<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 8, 1999.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AFFILIATED COMPUTER SERVICES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 51-0310342
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
2828 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204
(214) 841-6111
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------
DAVID W. BLACK
AFFILIATED COMPUTER SERVICES, INC.
2828 NORTH HASKELL AVENUE
DALLAS, TEXAS 75204
(214) 841-6152
(Name, address, and telephone number,
including area code, of agent for service)
Copies to:
<TABLE>
<S> <C>
DAVID G. LUTHER, JR. C. NEEL LEMON, III
HUGHES & LUCE, L.L.P. THOMPSON & KNIGHT, P.C.
1717 Main Street, Suite 2800 1700 Pacific Ave., Suite 3300
Dallas, Texas 75201 Dallas, Texas 75201
(214) 939-5500 (214) 969-1700
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 of the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TITLE OF SHARES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Class A Common Stock, $.01 par value(4) 4,025,000 $49.04 $197,386,000 $54,873.31
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</TABLE>
(1) Includes up to 525,000 shares of Common Stock to cover over-allotments, if
any.
(2) Estimated solely for the purpose of calculating the registration fee.
(3) Calculated pursuant to Rule 457(c) of the Securities Act based on the
average of the high and low prices reported for a share of Affiliated
Computer Services, Inc. Class A Common Stock on February 1, 1999, as
reported by the New York Stock Exchange, Inc. under the symbol "ACS."
(4) Includes an equivalent number of rights to purchase shares of Class A Common
Stock issuable under the Company's Rights Agreement. See "Description of
Capital Stock -- Rights Agreement."
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY SATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 8, 1999
PROSPECTUS
3,500,000 SHARES
[ACS LOGO]
AFFILIATED COMPUTER SERVICES, INC.
CLASS A COMMON STOCK
-------------------------
We are offering and selling 3,500,000 shares of our Class A Common Stock.
We have two classes of common stock outstanding. The Class A Common Stock is
entitled to one vote per share, and the Class B Common Stock is entitled to ten
votes per share. See "Description of Capital Stock."
The Class A Common Stock is listed on the New York Stock Exchange under the
symbol "ACS." The last reported sale price of our Class A Common Stock on
February 4, 1999 was $51 5/8 per share.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT CERTAIN RISKS THAT YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR CLASS A COMMON STOCK.
-------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price..................... $ $
Underwriting discount..................... $ $
Proceeds, before expenses, to us.......... $ $
</TABLE>
-------------------------
The underwriters may, under certain circumstances, purchase up to an
additional 525,000 shares of Class A Common Stock from Darwin Deason, our
Chairman and Chief Executive Officer, at the public offering price less the
underwriting discount. If all such shares are purchased, the total public
offering price will be $ , the underwriting discount will be
$ and the proceeds to Mr. Deason will be $ . The Company will
receive no proceeds from the sale of Mr. Deason's shares. The Company has agreed
to pay expenses incurred by Mr. Deason in connection with the offering, other
than the underwriting discount.
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New York
on , 1999.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
BEAR, STEARNS & CO. INC. GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
PRUDENTIAL SECURITIES
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE> 3
We are a Delaware corporation. Our principal executive offices are located
at 2828 North Haskell Avenue, Dallas, Texas 75204, and our telephone number is
(214) 841-6111. We maintain a worldwide web site at www.acs-inc.com. The
reference to our worldwide web address does not constitute incorporation by
reference of the information contained at the site. In this prospectus, the
"Company," "ACS," "we," "us" and "our" refer to Affiliated Computer Services,
Inc. and its subsidiaries, unless the context otherwise requires. In addition,
"Class A Common Stock" refers to our Class A Common Stock, $0.01 par value per
share, and "Class B Common Stock" refers to our Class B Common Stock, $0.01 par
value per share; and "Common Stock" refers to the Class A Common Stock and Class
B Common Stock. See "Description of Capital Stock."
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. We are offering to
sell, and seeking offers to buy, shares of Class A Common Stock only in
jurisdictions where offers and sales are permitted. The information contained or
incorporated by reference in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of any
sale of the Class A Common Stock.
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<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights certain information contained elsewhere in this
prospectus. This summary is not complete and does not contain all the
information you should consider before investing in the Class A Common Stock.
You should read the entire prospectus carefully, including the risks of
investing in the Class A Common Stock discussed under "Risk Factors." Unless
otherwise specifically stated, the information throughout this prospectus
assumes that the underwriters do not exercise their over-allotment option.
OVERVIEW
We are based in Dallas, Texas and have offices primarily in North America,
as well as Central and South America, Europe and the Middle East. We provide a
full range of information technology services to clients, which have
time-critical, transaction-intensive information processing needs. Our services
include technology outsourcing, business process outsourcing and professional
and systems integration services.
Our technology outsourcing services consist of processing our clients' data
on a remote basis from our data centers to deliver significant cost savings and
service improvements to our clients. The principal technology outsourcing
services we provide include data center outsourcing and network management
services. In order to provide these services, we utilize a variety of hardware
and software systems.
Our business process outsourcing services, an extension of technology
outsourcing, consist of managing, through an outsourcing arrangement, our
clients' non-core, but mission-critical, business processes. The principal
business process outsourcing services we provide include loan and mortgage
processing, claims processing, accounts payable processing, data capture,
storage and retrieval services and automated teller machine transaction
processing.
Our professional and systems integration services include technology
consulting, systems design and engineering, applications maintenance and
development and technical staff augmentation.
Our primary markets are the commercial and federal government sectors. The
commercial sector accounts for approximately two-thirds of our annual revenues,
and the government sector accounts for approximately one-third of our annual
revenues. Approximately 90% of our revenues for the past three fiscal years were
recurring revenues. Recurring revenues are derived from services that our
clients use each year in connection with their ongoing businesses.
Our revenues have grown from $477 million in fiscal 1994 to $1.2 billion in
fiscal 1998, representing a compounded annual growth rate of approximately 26%.
Of this growth, approximately half has come from internally generated services
and approximately half from acquisitions.
STRATEGY
In pursuit of our ultimate goal of enhancing shareholder value, we pursue a
balanced strategy of internal and external growth strategies. Our internal
growth strategy includes (1) expanding our recurring revenue base, (2)
maximizing economies of scale by diligently controlling our cost structure,
adding new clients and enhancing our relationships with existing clients, (3)
providing flexible solutions to those clients, (4) investing in technology and
(5) attracting and retaining high quality employees. Our external growth
strategy involves an aggressive but disciplined acquisition program, focused on
(1) expanding our service offerings, client base and geographic coverage, and
(2) the rapid, effective assimilation of the companies we acquire.
RECENT ACQUISITIONS
In December 1998, we purchased a 63% interest in BRC Holdings, Inc., a
provider of specialized information technology services to the local government
and healthcare sectors. We will acquire the remaining 37% interest in February
1999. In December 1998, we also acquired two smaller companies.
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The annual combined revenues from continuing operations of these three companies
during calendar year 1998 was approximately $146 million.
We are incorporated in Delaware and our principal offices are located at
2828 North Haskell Avenue, Dallas, Texas 75204 (Telephone (214) 841-6111).
THE OFFERING
Class A Common Stock
Offered.................. 3,500,000 shares
Common Stock to be
Outstanding after this
Offering:
Class A Common Stock..... 49,323,877 shares(1)
Class B Common Stock..... 3,299,686 shares(1)(2)
Total............ 52,623,563 shares(1)(2)
Voting Rights.............. The Class A Common Stock is entitled to one vote
per share and the Class B Common stock is entitled
to ten votes per share. See "Risk Factors -- Darwin
Deason's Stock Ownership Provides Substantial
Control Over Our Company" and "Description of
Capital Stock."
Use of Proceeds............ We intend to use the net proceeds from the Offering
to repay a portion of the debt incurred under ACS's
revolving credit agreement primarily in connection
with our acquisition of BRC Holdings, Inc. See "Use
of Proceeds."
Dividend Policy............ We do not anticipate declaring or paying any cash
dividends in the foreseeable future. Any future
determination to pay dividends will be at the
discretion of our Board of Directors and will be
dependent upon then existing conditions, including
our financial condition, results of operations,
contractual restrictions, capital requirements,
business prospects, and such other factors as our
Board of Directors deems relevant.
NYSE Symbol................ ACS
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(1) Based on 45,823,877 shares of Class A Common Stock and 3,299,686 shares of
Class B Common Stock outstanding as of December 31, 1998. Does not include
(a) 6,326,457 shares of Class A Common Stock reserved for issuance under our
stock option plans, under which options to purchase 4,876,957 shares were
outstanding as of December 31, 1998 at a weighted average exercise price of
$21.22 per share, (b) 5,391,936 shares of Class A Common Stock issuable upon
conversion of our 4% Convertible Subordinated Notes due March 15, 2005, or
(c) 3,299,686 shares of Class A Common Stock issuable upon conversion of all
outstanding shares of Class B Common Stock. See "Description of Capital
Stock -- Class A Common Stock and Class B Common Stock."
(2) See "Description of Capital Stock -- Class A Common Stock and Class B Common
Stock" regarding the conversion rights and restrictions on transfer of the
Class B Common Stock.
RISK FACTORS
For a description of certain risks that you should consider before buying
shares of the Class A Common Stock, see "Risk Factors."
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<PAGE> 6
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth our (1) summary historical consolidated
financial data as of and for each of the five years ended June 30, 1998 and as
of December 31, 1998 and for the six months ended December 31, 1998 and 1997;
(2) consolidated income statement data for the year ended June 30, 1998 and for
the six months ended December 31, 1998, pro forma for the acquisition of BRC
Holdings, Inc., four additional acquisitions during the year ended June 30, 1998
and five acquisitions subsequent to July 1, 1998; and (3) consolidated balance
sheet data as of December 31, 1998, as adjusted for the consummation of this
offering. You should read this data together with the consolidated financial
statements incorporated by reference in this Prospectus. See "Selected
Consolidated Financial Data," "Where You Can Find More Information," and "Pro
Forma Condensed Consolidated Financial Information (Unaudited)".
<TABLE>
<CAPTION>
PRO FORMA SIX MONTHS
YEAR ENDED
YEAR ENDED JUNE 30, ENDED DECEMBER 31,
------------------------------------------------------ JUNE 30, -------------------
1994 1995 1996 1997 1998 1998(3) 1997 1998
-------- -------- -------- -------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues........................... $476,978 $533,848 $647,608 $928,925 $1,189,123 $1,439,871 $550,229 $754,990
Operating income................... 37,475 44,378 56,583 90,266 98,319 127,301 33,388 72,910
Net income......................... 19,654 25,655 33,525 49,666 54,422 54,234 19,052 39,634
Earnings per common share:
Basic............................. $ 0.64 $ 0.74 $ 0.88 $ 1.08 1.14(2) $ 1.13(2) $ 0.40 $ 0.82
Diluted........................... 0.59 0.71 0.85 1.05 1.11(2) 1.10(2) 0.39 0.77
Shares used in computing earnings
per common share:
Basic............................. 30,664 34,625 38,228 46,136 47,599 47,913 47,167 48,488
Diluted........................... 33,233 35,998 39,320 47,452 50,487 50,801 48,453 55,304
<CAPTION>
PRO FORMA
SIX MONTHS
ENDED
DECEMBER 31,
1998(3)
------------
<S> <C>
INCOME STATEMENT DATA(1):
Revenues........................... $818,853
Operating income................... 83,443
Net income......................... 42,799
Earnings per common share:
Basic............................. $ 0.88
Diluted........................... 0.83
Shares used in computing earnings
per common share:
Basic............................. 48,761
Diluted........................... 55,577
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31, 1998
---------------------------------------------------- ---------------------------
1994 1995 1996 1997 1998 ACTUAL AS ADJUSTED(4)
-------- -------- -------- -------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 76,583 $ 77,615 $ 79,928 $110,866 $198,118 $ 210,472 $ 210,472
Total assets................................. 266,734 309,903 636,098 761,477 949,798 1,328,310 1,328,310
Total long-term debt (less current
portion).................................... 84,534 37,940 57,028 130,680 234,848 408,964 235,904
Total stockholders' equity................... 90,439 156,686 363,204 427,481 503,670 559,411 732,471
</TABLE>
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(1) ACS has acquired 31 companies during the periods presented under the
purchase method of accounting, and therefore revenues between periods are
not comparable. In addition, all periods reflect the merger of a
wholly-owned subsidiary of the Company with and into ACS Government
Solutions Group, Inc., formerly known as Computer Data Systems, Inc., in
December 1997. This merger was accounted for as a pooling of interests and,
accordingly, historical results have been restated to reflect the combined
operations of the two companies.
(2) Includes $12,974,000, $8,880,000 net of tax, or $.19 and $.18 per basic and
diluted shares, respectively, of merger costs incurred by the Company in
connection with the merger of a wholly-owned subsidiary of the Company with
and into ACS Government Solutions Group, Inc. in December 1997.
(3) Pro forma income statement data for the year ended June 30, 1998 and the six
months ended December 31, 1998 present the results of operations of the
Company for such year and such period as if the following transactions had
occurred as of July 1, 1997: (a) the consummation of the acquisition of BRC
Holdings, Inc.; and (b) the consummation of four additional acquisitions
during the year ended June 30, 1998 and five acquisitions subsequent to July
1, 1998. No adjustment has been made for the consummation of this offering.
(See "Pro Forma Condensed Consolidated Financial Information (Unaudited)"
included elsewhere herein).
(4) Balance sheet data at December 31, 1998 as adjusted, giving effect to the
receipt of the estimated net proceeds from the sale of 3,500,000 shares of
Class A Common Stock offered by the Company hereby. See "Use of Proceeds"
and "Capitalization."
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RISK FACTORS
You should carefully consider the following risk factors and warnings
before making an investment decision. The risks described below are not the only
ones facing our company. Additional risks that we do not yet know of or that we
currently think are immaterial may also impair our business operations. If any
of the following risks actually occur, our business, financial condition or
results of operations could be materially adversely affected. In such case, the
price of the Class A Common Stock could decline, and you may lose all or part of
your investment. You should also refer to the other information set forth and
incorporated by reference in this prospectus, including our consolidated
financial statements and the related notes.
This prospectus contains forward-looking statements. These statements refer
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "will",
"should", "expects", "anticipates", "plans", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of such terms and other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined below. These
factors may cause our actual results to differ materially from any
forward-looking statement. See "Cautionary Statement Concerning Forward-Looking
Statements."
LOSS OF SIGNIFICANT CLIENTS COULD ADVERSELY AFFECT OUR BUSINESS
Our five largest clients accounted for approximately 25% of our revenue for
the fiscal year ended June 30, 1998. For the fiscal year ended June 30, 1997,
our five largest clients accounted for approximately 26% of our revenue.
Approximately 8% of our revenue in fiscal 1998 and 11% of our revenue in
fiscal 1997 came from services performed for the Department of Education. Our
agreement with the Department of Education expires in September 2003; however,
the agreement contains certain provisions allowing the Department of Education
to terminate the contract prior to the expiration date, in specified
circumstances, including termination for convenience. If the Department of
Education terminates the contract, we would generally be reimbursed for the then
remaining unamortized costs incurred with respect to providing the services
under the contract, except to the extent that we are able to use any hardware,
software or other resources for other purposes. Our relationship with the
Department of Education is also subject to the risks of the reduction or
modification of the contract due to changing needs and requirements or to
unavailability of funds from the United States government. See "-- Government
Contracts." We cannot assure you that the Department of Education will not
cancel or modify the contract or that we will maintain our historic level of
revenues or profits from this relationship.
After the Department of Education, our next four largest clients accounted
for approximately 17% of our revenue in fiscal 1998 and 15% of our revenue in
fiscal 1997, and have remaining terms of one and one-half to five years. Our
success depends substantially upon retaining our significant clients. Generally,
we may lose clients due to merger or acquisition, business failure, contract
expiration, conversion to a competing data processor or conversion to an
in-house data processing system. We cannot guarantee that we will be able to
retain long-term relationships or secure renewals of short-term relationships
with our significant clients in the future.
We incur a high level of fixed costs related to our technology outsourcing
and business process outsourcing clients. These fixed costs result from
significant investments in data processing centers, including computer hardware
platforms, computer software, facilities, and client service infrastructure. The
loss of any one of our significant clients could leave us with a significantly
higher level of fixed costs than is necessary to serve our remaining clients,
thereby reducing our profitability. We also are vulnerable to reduced processing
volumes from our clients, which could occur due to business downturns, product
liability issues, work stoppages by organized labor, potential year 2000
problems affecting our clients' business or other business reasons. Many of our
clients are in industries that are currently undergoing
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significant consolidation. In the past, we have modified contracts on terms that
have been both adverse and beneficial, and it is possible that future adverse
modifications may occur.
WE HAVE SIGNIFICANT INVESTMENTS IN CERTAIN CLIENT CONTRACTS
We must make significant capital investments in order to attract and retain
large outsourcing agreements. We sometimes must purchase certain assets (such as
computing equipment and purchased software), assume certain financial
obligations (such as computer lease and software maintenance obligations), make
investments in certain securities issued by clients, incur specific capital
expenditures or incur expenses necessary to provide outsourcing services to a
client. We record these investments and asset purchases at fair market value. We
record the remainder of the purchase amount as intangible assets, which are then
amortized over the term of each contract. The termination of a client contract
or the deterioration of the financial condition of a client has in the past, and
may in the future, result in an impairment of the net book value of the assets
recorded. Moreover, we cannot guarantee that we will be able to finance and
properly evaluate these assets and investments.
WE OPERATE IN HIGHLY COMPETITIVE MARKETS
Our markets are intensely competitive and highly fragmented. Our market
share represents a small percentage of the total technology services market. Our
clients' requirements and the technology available to satisfy those requirements
continually change.
Our principal competitors include Electronic Data Systems Corporation, IBM
Global Services (a subsidiary or division of IBM), Computer Sciences Corporation
and several other national and regional competitors. Many of our competitors
have greater financial, technical, and operating resources and a larger client
base than we do. They may be able to use their resources to adapt more quickly
to new or emerging technologies or to devote greater resources to the promotion
and sale of their products and services. Many of our largest competitors have a
greater international presence than us and offer a broader range of services. In
addition, we must frequently compete with a client's own internal information
technology capability, which may constitute a fixed cost for the client. We
cannot guarantee that we will be able to compete successfully in the future. We
expect to encounter additional competition as we address new markets and as the
computing and communications markets converge. Competition could have a material
adverse effect on our business and financial condition and results of operations
results. If we are forced to lower our pricing or if demand for our services
decreases, our business, financial condition, and results of operations will be
materially and adversely affected.
CHANGES IN TECHNOLOGY COULD ADVERSELY AFFECT OUR BUSINESS
The markets for our information technology services are subject to rapid
technological changes and rapid changes in client requirements. To compete, we
commit substantial resources to operating multiple hardware platforms, to
customizing third-party software programs and to training client personnel and
our personnel in the use of new technologies. Future hardware and software
products may be able to manipulate large amounts of data more cost-effectively
than existing mainframe platforms which we use. Information processing is
shifting toward client-server and web-based systems, in which individual
computers or groups of personal computers and mid-range systems replace
mainframe systems. This trend could adversely affect our business and financial
results. We have committed substantial resources to developing outsourcing
solutions for these distributed computing environments. We cannot guarantee that
we will be successful in customizing products and services that incorporate new
technology on a timely basis. We also cannot guarantee that we will continue to
be able to deliver the services and products demanded by the marketplace.
Technology costs have also dropped significantly in recent years due in
large part to hardware technology advances. New contracts are generally priced
at lower unit rates than historical contracts. We sometimes renegotiate client
contracts in advance of the scheduled expiration date and will lower our charges
in return for other contractual considerations. If we are not able to lower our
technology costs to
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<PAGE> 9
keep up with market rates, then our business, financial condition, and results
of operations could be adversely affected.
OUR CONTRACTS CONTAIN TERMINATION PROVISIONS AND PRICING RISKS
Many of the services we provide are critical to our clients' business. Some
of our contracts with clients permit termination in the event our performance is
not consistent with service levels specified in those contracts. Some of our
government clients can terminate their contracts for any reason or no reason.
Our clients' ability to terminate contracts creates an uncertain revenue stream.
If clients are not satisfied with our level of performance, our reputation in
the industry may suffer, which could also materially and adversely affect our
business, financial condition, and results of operations.
Some of our contracts contain pricing provisions that require the client to
pay a set fee for our services regardless of whether our costs to perform these
services exceed the amount of the set fee. Many of our technology outsourcing
and business process outsourcing contracts provide for penalties if we fail to
achieve certain contract standards. Some of our contracts contain re-pricing
provisions which can result in reductions of our fees for performing our
services. In such situations, we could incur significant unforeseen costs or
financial penalties in performing the contract.
WE MAY HAVE DIFFICULTIES EXECUTING OUR ACQUISITION STRATEGY
We intend to continue to expand our business through acquisitions of
companies. Through acquisitions, we intend to expand our geographic presence, to
expand the products and services we offer to existing clients and to enter new
markets. Since our inception in June 1988, we have completed 44 acquisitions.
Approximately one-half of the increase in our revenues during the five years
ended June 30, 1998 is due to acquisitions. We regularly evaluate potential
acquisition candidates. Acquisitions are subject to various risks, including:
- higher acquisition prices due to increased competition for acquisitions;
- fewer suitable acquisition candidates at acceptable prices;
- insufficient capital resources for acquisitions;
- inability to enter into definitive agreements for desired acquisitions;
- inability to successfully integrate or operate acquired companies;
- loss of key management and other employees of acquired companies;
- departure of key clients of acquired companies; and
- inability to complete planned acquisitions due to governmental and
regulatory constraints.
We cannot assure you that any acquisitions, if consummated, will be
advantageous to us. Without additional acquisitions, we may not grow at
historical rates. If our acquisition strategy fails, our business, financial
condition and results of operations could be materially and adversely affected.
FAILURE TO PROPERLY MANAGE GROWTH COULD ADVERSELY AFFECT OUR BUSINESS
We have rapidly expanded our operations in recent years. We intend to
continue expansion in the foreseeable future to pursue existing and potential
market opportunities. This rapid growth places a significant demand on our
management and operational resources. In order to manage growth effectively, we
must implement and improve our operational systems, procedures, and controls on
a timely basis. If we fail to implement these systems procedures and controls on
a timely basis, our business, financial condition, and results of operations
will be materially and adversely affected.
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VARIABILITY OF QUARTERLY OPERATING RESULTS
Our revenues and operating results may vary from quarter to quarter. These
variations would be due to factors that are outside our control, such as:
- the loss of current clients through acquisitions or otherwise;
- the impact of competition on pricing, revenue and margins;
- timing of new contracts;
- timing and magnitude of acquisitions;
- changes in funding priorities on governmental contracts;
- the timing and magnitude of technological advances;
- completing client projects; and
- general economic conditions.
Accordingly, we believe that quarter-to-quarter comparisons of operating results
for preceding quarters are not necessarily meaningful. You should not rely on
the results of any one quarter as an indication of our future performance.
GOVERNMENT CONTRACTS
Approximately one-third of our revenues in fiscal 1998 were derived from
contracts with the United States government or its agencies. We have over 40
active prime contracts and numerous active subcontracts with the United States
government or its agencies. The largest such contract accounted for
approximately 8% of our revenue for fiscal 1998. Loss or termination of one or
more large government contracts could have a material adverse effect on our
business and financial results.
Government contracts, by their terms, generally can be terminated for
convenience by the government. This means that the government may terminate the
contract at any time, without cause. In certain instances, we will receive
compensation only for the services provided or costs incurred at the time of
termination. Many of our government contracts contain base periods of one or
more years, as well as one or more option periods that may cover more than half
of the potential contract duration. The government generally has the right not
to exercise option periods. Its failure to exercise option periods could curtail
the contract term of certain of our government contracts. The government's
termination of, or failure to exercise option periods for, significant
government contracts could have a material adverse effect on our business and
financial results.
Government contracts are generally subject to audits and investigations by
government agencies. These audits and investigations involve a review of the
contractor's performance on its contracts, as well as its pricing practices, its
cost structure, and its compliance with applicable laws, regulations and
standards. If the government finds that we improperly charged any costs to a
contract, the costs are not reimbursable. If already reimbursed, such cost must
be refunded to the government. If the government discovers improper or illegal
activities in the course of audits or investigations, the contractor may be
subject to various civil and criminal penalties and administrative sanctions,
which may include termination of contracts, forfeiture of profits, suspension of
payments, fines and suspensions or debarment from doing business with the
government.
In recent years, the government has substantially increased the personnel
and resources it devotes to audits and investigations and has encouraged
auditors and investigators to emphasize the detection of fraud or improper
activities. We believe that this high level of industry scrutiny will continue
for the foreseeable future. The government could subject us to such scrutiny in
the future. Any resulting penalties or sanctions could have a material adverse
effect on our business and financial results.
