Stock Purchase Agreement Dated February 27, 1998

STOCK PURCHASE AGREEMENT


DATED FEBRUARY 27, 1998,
AND EFFECTIVE AS OF FEBRUARY 1, 1998,


BY AND AMONG


ABR INFORMATION SERVICES, INC.,
A FLORIDA CORPORATION,


MATTHEWS, MALONE & ASSOCIATES, LTD.
AN ARIZONA CORPORATION,


AND


STEVEN R. MATTHEWS,
MICHAEL J. MALONE AND
ALAN GOLD,
AS SHAREHOLDERS 2
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS


1. PURCHASE AND SALE OF SHARES......................................... 1


2. PURCHASE PRICE - PAYMENT............................................ 1
2.1. Purchase Price............................................. 1
2.2. Payment of Purchase Price.................................. 4


3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF
COMPANY AND SHAREHOLDERS............................................ 6
3.1. Corporate.................................................. 6
3.2. Shareholders............................................... 8
3.3. No Violation............................................... 8
3.4. Financial Statements....................................... 8
3.5. Tax Matters................................................ 9
3.6. Accounts Receivable........................................ 10
3.7. Absence of Certain Changes................................. 10
3.8. Absence of Undisclosed Liabilities......................... 12
3.9. No Litigation.............................................. 12
3.10. Compliance With Laws and Orders............................ 13
3.11. Title to and Condition of Properties....................... 15
3.12. Insurance.................................................. 16
3.13. Contracts and Commitments.................................. 18
3.14. Labor Matters.............................................. 19
3.15. Employee Benefit Plans..................................... 20
3.16. Employment Matters......................................... 24
3.17. Trade Rights............................................... 25
3.18. Major Customers and Suppliers.............................. 26
3.19. Service Warranty and Liability............................. 26
3.20. Bank Accounts.............................................. 27
3.21. Affiliates' Relationships to Company....................... 27
3.22. Assets Necessary to Business............................... 27
3.23. No Brokers or Finders...................................... 27
3.24. Year 2000 Compliance....................................... 27
3.25 Systems Performance........................................ 28
3.26. Disclosure................................................. 29


4. REPRESENTATIONS AND WARRANTIES OF BUYER............................. 29
4.1. Corporate.................................................. 29
4.2. Authority.................................................. 29
4.3. No Brokers or Finders...................................... 30
4.4. Disclosure................................................. 30
4.5. Investment Intent.......................................... 30


5. COVENANTS........................................................... 30
5.1. Employment and Noncompetition Agreements;
Consulting Agreement....................................... 30
5.2. Noncompetition; Confidentiality............................ 30
5.3. General Releases........................................... 32
5.4. Credited Service........................................... 32
5.5. Capital Contribution....................................... 32


ii 3 6. INDEMNIFICATION..................................................... 32
6.1. By Shareholders............................................ 32
6.2. By Buyer................................................... 33
6.3. Indemnification of Third-Party Claims...................... 33
6.4. Payment.................................................... 34
6.5. Limitations on Indemnification............................. 35
6.6. No Waiver.................................................. 36


7. CLOSING............................................................. 36
7.1. Documents to be Delivered by Company and
Shareholders............................................... 36
7.2. Documents to be Delivered by Buyer......................... 38
7.3. Delivery of Buyer Loan..................................... 38


8. TERMINATION......................................................... 39


9. RESOLUTION OF DISPUTES.............................................. 39
9.1. Arbitration................................................ 39
9.2. Arbitrators................................................ 39
9.3. Procedures; No Appeal...................................... 40
9.4. Authority.................................................. 40
9.5. Entry of Judgment.......................................... 40
9.6. Confidentiality............................................ 40
9.7. Continued Performance...................................... 40
9.8. Tolling.................................................... 40


