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Stock Purchase Agreement Dated 12/12/97

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STOCK PURCHASE AGREEMENT


by and among


CORESTAFF, INC. ("COREStaff or Buyer"),


DYNAMIC DATA SOLUTIONS, INC. ("DDS"),


DDS EUROPE LIMITED ("DDS Europe"),


and


the SELLERS listed on the Signature page hereto
("Sellers")


Dated as of December 12, 1997


================================================================================


2


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT


TABLE OF CONTENTS
PAGE

1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Earn-Out Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Date and Form of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Post-Closing Adjusted Purchase Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . 8
(g) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(h) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Representations and Warranties Concerning the Transaction . . . . . . . . . . . . . . . . . . . . . . 9
(a) Representations and Warranties of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(ii) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(iii) Broker's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(iv) Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(b) Representations and Warranties of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . 10
(i) Organization of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(ii) Authorization of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(iii) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(iv) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(v) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Representations and Warranties Concerning the Targets . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Organization, Qualification, and Corporate Power . . . . . . . . . . . . . . . . . . . . . 12
(b) Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(d) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(f) Events Subsequent to Most Recent Year End . . . . . . . . . . . . . . . . . . . . . . . . . 14
(g) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(h) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(i) Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(j) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(k) Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(l) Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(m) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
-i-


3


(n) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(o) Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(q) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(r) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(s) Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(t) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(u) Environment, Health, and Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(v) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(w) Certain Business Relationships with the Targets . . . . . . . . . . . . . . . . . . . . . . 30
(x) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(y) Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(z) Payments to Officials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Notices and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Operation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Preservation of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(f) Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(h) Preparation of Financial Statements; Delivery of Financial Information . . . . . . . . . . 33
(i) Delivery of Schedules; Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6. Additional Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Monitoring Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(g) Section 338(h)(10) Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(h) Additional Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(i) Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(j) Conduct of Business During Earn-Out Period . . . . . . . . . . . . . . . . . . . . . . . . 37
(k) ADC and Disney Bad Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7. Conditions to Obligations to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Conditions to Obligation of the Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Conditions to Obligations of the Sellers . . . . . . . . . . . . . . . . . . . . . . . . . 40
8. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(a) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Indemnification Provisions for Benefit of the Buyer . . . . . . . . . . . . . . . . . . . . 41


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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(c) Limitations and Manner of Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(d) Indemnification Provisions for Benefit of the Sellers . . . . . . . . . . . . . . . . . . . 43
(e) Matters Involving Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(f) Determination of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(g) Exclusive Remedy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(h) Payment; General Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(i) Tax Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) The Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Press Releases and Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(c) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(d) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(e) Succession and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Facsimile/Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(g) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(i) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(j) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(k) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(l) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(m) Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(n) Incorporation of Exhibits, Annexes, and Schedules . . . . . . . . . . . . . . . . . . . . . 50
(o) Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
(p) Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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LIST OF EXHIBITS, ANNEXES AND SCHEDULES


EXHIBITS


Exhibit A Financial Statements Exhibit B Form of Employment Agreement Exhibit C Form of Employee Non-Competition Agreement Exhibit D Form of Opinion of Sellers' Legal Counsel Exhibit E Pro forma GAAP Adjustments


ANNEXES


Annex I Determination of EBIT Annex II Sellers' Disclosures Annex III Buyer's Disclosures


SCHEDULES


Disclosure Schedule


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT


This STOCK PURCHASE AGREEMENT ("AGREEMENT") is entered into as of the 12th day of December, 1997, by and among CORESTAFF, INC., a Delaware corporation (the "BUYER"), DYNAMIC DATA SOLUTIONS, INC., a Texas corporation ("DDS"), DDS EUROPE LIMITED ("DDS EUROPE" and together with DDS, the "TARGETS"), and TERRI YOUNGER MILLER and KEVIN T. KENNEFICK (each individually referred to as "SELLER" and collectively, the "SELLERS"). The Buyer and the Sellers are referred to collectively herein as the "PARTIES."