7
<PAGE> 11
POTENTIAL YEAR 2000 PROBLEMS COULD ADVERSELY AFFECT OUR BUSINESS
We use many computer software programs and operating systems across our
organization. If our progress or systems contain source codes that are unable to
interpret appropriately the upcoming calendar year 2000, modification or
replacement of such programs or systems may be necessary. We are evaluating and
managing the risks associated with Year 2000 software failures, and we are
attempting to ensure a smooth Year 2000 transition. We have identified and
analyzed both internally developed and acquired software that utilizes date
embedded codes that may experience operational problems when the year 2000 is
reached. We intend to complete substantial necessary modifications to the
identified software by June 1999. However, we expect our efforts regarding Year
2000 compliance to continue thereafter as necessary. We are spending or
incurring significant financial and operating expenses and resources to become
Year 2000 compliant. However, we cannot guarantee that our systems or our
clients' systems will be entirely Year 2000 compliant. Of the approximately $15
million of estimated expenditures for Year 2000 remediation projects,
approximately $4 million is incremental costs. Of the $15 million, approximately
$7 million had been incurred through December 31, 1998, and a majority of the
remainder is expected to be incurred by June 30, 1999. The costs required to
achieve substantial Year 2000 compliance, or our failure to do so, could have a
material adverse effect on our business, financial condition or results of
operations.
We are attempting to coordinate with our clients, suppliers and other
parties regarding their Year 2000 compliance. Most of our clients maintain their
own application programs, although they use our computer and network resources.
We generally do not have any contractual responsibility to ensure that our
client application programs are Year 2000 compliant. We do undertake to test and
modify system software for our clients, and we rely on vendors of such systems
software to provide Year 2000 compliant products. However, our business could be
adversely affected if our clients experience Year 2000 problems with such
applications, causing management resources to be devoted to such problems.
Consequently, such clients could use less of our computing resources, alter
their pattern of usage of resources or dedicate less of their information
processing budgets to projects we conduct. We could also be adversely affected
if potential new clients decide not to pursue outsourcing projects because they
are focusing their information technology resources on Year 2000 issues in their
own organizations.
We expect to identify and resolve all Year 2000 problems that could
materially adversely affect our business operations. However, we believe that it
is not possible to determine with complete certainty that all Year 2000 problems
affecting us or our clients have been identified or corrected. The number of
devices that could be affected and the interactions among these devices are
simply too numerous. In addition, no one can accurately predict how many Year
2000 problem-related failures will occur or the severity, duration or financial
consequences of these perhaps inevitable failures. As a result, we believe that
the following consequences are possible:
- a significant number of operational inconveniences and inefficiencies for
us and our clients that will divert management's time and attention and
financial and human resources from its ordinary business activities;
- a lesser number of serious system failures that will require significant
efforts by us or our clients to prevent or alleviate material business
disruptions;
- several routine business disputes and claims for pricing adjustments or
penalties due to Year 2000 problems by our clients, which will be
resolved in the ordinary course of business; and
- a few serious business disputes alleging that we failed to comply with
the terms of contracts or industry standards of performance, some of
which could result in litigation or contract termination.
ATM LEGISLATION COULD ADVERSELY AFFECT OUR BUSINESS
State and federal governmental entities have proposed legislation and
regulations to regulate and limit or eliminate the fees that may be collected by
automated teller machine owners. The regulation and limitation or elimination of
ATM fees may reduce the economic viability of many ATMs. If such
8
<PAGE> 12
legislation is enacted, the number of ATMs operated in geographic areas affected
by the legislation could decrease significantly, adversely affecting our results
of operations as they relate to our ATM business. Approximately 10% of our
revenues for fiscal 1998 were derived from our ATM business.
LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS
Our success depends on the skills, experience, and performance of certain
key members of our management team. The loss of any key employee could have an
adverse effect on our business, financial condition and results of operations
and prospects. We have not entered into employment agreements with any of our
key personnel, although we have entered into severance agreements with each of
our executive officers and we may in the future enter into employment agreements
with our key personnel.
Our success also depends to a significant extent upon our ability to
attract, retain and motivate highly skilled and qualified personnel. Competition
for such personnel is intense in the information technology services industry,
and recruiting and training such personnel requires substantial resources. We
must continue to grow internally by hiring and training technically-skilled
people in order to perform services under our existing contracts and new
contracts that we will enter into. The people capable of filling these positions
are in great demand and recruiting and training such personnel require
substantial resources. We have to pay an increasing amount to hire and retain a
technically-skilled workforce. Our business also experiences significant
turnover of technically-skilled people. If we fail to attract, train, and retain
sufficient numbers of these technically-skilled people, our business, financial
condition, and results of operations will be materially and adversely affected.
DARWIN DEASON'S STOCK OWNERSHIP PROVIDES SUBSTANTIAL CONTROL OVER OUR COMPANY
Darwin Deason, our Chairman and Chief Executive Officer, beneficially owns
3,299,686 shares of Class B Common Stock and 2,575,802 shares of Class A Common
Stock as of December 31, 1998. Accordingly, upon completion of the offering, Mr.
Deason will control approximately 43.2% of the total voting power of our company
assuming no exercise of the underwriters' over-allotment option, and 42.6% if
the underwriters' over-allotment option is exercised. As a result, Mr. Deason
has the requisite voting power to significantly affect virtually all decisions
made by the company and our stockholders, including the power to block corporate
actions such as an amendment to certain provisions of our Certificate of
Incorporation. In addition, Mr. Deason may significantly influence the election
of directors and any other action requiring shareholder approval.
LEGAL PROCEEDINGS
On December 16, 1998, a state district court in Houston, Texas entered
judgment against ACS for approximately $17 million in a lawsuit brought by
former employees of Gibraltar Savings Association and/or First Texas Savings
Association who alleged that they were entitled to the value of 401,541 shares
of ACS stock pursuant to options issued to these employees in 1988 in connection
with a former data processing services agreement between Gibraltar Savings
Association/First Texas Savings Association and ACS. We have filed a motion for
new trial, and plan to immediately and vigorously appeal the judgment. The
plaintiffs also have filed a notice of appeal. Should the proceedings not be
favorably resolved in the trial court or on appeal, we may be subject to a
material charge. See "Business -- Legal Proceedings."
We are subject to certain other legal proceedings, claims and disputes
which arise in the ordinary course of our business. If unfavorably resolved,
these proceedings could have a material adverse effect on our financial
position, results of operation and liquidity.
PROVISIONS OF OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW COULD
DETER TAKEOVER ATTEMPTS
Some provisions in our Certificate of Incorporation and Bylaws could also
delay, defer, prevent or make more difficult a merger, tender offer, or proxy
contest involving our company. Our stockholders might view such a transaction as
being in their best interests because, for example, a change of control
9
<PAGE> 13
might result in a price higher than the market price for shares of our Class A
Common Stock. Among other things, these provisions:
- require an 80% vote of the stockholders to amend certain provisions of
our Certificate of Incorporation;
- require an 80% vote of the stockholders to amend certain provisions of
our Bylaws;
- permit only our Chairman, President or a majority of the Board of
Directors to call stockholder meetings;
- authorize our Board of Directors to issue up to 3,000,000 shares of
preferred stock in series with the terms of each series to be fixed by
our Board of Directors;
- authorize our Board of Directors to issue Class B common stock, which
shares are entitled to ten votes per share;
- divide our Board of Directors into three classes so that only
approximately one-third of the total number of directors will be elected
each year;
- permit directors to be removed, with or without cause, only by vote of at
least 80% the combined voting power; and
- specify advance notice requirements for stockholder proposals and
director nominations to be considered at a meeting of Stockholders.
In addition, with certain exceptions, Section 203 of the Delaware General
Corporation Law restricts certain mergers and other business combinations
between us and any holder of 15% or more of our voting stock.
We also have a stockholder rights plan. Under this plan, after the
occurrence of specified events, our stockholders will be able to buy stock from
us or our successor at reduced prices. These rights will not extend, however, to
persons participating in takeover attempts without the consent of our Board of
Directors. Accordingly, this plan could delay, defer or prevent a change of
control of our company. See "Description of Capital Stock -- Rights Agreement."
Further, we have entered into severance agreements with each of our
executive officers, which may have the effect of discouraging an unsolicited
takeover proposal. Finally, Mr. Deason's ownership of approximately 45% of the
voting power of our company (approximately 43.2% after completion of the
offering, assuming no exercise of the underwriters' over-allotment option, and
42.6% if the underwriters' over-allotment option is exercised) could have the
effect of delaying, deterring or preventing a takeover of our company. See
"-- Darwin Deason's Stock Ownership Provides Substantial Control Over Our
Company."
INTELLECTUAL PROPERTY RIGHTS
In recent years, there has been significant litigation in the United States
involving patent and other intellectual property rights. We are not currently
involved in any material intellectual property litigation. We may, however, be a
party to material intellectual property litigation in the future to protect our
trade secrets or know-how.
Our suppliers, clients, and competitors may have patents and other
proprietary rights that cover technology employed by us. Such persons may also
seek patents in the future. United States patent applications are confidential
until a patent is issued and most technologies are developed in secret.
Accordingly, we are not, and cannot, be aware of all patents or other
intellectual property rights of which our services may pose a risk of
infringement. Others asserting rights against us could force us to defend
ourselves or our clients against alleged infringement of intellectual property
rights. We could incur
10
<PAGE> 14
substantial costs to prosecute or defend any such litigation and intellectual
property litigation could force us to do one or more of the following:
- cease selling or using products or services that incorporate the
challenged technology;
- obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology; and
- redesign those services or products that incorporate such technology.
AVAILABILITY OF SIGNIFICANT AMOUNTS OF CLASS A COMMON STOCK FOR SALE COULD
ADVERSELY AFFECT ITS MARKET PRICE
After consummation of this offering, 49,323,877 shares of Class A Common
Stock and 3,299,686 shares of Class B Common Stock will be outstanding. Sales of
substantial amounts of Class A Common Stock (including shares issued upon the
exercise of stock options) or Class B Common Stock, or the perception that such
sales could occur, may adversely affect prevailing market prices for Class A
Common Stock. In addition, up to 5,391,936 shares of Class A Common Stock could
be issued upon conversion of our 4% Convertible Subordinated Notes due March 15,
2005 in the aggregate principal amount of $230 million (the "4% Notes") at a
conversion price of $42.66 per share (equivalent to a conversion rate of 23.4432
shares per $1,000 principal amount of 4% Notes), and 3,299,686 shares of Class A
Common Stock could be issued upon conversion of all outstanding shares of Class
B Common Stock.
We have issued options to purchase 4,876,957 shares of Class A Common Stock
to our employees prior to this offering. Following this offering, we expect to
continue to issue options to our employees to reward performance and encourage
retention. The exercise of any additional options issued by us could adversely
affect the prevailing market price of the Class A Common Stock.
Our company and its directors and executive officers have agreed that,
during the period beginning on the date of this offering and continuing to and
including the 90th day after such date, they will not, directly or indirectly,
offer, sell, contract to sell or otherwise dispose of any shares of Class A or
Class B Common Stock (other than pursuant to existing employee stock option and
stock purchase plans, upon the conversion of outstanding convertible securities
or pursuant to existing earn-out obligations arising out of prior acquisitions),
without the prior consent of Bear, Stearns & Co. Inc.; provided, however, that
we may issue up to 1,000,000 shares of Class A Common Stock in consideration for
acquisitions of businesses occurring after the offering; and provided, further,
however, that during the period beginning on the 31st day after the date of the
offering and continuing to and including the 90th day after such date, the
directors and executive officers may offer, sell, contract to sell or otherwise
dispose of up to an aggregate of 15% of their individual holdings of shares of
Class A Common Stock and Class B Common Stock, which is a total of approximately
952,000 shares of Common Stock issued and outstanding as of the date of this
prospectus (including 881,323 shares held by Mr. Deason), excluding options. In
the event that the underwriters' over-allotment option is exercised in full and
as a result Mr. Deason sells 525,000 shares of his Common Stock, Mr. Deason may
thereafter offer, sell, contract to sell or otherwise dispose of a maximum of
356,323 shares of Class A Common Stock during the period specified above.
NO DIVIDENDS
Except for the dividends paid by ACS Government Solutions Group, Inc. prior
to its merger with a wholly-owned subsidiary of the Company in December 1997, we
have not declared or paid any cash dividends to date on our Common Stock. We
intend to continue to retain earnings for use in the operation of our business
and, therefore, do not anticipate declaring or paying any cash dividends in the
foreseeable future. Under the terms of our credit agreement, we are prohibited
from paying cash dividends in excess of certain amounts. See "Dividend Policy."
11
<PAGE> 15
RISKS RELATED TO INTERNATIONAL OPERATIONS
We have limited operations in many countries around the world but may
increase our international presence in the future. Risks that affect
international operations include:
- fluctuations in currency exchange rates;
- complicated licensing and work permit requirements;
- variations in the reaction of intellectual property rights;
- restrictions on the ability to convert currency; and
- additional expenses and risks inherent in conducting operations in
geographically distant locations, with clients speaking different
languages and having different cultural approaches to the conduct of
business.
WHERE YOU CAN FIND MORE INFORMATION
ACS files annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy the reports, statements or other information we file at the SEC's
public reference room in Washington, D.C. located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The SEC also maintains regional offices where you can
read and copy the reports. These are located at 500 West Madison Street, Room
1400, Chicago, Illinois 60606 and at 7 World Trade Center, Suite 1300, New York,
New York 10048. You can request copies of these documents, upon payment of
photocopying fees, by writing to the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public on the SEC's internet site
(http://www.sec.gov). These documents are also available for viewing and copying
at the offices of the New York Stock Exchange ("NYSE"), 20 Broad Street, New
York, New York 10005.
This prospectus is part of a registration statement on Form S-3 that we
filed with the SEC. This prospectus does not contain all the information in that
registration statement. For further information with respect to ACS and the
securities offered by this prospectus, you should review the registration
statement. You can obtain the registration statement from the SEC and the NYSE
at the public reference facilities we referred to above.
The SEC allows us to "incorporate by reference" information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information contained directly in this prospectus.
This prospectus incorporates by reference the documents set forth below that ACS
has previously filed with the SEC. These documents contain important information
about ACS and its financial condition.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this prospectus to the extent that a statement contained herein,
or in any other subsequently filed document that is also incorporated or deemed
to be incorporated by reference herein, modifies or supersedes the earlier
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
12
<PAGE> 16
The following ACS documents are incorporated by reference into this
prospectus:
<TABLE>
<CAPTION>
FILING PERIOD
- ------ ------
<S> <C>
Annual Report on Form 10-K......................... Year Ended June 30, 1998
Quarterly Report on Form 10-Q...................... Quarter Ended September 30, 1998
Quarterly Report on Form 10-Q...................... Quarter Ended December 31, 1998
Current Report on Form 8-K......................... Dated February 19, 1998
Current Report on Form 8-K......................... Dated December 30, 1998
Current Report on Form 8-K/A....................... Dated February 5, 1999
Proxy Statement on Schedule 14A.................... Dated September 29, 1998
The description of common stock purchase rights
included in the Company's registration statement
on Form 8-A...................................... Dated August 21, 1997
</TABLE>
The following BRC Holdings, Inc. information is incorporated by reference
into this prospectus:
<TABLE>
<CAPTION>
INFORMATION PERIOD
- ----------- ------
<S> <C>
Financial Statements of BRC Holdings, Inc. as of
December 31, 1996 and 1997 and for the three
years ended December 31, 1997 located on pages 22
through 49 of the Annual Report on Form 10-K..... Year Ended December 31, 1997
Financial Statements of BRC Holdings, Inc.
(unaudited) as of September 30, 1998 and for the
quarter ended September 30, 1998 located on pages
1 through 11 of the
Quarterly Report on Form 10-Q.................... Quarter Ended September 30, 1998
</TABLE>
All documents filed by ACS pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the date of this prospectus
will be deemed to be incorporated by reference into this prospectus and to be a
part hereof from the date of filing of such documents.
Documents incorporated by reference are available from ACS without charge,
excluding all exhibits unless specifically incorporated by reference as an
exhibit to this prospectus. Prospective investors may obtain documents
incorporated by reference in this prospectus by requesting them in writing or by
telephone from the company at its executive offices: Attention: General Counsel,
2828 North Haskell Avenue, Dallas, Texas 75204, (214) 841-6111.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Business" and elsewhere in this prospectus, or incorporated herein by
reference, constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements involve known and unknown
risks, uncertainties and other factors that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Statements
about ACS' outlook and all other statements in this prospectus other than
historical facts are forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "anticipates," "plans," "believes," "estimates," "predicts,"
"potential," "intends," "foresees," "projects," "forecasts" or "continue" or the
negative of such terms or other comparable terminology. These forward looking
statements rely on a number of assumptions concerning future events and are
subject to a number of uncertainties and factors, many of which are outside of
our control, that could cause actual results to differ materially from such
statements. While we believe that the assumptions concerning future events are
reasonable, we caution that there are inherent difficulties in predicting
certain important factors, especially the loss of any significant customers, the
competition in the information technology industry and the impact of such
competition on pricing, the timing and magnitude of
13
<PAGE> 17
technological advances, the performance of recently acquired businesses and
prospects for future acquisitions, uncertainties surrounding budget reductions
or changes in funding priorities or existing government programs, Year 2000
problems affecting ACS' and its clients' business, the costs of attracting and
retaining highly skilled personnel and the other factors described under "Risk
Factors" beginning on page 4.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of any such
forward-looking statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform such
statements to actual results.
USE OF PROCEEDS
The Company estimates that the net proceeds to the Company from this Class
A Common Stock offering (after deducting estimated expenses) will be
approximately $173 million. The Company will use the net proceeds of this
offering for repayment of a portion of the bank debt under its revolving credit
agreement, as restated (the "Credit Agreement"), with Wells Fargo Bank (Texas)
N.A., as agent, Bank One, Texas, N.A., as co-agent, and the other lenders that
are parties thereto, as amended. As of December 31, 1998, the Company's
outstanding debt under the Credit Agreement was $174.0 million, including
approximately $165 million used in connection with the acquisition of a 63%
interest in BRC Holdings, Inc. See "Business -- Recent Acquisitions." The Credit
Agreement expires in July 2002, and loans outstanding at December 31, 1998 under
the Credit Agreement bear interest at LIBOR plus 0.625%. As of December 31,
1998, after giving effect to the receipt of the estimated net proceeds from the
sale of the Class A Common Stock offered hereby, the Company will have $940,000
of indebtedness under the Credit Agreement and $196.6 million of availability
under the Credit Agreement. The Company intends to borrow under the Credit
Agreement from time to time as necessary to fund acquisitions and for other
general corporate purposes.
If the underwriters exercise their over-allotment option in full, Mr.
Deason will receive estimated net proceeds of approximately $26 million. The
Company will receive no proceeds from the sale of Mr. Deason's shares of Class A
Common Stock in connection with the exercise of the underwriters' over-
allotment option.
14
<PAGE> 18
SELLING STOCKHOLDER
IF UNDERWRITERS' OVER-ALLOTMENT OPTION IS EXERCISED
The following table sets forth certain information regarding the shares of
the Class A Common Stock and Class B Common Stock beneficially owned by Mr.
Deason, our Chairman and Chief Executive Officer, as of the date of this
Prospectus, and as adjusted to reflect the sale of the shares of Class A Common
Stock offered hereby, assuming that the underwriters' over-allotment option is
exercised.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR TO OFFERING
----------------------------------------------------------
PERCENT
OF TOTAL
PERCENT SHARES OF
NUMBER OF TOTAL NUMBER CLASS A PERCENT SHARES OF
OF SHARES SHARES OF OF SHARES AND OF CLASS A
OF CLASS A CLASS A OF CLASS B CLASS B TOTAL COMMON
COMMON COMMON COMMON COMMON VOTING STOCK
STOCK STOCK STOCK STOCK POWER(1) OFFERED
---------- --------- ---------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
SELLING STOCKHOLDER
Darwin Deason(2)........... 2,575,802 5.6% 3,299,686 12.0% 45.1% 525,000
<CAPTION>
SHARES BENEFICIALLY OWNED AFTER OFFERING,
ASSUMING EXERCISE OF OVER-ALLOTMENT OPTION
----------------------------------------------------------
PERCENT
OF TOTAL
PERCENT SHARES OF
NUMBER OF TOTAL NUMBER CLASS A PERCENT
OF SHARES SHARES OF OF SHARES AND OF
OF CLASS A CLASS A OF CLASS B CLASS B TOTAL
COMMON COMMON COMMON COMMON VOTING
STOCK STOCK STOCK STOCK POWER(1)
---------- --------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
SELLING STOCKHOLDER
Darwin Deason(2)........... 2,050,802 4.2% 3,299,686 10.2% 42.6%
</TABLE>
- ---------------
* Less than 1%.
(1) In calculating the percent of total voting power, the voting power of shares
of Class A Common Stock (one vote per share) and Class B Common Stock (ten
votes per share) is aggregated.
(2) Includes 1,628,397 shares of Class A Common Stock owned by The Deason
International Trust (the "Trust") and 72,728 of the shares of Class A Common
Stock owned by the Deason Foundation (the "Foundation"). Mr. Deason holds
the sole voting power with respect to such shares through an irrevocable
proxy granted by the Trust and a board resolution passed by the Foundation.
The investment power with respect to such shares is held by the Trust and
the Foundation. The shares of Class A Common Stock also include 7,310 shares
owned by Mr. Deason's spouse and her daughter, to which Mr. Deason disclaims
beneficial ownership.
15
<PAGE> 19
PRICE RANGE OF CLASS A COMMON STOCK
Since February 5, 1997, the Class A Common Stock has been traded on the
NYSE. From February 5, 1997 to November 30, 1998, the Class A Common Stock
traded under the symbol "AFA." Since December 1, 1998, it has traded under the
symbol "ACS." From September 26, 1994 to February 5, 1997, the Class A Common
Stock was traded on the Nasdaq National Market ("Nasdaq") under the symbol
"ACSA." The following table sets forth the quarterly high and low sales prices
of the Class A Common Stock for the last two fiscal years as reported on the
Nasdaq through February 1997 and thereafter on the NYSE, and have been
retroactively adjusted for the two-for-one stock split which occurred in
November 1996.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal year ended June 30, 1997
First Quarter............................................. $32 $21 1/8
Second Quarter............................................ $32 $24 3/4
Third Quarter............................................. $30 1/4 $19 1/2
Fourth Quarter............................................ $28 5/8 $20 3/4
Fiscal year ended June 30, 1998
First Quarter............................................. $29 15/16 $24 5/16
Second Quarter............................................ $26 1/2 $21 1/2
Third Quarter............................................. $37 1/8 $24 1/2
Fourth Quarter............................................ $39 3/4 $30 5/8
Fiscal year ended June 30, 1999
First Quarter............................................. $38 3/4 $29 3/4
Second Quarter............................................ $45 $22 3/8
Third Quarter (through February 4, 1999).................. $51 5/8 $41 1/16
</TABLE>
On February 4, 1999, the last reported sales price of the Class A Common
Stock as reported on the NYSE was $51 5/8 per share.
DIVIDEND POLICY
Except for the dividends paid by ACS Government Solutions Group, Inc.,
formerly known as Computer Data Systems, Inc., prior to its merger with a
wholly-owned subsidiary of ACS in December 1997, ACS has not paid any cash
dividends to date on its Class A Common Stock. We intend to continue to retain
earnings for use in the operation of our business and, therefore, do not
anticipate declaring or paying any cash dividends in the foreseeable future.
Under the terms of the Credit Agreement, we are prohibited from paying cash
dividends in any fiscal year in a total amount that would exceed 50% of the
Company's net income for the preceding fiscal year. Any future determination to
pay dividends will be at the discretion of our Board of Directors and will be
dependent upon our financial condition, results of operations, contractual
restrictions, capital requirements, business prospects and such other factors as
the Board of Directors deems relevant.
16
<PAGE> 20
CAPITALIZATION
The following table shows the capitalization of our company as of December
31, 1998, and as adjusted to give effect to the sale of shares of Class A Common
Stock offered by ACS hereby and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds." This table should be read in
conjunction with the other financial information appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
------------------------
AS
ACTUAL ADJUSTED
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Notes payable and current portion of long-term debt(1)...... $ 11,699 $ 11,699
======== ========
Long-term debt:
Credit Agreement(2)....................................... $174,000 $ 940
4% Convertible Subordinated Notes due 2005................ 230,000 230,000
Other debt, net of current portion(3)..................... 4,964 4,964
-------- --------
Total long-term debt.............................. 408,964 235,904
Stockholders' equity:
Class A Common Stock:
Class A, $.01 par value, 500,000,000 shares authorized,
45,823,877 shares issued and outstanding (49,323,877
after this offering)(4)............................... 459 494
Class B, par value $.01 per share, 14,000,000 shares
authorized, 3,299,686 shares issued and outstanding... 33 33
Additional paid-in capital................................ 314,490 487,515
Retained earnings......................................... 244,429 244,429
-------- --------
Total stockholders' equity........................ 559,411 732,471
-------- --------
Total capitalization.............................. $968,375 $968,375
======== ========
</TABLE>
- ---------------
(1) Notes payable and current portion of long-term debt consists of $9.0 million
borrowed from a commercial bank for cash used in ACS-owned ATMs and $2.7
million in capital lease obligations and other notes payable to individuals
and corporations.