10. MISCELLANEOUS....................................................... 40
10.1. Disclosure Schedule........................................ 40
10.2. Further Assurance.......................................... 41
10.3. Disclosures and Announcements.............................. 41
10.4. Assignment; Parties in Interest............................ 41
10.5. Law Governing Agreement.................................... 42
10.6. Amendment and Modification................................. 42
10.7. Notice..................................................... 42
10.8. Expenses................................................... 44
10.9. Entire Agreement........................................... 44
10.10. Counterparts; Facsimile Signatures......................... 44
10.11. Headings................................................... 45
10.12. Glossary of Terms.......................................... 45


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DISCLOSURE SCHEDULE


Schedule 3.1.(c) - Foreign Corporation Qualification Schedule 3.1.(e) - Directors and Officers of the Company Schedule 3.1.(f) - Shareholder List Schedule 3.3 - Violation, Conflict, Default Schedule 3.4 - Financial Statements Schedule 3.5.(b) - Tax Returns (Exceptions to
Representations) Schedule 3.5.(c) - Tax Audits Schedule 3.5.(e) - Tax, Other Schedule 3.6 - Accounts Receivable (Aged Schedule) Schedule 3.7 - Certain Changes Schedule 3.8 - Off-Balance Sheet Liabilities Schedule 3.9 - Litigation Matters Schedule 3.10.(a) - Non-Compliance with Laws Schedule 3.10.(b) - Licenses and Permits Schedule 3.10.(c) - Environmental Matters (Exceptions
to Representations) Schedule 3.11 - Liens Schedule 3.11.(c) - Real Property Schedule 3.12 - Insurance Schedule 3.13.(b) - Personal Property Leases Schedule 3.13.(d) - Significant Sales Commitments Schedule 3.13.(g) - Collective Bargaining Agreements Schedule 3.13.(h) - Loan Agreements, etc. Schedule 3.13.(i) - Guarantees Schedule 3.13.(l) - Material Contracts Schedule 3.14 - Labor Matters Schedule 3.15.(a) - Employee Plans/Agreements Schedule 3.16 - Employment Compensation Schedule 3.17 - Trade Rights Schedule 3.18.(a) - Major Customers Schedule 3.18.(b) - Major Suppliers Schedule 3.18.(c) - Sales Representatives Schedule 3.19 - Service Warranty, Warranty Expense
and Liability Claims Schedule 3.20 - Bank Accounts Schedule 3.21.(a) - Contracts with Affiliates Schedule 3.21.(c) - Obligations of and to Affiliates Schedule 3.24 - Year 2000 Noncompliance


iv 5
STOCK PURCHASE AGREEMENT


STOCK PURCHASE AGREEMENT (this "Agreement"), dated February 27, 1998, and effective as of February 1, 1998, by and among ABR Information Services, Inc., a Florida corporation ("Buyer"), Matthews, Malone & Associates, Ltd., an Arizona corporation ("Company"), and Steven R. Matthews, Michael J. Malone and Alan Gold (individually "Shareholder" and together the "Shareholders").


RECITALS


1. Company is engaged in the business of providing qualified and non-qualified pension administration services and flexible spending account administration services to third parties (the "MMA Business"). Shareholders own all of the issued and outstanding shares (the "Shares") of capital stock of Company.


2. Company's facilities consist solely of leased offices at 5050 North 40th Street, Phoenix, Arizona 85018 (the "Facilities").


3. Buyer desires to purchase the Shares from Shareholders and Shareholders desire to sell the Shares to Buyer, upon the terms and conditions herein set forth.


NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows.


1. PURCHASE AND SALE OF SHARES


Subject to the terms and conditions of this Agreement, effective as of the Effective Date (as hereinafter defined) Shareholders shall sell to Buyer and Buyer shall purchase from Shareholders all of the Shares.


