (c) of the Code ("Common Control Entity") has contributed or
---------------------
been obligated to contribute at any time or under which such Seller may incur
any liability, and (ii) which covers an employee or former employee of such
Seller; (c) any "employee pension benefit plan, as defined in Section 3(2) of
ERISA, (i) which Seller sponsors or to which such Seller or any Common Control
Entity contributes or is required to contribute or under which such Seller may
incur any liability, and (ii) which covers an employee or former employee of
such Seller; and (d) any deferred compensation plan, bonus plan, profit sharing
plan, stock option plan, employee stock purchase plan and any other employee
benefit plan, agreement, arrangement or commitment maintained by Seller which
covers an employee or former employee of such Seller.
"Encumbrances" shall mean any adverse claim, lien, pledge, option,
------------
charge, security interest, deed of trust, mortgage, restriction, encumbrance or
such other right of third parties, of any kind or nature.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time, and any successor statute, including the
rules and regulations promulgated thereunder.
"Intellectual Property" shall mean all of Seller's intellectual
---------------------
property rights, if any, including, without limitation, all of Seller's (a)
common law, state, federal and statutory rights in any trademarks, trademark
registrations and applications, service marks and trade names, copyrights,
copyright registrations; patents, patent applications, design rights,
inventions, trade secrets, technical and business confidential information
(including, but not limited to designs, plans, specifications, formulas,
processes, methods, shop rights, know-how and other business or technical
confidential information in each case whether or not such rights are patentable,
copyrightable or registerable); (b) computer software programs and systems,
know-how, formulae and designs and documentation relating to the foregoing or
used or useable in the Business; and (c) other proprietary information owned,
controlled, created or used by or on behalf of such Seller in connection with
the conduct of the Business in which such Seller has any interest whatsoever,
whether or not registered, including rights or obligations under any license
agreement with any other person.
"Laws" shall mean all applicable federal, state or local statutes,
----
regulations, ordinances, orders or decrees, or the common law or reported
decisions thereof.
"Permits" shall mean all permits, licenses, certificates, franchises,
-------
qualifications, authorizations, approvals and other rights from, and filings
with, any governmental authority used in or relating to the Business, if any.
"Permitted Encumbrances" shall mean (i) the Assumed Liabilities, (ii)
----------------------
Encumbrances for Taxes and assessments on property which are not yet past due,
(iii) Encumbrances securing Assumed Liabilities, (iv) the terms of all Contracts
constituting a part of the Assumed Liabilities or Purchased Assets, and (v) the
requirements of all Laws.
3
<PAGE>
"Representatives" shall mean any officer, director, principal,
---------------
shareholder, partner, attorney, accountant, advisor, agent, trustee, employee or
other representative of a party.
"Seller Adjusted Net Worth" shall mean the difference between the
-------------------------
amount of the Purchased Assets (including the Estimated Cash) and the amount of
the Assumed Liabilities, as determined in accordance with generally accepted
accounting principles consistently applied in accordance with Seller's prior
practice. Seller Adjusted Net Worth at the Balance Sheet Date is shown on
Exhibit B attached hereto. Seller Adjusted Net Worth at the Closing Date shall
- ---------
be determined in the same manner used by the parties to determine Seller
Adjusted Net Worth at the Balance Sheet Date.
"Seller Adjusted Working Capital" shall mean the difference between
-------------------------------
the amount of all current Purchased Assets (including the Estimated Cash) and
all current Assumed Liabilities, as determined in accordance with generally
accepted accounting principles, consistently applied in accordance with Seller's
prior practice. Seller Adjusted Working Capital at the Balance Sheet Date is
shown on Exhibit C attached hereto. Seller Adjusted Working Capital at the
---------
Closing Date shall be determined in the same manner used by the parties to
determine Seller Adjusted Working Capital at the Balance Sheet Date.
"Tax(es)" shall mean all taxes, charges, fees, levies or other
-------
assessments imposed by and required to be paid to any federal, state, local or
foreign taxing authority, including, without limitation, income, excise,
property, sales, transfer, ad valorem, payroll and franchise taxes (including
any interest, penalties or additions attributable to or imposed on or with
respect to any such assessment) and any estimated payments or estimated taxes.
"Tax Return" shall mean any return, report, information return or
----------
other document (including any related or supporting information) filed or
required to be filed with any federal, state, local or foreign governmental
entity or other authority in connection with the determination, assessment or
collection of any Tax (whether or not such Tax is imposed on Seller) or the
administration of any Laws, regulations or administrative requirements relating
to any Tax.
1.2 Other Defined Terms. The following capitalized terms shall have the
-------------------
meanings given to them in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
AAA 8.4(c)
Additional Cash Consideration 2.5(b)(ii)
Additional Consideration 2.5(b)(i)
Additional Consideration Overpayment 2.5(b)(i)(B)
Additional Consideration Payment Date 2.5(b)(i)
Additional DPRC Shares 2.5(b)(ii)
Affiliated Party(ies) 3.25
Aged Receivables 2.5(a)(ii)
Agreement Preamble
Ancillary Agreements 3.2
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Assignment and Assumption Agreement 6.2(b)
Assumed Liabilities 2.4(a)
Balance Sheet 3.8
Balance Sheet Date 3.8
Business Recital A
Closing Date 6.1
Contracts 2.1(g)
Decision 8.4(c)(i)
Effective Date Preamble
Escrow Agent 2.6
Escrow Agreement 2.6
Escrowed Shares 2.6
Estimated Cash 2.1(n)
Excluded Assets 2.2
Excluded Liabilities 2.4(b)
Executive Employment Agreement 6.2(f)
FF&E 2.1(a)
Financial Statements 3.8
Goodwill 2.1(j)
Indemnitee 7.2(c)
Indemnitor 7.2(c)
Independent Accountant 2.5(c)(i)(A)
Initial Consideration 2.5(a)(ii)
Initial DPRC Shares 2.5(a)(iii)
Lawson 3.16(a)(v)
Leases 3.15
Major Customers 3.16(b)
Recent Purchaser Report 5.6
Noncompetition Agreement 2.5(a)(iv)
Noncompetition Payments 2.5(a)(iv)
Note 2.5(b)(iii)
Numbers and Addresses 2.1(m)
Other Employment Agreements 6.2(g)
Other Tangible Property 2.1(d)
Plan 7.4
Prepaid Items 2.1(i)
Purchased Assets 2.1
Purchase Price 2.5
Purchaser Preamble
Purchaser Reports 5.6
Purchaser Representatives 7.2(a)
Purchaser Required Consents 5.5
Purchaser's Accountant 2.5(c)(i)(A)
Receivables 2.1(e)
Recomputed Business Adjusted EBIT 2.5(c)(i)(A)
Registration Rights Agreement 6.2(h)
</TABLE>
5
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<TABLE>
<S> <C>
Sales Materials 2.1(c)
Seller Preamble
Seller Representatives 7.2(b)
Seller Required Consents 3.5
Seller's Cash 2.1(n)
Seller's Shares 3.29
Seller Stock 3.7
Shareholder Preamble
Survival Date 7.1
Transferred Employee 7.5
Unbilled Receivables 2.1(f)
Vehicles 2.1(b)
Warranty Claims 7.2(g)
</TABLE>
ARTICLE 2
PURCHASE AND SALE OF ASSETS
---------------------------
2.1 Purchase and Sale of Assets. On the terms and subject to the
---------------------------
conditions of this Agreement, except for the Excluded Assets, Seller hereby
sells, transfers, assigns and delivers to Purchaser, and Purchaser hereby
purchases and acquires from Seller, all of Seller's right, title and interest in
and to all of the assets, of every type and nature and wherever situated,
whether real, personal or mixed, whether tangible, intangible or contingent,
which (i) are either owned by Seller, or in which Seller has any other interest
of any type or nature, and (ii) which are used in the operation of the Business
(collectively, the "Purchased Assets"), including without limitation, the
----------------
following:
(a) All of the furniture, fixtures and equipment used in the Business,
including all of the foregoing set forth on Schedule 2.1(a) hereto (the "FF&E"),
--------------- ----
which schedule includes the location, acquisition date, depreciation history and
lease information, if applicable, concerning the FF&E;
(b) The motor vehicles used in the Business, including all of the
foregoing set forth on Schedule 2.1(b) hereto (the "Vehicles");
--------------- --------
(c) All of the catalogs, price lists, brochures and related sales
materials, and all listings pertaining to Seller in all telephone books and
other directories, utilized by Seller in connection with the Business (the
"Sales Materials");
---------------
(d) Any additional items of tangible property used or owned by Seller
in connection with the Business (the "Other Tangible Property");
-----------------------
(e) All of the accounts and notes receivable with respect to the
Business, including all of the foregoing set forth on Schedule 2.1(e) hereto to
---------------
the extent not paid prior to the Closing Date (the "Receivables"), which
-----------
schedule includes a 90-day aging report for the Receivables;
6
<PAGE>
(f) All rights to payment with respect to services performed by Seller
on or before the Closing Date and which are capable of being billed, but which
have not yet been billed, including all of the foregoing set forth on Schedule
--------
2.1(f) hereto (the "Unbilled Receivables");
- ------ --------------------
(g) All of the contracts, licenses, Leases, arrangements,
understandings or other agreements pertaining to the Business or the Purchased
Assets, including all of the foregoing specified on Schedules 3.15, 3.16 and
--------- ---- ----
3.17 hereto or entered into between the Effective Date and the Closing Date (the
- ----
"Contracts");
---------
(h) All of the Intellectual Property, including, without limitation,
all rights of Seller to use the names "S3G, Inc.," "Spectrum Software Services
Group, Inc." and all other fictitious business names and trade name used by
Seller in connection with the Business;
(i) All of the prepaid items relating to the Business, such as,
insurance, prepaid taxes, prepaid expenses, deferred charges, advance payments,
security deposits, prepaid rent and other prepaid items, including all of the
foregoing set forth on Schedule 2.1(i) hereto (the "Prepaid Items");
--------------- -------------
(j) The goodwill with respect to the Business (the "Goodwill");
--------
(k) All of the Books and Records;
(l) All of the Permits, to the extent assignable;
(m) All of the telephone and facsimile numbers, including "800"
numbers, and post office boxes, used by Seller in connection with the Business,
including all of the foregoing set forth on Schedule 2.1(m) hereto (the "Numbers
--------------- -------
and Addresses"); and
- -------------
(n) That amount of cash, if any, necessary for Seller Adjusted Net
Worth at the Closing Date to be $2,650,000 or for Seller Adjusted Working
Capital at the Closing Date to be $2,100,000, whichever is greater ("Seller's
--------
Cash"). The amount of cash to be delivered at Closing (the "Estimated Cash")
- ---- --------------
shall be the amount estimated by Purchaser and Seller to be necessary to satisfy
the requirements of the immediately preceding sentence. The Seller's Cash shall
be subject to adjustment as provided in Section 2.5(c)(ii), below.
2.2 Excluded Assets. Schedule 2.2 hereto contains a list and description
--------------- ------------
of all assets owned by Seller which are not being sold, transferred, assigned or
delivered at the Closing, but are being retained, by Seller (the "Excluded
--------
Assets"). Notwithstanding anything to the contrary in Section 2.1, above, or
- ------
any of the Schedules hereto, Purchaser is not purchasing, nor is Purchaser
assuming any liability related to, and the Purchased Assets do not include, any
of the Excluded Assets.
2.3 Purchased Assets Free of Liens. Except for Permitted Encumbrances,
------------------------------
all of the Purchased Assets are being transferred by Seller to Purchaser free
and clear of all Encumbrances.
7
<PAGE>
2.4 Liabilities.
-----------
(a) Assumed Liabilities. Purchaser is, on and as of the Closing Date,
-------------------
expressly assuming and agreeing to pay, perform or otherwise discharge as the
same shall become due in accordance with their respective terms, all of the
following liabilities, obligations and commitments of Seller existing or arising
on or after the Closing Date (the "Assumed Liabilities"):
-------------------
(i) Any and all liabilities, obligations and commitments of
Seller other than Excluded Liabilities relating to the Business or the Purchased
Assets and that are (A) reflected on the Balance Sheet, or (B) incurred in
connection with the Business after the Balance Sheet Date in the ordinary course
of business consistent with prior practice and in accordance with the terms of
this Agreement;
(ii) Any and all liabilities, obligations and commitments of
Seller arising out of the Contracts, but not including any liability, obligation
or commitment of Seller (A) for any breach thereof by Seller or a predecessor-
in-interest occurring prior to the Closing Date, or (B) relating to any of the
Excluded Assets;
(iii) All liabilities, obligations and commitments of Seller with
respect to the Transferred Employees which are set forth on Schedule 2.4(a)(iii)
--------------------
hereto; and
(iv) All future obligations arising under any Permits that are
Purchased Assets.
(b) Excluded Liabilities. Notwithstanding anything to the contrary
--------------------
herein or in any Schedule or Exhibit hereto, except for the Assumed Liabilities,
Purchaser is not assuming any liabilities, obligations or commitments of Seller,
whether arising before, on or after the Closing Date, and all such other
liabilities, obligations and commitments (the "Excluded Liabilities") shall
--------------------
remain the exclusive liabilities, obligations and commitments of Seller. In
particular, the liabilities described on Schedule 2.4(b) hereto are Excluded
---------------
Liabilities.
2.5 Consideration for Purchased Assets. In consideration of the sale,
----------------------------------
assignment, transfer and delivery of the Purchased Assets by Seller to
Purchaser, and Seller's and Shareholder's respective obligations under the
Noncompetition Agreement, on the terms and subject to the conditions of this
Agreement, Purchaser will pay or cause to be paid to Seller and Shareholder the
following (collectively, the "Purchase Price"):
--------------
(a) Initial Consideration. At the Closing:
---------------------
(i) Purchaser, on the terms and subject to the conditions of the
Assignment and Assumption Agreement, shall assume and pay, perform or otherwise
discharge as the same shall become due in accordance with their respective
terms, all of the Assumed Liabilities.