(2) The Credit Agreement has a maximum availability of $200 million, expires in
July 2002 and accrues interest at LIBOR plus 0.3% to 0.875%, or the bank's
prime rate, as elected by ACS. At December 31, 1998, our borrowing rate was
LIBOR plus 0.625%.
(3) Other long-term debt includes $2.2 million in capital lease obligations and
$2.8 million in other amounts due to individuals and corporations.
(4) Does not include (a) 6,326,457 shares of Class A Common Stock reserved for
issuance under our stock option plans, under which options to purchase
4,876,957 shares were outstanding as of December 31, 1998 at a weighted
average exercise price of $21.22 per share, (b) 5,391,936 shares of Class A
Common Stock issuable upon conversion of our 4% Convertible Subordinated
Notes due March 15, 2005, or (c) 3,299,686 shares of Class A Common Stock
issuable upon conversion of all outstanding shares of Class B Common Stock.
See "Description of Capital Stock -- Class A Common Stock and Class B Common
Stock."
17
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated income statement data for the fiscal
years ended June 30, 1995, 1996, 1997 and 1998 and selected consolidated balance
sheet data as of June 30, 1996, 1997 and 1998 were derived from our audited
financial statements, incorporated herein by reference. The following selected
consolidated income statement data for the fiscal year ended June 30, 1994 and
selected consolidated balance sheet data as of June 30, 1994 and 1995 were
derived from our audited financial statements, incorporated herein by reference,
and the audited financial statements of ACS Government Solutions Group, Inc.,
(formerly Computer Data Systems, Inc.). The following selected consolidated
income statement data for the six months ended June 30, 1997 and 1998 and the
selected consolidated balance sheet data as of December 31, 1998 were derived
from our unaudited financial statements, incorporated herein by reference. In
the opinion of management, our unaudited financial statements reflect all
adjustments (consisting of only normal recurring accruals) that are necessary to
present fairly the financial results for such periods. The selected financial
data do not purport to indicate results of operations as of any future date or
any future period.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
------------------------------------------------------ -------------------
1994 1995 1996 1997 1998 1997 1998
-------- -------- -------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1):
Revenues $476,978 $533,848 $647,608 $928,925 $1,189,123 $550,229 $754,990
Operating expenses:
Wages and benefits............................ 233,678 248,680 298,659 395,780 504,284 234,217 319,152
Services and supplies......................... 116,483 132,737 185,550 264,104 364,285 168,136 234,951
Rent, lease and maintenance................... 72,184 87,661 82,314 132,837 150,253 74,792 87,895
Depreciation and amortization................. 10,614 14,784 18,450 35,510 47,475 21,833 31,347
Merger costs.................................. -- -- -- -- 12,974 12,974 --
Other operating expenses...................... 6,544 5,608 6,052 10,428 11,533 4,889 8,735
-------- -------- -------- -------- ---------- -------- --------
Total operating expenses................ 439,503 489,470 591,025 838,659 1,090,804 516,841 682,080
-------- -------- -------- -------- ---------- -------- --------
Operating income.............................. 37,475 44,378 56,583 90,266 98,319 33,388 72,910
Interest expense.............................. 6,483 4,729 3,417 7,121 12,059 5,456 7,168
Other nonoperating income, net................ (1,727) (3,321) (2,751) (425) (7,832) (6,596) (1,164)
-------- -------- -------- -------- ---------- -------- --------
Income before income taxes.................... 32,719 42,970 55,917 83,570 94,092 34,528 66,906
Income tax expense............................ 13,065 17,315 22,392 33,904 39,670 15,476 27,272
-------- -------- -------- -------- ---------- -------- --------
Net income..................................... $ 19,654 $ 25,655 $ 33,525 $ 49,666 $ 54,422 $ 19,052 $ 39,634
======== ======== ======== ======== ========== ======== ========
Earnings per common share:
Basic......................................... $ 0.64 $ 0.74 $ 0.88 $ 1.08 $ 1.14(2) $ 0.40 $ 0.82
Diluted....................................... 0.59 0.71 0.85 1.05 1.11(2) 0.39 0.77
Shares used in computing earnings per common
share:
Basic......................................... 30,664 34,625 38,228 46,136 47,599 47,167 48,488
Diluted....................................... 33,233 35,998 39,320 47,452 50,487 48,453 55,304
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
---------------------------------------------------- ------------------
1994 1995 1996 1997 1998 1998
-------- -------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................... $ 76,583 $ 77,615 $ 79,928 $110,866 $198,118 $ 210,472
Total assets...................................... 266,734 309,903 636,098 761,477 949,798 1,328,310
Total long-term debt (less current portion)....... 84,534 37,940 57,208 130,680 234,848 408,964
Total stockholders' equity........................ 90,439 156,686 363,204 427,481 503,670 559,411
</TABLE>
- ---------------
(1) ACS has acquired 31 companies during the periods presented under the
purchase method of accounting, and therefore revenues between periods are
not comparable. In addition, all periods reflect the merger of a
wholly-owned subsidiary of ACS with and into ACS Government Solutions Group,
Inc., formerly known as Computer Data Systems, Inc., in December 1997. This
merger was accounted for as a pooling of interests and, accordingly,
historical results have been restated to reflect the combined operations of
the two companies.
(2) Includes $12,974,000, $8,880,000 net of tax, or $.19 and $.18 per basic and
diluted shares, respectively, of merger costs incurred by ACS in connection
with the merger of a wholly-owned subsidiary of ACS with and into ACS
Government Solutions Group, Inc. in December 1997.
18
<PAGE> 22
BUSINESS
GENERAL
We are based in Dallas, Texas and have offices primarily in North America,
as well as Central and South America, Europe and the Middle East. We provide a
full range of information technology services to clients which have
time-critical, transaction-intensive information processing needs. Our services
include technology outsourcing, business process outsourcing and professional
and systems integration services. Approximately 90% of our revenues for the past
three fiscal years were recurring revenues, which are revenues derived from
services that our clients use each year in connection with their ongoing
businesses.
We were formed in 1988 to participate in the trend to outsource technology
intensive information processing functions to third parties, which enables
businesses to focus on core operations, respond to rapidly changing technologies
and reduce technology expenses. Our business strategy is to continue to lower
our unit processing costs by expanding our client base through both internal
marketing and the acquisition of complementary companies. Our marketing efforts
focus on developing long-term relationships with clients that choose to
outsource various information processing requirements, as well as on expanding
the services we offer to existing clients. Since inception through December 31,
1998, we have completed 44 acquisitions, which have resulted in geographic
expansion, growth and diversification of our client base, expansion of services
and products offered, and increased economies of scale. Approximately half of
the increase in our revenues for the five years ended June 30, 1998 has been
attributable to acquisitions.
Our largest transaction occurred in December 1997, when we acquired ACS
Government Solutions Group, Inc. ("ACS Government Solutions"), formerly known as
Computer Data Systems, Inc., a provider of information technology solutions
primarily to Federal government agencies. We accounted for this transaction as a
pooling of interests (the "Merger"), and as a result, we have restated our
historical financial statements to reflect the combined operations of both
companies.
We serve two primary markets. Our largest market is the commercial sector,
which accounts for approximately two-thirds of our annual revenue. Within the
commercial sector, we provide technology outsourcing, business process
outsourcing and professional and systems integration services to a variety of
clients nationwide, including retailers, local municipalities, healthcare
providers, telecommunications companies, wholesale distributors, manufacturers,
utilities, financial institutions and insurance companies.
We also serve the federal government market which accounts for
approximately one-third of our annual revenues. Our services in this market are
comprised primarily of professional and systems integration services and
business process outsourcing. Within our federal government business,
approximately half of our revenues are derived from civilian agencies with the
remaining half from the Department of Defense.
Our revenues, derived from the services indicated, are as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
-------------------------------- ------------
1996 1997 1998 1998
-------- -------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Technology outsourcing............................. $185,945 $297,268 $ 330,727 $187,396
Business process outsourcing....................... 260,220 385,937 468,175 303,091
Professional services/systems integration.......... 201,443 245,720 390,221 264,503
-------- -------- ---------- --------
Total.................................... $647,608 $928,925 $1,189,123 $754,990
======== ======== ========== ========
</TABLE>
MARKET OVERVIEW
According to industry sources, the 1997 worldwide market for information
technology services and solutions was approximately $266 billion, with the
United States market accounting for $124 billion, or
19
<PAGE> 23
approximately half of the total market. Approximately $47 billion, or one-third,
of the U.S. market has been outsourced to companies like ours. The U.S.
outsourced market is expected to grow to $76 billion in 2002, representing a 10%
compounded annual growth rate. However, in the particular markets in which ACS
competes, information technology spending in the U.S. was approximately $50
billion in 1997, of which approximately $18 billion was outsourced. This
outsourced market is expected to increase to $36 billion in 2002, representing a
14% compounded annual growth rate.
We believe that the demand for third-party information processing services
has grown substantially in recent years and will continue to increase in the
future as a result of financial, strategic and technological factors. These
factors include: (1) the increasing complexity in the information technology
systems environment, (2) the desire by businesses to take advantage of the
latest advances in technology without the cost and time commitment required to
maintain an in-house system, (3) the increasing requirements for rapid
processing and communication of large amounts of data to multiple locations, (4)
the increasing attention by businesses to controlling costs, causing them to
compare the fully allocated cost of in-house processing with the cost of
outsourcing and (5) the desire of organizations to focus on their primary
competencies.
As a result of rapid technological change in our markets, we expect strong
demand for third-party professional programming and consulting services. Because
we provide professional programming services to clients with mainframe
environments as well as with client-server and network applications, we believe
that we are well-positioned to expand our services in current locations as well
as in new geographic markets. As part of our consulting services, we advise
clients on the strategic acquisition and utilization of information technology
to achieve and improve their competitive position.
BUSINESS STRATEGY
The key components of our business strategy include the following:
- Expand Client Base -- We seek to develop long-term relationships with new
clients by leveraging our expertise and breadth of information technology
products and services. Our primary focus is to increase our revenues by
obtaining new clients with recurring requirements for information
technology services.
- Expand Existing Client Relationships -- We seek to leverage existing
clients relationships in which we are currently not providing a full
range of services in order to increase the information technology
services we provide to these clients.
- Build Recurring Revenues -- We seek to enter into long-term contracts
with clients to provide services that meet their ongoing information
technology needs.
- Invest in Technology -- We respond to technological advances and the
rapid changes in the requirements of our clients by committing
substantial amounts of our resources to the operation of multiple
hardware platforms, customization of products and services that
incorporate new technology on a timely basis and continuous training of
our client service personnel.
- Provide Flexible Solutions -- We offer custom-tailored information
processing solutions using a variety of proprietary and third-party
licensed software on multiple hardware and systems software platforms.
- Maximize Economies of Scale -- Our strategy is to develop and maintain a
significant client and account/transaction base to create sufficient
economies of scale that will enable us to achieve competitive costs.
- Complete Strategic and Tactical Acquisitions -- Our acquisition strategy
is to acquire companies to expand our geographic presence, to expand the
products and services we offer to existing clients, and to obtain a
presence in new, complementary markets. Although we currently generate
virtually all of our revenue from domestic clients, we believe we have
significant international growth opportunities and intend to pursue those
opportunities in a disciplined manner.
20
<PAGE> 24
- Attract, Train, and Retain Employees -- We believe that attracting,
training, and retaining high quality employees is essential to our
growth. We hire motivated individuals with strong character and
leadership traits and provide them with ongoing technological and
leadership skills training. We emphasize retaining our employees with
challenging work assignments and incentive programs.
COMMERCIAL SECTOR
In the commercial sector we provide our clients with technology
outsourcing, business process outsourcing and professional programming and
systems integration services.
Technology Outsourcing
We offer a diverse set of technology outsourcing solutions to businesses
desiring to achieve reductions in data processing costs and/or improvements in
the quality of data processing. Our principal technology outsourcing service is
the delivery of data processing services on a remote basis from host data
centers with sufficient computer processing capacity to deliver significant cost
savings and process improvements to clients. We typically outsource a client's
in-house data processing operation by migrating the processing workload to one
of our data centers over a period of three to six months, and in some instances
we acquire the client's data processing assets and hire certain client
personnel. Our services include both on-line and batch processing of data and
network management assistance. We process the mission-critical application
systems for our clients including financial, human resources, retail and
wholesale inventory distribution, manufacturing, healthcare management,
transportation management, commercial and residential telephone billing,
mortgage portfolio information and software development systems.
We provide our technology outsourcing services through an extensive
national data and service center network, which comprises five host data centers
and seven remote data centers, as well as an extensive telecommunications
network. We manage data communications and, in some instances, voice
communications for our clients, as well as various local and wide area networks.
We maintain a nationwide voice and data network to support the complex
telecommunications requirements of our client base. We monitor and maintain
network lines and circuits on a seven-day, 24-hour basis from our host data
centers. We also provide shared hub satellite transmission services as an
alternative to multi-drop and point-to-point hard line telecommunication
networks.
Our target market for technology outsourcing services consists of medium-
to large-sized commercial organizations with time-critical,
transaction-intensive information processing needs. We typically provide our
technology outsourcing services pursuant to multi-year contracts which are
typically priced on a resource utilization basis. Resources utilized include
processing time, professional services, hardware, data storage and retrieval
requirements and output volume required for processing.
Business Process Outsourcing
We participate in several segments of the business process outsourcing
market. We developed and acquired our business process outsourcing services to
capitalize on a growing trend in corporate America. More and more companies are
concluding that it is more efficient to focus on their core competencies and to
outsource their non-core but mission-critical processes. As a result, they turn
to companies such as ours to manage their processes. We provide a variety of
services on behalf of our clients, including loan and mortgage processing,
claims processing, accounts payable processing, data capture, storage and
retrieval services and trade marketing. We typically receive client information
in a variety of media such as paper, microfilm, computer tape, optical disk or
CD ROM. Upon receipt, we either duplicate, electronically scan or convert the
information into another suitable medium for processing. Using state-of-the-art
image transmission, storage and retrieval technology, we digitize and transmit
millions of information records daily from client locations for high-speed
conversion and database update. In many instances, we store the information for
our clients on a long term basis. Pricing is typically based on the number of
accounts or transactions processed.
21
<PAGE> 25
We also provide automated teller machine transaction processing services
primarily for financial institutions and retailers. We believe we are the
largest processor of retail automated teller machines in the United States.
Professional Services/Systems Integration
Our professional services include consulting, contract programming,
applications and technical support and training, as well as network design and
installation services. We provide a variety of clients with professional
services allowing such clients the opportunity to use a planned, flexible
workforce, either through staff augmentation or by serving as a client's
in-house development staff. Our ability to deliver high-level skill sets and
proven methodologies across a variety of technologies enhances our ability to
offer complementary services to clients and prospects dealing with technological
change.
We also provide systems integration services to clients in selected
industries who are deploying newer technology such as client/server
architectures, advanced networks and web-based systems. We use a combination of
third party and proprietary systems to offer packaged solutions to clients with
intensive document management needs. We currently have approximately 1,500
employees providing professional and systems integration services to commercial
clients. We provide these services in fifteen offices in major cities throughout
the United States. Due to the nature of the work, we generally offer our
professional services on a time and materials basis to a changing client base
under short-term contractual arrangements.
FEDERAL GOVERNMENT SECTOR
Within the federal government sector, we provide professional
services/system integration services and business process outsourcing services
to several agencies. Our civilian agency clients account for about half of our
federal government revenues and our department of defense clients accounts for
the remaining half.
Professional Services/Systems Integration
We provide applications maintenance and development, network implementation
and maintenance, desktop services, technical staff augmentation, training and
web page development. Department of Defense and civilian agencies generally
either contract directly with us or through the General Services Administration
(GSA). The GSA performs the procurement function for many civilian and
Department of Defense agencies. Approximately 41% of the professional
services/systems integration services we provided to the federal government for
fiscal 1998 were provided pursuant to three contracts with the GSA. We provide
our services to a variety of civilian agencies such as the Departments of Labor,
Treasury and Transportation, the U.S. Senate, the U.S. Postal Service, the
Federal Energy Regulatory Commission and the National Drug Intelligence Center.
In addition, we also provide these services to a variety of Department of
Defense agencies such as Strategic Command, Air Combat Command, the National
Security Agency and the Defense Special Weapons Agency.
We currently have over 3,900 employees providing these services to our
government clients. Additionally, approximately 1,100 of these employees have
security clearance. We generally price these services on a time and materials
basis.
Business Process Outsourcing
Our business process outsourcing services consist primarily of loan
servicing to federal agencies. Our services include billing, lockbox payment
processing, related accounting and reconciliation and client service call center
operations. Our largest contract for these services is with the Department of
Education, for which we service student loans under the Department of
Education's Direct Student Loan program. Under this contract, we currently
provide loan servicing to over 3.8 million borrowers, or over 10.8 million loans
with an aggregate value of $39 billion. During fiscal year 1998, revenue from
this contract was approximately $97 million. This contract is scheduled to
expire September 2003. We also have contracts
22
<PAGE> 26
with the Small Business Administration and Department of Veterans
Administration. Pricing is typically based on the number of accounts or
transactions processed.
RECENT ACQUISITIONS
We purchased approximately 63% of the shares of BRC in a tender offer
completed on December 15, 1998 for a total of approximately $165 million in
cash. Pursuant to a merger agreement, we will purchase the remaining shares of
BRC in a second-step merger in February 1999 for a total of approximately $104
million, and as a result, BRC will become a wholly-owned subsidiary of our
company. BRC is an information technology services firm with 30 years experience
providing consulting, project management, technical support and system services,
and specializing in information technology outsourcing, consulting, information
systems and document management services to the local government and healthcare
sectors.
In December 1998 we also acquired two other companies. The combined annual
revenues of these three companies during calendar year 1998 was approximately
$146 million.
COMPETITION
The markets for our services are intensely competitive and highly
fragmented. The most significant competitive factors are reliability and quality
of services, technical competence and price of services.
In connection with certain large technology outsourcing contracts, we may
be required to purchase technology assets from prospective clients or to provide
financial assistance to prospective clients in order to obtain their contracts.
Many of our competitors have substantially greater resources and thus, may have
a greater ability to obtain client contracts where sizable asset purchases or
investments are required. To maintain competitive prices, we operate with
efficient and low overhead and maintain a significant client base and
account/transaction base to achieve sufficient economies of scale. Our
competition for technology outsourcing contracts consists of (1) the first-tier
outsourcers, including IBM, Electronic Data Systems Corporation ("EDS") and
Computer Sciences Corporation ("CSC"), (2) mid-sized divisions of large
corporations, such as MCI WorldCom and Lockheed-Martin and (3) other smaller,
regional competitors.
In professional services markets, we actively compete with small
specialized firms as well as with large competitors with a wider range of
professional services. We believe that the key competitive factors in obtaining
and retaining clients include the ability to understand project requirements,
deliver appropriate skill sets in a timely manner and price services
effectively. We must also compete for qualified personnel through competitive
wages and by maintaining a consistent demand for the skills recruited. Our
competition in professional services includes EDS, CSC, Science Applications
International Corporation and several other local and regional players.
We compete successfully in the business process outsourcing business by
offering a wide range of high quality services and achieving favorable pricing
by maintaining a significant volume of transactions to obtain economies of
scale. Competition is highly fragmented and depends on the specific business
process. Principal competitors for accounts payable, claims processing and
records storage and retrieval services include FYI, Inc., National Processing
Company, Lason, Inc., and several other small- to medium-sized local and
regional competitors. Principal electronic commerce solution competitors include
EDS, Deluxe Data Corporation, Concord EFS, Inc., large financial institutions
and several regional automated teller machine networks and processors.
GOVERNMENT CONTRACTS AND REGULATION
One-third of our revenues are derived from contracts and subcontracts with
federal government agencies. Our allowable federal government contract costs and
fees are subject to audit by the Defense Contract Audit Agency ("DCAA"). These
audits may result in non-reimbursement of some contract costs and fees. To date,
we have experienced no material adjustments as a result of audits by the DCAA.
The DCAA has completed audits of our federal contracts through fiscal 1996, with
the exception of the
23
<PAGE> 27
operations of our subsidiary, Analytical Systems Engineering Corporation, which
have been audited through calendar year 1995.
We are not directly subject to federal or state regulations specifically
applicable to financial institutions. As a provider of services to financial
institutions, however, our technology outsourcing and electronic commerce
solutions operations are examined periodically by various state and federal
regulatory agencies. These agencies make recommendations regarding various
aspects of our operations, and generally, we implement such recommendations. We
also arrange for an annual independent examination of our major data processing
facilities.
Our ATM network operations are subject to federal and state regulations
governing consumers' rights with respect to ATM transactions. Fees charged by
ATM owners are currently regulated, and additional legislation which would
regulate or eliminate certain ATM fees has been proposed by the federal
government and by several states. There can be no assurance whether such
regulations or legislation will be enacted in the future or that existing
consumer protection laws will not be expanded to apply to fees charged in
connection with ATM transactions. However, if such legislation were enacted, the
number of ATMs operated nationwide (or within the geographic areas affected by
the legislation) could be significantly reduced. This could adversely affect our
revenues and income as they relate to our ATM network operations.
PROPERTIES
As of December 31, 1998, we had approximately 248 locations in the United
States and countries outside the United States, nine of which are
owned and 239 of which are leased. Our leases have expiration dates ranging from
1999 to 2018. Our executive offices are located in Dallas, Texas at a
company-owned facility of approximately 587,000 square feet, which also houses a
host data center and other operations. Our other significant facilities include
four host data centers, seven remote data centers, 58 facilities for business
process outsourcing service centers, two records centers (located on 334 acres
of land with 38 underground storage bunkers, and 199 acres of land with 23
underground storage bunkers, respectively), and 88 other facilities we use for
office or warehouse space. Upon expiration of our leases, we do not anticipate
any significant difficulty in obtaining renewals or alternative space. In
addition to these properties, we occupy office space at client locations
throughout the world. Such space is generally occupied pursuant to the terms of
the agreement with the particular client. All properties we lease or own are in
good repair and in suitable condition for the purposes for which we use them.
LEGAL PROCEEDINGS
On December 16, 1998, a state district court in Houston, Texas entered
final judgment against ACS in a lawsuit brought by twenty-one former employees
of Gibraltar Savings Association and/or First Texas Savings Association
(collectively, "GSA/FTSA"). The GSA/FTSA employees alleged that they were
entitled to the value of 401,541 shares of ACS stock pursuant to options issued
to the GSA/FTSA employees in 1988 in connection with a former data processing
services agreement between GSA/FTSA and ACS. The judgment against ACS was for
approximately $17 million (which includes attorneys' fees and prejudgment
interest, but excludes additional attorneys' fees of approximately $850,000
which could be awarded in the event the plaintiffs are successful upon appeal
and final judgment). We continue to believe that we have a meritorious defense
to all or a substantial portion of the Plaintiffs' claims. ACS has filed a
motion for new trial, and if that motion is denied, ACS plans to immediately and
vigorously appeal the judgment. The Plaintiffs also have filed a notice of
appeal. Should the proceedings not be favorably resolved in the trial court or
on appeal, we may be subject to a material charge.
A putative class action complaint by Matador Capital Management
Corporation, among other plaintiffs, against BRC, our company and the directors
of BRC at that time, was filed on October 30, 1998 in the Court of Chancery of
the State of Delaware seeking, among other things, to enjoin the tender offer
and proposed merger involving BRC. The complaint alleged, among other things,
certain misstatements and omissions by BRC in certain documents mailed to the
stockholders of BRC in connection with the
24
<PAGE> 28
tender offer, certain breaches of the fiduciary duties of the board of directors
of BRC and the aiding and abetting of such alleged breaches of fiduciary duties
by ACS. On November 25, 1998, the Court of Chancery issued an opinion and
related order denying Matador's motion for a preliminary injunction except
insofar as it sought to require the disclosure and dissemination of certain
additional information outlined in the opinion to our stockholders by ACS. On
December 2, 1998, the Court of Chancery entered a further order permitting the
tender offer to be consummated on December 14, 1998, following dissemination by
BRC to its stockholders of a disclosure reviewed by the Court of Chancery. BRC
mailed such disclosure to its stockholders on December 2, 1998.
It is possible that some BRC stockholders will exercise their dissenter's
rights under Delaware law in connection with the merger of BRC with and into a
subsidiary of ACS. BRC stockholders can exercise such dissenter's rights only
prior to the BRC stockholders meeting to be held February 11, 1999. Upon the
exercise of such rights, such stockholders may be entitled to an appraisal by
the Delaware Court of Chancery of the fair value of their shares of BRC stock.