2. PURCHASE PRICE - PAYMENT


2.1. Purchase Price.


2.1.(a) Amount. The aggregate purchase price (the "Purchase
Price") payable for the Shares shall be the sum of (a) TWO MILLION NINE
HUNDRED THOUSAND DOLLARS ($2,900,000), payable to the Shareholders as
hereinafter provided, and (b) a contingent payment (the "Contingent
Payment") based on the MMA Business' net earnings before income taxes
("EBIT") for the twelve-month period commencing as of the Effective
Date (the "Contingent Payment Period"), payable one-half (1/2) to
Steven R. Matthews and one-half (1/2) to Michael J. Malone.


6
2.1.(b) Calculation of Contingent Payment. The Contingent
Payment shall equal (i) TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000),
in the event the MMA Business' EBIT for the Contingent Payment Period
equals or exceeds $500,000 and is less than $900,000, or (ii) FIVE
HUNDRED THOUSAND DOLLARS ($500,000), in the event the MMA Business'
EBIT for the Contingent Payment Period equals or exceeds $900,000. No
Contingent Payment shall be due or payable in the event the MMA
Business' EBIT for the Contingent Payment Period is less than $500,000.
The Contingent Payment shall be paid by Buyer to Shareholders as
follows: 50% to Steven R. Matthews, 50% to Michael J. Malone, and 0% to
Alan Gold.


2.1.(c) Calculation of EBIT. The calculation of the MMA
Business' EBIT for the Contingent Payment Period shall include revenue
received from qualified and non-qualified pension and existing flexible
spending account administration services but shall not include revenue
received from COBRA administration services or other services not
performed by Company as of the date hereof but offered by Buyer or any
of its subsidiaries or affiliates. Except as expressly provided herein,
the calculation of EBIT shall be made in accordance with generally
accepted accounting principles applied on a consistent basis, subject
to the following adjustments:


(i) Any depreciation or amortization adjustments
resulting solely from the transactions contemplated by this
Agreement shall not be included for purposes of calculating
EBIT for the Contingent Payment Period.


(ii) Notwithstanding Company's actual expenses
for the Contingent Payment Period relating to items and
functions (such as property and casualty insurance, errors and
omissions insurance, health and welfare programs and human
resource functions) that Company and Buyer mutually agree
shall be provided by Buyer or another subsidiary thereof,
Company shall accrue as an expense for purposes of calculating
EBIT for the Contingent Payment Period the same dollar amount
as it accrued in the twelve months preceding the Effective
Date with respect to such items and functions.


(iii) To the extent that any employee of Company
shall be required to travel, at Buyer's request, to any of
Buyer's offices outside of Arizona, Buyer shall make and pay
for directly all necessary travel and lodging arrangements.


(iv) The calculation of EBIT for the Contingent
Payment Period shall not exclude any expense


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item (or series of related items) relating to personnel
matters or exceeding $10,000 annually, unless such exclusion
has been preapproved in writing by Buyer.


(v) Company shall review with Buyer on a monthly
basis any and all expense items Company intends to exclude for
purposes of calculating EBIT for the Contingent Payment
Period.


(vi) In calculating EBIT for the Contingent
Payment Period, the first $1,000 per month of otherwise
excludable miscellaneous general and administrative expenses
(other than agreed upon personnel costs) shall be included in
making such calculation.


(vii) In the event Buyer (or any subsidiary
thereof) generates new qualified and non-qualified pension
administration services business (but excluding new flexible
spending account business) for Company during the Contingent
Payment Period, and/or Company generates new COBRA
administration services business (or other new business for
similar administrative services not performed by Company as of
the date hereof), Buyer and Company agree to make a reasonable
allocation of sales and other reasonable costs associated with
obtaining such new business for purposes of calculating
Company's EBIT for the Contingent Payment Period.


(viii) The imputed interest expense on the Buyer
Loan (as hereinafter defined) shall be included in the
calculation of EBIT for the Contingent Payment Period.