(ii) Purchaser shall deliver cash by wire transfer to Seller's
account, in an amount equal to (A) the product obtained by multiplying the
Initial Consideration by eighty-five percent (85%), less (B) the amount of the
----
Noncompetition Payments set forth in Section 2.5(a)(iv),
8
<PAGE>
below. As used herein, the term, "Initial Consideration," shall mean Thirty-
---------------------
Three Million Three Hundred Nine Thousand Eight Hundred Eighty-Two Dollars
($33,309,882), less the amount of the Receivables at the Closing Date which have
aged for more than 90 days after the date of the initial invoice therefor (the
"Aged Receivables").
----------------
(iii) Purchaser shall deliver a stock certificate of Purchaser,
certifying that Seller is the record holder of that number of shares of the DPRC
Common Shares (collectively, the "Initial DPRC Shares"), equal to the number of
-------------------
shares which when multiplied by the DPRC Average Closing Price, shall be equal
to the product obtained by multiplying the Initial Consideration by fifteen
percent (15%).
(iv) Purchaser shall pay or cause to be paid to Seller and
Shareholder, cash by wire transfer to each of their respective accounts, in the
amounts set forth opposite each of such persons' names on Schedule 2.5(a)(iv)
-------------------
hereto, which amounts, in the aggregate, shall be equal to Two Hundred Fifty
Thousand Dollars ($250,000) (the "Noncompetition Payments"), in consideration of
-----------------------
each of such persons' execution and delivery of the noncompetition agreement in
the form attached as Exhibit D hereto (the "Noncompetition Agreement").
--------- ------------------------
(b) Additional Consideration.
------------------------
(i) On the terms and subject to the conditions of this Section
2.5(b), if, and only if, Shareholder has not voluntarily terminated his
employment under the Executive Employment Agreement prior to September 1, 1998,
on or before September 1, 1998 and March 1, 1999 (each, an "Additional
----------
Consideration Payment Date"), subject to this Section 2.5(b), Purchaser shall
- --------------------------
pay or cause to be paid to Seller additional consideration ("Additional
----------
Consideration") as follows:
- -------------
(A) With respect to the September 1, 1998 Additional
Consideration Payment Date, Purchaser shall pay Seller an amount equal to the
product obtained by multiplying the Additional Consideration Multiplier by the
amount by which Business Adjusted EBIT for the first six months of the 1998
calendar year exceeds 130% of Recomputed Business Adjusted EBIT for the first
six months of the 1997 calendar year. For example, if Business Adjusted EBIT for
the first six months of the 1998 calendar year is $3.0 million, 130% of
Recomputed Business Adjusted EBIT for the first six months of the 1997 calendar
year is $2.8 million, and the Additional Consideration Multiplier is 7.0, then
the Additional Consideration for the September 1, 1998 Additional Consideration
Payment Date shall be $1.4 million (i.e., [$3.0 million - $2.8 million] x 7.00 =
$1.4 million).
(B) With respect to the March 1, 1999 Additional
Consideration Payment Date, Purchaser shall pay Seller an amount equal to the
difference between (1) the product obtained by multiplying the Additional
Consideration Multiplier by the amount by which Business Adjusted EBIT for the
1998 calendar year exceeds 130% of the Recomputed Business Adjusted EBIT, and
(2) the amount of Additional Consideration paid to Seller pursuant to
subparagraph (A), above. If, however, based upon the foregoing formula, the
amount of such Additional Consideration would be a negative number (the
"Additional Consideration Overpayment"), then (1) Purchaser shall have no
------------------------------------
obligations under this Section 2.5(b)(i)(B) to pay Seller any Additional
Consideration with
9
<PAGE>
respect to the March 1, 1999 Additional Consideration Payment Date, and (2) on
or before March 1, 1999, Seller shall pay Purchaser an amount equal to the
absolute amount of the Additional Consideration Overpayment. For example, if
Business Adjusted EBIT for the 1998 calendar year is $6.0 million, the amount of
the Additional Consideration paid to Seller pursuant to subparagraph (A), above,
is as set forth in the example in subparagraph (A), above, 130% of the amount of
the Recomputed Business Adjusted EBIT is $5.497 million and the Additional
Consideration Multiplier is 7.0, then the Additional Consideration for the March
1, 1999 Additional Consideration Payment Date shall be $2.121 million (i.e.,
[$6.0 million - $5.497 million] x 7.00 - $1.4 million = $2.121 million).
(ii) With respect to each payment of Additional Consideration, on
or before the applicable Additional Consideration Payment Date, (a) Purchaser
shall deliver cash by wire transfer to Seller's account, in an amount equal to
the product obtained by multiplying such Additional Consideration by 85% (the
"Additional Cash Consideration"); and (b) Purchaser shall deliver a stock
- ------------------------------
certificate of Purchaser, certifying that Seller is the record holder of that
number of shares of the DPRC Common Shares (the "Additional DPRC Shares") equal
----------------------
to the number of shares which when multiplied by the DPRC Average Closing Price,
shall be equal to the product obtained by multiplying such Additional
Consideration by 15%.
(iii) Notwithstanding anything in this Agreement to the contrary,
in the event that the board of directors of Purchaser determines in good faith,
in light of all then available information, that there is not sufficient cash
available to permit payment of all or a part of the Additional Cash
Consideration, then Purchaser may, at its option, pay all or part of the
Additional Consideration by delivering a promissory note (the "Note") to Seller.
----
The Note shall (A) bear interest from the applicable payment date at 12% per
annum, (B) be payable in one blended installment of principal and interest,
which shall be payable on the 30th day after the date of issuance of the Note,
and (C) be payable in lawful money of the United States at the offices of
Seller.
(c) Adjustments to Purchase Price.
-----------------------------
(i) Audit of Financial Statements.
-----------------------------
(A) Seller and Shareholder acknowledge that Purchaser, in
connection with the satisfaction of its disclosure obligations under and
pursuant to applicable securities laws, has retained Deloitte & Touche LLP
("Purchaser's Accountant") to audit certain of the Financial Statements.
----------------------
Purchaser shall use its best efforts to cause Purchaser's Accountant to complete
such audit by no later than April 1, 1998. Within ten (10) days after the
conclusion of such audit, on the basis of the audited numbers, Purchaser shall
recompute Business Adjusted EBIT for the 1997 calendar year (the "Recomputed
----------
Business Adjusted EBIT"), and shall provide to Seller for its review and
- ----------------------
approval, its computations and working papers reflecting how such computations
were made. If Seller has any objections to such computation of the Recomputed
Business Adjusted EBIT, it will deliver detailed statements describing its
objections to Purchaser within 30 days after receiving Purchaser's computations
and working papers reflecting how Purchaser's computations were made. The
parties will use their reasonable efforts to resolve any such objections. If,
however, the parties do not obtain final resolution of this matter within 30
days after Purchaser has received the statements of objections, the dispute
shall be referred to the Austin, Texas office of Ernst & Young LLP (the
10
<PAGE>
"Independent Accountant") within 15 days following such 30-day period. The
----------------------
Independent Accountant's determination of the amount of the Recomputed Business
Adjusted EBIT shall, for purposes of this Section 2.5(c)(i)(A), be binding upon
all parties. Purchaser and Shareholder will share responsibility for the fees
and expenses of the Independent Accountant based on the degree to which the
Independent Accountant accepts the respective positions of the parties, as
conclusively determined by the Independent Accountant.
(B) If the Recomputed Business Adjusted EBIT is less than
$3,701,098, Seller shall pay to Purchaser within 10 business days of such
determination a cash amount equal to the product obtained by multiplying nine
(9) by the difference between $3,701,098 and the Recomputed Business Adjusted
EBIT. If, however, the Recomputed Business Adjusted EBIT is more than
$3,701,098, Purchaser shall pay to Seller within 10 business days of such
determination a cash amount equal to the product obtained by multiplying nine
(9) by the difference between the Recomputed Business Adjusted EBIT and
$3,701,098.
(C) In the event this Agreement should terminate prior to
Closing, Purchaser will allow Seller to "purchase" the results of Purchaser's
Accountant's audit by reimbursing Purchaser for the cost thereof.
(ii) Working Capital/Net Worth Adjustment.
------------------------------------
(A) As soon as practicable after the Closing Date, Purchaser
shall compute the amount of the Seller Adjusted Working Capital at the Closing
Date and the Seller Adjusted Net Worth at the Closing Date, and shall provide to
Seller for its review and approval, its computations and working papers
reflecting how such computations were made. If Seller has any objections to such
computation of such Seller Adjusted Working Capital or such Seller Adjusted Net
Worth, it will deliver detailed statements describing its objections to
Purchaser within 30 days after receiving Purchaser's computations and working
papers reflecting how Purchaser's computations were made. The parties will use
their reasonable efforts to resolve any such objections. If, however, the
parties do not obtain final resolution of this matter within 30 days after
Purchaser has received the statements of objections, the dispute shall be
referred to the Independent Accountant in accordance with the procedures set
forth in Section 2.5(c)(i)(A), above.
(B) If either Seller Adjusted Working Capital at the Closing
Date is less than $2,100,000, or Seller Adjusted Net Worth at the Closing Date
is less than $2,650,000, then, in such event, Seller shall pay to Purchaser
within 10 business days of such determination a cash amount equal to the greater
-------
of the following:
(1) The difference between $2,100,000 and the Seller
Adjusted Working Capital at the Closing Date; and
(2) The difference between $2,650,000 and the Seller
Adjusted Net Worth at the Closing Date.
(C) If, however, both Seller Adjusted Working Capital at the
Closing Date is more than $2,100,000, and Seller Adjusted Net Worth at the
----
Closing Date is more
----
11
<PAGE>
than $2,650,000, then, in such event, Purchaser shall pay to Seller,
within ten (10) business days of such determination a cash amount equal to the
lesser of the following:
- ------
(1) The difference between the Seller Adjusted Working
Capital at the Closing Date and $2,100,000; and
(2) The difference between the Seller Adjusted Net Worth
at the Closing Date and $2,650,000.
(iii) Any adjustment in the amount of the Initial Consideration as
a result of the audit contemplated under Section 2.5(c)(i)(A), above, shall not
separately give rise to a claim of a breach of a representation or warranty
under Section 7.2, below, but shall be the sole recovery of the parties with
respect to the matter adjusted as a result of such audit.
(iv) Collection of Aged Receivables. If, at any time during the
------------------------------
90-day period after the Closing Date, Purchaser should collect any of the Aged
Receivables, Purchaser shall promptly remit such amounts to Seller.
(v) Adjustment in Multiplier. If the amount of any Additional
------------------------
Consideration shall have been calculated using an Additional Consideration
Multiplier of 7.0 and such Additional Consideration Multiplier, by its terms, is
subsequently and retroactively reduced to 6.5, then, within 30 days after the
voluntary termination of Shareholder giving rise to such reduction in the
Additional Consideration Multiplier, Shareholder shall reimburse Purchaser an
amount equal to the difference between (A) the actual amount of the Additional
Consideration which was calculated based upon an Additional Consideration
Multiplier of 7.0, and (B) the amount of the readjusted Additional Consideration
based upon an Additional Consideration Multiplier of 6.5
2.6 Escrowed Shares. A number of the Initial DPRC Shares which, when
---------------
multiplied by the DPRC Average Closing Price for the Initial Consideration,
equals Three Million Dollars ($3,000,000) (the "Escrowed Shares") shall be held
---------------
by an escrow agent (the "Escrow Agent") pursuant to an escrow agreement in
------------
substantially the form attached hereto as Exhibit E (the "Escrow Agreement"), to
--------- ----------------
secure claims by Purchaser for the indemnification obligations of Seller and
Shareholder pursuant to Section 7.2, below. All costs and expenses of the
Escrow Agent in connection with the Escrow Agreement shall be shared equally by
Seller and Purchaser.
2.7 Taxes. Purchaser shall pay all sales, use and transfer Taxes
-----
relating to the transfer of the Vehicles. Seller and Purchaser do not believe
that any sales or use Taxes will be due in connection with the transfer of the
other Purchased Assets. However, Seller shall pay all sales and use Taxes, if
any, arising out of the transfer of the Purchased Assets other than the
Vehicles. Except for the Assumed Liabilities, Purchaser shall not be
responsible for any Tax owed by Seller and related to any period ending prior to
the Closing Date.
2.8 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
among the Purchased Assets in the manner set forth on Exhibit F hereto, with any
---------
adjustments in the Purchase Price resulting in a revised allocation based upon
the parameters set forth in Exhibit F. Upon agreeing to any adjustments in
---------
allocation of the Purchase Price resulting from an adjustment in the
12
<PAGE>
Purchase Price (the "Purchase Price Allocation"), Purchaser and Seller shall
-------------------------
evidence their agreement by entering into an amendment to this Agreement to
which shall be attached a schedule on which the final Purchase Price Allocation
shall be set forth. Purchaser, Seller and Shareholder each agrees (a) to report
the sale of the Purchased Assets for federal and state income Tax purposes in
accordance with the final Purchase Price Allocation set forth on such schedule,
not to take any position inconsistent with such final Purchase Price Allocation
on any of its Tax Returns, and (c) to timely file federal Tax Form 8594 with the
applicable Tax Return for the year of this transaction reflecting such Purchase
Price Allocation. Each party shall provide the other with a draft copy of its
relevant federal Tax Form 8594 a least 15 days prior to filing such form.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Purchaser that the following statements
are true and correct and not materially misleading as of the Effective Date:
3.1 Organization and Qualification. Seller is a corporation duly
------------------------------
organized, validly existing and in good standing under the Laws of the State of
Texas. Seller has the requisite corporate power and authority to own and
operate the Business and the Purchased Assets and to carry on the Business as
presently conducted. Seller is qualified to do business as a foreign
corporation in each jurisdiction in which the conduct of its business or the
ownership or leasing of properties makes such qualification necessary. Seller
has provided to Purchaser true and correct copies of Seller's Articles of
Incorporation and Bylaws, together with all amendments thereto.
3.2 Authorization. Seller has the requisite power, authority and legal
-------------
right and capacity to enter into this Agreement and the agreements contemplated
hereby (the "Ancillary Agreements"), to the extent it is a party thereto, to
--------------------
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Seller of this Agreement and the Ancillary Agreements to which it
is a party, have been duly authorized by all necessary corporate action on the
part of Seller to make this Agreement and the Ancillary Agreements valid and
binding upon Seller in accordance with their respective terms.