We are subject to certain other legal proceedings, claims and disputes
which arise in the ordinary course of our business. Although we cannot predict
the outcomes of these legal proceedings, our management does not believe these
actions will have a material adverse effect on our financial position, results
of operations or liquidity. However, if unfavorably resolved, these proceedings
could have a material adverse effect on our financial position, results of
operations and liquidity.
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue up to 500,000,000 shares of Class A Common
Stock, up to 14,000,000 shares of Class B Common Stock and up to 3,000,000
shares of Preferred Stock, $1.00 par value. As of December 31, 1998, we had
issued and outstanding 45,823,877 shares of Class A Common Stock held by 364
stockholders of record, 3,299,686 shares of Class B Common Stock held by one
holder of record, and no shares of Preferred Stock. As of December 31, 1998,
4,876,957 shares of Class A Common Stock were subject to outstanding options. In
addition, up to 5,391,936 shares of Class A Common Stock could be issued upon
conversion of our 4% Convertible Subordinated Notes due March 15, 2005 in the
aggregate principal amount of $230 million (the "4% Notes") at a conversion
price of $42.66 per share (equivalent to a conversion rate of 23.4432 shares per
$1,000 principal amount of 4% Notes), and 3,299,686 shares of Class A Common
Stock could be issued upon conversion of all outstanding shares of Class B
Common Stock.
The relative rights and limitations of the Class A Common Stock and the
Class B Common Stock, as well as our Preferred Stock, are summarized below. The
following summary description of our capital stock is qualified in its entirety
by reference to the Certificate of Incorporation and the Bylaws, copies of which
have been filed as exhibits to our reports or registration statements filed with
the SEC.
PREFERRED STOCK
Our Board of Directors has the authority, without further action by the
stockholders, to issue up to 3,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
to or imposed upon any unissued shares of Preferred Stock and to fix the number
of shares constituting any series and the designations of such series. The
issuance of Preferred Stock could adversely affect the voting power of the
holders of Class A Common Stock and the likelihood that such holders will
receive dividend payments and payments upon liquidation and may have the effect
of delaying, deferring or preventing a change in control of ACS.
25
<PAGE> 29
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Voting Rights
Each share of Class A Common Stock is entitled to one vote and each share
of Class B Common Stock is entitled to ten votes on all matters submitted to a
vote of the stockholders. Except as otherwise provided by law, Class A Common
Stock and Class B Common Stock vote together as a single class on all matters
presented for a vote of the stockholders. Neither class of our Common Stock has
cumulative voting rights.
Conversion
Class A Common Stock has no conversion rights. Each share of Class B Common
Stock is convertible at any time, at the option of and without cost to the
stockholder, into one share of Class A Common Stock upon surrender to our
transfer agent of the certificate or certificates evidencing the Class B Common
Stock to be converted, together with a written notice of the election of such
stockholder to convert such shares into Class A Common Stock. Shares of Class B
Common Stock will also be automatically converted into shares of Class A Common
Stock on the occurrence of certain events described below. Once shares of Class
B Common Stock are converted into shares of Class A Common Stock, such shares
may not be converted back into Class B Common Stock.
Restrictions on Transfer of Class A and Class B Common Stock
No person or entity holding shares of Class B Common Stock (a "Class B
Holder") may transfer such shares, whether by sale, assignment, gift, bequest,
appointment or otherwise, except to a Permitted Transferee (as hereinafter
defined). In the case of a Class B Holder who is a natural person and the
beneficial owner of shares of Class B Common Stock to be transferred, a
Permitted Transferee consists of (i) such Class B Holder's spouse; provided,
however, that upon divorce any Class B Common Stock held by such spouse shall
automatically be converted into Class A Common Stock, (ii) any lineal descendant
of any great-grandparent of such Class B Holder, including adopted children, and
such descendant's spouse (such descendants and their spouses, together with such
Class B Holder's spouse, are referred to as "family members"), (iii) the trustee
of a trust for the sole benefit of such Class B Holder or any of such Class B
Holder's family members, (iv) any charitable organization established by such
Class B Holder or any of such Class B Holder's family members, (v) any
partnership made up exclusively of such Class B Holder and any of such Class B
Holder's family members or any corporation wholly-owned by such Class B Holder
and any of such Class B Holder's family members; provided that, if there is any
change in the partners of such partnership or in the stockholders of such
corporation that would cause such partnership or corporation no longer to be a
Permitted Transferee, any Class B Common Stock held by such partnership or
corporation shall automatically be converted into Class A Common Stock. In the
case of a Class B Holder that is a partnership or corporation, a Permitted
Transferee consists of (i) such partnership's partners or such corporation's
stockholders, as the case may be, (ii) any transferor to such partnership or
corporation of shares of Class B Common Stock after the record date of the
initial distribution of Class B Common Stock and (iii) successors by merger or
consolidation. In the case of a Class B Holder that is an irrevocable trust on
the record date of the distribution of Class B Common Stock, a Permitted
Transferee consists of (i) certain successor trustees of such trust, (ii) any
person to whom or for whose benefit principal or income may be distributed under
the terms of such trust or any person to whom such trust may be obligated to
make future transfers, provided such obligation exists prior to the date such
trust becomes a holder of Class B Common Stock and (iii) any family member of
the creator of such trust. In the case of a Class B Holder that is any trust
other than an irrevocable trust on the date of the distribution of Class B
Common Stock, a Permitted Transferee consists of (i) certain successor trustees
of such trust and (ii) the person who established such trust and such person's
Permitted Transferees. Upon the death or permanent incapacity of any Class B
Holder, such Holder's Class B Common Stock shall automatically be converted into
Class A Common Stock. All shares of Class B Common Stock will automatically
convert into shares of Class A Common Stock on the ninetieth day
26
<PAGE> 30
after the death of Darwin Deason or upon the conversion by Mr. Deason of all
Class B Common Stock beneficially owned by Mr. Deason into shares of Class A
Common Stock.
Subject to compliance with applicable securities laws, shares of Class B
Common Stock are freely transferable among Permitted Transferees, but any other
transfer of Class B Common Stock will result in its automatic conversion into
Class A Common Stock. The restriction on transfers of shares of Class B Common
Stock to other than a Permitted Transferee may preclude or delay a change in
control of ACS.
Dividends and Liquidation Rights
The holders of Class A Common Stock and Class B Common Stock are entitled
to receive dividends out of assets legally available therefore at such times and
in such amounts as the Board of Directors may from time to time determine. Upon
liquidation and dissolution of ACS, the holders of Class A Common Stock and
Class B Common Stock are entitled to receive all assets available for
distribution to stockholders.
Other Rights
The holders of Class A Common Stock and Class B Common Stock are not
entitled to preemptive or subscription rights, and there are no redemption or
sinking fund provisions applicable to such common stock.
RIGHTS AGREEMENT
On August 5, 1997, ACS entered into a rights agreement (as subsequently
amended, the "Rights Agreement") and authorized and declared a dividend
distribution of one right (a "Right") for each share of Class A Common Stock and
one Right for each share of Class B Common Stock, each as outstanding at the
close of business on August 25, 1997. Class A Common Stock and Class B Common
Stock issued after August 25, 1997 will be issued with an associated Right. Each
Right entitles the registered holder to purchase from ACS one share of Class A
Common Stock at an exercise price of $150.00 per share, subject to adjustment
from time to time.
CERTIFICATE OF INCORPORATION AND BYLAWS
The following description of certain provisions of our Certificate of
Incorporation and Bylaws is qualified in its entirety by reference to the
Certificate of Incorporation and Bylaws, copies of which have been filed as
exhibits to our reports or registration statements filed with the SEC.
The Certificate of Incorporation and Bylaws contain several provisions that
may be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt. See "Risk Factors -- Provisions of Our
Certificate of Incorporation, Bylaws and Delaware Law Could Deter Takeover
Attempts." The Certificate of Incorporation does not provide for cumulative
voting.
Any action required or permitted to be taken by our stockholders may be
taken at a duly called annual or special meeting of stockholders. The Bylaws
provide that special meetings of the stockholders may be called only by the
Chairman of the Board of Directors, the President or a majority of the members
of the Board of Directors. These provisions could have the effect of delaying
until the next annual stockholders' meeting actions that are not favored by the
holders of a majority of the voting power of our outstanding capital stock.
Moreover, the Bylaws authorize the stockholders to take action by written
consent signed by the holders of a majority of the voting power of our
outstanding capital stock, provided that written notice is given to those
stockholders who have not consented in writing.
Under the Delaware General Corporation Law ("DGCL"), the approval of a
Delaware corporation's board of directors, in addition to stockholder approval,
is required to adopt any amendment to the company's certificate of
incorporation, but the exclusive power to adopt, amend and repeal the bylaws is
conferred solely upon the stockholders, unless the corporation's certificate of
incorporation also confers
27
<PAGE> 31
such power on its board of directors. The Certificate of Incorporation grants
the power to amend the Bylaws to the Board of Directors.
The Certificate of Incorporation contains certain provisions permitted
under the DGCL that limit the liability of directors.
In addition to the foregoing provisions of the Certificate of Incorporation
and Bylaws, we are subject to the provisions of Section 203 of the DGCL, which
restricts the consummation of certain business combination transactions
(including mergers, stock and asset sales and other transactions resulting in
financial benefit to the stockholder) between a Delaware public corporation and
an "interested stockholder" for a period of three years after the date the
interested stockholder acquired its stock. An "interested stockholder" is
defined as a person who, together with any affiliates and/or associates of such
person, beneficially owns 15% or more of any class or series of stock entitled
to vote in the election of directors, unless, among other exceptions, (1) the
transaction is approved by (a) the corporation's board of directors prior to the
date the interested stockholder acquired such shares or (b) a majority of the
board of directors and by the affirmative vote of the holders of two-thirds of
the outstanding shares of each class or series of stock entitled to vote
generally in the election of directors, not including the shares owned by the
interested stockholder, or (2) the interested stockholder acquired at least 85%
of the voting stock of the corporation in the transaction in which it became an
interested stockholder. Section 203 of the DGCL is intended to discourage
certain takeover practices by impeding the ability of a hostile acquirer to
engage in certain transactions with the target company.
Moreover, the Bylaws contain a provision that permits any contract or other
transaction between ACS and any of our directors, officers or stockholders (or
any corporation or firm in which any of them are directly or indirectly
interested) to be valid notwithstanding the presence of such director, officer
or stockholder at the meeting authorizing such contract or transaction, or his
participation or vote in such stockholder's meeting or authorization, subject to
certain conditions, including disclosure.
TRANSFER AGENT
First City Transfer Company, our affiliate, serves as transfer agent and
registrar for the Class A Common Stock.
28
<PAGE> 32
UNDERWRITING
Bear, Stearns & Co. Inc., Goldman, Sachs & Co., Donaldson, Lufkin &
Jenrette Securities Corporation, Hambrecht & Quist LLC and Prudential Securities
Incorporated are representing the underwriters listed below (collectively, the
"Underwriters"). Subject to the terms and conditions of an Underwriting
Agreement, dated , 1999 (the "Underwriting Agreement"), the
Underwriters have severally agreed to purchase from us the number of shares of
Class A Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- ------------ ---------
<S> <C>
Bear, Stearns & Co. Inc.....................................
Goldman, Sachs & Co.........................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Hambrecht & Quist LLC.......................................
Prudential Securities Incorporated..........................
---------
Total............................................. 3,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Class A Common
Stock offered by this prospectus are subject to approval by their counsel and to
certain other conditions. The Underwriters are obligated to purchase and accept
delivery of all the shares of Class A Common Stock offered by this prospectus,
other than shares covered by the over-allotment option, if any are purchased.
The Underwriters propose to offer the shares of Class A Common Stock to the
public initially at the public offering price set forth on the cover page of
this prospectus and in part to certain dealers, including the Underwriters, at
such price less a concession not to exceed $ per share. The underwriters may
allow, and some dealers may reallow to certain other dealers, a concession not
in excess of $ per share. After the initial offering to the public, the
public offering price and other selling terms may be changed by the
representatives of the Underwriters at any time without notice.
Mr. Deason, our Chairman and Chief Executive Officer, has granted to the
Underwriters an option to purchase up to 525,000 additional shares of Class A
Common Stock at the public offering price less the underwriting discount set
forth on the cover page of this prospectus solely for the purpose of covering
over-allotments, if any. Such option may be exercised at any time until 30 days
after the date of this prospectus. To the extent that the Underwriters exercise
such option, each Underwriter will become obligated, subject to certain
conditions, to purchase a number of additional shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.
We and Mr. Deason have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereto.
We and our directors and executive officers, who beneficially own in the
aggregate approximately 6% of the Class A Common Stock and 100% of the Class B
Common Stock after this public offering, have agreed that, during the period
beginning on the date of this offering and continuing to and including the 90th
day after such date, we will not directly or indirectly, offer, sell, contract
to sell or otherwise dispose of any shares of Class A or Class B Common Stock
(other than pursuant to existing employee stock option and stock purchase plans,
upon the conversion of outstanding convertible securities or pursuant to
existing earn-out obligations arising out of prior acquisitions), without the
prior consent of Bear, Stearns & Co. Inc.; provided, however, that we may issue
up to 1,000,000 shares of Class A Common Stock in consideration for acquisitions
of businesses occurring after the offering; and provided, further, however, that
during the period beginning on the 31st day after the date of the offering and
continuing to and including
29
<PAGE> 33
the 90th day after such date, the directors and executive officers may offer,
sell, contract to sell or otherwise dispose of up to an aggregate of 15% of
their individual holdings of shares of Class A Common Stock and Class B Common
Stock, which is a total of approximately 952,000 shares of Common Stock issued
and outstanding as of the date of this prospectus (including 881,323 shares held
by Mr. Deason), excluding options. In the event that the underwriters'
over-allotment option is exercised in full, and as a result Mr. Deason sells
525,000 shares of his Common Stock, Mr. Deason may thereafter offer, sell,
contract to sell or otherwise dispose of a maximum of 356,323 shares of Class A
Common Stock during the period specified above.
The following table shows the underwriting discounts and commissions to be
paid by ACS and, assuming the exercise in full of the underwriters'
over-allotment option, Mr. Deason upon the sale of the shares offered hereby:
<TABLE>
<CAPTION>
ACS MR. DEASON
-------- ----------
<S> <C> <C>
Per share................................................... $ $
Total....................................................... $ $
</TABLE>
In order to facilitate the offering, certain persons participating in the
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the Class A Common Stock during and after the offering.
Specifically, the Underwriters may over-allot or otherwise create a short
position in the Class A Common Stock for their own account by selling more
shares of Class A Common Stock than have been sold to them by us. The
Underwriters may elect to cover any such short position by purchasing shares of
Class A Common Stock in the open market or by exercising the over-allotment
option. In addition, such persons may stabilize or maintain the price of the
Class A Common Stock by bidding for or purchasing shares of Class A Common Stock
in the open market and may impose penalty bids, under which selling concessions
allowed to syndicate members or other broker-dealers participating in the
offering are reclaimed if shares of Class A Common Stock previously distributed
in the offering are repurchased in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the Class A Common Stock at a level above the level that might
otherwise prevail in the open market. The imposition of a penalty bid may also
affect the price of the Class A Common Stock to the extent that it discourages
resales. No representation is made as to the magnitude or effect of any such
stabilization or other transactions. Such transactions, if commenced, may be
discontinued at any time.
Certain Underwriters (including the representatives of the Underwriters) or
their affiliates provide ACS with investment banking services from time to time
for which they receive customary compensation.
EXPERTS
The consolidated financial statements of ACS as of June 30, 1998 and 1997
and for each of the fiscal years in the three-year period ended June 30, 1998
have been incorporated in this prospectus by reference from the ACS Annual
Report on Form 10-K for the year ended June 30, 1998, except as they relate to
ACS Government Solutions Group, Inc. (formerly Computer DataSystems, Inc.
(CDSI)) as of June 30, 1997 and for each of the two years in the period ended
June 30, 1997, and have been audited by PricewaterhouseCoopers LLP, independent
accountants, as set forth in their report which is incorporated herein by
reference. The consolidated financial statements of CDSI as of June 30, 1997 and
for each of the two years in the period ended June 30, 1997, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their respective
report thereon included in the Company's Annual Report on Form 10-K for the year
ended June 30, 1998, which is incorporated by reference herein. ACS'
consolidated financial statements are incorporated herein by reference in
reliance upon such reports given on the authority of such firms as experts in
accounting and auditing.
The consolidated financial statements of BRC as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997 as
included in the Company's Current Report on Form 8-K/A dated February 5, 1999,
which is incorporated herein by reference, have been audited by
30
<PAGE> 34
PricewaterhouseCoopers LLP, independent accountants, as set forth in their
report which appears in such Current Report on Form 8-K/A. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of said firm as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the Class A Common Stock offered hereby has been passed
upon on behalf of ACS by Hughes & Luce, L.L.P., Dallas, Texas. Certain legal
matters with respect to the Class A Common Stock will be passed upon on behalf
of the Underwriters by Thompson & Knight, P.C., Dallas, Texas, which firm also
represents the Company with respect to intellectual property matters from time
to time.
31
<PAGE> 35
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
The following unaudited pro forma condensed consolidated balance sheet as
of December 31, 1998 set forth below presents the financial position of the
Company as if the consummation of this offering, including the issuance and sale
of 3,500,000 shares of Common Stock by the Company and the application of the
estimated net proceeds to the Company therefrom occurred on December 31, 1998.
The unaudited pro forma condensed consolidated statements of income for the
six months ended December 31, 1998 and for the year ended June 30, 1998 set
forth below present the results of operations of the Company for such period and
such year as if the following transactions had occurred at the beginning of each
such period: (i) the consummation of the acquisition of BRC Holdings, Inc.
("BRC"); (ii) the four additional acquisitions completed during fiscal 1998 and
the five acquisitions (excluding BRC) completed subsequent to July 1, 1998
(collectively, the "Other Acquisitions"); and (iii) the consummation of this
offering including the issuance and sale of 3,500,000 shares of Common Stock by
the Company and the application of the estimated net proceeds to the Company
therefrom. The unaudited pro forma condensed consolidated statement of income
for the six months ended December 31, 1998 combines, with appropriate
adjustments, the Company's unaudited consolidated statement of income for the
six months ended December 31, 1998 with the unaudited consolidated statement of
income of BRC and the Other Acquisitions for the same six month period to the
extent they are not included in the Company's results of operations. The
unaudited pro forma condensed consolidated statement of income for the year
ended June 30, 1998 combines, with appropriate adjustments, the Company's
audited consolidated statements of income for its fiscal year ended June 30,
1998 and the unaudited consolidated statements of income of BRC and the Other
Acquisitions for the twelve months ended June 30, 1998 to the extent they are
not included in the Company's statements of income. Certain reclassifications
were made to conform the historical financial statements of BRC and the Other
Acquisitions with the Company's historical financial statements.
The unaudited pro forma condensed consolidated financial statements have
been prepared on the basis of preliminary assumptions and estimates. The pro
forma adjustments represent the Company's preliminary determinations of these
adjustments and are based on "Where You Can Find More Information" and certain
assumptions the Company considers reasonable under the circumstances. Final
amounts could differ from those set forth herein. The unaudited pro forma
consolidated financial statements may not be indicative of the results of
operations that would have been achieved if the acquisition of BRC and the Other
Acquisitions and the Offering had been effected on the dates indicated or which
may be achieved in the future. The unaudited pro forma consolidated financial
statements and notes thereto should be read in conjunction with the Company's
"Selected Consolidated Financial Data", "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the annual consolidated
financial statements of the Company and BRC appearing or incorporated by
reference herein.
F-1
<PAGE> 36
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(UNAUDITED)
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
OFFERING
ACS(A) ADJUSTMENTS(B) COMBINED
---------- -------------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 146,254 $ $ 146,254
ATM cash.............................................. 9,000 9,000
Accounts receivable, net of allowance for doubtful
accounts of $4,188 and $2,840, respectively........ 305,333 305,333
Inventory............................................. 15,984 15,984
Prepaid expenses and other current assets............. 45,273 45,273
Deferred taxes........................................ 12,902 12,902
---------- --------- ----------
Total current assets.......................... 534,746 -- 534,746
---------
Property and equipment, net of accumulated depreciation
and amortization of $107,668 and $90,096,
respectively.......................................... 160,698 160,698
Software, net of accumulated amortization of $12,353 and
$11,029, respectively................................. 16,998 16,998
Goodwill, net of accumulated amortization of $32,860 and
$25,846, respectively................................. 545,001 545,001
Other intangible assets, net of accumulated amortization
of $19,596 and $14,414, respectively.................. 39,107 39,107
Long-term investments and other assets.................. 31,760 31,760
---------- --------- ----------
Total assets.................................. $1,328,310 $ -- $1,328,310
========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 41,728 $ $ 41,728
Accrued compensation and benefits..................... 43,012 43,012
Other accrued liabilities............................. 108,558 108,558
Due to BRC Holdings, Inc. shareholders................ 104,066 104,066
Notes payable and current portion of long-term debt... 11,699 11,699
Current portion of unearned revenue................... 15,211 15,211
---------- --------- ----------
Total current liabilities..................... 324,274 -- 324,274
Convertible notes due 2005.............................. 230,000 230,000
Long-term debt.......................................... 178,964 (173,060) 5,904
Deferred taxes.......................................... 19,712 19,712
Other long-term liabilities............................. 15,949 15,949
---------- --------- ----------
Total liabilities............................. 768,899 (173,060) 595,839
---------- --------- ----------
Stockholders' equity:
Class A common stock.................................. 459 35 494
Class B common stock.................................. 33 33
Additional paid-in capital............................ 314,490 173,025 487,515
Retained earnings..................................... 244,429 244,429
---------- --------- ----------
Total stockholders' equity.................... 559,411 173,060 732,471
---------- --------- ----------
Total liabilities and stockholders' equity.... $1,328,310 $ -- $1,328,310
========== ========= ==========
</TABLE>
F-2
<PAGE> 37
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF DECEMBER 31, 1998
(A) Information obtained from the December 31, 1998 unaudited condensed
consolidated balance sheet of ACS. Amounts include the allocation of the
purchase price for BRC and five other acquisitions completed since July 1,
1998.
(B) Reflects an estimate of the net proceeds to be received by the Company from
this offering of 3,500,000 new shares of the Company's Class A Common Stock
at an assumed offering price of $51 5/8 per share less underwriting
discounts and estimated offering expenses. Proceeds received will be used
to pay down a substantial portion of the Company's line of credit.
F-3
<PAGE> 38
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
--------------------------------------
BRC BRC
ACQUISITION DIVESTED BRC OTHER
ACS BRC(A) ADJUSTMENTS OPERATIONS(B) SUBTOTAL ACQUISITIONS(G)
-------- ------- ----------- ------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................... $754,990 $54,540 $ -- $(5,690) $48,850 $16,382
Operating expenses
Wages and benefits......... 319,152 27,557 (925)(C) (4,171) 22,461 5,522
Services and supplies...... 234,951 13,791 (516)(C) (1,731) 11,544 5,578
Rent, lease and
maintenance.............. 87,895 4,123 (151)(C) (357) 3,615 699
Depreciation and
amortization............. 31,347 3,105 (227)(D) (235) 2,643 429
Other operating expenses... 8,735 612 275 887 1,074
-------- ------- ------- ------- ------- -------
Total operating
expenses............ 682,080 49,188 (1,819) (6,219) 41,150 13,302
-------- ------- ------- ------- ------- -------
Operating income........... 72,910 5,352 1,819 529 7,700 3,080
Other non-operating (income)
expense, net............... 6,004 (3,282) 7,134(D) 32 3,884 --
-------- ------- ------- ------- ------- -------
Pretax profit from
continuing operations.... 66,906 8,634 (5,315) 497 3,816 3,080
Income tax expense.......... 27,272 3,419 (1,364)(F) 199 2,254 1,217
-------- ------- ------- ------- ------- -------
Income from continuing
operations............... $ 39,634 $5,215 $(3,951) $ 298 $ 1,562 $ 1,863
======== ======= ======= ======= ======= =======
Earnings per common share:
Basic...................... $ 0.82
Diluted.................... $ 0.77
Shares used in computing
earnings per common share:
Basic...................... 48,488 -- -- -- -- --
Diluted.................... 55,304 -- -- -- -- --
<CAPTION>
PRO FORMA
------------------------- AS ADJUSTED
OTHER -------------------------
ACQUISITIONS OFFERING
ADJUSTMENTS(H) COMBINED ADJUSTMENTS(J) COMBINED
-------------- -------- -------------- --------
<S> <C> <C> <C> <C>
Revenues.................... $(1,369) $818,853 $ -- $$818,853
Operating expenses
Wages and benefits......... (151) 346,984 -- 346,984
Services and supplies...... (1,401) 250,672 -- 250,672
Rent, lease and
maintenance.............. -- 92,209 -- 92,209
Depreciation and
amortization............. 435 34,854 -- 34,854
Other operating expenses... (5) 10,691 -- 10,691
------- -------- -------- --------
Total operating
expenses............ (1,122) 735,410 -- 735,410
------- -------- -------- --------
Operating income........... (247) 83,443 83,443
Other non-operating (income)
expense, net............... 179 10,067 (5,192) 4,875
------- -------- -------- --------
Pretax profit from
continuing operations.... (426) 73,376 5,192 78,568
Income tax expense.......... (166) 30,577 2,051 32,628
------- -------- -------- --------
Income from continuing
operations............... $ (260) $42,799 $ 3,141 $ 45,940
======= ======== ======== ========
Earnings per common share:
Basic...................... $ 0.88 $ 0.88
Diluted.................... $ 0.83 $ 0.83
Shares used in computing
earnings per common share:
Basic...................... 273(I) 48,761 3,500 52,261
Diluted.................... 273(I) 55,577 3,500 59,077
</TABLE>
F-4
<PAGE> 39
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(A) Information obtained from the unaudited financial statements of BRC for the
six months ended December 31, 1998 to the extent they are not included in
ACS's results of operations.