The Sellers in the aggregate own all of the outstanding capital stock of DDS, and DDS and the Sellers in the aggregate own all of the outstanding capital stock of DDS Europe.


This Agreement contemplates a transaction in which the Buyer will purchase from the Sellers, and the Sellers will sell to the Buyer, all of the outstanding capital stock of the Targets owned by the Sellers.


Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows:


1. DEFINITIONS.


"ADJUSTED PURCHASE PRICE" has the meaning set forth in Section 2(e) below.


"ADVERSE CONSEQUENCES" means all charges, complaints, actions, suits, proceedings, hearings, investigations, claims, demands, judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, taxes, liens, losses, expenses, and fees, including all reasonable attorneys' fees and court costs.


"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.


"AFFILIATED GROUP" means any affiliated group within the meaning of Code Sec. 1504 (or any similar group defined under a similar provision of state, local or foreign law).


"BASIS" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could form the basis for any specified consequence.


"BUYER" has the meaning set forth in the preface above.


"CASH PORTION OF THE PURCHASE PRICE" has the meaning set forth in Section 2(b) below.


7


"CLOSING" has the meaning set forth in Section 2(g) below.


"CLOSING DATE" has the meaning set forth in Section 2(g) below.


"CODE" means the Internal Revenue Code of 1986, as amended.


"CONFIDENTIAL INFORMATION" means all confidential information and trade secrets of the Targets including, without limitation, the identity, lists or descriptions of any customers, referral sources or organizations; financial statements, cost reports or other financial information; contract proposals, or bidding information; business plans and training operations methods and manuals; personnel records; fee structure; and management systems, policies or procedures, including related forms and manuals.


"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code Sec. 1563.


"CUSTOMER CONTRACT OR AGREEMENT" means any contract or agreement of the Targets related to (a) SAP training, education and change management services; (b) maintenance contracts for application software; (c) maintenance support arrangements, (d) reengineering and refurbishment arrangements; (e) consulting arrangements; (f) any other contract computer support services arrangement; and (g) agreements related to any other services provided by the Targets.


"DEFERRED INTERCOMPANY TRANSACTION" has the meaning set forth in Treas. Reg. Section 1.1502-13.


"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4 below.


"DOCUMENTATION" has the meaning set forth in Section 4(l) below.


"EARN-OUT PAYMENT" has the meaning set forth in Section 2(c) below.


"EARN-OUT PAYMENT DETERMINATION" has the meaning set forth in Section 2(d) below.


"EARN-OUT PAYMENT DISAGREEMENT NOTICE" has the meaning set forth in Section 2(d) below.


"EARN-OUT PERIOD" has the meaning set forth in Section 2(c) below.


"EBIT" means earnings before interest and taxes (prepared on an accrual basis of accounting and in accordance with GAAP, consistently applied), plus mutually agreed upon "ADJUSTMENTS" and "ADDBACKS" during the Earn-Out Period (as defined in Section 2(c) below), and as determined by Annex I attached hereto.


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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"E&Y EARN-OUT PAYMENT DETERMINATION" has the meaning set forth in Section 2(d) below.


"E&Y NET WORKING CAPITAL DETERMINATION" has the meaning set forth in section 2(f) below.


"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multi employer Plan), or (d) Employee Welfare Benefit Plan or Material fringe benefit plan or program.


"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Sec. 3(2).


"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Sec. 3(1).


"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


"EXCESS LOSS ACCOUNT" has the meaning set forth in Treas. Reg. Section 1.1502-19.


"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Sec. 302 of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.


"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).


"FINANCIAL STATEMENTS" has the meaning set forth in Section 4(e) below.


"FIRST EARN-OUT PAYMENT" has the meaning set forth in Section 2(c)(i) below.


"GAAP" means United States generally accepted accounting principles as in effect from time to time.