3.3 Due Execution and Delivery; Binding Obligations. This Agreement and
-----------------------------------------------
each of the Ancillary Agreements has been duly executed and delivered by Seller,
to the extent Seller is a party hereto or thereto. This Agreement and each of
the Ancillary Agreements constitute the legal, valid and binding agreements and
obligations of Seller, to the extent Seller is a party hereto or thereto,
enforceable against Seller in accordance with their terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or conveyance or similar Laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability and except as
rights of indemnity or contribution may be limited by federal or state
securities or other Laws or the public policy underlying such Laws.
3.4 No Conflict or Violation. Assuming all of the Seller Required
------------------------
Consents are obtained, except as reflected on Schedule 3.4 hereto, neither the
------------
execution and delivery of this Agreement and the Ancillary Agreements by Seller,
to the extent Seller is a party hereto or thereto, nor the
13
<PAGE>
consummation of the transactions contemplated hereby and thereby, will result in
(a) a violation of, or a conflict with, Seller's charter documents or any
subscription, shareholders' or similar types of agreements or understandings to
which Seller is a party; (b) a breach of, or a default (or an event which, with
notice or lapse of time or both would constitute a default) under or result in
the termination of, or accelerate the performance required by, or create a right
of termination or acceleration under, any Contract, Encumbrance or Permit to
which Seller is a party or by which the Purchased Assets or the Business is
bound or affected; (c) the payment by, or the creation of any obligation
(absolute or contingent) to pay on behalf of, any party of any severance,
termination, "golden parachute" or other similar payments pursuant to any
employment or other Contracts of Seller, or Seller's current or former officers,
directors or employees; (d) to Seller's knowledge, a violation by Seller of any
applicable Law; (e) to Seller's knowledge, a violation by Seller of any order,
judgment, writ, injunction decree or award to which Seller is a party or by
which the Purchased Assets or the Business are bound; or (f) an imposition of
any Encumbrance on the Purchased Assets.
3.5 Consents and Approvals. To Seller's knowledge, except as set forth on
----------------------
Schedule 3.5 hereto (the "Seller Required Consents"), no consent, Permit,
- ------------ ------------------------
approval or authorization of, or declaration, filing, application, transfer,
registration with, any governmental or regulatory authority, or any other person
or entity is required to be made or obtained by Seller by virtue of its
execution, delivery and performance of this Agreement or any of the Ancillary
Agreements to which it is a party, or to avoid the loss of any Permit, or the
violation, breach or termination of, or any default under, or the creation of
Encumbrances on any Purchased Assets pursuant to the terms of any Law, or to
enable Purchaser to own the Purchased Assets and continue the operation of the
Business after the Closing Date in the manner presently conducted by Seller.
3.6 Pending Litigation. Except as disclosed on Schedule 3.6 hereto, there
------------------ ------------
is no pending or, to Seller's knowledge, threatened Action, whether private or
public, affecting Seller or the Business which could reasonably be expected to
affect the enforceability of this Agreement or any of the Ancillary Agreements
or which could reasonably be expected to materially and adversely affect the
Business, the Purchased Assets or Seller's ability to consummate the
transactions contemplated by or perform its obligations under this Agreement or
any of the Ancillary Agreements to which it is a party.
3.7 Capitalization of Seller. The authorized capital stock of Seller
------------------------
consists of 100,000 shares of common stock, $.01 par value per share, of which
100,000 shares are issued and outstanding (the "Seller Stock"). Shareholder is
------------
the legal and beneficial owner of all of the Seller Stock. Other than this
Agreement, and except as set forth on Schedule 3.7 hereto, there is not
------------
outstanding any subscription, option, warrant, call, right or other agreement or
commitment obligating Seller to issue, sell, deliver or transfer (including any
right of conversion or exchange under any outstanding security or other
instrument) any shares of the Seller Stock or any other shares of the capital
stock of Seller. Seller does not own, directly or indirectly, shares of capital
stock of any other corporation or equity interest in any partnership,
association, limited liability company or any other entity or business, nor does
Seller control, directly or indirectly, any other corporation, association or
business organization.
3.8 Financial Statements and Other Information. Seller has furnished to
------------------------------------------
Purchaser copies of (a) the unaudited balance sheets of Seller at September 30,
1997 and 1996 and the related
14
<PAGE>
statements of income for the periods then ended, and (b) Seller's unaudited
balance sheet (the "Balance Sheet") of Seller at December 31, 1997 (the "Balance
------------- -------
Sheet Date"), and the related statements of income for the 12-month period then
- ----------
ended (collectively, the "Financial Statements"). The December 31, 1997
--------------------
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the respective
periods, and fairly present in all material respects the financial condition of
Seller as at the respective dates thereof and the results of operations of
Seller for the respective periods covered by the statements of income contained
therein. The September 30, 1996 and 1997 Financial Statements (i) have been
prepared in accordance with modified cash-based accounting; (ii) are not
materially misleading in any respect; and (iii) have been prepared consistent
with past procedures. The Financial Statements are attached hereto as Schedule
3.8. All reserves made by Seller in the December 31, 1997 Financial Statements
are appropriate and adequate for all known or anticipated liabilities.
3.9 Undisclosed Liabilities. Except as set forth on Schedule 3.9 hereto,
----------------------- ------------
Seller has no liabilities, obligations or commitments (absolute, accrued,
contingent or otherwise) related to the Business or the Purchased Assets except
for liabilities, obligations and commitments that are (a) reflected on the
Balance Sheet, (b) under and pursuant to any Contract (other than by breach
thereof by Seller or a predecessor-in-interest), and (c) incurred after the
Balance Sheet Date in the ordinary course of business consistent with prior
practice and consistent with the terms of this Agreement.
3.10 No Materially Adverse Change. Since the Balance Sheet Date, there
----------------------------
have been no changes in the financial condition or results of operation of the
Business whether or not arising from transactions in the ordinary course of
business, that individually or in the aggregate, have been, or could reasonably
be expected to be, materially adverse to the financial condition or results of
operation of the Business.
3.11 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
3.11 hereto, since the Balance Sheet Date the Business has been conducted in the
- ----
ordinary course of business and there has not been any:
(a) Amendment to Seller's Articles of Incorporation or Bylaws;
issuance of any shares of the capital stock of Seller; or issuance or creation
of any warrants, obligations, subscriptions, options, convertible securities or
other commitments under which any additional shares of the capital stock of
Seller of any class have been or might be, directly or indirectly, authorized,
issued or transferred;
(b) Any increase in the salary or other compensation payable or to
become payable by Seller to any of its officers, directors, partners or
employees; the declaration, payment, commitment or obligation of any kind for
the payment, by Seller, of a bonus or other additional salary or compensation to
any such person; the repayment by Seller of any loan from such person; or the
payment by Seller of any accrued but unpaid salaries, distributions or any other
payments, whether in cash or property, to any such person;
(c) Change in accounting methods or practices by Seller (including,
without limitation, any change in depreciation, amortization or valuation
policies or rates or any change in
15
<PAGE>
billing and revenue recognition policies) or revaluation of any of its assets,
liabilities or reserves reflected on the 1997 Financial Statements, or any
change in any assumption underlying or methods of calculating any bad debt,
contingency or other reserves related to the Business;
(d) Agreement entered into in connection with the Business other than
in the usual and ordinary course of the Business; agreement entered into in the
usual and ordinary course of the Business having a term of at least 12 months
and not terminable without penalty by Seller on 30 days notice or less or
involving an amount exceeding $20,000; or capital expenditure, or the incurring
of any obligation to make any capital expenditure, by Seller in excess of
$20,000;
(e) Agreement entered into to provide technical contractors at other
than a "times and material" basis or at a fixed bid, discounted or decelerating
rate, or pursuant to or subject to a capped or limited fee arrangement;
(f) Failure to pay or satisfy when due any obligation of Seller except
where such failure would not materially and adversely affect Seller, the
Business, its assets or its liabilities;
(g) Amendment, rescission, expiration or termination of any of
Seller's existing Contracts or agreements, including, without limitation, the
lapse, expiration or termination of any insurance coverage;
(h) Sale, transfer, disposal of or agreements to sell, transfer or
otherwise dispose of, any material portion of the assets, properties or rights
of Seller used in connection with the Business; destruction, damage to, or loss
of any material portion of Seller's assets or properties (whether or not covered
by insurance) used or useable in the Business; or disposition or lapsing of any
Intellectual Property or any disclosure to any person (other than persons
subject to confidentiality agreements) of any Intellectual Property;
(i) Labor dispute or other event or condition of any character
adversely affecting the financial condition or results of operation of the
Business; or
(j) Agreement by Seller or Shareholder to do or cause any of the
things described in clauses (a) through (i), above.
3.12 Title to Purchased Assets. Seller either owns or holds under leases
-------------------------
or licenses all of the material properties used by it in the Business and all
such properties are included in the Purchased Assets. Seller has good and
indefeasible title to all of the Purchased Assets owned by it, and to its leased
or licensed interests in all leased or licensed Purchased Assets, free and clear
of all Encumbrances other than Permitted Encumbrances.
3.13 Condition and Possession of Purchased Assets. Substantially all FF&E
--------------------------------------------
included in the Purchased Assets is in good operating condition and repair,
subject to reasonable wear and tear. Seller enjoys peaceful and undisturbed
possession of all of the Purchased Assets. None of the Purchased Assets is
subject to any commitment or other arrangement for their use by any Affiliated
Party of Seller or Shareholder or any third party. EXCEPT AS EXPRESSLY SET FORTH
ABOVE, NEITHER SELLER NOR SHAREHOLDER MAKES ANY WARRANTIES, EXPRESS
16
<PAGE>
OR IMPLIED, WITH RESPECT TO THE CONDITION OF ANY TANGIBLE ASSET, ALL SUCH
WARRANTIES AND REPRESENTATIONS, INCLUDING, WITHOUT LIMITATION, ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE HEREBY
DISCLAIMED, AND THE TANGIBLE, PURCHASED ASSETS ARE TO BE CONVEYED AS IS.
3.14 Receivables and Unbilled Receivables. Attached hereto as Schedules
------------------------------------ ---------
2.1(e) and 2.1(f) are true and complete lists of the Receivables and Unbilled
- ------ ------
Receivables as of the business day immediately preceding the Closing Date.
Except to the extent collected since the Balance Sheet Date, all receivables are
reflected on the Financial Statements and Schedule 2.1(e), and all Receivables
---------------
and Unbilled Receivables accruing or created after the Balance Sheet Date are
(a) valid bona fide claims against debtors for sales or other charges, and (b)
to Seller's Knowledge, subject to no defenses, set-offs or counterclaims. As of
the date hereof, Seller has no reason to believe that the Receivables and
Unbilled Receivables are not collectible in accordance with their terms.
3.15 Leases. Schedule 3.15 hereto sets forth a true, correct and complete
------ -------------
list of all leases, subleases, licenses and other occupancy or lease agreements
under which Seller leases, subleases, licenses, occupies or uses any tangible
property (real or personal) included in the Purchased Assets (the "Leases"). To
------
the knowledge of Seller, all of the Leases are in good standing, legal, valid,
binding and in full force and effect. To the knowledge of Seller, there is not
under any of such Leases any existing material default, violation or breach by
Seller or event or condition which after notice or lapse of time or both would
constitute a material default, violation or breach by Seller. Seller has
provided or made available to Purchaser true and correct copies of all Leases.
3.16 Contracts.
---------
(a) Schedule 3.16 hereto contains a complete and correct list of all
-------------
Contracts (other than Excluded Assets or Excluded Liabilities), whether written
or oral, (i) to which Seller is a party or by which it is bound, (ii) which are
currently in force, and (iii) pursuant to which Seller has ongoing rights or
obligations in connection with the Business, excluding (A) contracts or
commitments to sell, lease or otherwise dispose of any assets, properties or
business in the ordinary course, which do not involve payments or receipts or
receipts of more than $20,000, or (B) other contracts which are terminable on at
least thirty (30) days prior written notice and do not involve payments or
receipts, in the aggregate, of more than $20,000 in any one year, but expressly
including the following contracts:
(i) Mortgages, indentures, security agreements, and other
agreements and instruments relating to the borrowing of money by, or any
extension or credit to, Seller;
(ii) Sales agency or marketing agreement;
(iii) Agreements or commitments for capital expenditures;
(iv) Contracts with customers;
(v) Contracts with Lawson Associates, Inc. ("Lawson");
------
17
<PAGE>
(vi) Partnership, joint venture, strategic alliances or other
arrangements or agreements involving a sharing of profits or expenses;
(vi) Contracts or commitments to sell, lease or otherwise dispose
of any assets, properties or business other than in the ordinary course of
business;
(vi) Contracts with any predecessor-in-interest to the Business,
or pursuant to which Seller integrated any other business into the Business,
whether by merger, purchase or sale of assets of stock, or otherwise; and
(ix) Contracts or commitments limiting the freedom of Seller or
Shareholder to compete in any line of business or in any geographic area or with
any person;
(b) Schedule 3.16 hereto sets forth a correct and complete list of the
-------------
20 largest customers (by sales volume) (the "Major Customers") of the Business
---------------
during the 12-month period ended at the Balance Sheet Date, indicating the sales
to such Major Customers within such period and any existing contractual
arrangements with each such Major Customer. As of December 31, 1997, Seller had
no outstanding Contracts with customers requiring payments or credits in excess
of $20,000, except for those listed on Schedule 3.16 hereto. To Seller's
-------------
knowledge, there are no outstanding disputes with any Major Customer, and no
Major Customer has refused to do business with Seller or has stated its
intention not to continue to do business with Seller or Purchaser upon
consummation of the transactions contemplated hereby. To Seller's knowledge, no
customer account is being audited by a customer. Except as set forth on
Schedule 3.16 hereto, no existing contractual arrangement with a customer
- -------------
contains any terms other than at a "times and material" basis or at a fixed bid,
discounted or decelerating rate, or pursuant to or subject to a capped or
limited fee arrangement;
(c) As of the Balance Sheet Date, Seller had no outstanding Contracts
with suppliers or vendors requiring payments in excess of $20,000 on an
annualized basis except those listed on Schedule 3.16 hereto.