(B) Reflects an adjustment to eliminate operating results for certain
businesses of BRC which the Company has determined are to be either
divested or shut down after consummation of the merger. The operating
results for these businesses are included in BRC's historical financial
information noted in (A) above.
(C) Reflects employee terminations (i.e., salary and related expenses of
general and administration personnel) and elimination of redundant public
company and facility costs to be effected immediately after consummation of
the acquisition.
(D) Reflects the additional amortization of expense of approximately $2.0
million resulting from the allocation of the excess cost of the acquisition
to software, non-compete agreements and goodwill, offset by a reduction in
depreciation and amortization expense of approximately $2.2 million as a
result of recording BRC's fixed assets at their respective fair values
based upon an independent appraisal.
(E) Reflects interest expense for the financing of the transaction based upon
the terms of the Company's increase in its revolving line of credit (See
"Use of Proceeds" discussed elsewhere in this Prospectus).
(F) Reflects the income tax effect for the pro forma adjustments at the
statutory tax rate adjusted for the impact of non-deductible goodwill
amortization.
(G) Other Acquisitions reflects the aggregate historical results of operations
for the three acquisitions made by the Company during the period from July
1, 1998 through the date of this Prospectus (excluding BRC). Two other
acquisitions made by the Company during the period from July 1, 1998
through the date of this Prospectus were effective July 1, 1998 and are
therefore included in the Company's unaudited historical consolidated
statement of operations for the six months ended December 31, 1998.
(H) Reflects the aggregate pro forma adjustments from the three acquisitions
made by the Company during the period noted in (G) above. Such adjustments
represent primarily: (i) decreases to revenue to conform revenue
recognition policies to those of the Company, (ii) net decreases to
expenses upon the consolidation of the acquired business operations,
including the elimination of costs associated with the prior owners and
overhead allocations by the prior owners which would not be reflective of
the ongoing operations of the acquired operations, (iii) the net decrease
to depreciation and amortization expense from the allocation of the
purchase price of each acquisition to the assets and liabilities of the
business acquired, (iv) the increase to amortization expense resulting from
the allocation of the excess cost of the acquisition to client contracts,
software and goodwill after recording the fair value of the assets acquired
and the liabilities assumed, (v) the net increase to interest expense
reflecting the financing of the transactions, (vi) the related tax effect
of the pro forma adjustments at the statutory tax rates adjusted for the
impact of non-deductible goodwill amortization, and (vii) the elimination
of sales between the Company and the acquired businesses during the period
presented.
(I) Reflects an adjustment to the shares used in computing earnings per common
share issued in connection with the purchase of Other Acquisitions as if
the issuance had occurred at the beginning of the period.
(J) Reflects the reduction in interest expense, including related tax effect,
after applying estimated net proceeds from this offering of $173 million to
paydown the Company's line of credit.
F-5
<PAGE> 40
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED JUNE 30, 1998
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------
BRC BRC
ACQUISITION DIVESTED BRC OTHER
ACS BRC(A) ADJUSTMENTS OPERATIONS(B) SUBTOTAL ACQUISITIONS(G)
---------- -------- ----------- ------------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................... $1,189,123 $113,723 $ -- $(17,769) $95,954 $157,194
Operating expenses
Wages and benefits......... 504,284 60,871 (2,221)(C) (10,498) 48,152 84,253
Services and supplies...... 364,285 25,287 (1,238)(C) (5,503) 18,546 42,792
Rent, lease and
maintenance.............. 150,253 8,844 (362)(C) (827) 7,655 7,205
Depreciation and
amortization............. 47,475 8,135 (933)(D) (860) 6,342 5,490
Merger costs............... 12,974 -- -- -- -- --
Other operating expenses... 11,533 2,707 -- (1,305) 1,402 3,600
---------- -------- -------- -------- ------- --------
Total operating expenses... 1,090,804 105,844 (4,754) (18,993) 82,097 143,340
---------- -------- -------- -------- ------- --------
Operating income........... 98,319 7,879 4,754 1,224 13,857 13,854
Other non-operating (income)
expense net................ 4,227 (873) 17,741(E) (241) 16,627 615
---------- -------- -------- -------- ------- --------
Pretax profit from
continuing operations.... 94,092 8,752 (12,987) 1,465 (2,770) 13,239
Income tax expense.......... 39,670 5,177 (3,090)(F) 579 2,666 5,783
---------- -------- -------- -------- ------- --------
Income from continuing
operations............... $ 54,422 $ 3,575 $ (9,897) $ 886 $(5,436) $ 7,456
========== ======== ======== ======== ======= ========
Earnings per common share:
Basic...................... $ 1.14
Diluted.................... $ 1.11
Shares used in computing
earnings per common share:
Basic...................... 47,599 -- -- -- -- --
Diluted.................... 50,487 -- -- -- -- --
<CAPTION>
PRO FORMA AS ADJUSTED
--------------------------- ---------------------------
OTHER
ACQUISITIONS OFFERING
ADJUSTMENTS(H) COMBINED ADJUSTMENTS(J) COMBINED
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Revenues.................... $(2,400) $1,439,871 -- $1,439,871
Operating expenses
Wages and benefits......... (974) 635,715 -- 635,715
Services and supplies...... (4,076) 421,547 -- 421,547
Rent, lease and
maintenance.............. (2) 165,111 -- 165,111
Depreciation and
amortization............. 1,386 60,693 -- 60,693
Merger costs............... -- 12,974 -- 12,974
Other operating expenses... (5) 16,530 -- 16,530
------- ---------- ------- ----------
Total operating expenses... (3,671) 1,312,570 -- 1,312,570
------- ---------- ------- ----------
Operating income........... 1,271 127,301 -- 127,301
Other non-operating (income)
expense net................ 4,755 26,224 (10,384) 15,840
------- ---------- ------- ----------
Pretax profit from
continuing operations.... (3,484) 101,077 10,384 111,461
Income tax expense.......... ( 1,276) 46,843 4,102 50,945
------- ---------- ------- ----------
Income from continuing
operations............... $(2,208) $ 54,234 $ 6,282 $ 60,516
======= ========== ======= ==========
Earnings per common share:
Basic...................... $ 1.13 $ 1.18
Diluted.................... $ 1.10 $ 1.15
Shares used in computing
earnings per common share:
Basic...................... 314(I) 47,913 3,500 51,413
Diluted.................... 314(I) 50,801 3,500 54,301
</TABLE>
F-6
<PAGE> 41
AFFILIATED COMPUTER SERVICES, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
INCOME
(UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 1998
(A) Information obtained from the unaudited financial statements of BRC for the
twelve months ended June 30, 1998. In December 1997, BRC recognized a $5.8
million charge to other non-operating income related to the impairment of
goodwill and other intangible assets of BRC's payor services healthcare
business unit in accordance with Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of."
(B) Reflects an adjustment to eliminate operating results for certain
businesses of BRC which the Company has determined are to be either
divested or shut down after consummation of the merger. The operating
results for these businesses are included in BRC's historical financial
information noted in (A) above.
(C) Reflects employee terminations (i.e., salary and related expenses of
general and administration personnel) and elimination of redundant public
company and facility costs to be effected immediately after consummation of
the acquisition.
(D) Reflects the additional amortization of expense of approximately $4.8
million resulting from the allocation of the excess cost of the acquisition
to software, non-compete agreements and goodwill, offset by a reduction in
depreciation and amortization expense of approximately $5.7 million as a
result of recording BRC's fixed assets at their respective fair values
based upon an independent appraisal.
(E) Reflects interest expense for the financing of the transaction based upon
the terms of the Company's increase in its revolving line of credit. (See
"Use of Proceeds" included elsewhere in this Prospectus).
(F) Reflects the income tax effect for the pro forma adjustments at the
statutory tax rate adjusted for the impact of non-deductible goodwill
amortization.
(G) Other Acquisitions reflects the aggregate historical results of operations
for the nine acquisitions made by the Company during the period from July
1, 1997 through the date of this Prospectus (excluding BRC).
(H) Reflects the aggregate pro forma adjustments from the nine acquisitions
made by he Company during the period noted in (G) above. Such adjustments
represent primarily: (i) decreases to revenue to conform revenue
recognition policies to those of the Company, (ii) net decreases to
expenses upon the consolidation of the acquired business' operations,
including the elimination of costs associated with the prior owners and
overhead allocations by the prior owners which would not be reflective of
the ongoing operations of the acquired operations, (iii) the net decrease
to depreciation and amortization expense from the allocation of the
purchase price of each acquisition to the assets and liabilities of the
businesses acquired, (iv) the increase to amortization expense resulting
from the allocation of the excess cost of the acquisition to client
contracts, software and goodwill after recording the fair value of the
assets acquired and the liabilities assumed, (v) the net increase to
interest expense reflecting the financing of the transactions, (vi) the
related tax effect of the pro forma adjustments at the statutory tax rates
adjusted for the impact of non-deductible goodwill amortization, and (vii)
the elimination of sales between the Company and the acquired businesses
during the period presented.
(I) Reflects an adjustment to the shares used in computing earnings per common
share issued in connection with the purchase of Other Acquisitions as if
the issuance had occurred at the beginning of the period.
(J) Reflects the reduction in interest expense, including related tax effect,
after applying estimated net proceeds from this offering of $173 million to
paydown the Company's line of credit.
F-7
<PAGE> 42
- ------------------------------------------------------
- ------------------------------------------------------
PROSPECTIVE INVESTORS MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS
PROSPECTUS. NEITHER ACS NOR ANY UNDERWRITER HAS AUTHORIZED ANYONE TO PROVIDE
PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL INFORMATION. THIS PROSPECTUS
IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE
SECURITIES.
-------------------------
TABLE OF CONTENTS
-------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Where You Can Find More Information... 12
Cautionary Statement Concerning
Forward-Looking Statements.......... 13
Use of Proceeds....................... 14
Selling Stockholder if Underwriters'
Over-Allotment Option is Exercised.. 15
Price Range of Class A Common Stock... 16
Dividend Policy....................... 16
Capitalization........................ 17
Selected Consolidated Financial Data.. 18
Business.............................. 19
Description of Capital Stock.......... 25
Underwriting.......................... 29
Experts............................... 30
Legal Matters......................... 31
Pro Forma Condensed Consolidated
Financial Information (Unaudited)... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
AFFILIATED COMPUTER SERVICES, INC.
3,500,000 SHARES
CLASS A COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
-------------------------
DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
PRUDENTIAL SECURITIES
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 43
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the estimated expenses to be incurred in
connection with the offering described in this Registration Statement, all of
which will be paid by the Company.
<TABLE>
<S> <C>
Registration fee............................................ $ 54,873
Accounting fees and expenses................................ 60,000
Legal fees and expenses..................................... 80,000
NASD fees................................................... 20,239
Blue Sky fees and expenses (including counsel fees)......... 2,500
Printing and engraving expenses............................. 55,000
Miscellaneous expenses...................................... 127,388
--------
Total............................................. $400,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that no director of the
Company will be personally liable to the Company or any of its stockholders for
monetary damages arising from the director's breach of fiduciary duty as a
director, with certain limited exceptions.
Pursuant to the provisions of Section 145 of the Delaware General
Corporation Law, every Delaware corporation has the power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, against any and all
expenses, judgments, fines and amounts paid in settlement and reasonably
incurred in connection with such action, suit or proceeding. The power to
indemnify applies only if such person acted in good faith and in a manner such
person reasonably believed to be in the best interests, or not opposed to the
best interests, of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The power to indemnify applies to actions brought by or in the right of the
corporation as well, but only to the extent of defense and settlement expenses
and not to any satisfaction of a judgment or settlement of the claim itself, and
with the further limitation that in such actions no indemnification shall be
made in the event of any adjudication of negligence or misconduct unless the
court, in its discretion, believes that in light of all the circumstances
indemnification should apply.
The Company's Certificate of Incorporation contains provisions requiring it
to indemnify its officers and directors to the fullest extent permitted by the
Delaware General Corporation Law.
ITEM 16. EXHIBITS.
The Exhibits to this Registration Statement are listed in the Index to
Exhibits on page II-5 of this Registration Statement, which Index is
incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
(a) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
II-1
<PAGE> 44
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) and 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
II-2
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas, on February 5, 1999.
AFFILIATED COMPUTER SERVICES, INC.
By: /s/ JEFFREY A. RICH
----------------------------------
President, Chief Operating Officer
and Director
II-3
<PAGE> 46
POWER OF ATTORNEY
We, the undersigned officers and directors of Affiliated Computer Services,
Inc., hereby severally constitute and appoint Jeffrey A. Rich and David W.
Black, and each of them, our true and law attorneys-in-fact and agents, with
full power of substitution and resubstitution, for each of us in our name, place
and stead, in any and all capacities, to sign Affiliated Computer Services,
Inc.'s Registration Statement on Form S-3, and any other Registration Statement
relating to the same offering, and any and all amendments thereto (including
post-effective amendments), and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grant to such attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as each
of us might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DARWIN DEASON Chairman of the Board, Chief February 5, 1999
- ----------------------------------------------------- Executive Officer and
Darwin Deason Director
/s/ JEFFREY A. RICH President, Chief Operating February 5, 1999
- ----------------------------------------------------- Officer and Director
Jeffrey A. Rich
/s/ MARK A. KING Chief Financial Officer and February 5, 1999
- ----------------------------------------------------- Director
Mark A. King
/s/ HENRY G. HORTENSTINE Executive Vice President February 5, 1999
- -----------------------------------------------------
Henry G. Hortenstine
/s/ DAVID W. BLACK Executive Vice President, February 5, 1999
- ----------------------------------------------------- Secretary, General Counsel
David W. Black and Director
/s/ PETER A. BRACKEN Executive Vice President and February 5, 1999
- ----------------------------------------------------- Director
Peter A. Bracken
/s/ CLIFFORD M. KENDALL Director February 5, 1999
- -----------------------------------------------------
Clifford M. Kendall
/s/ JOSEPH P. O'NEILL Director February 5, 1999
- -----------------------------------------------------
Joseph P. O'Neill
/s/ FRANK A. ROSSI Director February 5, 1999
- -----------------------------------------------------
Frank A. Rossi
</TABLE>
II-4
<PAGE> 47
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
*1.1 -- Form of Underwriting Agreement
4.1 -- Rights Agreement, dated August 5, 1997 between the
Company and ChaseMellon Shareholder Services, L.L.C.,
filed as Exhibit 4.1 to the Company's Form 8-K (date of
earliest event reported: August 20, 1997) and
incorporated herein by reference
*5.1 -- Opinion of Hughes & Luce, L.L.P.
*23.1 -- Consent of PricewaterhouseCoopers LLP
*23.2 -- Consent of PricewaterhouseCoopers LLP
*23.3 -- Consent of Ernst & Young LLP
23.4 -- Consent of Hughes & Luce, L.L.P. (included in Exhibit
5.1)
24.1 -- Power of Attorney (included on signature page of
Registration Statement)
</TABLE>
- ---------------
* filed herewith
II-5
<PAGE> 1
EXHIBIT 1.1
AFFILIATED COMPUTER SERVICES, INC.
4,025,000 SHARES OF CLASS A COMMON STOCK
UNDERWRITING AGREEMENT
February __, 1999
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
HAMBRECHT & QUIST LLC
PRUDENTIAL SECURITIES INCORPORATED,
As Representatives of the
several Underwriters named in
Schedule I attached hereto
c/o Bear, Stearns & Co. Inc.
300 Crescent Court
Suite 200
Dallas, Texas 75201
Ladies and Gentlemen:
Affiliated Computer Services, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
Schedule I hereto (the "Underwriters"), for whom Bear, Stearns & Co. Inc.,
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation,
Hambrecht & Quist LLC and Prudential Securities Incorporated are acting as
representatives (the "Representatives"), 3,500,000 newly issued shares (the
"Firm Shares") of Class A Common Stock, par value $.01 per share, of the Company
(the "Common Stock"). In addition, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Shares, Darwin Deason or
an entity owned or controlled by Darwin Deason (the "Selling Stockholder"),
proposes to issue and sell to the Underwriters, at the option of the
Underwriters, up to an additional 525,000 shares of Common Stock, which 525,000
additional shares of Common Stock to be purchased at the option of the
Underwriters are referred to herein as the "Additional Shares." The Firm Shares
and any Additional Shares purchased by the Underwriters are herein referred to
as the "Shares." References herein to the "Stock" mean the Common Stock and the
Company's Class B Common Stock, par value $.01 per share. The Shares are more
fully described in the Registration Statement and the Prospectus hereinafter
mentioned.
-1-
T & K DRAFT 02/04/99
<PAGE> 2
1. Representations and Warranties of the Company and the
Selling Stockholder.
(a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, and may have
filed an amendment or amendments thereto, on Form S-3 (No. 333-______),
for the registration of the Shares under the Securities Act of 1933, as
amended (the "Act"). Such registration statement, including all
documents incorporated by reference therein, the prospectus, financial
statements and schedules, exhibits and all other documents filed as a
part thereof, as amended at the time of effectiveness of the
registration statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of
Rule 430A or Rule 434 of the Rules and Regulations of the Commission
under the Act (the "Regulations"), and any registration statement filed
pursuant to Rule 462(b) of the Regulations with respect to the Shares
is herein called the "Registration Statement," and the prospectus
(including any prospectus subject to completion meeting the
requirements of Rule 434(b) of the Regulations provided by the Company
with any term sheet meeting the requirements of such Rule 434(b) as the
prospectus provided to meet the requirements of Section 10(a) of the
Act), including all documents incorporated by reference therein, in the
form first filed with the Commission pursuant to Rule 424(b) of the
Regulations or filed as part of the Registration Statement at the time
of effectiveness if no such Rule 424(b) filing is required, is herein
called the "Prospectus." The term "preliminary prospectus" as used
herein means each preliminary prospectus included in the above
referenced Registration Statement before it is declared effective as
described in Rule 430 of the Regulations. Any reference in this
Agreement to the Registration Statement, any preliminary prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Act, as of the date of the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be, and any reference to
any amendment or supplement to the Registration Statement, any
preliminary prospectus or the Prospectus shall be deemed to refer to
and include any documents filed after such date under the Securities
Exchange Act of 1934, as amended, and the applicable published rules
and regulations of the Commission thereunder (collectively, the
"Exchange Act") which, upon filing, are incorporated by reference
therein, as required by paragraph (b) of Item 12 of Form S-3. As used
herein, the term "Incorporated Documents" means the documents or
portions thereof which at the time are incorporated by reference in the
Registration Statement, any preliminary prospectus, the Prospectus or
any amendment or supplement thereof. The Registration Statement is
effective under the Act, and no stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereof
has been issued and no proceedings therefor have been initiated or, to
the best knowledge of the Company, threatened by the Commission.
-2-
T & K DRAFT 02/04/99
<PAGE> 3
(ii) At the time of the effectiveness of the Registration
Statement or the effectiveness of any post-effective amendment to the
Registration Statement, when the Prospectus is first filed with the
Commission pursuant to Rule 424(b) of the Regulations, when any
supplement to or amendment of the Prospectus is filed with the
Commission and at the Closing Date, and the Additional Closing Date, if
any (as hereinafter respectively defined), the Registration Statement
and the Prospectus and any amendments thereof and supplements thereto
complied or will comply in all material respects with the applicable
provisions of the Act and the Regulations and do not or will not
contain an untrue statement of a material fact and do not or will not
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein (i) in the case of
the Registration Statement, not misleading and (ii) in the case of the
Prospectus, in the light of the circumstances under which they were
made, not misleading. When any related preliminary prospectus was first
filed with the Commission (whether filed as part of the Registration
Statement for the registration of the Shares or any amendment thereto
or pursuant to Rule 424(a) of the Regulations) and when any amendment
thereof or supplement thereto was first filed with the Commission, such
preliminary prospectus and any amendments thereof and supplements
thereto complied in all material respects with the applicable
provisions of the Act and the Regulations and did not contain an untrue
statement of a material fact and did not omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. No representation and warranty is made in
this subsection (a), however, with respect to any information contained
in or omitted from the Registration Statement or the Prospectus or any
related preliminary prospectus or any amendment thereof or supplement
thereto in reliance upon and in conformity with information furnished
in writing to the Company by or on behalf of any Underwriter through
the Representatives expressly for use in connection with the
preparation thereof. Any term sheet and prospectus subject to
completion provided by the Company to the Underwriters for use in
connection with the offering and sale of the Shares pursuant to Rule
434 of the Regulations together are not materially different from the
last preliminary prospectus included in the Registration Statement at
the time of its effectiveness (exclusive of any information deemed to
be a part thereof by virtue of Rule 434(d) of the Regulations).
The Incorporated Documents heretofore filed with the
Commission, when they were filed (or, if any amendment with respect to
any such document was filed, when such amendment was filed), complied
in all material respects with the applicable provisions of the Exchange
Act, and any further Incorporated Documents so filed will, when they
are filed, comply in all material respects with the applicable
provisions of the Exchange Act; no such document when it was filed (or,
if an amendment with respect to any such document was filed, when such
amendment was filed) contained an untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and
no such further document, when it is filed, will contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein not misleading.
-3-
T & K DRAFT 02/04/99
<PAGE> 4
(iii) Pricewaterhouse Coopers LLP, who has certified certain
financial statements and supporting schedules of the Company and its
subsidiaries, and Ernst & Young LLP, who has certified certain
financial statements and supporting schedules of ACS Government
Solutions Group, Inc., formerly known as Computer Data Systems, Inc.,
are and were each independent public accountants as required by the Act
and the Regulations. All references to "subsidiaries" in this Agreement
shall include, without limitation, BRC Holdings, Inc.
(iv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has been no material adverse change or any development involving
a prospective material adverse change in the business, prospects,
properties, operations, condition (financial or other) or results of
operations of the Company and its subsidiaries taken as a whole,
whether or not arising from transactions in the ordinary course of
business, and since the date of the latest balance sheet presented in
the Registration Statement and the Prospectus, neither the Company nor
any of its subsidiaries has incurred or undertaken any liabilities or
obligations, direct or contingent, which are material to the Company
and its subsidiaries taken as a whole, except for liabilities or
obligations which are reflected in the Registration Statement and the
Prospectus, and except for changes in amounts outstanding under
revolving or other credit agreements to which the Company or any
subsidiary thereof is a party and which agreements are disclosed in the
Prospectus.
(v) This Agreement and the transactions contemplated herein
have been duly and validly authorized, executed and delivered by the
Company, and constitute legal, valid and binding agreements of the
Company enforceable in accordance with their respective terms except to
the extent that (a) the enforceability hereof may be subject to
applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent
transfer, reorganization, moratorium, liquidation, conservatorship and
other laws affecting creditors' rights generally, (b) equitable
principles may limit the availability of equitable relief in the case
of a breach hereof (regardless of whether such remedies are sought in a
proceeding at law or in equity), and (c) federal securities laws may
limit the enforceability of the indemnification provisions hereof.