"GOVERNMENTAL AUTHORITY" shall mean any governmental, quasi-governmental, state, county, city or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof.


"INDEMNIFIED PARTY" has the meaning set forth in Section 8(d) below.


"INDEMNIFYING PARTY" has the meaning set forth in Section 8(d) below.


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
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"INTELLECTUAL PROPERTY" means all (a) trademarks, service marks, trade dress, logos, trade names, and corporate names and registrations and applications for registration thereof, (b) patents, patent applications, and provisional applications, including all continuations, divisionals and related applications, (c) copyrights and registrations and applications for registration thereof, (d) computer software, data, and documentation, (e) to the extent legally protectable, trade secrets and confidential business information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing, and business data, pricing and cost information, business and marketing plans, and customer and supplier lists and information), (f) to the extent legally protectable, other proprietary rights, and (g) copies and tangible embodiments thereof (in whatever form or medium).


"INTENTIONAL FRAUD" shall mean a knowing and deliberately false statement as to a material fact, made with the intent to deceive the other Party, which is believed by the other Party and on which it relies and by which it is induced to act and does act to its injury.


"JOINT AND SEVERAL" has the meaning set forth in Section 10(a) below.


"KNOWLEDGE" means actual knowledge after reasonable investigation and inquiry, which inquiry shall include an inquiry of the employees of the Targets with responsibility for the matters in question.


"LIABILITY" means any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.


"LICENSES" has the meaning set forth in Section 4(l) below.


"MOST RECENT BALANCE SHEET" means the balance sheet contained within the Most Recent Financial Statements.


"MOST RECENT FISCAL YEAR END" has the meaning set forth in Section 4(e) below.


"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).


"NET WORKING CAPITAL" means total current assets less total current liabilities of the Targets (including but not limited to all deferred taxes), further reduced by any long-term debt of the Targets, as determined in accordance with GAAP, consistently applied.


"NET WORKING CAPITAL DISAGREEMENT NOTICE" has the meaning set forth in Section 2(f) below.


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
- 4 - 10


"ORDINARY COURSE OF BUSINESS" means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).


"PARTY" has the meaning set forth in the preface above.


"PBGC" means the Pension Benefit Guaranty Corporation.


"PRE-CLOSING ADJUSTMENT" has the meaning set forth in Section 2(e) below.


"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406 and Code Sec. 4975.


"PURCHASE PRICE" has the meaning set forth in Section 2(b) below.


"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.


"SECOND EARN-OUT PAYMENT" has the meaning set forth in Section 2(c)(ii) below.


"SECURITIES ACT" means the Securities Act of 1933, as amended.


"SECURITY INTEREST" means any mortgage, pledge, security interest, encumbrance, charge, or other lien, other than (a) mechanic's, materialmen's and similar liens, (b) liens for Taxes not yet due and payable (or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings), (c) liens arising under worker's compensation, unemployment insurance, social security, retirement, and similar legislation, (d) liens arising in connection with sales of foreign receivables, (e) liens on goods in transit incurred pursuant to documentary letters of credit, (f) purchase money liens and liens securing rental payments under capital lease arrangements, and (g) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money.


"SELLER" has the meaning set forth in the preface above.


"SELLERS" has the meaning set forth in the preface above.


"SEVERAL" has the meaning set forth in Section 10(a) below.


"SHARES" means the shares of common stock, par value $.01 per share, of DDS and the shares of common stock, par value L.1.00 per share, of DDS Europe.


"SOFTWARE PROGRAMS" has the meaning set forth in Section 4(l) below.


CORESTAFF, INC.
STOCK PURCHASE AGREEMENT
- 5 - 11


"SUBSIDIARY" means any corporation with respect to which another specified corporation has the power to vote or direct the voting of sufficient securities to elect a majority of the directors.


"TARGETS" has the meaning set forth in the preface above.


"TAX" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real pr
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