-------------
(d) Seller's Contracts with Lawson are described on Schedule 3.16, are
-------------
in full force and effect, and, to Seller's knowledge, neither Seller nor Lawson
is in material default with respect to any of its obligations under any of such
Contracts. Lawson has not notified Seller of any claims against Seller or of its
termination of any of such Contracts. At least two of the Transferred Employees
are certified on products maintained, distributed, produced or otherwise
serviced by Lawson.
3.17 Intellectual Property. Seller owns, has a license for, or rightfully
---------------------
possesses all of the Intellectual Property necessary for the operation of the
Business as presently conducted, without any known conflict with the rights of
others. Attached hereto as Schedule 3.17 is a list of all of the material
-------------
Intellectual Property, including without limitation, all trade names,
trademarks, copyrights and patents, any and all applications and registrations
pertaining thereto, trade secrets, inventions know-how and formulae. Except as
set forth on Schedule 3.17 hereto, there are no outstanding options, licenses or
-------------
agreements of any kind relating to Seller's grant of any of its right, title and
interest in and to any such Intellectual Property, nor is Seller bound by or a
party to any options,
18
<PAGE>
licenses or agreements of any kind with respect to the proprietary rights of any
other person or entity. Seller has not received any communication alleging that
it has violated or, by conducting the Business, would violate any of the
proprietary rights of any other person or entity. Seller has no knowledge of any
infringement by any third parties on any of the rights of Seller in the
Intellectual Property; provided, that Seller makes no warranties that its rights
in any Intellectual Property are exclusive of the rights of others.
3.18 Books and Records. Seller has made and kept (and given Purchaser or
-----------------
its Representatives access to) the Books and Records pertaining to the Business,
which, in reasonable detail, accurately and fairly reflect, in all material
respects, the activities and transactions of Seller related to the Business,
the Purchased Assets, the Assumed Liabilities and the financial condition of
Seller and the Business.
3.19 Insurance. Attached as Schedule 3.19 hereto is a true and complete
--------- -------------
list and summary of all insurance currently maintained by Seller with respect to
the Business or the Purchased Assets. Seller has provided Purchaser with true
and correct copies of all such insurance policies. Seller has not agreed to
modify or cancel any of such insurance, nor has Seller or Shareholder received
notice of any actual or threatened modification or cancellation of such
insurance. The parties anticipate that Buyer will obtain its own insurance with
respect to the ongoing operations of the Business from and after the Closing.
3.20 Permits. Attached hereto as Schedule 3.20 is a list of all Permits,
------- -------------
if any, held by Seller with respect to the operation of the Business, true and
complete copies of which have been furnished to Purchaser.
3.21 Employees and Contractors. Attached hereto as Schedule 3.21 is a list
------------------------- -------------
of the names, current annual rates of salary, bonuses, employee benefits,
accrued vacation times, sick pay and other compensation, whether paid or
accrued, date of hire and location of all the present employees, contractors and
agents of Seller who provide services in connection with the Business. Except
as set forth on Schedule 3.21, none of such persons has received an increase in
-------------
salary or other compensation from Seller since the Balance Sheet Date. Except
as set forth on Schedule 3.21, there are no employment or consulting contracts
-------------
or arrangements, including pensions, bonus or profit sharing plans, or other
severance or termination contracts or arrangements which constitute contractual
obligations of Seller not terminable on 14 days' notice. There are no
collective bargaining agreements with any union or other bargaining group for
any of Seller's employees, and Seller has no knowledge of any efforts by its
employees or contractors to organize or participate in any of the foregoing. To
Seller's knowledge, no employee or contractor is in violation of any of its
obligations to, or any employment agreement with, a prior employer. No key
employee or contractor of Seller has left Seller since the Balance Sheet Date
and no current key employee or contractor has notified Seller of any present or
future intention to terminate his or her employment with Seller. Seller has
made available to Purchaser true and correct copies of all performance reviews
conducted of the persons set forth on Schedule 3.21 to the extent Seller has
-------------
copies of the same in its records.
3.22 Labor Matters. Seller has complied with all provision of Law
-------------
pertaining to the employment of employees and the hiring and terminating of
contractors, including, without limitation all such Laws relating to labor
relations, equal employment practices, fair employment practices,
19
<PAGE>
entitlements, classifications as employees or independent contractors, COBRA,
prohibited discrimination, terms and conditions of employment, wages and hours,
or other similar employment practices or acts, and Seller is not engaged in any
unfair labor practices or is a party to any Action involving a violation or
alleged violation of any of any of the foregoing Laws. Except as set forth on
Schedule 3.6 hereto, there are no pending or, to Seller's knowledge, threatened
- ------------
Actions against Seller by any employee or contractor with respect to any matter
arising out of, relating to or in connection with such employee's or
contractor's employment by Seller.
3.23 Employee Benefits. Except as set forth on Schedule 3.23 hereto, there
----------------- -------------
are no pension, bonus, profit sharing, stock option or employee benefit plans
maintained by Seller or to which Seller contributes or is required to
contribute. All such plans set forth on Schedule 3.23 hereto, and their related
-------------
trusts, if any, comply with the provisions of and have been administered in
compliance with the provisions of ERISA, and all other applicable Laws.
3.24 Compliance with Laws. To Seller's knowledge, Seller's operation of
--------------------
the Business and ownership and/or use of the Purchased Assets is in compliance
with all Laws (including, but not limited to, environmental Laws). Seller has
not received any notice from or otherwise been advised that any governmental
authority or other person is claiming any violation or potential violation of
any Law.
3.25 Transactions with Affiliated Parties. Except for the provisions of
------------------------------------
compensation and benefits by Seller to Shareholder as an employee of Seller, and
distributions by Seller to Shareholder in his capacity as a shareholder of
Seller, attached hereto as Schedule 3.25 is a true and complete list and
-------------
description of all transactions engaged in between Seller and any director,
officer, employee, shareholder (including Shareholder) or agent of Seller or, to
Seller's knowledge, any of their spouses or children, any trust of which any
such person is the grantor, trustee or beneficiary, any corporation of which any
such person or party is a shareholder, employee, officer or director, or any
partnership in which any such person or party owns an interest (all such
persons, trusts, corporations and partnerships being herein referred to
collectively as "Affiliated Parties" and individually as an "Affiliated Party").
------------------ ----------------
Except as described on Schedule 3.25 hereto, no Affiliated Party of Seller owns
-------------
or has any interest in, directly or indirectly, any of the Purchased Assets. To
Seller's and Shareholder's knowledge, no Affiliated Party has any ownership
interest, directly, indirectly or beneficially, in any competitor or potential
competitor, supplier or customer of Seller.
3.26 Taxes.
-----
(a) All federal, state and other Tax Returns of Seller required by Law
to be filed have been duly filed on a timely basis or properly extended. All Tax
Returns filed or to be filed with respect to all fiscal periods through and
including the fiscal year ended September 30, 1996 by Seller are true, correct
and complete in all material respects and no Taxes (other than those already
paid or reserved for with respect to such Tax returns) are or will be required
to be paid. True and correct copies of all Tax Returns for the years ended
September 30, 1995 and September 30, 1996 have been provided to Purchaser. All
Taxes which are due and payable by Seller have been paid in full and all
deposits required by Law to be made by Seller with respect to any such Taxes
have been duly made.
20
<PAGE>
(b) Schedule 3.26 hereto lists each jurisdiction in which Seller is
-------------
required to file Tax Returns in connection with the conduct of the Business.
Except as set forth on Schedule 3.26 hereto, Seller is not delinquent in the
-------------
payment of any Taxes nor does Seller have any Tax deficiency or claim
outstanding, proposed or assessed against it, and there is no basis for any such
deficiency of claim. Except for the federal income Tax Return of Seller for the
year ended September 30, 1997 (which has been extended), there is not now in
force any extension of time with respect to the date on which any Tax Return was
or is due to be filed by or with respect to Seller, or any waiver or agreement
by Seller for the extension or the assessment of any Tax.
(c) The charges, accruals and reserves on the consolidated books of
Seller in respect of federal, state and local Taxes for all periods since the
fiscal year ended September 30, 1997, and in respect of other Taxes for all
outstanding periods, are adequate and neither Seller is aware of any additional
assessments for such years or any basis therefor.
3.27 Certain Payments. Neither Shareholder nor, to Shareholder's knowledge,
----------------
Seller or any other person who is an employee, representative, agent or
affiliate of Seller has (a) made any unreported political contributions, or (b)
made or received any illegal payments to or from any person or entity (a "Third
Party"), or any Representative, of any such Third Party, in consideration of any
business or transaction which Seller has done, or proposed to do, with such
Third Party or any business or transaction which such Third Party has done, or
proposed to do, with Seller; provided, that this warranty does not cover or
extend to meals or other reasonable entertainment, from time to time, provided
by Seller or Shareholder in connection with the Business.
3.28 No Finder. Neither Seller nor any person or entity acting on its
---------
behalf has paid or has become obligated to pay any fee or commission to any
broker, finder or intermediary other than GulfStar Group, Inc. on account of the
transactions contemplated herein.
3.29 Securities Law Matters. Seller is acquiring the Initial DPRC Shares
----------------------
and the Additional DPRC Shares (collectively, the "Seller's Shares") for its
---------------
account, and not with a view to any sale, distribution or disposition in
violation of any federal or state securities Laws. Seller has been given the
opportunity to obtain any information or documents, and to ask questions and
receive answers about such documents, about Purchaser which Seller deems
necessary to evaluate the merits and risks related to its investment in Seller's
Shares and such Seller understands and has taken cognizance of all risk factors
related to such transactions. Seller can afford to bear the economic risk of
holding the unregistered Seller's Shares for an indefinite period of time, can
afford to suffer a complete loss of its investment in Seller' Shares, and Seller
has adequate means for providing for its needs and contingencies. Seller
acknowledges that Seller's Shares will be characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired directly from Purchaser in a transaction not involving a public
offering and that all certificates and instruments evidencing Seller' Shares
will bear the following legends in addition to any other legend that may be
required under the Escrow Agreement:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES OR BLUE SKY LAWS OF CALIFORNIA OR ANY
21
<PAGE>
OTHER STATE AND MAY BE OFFERED AND SOLD ONLY IF
REGISTERED AND QUALIFIED PURSUANT TO THE
RELEVANT PROVISIONS OF FEDERAL AND STATE
SECURITIES OR BLUE SKY LAWS OR IF AN EXEMPTION
FROM SUCH REGISTRATION OR QUALIFICATION IS
APPLICABLE.
3.30 Full Disclosure. No representation, warranty or other statement of
---------------
Seller contained in this Agreement or any of the Ancillary Agreements is false
or materially misleading or contains any untrue statement of a fact or omits to
state a fact necessary in order to make the statements contained herein or
therein not misleading..
3.31 Seller's Knowledge. When the term "Seller's knowledge or
------------------
Shareholder's knowledge" is used in this Agreement, such term shall mean the
current actual knowledge of Shareholder.
3.32 No Other Warranties or Representations. Except for the warranties and
--------------------------------------
representations set forth in Sections 3.1 through 3.31, above, and the
representations of Shareholder set forth in Sections 4.1 through 4.6, below,
neither Seller nor Shareholder makes any warranties or representations
whatsoever, whether express or implied. Neither Seller nor Shareholder makes
any warranties or representations with respect to that certain Confidential
Memorandum prepared by GulfStar Group and/or Seller and previously provided to
Purchaser, including, without limitation, any projections relating to future
financial performance of the Business.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
---------------------------------------------
Shareholder represents and warrants to Purchaser that the following
statements are true and correct and not materially misleading as of the
Effective Date:
4.1 Authorization. Shareholder has full power, authority and legal right
-------------
and capacity to enter into this Agreement and each of the Ancillary Agreements
to which he is a party, to perform his obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby.
4.2 Due Execution and Delivery; Binding Obligations. This Agreement and
-----------------------------------------------
each of the Ancillary Agreements have been duly executed and delivered by
Shareholder, to the extent he is a party hereto and thereto. This Agreement and
each of the Ancillary Agreements constitute the legal, valid and binding
agreements and obligations of Shareholder, to the extent he is a party hereto
and thereto, enforceable against him in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or conveyance or similar Laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability and except as rights of indemnity or contribution may be limited
by federal or state securities or other Laws or the public policy underlying
such Laws.
22
<PAGE>
4.3 No Conflict or Violation. Assuming the Seller Required Consents are
------------------------
obtained and all indebtedness of Seller for borrowed money is repaid at the
Closing, neither the execution and delivery of this Agreement or any of the
Ancillary Agreements to which Shareholder is a party, nor his consummation of
the transactions contemplated hereby or thereby, nor the fulfillment of, or
compliance with the terms and conditions of any of the foregoing, will result in
(a) a material breach of, or a material default (or an event which, with notice
or lapse of time or both would constitute a material default) under or result in
the termination of, or accelerate the performance required by, or create a right
of termination or acceleration under, any material contract, agreement,
instrument, license, Encumbrance or Permit to which he is a party or by which
his assets are bound or affected, or (b) to Shareholder's knowledge, a violation
of any Law, order, judgment, writ, injunction, decree or award to which he is
subject or a party to or by which he or his assets are bound.
4.4 Consents and Approvals. Except for the Seller Required Consents, no
----------------------
consent, permit, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, or to Shareholder's
knowledge, any other person or entity, is required to be obtained or made by
Shareholder in connection with his execution, delivery and performance of this
Agreement and any of the Ancillary Agreements to which he is a party or the
consummation of the transactions contemplated hereby or thereby in accordance
with the provisions hereof and thereof.
4.5 Seller's Representations and Warranties. All of the representations
---------------------------------------
and warranties of Seller contained herein and in each of the Ancillary
Agreements to which it is a party are true and correct and not materially
misleading.
4.6 Full Disclosure. No representation, warranty or other statement of
---------------
Seller or Shareholder contained in this Agreement or any of the Ancillary
Agreements is false or materially misleading or contains any untrue statement of
a fact or omits to state a fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to Seller that the following statements
are true and correct and not materially misleading as of the Effective Date and
will be true and correct and not materially misleading at all times thereafter
up to and including the Closing Date:
5.1 Organization. Purchaser is a corporation duly incorporated, validly
------------
existing and in good standing under the Laws of the State of California.
Purchaser has the requisite corporate power and authority to own and operate its
business and to carry on its business as presently conducted.