(vi) The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated hereby
do not and will not (a) conflict with or result in a breach of any of
the terms and provisions of, or constitute a default (or an event which
with notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any material lien,
charge or encumbrance upon any property or assets of the Company or any
of its subsidiaries pursuant to, any agreement, contract, lease,
instrument, franchise, license, arrangement, authority or permit to
which the Company or any of its subsidiaries is a party or by which any
of such corporations or their respective properties or assets may be
bound or (b) violate or conflict with any provision of the certificate
of incorporation or bylaws of the Company or any of its subsidiaries,
or any judgment, decree or order of any court or any public,
governmental or regulatory agency or body having jurisdiction over, or
any federal, state or local statutory, regulatory or common
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<PAGE> 5
law applicable to, the Company or any of its subsidiaries or any of
their respective properties or assets, except where such violation or
conflict would not have a material adverse effect on the Company and
its subsidiaries taken as a whole. No consent, approval, authorization,
order, registration, filing, qualification, license or permit of or
with any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their respective properties or assets or with any other third party
is required for the execution, delivery and performance of this
Agreement by the Company or the consummation by the Company of the
transactions contemplated hereby, including the issuance, sale and
delivery of the Shares to be issued, sold and delivered by the Company
hereunder, except the registration under the Act of the Shares and such
consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as may be required under state
securities or blue sky laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(vii) All of the issued and outstanding shares of the
Company's capital stock of any class, series or rank (including,
without limitation, those Shares being sold by the Selling Stockholder
hereunder, if any) are duly and validly authorized and issued, fully
paid and nonassessable and were not issued and are not now in violation
of or subject to any preemptive rights. The unissued Shares being sold
by the Company hereunder, when issued, delivered and sold in accordance
with this Agreement, will be duly and validly issued and outstanding,
fully paid and nonassessable, and will not have been issued in
violation of or be subject to any preemptive rights. The Company has an
authorized and outstanding capitalization as set forth in the
Registration Statement and the Prospectus. The capital stock of the
Company, including the Stock, the Firm Shares and the Additional
Shares, conforms to the description thereof contained in the
Registration Statement and the Prospectus. All of the issued and
outstanding shares of capital stock of any class, series or rank of
each subsidiary of the Company have been duly and validly authorized
and issued and are fully paid and nonassessable and were not issued in
violation of preemptive rights and (except for directors' qualifying
shares and as otherwise disclosed in the Registration Statement and the
Prospectus) are owned directly or indirectly by the Company, free and
clear of any lien, encumbrance, claim, security interest, restriction
on transfer, shareholders' agreement, voting trust or other defect of
title whatsoever. The Shares, if any, to be sold by the Selling
Stockholder are included and duly admitted to trading are the New York
Stock Exchange, and prior to the Closing Date, the Shares to be issued
and sold by the Company will be authorized for listing by the New York
Stock Exchange upon official notice of issuance.
(viii) Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation. Each of the
Company and its subsidiaries is duly qualified and in good standing as
a foreign corporation in each jurisdiction in which the character or
location of its properties (owned, leased or licensed) or the nature or
conduct of its business makes such qualification necessary, except for
those failures to be so qualified or in good standing which will not in
the aggregate have a material adverse effect on the Company and its
subsidiaries
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<PAGE> 6
taken as a whole. Each of the Company and its subsidiaries has all
requisite power and authority, and possesses and is in compliance with
all necessary consents, approvals, authorizations, orders,
registrations, qualifications, licenses, franchises and permits of and
from all public, regulatory or governmental agencies and bodies to own,
lease and operate its properties and conduct its business as now being
conducted and as described in the Registration Statement and the
Prospectus, with such exceptions as are not material, and no such
consent, approval, authorization, order, registration, qualification,
license, franchise or permit contains a materially burdensome
restriction not adequately disclosed in the Registration Statement and
the Prospectus.
(ix) Except as described in the Prospectus, there is no
litigation or governmental proceeding to which the Company or any of
its subsidiaries is a party or to which any property of the Company or
any of its subsidiaries is subject or which is pending or, to the
knowledge of the Company, contemplated against the Company or any of
its subsidiaries which might result in any material adverse change or
any development involving a material adverse change in the business,
prospects, properties, operations, condition (financial or other) or
results of operations of the Company and its subsidiaries taken as a
whole or which is required to be disclosed in the Registration
Statement and the Prospectus.
(x) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(xi) The financial statements, including the notes thereto,
and supporting schedules relating to the Company and included or
incorporated by reference in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of
the dates indicated and the results of operations and cash flows for
the periods specified. The financial statements, including the notes
thereto, and supporting schedules relating to BRC Holdings, Inc. and
included or incorporated by reference in the Registration Statement and
the Prospectus present fairly in all material respects the financial
position of BRC Holdings, Inc. as of the dates indicated and the
results of operations and cash flows for the periods specified. The pro
forma financial statements and the related notes thereto included or
incorporated by reference in the Registration Statement and the
Prospectus have been prepared in all material respects in accordance
with the Commission's rules and guidelines with respect to pro forma
financial statements and have been, in all material respects, properly
compiled on the bases described therein, and the assumptions used in
the preparation thereof are reasonable. Except as otherwise stated in
the Registration Statement, the Prospectus or the applicable
Incorporated Document, said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, and the supporting
schedules, if any, included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the
information required to be stated therein.
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(xii) Except as described in the Prospectus, no holder of
securities of the Company has any rights to the registration of
securities of the Company because of the filing of the Registration
Statement or otherwise in connection with the sale of the Shares
contemplated hereby.
(xiii) The Company is not, and upon consummation of the
transactions contemplated hereby will not be, required to register as
an "investment company" under the Investment Company Act of 1940, as
amended.
(xiv) Except as otherwise disclosed in the Registration
Statement and the Prospectus, the Company and its subsidiaries have
good and marketable title to all real property and to all personal
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus
or such as do not materially affect the value of such property and do
not interfere in any material respect with the use made and proposed to
be made of such property by the Company and its subsidiaries; and any
real property, buildings and personal property held under lease by the
Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do
not interfere with the use thereof made and proposed to be made by the
Company and its subsidiaries.
(xv) The Company and its subsidiaries possess and are in
compliance with all patents, trademarks, franchises, permits, licenses
(including, without limitation, all software licenses) and similar
items as well as all electronic data processing, electronic fund
transfer and other contracts, agreements, leases and arrangements
necessary or material to carrying on their business as presently
conducted or proposed to be conducted and as described in the
Registration Statement and the Prospectus, except where the failure to
possess any of the foregoing would not, singly or in the aggregate,
have a material adverse effect upon the business, prospects,
properties, operations, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole; and
except as otherwise described in the Registration Statement and the
Prospectus, neither the Company nor any such subsidiary has received
any notice of cancellation of the same or any notice of proceedings
relating to the revocation, suspension or modification of any of the
foregoing which, singly or in the aggregate, would result in a material
adverse change in the business, prospects, properties, operations,
condition (financial or other) or results of operations of the Company
and its subsidiaries taken as a whole or which is required to be
disclosed in the Registration Statement and the Prospectus.
(xvi) The Company has (a) initiated a review and assessment of
all areas within its and each of its subsidiaries' business and
operations (including those affected by suppliers, vendors and
customers) that could be adversely affected by the "Year 2000 Problem"
(that is, the risk that computer applications used by the Company or
any of its subsidiaries (or suppliers, vendors and customers) may be
unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999),
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<PAGE> 8
(b) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis and (c) to date, has implemented that plan in
accordance with that timetable. Based on the foregoing, the Company
believes that all computer applications (including those of the
Company's suppliers, vendors and customers) that are material to its or
any of its subsidiaries' business and operations are reasonably
expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 Compliant"), except to the extent that a
failure to do so would not reasonably be expected to have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(xvii) Neither the Company nor any of its subsidiaries is in
default (nor has any event occurred which, with notice or lapse of time
or both, would constitute a default) under any provisions of any
agreement, contract, lease, indenture, instrument, license or
arrangement to which the Company or any of its subsidiaries is a party
or by which it is bound, where such default could have a material
adverse effect on the business, prospects, properties, condition
(financial or otherwise) or results of operations of the Company and
its subsidiaries taken as a whole.
(xviii) The Company has received and has delivered to the
Representatives executed undertakings, substantially in the form
attached hereto as Annex I, of each of the directors and executive
officers of the Company, with respect to his disposition of any Stock
or any securities substantially similar to the Stock or any securities
exchangeable for, convertible into or exercisable for Stock or
securities substantially similar to the Stock (any such securities
herein called the "Covered Securities") owned of record or beneficially
by him until after ______________, 1999.
(xix) The Company is eligible to utilize Form S-3 registration
statements under the Act and the Regulations with respect to sales of
its securities, including without limitation, the sale of the Shares
contemplated hereby.
(xx) The Company, through its wholly-owned subsidiary ACS
Acquisition Corporation, a Delaware corporation ("Purchaser"),
completed the purchase of 8,704,283 shares of common stock, par value
$.10 per share (the "BRC Stock"), of BRC Holdings, Inc. ("BRC")
pursuant to a tender offer by Purchaser to purchase 8,704,283 shares of
BRC Stock at a purchase price of $19.00 per share upon the terms and
subject to the Tender Offer Statement on Schedule 14D-1 filed with the
Commission on October 23, 1998, as subsequently amended. The Purchaser
purchased the 8,704,283 shares of BRC Stock in connection with that
certain Agreement and Plan of Merger, dated as of October 19, 1998
among the Company, the Purchaser and BRC (together with all of the
ancillary documents referred to therein, the "Merger Agreement"),
pursuant to which the Purchaser will be merged with and into BRC. The
execution, delivery and performance by the Company of the Merger
Agreement, and the consummation by the Company of the transactions
contemplated thereby, was duly authorized by all necessary corporate
action on the part of
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T & K DRAFT 02/04/99
<PAGE> 9
the Company. To the knowledge of the Company, the execution, delivery
and performance by BRC of the Merger Agreement, and the consummation by
BRC of the transactions contemplated thereby, was duly authorized by
all necessary corporate action on the part of BRC. Neither the Company
nor the Purchaser is in breach of or in default under, and no event has
occurred which (with or without the giving of notice or the passage of
time or both) would constitute a default by the Company or the
Purchaser under, the Merger Agreement to the extent that such default
would result in the material impairment of any rights of the Company or
the Purchaser under the Merger Agreement, and neither the Company nor
the Purchaser has received any notice from, or given any notice to, any
other party indicating that the Company or the Purchaser, on the one
hand, or such other party, on the other hand, is in breach of or in
default under the Merger Agreement.
(xxi) The assets and liabilities of BRC are substantially as
reflected in the condensed interim financial statements for the
nine-months ended September 30, 1998 incorporated by reference in the
Registration Statement and Prospectus.
(xxii) The statistical and market-related data included in the
Prospectus are based on or derived from sources from which the Company
believes to be reliable and accurate in all material respects.
(xxiii) Except as otherwise disclosed in the Registration
Statement and the Prospectus, no relationships, direct or indirect,
exists between or among the Company or any of its subsidiaries on the
one hand, and the directors, officers, stockholders, customers or
suppliers of the Company or any of its subsidiaries on the other hand,
which would be required by the Act to be described in the Prospectus.
(b) The Selling Stockholder represents and warrants
to, and agrees with, the several Underwriters that:
(i) Certificates in negotiable form for the Shares
(if any) to be sold by the Selling Stockholder have been
placed in custody under a Custody Agreement (the "Custody
Agreement") for delivery under this Agreement with the
Company, as Custodian (the "Custodian"). The Selling
Stockholder specifically agrees that the Shares represented by
the certificates so held in custody for the Selling
Stockholder are subject to the interests of the several
Underwriters and the Company, that the arrangements made by
the Selling Stockholder for such custody, including the Power
of Attorney (the "Power of Attorney") provided for in such
Custody Agreement, are to that extent irrevocable, and that
the obligations of the Selling Stockholder shall not be
terminated by any act of the Selling Stockholder (or by
operation of law, whether by the death or incapacity of the
Selling Stockholder or, in the case the Selling Shareholder is
not a natural person, the dissolution or liquidation of the
Selling Stockholder) or the occurrence of any other event; if
any such death, incapacity, dissolution, liquidation or other
such event should occur before the delivery of such
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<PAGE> 10
Shares hereunder, certificates for such Shares shall be
delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity,
dissolution, liquidation or other event had not occurred,
regardless of whether the Custodian shall have received notice
of such death, incapacity, dissolution, liquidation or other
event.
(ii) The execution, delivery and performance of this
Agreement and the Custody Agreement (including the Power of
Attorney included therein) by the Selling Stockholder and the
consummation of the transactions contemplated hereby and
thereby will not (a) conflict with or result in the breach of
any of the terms and provisions of, or constitute a default
(or an event which with notice or lapse of time, or both,
would constitute a default) or require consent under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Selling
Stockholder pursuant to the terms of any agreement,
instrument, franchise, license or permit to which the Selling
Stockholder is a party or by which the Selling Stockholder or
any of the Selling Stockholder's property or assets may be
bound or (b) violate or conflict with any judgment, decree,
order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction
over the Selling Stockholder or such Selling Stockholder's
properties or assets.
(iii) The Selling Stockholder has, and at the time of
delivery of the Shares to be sold by the Selling Stockholder
the Selling Stockholder will have, the requisite legal right,
power, authority and capacity, and, except as required under
the Act and state securities and Blue Sky laws, all necessary
consents, approvals, authorizations, orders, registrations,
filings, qualifications, licenses and permits of and from all
public, regulatory or governmental agencies and bodies as are
required for the execution, delivery and performance of this
Agreement and the Custody Agreement (including the Power of
Attorney therein) and the consummation of the transactions
contemplated hereby and thereby, including the sale,
assignment, transfer and delivery of the Shares to be sold,
assigned, transferred and delivered by the Selling Stockholder
hereunder.
(iv) Each of this Agreement and the Custody Agreement
(including the Power of Attorney therein) has been duly and
validly authorized, executed and delivered by the Selling
Stockholder and each of this Agreement and the Custody
Agreement is a valid and binding obligation of the Selling
Stockholder, enforceable against the Selling Stockholder in
accordance with its terms, except to the extent that (a) the
enforceability hereof may be subject to applicable bankruptcy,
insolvency, fraudulent conveyance, fraudulent transfer,
reorganization, moratorium, liquidation, conservatorship and
other laws affecting creditors' rights generally, (b)
equitable principles may limit the availability of equitable
relief in the case of a breach hereof (regardless of whether
such remedies are sought in a proceeding at law or in equity),
-10-
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<PAGE> 11
and (c) federal securities laws may limit the enforceability
of the indemnification provisions hereof.
(v) The Selling Stockholder has good, valid and
marketable title to the Shares to be sold by the Selling
Stockholder pursuant to this Agreement, free and clear of all
liens, encumbrances, claims, security interests, restrictions
on transfer (other than any restrictions on transfer imposed
by the Act and by the securities or Blue Sky laws of certain
jurisdictions), shareholders' agreements, voting trusts and
other defects in title whatsoever, with full power to deliver
such Shares hereunder, and, upon the delivery of and payment
for such Shares as herein contemplated, each of the
Underwriters will receive good, valid and marketable title to
the shares purchased by it from the Selling Stockholder, free
and clear of all liens, encumbrances, claims, security
interests, restrictions on transfer, shareholders' agreements,
voting trusts and other defects in title whatsoever to each of
the Underwriters who have purchased such Shares in good faith
and without notice of any such liens, encumbrances, claims,
security interests, restrictions on transfer, shareholders'
agreements, voting trusts and other defects in title.
(vi) The Selling Stockholder has not taken and will
not take, directly or indirectly, any action which has
constituted or which was designed to constitute or which might
be reasonably expected to cause or result in stabilization or
manipulation of the price of the shares of Common Stock.
(vii) When the Registration Statement became or
becomes effective, when any post-effective amendment to the
Registration Statement becomes effective, when the Prospectus
is first filed with the Commission pursuant to Rule 424(b) of
the Regulations, when any amendment of or supplement to the
Prospectus is filed with the Commission and at the Closing
Date and the Additional Closing Date, if any, such parts of
the Registration Statement and the Prospectus and any
amendments thereof and supplements thereto as relate to the
Selling Stockholder and are based upon information furnished
in writing to the Company by or on behalf of the Selling
Stockholder expressly for use therein did not and will not
contain an untrue statement of a material fact and did not and
will not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein
not misleading; and when any related preliminary prospectus
was first filed with the Commission (whether filed as part of
the Registration Statement for the registration of the Shares
or any amendment thereto or pursuant to Rule 424(a) of the
Regulations) and when any amendment thereof or supplement
thereto was first filed with the Commission, such parts of
such preliminary prospectus and any amendments thereof and
supplements thereto as relate to the Selling Stockholder and
are based on information furnished in writing to the Company
by or on behalf of the Selling Stockholder expressly for use
therein did not contain an untrue statement of a material fact
and did not omit to state any material fact required to be
stated therein or necessary in
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T & K DRAFT 02/04/99
<PAGE> 12
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to sell to each of the
Underwriters and each of the Underwriters, severally and not jointly,
agrees to purchase from the Company, at a purchase price per share of
$_____, the number of Firm Shares (to be adjusted by the
Representatives so as to eliminate fractional shares) determined by
multiplying the aggregate number of Firm Shares by a fraction, the
numerator of which is the aggregate number of Firm Shares to be
purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto (plus any additional number of Shares
which such Underwriter may become obligated to purchase pursuant to the
provisions of Section 9 hereof), and the denominator of which is the
aggregate number of Firm Shares to be purchased by all the
Underwriters.
(b) Payment of the purchase price for, and delivery
of certificates for, the Firm Shares shall be made at the office of
Bear, Stearns & Co. Inc., 300 Crescent Court, Suite 200, Dallas, Texas
75201, or at such other place as shall be agreed upon by the
Representatives and the Company, at 9:00 A.M., Dallas Time, on the
third or fourth (if the transactions contemplated hereby were priced
after the close of the market) business day (unless postponed in
accordance with the provisions of Section 9 hereof) following the date
of this Agreement, or such other time not later than seven full
business days after such date as shall be agreed upon in writing by the
Representatives and the Company(such time and date of payment and
delivery being herein called the "Closing Date"). Payment shall be made
to the Company by wire transfer on the federal wire system to accounts
in the United States designated in writing by the Company not later
than three (3) business days prior to the Closing Date, against
delivery to the Representatives for the respective accounts of the
Underwriters of certificates for the Firm Shares to be purchased by
them. Certificates for the Firm Shares shall be registered in such name
or names and in such authorized denominations as the Representatives
may request in writing at least one full business days prior to the
Closing Date. Such certificates will be made available to the
Representatives at the offices of Bear, Stearns & Co. Inc., 245 Park
Avenue, New York, New York 10167, for checking and packaging for
delivery at least one full business day prior to the Closing Date.
(c) In addition, in the event and to the extent that
the Underwriters shall exercise the option to purchase Additional
Shares as provided below, the Selling Stockholder agrees to sell to
each of the Underwriters and each of the Underwriters, severally and
not jointly, agrees to purchase from the Selling Stockholder, at the
purchase price per share set forth in subsection (a) of this Section 2,
that portion of the number of Additional Shares as to which such option
shall have been exercised (to be adjusted by the Representatives so as
to eliminate fractional shares) determined by multiplying such number
of Additional Shares
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T & K DRAFT 02/04/99
<PAGE> 13
by a fraction, the numerator of which is the maximum number of
Additional Shares that such Underwriter is entitled to purchase as set
forth opposite the name of such Underwriter in Schedule I hereto and
the denominator of which is the aggregate number of Additional Shares
which all of the Underwriters are entitled to purchase hereunder.
The Selling Stockholder hereby grants to the Underwriters the
option to purchase at their option up to 525,000 Additional Shares, at
the purchase price per Share set forth in subsection (a) of this
Section 2, for the sole purpose of covering any over-allotments in the
sale of the Firm Shares. Any such election to purchase Additional
Shares may be exercised by written notice from the Representatives to
the Custodian, given within a period of 30 calendar days after the date
of this Agreement and setting forth the aggregate number of Additional
Shares to be purchased and the date and time when such Additional
Shares are to be delivered, as reasonably determined by the
Representatives (such date and time being herein sometimes referred to
as the "Additional Closing Date"); provided, however, that the
Additional Closing Date shall not be earlier than the Closing Date or
earlier than the second full business day after the date on which the
option shall have been exercised nor later than the eighth full
business day after the date on which the option shall have been
exercised (unless such time and date are postponed in accordance with
the provisions of Section 9 hereof). Certificates for Additional Shares
shall be registered in such name or names and in such authorized
denominations as the Representatives may request in writing at least
one full business day prior to the Additional Closing Date. Such
certificates will be made available to the Representatives at the
offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New
York 10167, for checking and packaging for delivery at least one full
business day prior to the Additional Closing Date.
Payment for the Additional Shares shall be made by
wire transfer on the federal wire system to account(s) in the United
States designated in writing by the Custodian not later than three (3)
business days prior to the Additional Closing Date, upon delivery of
the certificates for the Additional Shares to the Representatives for
the respective accounts of the Underwriters.
3. Offering. Upon the Representatives' authorization
of the release of the Firm Shares, the Underwriters propose to offer
the Shares for sale to the public upon the terms set forth in the
Prospectus.
4. Covenants of the Company and the Selling
Stockholder.
(a) The Company covenants and agrees with the Underwriters that:
(i) If the Registration Statement has not yet been
declared effective, the Company will use its best efforts to cause the
Registration Statement and any amendments thereto to become effective
as promptly as possible, and if Rule 430A of the Regulations is used or
the filing of the Prospectus is otherwise required under Rule 424(b) of
the
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<PAGE> 14
Regulations, the Company will file the Prospectus (properly completed
if such Rule 430A has been used) pursuant to such Rule 424(b) within
the prescribed time period and will provide evidence satisfactory to
the Representatives of such timely filing. The Company will notify the
Representatives immediately (and, if requested by the Representatives,
will confirm such notice in writing) (A) when the Registration
Statement and any amendments thereto become effective, (B) of any
request by the Commission for any amendment of or supplement to the
Registration Statement or the Prospectus or for any additional
information, (C) of the mailing or the delivery to the Commission for
filing of any amendment of or supplement to the Registration Statement
or the Prospectus, (D) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or any
post-effective amendment thereto or of the initiation, or the
threatening, of any proceedings therefor, (E) of the receipt of any
comments from the Commission, and (F) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
the Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose. If the Commission shall
propose or enter a stop order at any time, the Company will make every
reasonable effort to prevent the issuance of any such stop order and,
if issued, to obtain the lifting of such order as soon as possible. The
Company will not file any amendment to the Registration Statement or
any amendment of or supplement to the Prospectus (including any
prospectus required to be filed pursuant to such Rule 424(b) and
including the issuance or filing of any term sheet within the meaning
of Rule 434 of the Regulations) that differs from the preliminary
prospectus on file at the time of the effectiveness of the Registration
Statement before or after the effective date of the Registration
Statement to which the Representatives shall reasonably object in
writing after being timely furnished in advance a copy thereof.
(ii) If at any time when a prospectus relating to the
Shares is required to be delivered under the Act any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it shall be necessary at
any time to amend or supplement the Prospectus or Registration
Statement to comply with the Act or the Regulations, the Company will
notify the Representatives promptly and prepare and file with the
Commission an appropriate amendment or supplement (in form and
substance reasonably satisfactory to the Representatives) which will
correct such statement or omission or which will effect such compliance
and will use all reasonable efforts to have any amendment to the
Registration Statement declared effective as soon as possible.
(iii) The Company will promptly deliver to the
Representatives four signed copies of the Registration Statement,
including exhibits and all amendments thereto, and the Company will
promptly deliver to each of the Underwriters such number of copies of
any preliminary prospectus, the Prospectus, the Registration Statement,
and all amendments of and supplements to such documents, if any, as the
Representatives may reasonably request.
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(iv) The Company will cooperate with the Representatives,
at or prior to the time of effectiveness of the Registration Statement,
in connection with the qualification of the offering or sale of the
Shares under the state securities or blue sky laws of such
jurisdictions as the Representatives may designate and the maintenance
of such qualification in effect for so long as required to complete the
offer and sale of the Shares, except that in no event shall the Company
be obligated in connection therewith to qualify as a foreign
corporation or as a broker or a dealer in any jurisdiction in which it
is not so qualified or to execute a general consent to service of
process.
(v) The Company will make generally available (within the
meaning of Section 11(a) of the Act) to its security holders and to the
Representatives as soon as practicable, but not later than 45 days
after the end of its fiscal quarter in which the first anniversary date
of the effective date of the Registration Statement occurs, an earnings
statement (in form complying with the provisions of Rule 158 of the
Regulations) covering a period of at least twelve consecutive months
beginning after the effective date of the Registration Statement.
(vi) During the period of 90 days from the date of the
Prospectus, the Company will not, without the prior written consent of
Bear, Stearns & Co. Inc., issue, sell, offer or agree to sell, grant
any option for the sale of, or otherwise dispose of, directly or
indirectly, any Covered Securities (other than pursuant to employee
stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of
this Agreement or pursuant to obligations existing on the date of this
Agreement to issue Covered Securities in connection with prior
acquisitions made by the Company), otherwise than hereunder or upon the
exercise of presently outstanding stock options; provided, however,
that during such period the Company may issue up to 1,000,000 shares
of unregistered Common Stock in connection with the consummation of
acquisitions provided that it gives prior written notice of any such
issuances to Bear, Stearns & Co. Inc. and provided further that each
recipient of any such Covered Securities so issued in connection with
any such acquisition shall agree in writing for the benefit of the
Underwriters, in form and substance reasonably satisfactory to Bear,
Stearns & Co. Inc., that all such Covered Securities shall remain
subject to restrictions identical to those contained in this subsection
(vi).