(ix) The reasonable accounting fees and other
fees and expenses incurred by the Company in connection with
the preparation of the audited financial statements of the
Company as set forth in Section 3.4 below, and the reasonable
legal fees and expenses incurred by Company in connection with
the transactions contemplated hereby, shall be borne by
Company, but shall not be included for purposes of calculating
EBIT for the Contingent Payment Period.


2.1.(d) Buyer Loan. Buyer agrees to loan to Company on the
Closing Date the sum of (i) $176,361.11 plus (ii) the amount necessary
to provide Company with available cash as of the Closing Date of
$50,000. The loan described in this Section 2.1(d) is referred to
herein as the "Buyer Loan." The proceeds of the Buyer Loan shall be
used by Company solely to pay off in full at the Closing Company's
obligations under its revolving line of credit loan and variable rate
single pay


3 8
loan with Biltmore Investors Bank, N.A. and to provide Company with
available cash immediately following Closing of $50,000. The Buyer Loan
shall be repaid in full by Company to Buyer during the Contingent
Payment Period. To the extent it is repaid after such time, the unpaid
principal balance as of the end of the Contingent Payment Period shall
be charged in full against EBIT for the Contingent Payment Period.


2.1.(e) Interest on Buyer Loan. The calculation of Company's
EBIT for the Contingent Payment Period shall include an imputed
interest expense to Company equal to interest calculated on the
outstanding principal balance of the Buyer Loan which remains unpaid
from time to time, at the rate announced from time to time by
NationsBank, N.A. (or its successor) as its prime rate. Interest on the
Buyer Loan calculated under this Section 2.1(e) shall commence on the
date the Buyer Loan is made to the Company and continue until the Buyer
Loan is repaid in full.


2.2. Payment of Purchase Price. The Purchase Price shall be paid by Buyer as follows:


2.2.(a) Cash to Shareholders. At the Closing, Buyer shall
deliver to the Shareholders the sum of Two Million Three Hundred Twenty
Thousand Dollars ($2,320,000), to be allocated among the Shareholders
as follows: Six Hundred Seventy-Six Thousand Six Hundred Sixty-Six and
67/100 Dollars ($676,666.67) to Steven R. Matthews; Six Hundred
Seventy-Six Thousand Six Hundred Sixty-Six and 67/100 Dollars
($676,666.67) to Michael J. Malone; and Nine Hundred Sixty-Six Thousand
Six Hundred Sixty-Six and 66/100 Dollars ($966,666.66) to Alan Gold.


2.2.(b) Purchase Price Holdback.


(i) Subject to the terms and conditions of this
Section 2.2(b), Buyer is withholding payment of a portion of
the Purchase Price equal to Five Hundred Eighty Thousand
Dollars ($580,000) (the "Holdback Amount") in order to secure
the indemnification obligations of Company and Shareholders
under this Agreement. For purposes hereof, "Holdback Period"
shall mean the period commencing on the date hereof and ending
four (4) months from the date hereof, subject to extension as
hereinafter provided.


(ii) If, prior to the expiration of the Holdback
Period, Buyer determines to assert a claim for indemnification
under Article 6 of this Agreement, then Buyer shall give each
of Steven R. Matthews and Michael J. Malone written notice of
such claim (for purposes of this Section 2.2(c), a "Claim
Notice"),


4 9
specifying in reasonable detail the basis therefor and the
amount and calculation thereof. If Steven R. Matthews and
Michael J. Malone do not deliver to Buyer a joint written
notice of an objection to the claim for indemnification within
twenty (20) days after receipt of the Claim Notice relating
thereto, Buyer shall be entitled to offset the dollar amount
of its claim (as set forth in the Claim Notice) against the
Holdback Amount. If Steven R. Matthews and Michael J. Malone
shall timely deliver to Buyer such joint written notice of
objection, then Buyer shall not be entitled to an offset
against the Holdback Amount with respect to the claim set
forth in the Claim Notice until: (x) Buyer, Steven R. Matthews
and Michael J. Malone have executed joint written instructions
referring to such Claim Notice and directing Buyer to make an
offset against the Holdback Amount; or (y) Buyer has received
a copy of a judgment, decree or order of a court, or copy of
an arbitration award, adjudicating the dispute with respect to
such claim for indemnification; whereupon Buyer shall offset
against the Holdback Amount such amount as provided therein.