5.2 Authorization. Purchaser has the requisite corporate power, authority
-------------
and legal right and capacity to enter into this Agreement and the Ancillary
Agreements to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by Purchaser of this Agreement and the
Ancillary Agreements to which it is a party have been duly authorized by all
necessary corporate
23
<PAGE>
action on the part of Purchaser to make this Agreement and the Ancillary
Agreements to which it is a party valid and binding upon Purchaser in accordance
with their respective terms.
5.3 Due Execution and Delivery; Binding Obligations. This Agreement and
-----------------------------------------------
each of the Ancillary Agreements have been duly executed and delivered by
Purchaser, to the extent Purchaser is a party hereto or thereto. This Agreement
and each of the Ancillary Agreements constitute the valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their
respective terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or conveyance or
similar Laws relating to or limiting creditors' rights generally or by equitable
principles relating to enforceability and except as rights of indemnity or
contribution may be limited by federal or state securities or other Laws or the
public policy underlying such Laws.
5.4 No Conflict or Violation. Assuming the Purchaser Required Consents
------------------------
are obtained, neither the execution and delivery of this Agreement and the
Ancillary Agreements to which Purchaser is a party, nor the consummation of the
transactions contemplated hereby and thereby, will result in (a) a violation of,
or a conflict with, Purchaser's charter documents, any subscription,
shareholders' or similar types of agreements or understandings, or any credit
facility or other financing document to which Purchaser is a party; (b) to
Purchaser's knowledge, a violation by Purchaser of any Law; or (c) to
Purchaser's knowledge, a violation by Purchaser of any order, judgment, writ,
injunction decree or award to which Purchaser is a party.
5.5 Consents and Approvals. Except as set forth on Schedule 5.5 hereto
---------------------- ------------
(the "Purchaser Required Consents"), no consent, permit, approval or
---------------------------
authorization of, or declaration, filing, application, transfer or registration
with, any governmental or regulatory authority, or to Purchaser's knowledge, any
other person or entity is required to be made or obtained by Purchaser by virtue
of its execution, delivery and performance of this Agreement, any of the
Ancillary Agreements or Purchaser's consummation of the transactions
contemplated hereby or thereby.
5.6 Financial Statements and Other Information. Purchaser has furnished
------------------------------------------
or made available to Seller copies of its annual report and Form 10-K for the
fiscal year ended July 31, 1997, as well as its Form 10-Q for the quarter ended
October 31, 1997 (collectively, the "Purchaser Reports"). The financial
-----------------
statements set forth in the Purchaser Report dated October 31, 1997 (the "Most
----
Recent Purchaser Report") fairly present the financial condition and results of
- -----------------------
operations of Purchaser as of, and for the periods ended on, the dates set forth
in such Purchaser Report. As of their respective dates of filing, each of the
Purchaser Reports was true, correct, complete and accurate in all material
respects and was not materially misleading in any respect.
5.7 Compliance with Securities Laws. Purchaser has complied in all
-------------------------------
material respects with all applicable securities Laws pertaining to the issuance
of all of its currently outstanding capital stock and has fully and timely filed
all material reports and filings required by applicable securities Laws.
5.8 No Material Adverse Change. Since the date of the Most Recent
--------------------------
Purchaser Report, there has been no material adverse change in the financial
condition or results of operations of Purchaser.
24
<PAGE>
5.9 Financing Available for Additional Consideration. Purchaser
------------------------------------------------
reasonably anticipates, although no assurances can be given, that on each of
the Additional Consideration Payment Dates, Purchaser shall have cash in hand
and/or financing arrangements in place through institutional lenders in an
amount sufficient to pay all sums due to Seller on such date.
5.10 Purchaser's Investigation. Purchaser has had the opportunity to
-------------------------
review the Schedules, talk with representatives of Seller's customers and
Lawson, talk with Seller's employees, and review Seller's Books and Records
prior to the execution of this Agreement and is not aware of any facts or
circumstances which would violate any of the warranties or representations of
Seller or Shareholder in this Agreement.
ARTICLE 6
THE CLOSING
-----------
6.1 Closing. The closing of the sale and purchase of the Purchased Assets
-------
(the "Closing" or "Closing Date") shall take place at the offices of Graves,
------- ------------
Dougherty, Hearon & Moody, 515 Congress Avenue, Austin, Texas at 10:00 a.m.
local time on the Effective Date.
6.2 Seller's Obligations. Seller and Shareholder are hereby delivering to
--------------------
Purchaser the following:
(a) The Bill of Sale in the form of Exhibit G hereto and such other
---------
instruments of transfer which shall be reasonably necessary to transfer to
Purchaser all of Seller's right, title and interest in and to the Purchased
Assets, all in form and substance reasonably satisfactory to Purchaser and duly
executed by Seller;
(b) The Assignment and Assumption Agreement in the form of Exhibit H
---------
hereto (the "Assignment and Assumption Agreement"), duly executed by Seller;
-----------------------------------
(c) Properly executed and acknowledged titles and other instruments of
transfer to all Vehicles;
(d) Such evidence which Seller shall possess of the Seller Required
Consents having been obtained (to the extent they have been obtained);
(e) The Escrow Agreement referred to in Section 2.6, above, duly
executed by Seller and the Escrow Agent;
(f) An executed employment agreement from Michael G. McCarthy in the
form of Exhibit I hereto (the "Executive Employment Agreement");
--------- ------------------------------
(g) The employment agreements in substantially the form attached
hereto as Exhibit J (the "Other Employment Agreements"), duly executed by Seller
--------- ---------------------------
and each of the following persons: John Davidson, Ruth Davidson and Robert
Harris;
25
<PAGE>
(h) The registration rights agreement in the form of Exhibit K hereto
---------
(the "Registration Rights Agreement"), duly executed by Seller and the Escrow
-----------------------------
Agent;
(i) An originally executed amendment to Seller's Articles of
Incorporation, for filing by Purchaser, amending Seller's Articles of
Incorporation to amend the name of such Seller to a name other than "S3G, Inc.,"
"Spectrum Software Services Group, Inc." or any variant thereof;
(j) A legal opinion from Graves, Dougherty, Hearon & Moody, P.C.,
counsel for Seller, dated the Closing Date, in the form attached as Exhibit L.
---------
(k) A search for UCC-1 filings, federal Tax liens and state Tax liens
on file in the office of the Secretary of State of the State of Texas. Seller
shall deliver the search to Purchaser before the Closing, as well as any UCC
termination statements or other documents required to terminate any liens
created by the UCC-1 filings to the extent the same pertain to the Purchased
Assets; and
(l) All Books and Records and other data relating to the Business
(which shall be delivered at the offices of Seller).
6.3 Purchaser's Obligations. Purchaser is hereby delivering to Seller the
-----------------------
following:
(a) The Assignment and Assumption Agreement, duly executed by
Purchaser;
(b) Cash by wire transfer to Seller's account, in the amount set in
Section 2.5(a)(ii) hereto, as contemplated under Section 2.5(a)(ii), above;
(c) A letter to U.S. Stock Transfer Co., instructing it to deliver to
(i) the Escrow Agent, on behalf of Seller, stock certificates certifying that
Seller is the record holders of the Escrow Shares, and (ii) to Seller, stock
certificates certifying that Seller is the record holder of the remaining
Initial DPRC Shares, as contemplated under Sections 2.5(a)(iii) and 2.6, above;
(d) Cash by wire transfer to Seller's and Shareholder's accounts, in
the amount set forth opposite each of such person's name on Schedule 2.5(a)(iv),
-------------------
hereto, as contemplated by Section 2.5(a)(iv), above;
(e) Such evidence when Purchaser shows proof of the Purchaser Required
Consents having been obtained (to the extent they have been obtained);
(f) The Escrow Agreement referred to in Section 2.6, above, duly
executed by Purchaser;
(g) The Executive Employment Agreement and the Other Employment
Agreements, duly executed by Purchaser;
(h) The Registration Rights Agreement, duly executed by Purchaser; and
26
<PAGE>
(i) The opinion of Purchaser's counsel, Riordan & McKinzie, in the
form of attached as Exhibit M.
---------
ARTICLE 7
POST CLOSING
------------
7.1 Survival of Representations and Warranties. Regardless of any
------------------------------------------
investigation at any time made by or on behalf of any party, or of any
information any party may have in respect thereof, all representations and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing Date for a period of
two years, except all representations and warranties with respect to ownership
of the Purchased Assets shall survive indefinitely and all representations and
warranties regarding Tax matters shall survive until the close of business on
the 120th day following the expiration of the applicable statute of limitations
(each, a "Survival Date").
-------------
7.2 Indemnification Obligations.
---------------------------
(a) Indemnification by Seller and Shareholder. From and after
-----------------------------------------
Closing, Seller and Shareholder, jointly and severally, shall indemnify, defend
and hold harmless Purchaser and any of its affiliates and their respective
Representatives, and their respective heirs, executors, administrators,
successors and assigns (collectively, "Purchaser Representatives"), and shall
-------------------------
reimburse Purchaser and any of its affiliates and Purchaser Representatives, on
demand, for any Damages resulting from any of the following:
(i) The Excluded Liabilities;
(ii) Any breach or default in the performance by Seller or
Shareholder of any covenant or agreement of Seller or Shareholder contained
herein, in any agreement contemplated hereby, or in any Schedule or Exhibit
hereto or thereto, or in any certificate or other instrument delivered or to be
delivered by or on behalf of Seller or Shareholder pursuant hereto or thereto;
(iii) Any breach of warranty or inaccurate or erroneous
representation made by Seller or Shareholder herein, in any agreement
contemplated hereby, or in any Schedule or Exhibit hereto or thereto, or in any
certificate or other instrument delivered or to be delivered by or on behalf of
Seller or Shareholder pursuant hereto or thereto; or
(iv) Purchaser's failure to comply with any applicable bulk
sale or transfer Law.
(b) Indemnification by Purchaser. From and after Closing, Purchaser
----------------------------
shall indemnify, defend and hold harmless Seller and Shareholder, and any of
their affiliates and their respective Representatives, and their respective
heirs, executors, administrators, successors and assigns (collectively, "Seller
------
Representatives"), and shall reimburse Seller and Shareholder, and any of their
- ---------------
respective affiliates and Seller Representatives, on demand, for any Damages
resulting from any of the following:
27
<PAGE>
(i) The Assumed Liabilities;
(ii) Any breach or default in the performance by Purchaser of
any covenant or agreement of Purchaser contained herein, in any agreement
contemplated hereby, or in any Schedule or Exhibit hereto or thereto, or in any
certificate or other instrument delivered or to be delivered by or on behalf of
Purchaser pursuant hereto or thereto;
(iii) Any breach of warranty or inaccurate or erroneous
representation made by Purchaser herein, in any agreement contemplated hereby,
or in any Schedule or Exhibit hereto or thereto, or in any certificate or other
instrument delivered or to be delivered by or on behalf of Purchaser pursuant
hereto or thereto; or
(iv) The operation of the Business by Purchaser on or after the
Closing Date.
(c) Notice of Claims for Indemnity. Whenever a claim for Damages
------------------------------
shall arise for which one party ("Indemnitee") shall be entitled to
----------
indemnification hereunder, Indemnitee shall notify the other party
("Indemnitor") in writing as soon as practicable following receipt of notice of
----------
such claim, and in any event within such shorter period as may be necessary for
Indemnitor to take appropriate action to resist such claim. Such notice shall
specify all facts known to Indemnitee giving rise to such indemnity rights,
including the estimated amount of Damages.
(d) Claims Between the Parties. Upon receipt of any request for
--------------------------
indemnification with respect to a claim by Indemnitee directly against
Indemnitor (rather than to a claim for indemnification with respect to a claim
brought against Indemnitee by a third party), Indemnitor shall, within 30 days
of the mailing of Indemnitee's notice setting forth such request for
indemnification, either (a) agree in writing to such indemnification request, or
(b) if Indemnitor believes in good faith that it is not obligated to indemnify
Indemnitee with respect to such claim, provide Indemnitee with written notice
setting forth the basis for such objection in reasonable detail. If Indemnitor
fails to respond to Indemnitee's written request within such 30-day period,
Indemnitee's right to indemnification, as set forth in Indemnitee's notice to
Indemnitor, shall be deemed agreed to by Indemnitor. If Indemnitor timely
objects to Indemnitee's request for indemnification, Indemnitor and Indemnitee
shall meet and confer and attempt to resolve such dispute through good faith
negotiations. If they are unable to resolve such dispute within 20 days (or such
longer period as Indemnitor and Indemnitee may agree) of delivery of
Indemnitor's written objection, such dispute shall be settled by binding
arbitration before a single arbitrator in (i) the County of Travis, State of
Texas, if Purchaser (or a Purchaser Representative) is Indemnitee, and (ii)
Orange County, California, if Seller or a Shareholder (or a Shareholder
Representative) is Indemnitee. Such proceedings shall be conducted by the
American Arbitration Association pursuant to such organization's rules for
commercial disputes, and any rights of indemnification established by reason of
such settlement, compromise or arbitration shall promptly thereafter be paid and
satisfied by Indemnitor.
(e) Indemnification With Respect to Third Party Claims. Upon receipt
--------------------------------------------------
by Indemnitor of a notice from Indemnitee with respect to any claim of a third
party against Indemnitee with respect to which Indemnitee requests to be
indemnified by Indemnitor, Indemnitor shall, within 20 days of the mailing of
Indemnitee's notice setting forth such request for indemnification, either (a)
28
<PAGE>
agree in writing to assume the defense of such third party claim, or (b) if
Indemnitor believes in good faith that it is not obligated to indemnify
Indemnitee with respect to such third party claim, provide Indemnitee with
written notice setting forth the basis for such objection in reasonable detail.