(vii) During a period of three years from the effective
date of the Registration Statement, the Company will furnish to the
Representatives copies of (A) all reports to its stockholders; and (B)
all reports, financial statements and proxy or information statements
filed by the Company with the Commission, any national securities
exchange or automated quotation system.
(viii) The Company will apply the net proceeds from the sale
of the Shares by it hereunder as set forth in "Use of Proceeds" in the
Prospectus.
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(ix) The Company will cause the Shares to be sold by it
hereunder to be approved, upon official notice of issuance, for listing
on the New York Stock Exchange.
(b) The Selling Stockholder covenants and agrees with the
several Underwriters that the Selling Stockholder has not taken and
will not take, directly or indirectly, any action which is designed to
or which has constituted or which might reasonably be expected to cause
or result in stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Shares.
5. Payment of Expenses. Whether or not the
transactions contemplated in this Agreement are consummated or this
Agreement is terminated, the Company hereby agrees to pay or cause to
be paid all costs and expenses, except as set forth below, incident to
the performance of the obligations of the Company and the Selling
Stockholder hereunder, including those in connection with (i)
preparing, printing, duplicating, filing and distributing the
Registration Statement, as originally prepared and all amendments
thereof (including all exhibits thereto), any preliminary prospectus,
the Prospectus and any amendments or supplements thereto (including,
without limitation, fees and expenses of the Company's accountants and
counsel), the underwriting documents (including this Agreement, the
related agreement among underwriters and any selected dealers
agreement, other than fees and expenses of Underwriters' counsel) and
all other documents related to the public offering of the Shares
(including those supplied to the Underwriters in quantities as
hereinabove stated), (ii) the issuance and delivery of the Shares by
the Company to the Underwriters, including any transfer or other taxes
payable thereon, (iii) the qualification of the Shares under state or
foreign securities or blue sky laws, including the costs of printing
and mailing a preliminary and final "blue sky memorandum" and the fees
of counsel for the Underwriters and such counsel's disbursements in
relation thereto, (iv) inclusion of the Shares to be sold by the
Company hereunder on the New York Stock Exchange, (v) the filing fees
of the Commission and the National Association of Securities Dealers,
Inc., (vi) the cost of printing certificates representing the Shares,
(vii) the cost and charges of any transfer agent or registrar and
(viii) the Company's (but not the Underwriters') "road show" and
similar marketing expenses. Notwithstanding the foregoing, the Selling
Stockholder shall pay all the Underwriters discounts and commissions in
respect of the Additional Shares. In addition, any transfer or other
taxes imposed on the sale or delivery of the Additional Shares by the
Selling Stockholder to the several Underwriters will be paid by the
Selling Stockholder.
6. Conditions of Underwriters' Obligations. The
obligations of the Underwriters to purchase and pay for the Firm Shares
and the Additional Shares, as provided herein, shall be subject to the
accuracy of the representations and warranties of the Company and the
Selling Stockholder herein contained, as of the date hereof and as of
the Closing Date (for purposes of this Section 6 "Closing Date" shall
refer to the Closing Date for the Firm Shares and any Additional
Closing Date, if different, for the Additional Shares), to the absence
from any certificates, opinions, written statements or letters
furnished by the
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<PAGE> 17
Company or the Selling Stockholder pursuant to this Section 6 of any
misstatement or omission, to the performance by the Company and the
Selling Stockholder of their respective obligations hereunder, and to
the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M., New York time, on the date of this Agreement, or
at such later time and date as shall have been consented to in writing
by the Representatives; if the Company shall have elected to rely upon
Rule 430A of the Regulations, the Prospectus shall have been filed with
the Commission in a timely fashion in accordance with Section 4(a)
hereof; and at or prior to the Closing Date no stop order suspending
the effectiveness of the Registration Statement or any post-effective
amendment thereof shall have been issued and no proceedings therefor
shall have been initiated or threatened by the Commission.
(b) At the Closing Date the Representatives shall have
received the opinion of Hughes & Luce, L.L.P., counsel for the Company,
dated the Closing Date and addressed to the Underwriters and in form
and substance satisfactory to the Representatives, to the effect that:
(i) Each of the Company and Dataplex Corporation,
ACS Government Services, Inc., The Genix Group, Inc.,
Technical Directions, Inc., ACS Government Solutions Group,
Inc. and BRC (the "Significant Subsidiaries") is validly
existing as a corporation in good standing under the laws of
its jurisdiction of incorporation.
(ii) The Company has an authorized capitalization
as set forth in the Registration Statement and the Prospectus.
The capital stock of the Company of any class, series or rank,
including the Stock, the Firm Shares and the Additional
Shares, conforms in all material respects to the description
thereof contained in the Registration Statement and the
Prospectus. The Shares to be issued by the Company and
delivered on the Closing Date have been duly and validly
authorized and, when delivered by the Company in accordance
with this Agreement, will be duly and validly issued, fully
paid and nonassessable and will not have been issued in
violation of or subject to any preemptive rights. The
Additional Shares (if any) to be delivered on the Additional
Closing Date by the Selling Stockholder are duly and validly
authorized and issued, fully paid and nonassessable and were
not issued in violation or subject to any preemptive rights.
(iii) This Agreement and the transactions
contemplated herein have been duly and validly authorized,
executed and delivered by the Company, and constitute legal,
valid and binding agreements of the Company enforceable in
accordance with their respective terms except to the extent
that (a) the enforceability hereof and thereof may be subject
to applicable bankruptcy, insolvency, fraudulent transfer,
fraudulent conveyance, reorganization, moratorium,
liquidation,
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conservatorship and other laws affecting creditors' rights
generally, (b) equitable principles may limit the availability
of equitable relief in the case of a breach hereof or thereof
(regardless of whether such remedies are sought in a
proceeding at law or in equity), and (c) federal securities
laws may limit the enforceability of the indemnification
provisions hereunder.
(iv) The execution, delivery, and performance of
this Agreement and the consummation of the transactions
contemplated hereby by the Company do not and will not (a)
conflict with or result in a breach of any of the terms and
provisions of, or constitute a default (or an event which with
notice or lapse of time, or both, would constitute a default)
under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to, any material
agreement, contract, lease, arrangement, instrument,
franchise, license or permit known to such counsel after
reasonable inquiry to which the Company or any of its
subsidiaries is a party or by which any of such corporations
or their respective properties or assets may be bound or (b)
violate or conflict with any provision of the certificate of
incorporation or bylaws of the Company or any of its
subsidiaries, any federal, state or local statutory,
regulatory or common law known to such counsel after
reasonable inquiry or, to the best knowledge of such counsel
after reasonable inquiry, any judgment, decree, order, rule or
regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their respective
properties or assets. No consent, approval, authorization,
order, registration, filing, qualification, license or permit
of or with any court or any public, governmental, or
regulatory agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their respective
properties or assets is required for the execution, delivery
and performance of this Agreement or the consummation of the
transactions contemplated hereby, except for (a) such as may
be required under state securities or blue sky laws in
connection with the purchase and distribution of the Shares by
the Underwriters (as to which such counsel need express no
opinion) and (b) such as have been made under the Act.
(v) The Company is not, and upon consummation of
the transactions contemplated hereby will not be, required to
register as an "investment company" under the Investment
Company Act of 1940, as amended.
(vi) The Registration Statement and the
Prospectus and any amendments thereof or supplements thereto
(other than the financial statements, financial statement
notes, financial statement schedules and other financial,
accounting or statistical data included or incorporated by
reference therein, as to which no opinion need be rendered)
comply as to form in all material respects with the
requirements of the Act and the Regulations.
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(vii) The Registration Statement is effective
under the Act, and, to the best knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof has been
issued and no proceedings therefor have been initiated or
threatened by the Commission and all filings required by Rule
424(b) of the Regulations have been timely made.
(viii) The statements made in the Prospectus, as
amended or supplemented, insofar as they purport to constitute
summaries or to describe the provisions of the documents,
transactions or legal matters therein described, in summary
form, are fair and accurate summaries in all material
respects.
In addition, such counsel shall also state that such
counsel has participated in conferences with officers and
representatives of the Company, representatives of the
independent public accountants for the Company and the
Underwriters at which the contents of the Registration
Statement and the Prospectus and related matters were
discussed and, although such counsel is not passing upon, and
does not assume responsibility for and has not independently
verified, the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the
Prospectus, on the basis of the foregoing, no facts have come
to the attention of such counsel which would lead such counsel
to believe that either the Registration Statement at the time
it became effective (including the information deemed to be
part of the Registration Statement at the time of
effectiveness pursuant to Rule 424, Rule 430A or Rule 434 of
the Regulations, if applicable), or any amendment thereof made
prior to the Closing Date as of the date of such amendment,
contained an untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the Prospectus as of its date (or any amendment thereof
or supplement thereto made prior to the Closing Date as of the
date of such amendment or supplement) and as of the Closing
Date contained or contains an untrue statement of a material
fact or omitted or omits to state any material fact required
to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading (it being understood that such
counsel need express no belief or opinion with respect to the
financial statements, financial statement notes, financial
statement schedules and other financial, accounting or
statistical data included therein).
In rendering such opinion, such counsel may rely (a)
as to matters involving the application of laws other than the
laws of the United States and jurisdictions in which they are
admitted, to the extent such counsel deems proper and to the
extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to
the Representatives) of other counsel reasonably acceptable to
the Representatives, familiar with the applicable laws; and
(b) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and
certificates or other written statements of officers of
departments
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<PAGE> 20
of various jurisdictions having custody of documents
respecting the corporate existence or good standing of the
Company and its subsidiaries, provided that copies of any such
statements or certificates shall be delivered to the
Representatives. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in
form satisfactory to such counsel and, in their opinion, the
Representatives and they are justified in relying thereon.
Furthermore, in rendering such opinion, to the extent that the
matters discussed in clause (iii) above involve or may be
governed by or construed under the laws of the State of New
York, such counsel may assume that the laws of New York are
the same as the laws of the State of Texas.
(c) At the Closing Date the Representatives shall have
received the opinion of David W. Black, Executive Vice President and
General Counsel of the Company, dated the Closing Date and addressed to
the Underwriters and in form and substance satisfactory to the
Representatives, to the effect that:
(i) All of the issued and outstanding shares
of the Company's capital stock of any class, series or rank,
including the Shares to be delivered and sold by the Company
and the Selling Stockholder in accordance with this Agreement,
are duly and validly authorized and issued, are fully paid and
nonassessable and were not issued in violation of or subject
to any preemptive rights. All of the issued and outstanding
shares of the capital stock of any class, series or rank of
each subsidiary of the Company have been duly and validly
issued and are fully paid and nonassessable and were not
issued in violation of preemptive rights and (except for
directors' qualifying shares and as set forth in the
Prospectus) are owned directly or indirectly by the Company,
free and clear of any lien, encumbrance, claim, security
interest, restriction on transfer, shareholders' agreement,
voting trust or other defect of title whatsoever.
(ii) Each subsidiary of the Company (other than
the Significant Subsidiaries) has been duly organized and is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation. Each of the
Company and its subsidiaries is duly qualified and in good
standing as a foreign corporation in each jurisdiction in
which the character or location of its properties (owned,
leased or licensed) or the nature or conduct of its business
makes such qualification necessary, except for those failures
to be so qualified or in good standing which will not in the
aggregate have a material adverse effect on the Company and
its subsidiaries taken as a whole. Each of the Company and its
subsidiaries has all requisite power and authority, and
possesses and is in compliance with all necessary consents,
approvals, authorizations, orders, registrations,
qualifications, licenses, franchises and permits of and from
all public, regulatory or governmental agencies and bodies to
own, lease and operate its properties and conduct its business
as now
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<PAGE> 21
being conducted and as described in the Registration Statement
and the Prospectus, with such exceptions as are not material.
(iii) To the best of such counsel's knowledge and
except as described in the Prospectus, there is no litigation
or governmental or other action, suit, proceeding or
investigation before any court or before or by any public,
regulatory or governmental agency or body pending or, to the
best of such counsel's knowledge after reasonable inquiry,
threatened against, or involving the properties or business
of, the Company or any of its subsidiaries, which might result
in any material adverse change in the business, prospects,
properties, operations, financial condition or results of
operations of the Company and its subsidiaries taken as a
whole, or which is of a character required to be disclosed in
the Prospectus.
(iv) The Company and its subsidiaries have good
and marketable title to all real property and to all personal
property owned by them, in each case free and clear of all
liens, encumbrances and defects with such exceptions as are
described in the Prospectus or are not material and do not
interfere with the use made or proposed to be made of such
property by the Company and its subsidiaries; and any real
property, buildings and personal property held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use thereof made
and proposed to be made by the Company and its subsidiaries,
except to the extent that (a) the enforceability thereof may
be subject to applicable bankruptcy, insolvency, fraudulent
transfer, fraudulent conveyance, reorganization, moratorium,
liquidation, conservatorship and other laws affecting
creditors' rights generally, and (b) equitable principles may
limit the availability of equitable relief in the case of a
breach thereof (regardless of whether such remedies are sought
in a proceeding at law or in equity). (In giving the opinion
in this clause, such counsel may state that no examination of
record titles for the purpose of such opinion has been made,
and that he is relying upon a general review of the titles of
the Company and its subsidiaries and abstracts, reports and
policies of title companies rendered or issued at or
subsequent to the time of the acquisition of such property by
the Company or its subsidiaries provided that such counsel
shall state that they believe that both the Underwriters and
he are justified in relying upon such opinion, abstracts,
reports and policies.)
(v) The Company and its subsidiaries possess
and are in compliance with all patents, trademarks,
franchises, permits, licenses (including, without limitation,
all software licenses) and similar items as well as all
electronic data processing, electronic fund transfer and other
contracts, agreements, leases and arrangements necessary or
material to carrying on their business as presently conducted
or proposed to be conducted and as described in the
Prospectus, except where the failure to possess any of the
foregoing would not, singly or in the
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<PAGE> 22
aggregate, have a material adverse effect upon the business,
prospects, properties, operations, condition (financial or
other) or results of operations of the Company and its
subsidiaries, taken as a whole; and except as otherwise
described in the Prospectus, neither the Company nor any such
subsidiary has received any notice of cancellation or any
notice of proceedings relating to the revocation, suspension
or modification of any of the foregoing which, singly or in
the aggregate, would result in a material adverse change in
the business, prospects, properties, operations, condition
(financial or other) or results of operations of the Company
and its subsidiaries taken as a whole or which is required to
be disclosed in the Prospectus.
(vi) Each of the Incorporated Documents (other
than the financial statements, financial statement notes,
financial statement schedules and other financial, accounting
or statistical data included or incorporated by reference
therein, as to which no opinion need be rendered) complies as
to form in all material respects with the requirements of the
Exchange Act at such time as the Incorporated Document was
filed with the Commission.
(vii) The statements made in the Prospectus,
as amended or supplemented, insofar as they purport to
constitute summaries of or to describe the provisions of the
documents, transactions or legal matters therein described, in
summary form, are fair and accurate summaries in all material
respects.
In addition, such counsel shall also state that such
counsel has participated in conferences with other officers
and representatives of the Company, representatives of the
independent public accountants and counsel for the Company and
the Underwriters at which the contents of the Registration
Statement and the Prospectus and related matters were
discussed (including review and discussion of the contents of
all Incorporated Documents) and, although such counsel is not
passing upon, and does not assume responsibility for and has
not independently verified, the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or the Prospectus, on the basis of the foregoing, no
facts have come to the attention of such counsel which would
lead such counsel to believe that either the Registration
Statement at the time it became effective (including the
Incorporated Documents and the information deemed to be part
of the Registration Statement at the time of effectiveness
pursuant to Rule 424, Rule 430A or Rule 434 of the
Regulations, if applicable), or any amendment thereof made
prior to the Closing Date as of the date of such amendment,
contained an untrue statement of a material fact or omitted to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
that the Prospectus as of its date (or any
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<PAGE> 23
amendment thereof or supplement thereto made prior to the
Closing Date as of the date of such amendment or supplement)
and as of the Closing Date contained or contains an untrue
statement of a material fact or omitted or omits to state any
material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances
under which they were made, not misleading (it being
understood that such counsel need express no belief or opinion
with respect to the financial statements, financial statement
notes, financial statement schedules and other financial,
accounting or statistical data included therein).
In rendering such opinion, such counsel may rely (a)
as to matters involving the application of laws other than the
laws of the United States and jurisdictions in which he is
admitted, to the extent such counsel deems proper and to the
extent specified in such opinion, if at all, upon an opinion
or opinions (in form and substance reasonably satisfactory to
the Representatives) of other counsel reasonably acceptable to
the Representatives, familiar with the applicable laws; and
(b) as to matters of fact, to the extent he deems proper, on
certificates of responsible officers of the Company and
certificates or other written statements of officers of
departments of various jurisdictions having custody of
documents respecting the corporate existence or good standing
of the Company and its subsidiaries, provided that copies of
any such statements or certificates shall be delivered to the
Representatives. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in
form satisfactory to such counsel and, in his opinion, the
Representatives and he are justified in relying thereon.
(d) At the Closing Date the Representatives shall have
received the favorable opinion of counsel for the Selling Stockholder
dated the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to the Representatives, to the effect that:
(i) Each of this Agreement and the Custody
Agreement (including the Power of Attorney therein) has been
duly and validly authorized, executed and delivered by or on
behalf of the Selling Stockholder and each of this Agreement
and the Custody Agreement (including the Power of Attorney
therein) is a valid and binding obligation of the Selling
Stockholder, enforceable against the Selling Stockholder in
accordance with its terms, except to the extent that (a) the
enforceability hereof and thereof may be subject to applicable
bankruptcy, insolvency, fraudulent transfer, fraudulent
conveyance, reorganization, moratorium, liquidation,
conservatorship and other laws affecting creditors' rights
generally, (b) equitable principles may limit the availability
of equitable relief in the case of a breach hereof or thereof
(regardless of whether such remedies are sought in a
proceeding at law or in equity), and (c) federal securities
laws may limit the enforceability of the indemnification
provisions hereunder.
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(ii) The Selling Stockholder has all requisite
power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, filings,
qualifications, licenses and permits of and from all courts
and all public, governmental or regulatory agencies and bodies
as are required for the execution, delivery and performance of
this Agreement, the Custody Agreement (including the Power of
Attorney therein) and the consummation of the transactions
contemplated hereby and thereby except for (1) such as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the
Underwriters (as to which such counsel need express no
opinion) and (2) such as have been made or obtained under the
Act.
(iii) Upon the delivery of and payment for the
Shares to be sold by the Selling Stockholder pursuant to this
Agreement as herein contemplated, each of the Underwriters who
is not aware of any adverse claim with respect thereto will
receive good, valid and marketable title to the Shares
purchased by it from the Selling Stockholder, free and clear
of all liens, encumbrances, claims, security interests,
restrictions on transfer, shareholders' agreements, voting
trusts and other defects in title whatsoever.
(iv) The execution, delivery and performance
of this Agreement and the Custody Agreement (including the
Power or Attorney therein) by or on behalf of the Selling
Stockholder and the consummation of the transactions
contemplated hereby and thereby will not violate or conflict
with any agreement, contract, lease, arrangement, instrument,
franchise, license or permit known to such counsel after
reasonable inquiry to which the Selling Stockholder is a party
or any statute or, to the best knowledge of such counsel after
reasonable inquiry, any judgment, decree, order, rule or
regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Selling
Stockholder or any of his properties or assets.
(v) The Statements in the Prospectus under
the caption "Selling Stockholder if Underwriter's
Over-Allotment Option is Exercised", insofar as such
statements constitute a summary of the matters referred to
therein, fairly present the information called for with
respect to such matters.
In rendering such opinion, such counsel may rely (A)
as to matters involving the application of laws other than the
laws of the United States and the jurisdiction in which they
are admitted, to the extent such counsel deems proper and to
the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably
satisfactory to the Representatives) of other counsel
reasonably acceptable to the Representatives, familiar with
the applicable laws; and (B) as to matters of fact, to the
extent they deem proper, on certificates of the Selling
Stockholder, provided that copies of any such statements or
certificates shall be
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<PAGE> 25
delivered to the Representatives. The opinions of such counsel
for the Selling Stockholder shall state that the opinion of
any such other counsel is in form satisfactory to such counsel
and, in their opinion, the Representatives and they are
justified in relying thereon.
(e) All proceedings taken in connection with the sale of the
Firm Shares and the Additional Shares as herein contemplated shall be
satisfactory in form and substance to the Representatives, and the
Underwriters shall have received from Thompson & Knight, P.C., counsel
for the Underwriters, a favorable opinion, dated as of the Closing
Date, with respect to the issuance and sale of the Shares, the
Registration Statement and the Prospectus and such other related
matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(f) At the Closing Date the Representatives shall have
received a certificate of the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer of the Company, dated the Closing
Date, to the effect that (i) the condition set forth in subsection (a)
of this Section 6 has been satisfied, (ii) as of the date hereof and as
of the Closing Date the representations and warranties of the Company
set forth in Section 1(a) hereof are accurate, (iii) as of the Closing
Date the obligations of the Company to be performed hereunder on or
prior thereto have been duly performed and (iv) subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, the Company and its subsidiaries have not
sustained any material loss or interference with their respective
businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding, and there has not been
any material adverse change, or any development involving a material
adverse change, in the business prospects, properties, operations,
condition (financial or otherwise), or results of operations of the
Company and its subsidiaries taken as a whole, except in each case as
described in or contemplated by the Prospectus.
(g) At the Closing Date, the Representatives shall have
received a certificate executed by an Attorney-in-Fact on behalf of the
Selling Stockholder, dated the Closing Date, to the effect that the
representations and warranties of the Selling Stockholder set forth in
Section 1(b) hereof are accurate, and that as of the Closing Date, the
obligations of such Selling Stockholder to be performed hereunder on or
prior thereto have been duly performed.
(h) At the time this Agreement is executed and at the Closing
Date, the Representatives shall have received a letter from
Pricewaterhouse Coopers LLP, independent public accountants for the
Company, dated, respectively, as of the date of this Agreement and as
of the Closing Date, addressed to the Underwriters and in form and
substance satisfactory to the Representatives, to the effect that: (i)
they are independent certified public accountants with respect to the
Company within the meaning of the Act and stating that no response to
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Item 10 of Form S-3 is required with respect to them; (ii) in their
opinion, the financial statements and schedules of the Company included
or incorporated by reference in the Registration Statement and the
Prospectus and covered by their opinion therein (of which the
Representatives shall have been provided with a manually signed copy)
comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act; (iii) they
consent to the use of their report concerning the Company's
consolidated financial statements in the Prospectus and to all
references to such accountants therein, including their designation as
experts under the caption "Experts" therein; (iv) on the basis of
certain specified procedures performed on the unaudited condensed
consolidated balance sheet as of December 31, 1998 and the unaudited
condensed consolidated statements of operations and of cash flows for
the six-month periods ended December 31, 1998 and 1997 included or
incorporated by reference in the Registration Statement and inquiries
of officers and other employees of the Company and its subsidiaries who
have responsibility for financial and accounting matters of the
Company, nothing has come to their attention that would cause them to
believe that (A) such unaudited consolidated financial statements do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Regulations or (B) any
material modifications should be made to such unaudited consolidated
financial statements for them to be in conformity with generally
accepted accounting principles; (v) on the basis of procedures (but not
an examination made in accordance with generally accepted auditing
standards) consisting of a reading of the latest available unaudited
interim consolidated financial statements of the Company and its
subsidiaries, a reading of the minutes of meetings and consents of the
shareholders and boards of directors of the Company and its
subsidiaries and the committees of such boards subsequent to December
31, 1998, inquiries of officers and other employees of the Company and
its subsidiaries who have responsibility for financial and accounting
matters of the Company and its subsidiaries with respect to
transactions and events subsequent to December 31, 1998 and other
specified procedures and inquiries to a date not more than two days
prior to the date of such letter, nothing has come to their attention
that would cause them to believe that: (A) with respect to the period
subsequent to December 31, 1998 there were, as of the date of the most
recent available monthly consolidated financial statements of the
Company and its subsidiaries, if any, and as of a specified date not
more than two days prior to the date of such letter, any changes in the
capital stock or increases in long-term indebtedness of the Company or
any decrease in the net current assets or shareholders' equity of the
Company, in each case as compared with the amounts shown in the most
recent balance sheet of the Company presented in the Prospectus, except
for changes or decreases which the Prospectus discloses have occurred
or may occur or which are set forth in such letter; (B) that during the
period from December 31, 1998 to the date of the most recent available
monthly consolidated financial statements of the Company and its
subsidiaries, if any, and to a specified date not more than two days
prior to the date of such letter, there was any decrease, as compared
with the corresponding period in the prior fiscal year, in total
revenues, operating income from continuing operations or total or per
share net income, except for decreases which the Prospectus disclose
have occurred or may occur or which are set forth in such letter; and
(C) they have compared specific dollar amounts, numbers of
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shares, percentages of revenues and earnings, and other financial
information pertaining to the Company and its subsidiaries set forth in
the Prospectus, which have been specified by the Representatives prior
to the date of this Agreement, to the extent that such amounts,
numbers, percentages, and information may be derived from the general
accounting and financial records of the Company and its subsidiaries or
from schedules furnished by the Company, and excluding any questions
requiring an interpretation by legal counsel, with the results obtained
from the application of specified readings, inquiries, and other
appropriate procedures (but not an examination made in accordance with
generally accepted auditing standards) specified by the Representatives
and set forth in such letter, and found them to be in agreement; and
(vi) on the basis of procedures consisting of a reading of the
unaudited pro forma condensed consolidated statements of operations for
the year ended June 30, 1998 and the six-months ended December 31, 1998
and related notes, included in the Registration Statement, inquiries of
officers and other employees of the Company and its subsidiaries who
have responsibility for financial and accounting matters of the Company
and its subsidiaries and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical amounts in
such unaudited pro forma condensed consolidated financial statements,
nothing has come to their attention that would cause them to believe
that (A) the unaudited pro forma condensed consolidated financial
statements included in the Registration Statement do not comply as to
form in all material respects with the applicable accounting
requirements of the Act and the Regulations or (B) the pro forma
adjustments have not been properly applied to the historical amounts in
the compilation of those statements.