(iii) If Buyer has not delivered a Claim Notice to
each of Steven R. Matthews and Michael J. Malone prior to the
expiration of the Holdback Period, or if any and all Claim
Notices delivered to each of Steven R. Matthews and Michael J.
Malone during the Holdback Period have been resolved pursuant
to subsection (ii) above, then Buyer shall deliver to Steven
R. Matthews and Michael J. Malone the portion of the Holdback
Amount equal to (x) $580,000, less (y) any amounts offset by
Buyer as provided herein, plus (z) any interest earned with
respect to such amount at an imputed rate of 5.25% per annum.
Buyer shall deliver such amount, one-half (1/2) to Steven R.
Matthews and one-half (1/2) to Michael J. Malone, promptly
after the expiration of the Holdback Period, unless one or
more Claim Notice(s) have not been finally resolved pursuant
to subsection (ii) above, in which case Buyer shall retain
such disputed amount(s) as calculated pursuant to Section
2.2.(b)(ii) above until: (a) Buyer, Steven R. Matthews and
Michael J. Malone have executed joint written instructions
referring to such Claim Notice(s) and directing Buyer as to
the disbursement of the remainder of the Holdback Amount; or
(b) Buyer has received a copy of a judgment, decree or order
of a court, or copy of an arbitration award, adjudicating the
dispute with respect to such Claim Notice(s); whereupon Buyer
shall disburse the remainder of the Holdback Amount as
provided therein.


5 10
2.2.(c) Contingent Payment. The initial calculation of the
Contingent Payment shall be made by Buyer, which shall deliver its
calculation within thirty (30) days following the first anniversary of
the Effective Date to each of Steven R. Matthews and Michael J. Malone
for their review and comment. If Buyer, Steven R. Matthews and Michael
J. Malone are able to agree in writing upon the amount of the Continent
Payment within fifteen (15) days following delivery of the initial
calculation to each of Steven R. Matthews and Michael J. Malone, then
Buyer shall pay such amount. Such payment of the Contingent Payment, if
any, shall be made, one-half (1/2) to Steven R. Matthews and one-half
(1/2) to Michael J. Malone, within sixty (60) days following the first
anniversary of the Effective Date. In the event Buyer, Steven R.
Matthews and Michael J. Malone cannot agree on the amount of the
Contingent Payment within sixty (60) days following the first
anniversary of the Effective Date, then the determination of the
Contingent Payment shall be submitted to binding arbitration in
accordance with Article 9 of this Agreement.


2.2.(d) Method of Cash Payment. All payments under this
Section 2.2 shall be made in the form of a bank check payable to the
order of the recipient or, at the recipient's option, by wire transfer
of immediately available funds to an account designated by the
recipient not less than 48 hours prior to the time for payment
specified herein.


3. JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SHAREHOLDERS


Company and Shareholders, jointly and severally, make the following representations and warranties to Buyer, each of which was true and correct on the Effective Date (other than Section 3.2(b)), remains true as of the Closing Date, shall be unaffected by any investigation heretofore or hereafter made by or on behalf of Buyer, or any knowledge of Buyer other than as specifically disclosed in the Disclosure Schedule delivered to Buyer at the time of the execution of this Agreement, and shall survive the Closing of the transactions provided for herein. Regardless of the foregoing, the representations and warranties set forth in Section 3.2 are made severally by each Shareholder, with respect to such Shareholder only.


3.1. Corporate.


3.1.(a) Organization. Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Arizona.


3.1.(b) Corporate Power. Company has all requisite corporate
power and author ...