If Indemnitor fails to respond to Indemnitee's written request within such 20
day period, Indemnitee's right to indemnification, as set forth in Indemnitee's
notice to Indemnitor, shall be deemed agreed to by Indemnitor. In the event
Indemnitor timely objects to Indemnitee's request for indemnification,
Indemnitor and Indemnitee shall meet and confer and attempt to resolve such
dispute through good faith negotiations. If they are unable to resolve such
dispute within 20 days (or such longer period as Indemnitor and Indemnitee may
agree) of delivery of Indemnitor's written objection, such dispute shall be
settled by binding arbitration before a single arbitrator in (i) the County of
Travis, State of Texas, if Purchaser (or a Purchaser Representative) is
Indemnitee, and (ii) Orange County, California, if Seller or a Shareholder (or a
Shareholder Representative) is Indemnitee. Such proceedings shall be conducted
by the American Arbitration Association pursuant to such organization's rules
for commercial disputes, and any rights of indemnification established by reason
of such settlement, compromise or arbitration shall promptly thereafter be paid
and satisfied by Indemnitor. In the event it is determined that Indemnitor is
required to indemnify Indemnitee, Indemnitor shall assume the defense of such
third party claim with counsel reasonably satisfactory to Indemnitee, and
Indemnitee shall cooperate to the extent reasonably requested by Indemnitor in
defense or prosecution thereof and shall furnish such records, information and
testimony and attend all such conferences, discovery proceedings, hearings,
trials and appeals as may be reasonably requested by Indemnitor in connection
therewith. If Indemnitor has agreed to indemnify Indemnitee and has assumed the
defense of any such third party claim, (A) Indemnitee shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of Indemnitee, and (B) Indemnitor shall have the
right to settle any claim for which indemnification has been sought and is
available hereunder; provided, however, that, to the extent that such settlement
-------- -------
requires Indemnitee to take, or prohibits Indemnitee from taking, any action or
purports to obligate Indemnitee, then Indemnitor shall not settle such claim
without the prior written consent of Indemnitee. If Indemnitor does not assume
the defense of any third party claim for which it is obligated to provide
indemnification hereunder, Indemnitee may assume control of the defense of such
claim through counsel of its choice at Indemnitor's expense and shall have
control over the litigation and authority to resolve such claim. If action is
required to be taken with respect to any third party claim prior to the
determination of Indemnitor's obligations hereunder, Indemnitee may assume
control of the defense of such claim through counsel of its choice until such
time as Indemnitor's obligations hereunder are determined; provided, however,
-------- -------
that Indemnitor shall not be liable hereunder for any settlement of such claim
without Indemnitor's prior written consent unless and until it is determined
that Indemnitor is obligated hereunder to provide indemnification with respect
thereto and refuses or fails to assume the defense of such claim.
(f) Rights Under Escrow Agreement. To the extent that any claims for
-----------------------------
indemnification under this Section 7 are (i) not contested by Seller or
Shareholder as set forth above, or (ii) finally adjudicated by arbitration as
provided above, Purchaser shall have the right to satisfy and discharge the same
by payment, compromise or otherwise, in accordance with the procedures set forth
in the Escrow Agreement. The rights, benefits, privileges, liabilities,
obligations and commitments of Purchaser, Seller and Shareholder, under and
pursuant to the Escrow Agreement are more specifically described therein and
incorporated herein by this reference.
29
<PAGE>
(g) Limitations on Warranty Claims. Notwithstanding anything to the
------------------------------
contrary in Sections 7.2(a) and (b), above, the parties agree that Indemnitor
shall not be obligated to indemnify Indemnitee for any Damages caused by or
arising out of, and Indemnitee shall not be entitled to make any claim for
Damages due to, any breach of warranty or inaccurate or erroneous representation
made by Indemnitor herein (other than ownership of the Purchased Assets and Tax
matters), in any agreement contemplated hereby, or in any Schedule or Exhibit
hereto or thereto, or in any certificate or other instrument delivered or to be
delivered by or on behalf of Indemnitor pursuant hereto or thereto
(collectively, "Warranty Claims"), unless and until the amount of all claims for
---------------
Damages caused by or arising out of Warranty Claims, in the aggregate, shall be
equal to $100,000, in which case Indemnitee shall indemnify Indemnitor for all
Damages then sustained or incurred by Indemnitor including such initial $100,000
in Damages. The rights of indemnification under this Article 7 shall be the
sole remedy of the parties with respect to any breach of a warranty set forth in
this Agreement or any Ancillary Agreement.
(h) Excluded Liabilities. The parties acknowledge that Purchaser has
--------------------
asked for and received certain warranties and representations from Seller in
Sections 3.1 through 3.29, above, which may cover or pertain to certain of the
Excluded Liabilities. Purchaser and Seller agree that, notwithstanding anything
set forth in this Agreement to the contrary, in the event that any of the
warranties or representations of Seller would otherwise be breached or violated
solely as the result of the existence of a liability constituting an Excluded
Liability, no "Damages" as defined in this Agreement, shall be deemed to occur
in the event that Seller or Shareholder defended Purchaser against such Excluded
Liability, and such Excluded Liability is paid by Seller or Shareholder in
accordance with its terms or promptly following receipt by Seller of notice of
its existence or after any appropriate contest of such liability (in which
Purchaser is not a party) is finally resolved.
7.3 Extent of Operational Autonomy. Purchaser hereby acknowledges
------------------------------
Shareholder's need to retain reasonable autonomy in making operational and
financial decisions regarding the conduct of the Business during the 1998
calendar year in order to earn the Additional Consideration. Shareholder
acknowledges, however, that Shareholder's autonomy will necessarily be subject
to such limitations and controls as may be appropriate (i) in light of the
Business' status as a division within a public company, and (ii) to ensure
appropriate oversight of the Business' activities. Accordingly, Purchaser
agrees to not unreasonably interfere with Shareholder's operation of the
Business during the 1998 calendar year so as to adversely impact his ability to
earn the Additional Consideration, subject, however, to (A) providing for the
achievement of specified minimum performance levels (e.g., revenues, gross
margins and operating profits) which, if not met, may justify involvement by
Purchaser in the operation of the Business, (B) setting operational standards to
ensure that the long-term prospects of the Business are not being sacrificed for
short term gains (e.g., establishing marketing and equipment maintenance
budgets), (C) ensuring coordination of the Business' operations with those of
Purchaser (e.g., establish requirements for budgeting, financial reporting and
working capital management), and (D) ensuring that the Business complies with
all applicable Laws, as reasonably determined by Purchaser.
7.4 Stock Options. At the next meeting of the Compensation Committee of
-------------
Purchaser after the Closing Date, each of the persons set forth on Schedule 7.4
------------
hereto shall be granted, under Purchaser's 1994 Stock Option Plan, as amended
(the "Plan"), options to purchase the number of shares of DPRC Common Shares set
----
forth opposite such person's name on Schedule 7.4 hereto. The
------------
30
<PAGE>
exercise price of each such option shall be the fair market value of the DPRC
Common Shares at the date of grant, as determined by the Plan (i.e., the closing
price of the DPRC Common Shares for the last preceding day on which Purchaser's
shares were traded).
7.5 Employees and Contractors. Seller acknowledges that, effective
-------------------------
immediately after the Closing, Purchaser intends to hire all or substantially
all of Seller's employees and contractors who work primarily for the Business,
as Purchaser's employees and contractors on terms and conditions which are, in
the aggregate, no less favorable than those provided by Seller as of the Closing
Date, including, without limitation, employee benefit plans and benefit
arrangements which, in the aggregate, are at least comparable to such employee
benefit plans and benefit arrangements as are currently provided by Seller to
the Transferred Employees. Seller will cooperate fully in providing the
necessary information or to perform any other duties as may be reasonably
requested by Purchaser to accomplish this result. Any current employee or
contractor of Seller who shall be hired by Purchaser shall be referred to herein
as a "Transferred Employee." Each Transferred Employee shall be terminated by
--------------------
Seller immediately prior to the Closing Date and deemed a "new hire" by
Purchaser. Purchaser shall take such reasonable actions as are necessary to
allow employees of Seller to participate in the benefit programs of Purchaser
or, to the extent permitted by, and subject to compliance with, applicable Law,
continue the plans of Seller (as assumed by Purchaser) as Shareholder may
determine through June 30, 1998, and, after June 30, 1998, Purchaser may
determine after first consulting with Shareholder. For purposes of satisfying
the terms and conditions of such programs, to the extent permitted by its
benefit programs or applicable Law, Purchaser shall give full credit for
eligibility, vesting and benefit accrual for each participant's period of
service with Seller and, if necessary to give such credit, shall amend its
benefit programs. It is the intention of the parties that the benefit programs
applicable to the Transferred Employees after the Closing, either be identical
to the benefit programs existing prior to the Closing or resemble the same
benefit programs as reasonably possible.
7.6 Further Assurances. Seller, at any time on or after the Closing Date,
------------------
will execute, acknowledge and deliver any further assignments and other
assurances, documents and instruments of transfer, reasonably requested by
Purchaser, and will take any other action that may be requested by Purchaser,
for the purpose of assigning, transferring, granting, conveying and confirming
to Purchaser, or reducing to possession, any or all property to be conveyed and
transferred by this Agreement.
7.7 Expenses. Seller will be solely responsible for and bear all of their
--------
respective cost and expenses, including, without limitation, expenses of legal
counsel, accountants, brokers, finders and other advisors, incurred in
connection with evaluating, negotiating and consummating the proposed
transaction incident to this Agreement. Purchaser will be solely responsible
for and bear all of its cost and expenses, including, without limitation,
expenses of legal counsel, accountants, brokers, finders and other advisors,
incurred in connection with evaluating, negotiating and consummating the
proposed transaction incident to this Agreement.
31
<PAGE>
ARTICLE 8
MISCELLANEOUS PROVISIONS
------------------------
8.1 Entire Agreement. This Agreement, together with the agreements
----------------
referred to herein and in the Schedules and Exhibits hereto and thereto, set
forth the entire agreement between the parties with regard to the subject matter
of this Agreement. All agreements, covenants, representations and warranties,
express or implied, oral and written, of the parties with regard to the subject
matter of this Agreement (including, without limitation, the letter of intent
between the parties dated December 5, 1997) are contained in this Agreement, in
the Schedules and Exhibits to this Agreement, and the documents referred to or
implementing the provisions of this Agreement. This is an integrated agreement.
8.2 Governing Law. The validity, construction and performance of this
-------------
Agreement, and any Action arising out of or relating to this Agreement (except
for any disputes relating to the Noncompetition Agreement, the Employment
Agreement and the Other Employment Agreements), shall be governed by the Laws,
without regard to the Laws as to choice or conflict of Laws, of the State of
California. The validity, construction and performance of the Noncompetition
Agreement, the Employment Agreement and the Other Employment Agreements, and any
Action arising out of or relating to any of the foregoing, shall be governed by
the Laws, without regard to the Laws as to choice or conflict of Laws, of the
State of Texas. Each party agrees to accept service of process in any such
Action in the manner provided for in Section 8.7, below.
8.3 Interpretation. The language in all parts of this Agreement and each
--------------
of the other Ancillary Agreements shall be in all cases construed simply
according to its fair meaning and not strictly for or against any party.
Whenever the context requires, all words used in the singular will be construed
to have been used in the plural, and vice versa, and each gender will include
any other gender. The captions of the Sections and Subsections of this
Agreement are for convenience only and shall not affect the construction or
interpretation of any of the provisions of this Agreement. All information of a
party contained in such party's Schedules hereto shall be deemed integrated into
and disclosed in all of such party's other Schedules, without the necessity of
any cross reference.
8.4 Dispute Resolution. Except to the extent that a specific dispute
------------------
resolution mechanism is specified in this Agreement, the parties agree that all
controversies or claims arising out of or relating to this Agreement or the
Ancillary Agreements shall be resolved as follows:
(a) The parties will first attempt in good faith to promptly resolve
any such controversy or claim by negotiations between senior executives of such
parties who have the actual authority to settle the controversy. The disputing
party shall give the other party and, if applicable, the Escrow Agent, written
notice of the dispute. Within 20 days after receipt of such notice, the
receiving party shall submit to the other and, if applicable, the Escrow Agent,
a written response. The notice and response shall include (i) a statement of
each party's position and a summary of the evidence and arguments supporting its
position, and (ii) the name and title of the executive who will represent that
party. The executive shall meet at a mutually acceptable time and place within
30 days of the date of the disputing party's notice and thereafter as often as
they reasonably deem necessary to exchange relevant information and to attempt
to resolve the dispute.
32
<PAGE>
(b) If the matter has not been resolved by the disputing parties
within 60 days after the disputing party's notice, or if the party receiving
such notice will not agree to meet with the disputing party within 30 days after
its receipt of such notice, either party may initiate mediation of the
controversy or claim in accordance with the Commercial Mediation Rules of the
American Arbitration Association.
(c) If the matter has not been resolved pursuant to the mediation
procedure referred to in Section 8.4(b), above, within 60 days of the initiation
of such procedure, or if either party will not participate in a mediation, then
the aggrieved party may, by notice as herein provided, require that the dispute
be submitted under the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") then in effect, provided, further, that the arbitration
--- -------- -------
provisions of this Agreement shall govern over any conflicting rules which may
now or hereafter be contained in the AAA rules. To the extent, and only to the
extent, that the particular dispute is to be determined by arbitration
hereunder, each party knowingly waives that party's right to a jury trial with
respect to such dispute by agreeing to the resolution of such dispute by
arbitration pursuant to the provisions of this Agreement.
(i) Binding Affect. No later than 60 days from the date of
--------------
closing of the arbitration hearing, or, if an oral hearing has been waived, from
the date of transmitting final statements and proofs to the arbitrator, the
arbitrator shall prepare and provide to the parties a written decision (the
"Decision") on all matter(s) which are the subject of the arbitration, including
--------
the findings of fact and the conclusions of law which are the basis of the
Decision of the arbitrator. The arbitrator shall have the authority to grant any
equitable and legal remedies that would be available in any judicial proceeding
brought in such jurisdiction; provided, however, that the arbitrator shall not
-------- -------
have the power to grant punitive damages. Any judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction over the
subject matter thereof. The Decision shall be binding upon the parties.
(ii) Compensation of Arbitrator. Any such arbitration shall be
--------------------------
conducted before a single arbitrator who will be compensated for his or her
services at a rate to be determined by the parties and by the AAA, but based
upon reasonable hourly or daily consulting rates for the arbitrator in the event
the parties are not able to agree upon his or her rate of compensation.