(i) At the time this Agreement is executed and at the Closing
Date, the Representatives shall have received a letter from
Pricewaterhouse Coopers LLP, independent public accountants for BRC
Holdings, Inc., dated, respectively, as of the date of this Agreement
and as of the Closing Date, addressed to the Underwriters and in form
and substance satisfactory to the Representatives, containing
statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial and statistical information
regarding BRC Holdings, Inc. contained or incorporated by reference in
the Registration Statement and the Prospectus.
[(j) Ernst & Young comfort letter]
(k) Prior to the Closing Date the Company shall have furnished
to the Representatives such further information, certificates and
documents as the Representatives may reasonably request.
(l) At the Closing Date, the Shares to be sold hereunder shall
have been approved for listing on the New York Stock Exchange.
If any of the conditions specified in this Section 6 shall not
have been fulfilled when and as required by this Agreement, or if any
of the certificates, opinions, written statements
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or letters furnished to the Representatives or to Underwriters' counsel
pursuant to this Section 6 shall not be in all material respects
reasonably satisfactory in form and substance to the Representatives,
all obligations of the Underwriters hereunder may be cancelled by the
Representatives at, or at any time prior to, the Closing Date and the
obligations of the Underwriters to purchase the Additional Shares may
be cancelled by the Representatives at, or at any time prior to, the
Additional Closing Date. Notice of such cancellation shall be given to
the Company in writing, or by telephone, telex or telegraph, confirmed
in writing.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against any and all losses, liabilities, claims, damages
and expenses whatsoever (including but not limited to reasonable
attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced
or threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement for the registration of the
Shares, as originally filed or any amendment thereof, or any related
preliminary prospectus or the Prospectus, or in any supplement thereto
or amendment thereof, or arise out of or are based upon the 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 under which such statements are made, not misleading;
provided, however, that the Company will not be liable in any such case
to the extent, but only to the extent, that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Underwriter
through the Representatives expressly for use therein; and provided
further, however, that the Company will not be liable to any
Underwriter under the indemnity agreement contained herein with respect
to any preliminary prospectus to the extent that any such loss,
liability, claim, damage or expense of such Underwriter results from
the fact that such Underwriter sold Shares to a person to whom there
was not sent or given, at or prior to the written confirmation of such
sale, a copy of the Prospectus as then amended or supplemented if the
Company has previously furnished copies thereof to such Underwriter.
This indemnity agreement will be in addition to any liability which the
Company may otherwise have including under this Agreement.
(b) Each Underwriter severally, and not jointly,
agrees to indemnify and hold harmless the Company, the Selling
Stockholder, each of the directors of the Company, each of the officers
of the Company who shall have signed the Registration Statement, and
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each other person, if any, who controls the Company within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act, against
any losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to reasonable attorneys' fees, and any and
all expenses whatsoever incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares, as originally filed or
any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any supplement thereto or amendment thereof, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent,
but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein
in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Underwriter through the
Representatives expressly for use therein. This indemnity will be in
addition to any liability which any Underwriter may otherwise have
including under this Agreement. The Company and the Selling Stockholder
acknowledges that the statements set forth in the last paragraph of the
cover page, and in the second and sixth paragraphs under the table of
Underwriters under the caption "Underwriting" in the Prospectus
constitute the only information furnished in writing by or on behalf of
any Underwriter expressly for use in the Registration Statement for the
registration of the Shares, as originally filed or in any amendment
thereof or supplement thereto, any related preliminary prospectus or
the Prospectus or in any amendment thereof or supplement thereto, as
the case may be.
(c) The Selling Stockholder agrees to indemnify and
hold harmless each Underwriter, the Company, each of the directors of
the Company, each of the officers of the Company who shall have signed
the Registration Statement, and each other person, if any, who controls
the Company or any Underwriter within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act, against any losses,
liabilities, claims, damages and expenses whatsoever (including but not
limited to reasonable attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation),
joint or several, to which they or any of them may become subject under
the Act, the Exchange Act or otherwise, insofar as such losses,
liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration
Statement for the registration of the Shares, as originally filed or
any amendment thereof, or any related preliminary prospectus or the
Prospectus, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or
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alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any
such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
written information relating to the Selling Stockholder furnished to
the Company by the Selling Stockholder expressly for use therein. This
indemnity will be in addition to any liability which the Selling
Stockholder may otherwise have including under this Agreement.
(d) Promptly after receipt by an indemnified party
under subsection (a), (b) or (c) above of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof
is to be made against the indemnifying party under such subsection,
notify each party against whom indemnification is to be sought in
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may
have under this Section 7 except to the extent that it has been
prejudiced in any material respect by such failure or from any
liability which it may have otherwise than under this Section 7). In
case any such action is brought against any indemnified party, and it
notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the
extent it may elect, by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel
satisfactory to such indemnified party. Notwithstanding the foregoing,
the indemnified party or parties shall have the right to employ its or
their own counsel in any such case, but the fees and expenses of which
counsel shall be at the expense of such indemnified party or parties
unless (i) the employment of such counsel shall have been authorized in
writing by one of the indemnifying parties in connection with the
defense of such action in which case such indemnifying party or parties
shall be responsible for such fees and expenses, (ii) the indemnifying
parties shall not have employed counsel to have charge of the defense
of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have been
notified in writing by counsel that there may be defenses available to
it or them which are different from or additional to those available to
one or all of the indemnifying parties (in which case the indemnifying
parties shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events
such fees and expenses shall be borne by the indemnifying parties.
Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim
or action effected without its written consent; provided, however, that
such consent was not unreasonably withheld.
8. Contribution. In order to provide for contribution
in circumstances in which the indemnification provided for in Section 7
hereof is for any reason held to be unavailable or is insufficient to
hold harmless a party indemnified thereunder, the Company, the Selling
Stockholder, and the Underwriters, severally and not jointly, shall
contribute to the aggregate losses, claims, damages, liabilities and
expenses of the nature contemplated
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by such indemnification provisions (including any investigation, legal
and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted,
but after deducting in the case of losses, claims, damages, liabilities
and expenses suffered by the Company or the Selling Stockholder any
contribution received by the Company or the Selling Stockholder, as the
case may be, from persons, other than the Underwriters, who may also be
liable for contribution, including persons who control the Company
within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, officers of the Company who signed the Registration
Statement and directors of the Company) to which the Company, the
Selling Stockholder and one or more of the Underwriters may be subject,
in such proportions as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other hand from the offering of the Shares or,
if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party
not having received notice as provided in Section 7 hereof, in such
proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company, the
Selling Stockholder and the Underwriters in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the
Selling Stockholder on the one hand and the Underwriters on the other
hand shall be deemed to be in the same proportion as the total proceeds
from the offering (net of underwriting discounts and commissions but
before deducting expenses) received by the Company and the Selling
Stockholder, and the discounts and commissions received by the
Underwriters, respectively, bear to the total price of the Shares to
investors, in each case as set forth on the cover page of the
Prospectus. The relative fault of the Company, the Selling Stockholder
and of the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company, the Selling
Stockholder or the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, the Selling Stockholder and
the Underwriters agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8, (i) in no case shall
any Underwriter be liable or responsible for any amount in excess of
the discount applicable to the Shares purchased by such Underwriter
hereunder, (ii) in no case shall the Selling Stockholder be liable or
responsible for any amount that exceeds the proceeds from the sale in
the offering at the initial price to public (as set forth in the table
on the cover page of the Prospectus) of the Shares sold by the Selling
Stockholder pursuant to this Agreement and (iii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this
Section 8, each person, if any, who controls an Underwriter within the
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meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
shall have the same rights to contribution as such Underwriter, each
person, if any, who controls a Selling Stockholder within the meaning
of Section 15 of the Act or Section 20(a) of the Exchange Act shall
have the same rights to contribution as such Selling Stockholder, and
each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement
and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to clauses (i), (ii)
and (iii) of this Section 8. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this
Section 8, notify such party or parties from whom contribution may be
sought, but the omission to so notify such party or parties shall not
relieve the party or parties from whom contribution may be sought from
any obligation it or they may have under this Section 8 or otherwise.
No party shall be liable for contribution with respect to any action or
claim settled without its consent; provided, however, that such consent
was not unreasonably withheld.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default
in its or their obligation to purchase Firm Shares or Additional Shares
hereunder, and if the Firm Shares or Additional Shares with respect to
which such default relates do not (after giving effect to arrangements,
if any, made by the Representatives pursuant to subsection (b) below)
exceed in the aggregate 10% of the aggregate principal amount of Firm
Shares or Additional Shares, as the case may be, which all Underwriters
have agreed to purchase hereunder, then such Firm Shares or Additional
Shares to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to the respective proportions
which the amount of Firm Shares set forth opposite their respective
names in Schedule I hereto bear to the aggregate amount of Firm Shares
set forth opposite the names of the non-defaulting Underwriters.
(b) In the event that such default relates to more
than 10% of the Firm Shares or Additional Shares, as the case may be,
the Representatives may in their discretion arrange for themselves or
for another party or parties (including any non-defaulting Underwriter
or Underwriters who so agree) to purchase such Firm Shares or
Additional Shares, as the case may be, to which such default relates on
the terms contained herein. In the event that within five business days
after such a default the Representatives do not arrange for the
purchase of the Firm Shares or Additional Shares, as the case may be,
to which such default relates as provided in this Section 9, this
Agreement or, in the case of a default with respect to the Additional
Shares, the obligations of the Underwriters to purchase and of the
Company to sell the Additional Shares shall thereupon terminate,
without liability on the part of the Company or the Selling Stockholder
with respect thereto (except in each case as provided in Sections 5,
7(a) and (c) and 8 hereof) or the several Underwriters, but nothing in
this Agreement shall relieve a defaulting Underwriter or Underwriters
of its or
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their liability, if any, to the other several Underwriters and the
Company for damages occasioned by its or their default hereunder.
(c) In the event that the Firm Shares or Additional
Shares to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or
parties as aforesaid, the Representatives or the Company shall have the
right to postpone the Closing Date or Additional Closing Date, as the
case may be, for a period not exceeding five business days, in order to
effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements, and the Company agrees to file promptly any amendment or
supplement to the Registration Statement or the Prospectus, as then
amended or supplemented, which in the Representatives' opinion may
thereby be made necessary or advisable. The term Underwriter as used in
this Agreement shall include any party substituted under this Section 9
with like effect as if it had originally been a party to this Agreement
with respect to such Firm Shares and Additional Shares.
10. Survival of Representations and Agreements. All
representations and warranties, covenants and agreements of the
Underwriters, the Selling Stockholder and the Company contained in this
Agreement, including, without limitation, the agreements contained in
Section 5 hereof, the indemnity agreements contained in Section 7
hereof and the contribution agreements contained in Section 8 hereof,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any Selling
Stockholder or any controlling person thereof or by or on behalf of the
Company or any of its officers and directors or any controlling person
thereof, and shall survive delivery of and payment for the Shares to
and by the several Underwriters. The representations contained in
Section 1 hereof and the agreements contained in Sections 5, 7, 8 and
11(d) hereof shall survive the termination of this Agreement,
including, without limitation, pursuant to Sections 9 or 11 hereof.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective after the
occurrence of both of, and upon the later of, (i) when the
Representatives and the Company shall have received notification of the
effectiveness of the Registration Statement and (ii) the execution of
this Agreement. If either the initial public offering price or the
purchase price per Share has not been agreed upon prior to 5:00 P.M.,
New York time, on the fifth full business day after the Registration
Statement shall have become effective, this Agreement shall thereupon
terminate without liability to the Company, the Selling Stockholder or
the Underwriters except as herein expressly provided. Until this
Agreement becomes effective as aforesaid, it may be terminated by the
Company by notifying the Representatives or by the Representatives
notifying the Company. Notwithstanding the foregoing, the provisions of
this Section 11 and of Sections 1, 5, 7 and 8 hereof shall at all times
be in full force and effect.
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(b) The Representatives shall have the right to
terminate this Agreement at any time prior to the Closing Date or the
obligations of the Underwriters to purchase the Additional Shares at
any time prior to the Additional Closing Date, as the case may be, if
(A) any domestic or international event or act or occurrence has
materially disrupted, or in the Representatives opinion will in the
immediate future materially disrupt, securities markets; or (B) trading
in any of the Company's securities has been suspended by the Commission
or the New York Stock Exchange or trading on the Nasdaq National Market
or American Stock Exchange shall have been suspended, or minimum or
maximum prices for trading shall have been fixed, or maximum ranges for
prices for securities shall have been required, on the New York or
American Stock Exchange by the New York or American Stock Exchange or
by order of the Commission or any other governmental authority having
jurisdiction; or (C) a banking moratorium has been declared by a state
or federal authority; or (D) a moratorium in foreign exchange trading
by major international banks or persons has been declared; or (E) any
new restriction materially adversely affecting the distribution of the
Firm Shares or the Additional Shares, as the case may be, shall have
become effective; or (F)(i) the United States becomes engaged in
hostilities or there is an escalation of hostilities involving the
United States or there is a declaration of a national emergency or war
by the United States or (ii) there shall have been a change in
political, financial or economic conditions, if the effect of any such
event in (i) or (ii) in the Representatives reasonable judgment makes
it inadvisable to proceed with the offering, sale and delivery of the
Firm Shares or the Additional Shares, as the case may be, on the terms
contemplated by the Prospectus, as then amended or supplemented.
(c) Any notice of termination pursuant to this
Section 11 shall be by telephone, telex, or telegraph, confirmed in
writing by letter.
(d) If this Agreement shall be terminated pursuant to
any of the provisions hereof (otherwise than pursuant to Sections 9(b)
or 11(b) hereof), or if the sale of the Shares provided for herein is
not consummated because any condition to the obligations of the several
Underwriters set forth herein is not satisfied or because of any
refusal, inability or failure on the part of the Company or the Selling
Stockholder to perform any agreement herein or comply with any
provision hereof, the Company and the Selling Stockholder agrees,
subject to written demand by the Representatives, to reimburse the
Underwriters for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of their counsel), incurred by the several
Underwriters in connection herewith.
12. Notice. All communications hereunder, except as
may be otherwise specifically provided herein, shall be in writing and,
if sent to any Underwriter, shall be mailed, delivered, or telexed or
telegraphed and confirmed in writing, to such Underwriter, c/o Bear,
Stearns & Co. Inc., 300 Crescent Court, Suite 200, Dallas, Texas 75201,
Attention: Corporate Finance; and if sent to the Company or the Selling
Stockholder, shall be mailed, delivered, or telegraphed and confirmed
in writing in either case to the address of the Company set forth in
the Registration Statement, Attention: Secretary.
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13. Parties. The Representatives represent that they
are authorized to act on behalf of the several Underwriters named in
Schedule I hereto, and the Company shall be entitled to act and rely on
any request, notice, consent, waiver or agreement purportedly given on
behalf of the Underwriters when the same shall have been given by the
Representatives on such behalf. This Agreement shall inure solely to
the benefit of, and shall be binding upon, the several Underwriters,
the Selling Stockholder and the Company and the controlling persons,
directors, officers, employees and agents referred to in Sections 7 and
8, and their respective successors and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy
or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not
include a purchaser, in its capacity as such, of Shares from any of the
Underwriters.
14. Governing Law. This Agreement shall be governed
by construed in accordance with the laws of the State of New York,
United States of America, but without regard to principles of conflicts
of law.
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If the foregoing correctly sets forth the understanding among
the Representatives, on behalf of the Underwriters, and the Company, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among us.
Very truly yours,
AFFILIATED COMPUTER SERVICES, INC.
By:
--------------------------------------------
Name:
Title:
SELLING STOCKHOLDER
By:
--------------------------------------------
Name:
As Attorney in Fact on behalf of the Selling
Stockholder
Accepted as of the date first above written.
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
HAMBRECHT & QUIST LLC
PRUDENTIAL SECURITIES INCORPORATED
By: BEAR, STEARNS & CO. INC.
By:
----------------------------------------
Name:
Title:
On behalf of themselves and the other several Underwriters named in Schedule I
hereto.
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T & K DRAFT 02/04/99
<PAGE> 37
SCHEDULE I
Underwriters
<TABLE>
<CAPTION>
Total
Number Number of
of Firm Additional
Shares Shares
to be to be
Name Purchased Purchased
---- --------- ----------
<S> <C> <C>
Bear, Stearns & Co. Inc......................
Goldman, Sachs & Co..........................
Donaldson, Lufkin & Jenrette
Securities Corporation.....................
Hambrecht & Quist LLC........................
Prudential Securities Incorporated...........
Total................................... --------- ----------
3,500,000 525,000
</TABLE>
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T & K DRAFT 02/04/99
<PAGE> 38
ANNEX I
LOCK-UP AGREEMENT
[Date]
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
HAMBRECHT & QUIST LLC
PRUDENTIAL SECURITIES INCORPORATED,
As Representatives of the
several Underwriters named in
Schedule I to the Underwriting Agreement
c/o Bear, Stearns & Co. Inc.
300 Crescent Court
Suite 200
Dallas, Texas 75201
Ladies and Gentlemen:
In connection with the offering (the "Offering") of shares of Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), of Affiliated
Computer Services, Inc., a Delaware corporation (the "Company"), pursuant to the
terms of the Underwriting Agreement (the "Underwriting Agreement") to be entered
into by and among the Company, the underwriters named therein (the
"Underwriters") and Darwin Deason or an entity owned or controlled by Darwin
Deason, and as described in the Company's Form S-3 Registration Statement filed
with the Securities and Exchange Commission on or about ___________, 1999, and
to induce you to purchase the shares of Class A Common Stock offered by the
Company, the undersigned, a stockholder of the Company, hereby irrevocably
confirms and agrees for your benefit as follows:
(i) During the period beginning on and including the date
hereof and continuing to and including _________________, 1999, the
undersigned will not, without your prior written consent, offer, sell,
offer to agree to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any Covered Securities (defined
below), except that during the period beginning on ________, 1999 and
continuing to and including _________, 1999 the undersigned may offer,
sell, offer to agree to sell, grant any option for the sale of, or
otherwise dispose of up to an aggregate of ____% of any Covered
Securities, and except that
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T & K DRAFT 02/04/99
<PAGE> 39
the undersigned may transfer Covered Securities to a Family Member
(defined below), a trust solely for the benefit of the undersigned
and/or Family Members, a corporation wholly owned by the undersigned
and/or Family Members or a partnership, all interests in which are
owned solely by the undersigned and/or Family Members, provided that
prior to any such transfer the transferee will have executed and
delivered to the Company and Bear, Stearns & Co. Inc., on behalf of the
Underwriters, a lock-up agreement substantially in the form of this
agreement. "Covered Securities" means any Stock (as defined in the
Underwriting Agreement) or other securities which are substantially
similar to the Stock (or any securities convertible or exchangeable
into or exercisable for Stock or other securities which are
substantially similar to the Stock), which Stock and other securities
are, on the date hereof, or become, at any time hereafter, registered
in the name of, or beneficially owned or controlled by, the
undersigned. "Family Members" means the spouse, parents, siblings and
lineal descendants of the undersigned or of any such person.
(ii) The undersigned hereby waives all preemptive rights,
rights of first refusal and other similar rights under any agreement or
arrangement with respect to the offering and sale of the Shares in the
Offering and agrees not to include any Stock or other securities in the
Offering, except as contemplated in the Underwriting Agreement, and,
during the period specified in clause (i) above, not to request or
otherwise require under any agreement or arrangement that any Stock or
other Covered Securities be registered under the Securities Act of
1933, either in connection with the Offering or otherwise.
(iii) The undersigned has not taken and will not take,
directly or indirectly, any action which constitutes, or is intended or
might reasonably be expected to result in, stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares, or which constitutes a bid for or
purchase, of, or an attempt to induce any person to purchase, the
Shares or any related securities that is prohibited by Regulation M
under the Securities Exchange Act of 1934, as amended.
The agreements set forth herein will terminate on ______________, 1999,
unless the Underwriting Agreement has been executed and delivered by the parties
thereto and the closings for any purchases of Shares by the Underwriters
pursuant thereto have occurred prior to such date. Neither the Company nor any
Underwriter makes any representations as to whether the Offering will be
completed.
Very truly yours,
[For Individuals]
-------------------------------------
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T & K DRAFT 02/04/99
<PAGE> 40
(Signature)
(Printed Name)
[For Corporations, Trusts and Other Entities]
--------------------------------------------
(Printed Name of Entity)
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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T & K DRAFT 02/04/99
<PAGE> 1
EXHIBIT 5.1
February 5, 1999
Affiliated Computer Services, Inc.
2828 North Haskell Avenue
Dallas, Texas 75204
Ladies and Gentlemen:
We have acted as counsel to Affiliated Computer Services, Inc., a
Delaware corporation (the "Company"), in connection with the Company's
registration under the Securities Act of 1933, as amended (the "Act"), of the
underwritten offering of 3,500,000 shares of the Company's Class A Common Stock,
par value $0.01 per share ("Common Stock"), on behalf of the Company and the
sale by Darwin Deason of up to 525,000 additional shares of Common Stock subject
to an over-allotment option to be granted to the underwriters of such offering
(the "Underwriters"), pursuant to a Registration Statement on Form S-3 (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission") (all such shares of Common Stock, the "Shares").
In connection with this opinion, we have examined such documents and
records of the Company and such statutes, regulations, and other instruments and
certificates as we have deemed necessary or advisable for the purposes of this
opinion. We have assumed that all signatures on all documents presented to us
are genuine, that all documents submitted to us as originals are accurate and
complete, and that all documents submitted to us as copies are true and correct
copies of the originals thereof. We have also relied upon such certificates of
public officials, corporate agents, and officers of the Company and Mr. Deason
to the extent necessary or advisable with respect to the accuracy of material
factual matters contained therein which were not independently established.
Based on the foregoing, we are of the opinion that the Shares being
sold by the Company, when issued and sold to the Underwriters as described in
the Registration Statement, will be validly issued, fully paid, and
nonassessable and that the shares being sold by Mr. Deason pursuant to the
Registration Statement are validly issued, fully paid, and nonassessable.
<PAGE> 2
Affiliated Computer Services, Inc.
February 5, 1999
Page 2
This opinion may be filed as an exhibit to the Registration Statement.
Consent is also given to the reference to this firm as having passed on the
validity of the Shares under the caption "Legal Matters" in the prospectus
contained in the Registration Statement. In giving this consent, we do not admit
that we are included in the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Commission promulgated
thereunder.
Very truly yours,
/s/ HUGHES & LUCE, L.L.P.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
July 28, 1998, except as to Note 15, which is as of August 10, 1998, which
appears on page 34 of the 1998 Annual Report to Stockholders of Affiliated
Computer Services, Inc., which is incorporated by reference in Affiliated
Computer Services, Inc.'s Annual Report on Form 10-K for the year ended June 30,
1998. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page F-1 of such Annual Report on
Form 10-K. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
PricewaterhouseCoopers LLP
Dallas, Texas
February 5, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
March 16, 1998 appearing on page 59 of BRC Holdings, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1997. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Dallas, Texas
February 5, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 33-XXXXX) and related Prospectus of
Affiliated Computer Services, Inc. for the registration of 4,025,000 shares of
its common stock and to the incorporation by reference therein of our report
dated July 28, 1997, with respect to the consolidated financial statements of
ACS Government Solutions (formerly Computer Data Systems, Inc.) included in its
Annual Report (Form 10-K) for the year ended June 30, 1998, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Washington, D.C.
February 5, 1999