(iii) Selection of Arbitrator. The parties shall use their best
-----------------------
efforts to agree upon a mutually satisfactory arbitrator. If, however, the
parties are unable to agree upon the arbitrator, then the AAA shall have the
authority to select an arbitrator from a list of arbitrators who are partners in
a major law firm; provided, however, that neither the law firm nor the
-------- -------
individual arbitrator shall be a firm or individual that has within the last
three years rendered, or is then rendering, services to any party or, also in
the case of a law firm, a firm or an individual lawyer, who has appeared, or is
then appearing, as counsel of record in opposition to any party; provided,
--------
further, that the individual arbitrator cannot have any other prior relationship
- -------
or affiliation to the disputing parties or any of their officers, directors or
employees which is likely to affect or compromise the arbitrator's independence.
(iv) Limited Discovery. The parties shall be permitted
-----------------
reasonable discover under the rules set by the arbitrator. The arbitrator shall
have power to impose such sanctions as the
33
<PAGE>
arbitrator deems appropriate for failure of a party or counsel for a party to
comply in good faith with the discovery rules established by the arbitrator.
(v) Payment of Costs. The parties will share responsibility
----------------
for the attorneys' fees and costs and all costs of arbitration, including those
provided for above, based on the degree to which the arbitrator accepts the
respective positions of the parties, as conclusively determined by the
arbitrator.
(vi) Terms of Arbitration. The arbitrator chosen in accordance
--------------------
with these provisions shall not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions, or any other documents that
are executed in connection therewith.
Negotiation, mediation or arbitration under this Section 8.4(c) shall be the
sole and exclusive remedy of the parties for any claim arising out of this
Agreement for which a specific dispute resolution or mechanism is not otherwise
applicable, provided, however, that a party may seek a preliminary injunction or
-------- -------
other preliminary relief if in its judgment such Action is necessary to avoid
irreparable damages. Any such Action may only be brought in (i) the County of
Travis, State of Texas, if Purchaser (or a Purchaser Representative) is
plaintiff (or the equivalent), and (ii) Orange County, California, if Seller or
a Shareholder (or a Shareholder Representative) is the plaintiff (or the
equivalent). Despite such Action, the parties will continue to participate in
good faith in the procedures specified in this Section 8.4.
8.5 Waiver and Amendment. This Agreement may be amended, supplemented,
--------------------
modified and/or rescinded only through an express written instrument signed by
all parties or their respective successors and permitted assigns. Any party may
specifically and expressly waive in writing any portion of this Agreement or any
breach hereof, but only to the extent such provision is for the benefit of the
waiving party, and no such waiver shall constitute a further or continuing
waiver of any preceding or succeeding breach of the same or any other provision.
The consent by one party to any act for which such consent was required shall
not be deemed to imply consent or waiver of the necessity of obtaining such
consent for the same or similar acts in the future, and no forbearance by a
party to seek a remedy for noncompliance or breach by another party shall be
construed as a waiver of any right or remedy with respect to such noncompliance
or breach.
8.6 Assignment. Except as specifically provided otherwise in this
----------
Agreement, neither this Agreement nor any interest herein shall be assignable
(voluntarily, involuntarily, by judicial process, operation of Law or
otherwise), in whole or in part, by any party without the prior written consent
of all other parties. Any attempt at such an assignment without such consent
shall be void and, at the option of the non-consenting party, shall be an
incurable breach of this Agreement resulting in the termination of this
Agreement. Purchaser may, without the consent of Seller and Shareholder, assign
all of its rights and obligations under this Agreement to any affiliate of
Purchaser, but in such event Purchaser shall remain fully liable as a primary
party under this Agreement and such assignment shall in no way relieve Purchaser
from any liability under this Agreement. After the Closing Date, Seller may,
without the consent of Purchaser, assign any of its rights under this Agreement
or any of the Ancillary Agreements to Shareholder provided that Shareholder
agrees to be bound by all of Seller's liabilities, obligations and commitments
hereunder or thereunder as if it were Seller hereunder.
34
<PAGE>
8.7 Successors and Assigns. Each of the terms, provisions and
----------------------
obligations of this Agreement shall be binding upon, shall inure to the benefit
of, and shall be enforceable by the parties and their respective legal
representatives, successors and permitted assigns.
8.8 Notices. All notices, requests, demands and other communications
-------
made under this Agreement shall be in writing, correctly addressed to the
recipient at the addresses set forth under such recipient's signature on the
signature page hereto and shall be deemed to have been duly given; (a) upon
delivery, if served personally on the party to whom notice is to be given; or
(b) on the date or receipt, refusal or non-delivery indicated on the receipt if
mailed to the party to whom notice is to be given by first class mail,
registered or certified, postage prepaid, or by air courier. Any party may give
written notice of a change of address in accordance with the provisions of this
Section 8.8 and after such notice of change has been received, any subsequent
notice shall be given to such party in the manner described at such new address.
8.9 Severability. Each provision of this Agreement is intended to be
------------
severable. Should any provision of this Agreement or the application thereof be
judicially declared to be or becomes illegal, invalid, unenforceable or void,
the remainder of this Agreement will continue in full force and effect and the
application of such provision to other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto.
8.10 Further Action. Each party agrees to perform any further acts and to
--------------
execute and deliver any other documents which may be reasonably necessary to
effect the provisions of this Agreement.
8.11 Specific Performance. Each party's obligations under this Agreement
--------------------
are unique. If any party should default in any of its obligations under this
Agreement, the parties each acknowledge that it would be impracticable to
measure the resulting damages. Accordingly, without prejudice to the right to
seek and recover monetary damages, each nondefaulting party shall be entitled to
sue in equity for specific performance of this Agreement or other injunctive
relief, and each party hereby waives any defense that a remedy in damages would
be adequate.
8.12 Cumulative Remedies. No remedy made available hereunder by any of
-------------------
the provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise.
8.13 Warranty of Authority. Each of the individuals signing this
---------------------
Agreement on behalf of a party hereto warrants and represents that such
individual is duly authorized and empowered to enter into this Agreement and
bind such party hereto.
[rest of page intentionally left blank]
35
<PAGE>
8.14 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the Closing Date.
"PURCHASER": "SELLER":
DATA PROCESSING S3G, INC.,
RESOURCES CORPORATION, a Texas corporation
a California corporation
By: /s/ Michael A. Piraino By: /s/ Michael G. McCarthy
--------------------------- ---------------------------
Its: Chief Financial Officer Michael G. McCarthy
-------------------------- President
Address:
- ------- Address:
4400 MacArthur Boulevard -------
Suite 600 13581 Pond Springs Road
Newport Beach, CA 92660-2037 Suite 103
Phone No.: (714) 752-9111 Austin, TX 78729
FAX No.: (714) 752-5850 Phone No.: (512) 219-7200
FAX No.: (512) 219-7900
"SHAREHOLDER":
/s/ Michael G. McCarthy
-------------------------------
MICHAEL G. McCARTHY
Address:
-------
c/o S3G, Inc.
13581 Pond Springs Road
Suite 103
Austin, TX 78729
Phone No.: (512) 219-7200
FAX No.: (512) 219-7900
36
<PAGE>
Exhibit 2.2
-----------
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
---------
into as of this 27th day of January 1998, by and between Data Processing
Resources Corporation, a California corporation (the "Company"), and S3G, Inc.,
-------
a Texas corporation ("Seller").
------
R E C I T A L S
- - - - - - - -
A. The Company, Seller and Michael G. McCarthy have entered into an
Agreement of Purchase and Sale of Assets of even date herewith (the "Purchase
--------
Agreement"), pursuant to which Purchaser is acquiring substantially all of the
- ---------
assets of Seller.
B. The Company has issued to Seller shares of the common stock of the
Company (the "Initial DPRC Shares"), and may subsequently issue additional
-------------------
shares of the common stock of the Company (the "Additional DPRC Shares"), as
----------------------
part of the consideration for the assets of Seller purchased by the Company
pursuant to the Purchase Agreement and the terms of the Purchase Agreement
require the Company to provide Seller certain registration rights with respect
to such Shares.
A G R E E M E N T
- - - - - - - - -
In consideration of the foregoing recitals and the mutual covenants and
conditions contained herein, the parties, intending to be legally bound, agree
as follows:
Section 1. Certain Definitions. In addition to the other terms defined
-------------------
elsewhere in this Agreement, as used in this Agreement, the following terms
shall have the following respective meanings:
a. "Act" means the Securities Act of 1933, as amended.
b. "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Act.
c. "Holder" means Seller and any person beneficially owning
Registerable Securities through permitted assignment thereof in accordance with
Section 12, below.
d. "Registerable Securities" means the Initial DPRC Shares, the
Additional DPRC Shares and any shares of the Company's common stock issued as a
dividend or other distribution with respect to, or in exchange for or in
replacement of the Initial DPRC Shares and the Additional DPRC Shares, excluding
any Registerable Securities sold by a person in a transaction in which his
rights under this Agreement are not assigned; provided further that shares which
would otherwise constitute Registerable Securities shall cease to do so once
they have been sold to the public.
<PAGE>
e. The terms "register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of effectiveness of such
registration statement.
Section 2. Piggyback Registration. If, at any time and from time to
----------------------
time during the period commencing at the end on the sixth full month after the
Effective Date (the "Commencement Date"), and ending on the third anniversary of
-----------------
the Closing Date, the Company shall propose to register in a public offering any
of its common stock (whether for the Company's account or for the account of
other shareholders) to be offered for cash pursuant thereto (other than a
registration statement (a) on Form S-4 or Form S-8 (or any substitute or
successor form that may be adopted by the Commission), (b) filed in connection
with any employee stock option or other benefit plan, (c) for an exchange offer
or offering of securities solely to the Company's existing shareholders, or (d)
for a dividend reinvestment plan), it shall give written notice (the "Company's
---------
Notice") to all Holders of Registerable Securities of its intention to do so at
- ------
least 30 days prior to the anticipated filing date. If any Holder of
Registerable Securities desires to dispose of all or part of such Holder's
Registerable Securities, it may request registration thereof in connection with
the Company's registration by delivering to the Company, within 10 days after
receipt of the Company's Notice, written notice of such request (the "Holder's
--------
Notice") stating the number of shares of Registerable Securities to be included.
- ------
The Company shall use its best efforts to cause all shares specified in the
Holder's Notices to be registered under the Act so as to permit the sale or
other disposition by such Holder or Holders of the shares so registered, subject
however, to the limitations set forth in Section 3, below. Notwithstanding the
foregoing, in the event the Company consummates a public offering of any of its
securities (whether for the Company's account or for the account of other
shareholders) to be offered for cash pursuant thereto (other than a registration
statement (a) on Form S-4 or Form S-8 (or any substitute or successor form that
may be adopted by the Commission), (b) filed in connection with any employee
stock option or other benefit plan, (c) for an exchange offer or offering of
securities solely to the Company's existing shareholders, or (d) for a dividend
reinvestment plan), prior to the Commencement Date, the Commencement Date shall
begin immediately after the consummation of such public offering.
-----
Section 3. Limitations on Piggyback Registration. If the managing
-------------------------------------
underwriter or underwriters for registration under Section 2, above, advises the
Company and the Holders requesting inclusion in such registration in writing,
that the dollar amount or number of shares of Registerable Securities and other
shares of common stock or securities to be included in the offering exceeds the
maximum dollar amount or number that can be sold in such offering without
adversely affecting the proposed offering price, the timing, the distribution
method or the probability of success of such offering (the "Maximum Number of
-----------------
Shares"), then the Company shall include in such registration:
- ------
a. if the registration is a primary offering for the Company, (i)
first, the shares of common stock or other securities that the Company proposes
to sell which can be sold without exceeding the Maximum Number of Shares; (ii)
second, to the extent the Maximum Number of Shares has not been reached under
the foregoing clause (i), the shares of common stock or other securities
requested to be included in such registration by other shareholders with
registration rights
-2-
<PAGE>
granted prior to the date hereof which can be sold without exceeding the Maximum
Number of Shares (allocated pro rata among such other shareholders, as nearly as
practicable, on the basis of the number of shares of common stock or other
securities requested to be included in such offering by such other
shareholders); and (iii) third, to the extent the Maximum Number of Shares has
not been reached under the foregoing clauses (i) and (ii), the Registerable
Securities and shares of common stock or other securities requested to be
included in such registration by the Holders and other shareholders with
registration rights which can be sold without exceeding the Maximum Number of
Shares (allocated pro rata among such Holders and other shareholders, as nearly
as practicable, on the basis of the number of shares of Registerable Securities
and common stock or other securities requested to be included in such offering
by the Holders and such other shareholders); provided, however, that to the
-------- -------
extent that the Registerable Securities may be allocated pro rata among
shareholders with registration rights granted prior to the date hereof under
clause (ii) without violating any of the terms or conditions thereof, the
Company shall use its best efforts to do so; and
b. if the registration is for a secondary offering for any of the
Company's securityholders, (i) first, if the registration was requested by other
shareholders with demand registration rights, then the shares of common stock or
other securities that such other shareholders have requested to be included in
such offering which can be sold without exceeding the Maximum Number of Shares;
(ii) second, to the extent the Maximum Number of Shares has not been reached
under the foregoing clause (i), the shares of common stock or other securities
requested to be included in such registration by other shareholders with
registration rights granted prior to the date hereof which can be sold without
exceeding the Maximum Number of Shares (allocated pro rata among such other
shareholders, as nearly as practicable, on the basis of the number of shares of
common stock or other securities requested to be included in such offering by
such other shareholders); and (iii) third, to the extent the Maximum Number of
Shares has not been reached under the foregoing clauses (i) and (ii), the
Registerable Securities and shares of common stock or other securities requested
to be included in such registration by the Holders and other shareholders with
registration rights which can be sold without exceeding the Maximum Number of
Shares (allocated pro rata among such Holders and other shareholders, as nearly
as practicable, on the basis of the number of shares of Registerable Securities
and common stock or other securities requested to be included in such offering
by the Holders and such other shareholders) provided, however, that to the
-------- -------
extent that the Registerable Securities may be allocated pro rata among
shareholders with registration rights granted prior to the date hereof under
clause (ii) without violating any of the terms or conditions thereof, the
Company shall use its best efforts to do so.
Section 4. Registration Procedures.
-----------------------
a. If and when the Company is required by the provisions of this
Agreement to use its best efforts to effect the registration of shares of
Registerable Securities, the Company shall:
(i) Prepare and file with the Commission a registration
statement with respect to such shares and use its best efforts to cause such
registration statement to become and remain effective for the periods provided
herein;
-3-
<PAGE>
(ii) Prepare and file with the Commission such supplements to
such registration statement and the prospectuses used in connection therewith as
may be necessary to keep such registration statement effective and current for a
reasonable amount of time so that all of such securities can be disposed of in
accordance with the intended methods of disposition by seller or Seller thereof
set forth in such registration statement;
(iii) Furnish to the Holders such reasonable number of copies
of the registration statement, preliminary prospectus, final prospectus and such
other documents as the Holders may reasonably request to facilitate the public
offering of the Registerable Securities;
(iv) Use its best efforts to register or qualify the shares
covered by such registration statement under such other securities or Blue Sky
or other applicable laws of such jurisdictions as the Holders shall reasonably
request; provided, however, the Company shall not be obligated to qualify to do
business in such jurisdiction or consent to general service of process in such
jurisdiction, or subject itself to taxation in any such jurisdiction;
(v) Notify counsel for the Holders, promptly after it shall
receive notice thereof, of the time when such registration statement has become
effective under the Act or a supplement to any prospectus forming a part of such
registration statement has been filed;
(vi) Notify counsel for the Holders promptly of any request
by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) Prepare and file with the Commission, promptly upon the
request of the Holders, any amendments or supplements to such registration
statement or prospectus which, in the reasonable opinion of counsel for the
Holders (and reasonably concurred in by counsel for the Company), is required
under the Act or the rules and regulations thereunder in connection with the
distribution of the Registerable Securities;
(viii) Prepare and promptly file with the Commission and
promptly notify counsel for the Holders of the filing of such amendment or
supplement to any such registration statement or prospectus as may be necessary
to correct any statements or omissions if, at the time when a prospectus
relating to the Registerable Securities is required to be delivered under the
Act, any event shall have occurred as the result of which any such prospectus or
any other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
(ix) Advise counsel for the Holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the Commission suspending the effectiveness of such registration statement under
the Act or the initiation or threatening of any
-4-
<PAGE>
proceeding for such purpose, and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued;
(x) Use its best efforts to cause all such Registerable
Securities to be listed on each securities exchange or over-the-counter market
on which similar securities issued by the Company are then listed and file all
required listing applications and pay all required fees in connection with such
listings; and
(xi) Cooperate with Holders in effecting the transfer of any
shares sold pursuant to a registration effected hereunder.
Section 5. Expenses of Registration. Except as provided below, all of
------------------------
the expenses incurred by the Company in effecting any registration requested
pursuant to Section 2, above, including, without limitation, all registration
and filing fees, printing expenses, expenses of compliance with Blue Sky laws
(including, without limitation, fees and disbursements of underwriters counsel
relating thereto), fees and disbursements of counsel for the Company, and
expenses of any audits incidental to or required by any such registration
("Registration Expenses"), shall be borne by the Company. In either event,
---------------------
notwithstanding anything in this Section 5 to the contrary, the Company shall
have no obligation to pay or otherwise bear (a) any underwriting discounts or
brokerage fees or commissions relating to the sale of Registerable Securities by
the Holders, or (b) any Registration Expenses if the payment of such expenses by
the Company is prohibited by the laws of a state in which such offering is
qualified and only to the extent so prohibited, or (c) any expenses of any
compliance with Blue Sky laws which pertains only to an individual Holder, or
(d) any fees and disbursements of counsel for the Holders.
Section 6. Indemnification.
---------------
(a) The Company will indemnify, hold harmless and defend each
Holder, its officers, directors, partners, legal counsel and accountants, and
each person who controls a Holder within the meaning of Section 15 of the Act,
against any and all expenses, claims, losses, damages and liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereof, incident to any registration
or qualification of the Registerable Securities, or which arise out of or are
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of any rule or regulation promulgated under the Act or
any state securities laws applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each such indemnified party for
any legal and any other expenses reasonably incurred by them in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action. The Company also shall indemnify any underwriter of the Registerable
Securities, their officers, directors,
-5-
<PAGE>
partners, members and agents and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Holders
provided in this Section 6(a).
The indemnity agreement contained in this Section 6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage or liability or any
action in respect thereof if such settlement is effected without the consent of
the Company, nor shall the Company be liable to any Holder or its officers,
directors, partners, members or agents in any such case for any loss, claim,
damage, liability or any action in respect thereof to the extent that it arises
solely from or is based solely upon and is in conformity with written
information relating to such Holder furnished expressly for use in connection
with such registration by such Holder or its agents, nor shall the Company be
liable to any Holder for any such loss, claim, damage or liability or any action
in respect thereof to the extent it arises solely from or is based solely upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registerable Securities delivered by such Holder after the Company had provided
written notice to such Holder that such registration statement or prospectus
contained such untrue statement or alleged untrue statement of a material fact,
(ii) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
after the Company had provided written notice to such Holder that such
registration statement or prospectus contained such omission or alleged
omission, or (iii) the failure of such Holder to deliver any preliminary or
final prospectus, or any amendments or supplements thereto, required under
applicable securities laws, including the Act, to be so delivered, provided that
a sufficient number of copies thereof had been timely provided by the Company to
such Holder.
(b) Each Holder will, if Registerable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, and each
of its officers, directors, legal counsel and accountants, and each person who
controls the Company within the meaning of Section 15 of the Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Holder of any rule or
regulation promulgated under the Act or any state securities laws applicable to
the Holder and relating to action or inaction required by the Holder in
connection with any such registration, qualification or compliance, and will
reimburse each such indemnified person for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by or on behalf of such Holder and stated
to be specifically for use therein. Each Holder shall also indemnify and hold
harmless any underwriter of the Registerable Securities, their officers,
directors, partners, members and agents and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
the Company provided in this Section 6(b).
-6-
<PAGE>
(c) Each person to be indemnified pursuant to this Section 6 (the
"Indemnified Party") will, promptly after its receipt of written notice of the
- ------------------
commencement of any action against such Indemnified Party in respect of which
indemnity may be sought from an indemnifying person under this Section 6 (the
"Indemnifying Party") notify the Indemnifying Party in writing of the
- -------------------
commencement thereof, provided, however, that the failure of any person to give
-------- -------
notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent that such Indemnifying
Party is actually materially and adversely prejudiced by such failure to give
notice. If any such action shall be brought against any Indemnified Party and
it shall notify an Indemnifying Party of the commencement thereof, the
Indemnifying Party will be entitled to participate therein and, to the extent it
may desire, jointly with any other Indemnifying Party similarly notified, to
assume the defense thereof with counsel satisfactory to such Indemnified Party,
and after notice from the Indemnifying Party to such Indemnified Party of its
election so to assume the defense thereof, the Indemnifying Party will not be
liable to such Indemnified Party under this Section 6 for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation unless (a) the
Indemnified Party shall have employed counsel in an action in which the
Indemnified Party and Indemnifying Party are both defendants and there is a
conflict of interest between such parties that would prevent counsel from
adequately representing both parties, (b) the Indemnifying Party shall not have
employed counsel satisfactory within the exercise of reasonable judgment of the
Indemnified Party to represent the Indemnified Party within a reasonable time
after the notice of the commencement of the action, or (c) the Indemnifying
Party has authorized the employment of counsel for the Indemnified Party at the
expense of the Indemnifying Party. The undertaking contained in this Section
6(c) shall be in addition to any liabilities which the Indemnifying Party may
have pursuant to law.
(d) If the indemnification provided for in this Section 6 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements, actions or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
Section 7. Transfer of Registration Rights. The rights to cause the
-------------------------------
Company to register securities granted to a Holder under Section 2, above, may
be transferred or assigned by such Holder to a transferee or assignee in
connection with any transfer or assignment of Registerable Securities, provided
that: (a) such transfer or assignment may otherwise be effected in accordance
with applicable securities laws, (b) prompt written notice of such transfer or
assignment is given to the
-7-
<PAGE>
Company, and (c) such transferee or assignee expressly agrees in writing
delivered to the Company to be bound by the provisions of this Agreement.
Section 8. Standoff or Lock-Up Agreement. Each Holder of Registerable
-----------------------------
Securities agrees in connection with any firmly underwritten public offering of
the Company's common stock that, upon request of the underwriters managing any
underwritten offering of the Company's securities, such Holder shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registerable Securities (other than those included in the
registration) without the prior written consent of such underwriters, as the
case may be, during the 14 days prior to, and during the 120-day period
beginning on, the effective date of the registration statement relating to such
offering (except as part of such registration statement). In order to enforce
the foregoing covenant, the Company may impose stop-transfer instructions with
respect to the Registerable Securities until the end of such period.
Section 9. Amendment. Any modification, amendment, or waiver of this
---------
Agreement or any provision hereof shall be effective only if in writing and
executed by the Holders of at least a majority of the Registerable Securities
and the Company.
Section 10. Governing Law. This Agreement shall be governed in all
-------------
respects by the laws of the State of California without regard to its conflicts
of laws principles.
Section 11. Successors and Assigns. Except as otherwise expressly
----------------------
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, permitted assigns, heirs, executors and
administrators of the parties.
Section 12. Notices. All notices and other communications required or
-------
permitted hereunder shall be made in accordance with the Purchase Agreement.
Section 13. Severability. If any provision of this Agreement shall be
------------
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 14. Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subject matter hereof.
Section 15. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first set forth above.
-8-
<PAGE>
"PURCHASER": "SELLER":
DATA PROCESSING S3G, INC.,
RESOURCES CORPORATION, a Texas corporation
a California corporation
By: /s/ Michael A. Piraino By: /s/ Michael G. McCarthy
---------------------- -----------------------
Michael G. McCarthy
Its: Chief Financial Officer President
-----------------------
CMDOCS;59828;1
-9-
<PAGE>
EXHIBIT 99.1
Michael A. Piraino
Chief Financial Officer
(714) 553-1102, ext. 146
DATA PROCESSING RESOURCES CORPORATION
ACQUIRES SPECTRUM SOFTWARE SERVICES GROUP, INC.
FOR CASH AND STOCK TOTALING $32.2 MILLION
--
National Lawson Software Practice Located in Austin, Texas
--
Acquisition Expands Value-Added Practice Service Offerings
NEWPORT BEACH, CALIFORNIA, January 28, 1998 - Data Processing Resources
Corporation (Nasdaq:DPRC) today announced that it has acquired substantially all
of the assets of Spectrum Software Services Group, Inc ("S3G") for cash and
restricted DPRC common stock.
Under the terms of the definitive purchase agreement (the "Agreement"), the
purchase price was approximately $32.2 million, consisting of $28.2 million in
cash and 204,552 shares of restricted DPRC common stock, valued at $4.0 million
(computed using the average closing price of DPRC's common stock for 20 trading
days preceding the signing of the Agreement.) The Agreement also calls for an
earnout contingent upon S3G's earnings before interest and taxes ("EBIT") for
the year ending December 31, 1998. The earnout provisions contain certain
minimum EBIT growth hurdles before any contingent consideration may be paid.
The acquisition will be accounted for as a purchase and the excess of cost over
fair value of the net assets acquired of approximately $29 million will be
allocated to goodwill. S3G's revenues for the year ended December 31, 1997 were
approximately $10 million.
S3G, which was founded in 1994 by Michael G. McCarthy, maintains its sales,
recruiting, training and development "lab" offices in Austin, Texas. S3G's
information technology staffing ("IT") business engages primarily in supporting
Lawson Software packaged implementations. The Lawson Software platform is an
enterprise-wide resource planning ("ERP") client/server business application
specializing in financials, human resources, procurement and supply chain
management. S3G currently employs approximately 85 consultants, located in
approximately 20 states. S3G's current client list includes such companies as
Borders Group, Inc., Andersen Consulting and Walgreens, which, of course,
further broadens DPRC's client base.
Commenting on the acquisition, David M. Connell, DPRC's President and Chief
Operating Officer, stated, "The acquisition of S3G reflects our Company's
strategy of expanding our IT service offerings as a means of further penetrating
existing clients as well as converting new clients. The Lawson Software product
is considered a high-end, enterprise-wide ERP solution and generally
<PAGE>
Data Processing Resources Corporation
January 28, 1998
Page *2*
requires a significant amount of training and implementation expertise, which is
the nature of S3G's practice as a solutions provider. The Lawson Software
services practice joins DPRC's other "value-added" service offerings which
include Year 2000 Compliance, Network Management and HelpDesk, SAP, Tandem and
Internet services.
Mr. Connell added, "We are very excited about this new development and are
exceptionally pleased to have added more outstanding management talent and
strength to our organization as a result of this acquisition. Together we
combine the strength of DPRC's branch network with S3G's project management and
technical abilities to expand our respective business relationships. Mike
McCarthy and his management team will remain in place post acquisition pursuant
to the terms of their respective employment agreements. DPRC's acquisition
strategy is to carefully evaluate potential candidates, conduct thorough due
diligence investigations and most importantly integrate the new businesses in
such a way that synergies between the companies are optimized."
Mike McCarthy, founder and President of S3G, added, "I am excited about
combining our company with DPRC. The opportunity to leverage our Lawson
Software expertise across DPRC's broader base of clients and offices, coupled
with the ability to provide our consultants with additional opportunity for
expanding their skills and responsibilities are compelling reasons for this
transaction."
Statements herein concerning the Company's growth and strategies may
include forward-looking statements, and the Company's actual results may differ
materially from those suggested as a result of various factors, including,
without limitation, the Company's ability to recruit and retain qualified
technical consultants; identify, acquire and integrate suitable acquisition
candidates; obtain sufficient working capital to support such growth; and
compete successfully with existing and future competitors. Interested parties
should refer to the disclosures set forth under the caption "Risk Factors" and
elsewhere in the Company's prospectus dated January 21, 1997 for additional
information regarding risks affecting the Company's financial condition and
results of operations.
Data Processing Resources Corporation provides information technology
staffing services through a network of sixteen branch facilities and three
international recruiting offices to a diverse group of corporate clients through
a database of highly qualified technical consultants. Additional information on
DPRC is now available via the Internet's World Wide Web at http://www.dprc.com.
For more investor information via facsimile, please call 1-800-PRO-INFO and
enter client code DPRC.
###
